Bill Text: CA SB481 | 2015-2016 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Local government: auditors: independence.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Vetoed) 2016-04-18 - Last day to consider Governors veto pursuant to Joint Rule 58.5. [SB481 Detail]

Download: California-2015-SB481-Amended.html

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BILL NUMBER: SB 481	AMENDED
	BILL TEXT

	AMENDED IN SENATE  APRIL 6, 2015

INTRODUCED BY   Senator Hueso

                        FEBRUARY 26, 2015

   An act to amend Section 1236 of the Government Code, relating to
local government.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 481, as amended, Hueso.  Internal auditors: 
 Local government: auditors:  independence.
   Existing law requires, with certain exceptions, that all city,
county, city and county, and district employees who conduct audits or
that conduct audit activities of those respective agencies, conduct
their work under the general and specified standards prescribed by
the Institute of Internal Auditors or the Government Auditing
Standards issued by the Comptroller General of the United States, as
appropriate.  A willful violation of these provisions is a
crime.   Those standards generally provide, among other
things, that auditors should be independent of the activities they
audit. Existing law makes every willful omission to perform any duty
enjoined by law upon any public officer, or person holding any public
trust or   employment, where no special provision is made
for the punishment of that delinquency, a crime.  
   This bill would recast these provisions to prohibit these internal
audit employees from working under the direct oversight of the
general counsel or employees of the agency that they audit. The bill
would require these employees to conduct their work under conditions
that ensure their independence, as prescribed, including, but not
limited to, the requirement that the head of the auditing unit,
branch, or group for which he or she works be answerable directly to
the head, deputy head, or governing board of the governmental agency
being audited, is given direct access to that person or persons, as
applicable, and is required to report the audit results to head,
deputy head, or governing board.  
   This bill would prohibit the general counsel of the city, county,
city and county, or district, or the employees of the general counsel
from having direct oversight over the city, county, city and county,
and district employees that conduct audits or that conduct audit
activities of those respective agencies. This bill would also
prohibit all city, county, city and county, and district employees
that conduct audits or that conduct audit activities of those
respective agencies from being required to report to the general
counsel or any employees of the general counsel.  
   This bill would require that all city, county, city and county,
and district employees that conduct audits or that conduct audit
activities of those respective agencies be considered to conduct
their work under conditions that ensure independence, if the head of
the auditing unit, branch, or group for which the employee works
meets specified criteria. 
   By expanding the definition of an existing crime, this bill would
impose a state-mandated local program.
   The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
   
  SECTION 1.    Section 1236 of the Government Code
is amended to read:
   1236.  (a) A city, county, city and county, and district employee
who conducts audits or who conducts audit activities of those
respective agencies shall conduct his or her work under conditions
that ensure independence. The employee shall not work under the
direct oversight of the general counsel or employees of the audited
agency.
   (b) A city, county, city and county, and district employee who
conducts internal audit under the direction of the audited agency's
management shall be considered independent for the purposes of
subdivision (a) if all of the following conditions are met:
   (1) The head of the auditing unit, branch, or group for which the
internal auditor described in subdivision (a) works, meets all of the
following criteria:
   (A) He or she is answerable directly to the head, deputy head, or
governing board of the governmental agency being audited, and is
given direct access to that person or persons, as applicable.
   (B) He or she is required to report the audit results to the head
or deputy head of the agency being audited, or to the governing board
of that agency.
   (C) He or she is organizationally placed outside of the staff or
line-management function of the unit or function being audited.
   (D) He or she is, as much as practicable, administratively
situated in a manner that provides insulation from political or other
pressures that could affect his or her ability to conduct audits and
report findings, opinions, and conclusions objectively without fear
of political or other reprisal.
   (2) The internal auditor conducts his or her work under the
general and specified standards prescribed by the Institute of
Internal Auditors or the Government Auditing Standards issued by the
Comptroller General of the United States, as appropriate. The
standards generally provide as follows:
   (A) That auditors should be independent of the activities they
audit.
   (B) That audits should be performed with proficiency and due
professional care.
   (C) That the scope of the audit should encompass the examination
and evaluation of the adequacy and effectiveness of the organization'
s system of internal control and the quality of performance in
carrying out assigned responsibilities.
   (D) That audit work should include planning the audit, examining
and evaluating information, communicating results, and following up.
   (E) That the chief auditor should properly manage the auditing
department.
   (c) Nothing in this section is intended to limit the rights or
obligations of auditors to conduct audits and audit activities in
accordance with other laws and regulations that may apply to a
particular entity, as appropriate. 
  SECTION 1.    Sect   ion 1236 of the 
 Government Code   is amended to read: 
   1236.  (a) All city, county, city and county, and district
employees that conduct audits or that conduct audit activities of
those respective agencies shall conduct their work under the general
and specified standards prescribed by the Institute of Internal
Auditors or the Government Auditing Standards issued by the
Comptroller General of the United States, as appropriate. The
standards generally provide as follows:
   (1) That auditors should be independent of the activities they
audit.
   (2) That audits should be performed with proficiency and due
professional care.
   (3) That the scope of the audit should encompass the examination
and evaluation of the adequacy and effectiveness of the organization'
s system of internal control and the quality of performance in
carrying out assigned responsibilities.
   (4) That audit work should include planning the audit, examining
and evaluating information, communicating results, and following up.
   (5) That the chief auditor should properly manage the auditing
department.
   (b) Nothing in this section is intended to limit the rights or
obligations of auditors to conduct audits and audit activities in
accordance with other laws and regulations that may apply to a
particular entity, as appropriate. 
   (c) The general counsel of the city, county, city and county, or
district, or the employees of the general counsel shall not have
direct oversight over the city, county, city and county, or district
employees that conduct audits or that conduct audit activities of the
respective agency. All city, county, city and county, and district
employees that conduct audits or that conduct audit activities of
those respective agencies shall not be required to report to the
general counsel or any employees of the general counsel.  
   (d) All city, county, city and county, and district employees that
conduct audits or that conduct audit activities of those respective
agencies shall be considered to conduct their work under conditions
that ensure independence if the head of the auditing unit, branch, or
group for which the employee works meets all of the following
criteria:  
   (1) He or she is answerable directly to the head, deputy head, or
governing board of the governmental agency being audited, and is
given direct access to that person or persons, as applicable. 

   (2) He or she is required to report the audit results to the head
or deputy head of the agency being audited, or to the governing board
of that agency.  
   (3) He or she is organizationally placed outside of the staff or
line-management function of the unit or function being audited. 

   (4) He or she is, as much as practicable, administratively
situated in a manner that provides insulation from political or other
pressures that could affect his or her ability to conduct audits and
report findings, opinions, and conclusions objectively without fear
of political or other reprisal. 
  SEC. 2.  No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.