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
SB 490 (Beall) Page 1 of
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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:
SB 490 (Beall) Page 2 of
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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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