BILL ANALYSIS
SB 1473
Page 1
SENATE THIRD READING
SB 1473 (Wyland)
As Amended August 9, 2010
Majority vote
SENATE VOTE : 34-0
EDUCATION 8-0
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|Ayes:|Brownley, Nestande, | | |
| |Ammiano, Arambula, | | |
| |Carter, Eng, Miller, | | |
| |Torlakson | | |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Consistent with the provisions contained in
Proposition 39 of 2000 in regards to local general obligation
bonds, requires the annual, independent financial and
performance audits to be conducted in accordance with the
Government Auditing Standards issued by the Comptroller General
of the United States (U.S.) for financial and performance
audits.
EXISTING LAW :
1)Authorizes, under Section 1 of Article XIII A of the
California Constitution, school districts, community college
districts, or county offices of education to pass a general
obligation bond by a 55% vote, provided that the local
initiative includes the following accountability measures:
a) A requirement that the proceeds from the sale of the
bonds be used only for the construction, reconstruction,
rehabilitation, or replacement of school facilities,
including the furnishing and equipping of school
facilities, or the acquisition or lease of real property
for school facilities, and not for any other purpose;
b) Provide a list of the specific school facilities
projects to be funded and certification that the school
district board, community college board, or county office
of education has evaluated safety, class size reduction,
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and information technology needs in developing that list;
c) A requirement that the school district board, community
college board, or county office of education conduct an
annual, independent performance audit to ensure that the
funds have been expended only on the specified projects;
and,
d) A requirement that the school district board, community
college board, or county office of education conduct an
annual, independent financial audit of the proceeds from
the sale of the bonds until all of those proceeds have been
expended for the school facilities projects.
2)Authorizes school districts, community college districts, and
county offices of education to levy a 55% vote ad valorem tax
pursuant to limits specified in the proposition.
3)Requires the governing board of a school district or a
community college district to establish and appoint members to
an independent citizens' oversight committee within 60 days of
the date that the governing board enters the election results
on its minutes.
4)Requires each county superintendent of schools to provide for
an audit of all funds under his or her jurisdiction and
control. Requires governing board of each local educational
agency (LEA) to either provide for an audit of the books and
accounts of the LEA or make arrangements with the county
superintendent of schools to provide for that auditing.
Requires the audit to comply fully with the Government
Auditing Standards issued by the Comptroller General of the
U.S.
FISCAL EFFECT : According to the Legislative Counsel, this bill
is nonfiscal.
COMMENTS : Proposition 39 was passed by voters in 2000. Among
others, the Proposition, a Constitutional Amendment, reduced the
voting threshold for the passage of local general obligations
bonds from two-thirds to 55% provided that the local bond
initiative meets the following accountability measures:
1)The initiative identifies a list of the specific school
facilities projects that will be funded by bond proceeds;
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2)A requirement that the school board, community college board,
or county office of education conduct an annual, independent
performance audit to "ensure that the funds have been expended
only on the specific projects listed;" and,
3)A requirement that the school board, community college board,
or county office of education conduct an annual, independent
financial audit of the proceeds from the sale of the bonds
until all of those proceeds have been expended for the school
facilities projects.
AB 1908 (Lempert), Chapter 44, Statutes of 2000, a companion
bill to Proposition 39, requires each district, within 60 days
of the passage of a local bond with 55%, to appoint a citizens'
oversight committee to monitor and review expenditures to ensure
compliance with Proposition 39 requirements, and to keep the
public informed about bond expenditures. Both the financial
audit and performance audits must be reviewed by the independent
citizens' oversight committee.
This bill requires the financial and performances audit to be
conducted in accordance with the generally accepted government
auditing standards (GAGAS), informally known as the "Yellow
Book", issued by the comptroller general of the U.S. who heads
the U.S. Government Accountability Office (GAO). The GAGAS
contains standards for audits of government organizations,
programs, activities, and functions, and of government
assistance received by contractors, nonprofit organizations, and
other nongovernment organizations. The standards pertain to
auditors' professional qualifications and outline the processes
and parameters to achieve quality audits.
School districts are already conducting the Proposition 39
financial audits using the GAGAS standards when done in
conjunction with the annual financial audit required through
Education Code section 41020. According to the author, school
districts and their local bond oversight committees are confused
with regard to the standard to follow in carrying out the
mandatory performance audit, since existing law does not specify
an accounting standard. Currently, some districts have one
auditor conduct both the financial and performance audits,
others commission for extensive audits that review multiple
aspects of a district's facilities program, and some are
presenting the financial audit as both the financial and
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performance audits. Supporters of the bill argue that
conducting one audit that counts as both a financial and
performance audit does not comply with Proposition 39
requirements and does not provide the accountability the
initiative intended.
According to the GAO, "Performance audits entail an objective
and systematic examination of evidence to provide an independent
assessment of the performance and management of a program
against objective criteria?."
The GAGAS outlines several types of performance audits that
serve different objectives, including the following:
1)Program effectiveness and results audits are frequently
interrelated with economy and efficiency objectives. Program
effectiveness and results determine the extent to which the
intended results or benefits are being achieved, the
effectiveness of the entity, program, activity or function,
and whether the entity has complied with law and regulations
applicable to the program. Economy and efficiency objective
addresses the costs and resources used to achieve program
results;
2)Internal control audits relate to an assessment of the
component of an organization's system of internal control that
is designed to provide reasonable assurance of achieving
effective and efficient operations, reliable financial and
performance reporting, or compliance with applicable laws and
regulations;
3)Compliance audits relate to compliance criteria established by
laws, regulations, contract provisions, grant agreements, and
other requirements that could affect the acquisition,
protection, use, and disposition of the entity's resources and
the quantity, quality, timeliness, and cost of services the
entity produces and delivers; and,
4)Prospective analysis audit objectives provide analysis or
conclusions, about information that is based on assumptions
about events that may occur in the future along with possible
actions that the audited entity may take in response to the
future events.
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The GAGAS performance audit standards described above may
require a more extensive evaluation of local bond funds than
that required by Proposition 39. This bill requires the GAGAS
standards to be used to be consistent with Proposition 39
requirements. Since Proposition 39 simply requires a
performance audit to ensure that funds were spent only on the
projects for which the ballot initiative indicated the funds
would be used, the GAGAS standard for compliance audits appear
to be most consistent with the Proposition 39 requirement.
Analysis Prepared by : Sophia Kwong Kim / ED. / (916) 319-2087
FN: 0005729