BILL ANALYSIS �
AB 450
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Date of Hearing: May 18, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 450 (Wieckowski) - As Amended: May 2, 2011
Policy Committee: Higher
EducationVote:6-3
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill requires California State University (CSU) service
contractors to disclose and to credit manufacturer rebates to
CSU campuses. Specifically, this bill:
1)Requires the CSU Trustees' policies and procedures for the
acquisition of services to specify that any direct or indirect
rebates from a third party shall be fully disclosed and
credited to the campus or other unit of the CSU, and be
available for review as part of any audit.
2)Authorizes the Trustees, in conjunction with the State
Controller, to examine the books and records of a services
contractor relating to a contract with CSU, including records
related to any rebates received by a contractor from a third
party as a consequence of, or incidental to, a contract.
FISCAL EFFECT
1)To the extent the controller conducts the authorized audits of
services contractors, CSU would be required to reimburse the
controller for these services. Based on previous costs of
controller audits of vendor payments, conducting just three
audits in one year would cost $150,000.
2)The above costs could be much more than offset by recovering
of rebates.
COMMENTS
Purpose . According to the author, "There is no specific law or
AB 450
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policy in this area related to rebates nor are there laws
relating to the ability of the CSU Trustees or the State
Controller to examine a service contractor's books or records to
determine if the contractor is receiving off-invoice rebates
from its suppliers. This bill will allow CSU to determine if
for example, food service companies are receiving rebate
payments for their food purchases on behalf of the university
and whether these rebate payments are being credited back to the
campus. The audit provisions will allow CSU to discover if
off-invoice rebates exist which may point to receipt of rebates
from suppliers to the contractor."
According to the sponsor, the Service Employees International
Union, food manufacturers commonly give rebates for purchases
from large food service companies such as Sodexo, Chartwells,
and Aramark. In 2010, after significant controversy surrounding
the amounts of those rebates, the U.S. Department of Agriculture
enacted regulations requiring contractors under the
federally-subsidized school meals program to disclose all
discounts, rebates and other applicable credits received by the
contractor and to credit those rebates back to the school. While
these federal regulations apply to California's
federally-subsidized K-12 district meals programs, there appears
to be no federal or state laws governing this practice in
California's higher education segments.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081