Transcript Slide 1

The Unique Alternative to the Big Four®
PROPOSITION 39 BONDS
LEGAL, AUDIT and CBOC
REQUIREMENTS
The Unique Alternative to the Big Four®
Proposition 39 Requirements
• History
November 7, 2000
• Voters Approved Proposition 39
• “Smaller Classes, Safer Schools and Financial
Accountability Act”
• Amended portions of the California Constitution
(Article 13A)
• Added Education Code Sections 15264 – 15288 –
“Strict Accountability in Local School Construction
Bonds Act of 2000”
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The Unique Alternative to the Big Four®
Proposition 39 Requirements
 California Constitution – Article 13A
 Bond proceeds can only be used for
 Construction
 Reconstruction
 Rehabilitation
 Replacement of facilities
 Acquisition or lease of real property for facilities
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The Unique Alternative to the Big Four®
Proposition 39 Requirements
 California Constitution – Article 13A
 Bond proceeds cannot be used for:
 Teacher salaries
 Administrator salaries
 School operating expenses
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The Unique Alternative to the Big Four®
Proposition 39 Requirements
 California Constitution – Article 13A
 School Board must formulate a projects list
 School Board must certify that they have:
 Evaluated safety needs
 Evaluated class-size reduction needs
 Evaluated information technology needs
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The Unique Alternative to the Big Four®
Proposition 39 Requirements
 California Constitution – Article 13A
 School Board must conduct an annual, independent
performance audit to ensure that the funds have been
expended only on the specific projects listed
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The Unique Alternative to the Big Four®
Proposition 39 Requirements
 California Constitution – Article 13A
 School Board must conduct an annual, independent
financial audit of the proceeds from the sale of the bonds
until all of those proceeds have been expended for the
school facilities projects
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The Unique Alternative to the Big Four®
Proposition 39 Requirements
 California Education Code Section 15272
 Requires establishment of a Citizens’ Oversight
Committee
 Requires annual independent audits “to assure that funds
are spent only on school and classroom improvements
and for no other purposes”
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The Unique Alternative to the Big Four®
Proposition 39 Requirements
 California Education Code Section 15278
 Establishes purpose of the Citizens’ Oversight Committee,
which shall:
 Inform the public concerning the expenditure of bond
revenues
 Actively review and report on the proper expenditure of
funds for school construction
 Advise the public about compliance with Article 13A of
the State Constitution
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The Unique Alternative to the Big Four®
Proposition 39 Requirements
 California Education Code Section 15278
 Establishes purpose of the Citizens’ Oversight Committee,
which shall (continued):
 Provide oversight for:
 Ensuring that bond revenues are expended only for
the purposes described in paragraph (3) of subdivision
(b) of Section 1 of Article 13A; and
 Ensuring that no funds are used for teacher or
administrative salaries or other school operating
expenses
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The Unique Alternative to the Big Four®
Proposition 39 Requirements
 California Education Code Section 15278
 Citizens’ Oversight Committee may do the following:
 Receive and review copies of the annual independent financial and
performance audits
 Inspect school facilities to ensure bond funds are spent in
accordance with Article 13A
 Receive and review copies of deferred maintenance proposals or
plans
 Review efforts by the District to maximize bond revenues by
implementing cost-saving measures:
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Reduce costs of professional fees
Reduce costs of site preparation
Joint use of core facilities
Incorporating efficiencies in schoolsite design
Cost-effective and reusable facility plans
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The Unique Alternative to the Big Four®
Proposition 39 Requirements
 California Education Code Section 15278
 Citizens’ Oversight Committee may do the following:
 Receive and review copies of the annual independent financial and
performance audits
 Education Code Section 15286 has been added to require the
annual financial and performance audits be submitted to the
Citizens’ Oversight Committee by March 31 of each year
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The Unique Alternative to the Big Four®
Proposition 39 Requirements
 California Education Code Section 15280
 School District Governing Board shall provide to the
citizen’s oversight committee (without expending bond
funds):
 Necessary technical assistance
 Administrative assistance
 Citizen’s Oversight Committee:
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Meetings open to the public; properly noticed
Report to the Governing Board at least once per year
Minutes of meetings are public records
Minutes of meetings shall be available on an Internet website
maintained by the District
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The Unique Alternative to the Big Four®
Proposition 39 Requirements
 California Education Code Section 15282
 Describes the composition of the Citizens’ Oversight
Committee
 Minimum of seven members, of which five must be:
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2.
3.
4.
5.
Active Business member
Active Senior Citizens’ Organization
Active Bona Fide Taxpayers’ Organization
Parent or Guardian of a child enrolled in the District
Parent or Guardian of a child enrolled in the District, active in
Parent-Teacher Organization
 District Employees, Officials, Vendors, Contractors and
Consultants are prohibited from serving on the Committee
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The Unique Alternative to the Big Four®
SCUSD CBOC Bylaws (1/16/2007)
 Establishes purpose of the Citizens’ Oversight
Committee, which shall (Section 3):
 Inform the public concerning the District’s expenditure of
bond proceeds (3.1)
 Review expenditure reports produced by the District to
ensure (3.2):
 Bond proceeds are expended only for the purposed set
forth in the ballot measure
 No bond proceeds are used for any teacher or
administrative salaries or other operating expenses
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The Unique Alternative to the Big Four®
SCUSD CBOC Bylaws (1/16/2007)
 Establishes purpose of the Citizens’ Oversight
Committee, which shall (Section 3)(continued):
 Present to the Board, in public session an annual written
report which shall contain the following (3.3):
 A statement whether the District is in compliance with
the requirements of Article XIIIA, Section 1(b)(3) of the
California Constitution; and
 A summary of the Committee’s proceedings and
activities for the preceding year
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The Unique Alternative to the Big Four®
SCUSD CBOC Bylaws (1/16/2007)
 Citizens’ Oversight Committee may do the following
(Section 4.1):
 Receive and review copies of the annual independent
financial and performance audits
 Inspect some of the facilities and grounds for which bond
proceeds have been or will be expended
 Receive and review copies of deferred maintenance
proposals or plans developed by the District
 Provide input and advise to District staff and the Board
regarding the selection of an independent auditor for
performance audit of bond funds
 Make requests for copies or inspection of District records
in writing to the Chief Financial Officer
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The Unique Alternative to the Big Four®
SCUSD CBOC Bylaws (1/16/2007)
 Citizens’ Oversight Committee is not empowered to
do any of the following (Section 3.4):
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Approval of construction contracts
Approval of construction change orders
Appropriation of construction funds
Handling of legal matters
Approval of construction plans and schedules
Approval of Deferred Maintenance Plans
Approval for sale of bonds
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The Unique Alternative to the Big Four®
SCUSD CBOC Bylaws (1/16/2007)
 Citizens’ Oversight Committee is not responsible for any of
the following (Section 3.5):
 Projects financed through the State of California, developer fees,
COPs, lease/revenue bonds or sale of surplus property (all sources
not involving Proposition 39 bond proceeds)
 Establishment of priorities and order of construction for bond projects
 Selection of architects, engineers, soils engineers, construction
managers, project managers, CEQA consultants and other
professional service firms required to complete the bond projects
 Approval of design for bond projects
 Selection of independent audit firm, performance audit consultants
and other consultants necessary to support the activity of the
committee
 Approval of an annual budget for the Committee necessary for the
committee to carry out its activities
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The Unique Alternative to the Big Four®
Performance Audit Standards
 Performance Audit Standards
 Described in Generally Accepted Government Auditing
Standards (GAGAS), issued by the Comptroller General of
the United States (the “Yellow Book”)
 Did not exist in GAGAS in 2000 when Proposition 39 was
passed
 Added to GAGAS in 2003; further enhanced in 2007
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The Unique Alternative to the Big Four®
Performance Audit Standards
 Recent Developments:
 SB 1473 (EC 15286)
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Introduced 2/19/10
Amended 3/25/10 and 4/12/10
First hearing 4/14/10
Passed Assembly 8/16/10; Passed Senate 8/26/10
Signed by Governor 9/22/10
Became effective January 1, 2011
EC 15286 clarifies Education Code to state that the Performance
Audit required under Proposition 39 must be done in accordance
with Generally Accepted Governmental Auditing Standards
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The Unique Alternative to the Big Four®
Performance Audit Standards
 GAGAS General Standards
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Independence
Professional Judgment
Competence
Continuing Professional Education
Quality Control
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The Unique Alternative to the Big Four®
Performance Audit Standards
 GAGAS Fieldwork Standards
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Reasonable Assurance
Significance
Audit Risk
Planning
Supervision and Review
Sufficient, Appropriate Evidence
Audit Documentation
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The Unique Alternative to the Big Four®
Performance Audit Standards
 GAGAS Reporting Standards
 Reporting
 Report Contents
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The Unique Alternative to the Big Four®
Performance Audits
 What will the Auditor look for?
 Internal Controls
 Documentation of the control environment
 Verification that the controls work
 Compliance with laws and regulations
 Compliance with District controls
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The Unique Alternative to the Big Four®
Performance Audits
 What will the Auditor look for?
 Bond Expenditures
 Expenditure details agree with District’s financial
statements / General Ledger
 Sample of expenditures
 District procedures are followed
 Compliance with Bond provisions
 Compliance with project list
 School / classroom improvements; not teacher or
administrator salaries
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The Unique Alternative to the Big Four®
Performance Audits
 What will the Auditor look for?
 Oversight Committee
 Relationship to the Governing Board
 Compliance with oversight responsibilities
 Reports to the Board
 Committee meeting minutes
 Accessibility of website information
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