BILL ANALYSIS �
AB 2155
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Date of Hearing: April 11, 2012
ASSEMBLY COMMITTEE ON EDUCATION
Julia Brownley, Chair
AB 2155 (Hueso) - As Amended: March 21, 2012
SUBJECT : School districts: financial statements and financial
settlements: ethics training
SUMMARY : Requires school districts and charter schools to
report specified information regarding district and school
administrator expenditures; reduces the size of the severance
pay a district superintendent can receive when his or her
contract is terminated; and deletes limitations on the severance
pay for a superintendent who was terminated due to fraud,
misappropriation of funds, of other illegal fiscal practices.
Specifically, this bill :
1) Requires the annual financial statements of school
districts to include separate line items setting forth the
values and purposes of expenditures incurred by the
district superintendent and each district administrator for
the preceding fiscal year.
2) Requires the annual financial statements of charter
schools to include separate line items setting forth the
values and purposes of expenditures incurred by each
administrator for the preceding fiscal year.
3) Requires, beginning January 1, 2013, that members of the
governing boards of community college districts, school
districts, and county offices of education receive ethics
training by January 1, 2014 and at least once every two
years thereafter. Board members whose terms expire before
January 1, 2014 are exempt from this requirement.
4) Limits, for school district superintendents whose
contract is terminated, the value of the severance cash
settlement to a maximum of 12 times his or her monthly
salary.
5) Provides, for terminated superintendents for whom the
unexpired term of the contract of greater than 12 months,
that the severance cash settlement shall be the monthly
salary multiplied by 12.
6) Deletes the requirement that the maximum severance cash
settlement for a superintendent who is terminated due to
fraud, misappropriation of funds, or other illegal fiscal
practices be limited to 6 months of salary and that the
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settlement be determined by an administrative law judge.
EXISTING LAW
1)Requires school districts and charter schools to report, no
later than September 15 each year, in a format prescribed by
the Superintendent of Public Instruction, an annual statement
of all receipts and expenditures of the district for the
preceding fiscal year.
2)Requires each local education agency (LEA) to provide for an
annual, independent audit of all funds under its jurisdiction.
3)Requires the annual audit report to include, among other
things, a summary of audit exceptions and management
improvement recommendations.
4)Requires county superintendents of schools to review audit
exceptions in audits of school districts within their
jurisdiction related to, among other things, inventory of
equipment and internal control and determine whether the
exceptions have been corrected or an acceptable plan of
correction has been developed.
5)Limits the cash settlement of a terminated school district
superintendent to his or her monthly salary times the number
of months left on the unexpired contract, not to exceed 18,
except in cases where it is believed and subsequently
confirmed that the superintendent has engaged in fraud,
misappropriation of funds, or other illegal fiscal practices.
In such cases, the maximum settlement is determined by an
administrative law judge, up to six times the superintendent's
monthly salary.
6)Requires local agency officials, other than community college
district, school district, and county office of education
officials to take specified ethics training at least once
every two years.
FISCAL EFFECT : Unknown
COMMENTS : This bill is in response to alleged corruption in
the Sweetwater Union High School District. In January the San
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Diego County District Attorney filed a total of 26 felony
charges against the district's former superintendent, a former
board member, and two current members of the board. The charges
allege a "pay to play" culture within the district, in which
favors such as expensive dinners, concert tickets, Los Angeles
Laker playoff tickets, Rose Bowl tickets and a trip to Napa
Valley were bestowed on district officials by contractors and
venders. All four have pled not guilty. The former
superintendent's contract was terminated by a 5-0 vote of the
district board and he was given an 18-month buyout worth more
than $400,000.
New mandate duplicates current requirements. This bill requires
line item accounting of receipts and expenditures of district
superintendents and all district and charter school
administrators in each district's and charter school's annual
financial statement. According to the Legislative Counsel's
Digest, this imposes a new state-mandated local program.
A school district's and a charter school's annual financial
statement is reviewed by the county superintendent of schools
and chartering authority, respectively, only for mathematical
accuracy. Such a review is not likely to disclose fraud or
abuse. However, all district and charter school receipts and
expenditures are subject to an annual independent audit under
existing law, and any audit exceptions must be disclosed in the
audit report. According to the California State Controller,
auditing standards require auditors to verify that financial
statements are free of material misstatement, whether caused by
error, fraud, or illegal acts. To avoid creating a new mandate
that does not strengthen existing fiscal oversight, staff
recommends that the bill be amended to delete this requirement.
Termination of contracts. For contract employees who are
terminated, existing law allows the maximum severance pay to be
equal to the monthly salary times the number of months left on
the unexpired contract, up to a maximum of 18 months. This
provision applies to contracts of employment between an employee
and all local agencies. This bill, for school superintendents
only, limits the maximum buyout to 12 month's salary and
provides that, if the number of months left on the unexpired
contract is greater than 12, the buyout shall be equal to 12
month's salary.
Drafting error. Existing law also limits severance pay for
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terminated school district superintendents to six months, if the
district believes and subsequently confirms, pursuant to an
independent audit, that the superintendent engaged in fraud,
misappropriation of funds, or other illegal fiscal practices.
Existing law requires the actual buyout in such cases to be
determined by an administrative law judge after a hearing. This
bill deletes these provisions and effectively increases the
maximum buyout to 12 month's salary. According to the author's
office, this is a drafting error. Staff recommends the bill be
amended to restore these provisions.
Ethics training. Existing law requires city council members,
county supervisors and other local government officials to
receive ethics training every two years. Members of the
governing boards of community college districts, school
districts, and county office of education are exempt from this
requirement. This bill requires those governing board members
to receive ethics training once every two years beginning in
2013. This requirement can be satisfied by taking a free online
training course offered by the Fair Political Practices
Commission.
Arguments in support. The author's office argues that this bill
creates stronger fiscal controls for school districts, and
provides greater transparency of and public access to school
district budget expenditures. In addition, the author argues
that limiting the severance pay of school district
superintendents protects limited school funding.
Arguments against. Opponents object to the new financial
reporting requirements and to reducing the maximum buyout to 12
month's salary. They argue that the mandate to add itemized
receipts and expenditures of all district administrators to each
district's annual financial statement is costly, but unnecessary
due to the existing requirement for independent audits. In
addition, they argue that superintendents have no due process
rights and contracts can be unilaterally broken. Opponents
argue that, superintendents accept significant financial risks
when they move their families to a new community, and reducing
the severance when a contract is broken could discourage them
from making that commitment, thereby making recruitment more
difficult.
REGISTERED SUPPORT / OPPOSITION :
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Support
None received
Opposition
Association of California School Administrators (unless amended)
California School Boards Association
Small School Districts Association
Analysis Prepared by : Rick Pratt / ED. / (916) 319-2087