BILL ANALYSIS �
AB 229
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Date of Hearing: May 11, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 229 (Lara) - As Amended: April 14, 2011
Policy Committee: Local
GovernmentVote:8-0
BPCP 9-0
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill requires the Controller to receive every annual
financial audit report prepared for any local agency, and
requires these audits comply with Government Auditing Standards
issued by the Comptroller General of the United States.
Specifically, this bill:
1)Requires these audits to be made by a certified public
accountant (CPA), licensed by the California Board of
Accountancy (Board), and selected by the local agency from a
directory of CPAs maintained by the Controller who meet
specified criteria.
2)Requires the Controller to develop a plan to review and report
on financial and compliance audits of local agencies, and
requires the Controller to adopt an audit guide.
3)Requires the Controller, on an annual basis, to review and
monitor the audit reports performed by independent auditors,
and to determine whether the audit reports conform to
government auditing standards and the audit guide, and notify
each local agency regarding each determination.
FISCAL EFFECT
The State Controller's office estimates the administrative costs
to implement the bill will be approximately $775,000. The
program would have some small startup costs, so the budget is
expected to decline slightly to $750,000 in subsequent years.
AB 229
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COMMENTS
1)Purpose. According to the author's office, the current
statutory approach to protect taxpayers from waste, fraud and
abusive practices by local governments is not working, as
illustrated by the Controller's Office audit findings in the
City of Bell and the County of Modoc where millions of state,
federal and local dollars were misspent over several years.
This bill is a result of the exposure of unethical and illegal
financial practices by numerous officials in the City of Bell,
which came to light in 2010. The city's independent auditor
failed to report abuses such as excessive salaries, illegal
loans and questionable fees. In a series of audits of Bell's
finances, the Controller found that the independent auditor
failed to comply with 13 of 17 fieldwork auditing standards
and reported no significant deficiencies in any of the city's
funds.
2)Audit requirements. Current law requires local governments
subject to federal single audit requirements to send their
annual audit reports to the Controller for review and
certification for compliance with specified auditing
standards. This applies only to local agencies that expend
more than $500,000 in federal funds.
3)Related Relevant legislation, all pending in the Assembly.
a. AB 162 (Smyth) requires that, if an audit of a local
agency reveals certain financial irregularities, the
findings be sent separately to the Controller immediately
after the audit has been concluded.
b. AB 187 (Lara) authorizes the State Auditor to establish
a program "for the purpose of identifying, auditing, and
issuing reports on any local government agency" which the
auditor determines is "at risk for the potential of waste,
fraud, abuse, or mismanagement."
c. AB 253 (Smyth) requires the Controller to prescribe
uniform accounting and reporting procedures to cities.
d. AB 276 (Alejo) requires joint powers agencies to furnish
to the Controller a report of all the financial
transactions of the agency during the next preceding fiscal
AB 229
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year within 90 days of the close of each fiscal year, and
increases penalties for local governments that do not
comply.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081