BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 899 (La Malfa)
Hearing Date: 5/23/2011 Amended: 5/17/2011
As proposed to be amended
Consultant: Bob Franzoia Policy Vote: Agriculture 6-0
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BILL SUMMARY: SB 899 would delete the duty of the Department of
Food and Agriculture (department) to conduct fiscal and
performance audits of county fairs and citrus fairs. This bill
would instead allow, but could require that the books and
accounts of all district agricultural associations, county fairs
and citrus fairs be audited by an independent registered
certified public accountant. This bill would permit
discretionary audits and may at the request of the department,
permit a fair to conduct an audit if the cost of the audit is
below a specified threshold.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Discretionary audits No new costs; potential savings over
General/
existing department audit
requirementsSpecial*
State mandated local Unknown; potentially significant, likely
zero General/
program Special*
* Department of Food and Agriculture Fund
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STAFF COMMENTS: This bill may meet the criteria for referral to
the Suspense File.
Under existing law, the department is responsible for, among
other things, ensuring the integrity of the Fair and Exposition
Fund and providing oversight of activities carried out by each
California fair. That oversight includes conducting fiscal and
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performance audits of county fairs and citrus fairs that are
requested by the fair that is the subject of the audit, and that
the department deems to be necessary. This bill would provide
for the audits except in instances where the fair and the
department concur that an independent registered certified
public accountant may be contracted for this purpose, as set
forth in Food and Agriculture Code 3205, as added by this bill.
Food and Agriculture Code 3205, as added by this bill, provides
in part, that fairs may be examined and audited annually by an
independent registered certified public accountant (CPA) if the
cost to do so is equal to or less than the costs of the
Department to conduct such an audit and the fair requests an
independent audit. Preliminary information indicates department
compliance audit costs for county fairs average $10,013 (two
fairs), audit costs for county and citrus fairs average $13,853
and fiscal and compliance audit costs average $14,813. Under
this provision, fairs may submit an annual audit only when the
cost of an independent (non department) audit is less than the
above amounts and the fair requests the audit. Under those
conditions, there will likely be far fewer, if any, audits.
This section provides that fair may submit an annual audit, at
the request of the department. How this would function is
unclear. If the department requests an audit, that would impose
a state mandated program but it also appears the bill language
allows a fair to "decline" the request, resulting in no audit.
If there were reimbursable costs, those costs presumably would
be less than current department audit costs. Also, since fairs
have enterprise functions, it may be that any mandate costs
would not be reimbursable. In that case, it may be a savings to
the fairs to mandate that they conduct an audit by an
independent registered certified public account as the cost of
such an audit is presumably less than a department audit. Staff
recommends this bill be amended to clarify how this provision
would be implemented.
The May Revise noted the following: ?The Secretary of Food and
Agriculture will develop a plan to be included in the Governor's
2012-13 Budget, addressing the future operation, maintenance,
and oversight of the Network of California Fairs, including real
and personal property and the feasibility to restructure the
governance of the fairs within this network.
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This bill, as proposed to be amended, would be as follows:
SECTION 1. Section 19620 of the Business and Professions Code
is amended to read:
19620. (a) The Legislature finds and declares that the
Department of Food and Agriculture is responsible for ensuring
the integrity of the Fair and Exposition Fund, administering
allocations from the fund to the network of California fairs, as
defined in Sections 19418 to 19418.3, inclusive, and providing
oversight of activities carried out by each California fair.
(b) Oversight shall include, but not be limited to, the
following:
(1) Monitoring the solvency of the Fair and Exposition Fund.
(2) Distributing available state resources to the network of
California fairs based on criteria for state allocations
approved by the Secretary of Food and Agriculture. The criteria
for the distribution of available state resources to the network
of California fairs shall not include a consideration of the
structure that governs the fair.
(3) Creating a framework for administration of the network of
California fairs allowing for maximum autonomy and local
decision making authority, and conducting, or causing to be
conducted, annual fiscal audits and periodic compliance audits.
(4) Conducting fiscal and performance audits of county fairs
and citrus fruit fairs that are requested by the fair that is
the subject of the audit, except in instances where the fair and
the Department concur that an independent registered certified
public accountant may be contracted for this purpose in
accordance with Section 3205 of the Food and Agricultural Code,
and that the Department of Food and Agriculture deems to be
necessary.
(5) Guiding and providing incentives to fairs to seek
matching funds and generate new revenue from a variety of
sources.
(6) Supporting continuous improvement of fair programming to
ensure that California fairs remain highly relevant community
institutions.
SEC. 2. Section 19620.1 of the Business and Professions
Code is amended to read:
19620.1. From the total revenue received by the department,
exclusive of money received pursuant to Sections 19640 and
19641, the Legislature shall annually appropriate to the
department those sums as it deems necessary for the following
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purposes:
(a) For the oversight of the network of California fairs
receiving
money from the fund.
(b) For the auditing of all district agricultural association
fairs, county fairs, and citrus fruit fairs, and review of such
audits as are prepared in accordance with Section 19620 of the
Business and Professions Code and Section 3205 of the Food and
Agricultural Code.
SEC. 3. Section 3205 is added to the Food and Agricultural
Code, to read:
3205. Notwithstanding any other law, all district
agricultural association fairs, county fairs, and citrus fairs
may, at the request of the Department, submit an annual audit to
the department for review, in accordance with the following:
(a) The books and accounts of all district agricultural
association fairs, county fairs, and citrus fairs for the
calendar year or fiscal year, as the case may be, may be
examined and audited annually by an independent registered
certified public accountant (CPA) if the cost to do so is equal
to or less than the costs of the Department to conduct such an
audit and the fair requests an independent audit. A summary of
this examination, certified by that CPA, may be appended to the
fair's annual statement of operations, along with the CPA's
recommendations.
(b) With the approval of the department, two or more fairs
may contract for a single audit by the same certified public
accountant in order to be more cost effective.
SECTION 1. SEC. 4. Section 4051 of
the Food and Agricultural Code is amended to read:
4051. An association, with the approval of the Department of
Food and Agriculture, may do any of the following:
(a) Contract.
(b) Purchase, acquire, hold, sell, exchange, or convey any
interest in real or personal property and beautify or improve
that property. Any acquisition of land or other real property
shall be
subject to the Property Acquisition Law (Part 11 (commencing
with Section 15850) of Division 3 of Title 2 of the Government
Code).
(c) Lease, let, or grant licenses for the use of its real
estate or personal property, or any portion of that property, to
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any person or public body for whatever purpose may be approved
by the board.
(d) Use or manage its real estate or personal property, or
any portion of that property, for any or all of the purposes of
this section jointly with any lessee, sublessee, or licensee, or
otherwise
use or manage the property in connection with the lease,
sublease, or license which is made or granted.
(e) Lease or let its real property for use as a public park,
or for recreational or playground purposes.
(f) Rent or permit the use of its premises for any purpose
which is beneficial to the agricultural industry, including, but
not limited to, the holding of sales or auctions of cattle or
other
livestock.
(g) Contract with any county or county fair association for
holding a fair jointly with the county or county fair
association. The joint fair is a district fair of the
association.
(h) Make permanent improvements upon publicly owned real
property adjacent to real property of the district when the
improvements materially benefit the property of the district.
(i) Pledge any and all revenues, moneys, accounts, accounts
receivable, contract rights, and other rights to payment of
whatever kind, pursuant to such terms and conditions as are
approved by the board. The revenues, moneys, accounts, accounts
receivable, contract rights, and other rights to payment of
whatever kind pledged by the association or its assignees
constitute a lien and security interest which immediately
attaches to the property so pledged and is effective, binding,
and enforceable against the association, its successors,
purchasers of the property so pledged, creditors, and all others
asserting rights therein, to the extent set forth, and in
accordance with, the terms and conditions of the pledge,
irrespective of whether those persons have notice of the pledge
and without the need for any physical delivery, recordation,
filing, or further act.
SEC. 5. If the Commission on State Mandates determines
that this act contains costs mandated by the state,
reimbursement to local agencies and school districts for those
costs
shall be made pursuant to Part 7 (commencing with Section 17500)
of Division 4 of Title 2 of the Government Code.
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