BILL ANALYSIS �
AB 1538
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Date of Hearing: May 9, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1538 (Cook) - As Amended: April 19, 2012
Policy Committee: Business and
Professions Vote: 9 - 0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill authorizes the State Controller's Office (SCO) to
conduct recovery audits twice a year for state agencies with
expenditures exceeding $50 million in a fiscal year.
Specifically, this bill:
1)Authorizes the SCO to contract with one or more consultants to
conduct semiannual recovery audits of payments made by state
agencies to vendors, in order to detect and recover
overpayments to vendors and to recommend improved state agency
accounting operations.
2)Authorizes the SCO to require semiannual recovery audits be
performed on payments to vendors made by each state agency
that has total expenditures during a fiscal year exceeding $50
million.
3)Requires state agencies to provide the recovery audit
consultant with all information necessary for the audit.
4)Requires state agencies to pay, from recovered moneys
appropriated for the purpose, the recovery audit consultant
responsible for obtaining a reimbursement from a vendor.
5)Requires the SCO to provide copies of any report received from
a consultant contracted under this bill to the Director of
Finance (DOF) and the Bureau of State Audits (BSA) no later
than one week after the date the SCO receives the consultant's
report.
6)Requires the SCO, before January 2 of each year, to issue a
AB 1538
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report to the Legislature summarizing the contents of all
reports received pursuant to this bill during the immediately
preceding fiscal year, until January 1, 2017, at which time
this requirement is deemed inoperative.
FISCAL EFFECT
Unknown costs, potentially in excess of several hundred thousand
dollars per year, for the workload associated with the SCO
manually gathering hundreds of claims, reviewing invoices and
summarizing the information for the contractors to review during
their audits.
COMMENTS
1)Purpose . The author believes that state agencies are making
significant overpayments to private contractors and that those
overpayments are not being adequately detected under the
current review system. The author contends the proposed audits
will allow the state to recoup overpayments that are not
currently being recouped.
2)Background . Recovery auditing is a method used to identify
and correct erroneous payments. Erroneous payments are either
disbursement errors or contract compliance errors.
Disbursement errors are easier to identify and are commonly
due to human error. During a recovery audit, electronic
information is mined and compared based on a variety of data
entry fields. Matches or duplicates between fields are noted
as possible errors and are researched. Upon documenting a
valid erroneous payment, the vendor is contacted and requested
to correct the error by either reimbursing the funds or
crediting the payor's account.
Under existing law, there are several governmental entities
tasked with conducting expenditure audits including DOF, the
Controller, and at the request of the Legislature, the BSA.
This bill requires the Controller to contract with private
sector consultants to conduct semiannual recovery audit
services.
3)Previous legislation . AB 461 (Cook) of 2008, a substantially
similar bill was held in the Assembly Business and Professions
Committee.
AB 1538
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Analysis Prepared by : Julie Salley-Gray / APPR. / (916)
319-2081