BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
480 (Tran)
Hearing Date: 8/27/2009 Amended: 6/1/2009
Consultant: Bob Franzoia Policy Vote: G O 11-0
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BILL SUMMARY: AB 480 would require any state bond measure
approved on and after January 1, 2010, to include auditing
provisions with respect to the use of any bond moneys that would
be spent for the purposes of the bond measure. This bill would
authorize the Bureau of State Audits (BSA) to conduct periodic
audits to ensure that bond proceeds are awarded in a timely
manner and that recipients of bond moneys use the funds in
compliance with applicable provisions of law. This bill would
require that the costs associated with the audits be reimbursed
by the bond proceeds.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Bond act audits Estimated $210 annually after January 1,
Bond
2010; costs could be higher
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STAFF COMMENTS: SUSPENSE FILE.
This bill provides that the department or agency responsible for
the project being audited shall reimburse the BSA for the cost
of conducting the audit from the proceeds of bonds allocated for
that project. The audit would be predetermined with the
administering agency, similar to an interagency agreement.
Disagreements with the administering agency should be few, as
the BSA and the administering agency would pre-agree on the
amount and ensure it was within the administration budget.
The fiscal impact of this bill on bond funds depends in part on
the manner in which the BSA would initiate an audit. Often
bonds will have a cap on administrative costs. When a
department or agency will use all five percent of its
administrative allocation, the audit would result in a cost that
would come as a reduction of administrative expenses and a shift
of funds dedicated to administration, depending on the cost of
each audit, to one or more audits.
When a department or agency would not otherwise expend all five
percent of its administrative set aside, this bill would result
in a potential reduction of funds, the amount of the audit, for
construction. This is because all un-used administrative funds
are directed to construction. All savings identified by an
audit would result in a potential increase of funds for
construction. When an audit of an ongoing project identified
savings, the bond funds may be spent more efficiently than would
have otherwise occurred absent an audit.
There is significant variance in how audit costs are calculated.
An "upper end" estimate of time and cost for one audit of the
type proposed by this bill would be 600 hours (4
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AB 480 (Tran)
months) and $50,000 (including expenses). Audit costs will
likely range from $20,000 to
$50,000. In general, an audit costing $50,000 would likely show
more savings as the auditor is on the project longer and
identifying more savings or cost avoidance. Taking a mid point,
or $35,000, six audits would cost $210,000 annually. Depending
on the type of capital outlay projects authorized by the bond
costs could be significantly higher. (Costs may be zero if the
bond act contains a different audit option or notwithstands the
code section added by this bill.)
These projections are based on local agency, project-level
audits, not at the state administrator level. For comparison,
Caltrans has an interagency agreement with the State
Controller's Office for 12 full-time auditors annually to work
on Proposition 1B bond oversight.
Based on past audit performance, savings/deferred costs of
several million dollars annually for the duration of the bond is
likely. If even a small percentage of this estimated savings is
realized, all costs would be offset by savings.
The fiscal impact of this bill is similar to that of SB 503
(Kehoe) which is on the Suspense File.