2005 California Government Code Sections 8546-8546.9 Article 2. Powers and Duties

GOVERNMENT CODE
SECTION 8546-8546.9

8546.  It is the intent of the Legislature that the Bureau of State
Audits 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.  Therefore, all of the
following exclusions apply to the office:
   (a) Notwithstanding Section 19790, the State Auditor shall
establish an affirmative action program that shall meet the criteria
and objectives established by the State Personnel Board and shall
report annually to the State Personnel Board and the commission.
   (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 Sections 11730 and 13292, the State Auditor is
delegated the authority to establish and administer the fiscal and
administrative policies of the bureau 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 bureau.
   (e) Notwithstanding Section 11033, the State Auditor or officers
and employees of the bureau 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 Bureau
of State Audits.  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 Bureau of State Audits.  The State Auditor
may adopt regulations necessary for the operation of the bureau
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 bureau.
   (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 Bureau of State Audits
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 bureau 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 Bureau of State Audits 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 bureau employees in these state benefit programs.
8546.1.  (a) The State Auditor shall conduct financial and
performance audits as directed by statute.  The 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 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 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 State
Auditor as a committee request.
   (c) The 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 State Auditor
shall transmit a copy of the audit report to the commission.  Not
later than 24 hours after delivery to the commission, the commission
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.
8546.3.  The 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 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 7501 and
following) and the purposes set forth in Section 8521.5.
8546.4.  (a) The 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 State Auditor, in the performance of this annual audit,
may examine all the financial records, accounts, and documents of any
state agency as defined by Section 11000.
   (c) The 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 State Auditor, and the Controller when they
are required to obtain federally required financial and compliance
audits.  The Director of Finance, the 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
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 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 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) 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.
8546.5.  (a) The 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, that the 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, the 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 State Auditor shall notify the Joint Legislative Audit
Committee whenever it identifies a state agency as at high risk.
   (d) The State Auditor may issue audit reports with recommendations
for improvement in state agencies identified as at high risk not
less than once every two years.
   (e) The State Auditor may require state agencies identified as
high risk to periodically report to the auditor regarding the status
of recommendations for improvement made by the State Auditor or other
state oversight agencies.
8546.6.  The 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.
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 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 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 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.
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 State Auditor and the Bureau of State Audits,
respectively.
8546.9.  (a) The State Auditor shall conduct an audit of the state's
procurement and reimbursement practices as they relate to the
purchase of drugs for or by state agencies, including, but not
limited to, the State Department of Mental Health, the Department of
Corrections, the Department of the Youth Authority, the State
Department of Developmental Services, the Public Employees'
Retirement System, and the State Department of Health Services.
   (b) The State Auditor shall issue and provide the audit report to
the Legislature no later than May 31, 2005.  The State Auditor shall
provide to the Chairs of the Assembly Health Committee, the Assembly
Budget Committee, the Senate Health and Human Services Committee, the
Senate Budget and Fiscal Review Committee, and the Joint Legislative
Audit Committee the State Auditor's analysis of the auditee's
one-year status report on the auditee's implementation of the
recommendations contained in the audit report.  It is the intent of
the Legislature, if the results of the status report warrant further
inquiry, that the Joint Legislative Audit Committee direct the State
Auditor to conduct additional audit work, as described in this
section, and to issue an additional audit report by June 2007.  If
circumstances continue to warrant additional work, it is the intent
of the Legislature that the Joint Legislative Audit Committee direct
the State Auditor to issue a third audit report by June 2009.
   (c) The audit report shall include, but not necessarily be limited
to, all of the following:
   (1) A review of a representative sample of the state's procurement
and reimbursement of drugs for the period examined to determine
whether the state is receiving the best value for the drugs it
purchases.
   (2) To the extent possible, a comparison of drug costs to the
state with drug costs to other appropriate entities such as the
federal government, the Canadian government, and private payers.
   (3) A determination of whether the state's procurement and
reimbursement practices result in savings from strategies such as
negotiated discounts, rebates, and contracts with multistate
purchasing organizations, and whether the strategies selected by the
state result in the lowest possible costs.
   (d) In preparing the audit report, as in the case of any other
audit, the Bureau of State Audits is subject to Section 8545.1 of the
Government Code.
   (e) This section shall remain in effect only until January 1,
2010, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2010, deletes or extends
that date.



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