| 63 | | - | |
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| 64 | | - | 5076. (a) In order to renew its registration in an active status or convert to an active status, a firm, as defined in Section 5035.1, shall have a peer review report of its accounting and auditing practice accepted by a board-recognized peer review program no less frequently than every three years.(b) For purposes of this article, the following definitions apply:(1) Peer review means a study, appraisal, or review conducted in accordance with professional standards of the professional work of a firm, and may include an evaluation of other factors in accordance with the requirements specified by the board in regulations. The peer review report shall be issued by an individual who has a valid and current license, certificate, or permit to practice public accountancy from this state or another state and is unaffiliated with the firm being reviewed.(2) Accounting and auditing practice includes any services that were performed in the prior three years using professional standards defined by the board in regulations.(c) (1) The board shall adopt regulations as necessary to implement, interpret, and make specific the peer review requirements in this section, including, but not limited to, regulations specifying the requirements for board recognition of a peer review program, standards for administering a peer review, extensions of time for fulfilling the peer review requirement, exclusions from the peer review program, and document submission.(2) The board shall adopt regulations as necessary to implement, interpret, and make specific the peer review requirements for firms that conduct local educational agency financial and compliance audits, including that the peer review team has at least one team member with experience conducting local educational agency financial and compliance audits and that a local educational agency financial and compliance audit is included in the engagements selected for peer review.(d) Nothing in this section shall prohibit the board from initiating an investigation and imposing discipline against a firm or licensee, either as the result of a complaint that alleges violations of statutes, rules, or regulations, or from information contained in a peer review report received by the board.(e) A firm issued a peer reviewed report with a rating of fail, as defined by the board in regulation, shall submit a copy of that report to the board. The board shall establish in regulation the time period that a firm must submit the report to the board. This period shall not exceed 60 days from the time the report is accepted by a board-recognized peer review program provider to the date the report is submitted to the board.(f) (1) A board-recognized peer review program provider shall file a copy with the board of all peer review reports issued to California-licensed firms with a rating of fail. The board shall establish in regulation the time period that a board-recognized peer review program provider shall file the report with the board. This period shall not exceed 60 days from the time the report is accepted by a board-recognized peer review program provider to the date the report is filed with the board. These reports may be filed with the board electronically.(2) Nothing in this subdivision shall require a board-recognized peer review program provider, when administering peer reviews in another state, to violate the laws of that state.(g) The board shall define a peer review report rating of fail in regulation.(h) Any requirements imposed by a board-recognized peer review program on a firm in conjunction with the completion of a peer review shall be separate from, and in addition to, any action by the board pursuant to this section.(i) Any peer review report with a rating of fail submitted to the board in conjunction with this section shall be collected for investigatory purposes.(j) Nothing in this section affects the discovery or admissibility of evidence in a civil or criminal action.(k) Nothing in this section requires any firm to become a member of any professional organization.(l) A peer reviewer shall not disclose information concerning licensees or their clients obtained during a peer review, unless specifically authorized pursuant to this section, Section 5076.1, or regulations prescribed by the board.(m) A board-recognized peer review program provider shall utilize a secure web-based application, such as Facilitated State Board Access, to provide the board with objective information and data relating to the progress, participation, and results of a peer review, including peer review reports, peer review status, and correspondence between the board-recognized peer review provider and the firm.(1) Firms shall participate in the secure web-based application utilized by the board-recognized peer review provider.(2) Firms shall authorize the board access to the secure web-based application and authorize the board-recognized peer review program provider to comply with this subdivision. |
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| 65 | | - | |
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| 66 | | - | 5076. (a) In order to renew its registration in an active status or convert to an active status, a firm, as defined in Section 5035.1, shall have a peer review report of its accounting and auditing practice accepted by a board-recognized peer review program no less frequently than every three years.(b) For purposes of this article, the following definitions apply:(1) Peer review means a study, appraisal, or review conducted in accordance with professional standards of the professional work of a firm, and may include an evaluation of other factors in accordance with the requirements specified by the board in regulations. The peer review report shall be issued by an individual who has a valid and current license, certificate, or permit to practice public accountancy from this state or another state and is unaffiliated with the firm being reviewed.(2) Accounting and auditing practice includes any services that were performed in the prior three years using professional standards defined by the board in regulations.(c) (1) The board shall adopt regulations as necessary to implement, interpret, and make specific the peer review requirements in this section, including, but not limited to, regulations specifying the requirements for board recognition of a peer review program, standards for administering a peer review, extensions of time for fulfilling the peer review requirement, exclusions from the peer review program, and document submission.(2) The board shall adopt regulations as necessary to implement, interpret, and make specific the peer review requirements for firms that conduct local educational agency financial and compliance audits, including that the peer review team has at least one team member with experience conducting local educational agency financial and compliance audits and that a local educational agency financial and compliance audit is included in the engagements selected for peer review.(d) Nothing in this section shall prohibit the board from initiating an investigation and imposing discipline against a firm or licensee, either as the result of a complaint that alleges violations of statutes, rules, or regulations, or from information contained in a peer review report received by the board.(e) A firm issued a peer reviewed report with a rating of fail, as defined by the board in regulation, shall submit a copy of that report to the board. The board shall establish in regulation the time period that a firm must submit the report to the board. This period shall not exceed 60 days from the time the report is accepted by a board-recognized peer review program provider to the date the report is submitted to the board.(f) (1) A board-recognized peer review program provider shall file a copy with the board of all peer review reports issued to California-licensed firms with a rating of fail. The board shall establish in regulation the time period that a board-recognized peer review program provider shall file the report with the board. This period shall not exceed 60 days from the time the report is accepted by a board-recognized peer review program provider to the date the report is filed with the board. These reports may be filed with the board electronically.(2) Nothing in this subdivision shall require a board-recognized peer review program provider, when administering peer reviews in another state, to violate the laws of that state.(g) The board shall define a peer review report rating of fail in regulation.(h) Any requirements imposed by a board-recognized peer review program on a firm in conjunction with the completion of a peer review shall be separate from, and in addition to, any action by the board pursuant to this section.(i) Any peer review report with a rating of fail submitted to the board in conjunction with this section shall be collected for investigatory purposes.(j) Nothing in this section affects the discovery or admissibility of evidence in a civil or criminal action.(k) Nothing in this section requires any firm to become a member of any professional organization.(l) A peer reviewer shall not disclose information concerning licensees or their clients obtained during a peer review, unless specifically authorized pursuant to this section, Section 5076.1, or regulations prescribed by the board.(m) A board-recognized peer review program provider shall utilize a secure web-based application, such as Facilitated State Board Access, to provide the board with objective information and data relating to the progress, participation, and results of a peer review, including peer review reports, peer review status, and correspondence between the board-recognized peer review provider and the firm.(1) Firms shall participate in the secure web-based application utilized by the board-recognized peer review provider.(2) Firms shall authorize the board access to the secure web-based application and authorize the board-recognized peer review program provider to comply with this subdivision. |
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| 67 | | - | |
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| 68 | | - | 5076. (a) In order to renew its registration in an active status or convert to an active status, a firm, as defined in Section 5035.1, shall have a peer review report of its accounting and auditing practice accepted by a board-recognized peer review program no less frequently than every three years.(b) For purposes of this article, the following definitions apply:(1) Peer review means a study, appraisal, or review conducted in accordance with professional standards of the professional work of a firm, and may include an evaluation of other factors in accordance with the requirements specified by the board in regulations. The peer review report shall be issued by an individual who has a valid and current license, certificate, or permit to practice public accountancy from this state or another state and is unaffiliated with the firm being reviewed.(2) Accounting and auditing practice includes any services that were performed in the prior three years using professional standards defined by the board in regulations.(c) (1) The board shall adopt regulations as necessary to implement, interpret, and make specific the peer review requirements in this section, including, but not limited to, regulations specifying the requirements for board recognition of a peer review program, standards for administering a peer review, extensions of time for fulfilling the peer review requirement, exclusions from the peer review program, and document submission.(2) The board shall adopt regulations as necessary to implement, interpret, and make specific the peer review requirements for firms that conduct local educational agency financial and compliance audits, including that the peer review team has at least one team member with experience conducting local educational agency financial and compliance audits and that a local educational agency financial and compliance audit is included in the engagements selected for peer review.(d) Nothing in this section shall prohibit the board from initiating an investigation and imposing discipline against a firm or licensee, either as the result of a complaint that alleges violations of statutes, rules, or regulations, or from information contained in a peer review report received by the board.(e) A firm issued a peer reviewed report with a rating of fail, as defined by the board in regulation, shall submit a copy of that report to the board. The board shall establish in regulation the time period that a firm must submit the report to the board. This period shall not exceed 60 days from the time the report is accepted by a board-recognized peer review program provider to the date the report is submitted to the board.(f) (1) A board-recognized peer review program provider shall file a copy with the board of all peer review reports issued to California-licensed firms with a rating of fail. The board shall establish in regulation the time period that a board-recognized peer review program provider shall file the report with the board. This period shall not exceed 60 days from the time the report is accepted by a board-recognized peer review program provider to the date the report is filed with the board. These reports may be filed with the board electronically.(2) Nothing in this subdivision shall require a board-recognized peer review program provider, when administering peer reviews in another state, to violate the laws of that state.(g) The board shall define a peer review report rating of fail in regulation.(h) Any requirements imposed by a board-recognized peer review program on a firm in conjunction with the completion of a peer review shall be separate from, and in addition to, any action by the board pursuant to this section.(i) Any peer review report with a rating of fail submitted to the board in conjunction with this section shall be collected for investigatory purposes.(j) Nothing in this section affects the discovery or admissibility of evidence in a civil or criminal action.(k) Nothing in this section requires any firm to become a member of any professional organization.(l) A peer reviewer shall not disclose information concerning licensees or their clients obtained during a peer review, unless specifically authorized pursuant to this section, Section 5076.1, or regulations prescribed by the board.(m) A board-recognized peer review program provider shall utilize a secure web-based application, such as Facilitated State Board Access, to provide the board with objective information and data relating to the progress, participation, and results of a peer review, including peer review reports, peer review status, and correspondence between the board-recognized peer review provider and the firm.(1) Firms shall participate in the secure web-based application utilized by the board-recognized peer review provider.(2) Firms shall authorize the board access to the secure web-based application and authorize the board-recognized peer review program provider to comply with this subdivision. |
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| 69 | | - | |
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| 70 | | - | |
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| 71 | | - | |
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| 72 | | - | 5076. (a) In order to renew its registration in an active status or convert to an active status, a firm, as defined in Section 5035.1, shall have a peer review report of its accounting and auditing practice accepted by a board-recognized peer review program no less frequently than every three years. |
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| 73 | | - | |
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| 74 | | - | (b) For purposes of this article, the following definitions apply: |
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| 75 | | - | |
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| 76 | | - | (1) Peer review means a study, appraisal, or review conducted in accordance with professional standards of the professional work of a firm, and may include an evaluation of other factors in accordance with the requirements specified by the board in regulations. The peer review report shall be issued by an individual who has a valid and current license, certificate, or permit to practice public accountancy from this state or another state and is unaffiliated with the firm being reviewed. |
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| 77 | | - | |
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| 78 | | - | (2) Accounting and auditing practice includes any services that were performed in the prior three years using professional standards defined by the board in regulations. |
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| 79 | | - | |
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| 80 | | - | (c) (1) The board shall adopt regulations as necessary to implement, interpret, and make specific the peer review requirements in this section, including, but not limited to, regulations specifying the requirements for board recognition of a peer review program, standards for administering a peer review, extensions of time for fulfilling the peer review requirement, exclusions from the peer review program, and document submission. |
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| 81 | | - | |
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| 82 | | - | (2) The board shall adopt regulations as necessary to implement, interpret, and make specific the peer review requirements for firms that conduct local educational agency financial and compliance audits, including that the peer review team has at least one team member with experience conducting local educational agency financial and compliance audits and that a local educational agency financial and compliance audit is included in the engagements selected for peer review. |
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| 83 | | - | |
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| 84 | | - | (d) Nothing in this section shall prohibit the board from initiating an investigation and imposing discipline against a firm or licensee, either as the result of a complaint that alleges violations of statutes, rules, or regulations, or from information contained in a peer review report received by the board. |
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| 85 | | - | |
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| 86 | | - | (e) A firm issued a peer reviewed report with a rating of fail, as defined by the board in regulation, shall submit a copy of that report to the board. The board shall establish in regulation the time period that a firm must submit the report to the board. This period shall not exceed 60 days from the time the report is accepted by a board-recognized peer review program provider to the date the report is submitted to the board. |
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| 87 | | - | |
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| 88 | | - | (f) (1) A board-recognized peer review program provider shall file a copy with the board of all peer review reports issued to California-licensed firms with a rating of fail. The board shall establish in regulation the time period that a board-recognized peer review program provider shall file the report with the board. This period shall not exceed 60 days from the time the report is accepted by a board-recognized peer review program provider to the date the report is filed with the board. These reports may be filed with the board electronically. |
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| 89 | | - | |
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| 90 | | - | (2) Nothing in this subdivision shall require a board-recognized peer review program provider, when administering peer reviews in another state, to violate the laws of that state. |
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| 91 | | - | |
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| 92 | | - | (g) The board shall define a peer review report rating of fail in regulation. |
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| 93 | | - | |
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| 94 | | - | (h) Any requirements imposed by a board-recognized peer review program on a firm in conjunction with the completion of a peer review shall be separate from, and in addition to, any action by the board pursuant to this section. |
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| 95 | | - | |
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| 96 | | - | (i) Any peer review report with a rating of fail submitted to the board in conjunction with this section shall be collected for investigatory purposes. |
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| 97 | | - | |
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| 98 | | - | (j) Nothing in this section affects the discovery or admissibility of evidence in a civil or criminal action. |
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| 99 | | - | |
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| 100 | | - | (k) Nothing in this section requires any firm to become a member of any professional organization. |
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| 101 | | - | |
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| 102 | | - | (l) A peer reviewer shall not disclose information concerning licensees or their clients obtained during a peer review, unless specifically authorized pursuant to this section, Section 5076.1, or regulations prescribed by the board. |
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| 103 | | - | |
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| 104 | | - | (m) A board-recognized peer review program provider shall utilize a secure web-based application, such as Facilitated State Board Access, to provide the board with objective information and data relating to the progress, participation, and results of a peer review, including peer review reports, peer review status, and correspondence between the board-recognized peer review provider and the firm. |
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| 105 | | - | |
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| 106 | | - | (1) Firms shall participate in the secure web-based application utilized by the board-recognized peer review provider. |
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| 107 | | - | |
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| 108 | | - | (2) Firms shall authorize the board access to the secure web-based application and authorize the board-recognized peer review program provider to comply with this subdivision. |
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| 109 | | - | |
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| 110 | | - | SEC. 2. Section 14504.2 of the Education Code is amended to read:14504.2. (a) The Controller may perform quality control reviews of audit working papers to determine whether audits are performed in conformity with subdivision (a) of Section 14503. The Department of Finance may refer an independent auditor of a school district local educational agency to the Controller for a review pursuant to this section if the Department of Finance finds that an audit of a school district local educational agency was conducted in a manner that may constitute noncompliance with subdivision (a) of Section 14503. The Controller shall communicate the results of his or her the Controllers reviews to the Department of Finance, the independent auditor, and the school district or office of the county superintendent of schools local educational agency for which the audit was performed, and shall review his or her the Controllers findings with the independent auditor.(b) Prior to the performance of any quality control reviews, the Controller shall develop and publish guidelines and standards for those reviews. Pursuant to the development of those guidelines and standards, the Controller shall provide opportunity for public comment.(c) (1) The Controller shall conduct a quality control review of the audit working papers of the independent auditor who performed the audits for a local education educational agency for the prior three fiscal years if any of the following circumstances exists:(A) The local education educational agency has received an emergency apportionment pursuant to Article 2 (commencing with Section 41320) or Article 2.5 (commencing with Section 41325) of Chapter 3 of Part 24. 24 of Division 3 of Title 2.(B) The budget of the local education educational agency is disapproved or the local education educational agency has received a negative certification on any budget or interim financial report, as defined in Section 42131, during the current or preceding fiscal year.(C) The responsible county superintendent of schools has otherwise determined that a lack of going concern exists for a local education educational agency pursuant to Section 42127.6.(2) If the quality control review of the Controller indicates that the audit was conducted in a manner that may constitute unprofessional conduct as defined pursuant to Section 5100 of the Business and Professions Code, including, but not limited to, gross negligence resulting in a material misstatement in the audit, the Controller shall refer the case to the California Board of Accountancy. If the California Board of Accountancy finds that the independent auditor conducted an audit in an unprofessional manner, the independent auditor is prohibited from performing any audit of a local education educational agency for a period of three years, in addition to any other penalties that the California Board of Accountancy may impose.(d) The Controller shall conduct a quality control review after an authorized certified public accountant or public accountant listed in the Certified Public Accountants Directory Service (1) completes its first local educational agency financial statement and compliance audit or (2) completes its first local educational agency financial statement and compliance audit after three or more years of not having completed an audit.(e) The Controller shall conduct a quality control review of certified public accounts and public accountants conducting financial statement and compliance audits of charter schools every three years to ensure that all certified public accountant firms and public accountant firms are periodically reviewed.(d)(f) In any matter that is referred to the California Board of Accountancy under subparagraph (A) of paragraph (1) of subdivision (c), the Controller may suspend the independent auditor from performing any local education educational agency audits pending final disposition of the matter by the California Board of Accountancy if the Controller gives the independent auditor notice and an opportunity to respond to that suspension. The independent auditor shall be given credit for any period of suspension if the California Board of Accountancy prohibits the independent auditor from performing audits of the local education educational agency under subdivision (c). In no event may the The Controller shall not suspend an independent auditor under this subdivision for a period of longer than three years.(e)(g) The county superintendent of schools or the county board of education schools, the chartering authority, the Controller, or the Superintendent may refer an independent auditor of a local education educational agency to the California Board of Accountancy for action pursuant to described in paragraph (2) of subdivision (c) if an any of the following circumstances exist:(1) An audit of a local education educational agency was conducted in a manner that may constitute unprofessional conduct as defined by Section 5100 of the Business and Professions Code, including, but not limited to, gross negligence resulting in a material misstatement in the audit.(2) Material deficiencies are discovered in the quality control review conducted pursuant to this section.(3) Material deficiencies are discovered in the peer review conducted in accordance with the Government Auditing Standards.(4) The continuing education and prior experience requirements of Section 41020 are not met.(h) For purposes of this section, local educational agency means a school district, county office of education, or charter school. |
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| 111 | | - | |
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| 112 | | - | SEC. 2. Section 14504.2 of the Education Code is amended to read: |
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| 113 | | - | |
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| 114 | | - | ### SEC. 2. |
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| 115 | | - | |
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| 116 | | - | 14504.2. (a) The Controller may perform quality control reviews of audit working papers to determine whether audits are performed in conformity with subdivision (a) of Section 14503. The Department of Finance may refer an independent auditor of a school district local educational agency to the Controller for a review pursuant to this section if the Department of Finance finds that an audit of a school district local educational agency was conducted in a manner that may constitute noncompliance with subdivision (a) of Section 14503. The Controller shall communicate the results of his or her the Controllers reviews to the Department of Finance, the independent auditor, and the school district or office of the county superintendent of schools local educational agency for which the audit was performed, and shall review his or her the Controllers findings with the independent auditor.(b) Prior to the performance of any quality control reviews, the Controller shall develop and publish guidelines and standards for those reviews. Pursuant to the development of those guidelines and standards, the Controller shall provide opportunity for public comment.(c) (1) The Controller shall conduct a quality control review of the audit working papers of the independent auditor who performed the audits for a local education educational agency for the prior three fiscal years if any of the following circumstances exists:(A) The local education educational agency has received an emergency apportionment pursuant to Article 2 (commencing with Section 41320) or Article 2.5 (commencing with Section 41325) of Chapter 3 of Part 24. 24 of Division 3 of Title 2.(B) The budget of the local education educational agency is disapproved or the local education educational agency has received a negative certification on any budget or interim financial report, as defined in Section 42131, during the current or preceding fiscal year.(C) The responsible county superintendent of schools has otherwise determined that a lack of going concern exists for a local education educational agency pursuant to Section 42127.6.(2) If the quality control review of the Controller indicates that the audit was conducted in a manner that may constitute unprofessional conduct as defined pursuant to Section 5100 of the Business and Professions Code, including, but not limited to, gross negligence resulting in a material misstatement in the audit, the Controller shall refer the case to the California Board of Accountancy. If the California Board of Accountancy finds that the independent auditor conducted an audit in an unprofessional manner, the independent auditor is prohibited from performing any audit of a local education educational agency for a period of three years, in addition to any other penalties that the California Board of Accountancy may impose.(d) The Controller shall conduct a quality control review after an authorized certified public accountant or public accountant listed in the Certified Public Accountants Directory Service (1) completes its first local educational agency financial statement and compliance audit or (2) completes its first local educational agency financial statement and compliance audit after three or more years of not having completed an audit.(e) The Controller shall conduct a quality control review of certified public accounts and public accountants conducting financial statement and compliance audits of charter schools every three years to ensure that all certified public accountant firms and public accountant firms are periodically reviewed.(d)(f) In any matter that is referred to the California Board of Accountancy under subparagraph (A) of paragraph (1) of subdivision (c), the Controller may suspend the independent auditor from performing any local education educational agency audits pending final disposition of the matter by the California Board of Accountancy if the Controller gives the independent auditor notice and an opportunity to respond to that suspension. The independent auditor shall be given credit for any period of suspension if the California Board of Accountancy prohibits the independent auditor from performing audits of the local education educational agency under subdivision (c). In no event may the The Controller shall not suspend an independent auditor under this subdivision for a period of longer than three years.(e)(g) The county superintendent of schools or the county board of education schools, the chartering authority, the Controller, or the Superintendent may refer an independent auditor of a local education educational agency to the California Board of Accountancy for action pursuant to described in paragraph (2) of subdivision (c) if an any of the following circumstances exist:(1) An audit of a local education educational agency was conducted in a manner that may constitute unprofessional conduct as defined by Section 5100 of the Business and Professions Code, including, but not limited to, gross negligence resulting in a material misstatement in the audit.(2) Material deficiencies are discovered in the quality control review conducted pursuant to this section.(3) Material deficiencies are discovered in the peer review conducted in accordance with the Government Auditing Standards.(4) The continuing education and prior experience requirements of Section 41020 are not met.(h) For purposes of this section, local educational agency means a school district, county office of education, or charter school. |
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| 117 | | - | |
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| 118 | | - | 14504.2. (a) The Controller may perform quality control reviews of audit working papers to determine whether audits are performed in conformity with subdivision (a) of Section 14503. The Department of Finance may refer an independent auditor of a school district local educational agency to the Controller for a review pursuant to this section if the Department of Finance finds that an audit of a school district local educational agency was conducted in a manner that may constitute noncompliance with subdivision (a) of Section 14503. The Controller shall communicate the results of his or her the Controllers reviews to the Department of Finance, the independent auditor, and the school district or office of the county superintendent of schools local educational agency for which the audit was performed, and shall review his or her the Controllers findings with the independent auditor.(b) Prior to the performance of any quality control reviews, the Controller shall develop and publish guidelines and standards for those reviews. Pursuant to the development of those guidelines and standards, the Controller shall provide opportunity for public comment.(c) (1) The Controller shall conduct a quality control review of the audit working papers of the independent auditor who performed the audits for a local education educational agency for the prior three fiscal years if any of the following circumstances exists:(A) The local education educational agency has received an emergency apportionment pursuant to Article 2 (commencing with Section 41320) or Article 2.5 (commencing with Section 41325) of Chapter 3 of Part 24. 24 of Division 3 of Title 2.(B) The budget of the local education educational agency is disapproved or the local education educational agency has received a negative certification on any budget or interim financial report, as defined in Section 42131, during the current or preceding fiscal year.(C) The responsible county superintendent of schools has otherwise determined that a lack of going concern exists for a local education educational agency pursuant to Section 42127.6.(2) If the quality control review of the Controller indicates that the audit was conducted in a manner that may constitute unprofessional conduct as defined pursuant to Section 5100 of the Business and Professions Code, including, but not limited to, gross negligence resulting in a material misstatement in the audit, the Controller shall refer the case to the California Board of Accountancy. If the California Board of Accountancy finds that the independent auditor conducted an audit in an unprofessional manner, the independent auditor is prohibited from performing any audit of a local education educational agency for a period of three years, in addition to any other penalties that the California Board of Accountancy may impose.(d) The Controller shall conduct a quality control review after an authorized certified public accountant or public accountant listed in the Certified Public Accountants Directory Service (1) completes its first local educational agency financial statement and compliance audit or (2) completes its first local educational agency financial statement and compliance audit after three or more years of not having completed an audit.(e) The Controller shall conduct a quality control review of certified public accounts and public accountants conducting financial statement and compliance audits of charter schools every three years to ensure that all certified public accountant firms and public accountant firms are periodically reviewed.(d)(f) In any matter that is referred to the California Board of Accountancy under subparagraph (A) of paragraph (1) of subdivision (c), the Controller may suspend the independent auditor from performing any local education educational agency audits pending final disposition of the matter by the California Board of Accountancy if the Controller gives the independent auditor notice and an opportunity to respond to that suspension. The independent auditor shall be given credit for any period of suspension if the California Board of Accountancy prohibits the independent auditor from performing audits of the local education educational agency under subdivision (c). In no event may the The Controller shall not suspend an independent auditor under this subdivision for a period of longer than three years.(e)(g) The county superintendent of schools or the county board of education schools, the chartering authority, the Controller, or the Superintendent may refer an independent auditor of a local education educational agency to the California Board of Accountancy for action pursuant to described in paragraph (2) of subdivision (c) if an any of the following circumstances exist:(1) An audit of a local education educational agency was conducted in a manner that may constitute unprofessional conduct as defined by Section 5100 of the Business and Professions Code, including, but not limited to, gross negligence resulting in a material misstatement in the audit.(2) Material deficiencies are discovered in the quality control review conducted pursuant to this section.(3) Material deficiencies are discovered in the peer review conducted in accordance with the Government Auditing Standards.(4) The continuing education and prior experience requirements of Section 41020 are not met.(h) For purposes of this section, local educational agency means a school district, county office of education, or charter school. |
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| 119 | | - | |
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| 120 | | - | 14504.2. (a) The Controller may perform quality control reviews of audit working papers to determine whether audits are performed in conformity with subdivision (a) of Section 14503. The Department of Finance may refer an independent auditor of a school district local educational agency to the Controller for a review pursuant to this section if the Department of Finance finds that an audit of a school district local educational agency was conducted in a manner that may constitute noncompliance with subdivision (a) of Section 14503. The Controller shall communicate the results of his or her the Controllers reviews to the Department of Finance, the independent auditor, and the school district or office of the county superintendent of schools local educational agency for which the audit was performed, and shall review his or her the Controllers findings with the independent auditor.(b) Prior to the performance of any quality control reviews, the Controller shall develop and publish guidelines and standards for those reviews. Pursuant to the development of those guidelines and standards, the Controller shall provide opportunity for public comment.(c) (1) The Controller shall conduct a quality control review of the audit working papers of the independent auditor who performed the audits for a local education educational agency for the prior three fiscal years if any of the following circumstances exists:(A) The local education educational agency has received an emergency apportionment pursuant to Article 2 (commencing with Section 41320) or Article 2.5 (commencing with Section 41325) of Chapter 3 of Part 24. 24 of Division 3 of Title 2.(B) The budget of the local education educational agency is disapproved or the local education educational agency has received a negative certification on any budget or interim financial report, as defined in Section 42131, during the current or preceding fiscal year.(C) The responsible county superintendent of schools has otherwise determined that a lack of going concern exists for a local education educational agency pursuant to Section 42127.6.(2) If the quality control review of the Controller indicates that the audit was conducted in a manner that may constitute unprofessional conduct as defined pursuant to Section 5100 of the Business and Professions Code, including, but not limited to, gross negligence resulting in a material misstatement in the audit, the Controller shall refer the case to the California Board of Accountancy. If the California Board of Accountancy finds that the independent auditor conducted an audit in an unprofessional manner, the independent auditor is prohibited from performing any audit of a local education educational agency for a period of three years, in addition to any other penalties that the California Board of Accountancy may impose.(d) The Controller shall conduct a quality control review after an authorized certified public accountant or public accountant listed in the Certified Public Accountants Directory Service (1) completes its first local educational agency financial statement and compliance audit or (2) completes its first local educational agency financial statement and compliance audit after three or more years of not having completed an audit.(e) The Controller shall conduct a quality control review of certified public accounts and public accountants conducting financial statement and compliance audits of charter schools every three years to ensure that all certified public accountant firms and public accountant firms are periodically reviewed.(d)(f) In any matter that is referred to the California Board of Accountancy under subparagraph (A) of paragraph (1) of subdivision (c), the Controller may suspend the independent auditor from performing any local education educational agency audits pending final disposition of the matter by the California Board of Accountancy if the Controller gives the independent auditor notice and an opportunity to respond to that suspension. The independent auditor shall be given credit for any period of suspension if the California Board of Accountancy prohibits the independent auditor from performing audits of the local education educational agency under subdivision (c). In no event may the The Controller shall not suspend an independent auditor under this subdivision for a period of longer than three years.(e)(g) The county superintendent of schools or the county board of education schools, the chartering authority, the Controller, or the Superintendent may refer an independent auditor of a local education educational agency to the California Board of Accountancy for action pursuant to described in paragraph (2) of subdivision (c) if an any of the following circumstances exist:(1) An audit of a local education educational agency was conducted in a manner that may constitute unprofessional conduct as defined by Section 5100 of the Business and Professions Code, including, but not limited to, gross negligence resulting in a material misstatement in the audit.(2) Material deficiencies are discovered in the quality control review conducted pursuant to this section.(3) Material deficiencies are discovered in the peer review conducted in accordance with the Government Auditing Standards.(4) The continuing education and prior experience requirements of Section 41020 are not met.(h) For purposes of this section, local educational agency means a school district, county office of education, or charter school. |
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| 121 | | - | |
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| 122 | | - | |
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| 123 | | - | |
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| 124 | | - | 14504.2. (a) The Controller may perform quality control reviews of audit working papers to determine whether audits are performed in conformity with subdivision (a) of Section 14503. The Department of Finance may refer an independent auditor of a school district local educational agency to the Controller for a review pursuant to this section if the Department of Finance finds that an audit of a school district local educational agency was conducted in a manner that may constitute noncompliance with subdivision (a) of Section 14503. The Controller shall communicate the results of his or her the Controllers reviews to the Department of Finance, the independent auditor, and the school district or office of the county superintendent of schools local educational agency for which the audit was performed, and shall review his or her the Controllers findings with the independent auditor. |
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| 125 | | - | |
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| 126 | | - | (b) Prior to the performance of any quality control reviews, the Controller shall develop and publish guidelines and standards for those reviews. Pursuant to the development of those guidelines and standards, the Controller shall provide opportunity for public comment. |
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| 127 | | - | |
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| 128 | | - | (c) (1) The Controller shall conduct a quality control review of the audit working papers of the independent auditor who performed the audits for a local education educational agency for the prior three fiscal years if any of the following circumstances exists: |
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| 129 | | - | |
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| 130 | | - | (A) The local education educational agency has received an emergency apportionment pursuant to Article 2 (commencing with Section 41320) or Article 2.5 (commencing with Section 41325) of Chapter 3 of Part 24. 24 of Division 3 of Title 2. |
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| 131 | | - | |
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| 132 | | - | (B) The budget of the local education educational agency is disapproved or the local education educational agency has received a negative certification on any budget or interim financial report, as defined in Section 42131, during the current or preceding fiscal year. |
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| 133 | | - | |
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| 134 | | - | (C) The responsible county superintendent of schools has otherwise determined that a lack of going concern exists for a local education educational agency pursuant to Section 42127.6. |
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| 135 | | - | |
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| 136 | | - | (2) If the quality control review of the Controller indicates that the audit was conducted in a manner that may constitute unprofessional conduct as defined pursuant to Section 5100 of the Business and Professions Code, including, but not limited to, gross negligence resulting in a material misstatement in the audit, the Controller shall refer the case to the California Board of Accountancy. If the California Board of Accountancy finds that the independent auditor conducted an audit in an unprofessional manner, the independent auditor is prohibited from performing any audit of a local education educational agency for a period of three years, in addition to any other penalties that the California Board of Accountancy may impose. |
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| 137 | | - | |
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| 138 | | - | (d) The Controller shall conduct a quality control review after an authorized certified public accountant or public accountant listed in the Certified Public Accountants Directory Service (1) completes its first local educational agency financial statement and compliance audit or (2) completes its first local educational agency financial statement and compliance audit after three or more years of not having completed an audit. |
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| 139 | | - | |
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| 140 | | - | (e) The Controller shall conduct a quality control review of certified public accounts and public accountants conducting financial statement and compliance audits of charter schools every three years to ensure that all certified public accountant firms and public accountant firms are periodically reviewed. |
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| 141 | | - | |
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| 142 | | - | (d) |
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| 143 | | - | |
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| 144 | | - | |
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| 145 | | - | |
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| 146 | | - | (f) In any matter that is referred to the California Board of Accountancy under subparagraph (A) of paragraph (1) of subdivision (c), the Controller may suspend the independent auditor from performing any local education educational agency audits pending final disposition of the matter by the California Board of Accountancy if the Controller gives the independent auditor notice and an opportunity to respond to that suspension. The independent auditor shall be given credit for any period of suspension if the California Board of Accountancy prohibits the independent auditor from performing audits of the local education educational agency under subdivision (c). In no event may the The Controller shall not suspend an independent auditor under this subdivision for a period of longer than three years. |
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| 147 | | - | |
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| 148 | | - | (e) |
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| 149 | | - | |
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| 150 | | - | |
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| 151 | | - | |
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| 152 | | - | (g) The county superintendent of schools or the county board of education schools, the chartering authority, the Controller, or the Superintendent may refer an independent auditor of a local education educational agency to the California Board of Accountancy for action pursuant to described in paragraph (2) of subdivision (c) if an any of the following circumstances exist: |
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| 153 | | - | |
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| 154 | | - | (1) An audit of a local education educational agency was conducted in a manner that may constitute unprofessional conduct as defined by Section 5100 of the Business and Professions Code, including, but not limited to, gross negligence resulting in a material misstatement in the audit. |
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| 155 | | - | |
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| 156 | | - | (2) Material deficiencies are discovered in the quality control review conducted pursuant to this section. |
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| 157 | | - | |
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| 158 | | - | (3) Material deficiencies are discovered in the peer review conducted in accordance with the Government Auditing Standards. |
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| 159 | | - | |
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| 160 | | - | (4) The continuing education and prior experience requirements of Section 41020 are not met. |
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| 161 | | - | |
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| 162 | | - | (h) For purposes of this section, local educational agency means a school district, county office of education, or charter school. |
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| 163 | | - | |
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| 164 | | - | SEC. 3. Section 41020 of the Education Code is amended to read:41020. (a) It is the intent of the Legislature to encourage sound fiscal management practices among local educational agencies for the most efficient and effective use of public funds for the education of children in California by strengthening fiscal accountability at the school district, county, and state levels.(b) (1) Not later than the first day of May of each fiscal year, each county superintendent of schools shall provide for an audit of all funds under their jurisdiction and control and the governing board of each local educational agency shall either provide for an audit of the books and accounts of the local educational agency, including an audit of income and expenditures by source of funds, or make arrangements with the county superintendent of schools having jurisdiction over the local educational agency to provide for that auditing.(2) A contract to perform the audit of a local educational agency that has a disapproved budget or has received a negative certification on any budget or interim financial report during the current fiscal year or either of the two preceding fiscal years, or for which the county superintendent of schools has otherwise determined that a lack of going concern exists, is not valid unless approved by the responsible county superintendent of schools and the governing board of the local educational agency.(3) If the governing board of a local educational agency has not provided for an audit of the books and accounts of the local educational agency by April 1, the county superintendent of schools having jurisdiction over the local educational agency shall provide for the audit of the local educational agency.(4) An audit conducted pursuant to this section shall comply fully with the Government Auditing Standards issued by the Comptroller General of the United States.(5) For purposes of this section, local educational agency does not include community colleges.(c) Each audit conducted in accordance with this section shall include all funds of the local educational agency, including the student body and cafeteria funds and accounts and any other funds under the control or jurisdiction of the local educational agency. Each audit shall also include an audit of pupil attendance procedures. Each audit shall include a determination of whether funds were expended pursuant to a local control and accountability plan or an approved annual update to a local control and accountability plan pursuant to Article 4.5 (commencing with Section 52059.5) of Chapter 6.1 of Part 28 of Division 4.(d) All audit reports for each fiscal year shall be developed and reported using a format established by the Controller after consultation with the Superintendent and the Director of Finance.(e) (1) The cost of the audits provided for by the county superintendent of schools shall be paid from the county school service fund and the county superintendent of schools shall transfer the pro rata share of the cost chargeable to each school district from school district funds.(2) The cost of the audit provided for by a governing board of a local educational agency shall be paid from local educational agency funds. The audit of the funds under the jurisdiction and control of the county superintendent of schools shall be paid from the county school service fund.(f) (1) The audits shall be made by a certified public accountant or a public accountant, licensed by the California Board of Accountancy, and selected by the local educational agency, as applicable, from a directory of certified public accountants and public accountants deemed by the Controller as qualified to conduct audits of local educational agencies, which shall be published by the Controller not later than December 31 of each year.(2) Commencing with the 200304 fiscal year and except as provided in subdivision (d) of Section 41320.1, it is unlawful for a public accounting firm to provide audit services to a local educational agency if the lead audit partner, or coordinating audit partner, having primary responsibility for the audit, or the audit partner responsible for reviewing the audit, has performed audit services for that local educational agency in each of the six previous fiscal years. The Education Audits Appeal Panel may waive this requirement if the panel finds that no otherwise eligible auditor is available to perform the audit.(3) It is the intent of the Legislature that, notwithstanding paragraph (2), the rotation within public accounting firms conform to provisions of the federal Sarbanes-Oxley Act of 2002 (Public Law 107-204; 15 (15 U.S.C. Sec. 7201 et seq.), and upon release of the report required by the act of the Comptroller General of the United States addressing the mandatory rotation of registered public accounting firms, the Legislature intends to reconsider paragraph (2). In determining which certified public accountants and public accountants shall be included in the directory, the Controller shall use the following criteria:(A) The certified public accountants or public accountants shall be in good standing as certified by the Board of Accountancy.(B) The certified public accountants or public accountants, as a result of a quality control review conducted by the Controller pursuant to Section 14504.2, shall not have been found to have conducted an audit in a manner constituting noncompliance with subdivision (a) of Section 14503.(4) (A) (i) Commencing with the 202627 fiscal year, and every two years thereafter, certified public accountant firms, certified public accountants or public accountants, and audit staff that conduct audits of local educational agencies shall comply with both of the following:(I) Complete 24 hours of continuing education in governmental accounting, auditing, or related subjects specific to local educational agencies and the most current Guide for Annual Audits of K12 Local Education Agencies and State Compliance Reporting. The continuing education shall include both of the following:(ia) Training on the specific requirements included in the most current Guide for Annual Audits of K12 Local Education Agencies and State Compliance Reporting.(ib) Training on compliance topics that include pupil attendance, independent study, charter schools, nonclassroom-based instruction, school calendars, and instructional minutes.(II) Have prior experience conducting financial and compliance audits for local educational agencies or have gained the necessary competence through training or other professional development activities in accordance with generally accepted auditing standards and generally accepted government auditing standards prior to conducting local educational agency annual financial statement and compliance audits.(ii) The continuing education and prior experience required pursuant to this paragraph shall be evidenced by a certification to the Controller from the certified public accountant firm or the public accountant firm that the firm and their staff have met those requirements.(B) The Controller shall convene and lead a broad-based workgroup for purposes of subclause (I) of clause (i) of subparagraph (A) to recommend local educational agency-specific training topics. Those topics may include, but are not limited to, the topics described in sub-subclauses (ia) and (ib) of subclause (I) of clause (i) of subparagraph (A). The workgroup shall include representatives from all of the following:(i) The department.(ii) CalCPA.(iii) County offices of education.(iv) The County Office Fiscal Crisis and Management Assistance Team.(v) The California Association of School Business Officials.(5) The requirements of this subdivision shall apply to audits of local educational agencies regardless of whether the local educational agency is a governmental agency or a nonprofit organization.(g) (1) The auditors report shall include each of the following:(A) A statement that the audit was conducted pursuant to standards and procedures developed in accordance with Chapter 3 (commencing with Section 14500) of Part 9 of Division 1 of Title 1.(B) A summary of audit exceptions and management improvement recommendations.(C) An evaluation by the auditor on whether there is substantial doubt about the ability of the local educational agency to continue as a going concern for a reasonable period of time. This evaluation shall be based on the Statement on Auditing Standards No. 59, as issued by the American Institute of Certified Public Accountants regarding disclosure requirements relating to the ability of the entity to continue as a going concern.(2) To the extent possible, a description of correction or plan of correction shall be incorporated in the audit report, describing the specific actions that are planned to be taken, or that have been taken, to correct the problem identified by the auditor. The descriptions of specific actions to be taken or that have been taken shall not solely consist of general comments such as will implement, accepted the recommendation, or will discuss at a later date.(h) (1) Not later than December 15, a report of each local educational agency audit for the preceding fiscal year shall be filed with the county superintendent of schools of the county in which the local educational agency is located, the department, and the Controller. The Superintendent shall make any adjustments necessary in future apportionments of all state funds to correct any audit exceptions revealed by those audit reports.(2) The audit report referenced in paragraph (1) for the 202021 fiscal year shall instead be filed no later than January 31, 2022.(3) The extension for the audit report referenced in subdivision (m) of Sections 47605 and 47605.6 for the 202021 fiscal year shall instead be filed no later than January 31, 2022.(i) (1) Commencing with the 200203 audit of local educational agencies pursuant to this section and subdivision (d) of Section 41320.1, each county superintendent of schools shall be responsible for reviewing the audit exceptions contained in an audit of a local educational agency under their jurisdiction related to attendance, inventory of equipment, internal control, and any miscellaneous items, and determining whether the exceptions have been either corrected or an acceptable plan of correction has been developed.(2) Commencing with the 200405 audit of local educational agencies pursuant to this section and subdivision (d) of Section 41320.1, each county superintendent of schools shall include in the review of audit exceptions performed pursuant to this subdivision those audit exceptions related to use of instructional materials program funds, teacher misassignments pursuant to Section 44258.9, and information reported on the school accountability report card required pursuant to Section 33126, and shall determine whether the exceptions are either corrected or an acceptable plan of correction has been developed.(j) Upon submission of the final audit report to the governing board of each local educational agency and subsequent receipt of the audit by the county superintendent of schools having jurisdiction over the local educational agency, the county office of education shall do all of the following:(1) Review audit exceptions related to attendance, inventory of equipment, internal control, and other miscellaneous exceptions. Attendance exceptions or issues shall include, but not be limited to, those related to local control funding formula allocations pursuant to Section 42238.02, as implemented by Section 42238.03, and independent study.(2) (A) If a description of the correction or plan of correction has not been provided as part of the audit required by this section, the county superintendent of schools shall notify the local educational agency and request the governing board of the local educational agency to provide to the county superintendent of schools a description of the corrections or plan of correction by March 15.(B) In audit reports for the 202021 fiscal year, the description of the corrections or plan of correction referenced in subparagraph (A) shall instead be filed no later than April 15, 2022.(3) Review the description of correction or plan of correction and determine its adequacy. If the description of the correction or plan of correction is not adequate, the county superintendent of schools shall require the local educational agency to resubmit that portion of its response that is inadequate.(k) (1) Each county superintendent of schools shall certify to the Superintendent and the Controller, not later than May 15, that the county superintendent of schools staff has reviewed all audits of local educational agencies under the county superintendent of schools jurisdiction for the prior fiscal year, that all exceptions that the county superintendent was required to review were reviewed, and that all of those exceptions, except as otherwise noted in the certification, have been corrected by the local educational agency or that an acceptable plan of correction has been submitted to the county superintendent of schools. In addition, the county superintendent shall identify, by local educational agency, any attendance-related audit exception or exceptions involving state funds, and require the local educational agency to which the audit exceptions were directed to submit appropriate reporting forms for processing by the Superintendent.(2) For audit reports for the 202021 fiscal year, the deadline for certification referenced in paragraph (1) shall instead be filed no later than June 15, 2022.(l) In the audit of a local educational agency for a subsequent year, the auditor shall review the correction or plan or plans of correction submitted by the local educational agency to determine if the exceptions have been resolved. If an exception has not been resolved, the auditor shall immediately notify the appropriate county office of education and the department and restate the exception in the audit report. After receiving that notification, the department shall either consult with the local educational agency to resolve the exception or require the county superintendent of schools to follow up with the local educational agency.(m) (1) The Superintendent is responsible for ensuring that local educational agencies have either corrected or developed plans of correction for any one or more of the following:(A) All federal and state compliance audit exceptions identified in the audit.(B) Exceptions that the county superintendent of schools certifies as of May 15 have not been corrected.(C) Repeat audit exceptions that are not assigned to a county superintendent of schools to correct.(2) In addition, the Superintendent is responsible for ensuring that county superintendents of schools and each county board of education that serves as the governing board of a local educational agency either correct all audit exceptions identified in the audits of county superintendents of schools and of the local educational agencies for which the county boards of education serve as the governing boards or develop acceptable plans of correction for those exceptions.(3) The Superintendent shall report annually to the Controller on the Superintendents actions to ensure that school districts, county superintendents of schools, and each county board of education that serves as the governing board of a school district have either corrected or developed plans of correction for any of the exceptions noted pursuant to paragraph (1).(n) To facilitate correction of the exceptions identified by the audits issued pursuant to this section, the Controller shall require auditors to categorize audit exceptions in each audit report in a manner that will make it clear to both the county superintendent of schools and the Superintendent which exceptions they are responsible for ensuring the correction of by a local educational agency. In addition, the Controller annually shall select a sampling of county superintendents of schools, perform a followup of the audit resolution process of those county superintendents of schools, and report the results of that followup to the Superintendent and the county superintendents of schools that were reviewed.(o) County superintendents of schools shall adjust subsequent local property tax requirements to correct audit exceptions relating to local educational agency tax rates and tax revenues.(p) If a governing board or county superintendent of schools fails or is unable to make satisfactory arrangements for the audit pursuant to this section, the Controller shall make arrangements for the audit and the cost of the audit shall be paid from local educational agency funds or the county school service fund, as the case may be.(q) Audits of regional occupational centers and programs are subject to this section.(r) This section does not authorize examination of, or reports on, the curriculum used or provided for in any local educational agency.(s) Notwithstanding any other law, a nonauditing, management, or other consulting service to be provided to a local educational agency by a certified public accounting firm while the certified public accounting firm is performing an audit of the agency pursuant to this section shall be in accord with Government Accounting Standards, Amendment No. 3, as published by the United States General Accounting Office. |
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| 165 | | - | |
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| 166 | | - | SEC. 3. Section 41020 of the Education Code is amended to read: |
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| 167 | | - | |
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| 168 | | - | ### SEC. 3. |
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| 169 | | - | |
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| 170 | | - | 41020. (a) It is the intent of the Legislature to encourage sound fiscal management practices among local educational agencies for the most efficient and effective use of public funds for the education of children in California by strengthening fiscal accountability at the school district, county, and state levels.(b) (1) Not later than the first day of May of each fiscal year, each county superintendent of schools shall provide for an audit of all funds under their jurisdiction and control and the governing board of each local educational agency shall either provide for an audit of the books and accounts of the local educational agency, including an audit of income and expenditures by source of funds, or make arrangements with the county superintendent of schools having jurisdiction over the local educational agency to provide for that auditing.(2) A contract to perform the audit of a local educational agency that has a disapproved budget or has received a negative certification on any budget or interim financial report during the current fiscal year or either of the two preceding fiscal years, or for which the county superintendent of schools has otherwise determined that a lack of going concern exists, is not valid unless approved by the responsible county superintendent of schools and the governing board of the local educational agency.(3) If the governing board of a local educational agency has not provided for an audit of the books and accounts of the local educational agency by April 1, the county superintendent of schools having jurisdiction over the local educational agency shall provide for the audit of the local educational agency.(4) An audit conducted pursuant to this section shall comply fully with the Government Auditing Standards issued by the Comptroller General of the United States.(5) For purposes of this section, local educational agency does not include community colleges.(c) Each audit conducted in accordance with this section shall include all funds of the local educational agency, including the student body and cafeteria funds and accounts and any other funds under the control or jurisdiction of the local educational agency. Each audit shall also include an audit of pupil attendance procedures. Each audit shall include a determination of whether funds were expended pursuant to a local control and accountability plan or an approved annual update to a local control and accountability plan pursuant to Article 4.5 (commencing with Section 52059.5) of Chapter 6.1 of Part 28 of Division 4.(d) All audit reports for each fiscal year shall be developed and reported using a format established by the Controller after consultation with the Superintendent and the Director of Finance.(e) (1) The cost of the audits provided for by the county superintendent of schools shall be paid from the county school service fund and the county superintendent of schools shall transfer the pro rata share of the cost chargeable to each school district from school district funds.(2) The cost of the audit provided for by a governing board of a local educational agency shall be paid from local educational agency funds. The audit of the funds under the jurisdiction and control of the county superintendent of schools shall be paid from the county school service fund.(f) (1) The audits shall be made by a certified public accountant or a public accountant, licensed by the California Board of Accountancy, and selected by the local educational agency, as applicable, from a directory of certified public accountants and public accountants deemed by the Controller as qualified to conduct audits of local educational agencies, which shall be published by the Controller not later than December 31 of each year.(2) Commencing with the 200304 fiscal year and except as provided in subdivision (d) of Section 41320.1, it is unlawful for a public accounting firm to provide audit services to a local educational agency if the lead audit partner, or coordinating audit partner, having primary responsibility for the audit, or the audit partner responsible for reviewing the audit, has performed audit services for that local educational agency in each of the six previous fiscal years. The Education Audits Appeal Panel may waive this requirement if the panel finds that no otherwise eligible auditor is available to perform the audit.(3) It is the intent of the Legislature that, notwithstanding paragraph (2), the rotation within public accounting firms conform to provisions of the federal Sarbanes-Oxley Act of 2002 (Public Law 107-204; 15 (15 U.S.C. Sec. 7201 et seq.), and upon release of the report required by the act of the Comptroller General of the United States addressing the mandatory rotation of registered public accounting firms, the Legislature intends to reconsider paragraph (2). In determining which certified public accountants and public accountants shall be included in the directory, the Controller shall use the following criteria:(A) The certified public accountants or public accountants shall be in good standing as certified by the Board of Accountancy.(B) The certified public accountants or public accountants, as a result of a quality control review conducted by the Controller pursuant to Section 14504.2, shall not have been found to have conducted an audit in a manner constituting noncompliance with subdivision (a) of Section 14503.(4) (A) (i) Commencing with the 202627 fiscal year, and every two years thereafter, certified public accountant firms, certified public accountants or public accountants, and audit staff that conduct audits of local educational agencies shall comply with both of the following:(I) Complete 24 hours of continuing education in governmental accounting, auditing, or related subjects specific to local educational agencies and the most current Guide for Annual Audits of K12 Local Education Agencies and State Compliance Reporting. The continuing education shall include both of the following:(ia) Training on the specific requirements included in the most current Guide for Annual Audits of K12 Local Education Agencies and State Compliance Reporting.(ib) Training on compliance topics that include pupil attendance, independent study, charter schools, nonclassroom-based instruction, school calendars, and instructional minutes.(II) Have prior experience conducting financial and compliance audits for local educational agencies or have gained the necessary competence through training or other professional development activities in accordance with generally accepted auditing standards and generally accepted government auditing standards prior to conducting local educational agency annual financial statement and compliance audits.(ii) The continuing education and prior experience required pursuant to this paragraph shall be evidenced by a certification to the Controller from the certified public accountant firm or the public accountant firm that the firm and their staff have met those requirements.(B) The Controller shall convene and lead a broad-based workgroup for purposes of subclause (I) of clause (i) of subparagraph (A) to recommend local educational agency-specific training topics. Those topics may include, but are not limited to, the topics described in sub-subclauses (ia) and (ib) of subclause (I) of clause (i) of subparagraph (A). The workgroup shall include representatives from all of the following:(i) The department.(ii) CalCPA.(iii) County offices of education.(iv) The County Office Fiscal Crisis and Management Assistance Team.(v) The California Association of School Business Officials.(5) The requirements of this subdivision shall apply to audits of local educational agencies regardless of whether the local educational agency is a governmental agency or a nonprofit organization.(g) (1) The auditors report shall include each of the following:(A) A statement that the audit was conducted pursuant to standards and procedures developed in accordance with Chapter 3 (commencing with Section 14500) of Part 9 of Division 1 of Title 1.(B) A summary of audit exceptions and management improvement recommendations.(C) An evaluation by the auditor on whether there is substantial doubt about the ability of the local educational agency to continue as a going concern for a reasonable period of time. This evaluation shall be based on the Statement on Auditing Standards No. 59, as issued by the American Institute of Certified Public Accountants regarding disclosure requirements relating to the ability of the entity to continue as a going concern.(2) To the extent possible, a description of correction or plan of correction shall be incorporated in the audit report, describing the specific actions that are planned to be taken, or that have been taken, to correct the problem identified by the auditor. The descriptions of specific actions to be taken or that have been taken shall not solely consist of general comments such as will implement, accepted the recommendation, or will discuss at a later date.(h) (1) Not later than December 15, a report of each local educational agency audit for the preceding fiscal year shall be filed with the county superintendent of schools of the county in which the local educational agency is located, the department, and the Controller. The Superintendent shall make any adjustments necessary in future apportionments of all state funds to correct any audit exceptions revealed by those audit reports.(2) The audit report referenced in paragraph (1) for the 202021 fiscal year shall instead be filed no later than January 31, 2022.(3) The extension for the audit report referenced in subdivision (m) of Sections 47605 and 47605.6 for the 202021 fiscal year shall instead be filed no later than January 31, 2022.(i) (1) Commencing with the 200203 audit of local educational agencies pursuant to this section and subdivision (d) of Section 41320.1, each county superintendent of schools shall be responsible for reviewing the audit exceptions contained in an audit of a local educational agency under their jurisdiction related to attendance, inventory of equipment, internal control, and any miscellaneous items, and determining whether the exceptions have been either corrected or an acceptable plan of correction has been developed.(2) Commencing with the 200405 audit of local educational agencies pursuant to this section and subdivision (d) of Section 41320.1, each county superintendent of schools shall include in the review of audit exceptions performed pursuant to this subdivision those audit exceptions related to use of instructional materials program funds, teacher misassignments pursuant to Section 44258.9, and information reported on the school accountability report card required pursuant to Section 33126, and shall determine whether the exceptions are either corrected or an acceptable plan of correction has been developed.(j) Upon submission of the final audit report to the governing board of each local educational agency and subsequent receipt of the audit by the county superintendent of schools having jurisdiction over the local educational agency, the county office of education shall do all of the following:(1) Review audit exceptions related to attendance, inventory of equipment, internal control, and other miscellaneous exceptions. Attendance exceptions or issues shall include, but not be limited to, those related to local control funding formula allocations pursuant to Section 42238.02, as implemented by Section 42238.03, and independent study.(2) (A) If a description of the correction or plan of correction has not been provided as part of the audit required by this section, the county superintendent of schools shall notify the local educational agency and request the governing board of the local educational agency to provide to the county superintendent of schools a description of the corrections or plan of correction by March 15.(B) In audit reports for the 202021 fiscal year, the description of the corrections or plan of correction referenced in subparagraph (A) shall instead be filed no later than April 15, 2022.(3) Review the description of correction or plan of correction and determine its adequacy. If the description of the correction or plan of correction is not adequate, the county superintendent of schools shall require the local educational agency to resubmit that portion of its response that is inadequate.(k) (1) Each county superintendent of schools shall certify to the Superintendent and the Controller, not later than May 15, that the county superintendent of schools staff has reviewed all audits of local educational agencies under the county superintendent of schools jurisdiction for the prior fiscal year, that all exceptions that the county superintendent was required to review were reviewed, and that all of those exceptions, except as otherwise noted in the certification, have been corrected by the local educational agency or that an acceptable plan of correction has been submitted to the county superintendent of schools. In addition, the county superintendent shall identify, by local educational agency, any attendance-related audit exception or exceptions involving state funds, and require the local educational agency to which the audit exceptions were directed to submit appropriate reporting forms for processing by the Superintendent.(2) For audit reports for the 202021 fiscal year, the deadline for certification referenced in paragraph (1) shall instead be filed no later than June 15, 2022.(l) In the audit of a local educational agency for a subsequent year, the auditor shall review the correction or plan or plans of correction submitted by the local educational agency to determine if the exceptions have been resolved. If an exception has not been resolved, the auditor shall immediately notify the appropriate county office of education and the department and restate the exception in the audit report. After receiving that notification, the department shall either consult with the local educational agency to resolve the exception or require the county superintendent of schools to follow up with the local educational agency.(m) (1) The Superintendent is responsible for ensuring that local educational agencies have either corrected or developed plans of correction for any one or more of the following:(A) All federal and state compliance audit exceptions identified in the audit.(B) Exceptions that the county superintendent of schools certifies as of May 15 have not been corrected.(C) Repeat audit exceptions that are not assigned to a county superintendent of schools to correct.(2) In addition, the Superintendent is responsible for ensuring that county superintendents of schools and each county board of education that serves as the governing board of a local educational agency either correct all audit exceptions identified in the audits of county superintendents of schools and of the local educational agencies for which the county boards of education serve as the governing boards or develop acceptable plans of correction for those exceptions.(3) The Superintendent shall report annually to the Controller on the Superintendents actions to ensure that school districts, county superintendents of schools, and each county board of education that serves as the governing board of a school district have either corrected or developed plans of correction for any of the exceptions noted pursuant to paragraph (1).(n) To facilitate correction of the exceptions identified by the audits issued pursuant to this section, the Controller shall require auditors to categorize audit exceptions in each audit report in a manner that will make it clear to both the county superintendent of schools and the Superintendent which exceptions they are responsible for ensuring the correction of by a local educational agency. In addition, the Controller annually shall select a sampling of county superintendents of schools, perform a followup of the audit resolution process of those county superintendents of schools, and report the results of that followup to the Superintendent and the county superintendents of schools that were reviewed.(o) County superintendents of schools shall adjust subsequent local property tax requirements to correct audit exceptions relating to local educational agency tax rates and tax revenues.(p) If a governing board or county superintendent of schools fails or is unable to make satisfactory arrangements for the audit pursuant to this section, the Controller shall make arrangements for the audit and the cost of the audit shall be paid from local educational agency funds or the county school service fund, as the case may be.(q) Audits of regional occupational centers and programs are subject to this section.(r) This section does not authorize examination of, or reports on, the curriculum used or provided for in any local educational agency.(s) Notwithstanding any other law, a nonauditing, management, or other consulting service to be provided to a local educational agency by a certified public accounting firm while the certified public accounting firm is performing an audit of the agency pursuant to this section shall be in accord with Government Accounting Standards, Amendment No. 3, as published by the United States General Accounting Office. |
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| 172 | | - | 41020. (a) It is the intent of the Legislature to encourage sound fiscal management practices among local educational agencies for the most efficient and effective use of public funds for the education of children in California by strengthening fiscal accountability at the school district, county, and state levels.(b) (1) Not later than the first day of May of each fiscal year, each county superintendent of schools shall provide for an audit of all funds under their jurisdiction and control and the governing board of each local educational agency shall either provide for an audit of the books and accounts of the local educational agency, including an audit of income and expenditures by source of funds, or make arrangements with the county superintendent of schools having jurisdiction over the local educational agency to provide for that auditing.(2) A contract to perform the audit of a local educational agency that has a disapproved budget or has received a negative certification on any budget or interim financial report during the current fiscal year or either of the two preceding fiscal years, or for which the county superintendent of schools has otherwise determined that a lack of going concern exists, is not valid unless approved by the responsible county superintendent of schools and the governing board of the local educational agency.(3) If the governing board of a local educational agency has not provided for an audit of the books and accounts of the local educational agency by April 1, the county superintendent of schools having jurisdiction over the local educational agency shall provide for the audit of the local educational agency.(4) An audit conducted pursuant to this section shall comply fully with the Government Auditing Standards issued by the Comptroller General of the United States.(5) For purposes of this section, local educational agency does not include community colleges.(c) Each audit conducted in accordance with this section shall include all funds of the local educational agency, including the student body and cafeteria funds and accounts and any other funds under the control or jurisdiction of the local educational agency. Each audit shall also include an audit of pupil attendance procedures. Each audit shall include a determination of whether funds were expended pursuant to a local control and accountability plan or an approved annual update to a local control and accountability plan pursuant to Article 4.5 (commencing with Section 52059.5) of Chapter 6.1 of Part 28 of Division 4.(d) All audit reports for each fiscal year shall be developed and reported using a format established by the Controller after consultation with the Superintendent and the Director of Finance.(e) (1) The cost of the audits provided for by the county superintendent of schools shall be paid from the county school service fund and the county superintendent of schools shall transfer the pro rata share of the cost chargeable to each school district from school district funds.(2) The cost of the audit provided for by a governing board of a local educational agency shall be paid from local educational agency funds. The audit of the funds under the jurisdiction and control of the county superintendent of schools shall be paid from the county school service fund.(f) (1) The audits shall be made by a certified public accountant or a public accountant, licensed by the California Board of Accountancy, and selected by the local educational agency, as applicable, from a directory of certified public accountants and public accountants deemed by the Controller as qualified to conduct audits of local educational agencies, which shall be published by the Controller not later than December 31 of each year.(2) Commencing with the 200304 fiscal year and except as provided in subdivision (d) of Section 41320.1, it is unlawful for a public accounting firm to provide audit services to a local educational agency if the lead audit partner, or coordinating audit partner, having primary responsibility for the audit, or the audit partner responsible for reviewing the audit, has performed audit services for that local educational agency in each of the six previous fiscal years. The Education Audits Appeal Panel may waive this requirement if the panel finds that no otherwise eligible auditor is available to perform the audit.(3) It is the intent of the Legislature that, notwithstanding paragraph (2), the rotation within public accounting firms conform to provisions of the federal Sarbanes-Oxley Act of 2002 (Public Law 107-204; 15 (15 U.S.C. Sec. 7201 et seq.), and upon release of the report required by the act of the Comptroller General of the United States addressing the mandatory rotation of registered public accounting firms, the Legislature intends to reconsider paragraph (2). In determining which certified public accountants and public accountants shall be included in the directory, the Controller shall use the following criteria:(A) The certified public accountants or public accountants shall be in good standing as certified by the Board of Accountancy.(B) The certified public accountants or public accountants, as a result of a quality control review conducted by the Controller pursuant to Section 14504.2, shall not have been found to have conducted an audit in a manner constituting noncompliance with subdivision (a) of Section 14503.(4) (A) (i) Commencing with the 202627 fiscal year, and every two years thereafter, certified public accountant firms, certified public accountants or public accountants, and audit staff that conduct audits of local educational agencies shall comply with both of the following:(I) Complete 24 hours of continuing education in governmental accounting, auditing, or related subjects specific to local educational agencies and the most current Guide for Annual Audits of K12 Local Education Agencies and State Compliance Reporting. The continuing education shall include both of the following:(ia) Training on the specific requirements included in the most current Guide for Annual Audits of K12 Local Education Agencies and State Compliance Reporting.(ib) Training on compliance topics that include pupil attendance, independent study, charter schools, nonclassroom-based instruction, school calendars, and instructional minutes.(II) Have prior experience conducting financial and compliance audits for local educational agencies or have gained the necessary competence through training or other professional development activities in accordance with generally accepted auditing standards and generally accepted government auditing standards prior to conducting local educational agency annual financial statement and compliance audits.(ii) The continuing education and prior experience required pursuant to this paragraph shall be evidenced by a certification to the Controller from the certified public accountant firm or the public accountant firm that the firm and their staff have met those requirements.(B) The Controller shall convene and lead a broad-based workgroup for purposes of subclause (I) of clause (i) of subparagraph (A) to recommend local educational agency-specific training topics. Those topics may include, but are not limited to, the topics described in sub-subclauses (ia) and (ib) of subclause (I) of clause (i) of subparagraph (A). The workgroup shall include representatives from all of the following:(i) The department.(ii) CalCPA.(iii) County offices of education.(iv) The County Office Fiscal Crisis and Management Assistance Team.(v) The California Association of School Business Officials.(5) The requirements of this subdivision shall apply to audits of local educational agencies regardless of whether the local educational agency is a governmental agency or a nonprofit organization.(g) (1) The auditors report shall include each of the following:(A) A statement that the audit was conducted pursuant to standards and procedures developed in accordance with Chapter 3 (commencing with Section 14500) of Part 9 of Division 1 of Title 1.(B) A summary of audit exceptions and management improvement recommendations.(C) An evaluation by the auditor on whether there is substantial doubt about the ability of the local educational agency to continue as a going concern for a reasonable period of time. This evaluation shall be based on the Statement on Auditing Standards No. 59, as issued by the American Institute of Certified Public Accountants regarding disclosure requirements relating to the ability of the entity to continue as a going concern.(2) To the extent possible, a description of correction or plan of correction shall be incorporated in the audit report, describing the specific actions that are planned to be taken, or that have been taken, to correct the problem identified by the auditor. The descriptions of specific actions to be taken or that have been taken shall not solely consist of general comments such as will implement, accepted the recommendation, or will discuss at a later date.(h) (1) Not later than December 15, a report of each local educational agency audit for the preceding fiscal year shall be filed with the county superintendent of schools of the county in which the local educational agency is located, the department, and the Controller. The Superintendent shall make any adjustments necessary in future apportionments of all state funds to correct any audit exceptions revealed by those audit reports.(2) The audit report referenced in paragraph (1) for the 202021 fiscal year shall instead be filed no later than January 31, 2022.(3) The extension for the audit report referenced in subdivision (m) of Sections 47605 and 47605.6 for the 202021 fiscal year shall instead be filed no later than January 31, 2022.(i) (1) Commencing with the 200203 audit of local educational agencies pursuant to this section and subdivision (d) of Section 41320.1, each county superintendent of schools shall be responsible for reviewing the audit exceptions contained in an audit of a local educational agency under their jurisdiction related to attendance, inventory of equipment, internal control, and any miscellaneous items, and determining whether the exceptions have been either corrected or an acceptable plan of correction has been developed.(2) Commencing with the 200405 audit of local educational agencies pursuant to this section and subdivision (d) of Section 41320.1, each county superintendent of schools shall include in the review of audit exceptions performed pursuant to this subdivision those audit exceptions related to use of instructional materials program funds, teacher misassignments pursuant to Section 44258.9, and information reported on the school accountability report card required pursuant to Section 33126, and shall determine whether the exceptions are either corrected or an acceptable plan of correction has been developed.(j) Upon submission of the final audit report to the governing board of each local educational agency and subsequent receipt of the audit by the county superintendent of schools having jurisdiction over the local educational agency, the county office of education shall do all of the following:(1) Review audit exceptions related to attendance, inventory of equipment, internal control, and other miscellaneous exceptions. Attendance exceptions or issues shall include, but not be limited to, those related to local control funding formula allocations pursuant to Section 42238.02, as implemented by Section 42238.03, and independent study.(2) (A) If a description of the correction or plan of correction has not been provided as part of the audit required by this section, the county superintendent of schools shall notify the local educational agency and request the governing board of the local educational agency to provide to the county superintendent of schools a description of the corrections or plan of correction by March 15.(B) In audit reports for the 202021 fiscal year, the description of the corrections or plan of correction referenced in subparagraph (A) shall instead be filed no later than April 15, 2022.(3) Review the description of correction or plan of correction and determine its adequacy. If the description of the correction or plan of correction is not adequate, the county superintendent of schools shall require the local educational agency to resubmit that portion of its response that is inadequate.(k) (1) Each county superintendent of schools shall certify to the Superintendent and the Controller, not later than May 15, that the county superintendent of schools staff has reviewed all audits of local educational agencies under the county superintendent of schools jurisdiction for the prior fiscal year, that all exceptions that the county superintendent was required to review were reviewed, and that all of those exceptions, except as otherwise noted in the certification, have been corrected by the local educational agency or that an acceptable plan of correction has been submitted to the county superintendent of schools. In addition, the county superintendent shall identify, by local educational agency, any attendance-related audit exception or exceptions involving state funds, and require the local educational agency to which the audit exceptions were directed to submit appropriate reporting forms for processing by the Superintendent.(2) For audit reports for the 202021 fiscal year, the deadline for certification referenced in paragraph (1) shall instead be filed no later than June 15, 2022.(l) In the audit of a local educational agency for a subsequent year, the auditor shall review the correction or plan or plans of correction submitted by the local educational agency to determine if the exceptions have been resolved. If an exception has not been resolved, the auditor shall immediately notify the appropriate county office of education and the department and restate the exception in the audit report. After receiving that notification, the department shall either consult with the local educational agency to resolve the exception or require the county superintendent of schools to follow up with the local educational agency.(m) (1) The Superintendent is responsible for ensuring that local educational agencies have either corrected or developed plans of correction for any one or more of the following:(A) All federal and state compliance audit exceptions identified in the audit.(B) Exceptions that the county superintendent of schools certifies as of May 15 have not been corrected.(C) Repeat audit exceptions that are not assigned to a county superintendent of schools to correct.(2) In addition, the Superintendent is responsible for ensuring that county superintendents of schools and each county board of education that serves as the governing board of a local educational agency either correct all audit exceptions identified in the audits of county superintendents of schools and of the local educational agencies for which the county boards of education serve as the governing boards or develop acceptable plans of correction for those exceptions.(3) The Superintendent shall report annually to the Controller on the Superintendents actions to ensure that school districts, county superintendents of schools, and each county board of education that serves as the governing board of a school district have either corrected or developed plans of correction for any of the exceptions noted pursuant to paragraph (1).(n) To facilitate correction of the exceptions identified by the audits issued pursuant to this section, the Controller shall require auditors to categorize audit exceptions in each audit report in a manner that will make it clear to both the county superintendent of schools and the Superintendent which exceptions they are responsible for ensuring the correction of by a local educational agency. In addition, the Controller annually shall select a sampling of county superintendents of schools, perform a followup of the audit resolution process of those county superintendents of schools, and report the results of that followup to the Superintendent and the county superintendents of schools that were reviewed.(o) County superintendents of schools shall adjust subsequent local property tax requirements to correct audit exceptions relating to local educational agency tax rates and tax revenues.(p) If a governing board or county superintendent of schools fails or is unable to make satisfactory arrangements for the audit pursuant to this section, the Controller shall make arrangements for the audit and the cost of the audit shall be paid from local educational agency funds or the county school service fund, as the case may be.(q) Audits of regional occupational centers and programs are subject to this section.(r) This section does not authorize examination of, or reports on, the curriculum used or provided for in any local educational agency.(s) Notwithstanding any other law, a nonauditing, management, or other consulting service to be provided to a local educational agency by a certified public accounting firm while the certified public accounting firm is performing an audit of the agency pursuant to this section shall be in accord with Government Accounting Standards, Amendment No. 3, as published by the United States General Accounting Office. |
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| 174 | | - | 41020. (a) It is the intent of the Legislature to encourage sound fiscal management practices among local educational agencies for the most efficient and effective use of public funds for the education of children in California by strengthening fiscal accountability at the school district, county, and state levels.(b) (1) Not later than the first day of May of each fiscal year, each county superintendent of schools shall provide for an audit of all funds under their jurisdiction and control and the governing board of each local educational agency shall either provide for an audit of the books and accounts of the local educational agency, including an audit of income and expenditures by source of funds, or make arrangements with the county superintendent of schools having jurisdiction over the local educational agency to provide for that auditing.(2) A contract to perform the audit of a local educational agency that has a disapproved budget or has received a negative certification on any budget or interim financial report during the current fiscal year or either of the two preceding fiscal years, or for which the county superintendent of schools has otherwise determined that a lack of going concern exists, is not valid unless approved by the responsible county superintendent of schools and the governing board of the local educational agency.(3) If the governing board of a local educational agency has not provided for an audit of the books and accounts of the local educational agency by April 1, the county superintendent of schools having jurisdiction over the local educational agency shall provide for the audit of the local educational agency.(4) An audit conducted pursuant to this section shall comply fully with the Government Auditing Standards issued by the Comptroller General of the United States.(5) For purposes of this section, local educational agency does not include community colleges.(c) Each audit conducted in accordance with this section shall include all funds of the local educational agency, including the student body and cafeteria funds and accounts and any other funds under the control or jurisdiction of the local educational agency. Each audit shall also include an audit of pupil attendance procedures. Each audit shall include a determination of whether funds were expended pursuant to a local control and accountability plan or an approved annual update to a local control and accountability plan pursuant to Article 4.5 (commencing with Section 52059.5) of Chapter 6.1 of Part 28 of Division 4.(d) All audit reports for each fiscal year shall be developed and reported using a format established by the Controller after consultation with the Superintendent and the Director of Finance.(e) (1) The cost of the audits provided for by the county superintendent of schools shall be paid from the county school service fund and the county superintendent of schools shall transfer the pro rata share of the cost chargeable to each school district from school district funds.(2) The cost of the audit provided for by a governing board of a local educational agency shall be paid from local educational agency funds. The audit of the funds under the jurisdiction and control of the county superintendent of schools shall be paid from the county school service fund.(f) (1) The audits shall be made by a certified public accountant or a public accountant, licensed by the California Board of Accountancy, and selected by the local educational agency, as applicable, from a directory of certified public accountants and public accountants deemed by the Controller as qualified to conduct audits of local educational agencies, which shall be published by the Controller not later than December 31 of each year.(2) Commencing with the 200304 fiscal year and except as provided in subdivision (d) of Section 41320.1, it is unlawful for a public accounting firm to provide audit services to a local educational agency if the lead audit partner, or coordinating audit partner, having primary responsibility for the audit, or the audit partner responsible for reviewing the audit, has performed audit services for that local educational agency in each of the six previous fiscal years. The Education Audits Appeal Panel may waive this requirement if the panel finds that no otherwise eligible auditor is available to perform the audit.(3) It is the intent of the Legislature that, notwithstanding paragraph (2), the rotation within public accounting firms conform to provisions of the federal Sarbanes-Oxley Act of 2002 (Public Law 107-204; 15 (15 U.S.C. Sec. 7201 et seq.), and upon release of the report required by the act of the Comptroller General of the United States addressing the mandatory rotation of registered public accounting firms, the Legislature intends to reconsider paragraph (2). In determining which certified public accountants and public accountants shall be included in the directory, the Controller shall use the following criteria:(A) The certified public accountants or public accountants shall be in good standing as certified by the Board of Accountancy.(B) The certified public accountants or public accountants, as a result of a quality control review conducted by the Controller pursuant to Section 14504.2, shall not have been found to have conducted an audit in a manner constituting noncompliance with subdivision (a) of Section 14503.(4) (A) (i) Commencing with the 202627 fiscal year, and every two years thereafter, certified public accountant firms, certified public accountants or public accountants, and audit staff that conduct audits of local educational agencies shall comply with both of the following:(I) Complete 24 hours of continuing education in governmental accounting, auditing, or related subjects specific to local educational agencies and the most current Guide for Annual Audits of K12 Local Education Agencies and State Compliance Reporting. The continuing education shall include both of the following:(ia) Training on the specific requirements included in the most current Guide for Annual Audits of K12 Local Education Agencies and State Compliance Reporting.(ib) Training on compliance topics that include pupil attendance, independent study, charter schools, nonclassroom-based instruction, school calendars, and instructional minutes.(II) Have prior experience conducting financial and compliance audits for local educational agencies or have gained the necessary competence through training or other professional development activities in accordance with generally accepted auditing standards and generally accepted government auditing standards prior to conducting local educational agency annual financial statement and compliance audits.(ii) The continuing education and prior experience required pursuant to this paragraph shall be evidenced by a certification to the Controller from the certified public accountant firm or the public accountant firm that the firm and their staff have met those requirements.(B) The Controller shall convene and lead a broad-based workgroup for purposes of subclause (I) of clause (i) of subparagraph (A) to recommend local educational agency-specific training topics. Those topics may include, but are not limited to, the topics described in sub-subclauses (ia) and (ib) of subclause (I) of clause (i) of subparagraph (A). The workgroup shall include representatives from all of the following:(i) The department.(ii) CalCPA.(iii) County offices of education.(iv) The County Office Fiscal Crisis and Management Assistance Team.(v) The California Association of School Business Officials.(5) The requirements of this subdivision shall apply to audits of local educational agencies regardless of whether the local educational agency is a governmental agency or a nonprofit organization.(g) (1) The auditors report shall include each of the following:(A) A statement that the audit was conducted pursuant to standards and procedures developed in accordance with Chapter 3 (commencing with Section 14500) of Part 9 of Division 1 of Title 1.(B) A summary of audit exceptions and management improvement recommendations.(C) An evaluation by the auditor on whether there is substantial doubt about the ability of the local educational agency to continue as a going concern for a reasonable period of time. This evaluation shall be based on the Statement on Auditing Standards No. 59, as issued by the American Institute of Certified Public Accountants regarding disclosure requirements relating to the ability of the entity to continue as a going concern.(2) To the extent possible, a description of correction or plan of correction shall be incorporated in the audit report, describing the specific actions that are planned to be taken, or that have been taken, to correct the problem identified by the auditor. The descriptions of specific actions to be taken or that have been taken shall not solely consist of general comments such as will implement, accepted the recommendation, or will discuss at a later date.(h) (1) Not later than December 15, a report of each local educational agency audit for the preceding fiscal year shall be filed with the county superintendent of schools of the county in which the local educational agency is located, the department, and the Controller. The Superintendent shall make any adjustments necessary in future apportionments of all state funds to correct any audit exceptions revealed by those audit reports.(2) The audit report referenced in paragraph (1) for the 202021 fiscal year shall instead be filed no later than January 31, 2022.(3) The extension for the audit report referenced in subdivision (m) of Sections 47605 and 47605.6 for the 202021 fiscal year shall instead be filed no later than January 31, 2022.(i) (1) Commencing with the 200203 audit of local educational agencies pursuant to this section and subdivision (d) of Section 41320.1, each county superintendent of schools shall be responsible for reviewing the audit exceptions contained in an audit of a local educational agency under their jurisdiction related to attendance, inventory of equipment, internal control, and any miscellaneous items, and determining whether the exceptions have been either corrected or an acceptable plan of correction has been developed.(2) Commencing with the 200405 audit of local educational agencies pursuant to this section and subdivision (d) of Section 41320.1, each county superintendent of schools shall include in the review of audit exceptions performed pursuant to this subdivision those audit exceptions related to use of instructional materials program funds, teacher misassignments pursuant to Section 44258.9, and information reported on the school accountability report card required pursuant to Section 33126, and shall determine whether the exceptions are either corrected or an acceptable plan of correction has been developed.(j) Upon submission of the final audit report to the governing board of each local educational agency and subsequent receipt of the audit by the county superintendent of schools having jurisdiction over the local educational agency, the county office of education shall do all of the following:(1) Review audit exceptions related to attendance, inventory of equipment, internal control, and other miscellaneous exceptions. Attendance exceptions or issues shall include, but not be limited to, those related to local control funding formula allocations pursuant to Section 42238.02, as implemented by Section 42238.03, and independent study.(2) (A) If a description of the correction or plan of correction has not been provided as part of the audit required by this section, the county superintendent of schools shall notify the local educational agency and request the governing board of the local educational agency to provide to the county superintendent of schools a description of the corrections or plan of correction by March 15.(B) In audit reports for the 202021 fiscal year, the description of the corrections or plan of correction referenced in subparagraph (A) shall instead be filed no later than April 15, 2022.(3) Review the description of correction or plan of correction and determine its adequacy. If the description of the correction or plan of correction is not adequate, the county superintendent of schools shall require the local educational agency to resubmit that portion of its response that is inadequate.(k) (1) Each county superintendent of schools shall certify to the Superintendent and the Controller, not later than May 15, that the county superintendent of schools staff has reviewed all audits of local educational agencies under the county superintendent of schools jurisdiction for the prior fiscal year, that all exceptions that the county superintendent was required to review were reviewed, and that all of those exceptions, except as otherwise noted in the certification, have been corrected by the local educational agency or that an acceptable plan of correction has been submitted to the county superintendent of schools. In addition, the county superintendent shall identify, by local educational agency, any attendance-related audit exception or exceptions involving state funds, and require the local educational agency to which the audit exceptions were directed to submit appropriate reporting forms for processing by the Superintendent.(2) For audit reports for the 202021 fiscal year, the deadline for certification referenced in paragraph (1) shall instead be filed no later than June 15, 2022.(l) In the audit of a local educational agency for a subsequent year, the auditor shall review the correction or plan or plans of correction submitted by the local educational agency to determine if the exceptions have been resolved. If an exception has not been resolved, the auditor shall immediately notify the appropriate county office of education and the department and restate the exception in the audit report. After receiving that notification, the department shall either consult with the local educational agency to resolve the exception or require the county superintendent of schools to follow up with the local educational agency.(m) (1) The Superintendent is responsible for ensuring that local educational agencies have either corrected or developed plans of correction for any one or more of the following:(A) All federal and state compliance audit exceptions identified in the audit.(B) Exceptions that the county superintendent of schools certifies as of May 15 have not been corrected.(C) Repeat audit exceptions that are not assigned to a county superintendent of schools to correct.(2) In addition, the Superintendent is responsible for ensuring that county superintendents of schools and each county board of education that serves as the governing board of a local educational agency either correct all audit exceptions identified in the audits of county superintendents of schools and of the local educational agencies for which the county boards of education serve as the governing boards or develop acceptable plans of correction for those exceptions.(3) The Superintendent shall report annually to the Controller on the Superintendents actions to ensure that school districts, county superintendents of schools, and each county board of education that serves as the governing board of a school district have either corrected or developed plans of correction for any of the exceptions noted pursuant to paragraph (1).(n) To facilitate correction of the exceptions identified by the audits issued pursuant to this section, the Controller shall require auditors to categorize audit exceptions in each audit report in a manner that will make it clear to both the county superintendent of schools and the Superintendent which exceptions they are responsible for ensuring the correction of by a local educational agency. In addition, the Controller annually shall select a sampling of county superintendents of schools, perform a followup of the audit resolution process of those county superintendents of schools, and report the results of that followup to the Superintendent and the county superintendents of schools that were reviewed.(o) County superintendents of schools shall adjust subsequent local property tax requirements to correct audit exceptions relating to local educational agency tax rates and tax revenues.(p) If a governing board or county superintendent of schools fails or is unable to make satisfactory arrangements for the audit pursuant to this section, the Controller shall make arrangements for the audit and the cost of the audit shall be paid from local educational agency funds or the county school service fund, as the case may be.(q) Audits of regional occupational centers and programs are subject to this section.(r) This section does not authorize examination of, or reports on, the curriculum used or provided for in any local educational agency.(s) Notwithstanding any other law, a nonauditing, management, or other consulting service to be provided to a local educational agency by a certified public accounting firm while the certified public accounting firm is performing an audit of the agency pursuant to this section shall be in accord with Government Accounting Standards, Amendment No. 3, as published by the United States General Accounting Office. |
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| 178 | | - | 41020. (a) It is the intent of the Legislature to encourage sound fiscal management practices among local educational agencies for the most efficient and effective use of public funds for the education of children in California by strengthening fiscal accountability at the school district, county, and state levels. |
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| 179 | | - | |
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| 180 | | - | (b) (1) Not later than the first day of May of each fiscal year, each county superintendent of schools shall provide for an audit of all funds under their jurisdiction and control and the governing board of each local educational agency shall either provide for an audit of the books and accounts of the local educational agency, including an audit of income and expenditures by source of funds, or make arrangements with the county superintendent of schools having jurisdiction over the local educational agency to provide for that auditing. |
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| 181 | | - | |
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| 182 | | - | (2) A contract to perform the audit of a local educational agency that has a disapproved budget or has received a negative certification on any budget or interim financial report during the current fiscal year or either of the two preceding fiscal years, or for which the county superintendent of schools has otherwise determined that a lack of going concern exists, is not valid unless approved by the responsible county superintendent of schools and the governing board of the local educational agency. |
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| 183 | | - | |
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| 184 | | - | (3) If the governing board of a local educational agency has not provided for an audit of the books and accounts of the local educational agency by April 1, the county superintendent of schools having jurisdiction over the local educational agency shall provide for the audit of the local educational agency. |
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| 185 | | - | |
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| 186 | | - | (4) An audit conducted pursuant to this section shall comply fully with the Government Auditing Standards issued by the Comptroller General of the United States. |
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| 187 | | - | |
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| 188 | | - | (5) For purposes of this section, local educational agency does not include community colleges. |
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| 189 | | - | |
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| 190 | | - | (c) Each audit conducted in accordance with this section shall include all funds of the local educational agency, including the student body and cafeteria funds and accounts and any other funds under the control or jurisdiction of the local educational agency. Each audit shall also include an audit of pupil attendance procedures. Each audit shall include a determination of whether funds were expended pursuant to a local control and accountability plan or an approved annual update to a local control and accountability plan pursuant to Article 4.5 (commencing with Section 52059.5) of Chapter 6.1 of Part 28 of Division 4. |
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| 191 | | - | |
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| 192 | | - | (d) All audit reports for each fiscal year shall be developed and reported using a format established by the Controller after consultation with the Superintendent and the Director of Finance. |
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| 193 | | - | |
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| 194 | | - | (e) (1) The cost of the audits provided for by the county superintendent of schools shall be paid from the county school service fund and the county superintendent of schools shall transfer the pro rata share of the cost chargeable to each school district from school district funds. |
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| 195 | | - | |
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| 196 | | - | (2) The cost of the audit provided for by a governing board of a local educational agency shall be paid from local educational agency funds. The audit of the funds under the jurisdiction and control of the county superintendent of schools shall be paid from the county school service fund. |
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| 197 | | - | |
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| 198 | | - | (f) (1) The audits shall be made by a certified public accountant or a public accountant, licensed by the California Board of Accountancy, and selected by the local educational agency, as applicable, from a directory of certified public accountants and public accountants deemed by the Controller as qualified to conduct audits of local educational agencies, which shall be published by the Controller not later than December 31 of each year. |
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| 199 | | - | |
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| 200 | | - | (2) Commencing with the 200304 fiscal year and except as provided in subdivision (d) of Section 41320.1, it is unlawful for a public accounting firm to provide audit services to a local educational agency if the lead audit partner, or coordinating audit partner, having primary responsibility for the audit, or the audit partner responsible for reviewing the audit, has performed audit services for that local educational agency in each of the six previous fiscal years. The Education Audits Appeal Panel may waive this requirement if the panel finds that no otherwise eligible auditor is available to perform the audit. |
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| 201 | | - | |
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| 202 | | - | (3) It is the intent of the Legislature that, notwithstanding paragraph (2), the rotation within public accounting firms conform to provisions of the federal Sarbanes-Oxley Act of 2002 (Public Law 107-204; 15 (15 U.S.C. Sec. 7201 et seq.), and upon release of the report required by the act of the Comptroller General of the United States addressing the mandatory rotation of registered public accounting firms, the Legislature intends to reconsider paragraph (2). In determining which certified public accountants and public accountants shall be included in the directory, the Controller shall use the following criteria: |
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| 203 | | - | |
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| 204 | | - | (A) The certified public accountants or public accountants shall be in good standing as certified by the Board of Accountancy. |
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| 205 | | - | |
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| 206 | | - | (B) The certified public accountants or public accountants, as a result of a quality control review conducted by the Controller pursuant to Section 14504.2, shall not have been found to have conducted an audit in a manner constituting noncompliance with subdivision (a) of Section 14503. |
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| 207 | | - | |
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| 208 | | - | (4) (A) (i) Commencing with the 202627 fiscal year, and every two years thereafter, certified public accountant firms, certified public accountants or public accountants, and audit staff that conduct audits of local educational agencies shall comply with both of the following: |
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| 209 | | - | |
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| 210 | | - | (I) Complete 24 hours of continuing education in governmental accounting, auditing, or related subjects specific to local educational agencies and the most current Guide for Annual Audits of K12 Local Education Agencies and State Compliance Reporting. The continuing education shall include both of the following: |
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| 211 | | - | |
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| 212 | | - | (ia) Training on the specific requirements included in the most current Guide for Annual Audits of K12 Local Education Agencies and State Compliance Reporting. |
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| 213 | | - | |
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| 214 | | - | (ib) Training on compliance topics that include pupil attendance, independent study, charter schools, nonclassroom-based instruction, school calendars, and instructional minutes. |
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| 215 | | - | |
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| 216 | | - | (II) Have prior experience conducting financial and compliance audits for local educational agencies or have gained the necessary competence through training or other professional development activities in accordance with generally accepted auditing standards and generally accepted government auditing standards prior to conducting local educational agency annual financial statement and compliance audits. |
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| 217 | | - | |
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| 218 | | - | (ii) The continuing education and prior experience required pursuant to this paragraph shall be evidenced by a certification to the Controller from the certified public accountant firm or the public accountant firm that the firm and their staff have met those requirements. |
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| 219 | | - | |
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| 220 | | - | (B) The Controller shall convene and lead a broad-based workgroup for purposes of subclause (I) of clause (i) of subparagraph (A) to recommend local educational agency-specific training topics. Those topics may include, but are not limited to, the topics described in sub-subclauses (ia) and (ib) of subclause (I) of clause (i) of subparagraph (A). The workgroup shall include representatives from all of the following: |
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| 221 | | - | |
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| 222 | | - | (i) The department. |
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| 223 | | - | |
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| 224 | | - | (ii) CalCPA. |
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| 225 | | - | |
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| 226 | | - | (iii) County offices of education. |
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| 227 | | - | |
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| 228 | | - | (iv) The County Office Fiscal Crisis and Management Assistance Team. |
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| 229 | | - | |
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| 230 | | - | (v) The California Association of School Business Officials. |
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| 231 | | - | |
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| 232 | | - | (5) The requirements of this subdivision shall apply to audits of local educational agencies regardless of whether the local educational agency is a governmental agency or a nonprofit organization. |
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| 233 | | - | |
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| 234 | | - | (g) (1) The auditors report shall include each of the following: |
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| 235 | | - | |
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| 236 | | - | (A) A statement that the audit was conducted pursuant to standards and procedures developed in accordance with Chapter 3 (commencing with Section 14500) of Part 9 of Division 1 of Title 1. |
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| 237 | | - | |
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| 238 | | - | (B) A summary of audit exceptions and management improvement recommendations. |
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| 239 | | - | |
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| 240 | | - | (C) An evaluation by the auditor on whether there is substantial doubt about the ability of the local educational agency to continue as a going concern for a reasonable period of time. This evaluation shall be based on the Statement on Auditing Standards No. 59, as issued by the American Institute of Certified Public Accountants regarding disclosure requirements relating to the ability of the entity to continue as a going concern. |
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| 241 | | - | |
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| 242 | | - | (2) To the extent possible, a description of correction or plan of correction shall be incorporated in the audit report, describing the specific actions that are planned to be taken, or that have been taken, to correct the problem identified by the auditor. The descriptions of specific actions to be taken or that have been taken shall not solely consist of general comments such as will implement, accepted the recommendation, or will discuss at a later date. |
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| 243 | | - | |
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| 244 | | - | (h) (1) Not later than December 15, a report of each local educational agency audit for the preceding fiscal year shall be filed with the county superintendent of schools of the county in which the local educational agency is located, the department, and the Controller. The Superintendent shall make any adjustments necessary in future apportionments of all state funds to correct any audit exceptions revealed by those audit reports. |
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| 245 | | - | |
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| 246 | | - | (2) The audit report referenced in paragraph (1) for the 202021 fiscal year shall instead be filed no later than January 31, 2022. |
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| 247 | | - | |
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| 248 | | - | (3) The extension for the audit report referenced in subdivision (m) of Sections 47605 and 47605.6 for the 202021 fiscal year shall instead be filed no later than January 31, 2022. |
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| 249 | | - | |
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| 250 | | - | (i) (1) Commencing with the 200203 audit of local educational agencies pursuant to this section and subdivision (d) of Section 41320.1, each county superintendent of schools shall be responsible for reviewing the audit exceptions contained in an audit of a local educational agency under their jurisdiction related to attendance, inventory of equipment, internal control, and any miscellaneous items, and determining whether the exceptions have been either corrected or an acceptable plan of correction has been developed. |
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| 251 | | - | |
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| 252 | | - | (2) Commencing with the 200405 audit of local educational agencies pursuant to this section and subdivision (d) of Section 41320.1, each county superintendent of schools shall include in the review of audit exceptions performed pursuant to this subdivision those audit exceptions related to use of instructional materials program funds, teacher misassignments pursuant to Section 44258.9, and information reported on the school accountability report card required pursuant to Section 33126, and shall determine whether the exceptions are either corrected or an acceptable plan of correction has been developed. |
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| 253 | | - | |
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| 254 | | - | (j) Upon submission of the final audit report to the governing board of each local educational agency and subsequent receipt of the audit by the county superintendent of schools having jurisdiction over the local educational agency, the county office of education shall do all of the following: |
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| 255 | | - | |
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| 256 | | - | (1) Review audit exceptions related to attendance, inventory of equipment, internal control, and other miscellaneous exceptions. Attendance exceptions or issues shall include, but not be limited to, those related to local control funding formula allocations pursuant to Section 42238.02, as implemented by Section 42238.03, and independent study. |
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| 257 | | - | |
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| 258 | | - | (2) (A) If a description of the correction or plan of correction has not been provided as part of the audit required by this section, the county superintendent of schools shall notify the local educational agency and request the governing board of the local educational agency to provide to the county superintendent of schools a description of the corrections or plan of correction by March 15. |
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| 259 | | - | |
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| 260 | | - | (B) In audit reports for the 202021 fiscal year, the description of the corrections or plan of correction referenced in subparagraph (A) shall instead be filed no later than April 15, 2022. |
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| 261 | | - | |
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| 262 | | - | (3) Review the description of correction or plan of correction and determine its adequacy. If the description of the correction or plan of correction is not adequate, the county superintendent of schools shall require the local educational agency to resubmit that portion of its response that is inadequate. |
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| 263 | | - | |
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| 264 | | - | (k) (1) Each county superintendent of schools shall certify to the Superintendent and the Controller, not later than May 15, that the county superintendent of schools staff has reviewed all audits of local educational agencies under the county superintendent of schools jurisdiction for the prior fiscal year, that all exceptions that the county superintendent was required to review were reviewed, and that all of those exceptions, except as otherwise noted in the certification, have been corrected by the local educational agency or that an acceptable plan of correction has been submitted to the county superintendent of schools. In addition, the county superintendent shall identify, by local educational agency, any attendance-related audit exception or exceptions involving state funds, and require the local educational agency to which the audit exceptions were directed to submit appropriate reporting forms for processing by the Superintendent. |
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| 265 | | - | |
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| 266 | | - | (2) For audit reports for the 202021 fiscal year, the deadline for certification referenced in paragraph (1) shall instead be filed no later than June 15, 2022. |
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| 267 | | - | |
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| 268 | | - | (l) In the audit of a local educational agency for a subsequent year, the auditor shall review the correction or plan or plans of correction submitted by the local educational agency to determine if the exceptions have been resolved. If an exception has not been resolved, the auditor shall immediately notify the appropriate county office of education and the department and restate the exception in the audit report. After receiving that notification, the department shall either consult with the local educational agency to resolve the exception or require the county superintendent of schools to follow up with the local educational agency. |
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| 269 | | - | |
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| 270 | | - | (m) (1) The Superintendent is responsible for ensuring that local educational agencies have either corrected or developed plans of correction for any one or more of the following: |
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| 271 | | - | |
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| 272 | | - | (A) All federal and state compliance audit exceptions identified in the audit. |
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| 273 | | - | |
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| 274 | | - | (B) Exceptions that the county superintendent of schools certifies as of May 15 have not been corrected. |
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| 275 | | - | |
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| 276 | | - | (C) Repeat audit exceptions that are not assigned to a county superintendent of schools to correct. |
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| 277 | | - | |
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| 278 | | - | (2) In addition, the Superintendent is responsible for ensuring that county superintendents of schools and each county board of education that serves as the governing board of a local educational agency either correct all audit exceptions identified in the audits of county superintendents of schools and of the local educational agencies for which the county boards of education serve as the governing boards or develop acceptable plans of correction for those exceptions. |
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| 279 | | - | |
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| 280 | | - | (3) The Superintendent shall report annually to the Controller on the Superintendents actions to ensure that school districts, county superintendents of schools, and each county board of education that serves as the governing board of a school district have either corrected or developed plans of correction for any of the exceptions noted pursuant to paragraph (1). |
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| 281 | | - | |
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| 282 | | - | (n) To facilitate correction of the exceptions identified by the audits issued pursuant to this section, the Controller shall require auditors to categorize audit exceptions in each audit report in a manner that will make it clear to both the county superintendent of schools and the Superintendent which exceptions they are responsible for ensuring the correction of by a local educational agency. In addition, the Controller annually shall select a sampling of county superintendents of schools, perform a followup of the audit resolution process of those county superintendents of schools, and report the results of that followup to the Superintendent and the county superintendents of schools that were reviewed. |
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| 283 | | - | |
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| 284 | | - | (o) County superintendents of schools shall adjust subsequent local property tax requirements to correct audit exceptions relating to local educational agency tax rates and tax revenues. |
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| 285 | | - | |
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| 286 | | - | (p) If a governing board or county superintendent of schools fails or is unable to make satisfactory arrangements for the audit pursuant to this section, the Controller shall make arrangements for the audit and the cost of the audit shall be paid from local educational agency funds or the county school service fund, as the case may be. |
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| 287 | | - | |
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| 288 | | - | (q) Audits of regional occupational centers and programs are subject to this section. |
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| 289 | | - | |
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| 290 | | - | (r) This section does not authorize examination of, or reports on, the curriculum used or provided for in any local educational agency. |
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| 291 | | - | |
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| 292 | | - | (s) Notwithstanding any other law, a nonauditing, management, or other consulting service to be provided to a local educational agency by a certified public accounting firm while the certified public accounting firm is performing an audit of the agency pursuant to this section shall be in accord with Government Accounting Standards, Amendment No. 3, as published by the United States General Accounting Office. |
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| 293 | | - | |
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| 294 | | - | |
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| 295 | | - | |
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| 296 | | - | It is the intent of the Legislature to enact subsequent legislation relating to the Multi-Agency Charter School Audits Task Force recommendations. |
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