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AMENDED IN SENATE MAY 15, 2012
AMENDED IN SENATE MAY 8, 2012
AMENDED IN SENATE APRIL 17, 2012
AMENDED IN SENATE APRIL 9, 2012

INTRODUCED BY Senator Rubio

FEBRUARY 24, 2012

An act to amend Section 6145 of the Business and Professions Code,
to amend Section 94949 of the Education Code, to amend Sections
6254.14, 8543, 8543.1, 8543.2, 8543.3, 8543.4,
8543.5, 8543.6, 8543.7,
8544, 8544.2, 8544.3, 8544.4,
8544.5, 8544.6, 8545, 8545.1, 8545.2, 8545.3, 8545.4,
8545.5,
8546, 8546.1, 8546.2, 8546.3,
8546.4, 8546.5, 8546.6, 8546.7, 8546.8, 8546.10, 8547.2,
8548.4, and 54954.5 of , to amend the heading of Chapter 6.5
(commencing with Section 8543) of Division 1 of Title 2 of,
the
Government Code, to amend Section 130506 of the Health and Safety
Code, to amend Section 1872.83 of the Insurance Code, to amend
Section 5024 of the Penal Code, to amend Section 71560 of the Public
Resources Code, to amend Section 421 of the Public Utilities Code,
and to amend Section 80270 of the Water Code, relating to the State
Auditor.



LEGISLATIVE COUNSEL'S DIGEST


SB 1395, as amended, Rubio. State Auditor.
Existing law creates in state government the Bureau of State
Audits under the direction of the Milton Marks "Little Hoover"
Commission on California State Government Organization and Economy.
Existing law provides that the bureau is headed by
the State Auditor and
independent of the executive branch and
legislative control.
This bill would rename the Bureau of State Audits as the
California
State Auditor's Office and the State Auditor as
the California State Auditor
. The bill would prohibit any
supplies, forms, insignias, signs, or logos from being destroyed or
changed as a result of the name change and would require their
continued use until exhausted or unserviceable. The bill would make
nonsubstantive, conforming changes.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

SECTION 1. Section 6145 of the Business and Professions Code is
amended to read:
6145. (a) The board shall engage the services of an independent
national or regional public accounting firm with at least five years
of experience in governmental auditing for an audit of its financial
statement for each fiscal year. The financial statement shall be
promptly certified under oath by the Treasurer of the State Bar, and
a copy of the audit and financial statement shall be submitted within
120 days of the close of the fiscal year to the board, to the Chief
Justice of the Supreme Court, and to the Assembly and Senate
Committees on Judiciary.
The audit shall examine the receipts and expenditures of the State
Bar and the State Bar sections to ensure that the receipts of the
sections are being applied, and their expenditures are being made, in
compliance with subdivision (a) of Section 6031.5, and that the
receipts of the sections are applied only to the work of the
sections.
The audit also shall examine the receipts and expenditures of the
State Bar to ensure that the funds collected on behalf of the
Conference of Delegates of California Bar Associations as the
independent successor entity to the former Conference of Delegates of
the State Bar are conveyed to that entity, that the State Bar has
been paid or reimbursed for the full cost of any administrative and
support services provided to the successor entity, including the
collection of fees or donations on its behalf, and that no mandatory
dues are being used to fund the activities of the successor entity.
In selecting the accounting firm, the board shall consider the
value of continuity, along with the risk that continued long-term
engagements of an accounting firm may affect the independence of that
firm.
(b) The board shall contract with the California State
Auditor's Office to conduct a performance audit of the State Bar's
operations from July 1, 2000, to December 31, 2000, inclusive. A copy
of the performance audit shall be submitted by May 1, 2001, to the
board, to the Chief Justice of the Supreme Court, and to the Assembly
and Senate Committees on Judiciary.
Every two years thereafter, the board shall contract with the
California
State Auditor's Office to conduct a performance
audit of the State Bar's operations for the respective fiscal year,
commencing with January 1, 2002, to December 31, 2002, inclusive. A
copy of the performance audit shall be submitted within 120 days of
the close of the fiscal year for which the audit was performed to the
board, to the Chief Justice of the Supreme Court, and to the
Assembly and Senate Committees on Judiciary.
For the purposes of this subdivision, the California
State Auditor's Office may contract with a third party to conduct the
performance audit. This subdivision is not intended to reduce the
number of audits the California State Auditor's Office may
otherwise be able to conduct.
SEC. 2. Section 94949 of the Education Code is amended to read:
94949. (a) On or before October 1, 2013, the Legislative Analyst'
s Office shall report to the Legislature and the Governor on the
appropriateness of the exemptions provided in this chapter, with
particular attention to the exemptions provided by Article 4
(commencing with Section 94874) that are based on accreditation. The
report shall examine and make recommendations regarding the degree to
which regional and national accrediting agencies provide oversight
of institutions and protection of student interests, whether that
oversight results in the same level of protection of students as
provided by this chapter, and whether the exemptions provided in
Article 4 (commencing with Section 94874) that are based on
accreditation should be continued, adjusted, or removed.
(b) (1) On or before August 1, 2013, the bureau shall contract
with the California State Auditor's Office to conduct a
performance audit to evaluate the effectiveness and efficiency of the
bureau's operations, consistent with the requirements of this
chapter, and the California State Auditor's Office shall
report the results of that audit to the Legislature and the Governor.

(2) The performance audit required by paragraph (1) shall include,
but shall not be limited to, an evaluation of all of the following:
(A) The Student Tuition Recovery Fund, including the adequacy of
its balance; the quality, timeliness, and consistency of claims
processing; and the degree to which it has been, or will be, able to
reimburse tuition for students.
(B) The bureau's enforcement program, including the means by which
the bureau makes students and school employees aware of their
ability to file complaints; the average time for investigating
complaints; the standards for referring complaints to investigation;
the average time to complete investigations; the adequacy of the
bureau's inspections; the bureau's record of imposing discipline; the
bureau's record of initiating investigations based upon publicly
available information; the bureau's record of coordinating with law
enforcement and public prosecutors; and whether the bureau has the
enforcement resources necessary to protect consumers and ensure a
fair and prompt resolution of complaints and investigations for both
students and institutions.
(C) The bureau's efforts with respect to, and extent of
institution compliance with, the public and student disclosure
requirements of this chapter.
(D) Whether the bureau's staffing level and expertise are
sufficient to fulfill its statutory responsibilities.
(c) Bureau staff and management shall cooperate with the
Legislative Analyst's Office and the California State
Auditor's Office and shall provide those agencies with access to
data, case files, employees, and information as those agencies may,
in their discretion, require for the purposes of this section.
SEC. 3. Section 6254.14 of the Government Code is amended to read:

6254.14. (a) (1) Except as provided in Sections 6254 and 6254.7,
nothing in this chapter shall be construed to require disclosure of
records of the Department of Corrections and Rehabilitation that
relate to health care services contract negotiations, and that reveal
the deliberative processes, discussions, communications, or any
other portion of the negotiations, including, but not limited to,
records related to those negotiations such as meeting minutes,
research, work product, theories, or strategy of the department, or
its staff, or members of the California Medical Assistance
Commission, or its staff, who act in consultation with, or on behalf
of, the department.
(2) Except for the portion of a contract that contains the rates
of payment, contracts for health services entered into by the
Department of Corrections and Rehabilitation or the California
Medical Assistance Commission on or after July 1, 1993, shall be open
to inspection one year after they are fully executed. In the event
that a contract for health services that is entered into prior to
July 1, 1993, is amended on or after July 1, 1993, the amendment,
except for any portion containing rates of payment, shall be open to
inspection one year after it is fully executed.
(3) Three years after a contract or amendment is open to
inspection under this subdivision, the portion of the contract or
amendment containing the rates of payment shall be open to
inspection.
(4) Notwithstanding any other provision of law, including, but not
limited to, Section 1060 of the Evidence Code, the entire contract
or amendment shall be open to inspection by the Joint Legislative
Audit Committee, the California State Auditor's Office,
and the Legislative Analyst's Office. The Joint Legislative Audit
Committee, the California State Auditor's Office, and the
Legislative Analyst's Office shall maintain the confidentiality of
the contracts and amendments until the contract or amendment is fully
open to inspection by the public.
(5) It is the intent of the Legislature that confidentiality of
health care provider contracts, and of the contracting process as
provided in this subdivision, is intended to protect the competitive
nature of the negotiation process, and shall not affect public access
to other information relating to the delivery of health care
services.
(b) The inspection authority and confidentiality requirements
established in subdivisions (q), (v), and (y) of Section 6254 for the
Legislative Audit Committee shall also apply to the California
State Auditor's Office and the Legislative Analyst's Office.
SEC. 4. The heading of Chapter 6.5 (commencing with
Section 8543) of Division 1 of Title 2 of the
Government
Code
is amended to read:
CHAPTER 6.5. CALIFORNIA STATE AUDITOR


SEC. 4. SEC. 5. Section 8543 of the
Government Code is amended to read:
8543. (a) There is hereby created in state government the
California
State Auditor's Office under the direction of the
Milton Marks "Little Hoover" Commission on California State
Government Organization and Economy. In order to be free of
organizational impairments to independence, the office shall be
independent of the executive branch and legislative control.
(b) Notwithstanding any other law, any reference to the "Bureau of
State Audits" or "bureau" "bureau,
" as used in a context to refer to the Bureau of the State
Audits,
shall be deemed to refer to the "State
"California State Auditor's Office."
Office," and any reference to the "State Auditor" or
"auditor," as used in a context to refer to the
"State Auditor," shall be deemed to refer to the

"California State Auditor."

SEC. 5. SEC. 6. Section 8543.1 of
the Government Code is amended to read:
8543.1. The duties of the California State Auditor's
Office are to examine and report annually upon the financial
statements prepared by the executive branch of the state and to
perform other related assignments, including performance audits, that
are mandated by statute. For the purposes of this chapter "office"
means the "State "California State
Auditor's Office," unless the context clearly requires otherwise.
SEC. 6. SEC. 7. Section 8543.2 of
the Government Code is amended to read:
8543.2. (a) The head of the office is the California
State Auditor, who shall be appointed by the Governor from a list of
three qualified individuals nominated by the Joint Legislative Audit
Committee by a vote of at least a majority of the committee
membership from each house of the Legislature. The term of any
individual appointed as the California State Auditor shall
be four years. Any vacancy in the office of the California
State Auditor
shall be filled in the same manner provided by
this subdivision for a full term.
(b) As the head of the office, the California State
Auditor may establish constituent parts of the office to carry out
the powers and duties of the office unless otherwise specified by
law.
(c) The office has a Chief Deputy California State
Auditor.
SEC. 8. Section 8543.3 of the
Government Code
is amended to read:
8543.3. The California State Auditor shall be chosen
without reference to party affiliation and solely on the ground of
fitness to perform the duties of the office of the California
State Auditor
. Prior to selection, the California
State Auditor shall possess a combination of education and experience
in auditing and management necessary to perform the duties of
the that office.
SEC. 7. SEC. 9. Section 8543.4 of
the Government Code is amended to read:
8543.4. In administering the fiscal policies of the
California
State Auditor's Office, for each fiscal year, the
office shall provide the Department of Finance with the office's
proposed budget and the Department of Finance shall include that
proposed budget in the Governor's Budget without modification.
SEC. 10. Section 8543.5 of the
Government Code
is amended to read:
8543.5. The Chief Deputy California State Auditor
shall be appointed by the California State Auditor. The
Chief Deputy California State Auditor shall carry out
those duties prescribed by the California State Auditor and
shall act for the California State Auditor when the
California
State Auditor is absent or unable to serve or when
the office of the California State Auditor is vacant. The
tenure of any incumbent Chief Deputy California State
Auditor shall expire on any date that an individual is appointed
California
State Auditor, but any incumbent Chief Deputy
California
State Auditor may be reappointed pursuant to this
section.
SEC. 11. Section 8543.6 of the
Government Code
is amended to read:
8543.6. The California State Auditor may be removed
for cause at any time by concurrent resolution of the Legislature. A
California State Auditor removed pursuant to this section
may not be reappointed to the that
office.
SEC. 12. Section 8543.7 of the
Government Code
is amended to read:
8543.7. (a) The annual salary for the California State
Auditor shall be equal to that of agency secretaries of the
executive branch of government pursuant to Section 11550.
(b) The California State Auditor shall be repaid all
actual expenses incurred or paid by him or her in the discharge of
his or her duties.
SEC. 8. SEC. 13. Section 8544 of the
Government Code is amended to read:
8544. (a) Consistent with subdivision (i) of Section 8546, the
California State Auditor may employ and fix the
compensation, in accordance with Article VII of the California
Constitution, of those professional assistants and technical,
clerical, deputy state auditors, and other officers and employees as
he or she deems necessary for the effective conduct of the work under
his or her charge.
(b) In establishing and adjusting classes of positions, and
establishing and adjusting salary ranges for each class of position,
to provide for the continued ability to attract and maintain
qualified individuals within the California State Auditor'
s Office, consideration shall be given to the fact that the level of
education, experience, knowledge, and ability required of the
employees in the office is generally higher than that of state
service generally, due to the unique duties and responsibilities
imposed on the office and the relatively small number of employees.
(c) When fixing compensation for employees, the California
State Auditor shall consider prevailing rates for comparable
service in other public employment and private business.
SEC. 9. SEC. 14. Section 8544.2 of
the Government Code is amended to read:
8544.2. Persons employed by the office pursuant to Section 8544.1
shall be allowed to enroll in the Public Employees' Medical and
Hospital Care Act contained in Part 5 (commencing with Section 22751)
of Division 5 of Title 2.
SEC. 10. SEC. 15. Section 8544.3 of
the Government Code is amended to read:
8544.3. All persons employed by the office pursuant to Section
8544.1 who were members of the Public Employees' Retirement System as
of November 3, 1992, shall retain their existing classification
within the system and shall be considered state miscellaneous members
as defined in Section 20014.
SEC. 16. Section 8544.4 of the
Government Code
is amended to read:
8544.4. The permanent office of the California State
Auditor shall be in Sacramento, where he or she shall be provided
with suitable and sufficient offices. When in his or her judgment the
conduct of the work requires, he or she may maintain offices at
other places in the state.
SEC. 11. SEC. 17. Section 8544.5 of
the Government Code is amended to read:
8544.5. (a) There is hereby established in the State Treasury the
State Audit Fund. Notwithstanding Section 13340, the State Audit
Fund is continuously appropriated for the expenses of the
California
State Auditor. There shall be appropriated annually
in the Budget Act to the State Audit Fund, from the General Fund and
the Central Service Cost Recovery Fund, the amount necessary to
reimburse the State Audit Fund for the cost of audits and any other
duties to be performed that are not directly reimbursed under
subdivision (c), including for the cost of any other duties imposed
on the office by statute. "Cost of audits or any other duties" means
all direct and indirect costs of conducting the audits or other
duties, and any other expenses incurred by the California
State Auditor in fulfilling his or her statutory responsibilities.
(b) With regard to the funds appropriated pursuant to subdivision
(a), upon certification by the California State Auditor of
estimated costs on a monthly basis, the Controller shall transfer
the amount thus certified from the General Fund or the Central
Service Cost Recovery Fund, as applicable, to the State Audit Fund.
The Controller shall thereafter issue warrants drawn against the
State Audit Fund upon receipt of claims certified by the
California
State Auditor.
(c) To ensure appropriate reimbursement from federal and special
funds for the costs of the duties performed pursuant to Section
8546.3, the California State Auditor may directly bill
state agencies for the costs incurred, subject to the approval of the
Director of Finance.
(d) To ensure adequate oversight of the operations of the office,
the Milton Marks "Little Hoover" Commission on California State
Government Organization and Economy shall annually obtain the
services of an independent public accountant to audit the State Audit
Fund and the operation of the office to ensure compliance with state
law, including Section 8546. The results of this audit shall be
submitted to the commission and shall be a public record.
(e) To ensure that audits of the Milton Marks "Little Hoover"
Commission on California State Government Organization and Economy
are conducted in conformity with government auditing standards, any
audit of the commission that is required or permitted by law shall be
conducted by the independent public accountant selected pursuant to
subdivision (d).
SEC. 12. SEC. 18. Section 8544.6 of
the Government Code is amended to read:
8544.6. All unreimbursed expenditures of the office are defined
as "administrative costs" defined in Section 11270.
SEC. 13. SEC. 19. Section 8545 of
the Government Code is amended to read:
8545. The California State Auditor shall not destroy
any papers or memoranda used to support a completed audit sooner than
three years after the audit report is released to the public. All
books, papers, records, and correspondence of the office pertaining
to its work are public records subject to Chapter 3.5 (commencing
with Section 6250) of Division 7 of Title 1 and shall be filed at any
of the regularly maintained offices of the California
State Auditor, except that none of the following items or papers of
which these items are a part shall be released to the public by the
California State Auditor, his or her employees, or members
of the commission:
(a) Personal papers and correspondence of any person providing
assistance to the California State Auditor when that
person has requested in writing that his or her papers and
correspondence be kept private and confidential. Those papers and
correspondence shall become public records if the written request is
withdrawn or upon the order of the California State
Auditor.
(b) Papers, correspondence, memoranda, or any substantive
information pertaining to any audit not completed.
(c) Papers, correspondence, or memoranda pertaining to any audit
that has been completed, which papers, correspondence, or memoranda
are not used in support of any report resulting from the audit.
(d) Any survey of public employees that the California
State Auditor determines should be kept confidential because the
employees have expressed fear of retaliation by their employer if
they respond to the survey.
SEC. 14. SEC. 20. Section 8545.1 of
the Government Code is amended to read:
8545.1. (a) The California State Auditor, and any
employee or former employee of the office, shall not divulge or make
known to any person not employed by the office in any manner not
expressly permitted by law any particulars of any record, document,
or information the disclosure of which is restricted by law from
release to the public. This prohibition includes, but is not limited
to, the restrictions on the release of records, documents, or
information set forth in Section 8545.
(b) Subdivision (a) also applies to either of the following:
(1) Any person or business entity that is contracting with or has
contracted with the office and to the employees and former employees
of that person or business entity.
(2) The officers and employees of and any person or business
entity that is contracting with or has contracted with any state or
local governmental agency or publicly created entity that has
assisted the office in the course of any audit or investigation or
that has received a draft copy of any report or other draft document
from the office for comment or review.
(c) Any officer, employee, or person who discloses the particulars
of any record, document, or other information in violation of this
section is guilty of a misdemeanor.
SEC. 21. Section 8545.2 of the
Government Code
is amended to read:
8545.2. (a) Notwithstanding any other provision of law, the
California
State Auditor during regular business hours shall
have access to and authority to examine and reproduce, any and all
books, accounts, reports, vouchers, correspondence files, and all
other records, bank accounts, and money or other property, of any
agency of the state, whether created by the California Constitution
or otherwise, any local governmental entity, including any city,
county, and school or special district, and any publicly created
entity, for any audit or investigation. Any officer or employee of
any agency or entity having these records or property in his or her
possession, under his or her control, or otherwise having access to
them, shall permit access to, and examination and reproduction
thereof, upon the request of the California State Auditor
or his or her authorized representative.
(b) For the purposes of access to and examination and reproduction
of the records and property described in subdivision (a), an
authorized representative of the California State Auditor
is an employee or officer of the state or local governmental agency
or publicly created entity involved and is subject to any limitations
on release of the information as may apply to an employee or officer
of the state or local governmental agency or publicly created
entity. For the purpose of conducting any audit or investigation, the
California State Auditor or his or her authorized
representative shall have access to the records and property of any
public or private entity or person subject to review or regulation by
the public agency or public entity being audited or investigated to
the same extent that employees or officers of that agency or public
entity have access. No provision of law providing for the
confidentiality of any records or property shall prevent disclosure
pursuant to subdivision (a), unless the provision specifically refers
to and precludes access and examination and reproduction pursuant to
subdivision (a). Providing confidential information to the
California
State Auditor pursuant to this section, including,
but not limited to, confidential information that is subject to a
privilege, shall not constitute a waiver of that privilege. This
subdivision does not apply to records compiled pursuant to Part 1
(commencing with Section 8900) or Part 2 (commencing with Section
10200) of Division 2.
(c) Any officer or person who fails or refuses to permit access
and examination and reproduction, as required by this section, is
guilty of a misdemeanor.
(d) For purposes of this section "confidentiality of records or
property" means that the record or property may lawfully be kept
confidential as a result of a statutory or common law privilege or
any other provision of law.
SEC. 22. Section 8545.3 of the
Government Code
is amended to read:
8545.3. It is a misdemeanor for the California State
Auditor or any employee of the California State Auditor to
release any information received pursuant to Section 10850 of the
Welfare and Institutions Code or that is otherwise prohibited by law
to be disclosed.
SEC. 23. Section 8545.4 of the
Government Code
is amended to read:
8545.4. (a) In connection with any audit or investigation
conducted by the California State Auditor, the
California
State Auditor , or his or her designee,
may do any of the following:
(1) Administer oaths.
(2) Certify to all official acts.
(3) Issue subpoenas for the attendance of witnesses and the
production of papers, books, accounts, or documents, or for the
making of oral or written sworn statements, in any interview
conducted as part of an audit or investigation.
(b) Any subpoena issued under this section extends as process to
all parts of the state and may be served by any person authorized to
serve process of courts of record or by any person designated for
that purpose by the California State Auditor or his or her
designee. The person serving this process may receive compensation
as allowed by the California State Auditor or his or her
designee, not to exceed the fees prescribed by law for similar
service.
(c) Notwithstanding Section 7470, 7474, or 7491, subpoenas issued
under this section for financial records of financial institutions
concerning customers of financial institutions or for information
contained in those records shall not be subject to the requirement or
conditions of Section 7474.
SEC. 24. Section 8545.5 of the
Government Code
is amended to read:
8545.5. (a) The superior court in the county in which any
interview is held under the direction of the California
State Auditor or his or her designee has jurisdiction to compel the
attendance of witnesses, the making of oral or written sworn
statements, and the production of papers, books, accounts, and
documents, as required by any subpoena issued by the California
State Auditor or his or her designee.
(b) If any witness refuses to attend or testify or produce any
papers required by the subpoena, the California State
Auditor or his or her designee may petition the superior
court in the county in which the
hearing is pending for an order compelling the person to attend and
answer questions under penalty of perjury or produce the papers
required by the subpoena before the person named in the subpoena. The
petition shall set forth all of the following:
(1) That due notice of the time and place of attendance of the
person or the production of the papers has been given.
(2) That the person has been subpoenaed in the manner prescribed
in Section 8545.4.
(3) That the person has failed and refused to attend or produce
the papers required by subpoena before the California
State Auditor or his or her designee as named in the subpoena, or has
refused to answer questions propounded to him or her in the course
of the interview under penalty of perjury.
(c) Upon the filing of the petition, the court shall enter an
order directing the person to appear before the court at a specified
time and place and then and there show cause why he or she has not
attended, answered questions under penalty of perjury, or produced
the papers as required. A copy of the order shall be served upon him
or her. If it appears to the court that the subpoena was regularly
issued by the California State Auditor or his or her
designee, the court shall enter an order that the person appear
before the person named in the subpoena at the time and place fixed
in the order and answer questions under penalty of perjury or produce
the required papers. Upon failure to obey the order, the person
shall be dealt with as for contempt of court.
SEC. 15.
Section 8546 of the Government Code is
amended to read:
8546. It is the intent of the Legislature that the State Auditor'
s Office have the independence necessary to conduct all of its audits
in conformity with "Government Auditing Standards" published by the
Comptroller General of the United States and the standards published
by the American Institute of Certified Public Accountants, free from
influence of existing state control agencies that could be the
subject of audits conducted by the office. Therefore, all of the
following exclusions apply to the office:
(a) Notwithstanding Section 19790, the State Auditor shall
establish an equal employment opportunity program that shall meet the
criteria and objectives established by the State Personnel Board.
The State Auditor shall report annually to the State Personnel Board
and the commission regarding the program.
(b) Notwithstanding Section 12470, the State Auditor shall be
responsible for maintaining its payroll system. In lieu of audits of
the uniform payroll system performed by the Controller or any other
department, the office shall contract pursuant to subdivision (e) of
Section 8544.5 for an annual audit of its payroll and financial
operations by an independent public accountant.
(c) Notwithstanding Section 13292, the State Auditor is delegated
the authority to establish and administer the fiscal and
administrative policies of the office in conformity with the State
Administrative Manual without oversight by the Department of Finance,
the Department of Information Technology, or any other state agency.

(d) Notwithstanding Section 11032, the State Auditor may approve
actual and necessary traveling expenses for travel outside the state
for officers and employees of the office.
(e) Notwithstanding Section 11033, the State Auditor or officers
and employees of the office may be absent from the state on business
of the state upon approval of the State Auditor or Chief Deputy State
Auditor.
(f) Sections 11040, 11042, and 11043 shall not apply to the State
Auditor's Office. The State Auditor may employ legal counsel under
those terms that he or she deems necessary to conduct the legal
business of, or render legal counsel to, the State Auditor.
(g) The provisions and definitions of Article 2 (commencing with
Section 11342.510) of Chapter 3.5 of Division 3 shall not be
construed to include the State Auditor's Office. The State Auditor
may adopt regulations necessary for the operation of the office
pursuant to the provisions of the Administrative Procedure Act
(Chapter 3.5 (commencing with Section 11340) of Division 3), but
these regulations shall not be subject to the review or approval of
the Office of Administrative Law.
(h) The State Auditor shall be exempt from all contract
requirements of the Public Contract Code that require oversight,
review, or approval by the Department of General Services or any
other state agency. The State Auditor may contract on behalf of the
State of California for goods and services that he or she deems
necessary for the furtherance of the purposes of the office.
(i) (1) Subject to Article VII of the California Constitution, the
State Auditor is delegated the authority to establish and administer
the personnel policies and practices of the State Auditor's Office
in conformity with Part 2.6 (commencing with Section 19815) of
Division 5 of Title 2 without oversight or approval by the Department
of Personnel Administration.
(2) At the election of the State Auditor, officers and employees
of the office may participate in benefits programs administered by
the Department of Personnel Administration subject to the same
conditions for participation that apply to civil service employees in
other state agencies. For the purposes of benefits programs
administration only, the State Auditor is subject to the
determinations of the department. The State Auditor's Office shall
reimburse the Department of Personnel Administration for the normal
administrative costs incurred by the Department of Personnel
Administration and for any extraordinary costs resulting from the
inclusion of the office employees in these state benefit programs.

SEC. 25. Section 8546 of the Government
Code
is amended to read:
8546. It is the intent of the Legislature that the
Bureau of State Audits
California State Auditor's
Office
have the independence necessary to conduct all of its
audits in conformity with "Government Auditing Standards" published
by the Comptroller General of the United States and the standards
published by the American Institute of Certified Public Accountants,
free from influence of existing state control agencies that could be
the subject of audits conducted by the bureau
office
. Therefore, all of the following exclusions apply to
the office:
(a) Notwithstanding Section 19790, the California State
Auditor shall establish an equal employment opportunity program that
shall meet the criteria and objectives established by the State
Personnel Board. The California State Auditor shall report
annually to the State Personnel Board and the commission regarding
the program.
(b) Notwithstanding Section 12470, the California State
Auditor shall be responsible for maintaining its payroll system. In
lieu of audits of the uniform payroll system performed by the
Controller or any other department, the office shall contract
pursuant to subdivision (e) of Section 8544.5 for an annual audit of
its payroll and financial operations by an independent public
accountant.
(c) Notwithstanding Section 13292, the California State
Auditor is delegated the authority to establish and administer the
fiscal and administrative policies of the bureau
office in conformity with the State Administrative Manual
without oversight by the Department of Finance, the Department of
Information Technology, or any other state agency.
(d) Notwithstanding Section 11032, the California State
Auditor may approve actual and necessary traveling expenses for
travel outside the state for officers and employees of the
bureau
office .
(e) Notwithstanding Section 11033, the California State
Auditor or officers and employees of the bureau
office may be absent from the state on business of the
state upon approval of the California State Auditor or
Chief Deputy California State Auditor.
(f) Sections 11040, 11042, and 11043 shall not apply to the
Bureau of State Audits California State
Auditor's Office
. The California State Auditor may
employ legal counsel under those terms that he or she deems necessary
to conduct the legal business of, or render legal counsel to, the
California State Auditor.
(g) The provisions and definitions of Article 2 (commencing with
Section 11342.510) of Chapter 3.5 of Division 3 shall not be
construed to include the Bureau of State Audits
California State Auditor's Office . The California
State Auditor may adopt regulations necessary for the operation
of the bureau office pursuant to the
provisions of the Administrative Procedure Act (Chapter 3.5
(commencing with Section 11340) of Division 3), but these regulations
shall not be subject to the review or approval of the Office of
Administrative Law.
(h) The California State Auditor shall be exempt from
all contract requirements of the Public Contract Code that require
oversight, review, or approval by the Department of General Services
or any other state agency. The California State Auditor
may contract on behalf of the State of California for goods and
services that he or she deems necessary for the furtherance of the
purposes of the bureau office .
(i) (1) Subject to Article VII of the California Constitution, the
California State Auditor is delegated the authority to
establish and administer the personnel policies and practices of the
Bureau of State Audits California State
Auditor's Office
in conformity with Part 2.6 (commencing with
Section 19815) of Division 5 of Title 2 without oversight or approval
by the Department of Personnel Administration
Department of Human Resources .
(2) At the election of the California State Auditor,
officers and employees of the bureau office
may participate in benefits programs administered by the
Department of Personnel Administration
Department of Human Resources
subject to the same conditions
for participation that apply to civil service employees in other
state agencies. For the purposes of benefits programs administration
only, the California State Auditor is subject to the
determinations of the department. The Bureau of State Audits
California State Auditor's Office shall
reimburse the Department of Personnel Administration
Department of Human Resources for the normal
administrative costs incurred by the Department of Personnel
Administration
Department of Human Resources
and for any extraordinary costs resulting from the inclusion of the
bureau office employees in these state
benefit programs.
SEC. 26. Section 8546.1 of the
Government Code
is amended to read:
8546.1. (a) The California State Auditor shall conduct
financial and performance audits as directed by statute. The
California
State Auditor may conduct these audits of any state
agency as defined by Section 11000, whether created by the California
Constitution or otherwise, any local governmental agency, including
any city, county, and school or special district, or any publicly
created entity. However, the California State Auditor
shall not audit the activities of the Milton Marks Commission on
California State Government Organization and Economy or the
Legislature to assure compliance with government auditing standards.
(b) The California State Auditor shall conduct any
audit of a state or local governmental agency or any other publicly
created entity that is requested by the Joint Legislative Audit
Committee to the extent that funding is available and in accordance
with the priority established by the committee with respect to other
audits requested by the committee. Members of the Legislature may
submit requests for audits to the committee for its consideration and
approval. Any audit request approved by the committee shall be
forwarded to the California State Auditor as a committee
request.
(c) The California State Auditor shall complete any
audit in a timely manner and in accordance with the "Government
Auditing Standards" published by the Comptroller General of the
United States.
(d) Immediately upon completion of the audit, the California
State Auditor shall transmit a copy of the audit report to the
commission. Not later than 24 hours after delivery to the commission,
the California State Auditor shall deliver the report to
the Legislature, appropriate committees or subcommittees of the
Legislature, and the Governor. Once transmitted to these parties, the
report shall be made available to the public.
SEC. 27. Section 8546.2 of the
Government Code
is amended to read:
8546.2. (a) The California State Auditor shall request
that any state agency, as defined in Section 11000, whether created
by the California Constitution or otherwise, any local governmental
agency, including any city, county, city and county, school, or
special district, or any publicly created entity, that is the subject
of an audit or investigation conducted pursuant to this chapter
provide updates on its progress in implementing the recommendations
made by the California State Auditor, at intervals
prescribed by the California State Auditor.
(b) Any state agency described in subdivision (a) shall provide
the California State Auditor, in the form prescribed by
the California State Auditor, with updates on
implementation of recommendations as described in subdivision (a).
SEC. 28. Section 8546.3 of the
Government Code
is amended to read:
8546.3. The California State Auditor shall examine and
report annually upon the financial statements otherwise prepared by
the executive branch of the state so that the Legislature and the
public will be informed of the adequacy of those financial statements
in compliance with generally accepted accounting principles. In
making that examination, the California State Auditor may
make the audit examination of accounts and records, accounting
procedures, and internal auditing performance that he or she
determines to be necessary to disclose all material facts necessary
to proper reporting in accordance with the federal Single Audit Act
of 1984 (31 U.S.C. Section Sec. 7501
and following et seq. ) and the
purposes set forth in Section 8521.5.
SEC. 16. SEC. 29. Section 8546.4 of
the Government Code is amended to read:
8546.4. (a) The California State Auditor shall
annually issue an auditor's report based upon the general purpose
financial statements included in the Controller's annual report that
is submitted to the Governor pursuant to Section 12460. The report
shall be in accordance with the "Government Auditing Standards"
published by the Comptroller General of the United States and the
standards published by the American Institute of Certified Public
Accountants.
(b) The California State Auditor, in the performance of
this annual audit and any other audit or investigation undertaken by
the office, may examine all the financial records, accounts, and
documents of any state agency as defined by Section 11000.
(c) The California State Auditor shall rely, to the
maximum extent possible, upon the audits performed by the Controller,
the Department of Finance, internal auditors of state agencies, and
independent contractors. The Director of Finance shall be responsible
for coordinating and providing technical assistance to the internal
auditors of state agencies. Nothing in this article is intended to
reduce or restrict the operations of internal auditors whose review
of internal financial and administrative controls of state agencies
is essential for coordinated audits.
(d) State agencies receiving federal funds shall be primarily
responsible for arranging for federally required financial and
compliance audits. State agencies shall immediately notify the
Director of Finance, the California State Auditor, and the
Controller when they are required to obtain federally required
financial and compliance audits. The Director of Finance, the
California
State Auditor, and the Controller shall coordinate
the procurement by state agencies, including any negotiations with
cognizant federal agencies, of federally required financial and
compliance audits.
(e) To prevent duplication of the annual audit conducted by the
California State Auditor pursuant to subdivision (a),
except for those state agencies that are required by state law to
obtain an annual audit, no state agency shall enter into a contract
for a financial or compliance audit without prior written approval of
the Controller and the Director of Finance, which approval shall
state the reason for the contract and shall be filed with the
California
State Auditor at least 30 days prior to the award of
the contract. No funds appropriated by the Legislature shall be
encumbered for the purpose of funding any contract for an audit that
duplicates the annual financial audit conducted by the
California
State Auditor.
(f) Notwithstanding any other provision of this article, nothing
in this section shall be construed to limit, restrict, or otherwise
infringe upon the constitutional or statutory authority of the
Controller to superintend the fiscal concerns of the state.
(g) Except as provided in subdivision (b), notwithstanding any
other provision of this article, nothing in this section shall be
construed to limit, restrict, or otherwise infringe upon the
statutory authority of the Director of Finance to supervise the
financial and business policies of the state.
SEC. 30. Section 8546.5 of the
Government Code
is amended to read:
8546.5. (a) The California State Auditor may establish
a high-risk government agency audit program for the purpose of
identifying, auditing, and issuing reports on any agency of the
state, whether created by the California Constitution or otherwise,
as well as statewide issues, that the California State
Auditor identifies as being at high risk for the potential of waste,
fraud, abuse, and mismanagement or that has major challenges
associated with its economy, efficiency, or effectiveness.
(b) In addition to identifying an agency as high risk on the basis
of weaknesses identified in audit and investigative reports produced
by the bureau office , the
California
State Auditor may consult with the Legislative
Analyst, the Milton Marks "Little Hoover" Commission on California
State Government Organization and Economy, the Office of Inspector
General within the Department of Corrections, the Department of
Finance, and other state agencies that have oversight
responsibilities over any other agency of the state, in identifying
state agencies that are at high risk.
(c) The California State Auditor shall notify the Joint
Legislative Audit Committee whenever it identifies a state agency as
at high risk.
(d) The California State Auditor may issue audit
reports with recommendations for improvement in state agencies, and
for statewide issues, identified as at high risk not less than once
every two years.
(e) The California State Auditor may require state
agencies identified as high risk, or as responsible for all or a
portion of a statewide issue identified as high risk, to periodically
report to the auditor regarding the status of recommendations for
improvement made by the California State Auditor or other
state oversight agencies.
SEC. 31. Section 8546.6 of the
Government Code
is amended to read:
8546.6. The California State Auditor, in connection
with any audit or investigation conducted pursuant to this chapter,
shall be deemed to be a department head for the purposes of Section
11189.
SEC. 32. Section 8546.7 of the
Government Code
is amended to read:
8546.7. Notwithstanding any other provision of law, every
contract involving the expenditure of public funds in excess of ten
thousand dollars ($10,000) entered into by any state agency, board,
commission, or department or by any other public entity, including a
city, county, city and county, or district, shall be subject to the
examination and audit of the California State Auditor, at
the request of the public entity or as part of any audit of the
public entity, for a period of three years after final payment under
the contract. Every contract shall contain a provision stating that
the contracting parties shall be subject to that examination and
audit. The failure of a contract to contain this provision shall not
preclude the California State Auditor from conducting an
examination and audit of the contract at the request of the public
entity entering into the contract or as part of any audit of the
public entity.
It is the intent of the Legislature that the Regents of the
University of California include in contracts involving the
expenditure of state funds in excess of ten thousand dollars
($10,000) a provision stating that the contracting parties shall be
subject to the examination and audit of the California
State Auditor, at the request of the regents or as part of any audit
of the university, for a period of three years after final payment
under the contract.
The examinations and audits under this section shall be confined
to those matters connected with the performance of the contract,
including, but not limited to, the costs of administering the
contract.
SEC. 17. SEC. 33. Section 8546.8 of
the Government Code is amended to read:
8546.8. Unless the contrary is stated or clearly appears from the
context, any reference to the Auditor General or the Office of the
Auditor General in any statute or contract in effect on the effective
date of this chapter, other than Chapter 4 (commencing with Section
10500), with respect to the performance of audits, shall be construed
to refer to the California State Auditor and the
California
State Auditor's Office, respectively.
SEC. 18. SEC. 34. Section 8546.10 of
the Government Code is amended to read:
8546.10. (a) The California State Auditor may
establish a high-risk local government agency audit program for the
purpose of identifying, auditing, and issuing reports on any local
government agency, including, but not limited to, any city, county,
special district, or any publicly created entity, whether created by
the California Constitution or otherwise, that the California
State Auditor identifies as being at high risk for the
potential of waste, fraud, abuse, or mismanagement or that has major
challenges associated with its economy, efficiency, or effectiveness.

(b) In addition to identifying a local government agency as high
risk on the basis of weaknesses identified in audit and investigative
reports produced by the office, the California State
Auditor may consult with the Controller, Attorney General, and other
state agencies that have oversight responsibilities over any local
government agency, in identifying local governments that are at high
risk.
(c) The California State Auditor's Office shall be
responsible for the state costs associated with the high-risk local
government agency audit program, shall conduct the program as funds
permit, and shall only conduct the program to the extent that it does
not interfere with duties related to mandated audits and requests
from the Joint Legislative Audit Committee.
(d) (1) The California State Auditor shall notify the
Joint Legislative Audit Committee whenever he or she identifies a
local government as at high risk.
(2) The California State Auditor shall provide the Joint
Legislative Audit Committee, at a public hearing of the committee,
an annual update of all audits in progress.
(3) If a local government agency has taken significant corrective
measures for deficiencies identified by the California
State Auditor, that agency shall be removed from the high-risk local
government agency audit program.
(e) Notwithstanding the requirements of Section 10231.5, if the
California State Auditor establishes the program provided
for in this section and the California State Auditor
determines that a local agency is at high risk, the California
State Auditor shall issue audit reports at least once every two
years with recommendations for improvement in such a local
government so identified.
(f) Audits conducted pursuant to this section shall be approved by
the Joint Legislative Audit Committee.
SEC. 19. SEC. 35. Section 8547.2 of
the Government Code is amended to read:
8547.2. For the purposes of this article, the following terms
have the following meanings:
(a) "Employee" means an individual appointed by the Governor, or
employed or holding office in a state agency as defined by Section
11000, including, for purposes of Sections 8547.3 to 8547.7,
inclusive, an employee of the California State University, or an
individual appointed by the Legislature to a state board or
commission and who is not a Member or employee of the Legislature. In
addition, "employee" means a person employed by the Supreme Court, a
court of appeal, a superior court, or the Administrative Office of
the Courts for the purposes of Sections 8547.3 to 8547.7, inclusive,
and Section 8547.13, except for those provisions of Section 8547.4
concerning notice of adverse action and the State Personnel Board.
"Employee" includes a former employee who met the criteria of this
subdivision during his or her employment.
(b) "Illegal order" means a directive to violate or assist in
violating a federal, state, or local law, rule, or regulation, or an
order to work or cause others to work in conditions outside of their
line of duty that would unreasonably threaten the health or safety of
employees or the public.
(c) "Improper governmental activity" means an activity by a state
agency or by an employee that is undertaken in the performance of the
employee's duties, undertaken inside a state office, or, if
undertaken outside a state office by the employee, directly relates
to state government,
whether or not that activity is within the scope of his or her
employment, and that (1) is in violation of any state or federal law
or regulation, including, but not limited to, corruption,
malfeasance, bribery, theft of government property, fraudulent
claims, fraud, coercion, conversion, malicious prosecution, misuse of
government property, or willful omission to perform duty, (2) is in
violation of an Executive order of the Governor, a California Rule of
Court, or any policy or procedure mandated by the State
Administrative Manual or State Contracting Manual, or (3) is
economically wasteful, involves gross misconduct, incompetency, or
inefficiency. For purposes of Sections 8547.4, 8547.5, 8547.7,
8547.10, and 8547.11, "improper governmental activity" includes any
activity by the University of California or by an employee, including
an officer or faculty member, who otherwise meets the criteria of
this subdivision. For purposes of Sections 8547.4, 8547.5, and
8547.13, "improper governmental activity" includes any activity by
the Supreme Court, a court of appeal, a superior court, or the
Administrative Office of the Courts, or by an employee thereof, who
otherwise meets the criteria of this subdivision.
(d) "Person" means an individual, corporation, trust, association,
a state or local government, or an agency or instrumentality of any
of the foregoing.
(e) "Protected disclosure" means a good faith communication,
including a communication based on, or when carrying out, job duties,
that discloses or demonstrates an intention to disclose information
that may evidence (1) an improper governmental activity, or (2) a
condition that may significantly threaten the health or safety of
employees or the public if the disclosure or intention to disclose
was made for the purpose of remedying that condition. Protected
disclosure specifically includes a good faith communication to the
California State Auditor's Office alleging an improper
governmental activity and any evidence delivered to the
California
State Auditor's Office in support of the allegation.
"Protected disclosure" also includes, but is not limited to, a
complaint made to the Commission on Judicial Performance.
(f) "State agency" is defined by Section 11000. "State agency"
includes the University of California for purposes of Sections 8547.5
to 8547.7, inclusive, and the California State University for
purposes of Sections 8547.3 to 8547.7, inclusive. Sections 8547.3 to
8547.7, inclusive, shall apply to the Supreme Court, the courts of
appeal, the superior courts, and the Administrative Office of the
Courts in the same manner as they apply to a state agency.
SEC. 20. SEC. 36. Section 8548.4 of
the Government Code is amended to read:
8548.4. The California State Auditor shall post the
information described in Section 8548.1 on the Internet Web site of
the California State Auditor's Office.
SEC. 21. SEC. 37. Section 54954.5 of
the Government Code is amended to read:
54954.5. For purposes of describing closed session items pursuant
to Section 54954.2, the agenda may describe closed sessions as
provided below. No legislative body or elected official shall be in
violation of Section 54954.2 or 54956 if the closed session items
were described in substantial compliance with this section.
Substantial compliance is satisfied by including the information
provided below, irrespective of its format.
(a) With respect to a closed session held pursuant to Section
54956.7:
LICENSE/PERMIT DETERMINATION
Applicant(s): (Specify number of applicants)
(b) With respect to every item of business to be discussed in
closed session pursuant to Section 54956.8:
CONFERENCE WITH REAL PROPERTY NEGOTIATORS
Property: (Specify street address, or if no street address, the
parcel number or other unique reference, of the real property under
negotiation)
Agency negotiator: (Specify names of negotiators attending the
closed session) (If circumstances necessitate the absence of a
specified negotiator, an agent or designee may participate in place
of the absent negotiator so long as the name of the agent or designee
is announced at an open session held prior to the closed session.)
Negotiating parties: (Specify name of party (not agent))
Under negotiation: (Specify whether instruction to negotiator will
concern price, terms of payment, or both)
(c) With respect to every item of business to be discussed in
closed session pursuant to Section 54956.9:
CONFERENCE WITH LEGAL COUNSEL--EXISTING LITIGATION
(Subdivision (a) of Section 54956.9)
Name of case: (Specify by reference to claimant's name, names of
parties, case or claim numbers)
or
Case name unspecified: (Specify whether disclosure would
jeopardize service of process or existing settlement negotiations)
CONFERENCE WITH LEGAL COUNSEL--ANTICIPATED LITIGATION
Significant exposure to litigation pursuant to subdivision (b) of
Section 54956.9: (Specify number of potential cases)
(In addition to the information noticed above, the agency may be
required to provide additional information on the agenda or in an
oral statement prior to the closed session pursuant to subparagraphs
(B) to (E), inclusive, of paragraph (3) of subdivision (b) of Section
54956.9.)
Initiation of litigation pursuant to subdivision (c) of Section
54956.9: (Specify number of potential cases)
(d) With respect to every item of business to be discussed in
closed session pursuant to Section 54956.95:
LIABILITY CLAIMS
Claimant: (Specify name unless unspecified pursuant to Section
54961)
Agency claimed against: (Specify name)
(e) With respect to every item of business to be discussed in
closed session pursuant to Section 54957:
THREAT TO PUBLIC SERVICES OR FACILITIES
Consultation with: (Specify name of law enforcement agency and
title of officer, or name of applicable agency representative and
title)
PUBLIC EMPLOYEE APPOINTMENT
Title: (Specify description of position to be filled)
PUBLIC EMPLOYMENT
Title: (Specify description of position to be filled)
PUBLIC EMPLOYEE PERFORMANCE EVALUATION
Title: (Specify position title of employee being reviewed)
PUBLIC EMPLOYEE DISCIPLINE/DISMISSAL/RELEASE
(No additional information is required in connection with a closed
session to consider discipline, dismissal, or release of a public
employee. Discipline includes potential reduction of compensation.)
(f) With respect to every item of business to be discussed in
closed session pursuant to Section 54957.6:
CONFERENCE WITH LABOR NEGOTIATORS
Agency designated representatives: (Specify names of designated
representatives attending the closed session) (If circumstances
necessitate the absence of a specified designated representative, an
agent or designee may participate in place of the absent
representative so long as the name of the agent or designee is
announced at an open session held prior to the closed session.)
Employee organization: (Specify name of organization representing
employee or employees in question)
or
Unrepresented employee: (Specify position title of unrepresented
employee who is the subject of the negotiations)
(g) With respect to closed sessions called pursuant to Section
54957.8:
CASE REVIEW/PLANNING
(No additional information is required in connection with a closed
session to consider case review or planning.)
(h) With respect to every item of business to be discussed in
closed session pursuant to Sections 1461, 32106, and 32155 of the
Health and Safety Code or Sections 37606 and 37624.3 of the
Government Code:
REPORT INVOLVING TRADE SECRET
Discussion will concern: (Specify whether discussion will concern
proposed new service, program, or facility)
Estimated date of public disclosure: (Specify month and year)
HEARINGS
Subject matter: (Specify whether testimony/deliberation will
concern staff privileges, report of medical audit committee, or
report of quality assurance committee)
(i) With respect to every item of business to be discussed in
closed session pursuant to Section 54956.86:
CHARGE OR COMPLAINT INVOLVING INFORMATION PROTECTED BY FEDERAL LAW

(No additional information is required in connection with a closed
session to discuss a charge or complaint pursuant to Section
54956.86.)
(j) With respect to every item of business to be discussed in
closed session pursuant to Section 54956.96:
CONFERENCE INVOLVING A JOINT POWERS AGENCY (Specify by name)
Discussion will concern: (Specify closed session description used
by the joint powers agency)
Name of local agency representative on joint powers agency board:
(Specify name)
(Additional information listing the names of agencies or titles of
representatives attending the closed session as consultants or other
representatives.)
(k) With respect to every item of business to be discussed in
closed session pursuant to Section 54956.75:
AUDIT BY CALIFORNIA STATE AUDITOR'S OFFICE
SEC. 22. SEC. 38. Section 130506 of
the Health and Safety Code is amended to read:
130506. (a) The department shall negotiate drug discount
agreements with manufacturers to provide discounts for single-source
and multiple-source prescription drugs through the program. The
department shall attempt to negotiate the maximum possible discount
for an eligible Californian. The department shall attempt to
negotiate, with each manufacturer, discounts to offer single-source
prescription drugs under the program at a volume weighted average
discount that is equal to or below any one of the following benchmark
prices:
(1) Eighty-five percent of the average manufacturer price for a
drug, as published by the federal Centers for Medicare and Medicaid
Services.
(2) The lowest price provided to any nonpublic entity in the state
by a manufacturer to the extent that the Medicaid best price exists
under federal law.
(3) The Medicaid best price, to the extent that this price exists
under federal law.
(b) The department may require the drug manufacturer to provide
information that is reasonably necessary for the department to carry
out its duties pursuant to this division.
(c) The department shall pursue manufacturer discount agreements
to ensure that the number and type of drugs available through the
program is sufficient to give an eligible Californian a formulary
comparable to the Medi-Cal list of contract drugs, or if this
information is available to the department, a formulary that is
comparable to that provided to CalPERS enrollees.
(d) To obtain the most favorable discounts, the department may
limit the number of drugs available through the program.
(e) The drug discount agreements negotiated pursuant to this
section shall be used to reduce the cost of drugs purchased by
program participants and to fund program costs pursuant to Section
130542.1.
(f) All information reported by a manufacturer to, negotiations
with, and agreements executed with, the department or its third-party
vendor pursuant to this section, shall be considered confidential
and corporate proprietary information. This information shall not be
subject to disclosure under the California Public Records Act
(Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1
of the Government Code). The California State Auditor's
Office and the Controller shall have access to pricing information in
a manner that is consistent with their access to this information
under the Medi-Cal program and under law. The California
State Auditor's Office and the Controller may use this information
only to investigate or audit the administration of the program.
Neither the California State Auditor's Office, the
Controller, nor the department may disclose this information in a
form that identifies a specific manufacturer or wholesaler or prices
charged for drugs of this manufacturer or wholesaler. Information
provided to the department pursuant to subdivision (e) of Section
130530 shall not be affected by the confidentiality protections
established by this subdivision.
(g) (1) Any pharmacy licensed pursuant to Chapter 9 (commencing
with Section 4000) of Division 2 of the Business and Professions Code
may participate in the program.
(2) Any manufacturer may participate in the program.
SEC. 23. SEC. 39. Section 1872.83 of
the Insurance Code is amended to read:
1872.83. (a) The commissioner shall ensure that the Fraud
Division aggressively pursues all reported incidents of probable
workers' compensation fraud, as defined in Sections 11760 and 11880,
and in subdivision (a) of Section 1871.4, and in Section 549 of the
Penal Code, and forwards to the appropriate disciplinary body the
names, along with all supporting evidence, of any individuals
licensed under the Business and Professions Code who are suspected of
actively engaging in fraudulent activity. The Fraud Division shall
forward to the Insurance Commissioner or the Director of Industrial
Relations, as appropriate, the name, along with all supporting
evidence, of any insurer, as defined in subdivision (c) of Section
1877.1, suspected of actively engaging in the fraudulent denial of
claims.
(b) To fund increased investigation and prosecution of workers'
compensation fraud, and of willful failure to secure payment of
workers' compensation, in violation of Section 3700.5 of the Labor
Code, there shall be an annual assessment as follows:
(1) The aggregate amount of the assessment shall be determined by
the Fraud Assessment Commission, which is hereby established. The
commission shall be composed of seven members consisting of two
representatives of organized labor, two representatives of
self-insured employers, one representative of insured employers, one
representative of workers' compensation insurers, and the President
of the State Compensation Insurance Fund, or his or her designee.
The Governor shall appoint members representing organized labor,
self-insured employers, insured employers, and insurers. The term of
office of members of the commission shall be four years, and a member
shall hold office until the appointment of a successor. The
President of the State Compensation Insurance Fund shall be an ex
officio, voting member of the commission. Members of the commission
shall receive one hundred dollars ($100) for each day of actual
attendance at commission meetings and other official commission
business, and shall also receive their actual and necessary traveling
expenses incurred in the performance of commission duties. Payment
of per diem and travel expenses shall be made from the Workers'
Compensation Fraud Account in the Insurance Fund, established in
paragraph (4), upon appropriation by the Legislature.
(2) In determining the aggregate amount of the assessment, the
Fraud Assessment Commission shall consider the advice and
recommendations of the Fraud Division and the commissioner.
(3) The aggregate amount of the assessment shall be collected by
the Director of Industrial Relations pursuant to Section 62.6 of the
Labor Code. The Fraud Assessment Commission shall annually advise the
Director of Industrial Relations, not later than March 15, of the
aggregate amount to be assessed for the next fiscal year.
(4) The amount collected, together with the fines collected for
violations of the unlawful acts specified in Sections 1871.4, 11760,
and 11880, Section 3700.5 of the Labor Code, and Section 549 of the
Penal Code, shall be deposited in the Workers' Compensation Fraud
Account in the Insurance Fund, which is hereby created, and may be
used, upon appropriation by the Legislature, only for enhanced
investigation and prosecution of workers' compensation fraud and of
willful failure to secure payment of workers' compensation as
provided in this section.
(c) For each fiscal year, the total amount of revenues derived
from the assessment pursuant to subdivision (b) shall, together with
amounts collected pursuant to fines imposed for unlawful acts
described in Sections 1871.4, 11760, and 11880, Section 3700.5 of the
Labor Code, and Section 549 of the Penal Code, not be less than
three million dollars ($3,000,000). Any funds appropriated by the
Legislature pursuant to subdivision (b) that are not expended in the
fiscal year for which they have been appropriated, and that have not
been allocated under subdivision (f), shall be applied to satisfy for
the immediately following fiscal year the minimum total amount
required by this subdivision. In no case may that money be
transferred to the General Fund.
(d) After incidental expenses, at least 40 percent of the funds to
be used for the purposes of this section shall be provided to the
Fraud Division of the Department of Insurance for enhanced
investigative efforts, and at least 40 percent of the funds shall be
distributed to district attorneys, pursuant to a determination by the
commissioner with the advice and consent of the division and the
Fraud Assessment Commission, as to the most effective distribution of
moneys for purposes of the investigation and prosecution of workers'
compensation fraud cases and cases relating to the willful failure
to secure the payment of workers' compensation. Each district
attorney seeking a portion of the funds shall submit to the
commissioner an application setting forth in detail the proposed use
of any funds provided. A district attorney receiving funds pursuant
to this subdivision shall submit an annual report to the commissioner
with respect to the success of his or her efforts. Upon receipt, the
commissioner shall provide copies to the Fraud Division and the
Fraud Assessment Commission of any application, annual report, or
other documents with respect to the allocation of money pursuant to
this subdivision. Both the application for moneys and the
distribution of moneys shall be public documents. Information
submitted to the commissioner pursuant to this section concerning
criminal investigations, whether active or inactive, shall be
confidential.
(e) If a district attorney is determined by the commissioner to be
unable or unwilling to investigate and prosecute workers'
compensation fraud claims or claims relating to the willful failure
to secure the payment of workers' compensation, the commissioner
shall discontinue distribution of funds allocated for that county and
may redistribute those funds according to this subdivision.
(1) The commissioner shall promptly determine whether any other
county could assert jurisdiction to prosecute the fraud claims or
claims relating to the willful failure to secure the payment of
workers' compensation that would have been brought in the
nonparticipating county, and if so, the commissioner may award funds
to conduct the prosecutions redirected pursuant to this subdivision.
These funds may be in addition to any other fraud prosecution funds
or claims relating to the willful failure to secure the payment of
workers' compensation prosecution otherwise awarded under this
section. Any district attorney receiving funds pursuant to this
subdivision shall first agree that the funds shall be used solely for
investigating and prosecuting those cases of workers' compensation
fraud or claims relating to the willful failure to secure the payment
of workers' compensation that are redirected pursuant to this
subdivision and submit an annual report to the commissioner with
respect to the success of the district attorney's efforts. The
commissioner shall keep the Fraud Assessment Commission fully
informed of all reallocations of funds under this paragraph.
(2) If the commissioner determines that no district attorney is
willing or able to investigate and prosecute the workers'
compensation fraud claims or claims relating to the willful failure
to secure the payment of workers' compensation arising in the
nonparticipating county, the commissioner, with the advice and
consent of the Fraud Assessment Commission, may award to the Attorney
General some or all of the funds previously awarded to the
nonparticipating county. Before the commissioner may award any funds,
the Attorney General shall submit to the commissioner an application
setting forth in detail his or her proposed use of any funds
provided and agreeing that any funds awarded shall be used solely for
investigating and prosecuting those cases of workers' compensation
fraud or claims relating to the willful failure to secure the payment
of workers' compensation that are redirected pursuant to this
subdivision. The Attorney General shall submit an annual report to
the commissioner with respect to the success of the fraud prosecution
efforts of his or her office.
(3) Neither the Attorney General nor any district attorney shall
be required to relinquish control of any investigation or prosecution
undertaken pursuant to this subdivision unless the commissioner
determines that satisfactory progress is no longer being made on the
case or the case has been abandoned.
(4) A county that has become a nonparticipating county due to the
inability or unwillingness of its district attorney to investigate
and prosecute workers' compensation fraud or the willful failure to
secure the payment of workers' compensation shall not become eligible
to receive funding under this section until it has submitted a new
application that meets the requirements of subdivision (d) and the
applicable regulations.
(f) If in any fiscal year the Fraud Division does not use all of
the funds made available to it under subdivision (d), any remaining
funds may be distributed to district attorneys pursuant to a
determination by the commissioner in accordance with the same
procedures set forth in subdivision (d).
(g) The commissioner shall adopt rules and regulations to
implement this section in accordance with the rulemaking provisions
of the Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code). Included in the rules and regulations shall be the criteria
for redistributing funds to district attorneys and the Attorney
General. The adoption of the rules and regulations shall be deemed to
be an emergency and necessary for the immediate preservation of the
public peace, health, and safety, or general welfare.
(h) The department shall report to the Governor, the Legislature,
to the committees of the Senate and Assembly having jurisdiction over
insurance, and the Fraud Assessment Commission on the activities of
the Fraud Division and district attorneys supported by the funds
provided by this section in the annual report submitted pursuant to
Section 12922.
The annual report shall include, but is not limited to, all of the
following information for the department and each district attorney'
s office:
(1) All allocations, distributions, and expenditures of funds.
(2) The number of search warrants issued.
(3) The number of arrests and prosecutions, and the aggregate
number of parties involved in each.
(4) The number of convictions and the names of all convicted fraud
perpetrators.
(5) The estimated value of all assets frozen, penalties assessed,
and restitutions made for each conviction.
(6) Any additional items necessary to fully inform the Fraud
Assessment Commission and the Legislature of the fraud-fighting
efforts financed through this section.
(i) In order to meet the requirements of subdivision (g), the
department shall submit a biannual information request to those
district attorneys who have applied for and received funding through
the annual assessment process under this section.
(j) Assessments levied or collected to fight workers' compensation
fraud and insurance fraud are not taxes. Those funds are entrusted
to the state to fight fraud and the willful failure to secure the
payment of workers' compensation by funding state and local
investigation and prosecution efforts. Accordingly, any funds
resulting from assessments, fees, penalties, fines, restitution, or
recovery of costs of investigation and prosecution deposited in the
Insurance Fund shall not be deemed "unexpended" funds for any purpose
and, if remaining in that account at the end of any fiscal year,
shall be applied as provided in subdivision (f) and to offset or
augment subsequent years' program funding.
(k) The California State Auditor's Office shall
evaluate the effectiveness of the efforts of the Fraud Assessment
Commission, the Fraud Division, the Department of Insurance, and the
Department of Industrial Relations, as well as local law enforcement
agencies, including district attorneys, in identifying,
investigating, and prosecuting workers' compensation fraud and the
willful failure to secure payment of workers' compensation. The
report shall specifically identify areas of deficiencies. Included in
this report shall be recommendations on whether the current program
provides the appropriate levels of accountability for those
responsible for the allocation and expenditure of funds raised from
the assessment provided in this section. The California
State Auditor's Office shall submit a report to the Chairperson of
the Senate Committee on Labor and Industrial Relations and the
Chairperson of the Assembly Committee on Insurance on or before May
1, 2004.
SEC. 24. SEC. 40. Section 5024 of
the Penal Code is amended to read:
5024. (a) The Legislature finds and declares that:
(1) State costs for purchasing drugs and medical supplies for the
health care of offenders in state custody have grown rapidly in
recent years and will amount to almost seventy-five million dollars
($75,000,000) annually in the 1999-2000 fiscal year.
(2) The California State Auditor's Office found in a
January 2000 audit report that the state could save millions of
dollars annually by improving its current processes for the
procurement of drugs for inmate health care and by pursuing
alternative procurement methods.
(3) It is the intent of the Legislature that the Department of
Corrections and Rehabilitation, in cooperation with the Department of
General Services and other appropriate state agencies, take prompt
action to adopt cost-effective reforms in its drug and medical supply
procurement processes by establishing a program to obtain rebates
from drug manufacturers, implementing alternative contracting and
procurement reforms, or by some combination of these steps.
(b) (1) The Secretary of the Department of Corrections and
Rehabilitation, pursuant to the Administrative Procedure Act (Chapter
3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title
2 of the Government Code) may adopt regulations requiring
manufacturers of drugs to pay the department a rebate for the
purchase of drugs for offenders in state custody
that is at least equal to the rebate that would
be applicable to the drug under Section 1927(c) of the federal Social
Security Act (42 U.S.C. Sec. 1396r-8(c)). Any such regulation shall,
at a minimum, specify the procedures for notifying drug
manufacturers of the rebate requirements and for collecting rebate
payments.
(2) If a rebate program is implemented, the director shall
develop, maintain, and update as necessary a list of drugs to be
provided under the rebate program, and establish a rate structure for
reimbursement of each drug included in the rebate program. Rates
shall not be less than the actual cost of the drug. However, the
director may purchase a listed drug directly from the manufacturer
and negotiate the most favorable bulk price for that drug. In order
to minimize state administrative costs and maximize state benefits
for the rebate program, the director may establish a program that
focuses upon obtaining rebates for those drugs that it determines are
purchased by the department in relatively large volumes.
(3) If a rebate program is implemented, the department shall
submit an invoice, not less than two times per year, to each
manufacturer for the amount of the rebate required by this
subdivision. Drugs may be removed from the list for failure to pay
the rebate required by this subdivision, unless the department
determines that purchase of the drug is a medical necessity or that
purchase of the drug is necessary to comply with a court order to
ensure the appropriate provision of quality health care to offenders
in state custody.
(4) In order to minimize state administrative costs and maximize
state benefits for such a rebate program, if one is implemented, the
Department of Corrections and Rehabilitation may enter into
interagency agreements with the Department of General Services, the
State Department of Health Care Services, the State
Department of Mental Health, or the State Department of Developmental
Services, the University of California, another appropriate state
department, or with more than one of those entities, for joint
participation in a rebate program, collection and monitoring of
necessary drug price and rebate data, the billing of manufacturers
for rebates, the resolution of any disputes over rebates, and any
other services necessary for the cost-effective operation of the
rebate program.
(5) The Department of Corrections and Rehabilitation, separately
or in cooperation with other state agencies, may contract for the
services of a pharmaceutical benefits manager for any services
necessary for the cost-effective operation of the rebate program, if
one is implemented, or for other services to improve the contracting
and procurement of drugs and medical supplies for inmate health care.

(c) Nothing in this section shall prohibit the department, as an
alternative to or in addition to establishing a rebate program for
drugs for inmate health care, from implementing, in cooperation with
the Department of General Services and other appropriate state
agencies, other cost-effective strategies for procurement of drugs
and medical supplies for offenders in state custody, including, but
not limited to:
(1) Improvements in the existing statewide master agreement
procedures for purchasing contract and noncontract drugs at a
discount from drug manufacturers.
(2) Participation by offenders in state custody infected with
human immunodeficiency virus (HIV), the etiologic agent of acquired
immune deficiency syndrome (AIDS), in the AIDS Drug Assistance
Program.
(3) Membership in the Minnesota Multistate Contracting Alliance
for Pharmacy (MMCAP) or other cooperative purchasing arrangements
with other governmental entities.
(4) Greater centralization or standardization of procurement of
drugs and medical supplies among individual prisons in the Department
of Corrections and Rehabilitation prison system.
(d) The California State Auditor's Office shall report
to the Legislature and the Governor by January 10, 2002, its findings
in regard to:
(1) An evaluation of the trends in state costs for the procurement
of drugs and medical supplies for offenders in state custody, and an
assessment of the major factors affecting those trends.
(2) A summary of the steps taken by the Department of Corrections
and Rehabilitation, the Department of General Services, and other
appropriate state agencies to implement this section.
(3) An evaluation of the compliance by these state agencies with
the findings and recommendations of the January 2000 Bureau
of State Audits
California State Auditor's Office
report for reform of procurement of drugs and medical supplies
for offenders in state custody.
(4) Any further recommendations of the California State
Auditor's Office for reform of state drug procurement practices,
policies, or statutes.
SEC. 25. SEC. 41. Section 71560 of
the Public Resources Code is amended to read:
71560. (a) The endowment may receive charitable contributions or
any sources of income that may be lawfully received, including loans
from the state.
(b) The endowment shall administer any funds it receives in
accordance with this division.
(c) (1) Except as provided in paragraph (2), the endowment shall
invest and manage any funds it receives so that the investments shall
provide a source of income in perpetuity and the principal amount
consisting of charitable contributions and donations, including cost
savings donated pursuant to Section 6618 of the Fish and Game Code,
shall not be spent. Any returns on investments made by the endowment
are the only funds that shall be available for expenditure by the
endowment.
(2) Ten percent of any funds received by the endowment pursuant to
Section 6618 of the Fish and Game Code in a calendar year shall be
allocated by the endowment board, pursuant to Section 71552, as
grants for projects or programs consistent with the purpose of this
chapter within 24 months of receipt of the funds. The majority of
these funds shall be granted to state agencies engaged in coastal and
ocean protection.
(d) The endowment shall invest and manage any funds it receives in
accordance with the Nonprofit Public Benefit Corporation Law (Part 2
(commencing with Section 5110) of Division 2 of Title 1 of the
Corporations Code).
(e) The accounts of the endowment shall be audited annually in
accordance with generally accepted auditing standards by independent
certified public accountants.
(f) The financial transactions of the endowment for any fiscal
year may be audited by the California State Auditor's
Office.
(g) Each recipient of assistance by grant, contract, or loan
pursuant to this division shall keep records reasonably necessary to
disclose fully the amount of the assistance, the disposition of the
assistance, the total cost of the project or undertaking in
connection with which the assistance is given or used, the amount and
nature of that portion of the cost of the project or undertaking
supplied by other sources, and other records that will facilitate an
effective audit. Each recipient of a fixed price contract awarded
pursuant to competitive bidding procedures is exempt from this
subdivision.
(h) The endowment, or its authorized representative, and the
California
State Auditor's Office shall have access to any
records necessary for the purpose of auditing and examining all funds
received or expended by the recipients of assistance.
SEC. 26. SEC. 42. Section 421 of the
Public Utilities Code is amended to read:
421. (a) The commission shall annually determine a fee to be paid
by every passenger stage corporation, charter-party carrier of
passengers, pipeline corporation, for-hire vessel operator, common
carrier vessel operator, railroad corporation, and commercial air
operator, and every other common carrier and related business subject
to the jurisdiction of the commission, except as otherwise provided
in Article 3 (commencing with Section 431) of this chapter and
Chapter 6 (commencing with Section 5001) of Division 2.
(b) The annual fee shall be established to produce a total amount
equal to the amount established in the authorized commission budget
for the same year, including adjustments appropriated by the
Legislature and an appropriate reserve, to regulate common carriers
and related businesses, less the amount to be paid from special
accounts or funds pursuant to Section 403, reimbursements, federal
funds, other revenues, and unencumbered funds from the preceding
year.
(c) Notwithstanding any other provision of law, the fees paid by
railroad corporations shall be used for state-funded railroad
investigation and enforcement activities of the commission, other
than the rail safety activities funded by the Transportation Planning
and Development Account pursuant to Section 99315. The railroad fees
shall be set annually at a level which generates not less than the
amount sufficient to fund activities pursuant to Sections 765.5,
7711, and 7712.
(d) On January 1, 1992, the commission shall submit to the
Legislature a detailed budget implementing this section for the
1992-93 fiscal year. The commission shall also submit to the
Legislature by January 1, 1993, and on each January 1 thereafter, a
detailed budget for expenditure of railroad corporation fees for the
ensuing budget year. The budget for expenditure of railroad
corporation fees, for each of the 1996-97 and 1997-98 fiscal years,
shall not exceed the amount of three million dollars ($3,000,000).
Expenditures of this budget shall be limited to the following items:
(1) Expenditures for employees occupying, and actually performing
service in, railroad-safety personnel positions that are directly
involved in inspecting railroads and enforcing rail safety
regulations. The commission shall expend the funds budgeted pursuant
to this subdivision for the salaries, per diem, and travel expenses
of employees specified in this paragraph, unless, by statute, the
commission is specifically prohibited from expending all or part of
those funds.
(2) Expenditures for employees occupying, and actually performing
service in, clerical and support staff positions that are directly
associated with railroad-safety inspections.
(3) Expenditures for legal personnel who actually pursue
violations of rail safety regulations beyond the informal complaint
level.
(4) Expenditures for an audit by the California State
Auditor's Office pursuant to subdivision (f), not to exceed
seventy-five thousand dollars ($75,000).
(5) Expenditures for the pro rata share of the commission's
overhead costs while state personnel are actually occupying the
positions, and are performing the duties specified in paragraphs (1)
to (4), inclusive.
(e) The Department of Finance shall notify the Joint Legislative
Budget Committee, pursuant to Section 28.00 of the annual Budget Act,
prior to authorizing any change in the Budget Act appropriation for
railroad corporation fees that is larger than one hundred thousand
dollars ($100,000), or 10 percent of the amount budgeted, whichever
is less.
(f) Except as otherwise provided in this subdivision, commencing
with the 1993-94 fiscal year, and in each subsequent fiscal year
until the 1999-2000 fiscal year, the commission shall conduct an
audit of the expenditure of the funds received pursuant to this
section, except that for the 1996-97 fiscal year and fiscal years
thereafter the audit shall be conducted by the California
State Auditor's Office. The results of this audit shall be reported,
in writing, commencing on or before February 15, 1995, with respect
to the audit for the 1993-94 fiscal year, and on or before January 15
of each year thereafter, with respect to the audit for the fiscal
year ending on the previous June 30, to the appropriate policy and
budget committees of the respective houses of the Legislature. The
commission shall reimburse the California State Auditor's
Office for the costs of the audits beginning with the 1996-97 fiscal
year.
(g) On or before January 1, 1994, the commission shall hire a
minimum of four additional operating practices inspectors, exclusive
of supervisory personnel, who are, or shall become by July 1, 1994,
federally certified, for the purpose of enforcing compliance by
railroads operating in this state with state and federal safety
regulations.
(h) The commission, in performing its duties, shall limit the
expenditure of funds for rail safety division purposes to those
railroad corporation fees collected pursuant to subdivision (d). In
no event, shall the commission fund railroad safety activities
utilizing funds from other commission accounts unrelated to railroad
safety.
SEC. 27. SEC. 43. Section 80270 of
the Water Code is amended to read:
80270. The California State Auditor's Office shall
conduct a financial and performance audit of the department's
implementation of this division. The audit shall be completed before
December 31, 2001. The office shall issue a final report on or before
March 31, 2003.
SEC. 28. SEC. 44. No existing
supplies, forms, insignias, signs, or logos shall be destroyed or
changed as a result of changing the name of the Bureau of State
Audits to the California State Auditor's Office or
the name of the State Auditor to the California State Auditor
,
and those materials shall continue to be used until exhausted or
unserviceable.