BILL ANALYSIS �
AB 450
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CONCURRENCE IN SENATE AMENDMENTS
AB 450 (Wieckowski)
As Amended August 15, 2011
Majority vote
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|ASSEMBLY: |51-27|(June 1, 2011) |SENATE: |23-13|(August 30, |
| | | | | |2011) |
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Original Committee Reference: HIGHER ED.
SUMMARY : Requires the California State University (CSU)
trustees' policies and procedures for acquisition of food
services to ensure that the service contractor fully discloses
to CSU all rebates and incentives received from suppliers, and
requires that the service contractor pay the full amount of
these rebates and incentives to CSU.
The Senate amendments :
1)Revise and recast the requirements contained in the Assembly
version, that the CSU trustees' policies and procedures
regarding food service contracts require the full disclosure
and credit of all rebates and incentives received from
suppliers, and that food service contractors make information
related to supplier rebates and incentives available during
audits conducted pursuant to existing law.
2)Define the various terms used in the bill.
EXISTING LAW :
1)Provides the CSU Trustees broad powers to establish policies
and procedures governing the acquisition of services,
facilities, materials, goods, supplies, or equipment.
Requires the policies to include a competitive means for
obtaining best value while complying with legislative intent
regarding competitive bids or proposals as expressed in the
California Public Contracts Code (Education Code Section
89036).
2)Authorizes the CSU Trustees to establish a process that allows
a campus to make payments directly to vendors and provides the
CSU Trustees authority to draw from appropriated funds
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amounts necessary to make payments of obligations of the
university directly to vendors. Provides that payments in
excess of 10% of the fund total must be approved by the
Director of Finance (Government Code Section 12400.1).
3)Requires the CSU Trustees to contract with one or more public
accounting firms to conduct systemwide and individual campus
annual financial statement and compliance audits. Requires
audits to test compliance with procurement procedures and the
integrity of the payments made (Government Code Section
12400.1).
4)Requires every contract involving the expenditure of public
funds in excess of $10,000 by any public entity to be subject
to the examination and audit of the State Auditor for a period
of three years after final payment under the contract.
Requires every contract to contain a provision stating that
the contracting parties shall be subject to that examination
and audit (Government Code Section 8546.7).
AS PASSED BY THE ASSEMBLY , this bill required CSU service
contractors to disclose and credit manufacturer rebates to CSU
campuses and provided the CSU Trustees, in conjunction with the
controller, the right to examine the records of the services
contractor that relate to the provisions and requirements of all
service contracts.
FISCAL EFFECT : According to the Senate Appropriations
Committee, likely minor, one-time costs for contracting
requirements, and unknown and potentially significant revenues
from the requirement of disclosure and refunding of rebates
received by contractors.
COMMENTS : According to the sponsor, 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 (USDA) 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. The regulations are
designed to ensure that the limited school meals program
resources are used as efficiently as possible and that federal
agencies are only paying "net costs." After concerns were
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raised that large food service vendors were not returning all of
the rebates received, the New York Attorney General conducted an
investigation revealing that, over a five-year period beginning
in 2004, Sodexo received significant rebates from suppliers
without acknowledging or passing the savings on to these
schools-in violation of the contracts between Sodexo and the
schools as well as state and federal laws. In July of 2010,
Sodexo agreed to pay New York $20 million to settle complaints.
While federal regulations are in place to prohibit contractors
from pocketing rebates from food manufacturers in 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 : Laura Metune / HIGHER ED. / (916)
319-3960
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