BILL ANALYSIS                                                                                                                                                                                                    �



                                                                  AB 782
                                                                  Page  1

          Date of Hearing:   April 13, 2011

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

                AB 782 (Brownley) - As Introduced:  February 17, 2011 

          Policy Committee:                              PERS Vote:6-0

          Urgency:     No                   State Mandated Local Program: 
          No     Reimbursable:              

           SUMMARY  

          This bill allows the California Public Employees' Retirement 
          System (CalPERS) to assess a reasonable charge on employers to 
          recover additional costs incurred when an audit of the employer 
          takes an excessive amount of hours to complete.  Specifically, 
          this bill: 

          1)Requires CalPERS to notify an employer of the estimated time 
            to complete an audit prior to initiating the audit. 
          2)Requires CalPERS to identify the factors on which the estimate 
            is based. 
          3)Authorizes CalPERS to assess a reasonable charge on an 
            employer to recover its additional costs when the time 
            required to complete an audit exceeds the estimate.

           FISCAL EFFECT  

          Minor costs for CalPERS staff to calculate and recover the 
          additional costs for time spent performing an audit that exceeds 
          the estimate, which will be offset by reasonable amounts 
          assessed on those employers responsible for the additional 
          costs.

           COMMENTS  

           1)Rationale  .  According to CalPERS, the bill's sponsor, AB 782 
            will allow CalPERS to recoup administrative expenses incurred 
            when an audit takes an excessive amount of hours to complete.  
            This change would make the employer directly responsible for 
            the increase in administrative costs rather than distributing 
            the cost among all PERS contracting  employers









                                                                  AB 782
                                                                  Page  2

           2)Background.   CalPERS audits contracting agencies for 
            retirement benefit compliance and health benefit coverage for 
            employers who contract with CalPERS for health benefits.  The 
            audits take from three days to two weeks, depending on the 
            size of the agency.  CalPERS is expected to complete 54 audits 
            in FY 2010-11 and 89 audits in FY 2011-12.  CalPERS states 
            they occasionally experience difficulty with employers who are 
            uncooperative or have poor internal controls and 
            recordkeeping, resulting in excessive time and cost to CalPERS 
            staff.  CalPERS cites the Cities of Bell, Vernon and Maywood 
            as examples of excessive time and costs being spent to 
            complete the audit.


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