BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 1259 (Emmerson) - Regional center vendor audits.
Amended: April 30, 2012 Policy Vote: Human Services 7-0
Urgency: No Mandate: No
Hearing Date: May 24, 2012 Consultant: Brendan McCarthy
SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
Bill Summary: SB 1259 would authorize regional centers to allow
one or two year exemptions from existing auditing requirements
on vendors, providing significant issues were not found in a
previous audit.
Fiscal Impact:
Unknown potential erosion of savings associated with
auditing regional center vendors (General Fund).
Unknown costs to the Department to perform additional
vendor audits (General Fund). Additional costs to be
recovered through fees on vendors.
Background: The Department of Developmental Services is
responsible for coordinating care and services for about 250,000
people with developmental disabilities. The vast majority of
these people are served by 21 regional centers, which are
non-profit entities that contract with the state. The regional
centers, in turn, contract with a variety of vendors to provide
direct services to the developmentally disabled.
An report by the Bureau of State Audits in 2010 found that
regional centers were not appropriately monitoring expenditures
by vendors.
In response to the report, the 2011 developmental services
trailer bill (SB 74, Committee on Budget and Fiscal Review,
Chapter 9, Statutes of 2011), imposed new auditing requirements
on regional center vendors. SB 74 requires vendors that receive
payments of more than $500,000 per year to obtain an independent
fiscal audit. Regional center vendors that receive payments
between $250,000 and $500,000 per year are required to obtain
either an independent audit or an independent financial review.
SB 1259 (Emmerson)
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The 2011 Budget Act assumed that these additional auditing
requirements would reduce inappropriate billing for services and
save the state General Fund about $22 million per year.
Proposed Law: SB 1259 would allow vendors subject to the
auditing requirements of the 2011 trailer bill to apply to the
regional centers for certain exemptions. Specifically, the bill
provides:
Vendors that receive between $250,000 and $1,000,000 per
year may receive a two-year exemption from audit
requirements if they have received an unqualified opinion
from their auditor (signifying that there are no material
misstatements in the financial records), or a one-year
exemption if they have received a qualified opinion
(indicating some issues with the financial statements) but
the material issues do not have an impact on regional center
activities.
Vendors that receive between $250,000 and $500,000 per year
may receive a two-year exemption if the regional center does
not find issues that have an impact on regional center
activities in the prior year financial review.
The bill would require regional centers to notify the Department
of any exemptions granted under the bill. The bill's provisions
would become inoperative on July 1, 2016.
Related Legislation: SB 74 (Committee on Budget and Fiscal
Review) Chapter 9, Statutes of 2011, imposed new auditing
requirements on regional center vendors.
Staff Comments: The 2011 Budget Act assumed savings of about $22
million per year because better auditing practices would reduce
inappropriate billing from vendors. To the extent this bill
relaxes auditing requirements, it is possible that it would
reduce the anticipated savings. Because the auditing requirement
is new, no vendors have yet completed the required audits.
Therefore, the number of vendors that may qualify for the
exemptions allowed in the bill is unknown.
Staff notes that the author is continuing to work with
stakeholders on potential amendments.
Proposed Author Amendments: The proposed author's amendments
SB 1259 (Emmerson)
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would rewrite the bill, to require the Department of
Developmental Services to audit a random selection of vendors
each year, with every individual vendor to be audited at least
once every five years. If the Department cannot pay for the
additional audits within existing resources, the bill authorizes
the Department to assess a fee on the vendors to be audited.