BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 503
                                                                  Page  1

          Date of Hearing:   June 30, 2010

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

                     SB 503 (Kehoe) - As Amended:  June 23, 2010 

          Policy Committee:                              Business and  
          Professions  Vote:                            11-0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:               

           SUMMARY  

          This bill requires the State Controller to audit one or more  
          projects funded by any general obligation bond acts approved by  
          the voters after January 1, 2010.  This bill also:

          1)Requires the Controller to prepare an annual audit plan for  
            the above and to assign up to five auditor positions for this  
            work.

          2)Requires that the Controller be reimbursed for audit costs  
            from the portion of bond proceeds used for the administrative  
            costs of the audited projects. 

           FISCAL EFFECT  

          Costs for the audits would be up to $350,000 annually, assuming  
          the maximum of five auditors authorized in the bill plus one  
          supervisor to conduct 10 to 15 audits. This level of audit  
          activity would likely not be reached for several years, until  
          bonds are approved by the voters and numerous projects are  
          sufficiently underway to warrant a sustained auditing program.  
          As required by the bill, funding would come out of bond proceeds  
          allocated for the administrative costs of audited projects.  
          Presumably, these audits will identify savings or avoided costs  
          of up to several million dollars annually, which would more than  
          offset the costs of the audits and could be allocated to  
          additional bond-funded projects.

           COMMENTS  

           1)Purpose  . According to the author's office, "During the 2007-08  








                                                                  SB 503
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            legislative session, the Senate Appropriations Committee's  
            Subcommittee on Fiscal Oversight and Bonded Indebtedness held  
            an informational hearing focusing on the 1B-1E infrastructure  
            bonds and need for greater oversight. SB 503 provides for this  
            oversight ensuring accountability and government efficiency to  
            California taxpayers."

          2)Prior Legislation  . In 2007, SB 784 (Torlakson), which included  
            provisions requiring the Controller to assign up to 10  
            positions to audit bond-funded projects, was held on this  
            committee's Suspense File.

           Analysis Prepared by  :    Chuck Nicol / APPR. / (916) 319-2081