BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          SB 490 (Beall) - Regional centers:  audits
          
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          |Version: April 23, 2015         |Policy Vote: HUMAN S. 5 - 0     |
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          |Urgency: No                     |Mandate: No                     |
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          |Hearing Date: May 4, 2015       |Consultant: Brendan McCarthy    |
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          This bill does not meet the criteria for referral to the  
          Suspense File.



          


          Bill  
          Summary:  SB 490 would raise the thresholds at which regional  
          center vendors must obtain either an independent review or audit  
          of its financial statements. The bill would also require a  
          regional center to grant a two year exemption from the existing  
          audit or review requirement if no issues are raised in the  
          previous audit or review.


          Fiscal  
          Impact:  The bill is not likely to result in significant cost  
          increases for regional center services. The existing audit  
          requirement does not examine vendor billing records to determine  
          whether a vendor is appropriately billing a regional center for  
          authorized services. Rather, the audit requirement was intended  
          to improve vendor financial record keeping, generally. The  







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          Budget Act of 2011 assumed that better financial record keeping  
          would reduce billing by vendors to regional centers, yielding  
          savings. (The budget assumed a 1% reduction in costs, which  
          equaled about $22 million from the General Fund.) Since the  
          enactment of this requirement, the Department of Developmental  
          Services has not been able to document savings due to the audit  
          requirement. Because the auditors are not looking at the  
          appropriateness of the services provided, staff does not believe  
          that the audit requirement is likely to generate significant  
          savings. Therefore, relaxing the audit requirement is not likely  
          to increase costs to purchase services by the regional centers.


          Background:  The Department of Developmental Services is responsible for  
          coordinating care and services for about 250,000 people with  
          developmental disabilities. The vast majority of these people  
          are served by 21 regional centers, which are non-profit entities  
          that contract with the state. The regional centers, in turn,  
          contract with a variety of vendors to provide direct services to  
          the developmentally disabled.

          An report by the Bureau of State Audits in 2010 found that  
          regional centers were not appropriately monitoring expenditures  
          by vendors. In response to the report, the 2011 developmental  
          services trailer bill (SB 74, Committee on Budget and Fiscal  
          Review, Statutes of 2011), imposed new auditing requirements on  
          regional center vendors. SB 74 requires vendors that receive  
          payments of more than $500,000 per year to obtain an independent  
          fiscal audit. Regional center vendors that receive payments  
          between $250,000 and $500,000 per year are required to obtain  
          either an independent audit or an independent financial review.  
          The 2011 Budget Act assumed that these additional auditing  
          requirements would reduce inappropriate billing for services and  
          save the state General Fund about $22 million per year.


          Proposed Law:  
            SB 490 would raise the thresholds at which a regional center  
          vendor must obtain either an independent review or audit of its  
          financial statements. The bill would also require a regional  
          center to grant a two year exemption from the existing audit or  
          review requirement if no issues are raised in the previous audit  
          or review.
          Specific provisions of the bill would:








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              Limit the existing requirement for independent audits or  
              independent review by limiting the scope of audits and  
              reviews to payments made by regional centers to the vendor;
              Raise the threshold at which a vendor must obtain an  
              independent audit or independent review from $250,000 to  
              $500,000;
              Raise the threshold at which a vendor must obtain an  
              independent audit from $500,000 to $2,000,000;
              Require a regional center to grant a two-year exemption  
              from audit or review requirements if a vendor's prior audit  
              or review did not result in significant issues.


          Related  
          Legislation:  SB 1259 (Emmerson, 2012) would have authorize  
          two-year exemptions from audit requirements, similar to  
          provisions of this bill. That bill was held on this committee's  
          Suspense File.


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