BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session SB 490 (Beall) - Regional centers: audits ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: April 23, 2015 |Policy Vote: HUMAN S. 5 - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: May 4, 2015 |Consultant: Brendan McCarthy | | | | ----------------------------------------------------------------- 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 SB 490 (Beall) Page 1 of ? 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: SB 490 (Beall) Page 2 of ? 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. -- END --