BILL NUMBER: AB 1538	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  MARCH 13, 2012

INTRODUCED BY   Assembly Member Cook
    (   Coauthors:   Assembly Members 
 Nestande,   Portantino,   and Silva  
) 
    (   Coauthors:   Senators   Dutton
  and Harman   )

                        JANUARY 24, 2012

   An act to add  Sections 12430 and   Section
 12433 to  ,  the Government Code, relating to
audits.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 1538, as amended, Cook. Recovery audits.
   Existing law prescribes the duties of the Controller, including
auditing all claims against the state and the disbursement of state
money, for correctness, legality, and for sufficient provisions of
law for payment. 
   This bill would require the Controller, State Auditor, and the
Director of Finance to prepare plans each year to meet their audit
responsibilities and to meet to review their plans. 
   This bill would  also  require the Controller to
contract with consultants to provide semiannual  recovery 
audits of state agencies with expenditures exceeding $50,000,000 in a
fiscal year, unless excepted by regulation. The bill would authorize
reasonable payment to consultants from recovered overpayments, upon
appropriation, including as a percentage of recovery.  It
  The bill  would require contracts made under its
provisions to apply the same confidentiality provisions to
consultants as are applicable to the Controller,  the  state
agency  that is subject to the audit  , or employees of the
Controller or  the  state agency.  It 
 The bill  would further require the Controller to provide
copies of the consultants' audit reports to the Department of Finance
and the State Auditor, and would, until January 1, 2017, require
annual reports by the Controller to the Legislature summarizing these
audits.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
   
  SECTION 1.    Section 12430 is added to the
Government Code, to read:
   12430.  Annually, the Controller, the State Auditor, and the
Director of Finance shall each prepare a plan to meet their audit
responsibilities. With respect to audits to fulfill the requirements
necessary for the receipt of federal funds, the State Auditor shall
be primarily responsible for financial audits, and the Director of
Finance or the Controller shall be primarily responsible for
compliance audits, and the Director of Finance shall be primarily
responsible for coordinating state agency internal audits and
determining when agencies are required to obtain federally mandated
audits. Upon completion of these audit plans, the Controller, State
Auditor, and Director of Finance shall meet to review and discuss the
plans with the purpose of coordinating their audit efforts to avoid
unnecessary duplication and negotiation with federal agencies
regarding federally mandated audits.
   Subsequent to their review of the audit plans and negotiations
with federal agencies if the Controller, the Director of Finance, or
the State Auditor determines that the proposed audit plan of the
other does not fulfill all audit requirements necessary for the
receipt of federal funds, they may expand the scope of their audit of
state agencies to meet the additional federal audit requirements.
The financial audit report issued by the State Auditor and the
compliance audit report issued by the Controller, the Director of
Finance, or both, are intended to fulfill federally mandated audit
requirements. These audit reports shall be performed in accordance
with the "Standards for Audits of Governmental Organizations,
Programs, Activities and Functions," published by the Comptroller
General of the United States, and the standards published by the
American Institute of Certified Public Accountants.
   Nothing in this section shall be construed to limit, restrict, or
otherwise infringe upon the duty of the State Auditor to conduct
annual financial audits or to limit, restrict, or otherwise infringe
upon the authority of the Joint Legislative Audit Committee to direct
the State Auditor to conduct any audit of state government pursuant
to Chapter 6.5 (commencing with Section 8543) of Division 1 of Title
2.
   Nothing in this section shall be construed to limit, restrict, or
otherwise infringe upon the audits required by Section 12433, which
are separate from and in addition to any federally mandated audits
except those federally mandated audits that are conducted by contract
consultants and as provided by Section 12433. 
   SEC. 2.   SECTION 1.   Section 12433 is
added to the Government Code, to read:
   12433.  (a) Notwithstanding subdivision (a) of Section 8546.4, or
any other law, the Controller shall contract with one or more
consultants to conduct semiannual recovery audits of payments made by
state agencies to vendors. The audits shall be designed to detect
and recover overpayments to the vendors and to recommend improved
state agency accounting operations.
   (b) A contract under this section may provide reasonable
compensation for services provided under the contract, including
compensation determined by the application of a specified percentage
of the total amount recovered because of the consultant's audit
activities or recommendations as a fee for services. A contract may
permit or require the consultant to pursue a judicial action in court
inside or outside this state to recover an overpaid amount. To allow
time for the performance of any existing state payment auditing
procedures, a contract under this section may not allow a recovery
audit of a payment during the 180-day period after the date the
payment was made.
   (c) The Controller or a state agency  whose payments are
  that is  being audited pursuant to this section
may provide a consultant under this section with any confidential
information in the custody of the Controller or state agency that is
necessary for the performance of the audit or the recovery of an
overpayment, to the extent that the Controller or state agency is not
prohibited from sharing the information under an agreement with
another state or the federal government. A person acting under a
contract authorized by this section, and each employee or agent of
that person, is subject to all prohibitions against the disclosure of
confidential information obtained from the state in connection with
the contract that apply to the Controller or applicable state agency
or an employee of the Controller or applicable state agency. A person
acting under a contract authorized by this section or an employee or
agent of that person who discloses confidential information in
violation of this subdivision is subject to the same sanctions and
penalties that would apply to the Controller or applicable state
agency or an employee of the Controller or applicable state agency
for that disclosure.
   (d) The Controller shall require that these semiannual recovery
audits be performed on the payments to vendors made by each state
agency that has total expenditures during a fiscal year in an amount
that exceeds fifty million dollars ($50,000,000). Each state agency
described by this subdivision shall provide the recovery audit
consultant with all information necessary for the audit. The
Controller may exempt from the mandatory recovery audit process a
state agency that has a low proportion of its expenditures made to
vendors, according to the criteria that the Controller adopts by
regulation after consideration of the likely costs and benefits of
performing recovery audits for agencies that make relatively few or
small payments to vendors.
   (e) A state agency shall pay, from recovered moneys appropriated
for the purpose, the recovery audit consultant responsible for
obtaining for the agency a reimbursement from a vendor. A state
agency shall expend or return to the federal government any federal
money that is recovered through a recovery audit conducted under this
section. The state agency shall expend or return the federal money
in accordance with the rules of the federal program through which the
agency received the federal money.
   (f) The Controller shall provide copies, including electronic form
copies, of any report received from a consultant contracting under
this section to the Director of Finance and the State Auditor not
later than the seventh day after the date the Controller receives the
consultant's report. Not later than January 1 of each year, the
Controller shall issue a report to the Legislature summarizing the
contents of all reports received under this section during the
immediately preceding fiscal year.
   (g) For purposes of this section, "overpayment" includes a
duplicated payment made to a vendor for a single invoice, the amount
of a discount available from a vendor that was not applied, and the
amount of any of the following:
   (1) A late payment penalty that was improperly applied by the
vendor.
   (2) Excess shipping costs that were incorrectly computed or
incorrectly included in an invoice.
   (3) Payment for a good or service that the vendor did not provide.

   (4) State sales tax.
   (h) (1) The requirement for submitting a report to the Legislature
pursuant to subdivision (f) is inoperative on January 1, 2017,
pursuant to Section 10231.5.
   (2) A report to be submitted under subdivision (f) shall be
submitted in compliance with Section 9795.