BILL ANALYSIS �
AB 2087
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Date of Hearing: April 18, 2012
ASSEMBLY COMMITTEE ON EDUCATION
Julia Brownley, Chair
AB 2087 (Swanson) - As Introduced: February 23, 2012
SUBJECT : School districts: emergency apportionments: audits
SUMMARY : Allows the Education Audit Appeals Panel (EAAP) to
waive or reduce penalties for audit exceptions that occurred
while a school district was under the control of a
state-appointed trustee or administrator, if corrective action
occurred within two years of the final audit report.
Specifically, this bill :
1)Authorizes the EAAP to waive or reduce penalties for audit
exceptions that occurred while a school district was under the
control of a state-appointed trustee or administrator if the
State Controller determines that the district has taken
appropriate corrective action within two years of the final
audit report.
2)Provides that this authorization does not apply to all of the
following:
a) Audit findings that are the result of mathematical
errors, clerical errors, or a failure to retain records
basic to the audit.
b) The first two audits performed after the district has
received an emergency loan.
c) Audits conducted after the governing board of the school
district assumes full control over the district..
3)Provides that, if, after two years, the Controller determines
that the district has failed to correct the deficiencies
identified in the audit report, then the district shall repay
the reimbursement or penalty and waive its right to appeal the
finding.
EXISTING LAW provides for emergency loans to school districts
that are unable to meet their current operating expenses. Such
loans are provided by legislation enacted at the request of the
district. Existing law requires districts that request and
agree to receive an emergency loan to agree to statutory terms
and conditions regarding repayment of the loan and the steps to
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be taken to return the district to financial solvency.
If a district receives an emergency loan of up to 200% of its
recommended budget reserve, then the Superintendent of Public
Instruction (SPI) is required to appoint a trustee who has the
authority to stay and rescind any action of the district
governing board and who serves until the loan is repaid and the
district has adequate fiscal systems and controls in place. If
a district receives an emergency loan of more than 200% of its
recommended budget reserve, then the SPI is required to assume
all legal rights, duties, and powers of the governing board and
to appoint an administrator to act on his or her behalf in
exercising this authority. The administrator serves under the
direction and supervision of the SPI until terminated by the SPI
at his or her discretion and after consulting with the county
superintendent of schools. The administrator is authorized to
do all of the following:
1)Implement substantial changes in the fiscal policies and
practices of the district.
2)Revise the educational programs of the district to reflect
realistic income projections and pupil performance relative to
state standards.
3)Encourage all members of the school community to accept a fair
share of the burden of the fiscal recovery.
4)Consult with the district's governing board, the exclusive
representatives of its employees, parents, and the community.
5)Consult with and seek recommendations from the SPI, FCMAT, and
the county superintendent of schools.
6)Enter into agreements on behalf of the district, subject to
the approval of the SPI, and change any existing district
rules, regulations, policies, or practices as necessary for
the effective implementation of the district's recovery plans.
The authority of the SPI and administrator continue until all of
the following occur:
1)The administrator determines, after one year has elapsed since
the district accepted the emergency loan, that future
compliance by the district with the recovery plans is
probable.
2)The SPI has approved all of the recovery plans and has
completed at least two reports identifying the district's
progress in implementing the plans.
3)The administrator certifies that all necessary collective
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bargaining agreements have been negotiated and ratified and
that they are consistent with the terms of the recovery plans.
4)The district has completed all reports required by the SPI and
the administrator.
5)The SPI determines that future compliance by the district with
the recovery plans is probable.
All costs of the administrator and other related oversight and
monitoring activities are borne by the district.
FISCAL EFFECT : Unknown
COMMENTS : When a school district receives an emergency loan in
excess of 200% of its recommended reserve, all of the duties,
responsibilities, and authority of the district's governing
board are assumed by an administrator appointed by the SPI. The
governing board has only an advisory capacity. This bill deals
with situations in which the SPI-appointed administrator makes
decisions, takes actions, or fails to take actions that lead to
audit exceptions and the imposition of financial penalties. The
author's office argues that the district should not be held
financially liable for audit exceptions that occurred while the
district was under state control, except where the audit
discovered mathematical errors, clerical errors, or a failure to
retain necessary records. Accordingly, this bill gives the
district two years to correct the deficiencies that led to the
audit exceptions and appeal to the EAAP to have the penalty
waived or reduced. If the State Controller determines that the
district has taken appropriate corrective action, then the EAAP
may, but is not required to, waive or reduce the penalty.
REGISTERED SUPPORT / OPPOSITION :
Support
None received
Opposition
None received
Analysis Prepared by : Rick Pratt / ED. / (916) 319-2087