BILL ANALYSIS Ó
SB 1226
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Date of Hearing: August 3, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
SB 1226
(Beall) - As Amended June 30, 2016
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|Policy |Human Services |Vote:|7 - 0 |
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill, beginning January 1, 2018, requires an entity that
receives payments from a regional center to provide services or
supports, to obtain an independent audit or an independent
review report of its financial statements, and requires a
regional center to submit copies of all independent audit
reports it receives to the Department of Development Services
(DDS) for review. The bill further requires the DDS to compile
data, by regional center, on vendor compliance with audit
requirements and opinions resulting from audit reports and to
annually publish the data in a performance dashboard.
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FISCAL EFFECT:
Minor and absorbable fiscal impact to DDS to review and
summarize data received from regional centers to include on the
performance data dashboard.
COMMENTS:
1)Purpose. According to the author, "This bill helps address a
primary concern about existing audit requirements- they are a
burdensome cost to vendors and are not an effective way to
identify fraud. Because the cost to perform audits and
financial reviews are borne by vendors and reducing fraud is
important, it is critical for the Legislature to understand if
the audits are accomplishing what they were intended to do or
if they are a waste of money. With this bill, vendors can
focus on providing core services to those in need."
2)Background. DDS 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.
A 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
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$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.
AB X2 1 (Thurmond, Statutes of 2016) made changes to the
thresholds at which audits or independent financial reviews
are required. Under that bill, the threshold for requiring an
audit or review was raised to $500,000 per year and the
threshold for requiring an audit was raised to $2 million per
year. In addition, the bill allows vendors whose review or
audit raises no material issues to be granted a two-year
exemption from the audit or review requirement. These changes
to the audit requirements are expected to reduce by 70% the
number of vendors subject to annual audit. AB X2 1 went into
effect on June 9, 2016. The 2016-17 State Budget includes $1.0
million ($0.7 million GF) to permanently establish within DDS
and retain funding for seven limited-term auditor positions in
the Vendor Audit Section.
3)Prior Legislation. SB 490 (Beall), 2015, would have made
adjustments to audit requirements similar to those made in AB
X2 1. SB 490 was held on the Assembly Appropriations
Committee's Suspense File.
Analysis Prepared by:Jennifer Swenson / APPR. / (916)
319-2081
SB 1226
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