Lara Continues Fight for Greater Transparency and Oversight in Local Government

January 19, 2012

AB 1345 provides safeguards to protect taxpayers from waste, fraud and abuse

SACRAMENTO – Continuing his quest for greater transparency and oversight in local government, Assembly Member Ricardo Lara (D- Bell Gardens) has introduced AB 1345, a good government measure that strengthens the current independent audit process used to identify and timely correct financial mismanagement at the local government level. Specifically, the bill will require local government to submit the annual financial audits conducted by independent audit firms to the State Controller and require that local government rotate audit partners every six years in order to ensure that independent auditors maintain their independence.

"AB 1345 is a good government bill that nips financial mismanagement in the bud," said Lara. "The bill ensures true independence between auditors and the local government books they are charged with reviewing, protecting taxpayers from waste, fraud and abuse."

The current statutory approach to protect taxpayers from waste, fraud and abusive practices by local governments is not working as illustrated by the Controller's Office audit findings in the Cities of Bell, Montebello and the County of Modoc where millions of state, federal, and local dollars were misspent over several years. The misuse and abuse of funds may be attributed to a lack of proper checks and balances. For example, in the City of Bell, the lack of internal controls were overlooked by the city's auditors and year after year the independent auditors gave the city a "clean bill of health" despite record salaries, illegal taxes, and arbitrary fees. Currently, there are safeguards to identify and timely correct financial mismanagement at the local government level. The safeguards exist in the annual financial audit conducted by independent audit firms and in the single audit that is required of all local governments that expend more than $500 thousand in federal funds.

However, as in the case of Bell and Modoc, both of which required a financial and single audit, the SCO uncovered that these safeguards can fail if the audit is inadequate. The Controller's review of the work papers for these two audit firms found significant lapses in performance that led to a failure to identify the problems.

AB 1345 provides a necessary check over independent audits and ensures timely correction of financial mismanagement.

AB 1345 received unanimous, bipartisan support in the Assembly Appropriations Committee today. The bill will next be heard in the Assembly Floor.