BILL ANALYSIS                                                                                                                                                                                                    �



                                                                  AB 505
                                                                  Page  1

          Date of Hearing:   May 11, 2011

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

                    AB 505 (Harkey) - As Amended:  April 25, 2011 

          Policy Committee:                              Housing and 
          Community Development                         Vote: 5-0

          Urgency:     No                   State Mandated Local Program: 
          No     Reimbursable:              No

           SUMMARY  

          This bill requires, on or before January 1, 2013, and every two 
          years after, the Bureau of State Audits (BSA) to conduct a 
          performance audit of special fund and GF programs administered 
          by the Department of Housing and Community Development (HCD).   

           FISCAL EFFECT  

          Costs to the GF of approximately $350,000 for the Bureau of 
          State Audits to meet the requirements of AB 505.  

           COMMENTS  

           1)Background.   HCD administers programs that receive funding 
            from federal, state housing bond, special fund and the GF.  
            HCD administers federal programs for non-entitlement 
            jurisdictions that are typically smaller and do not have the 
            capacity to receive the funds directly from the Department of 
            Housing & Urban Development (HUD).  These federal programs are 
            audited by HUD on a regular basis. 

           2)Current HCD auditing requirements.   HCD also administered 
            housing bond programs funded by Proposition 1C and 46.  The 
            voter-approved bonds required that the BSA conduct periodic 
            audits to ensure the proceeds are spent according to the 
            bonds' requirements.  The only programs that are not audited 
            on a regular basis by an outside entity like the BSA or HUD 
            are the special fund and GF programs.  Existing law also 
            requires HCD in its annual report to the Legislature to report 
            how Proposition 1C funds were expended in the prior year.
                








                                                                 AB 505
                                                                  Page  2

            3)Auditing priorities.   The resources of the Bureau of State 
            Audits is limited, one reason that the Legislature has 
            established the Joint Legislative Audit Committee (JLAC).  
            JLAC has adopted a specific procedure for evaluating and 
            approving audit proposals.  The BSA gives priority to audits 
            mandated by statute and these would be done regardless of 
            JLAC's decisions.  This bill would circumvent the JLAC 
            process.  The committee should consider if the audit required 
            by this bill is compelling enough to warrant bypassing the 
            existing process so approval of the audit in AB 505 would mean 
            that JLAC would have to defer or deny an audit.  A factor for 
            the committee to consider is that because of the competition 
            for resources, BSA is receiving significant budget increases 
            in the next two fiscal years.  


           Analysis Prepared by  :    Roger Dunstan / APPR. / (916) 319-2081