ARTICLE 2. Accounting Regulations, Budget Controls and Audits [41010. - 41024.]

Cal. Education Code - EDC 2.

in effect

Cal. Education Code - EDC § 41010. Section 41010.

The accounting system used to record the financial affairs of any school district shall be in accordance with the definitions, instructions, and procedures published in the California School Accounting Manual as approved by the State Board of Education and furnished by the Superintendent of Public Instruction. No accounting manual so approved shall expressly or by implication affect the content of any educational program or objective, except as otherwise specifically provided for by this code. The Legislature hereby finds that such content shall be best determined by those involved in the administration of educational programs, including school district governing boards, local administrators, teachers, students, and parents.

Cal. Education Code - EDC § 41011. Section 41011.

The accounting system used to record the financial affairs of any school district shall be designed to provide separate recording and clear distinction between expenditures for salaries of classroom teachers employed by the district and expenditures for other purposes of the district. As used in this section “salaries of classroom teachers” means: (a) The salary paid to each teacher employed by the district whose duties require that the full time for which the teacher is employed be devoted to the teaching of pupils of the district. (b) The portion of the salary of each teacher whose duties require that a part, but not all, of the full time for which the teacher is employed be devoted to the teaching of pupils of the district, which is equal to the portion of such full time actually devoted by the teacher to teaching pupils of the district. (c) The salary paid to each instructional aide employed by the district, any portion of whose duties are required to be performed under the supervision of a classroom teacher. As used in this section a “teacher” means an employee of the district employed in a position requiring certification qualifications and whose duties require him to teach pupils of the district for at least one full instructional period each schoolday for which the employee is employed. In the case of a teacher employed to teach in an elementary school, an instructional period is a period of not less than 20 minutes. In the case of a teacher employed to teach in a secondary school, an instructional period is the number of minutes equal to the number of minutes of the regular academic period in the junior high school, or high school, in which the teacher is employed to teach.

Cal. Education Code - EDC § 41011.1. Section 41011.1.

(a) The accounting system used to record the financial affairs of any local educational agency shall be designed to provide a separate accounting of expenditures related to actual payments of legal settlements, judgments, or special assessments by a joint pooling arrangement, as a result of claims pursuant to Chapter 861 of the Statutes of 2019 (Assembly Bill 218 of the 2019–20 Regular Session) and Chapter 655 of the Statutes of 2023 (Assembly Bill 452 of the 2023–24 Regular Session). (b) The accounting system used to record financial affairs of any local educational agency shall be designed to provide a separate accounting of expenditures related to actual payments of legal settlements, judgments, or special assessments by a joint pooling arrangement, as a result of civil claims that are not captured pursuant to subdivision (a). (c) For purposes of this section, “local educational agency” means a school district, county office of education, charter school, or joint powers authority established pursuant to Article 1 (commencing with Section 6500) of Chapter 5 of Division 7 of Title 1 of the Government Code consisting of a combination of school districts, county offices of education, or charter schools.

Cal. Education Code - EDC § 41012. Section 41012.

For purposes of determining allowances pursuant to Chapter 8 (commencing with Section 52200) of Part 28, and Chapter 3 (commencing with Section 56500) and Chapter 4 (commencing with Section 56600) of Part 30, the Superintendent of Public Instruction shall require the use of a uniform cost accounting procedure, as set forth in the California School Accounting Manual.

Cal. Education Code - EDC § 41013. Section 41013.

For the purpose of achieving clarity and uniformity in the budgeting and reporting of school district expenditures by funds, whenever certain expenditures for the children’s center program, the development center for handicapped minors program, or any similar program, except the food service program, for which a special fund is required by law, are: (1) authorized by law and by action of the governing board to be paid from the general fund of the school district, or (2) required by law to be paid from the general fund of the school district, the amount estimated or actually required to meet these expenditures shall be transferred or paid from the general fund to the children’s center fund, the development center for handicapped minors fund, or other special fund as appropriate. Any amount transferred or paid in excess of the amount actually required shall be refunded to the general fund. The Superintendent of Public Instruction is hereby authorized to adopt rules and regulations governing the method of accounting for said payments and transfers.

Cal. Education Code - EDC § 41014. Section 41014.

Excepting only as provided in Article 1 (commencing with Section 41000) and this article, all constitutional and statutory limitations on the purposes for which moneys derived from particular specified sources may be expended, and all statutory provisions relative to the establishment of specified school district funds, shall be administered by county superintendents of schools, or in the discretion of county auditors, by county superintendents of schools and county auditors by means of budgetary accounting and not by the establishment and maintenance in the county or city and county treasury of special school district funds.

Cal. Education Code - EDC § 41015. Section 41015.

The governing board of any school district or any county office of education which has funds in a special reserve fund of the district or county office of education or any surplus moneys not required for the immediate necessities of the district or county office of education, is hereby authorized to invest all or any part of the funds in any of the investments specified in Section 16430 or 53601 of the Government Code.

Cal. Education Code - EDC § 41016. Section 41016.

The governing board of a school district which has made an investment pursuant to the authority of Section 41015 may deposit such security for safekeeping with a state or national bank or trust company located within this state or with the Federal Reserve Bank of San Francisco or any branch thereof within the state, or with any Federal Reserve bank or with any state or national bank located in any city designated as a reserve city by the Board of Governors of the Federal Reserve System. The governing board shall take from such bank a receipt for the security so deposited. The county treasurer with whom such funds if uninvested would be deposited shall not be responsible for securities delivered to and receipted for by a bank under the authority of this section until they are withdrawn from the bank by said treasurer.

Cal. Education Code - EDC § 41017. Section 41017.

The governing board of any school district or any county office of education may authorize any school district governed by it, or any school under its jurisdiction to deposit in one or more bank accounts as clearing accounts any miscellaneous receipts, including receipts from the sale of property or materials pursuant to Section 39526 or 39527, received or collected by the school district or county office of education, and may provide for the withdrawals from those accounts. All moneys in those bank accounts shall be paid into the county treasury within the time periods specified pursuant to Section 41001. Cashiers’ checks, certified checks, and money placed in the custody of the school district or county office of education as security that a bidder will execute or faithfully perform a contract, if awarded to him or her, may be deposited in those bank accounts but shall not be paid into the county treasury to the credit of the school district or county office of education unless forfeited or unless unclaimed by the bidder for a period of 12 months. Such bank accounts shall not be subject to the deposit of funds provisions of Article 2 (commencing with Section 53630) of Chapter 4 of Part 1 of Division 2 of Title 5 of the Government Code, except to the extent provided by Section 53679 of the Government Code.

Cal. Education Code - EDC § 41018. Section 41018.

The governing board of any school district or any county office of education having an average daily attendance of 100,000 or more may deposit in one or more bank accounts moneys received from the temporary rental of property acquired by a school district or county office of education pending construction of school facilities on the property. The moneys may be held in the accounts for a period of not to exceed three years and may be used to pay any proper costs incurred as a result of the temporary rental, provided that when the moneys are not being used to pay the costs they may be invested, along with all other moneys deposited in clearing accounts, pursuant to Section 41015 as determined by the governing board of the school district or the county office of education. The moneys invested pursuant to this section shall be invested with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with these matters would use in the conduct of an enterprise of like character and with like aims.

Cal. Education Code - EDC § 41019. Section 41019.

The governing board of any school district which maintains clearing accounts, cafeteria accounts, and other accounts in a bank or banks, pursuant to Section 41017 or 39892, or pursuant to any other provisions of law, may contract and pay for the expenses of transporting money to and from such bank or banks.

Cal. Education Code - EDC § 41020. Section 41020.

(a) It is the intent of the Legislature to encourage sound fiscal management practices among local educational agencies for the most efficient and effective use of public funds for the education of children in California by strengthening fiscal accountability at the school district, county, and state levels. (b) (1) Not later than the first day of May of each fiscal year, each county superintendent of schools shall provide for an audit of all funds under their jurisdiction and control and the governing board of each local educational agency shall either provide for an audit of the books and accounts of the local educational agency, including an audit of income and expenditures by source of funds, or make arrangements with the county superintendent of schools having jurisdiction over the local educational agency to provide for that auditing. (2) A contract to perform the audit of a local educational agency that has a disapproved budget or has received a negative certification on any budget or interim financial report during the current fiscal year or either of the two preceding fiscal years, or for which the county superintendent of schools has otherwise determined that a lack of going concern exists, is not valid unless approved by the responsible county superintendent of schools and the governing board of the local educational agency. (3) If the governing board of a local educational agency has not provided for an audit of the books and accounts of the local educational agency by April 1, the county superintendent of schools having jurisdiction over the local educational agency shall provide for the audit of the local educational agency. (4) An audit conducted pursuant to this section shall comply fully with the Government Auditing Standards issued by the Comptroller General of the United States. (5) For purposes of this section, “local educational agency” does not include community colleges. (c) Each audit conducted in accordance with this section shall include all funds of the local educational agency, including the student body and cafeteria funds and accounts and any other funds under the control or jurisdiction of the local educational agency. Each audit shall also include an audit of pupil attendance procedures. Each audit shall include a determination of whether funds were expended pursuant to a local control and accountability plan or an approved annual update to a local control and accountability plan pursuant to Article 4.5 (commencing with Section 52059.5) of Chapter 6.1 of Part 28 of Division 4. (d) All audit reports for each fiscal year shall be developed and reported using a format established by the Controller after consultation with the Superintendent and the Director of Finance. (e) (1) The cost of the audits provided for by the county superintendent of schools shall be paid from the county school service fund and the county superintendent of schools shall transfer the pro rata share of the cost chargeable to each school district from school district funds. (2) The cost of the audit provided for by a governing board of a local educational agency shall be paid from local educational agency funds. The audit of the funds under the jurisdiction and control of the county superintendent of schools shall be paid from the county school service fund. (f) (1) The audits shall be made by a certified public accountant or a public accountant, licensed by the California Board of Accountancy, and selected by the local educational agency, as applicable, from a directory of certified public accountants and public accountants deemed by the Controller as qualified to conduct audits of local educational agencies, which shall be published by the Controller not later than December 31 of each year. (2) Commencing with the 2003–04 fiscal year and except as provided in subdivision (d) of Section 41320.1, it is unlawful for a public accounting firm to provide audit services to a local educational agency if the lead audit partner, or coordinating audit partner, having primary responsibility for the audit, or the audit partner responsible for reviewing the audit, has performed audit services for that local educational agency in each of the six previous fiscal years. The Education Audits Appeal Panel may waive this requirement if the panel finds that no otherwise eligible auditor is available to perform the audit. (3) It is the intent of the Legislature that, notwithstanding paragraph (2), the rotation within public accounting firms conform to provisions of the federal Sarbanes-Oxley Act of 2002 (Public Law 107-204; 15 U.S.C. Sec. 7201 et seq.), and upon release of the report required by the act of the Comptroller General of the United States addressing the mandatory rotation of registered public accounting firms, the Legislature intends to reconsider paragraph (2). In determining which certified public accountants and public accountants shall be included in the directory, the Controller shall use the following criteria: (A) The certified public accountants or public accountants shall be in good standing as certified by the Board of Accountancy. (B) The certified public accountants or public accountants, as a result of a quality control review conducted by the Controller pursuant to Section 14504.2, shall not have been found to have conducted an audit in a manner constituting noncompliance with subdivision (a) of Section 14503. (g) (1) The auditor’s report shall include each of the following: (A) A statement that the audit was conducted pursuant to standards and procedures developed in accordance with Chapter 3 (commencing with Section 14500) of Part 9 of Division 1 of Title 1. (B) A summary of audit exceptions and management improvement recommendations. (C) An evaluation by the auditor on whether there is substantial doubt about the ability of the local educational agency to continue as a going concern for a reasonable period of time. This evaluation shall be based on the Statement on Auditing Standards No. 59, as issued by the American Institute of Certified Public Accountants regarding disclosure requirements relating to the ability of the entity to continue as a going concern. (2) To the extent possible, a description of correction or plan of correction shall be incorporated in the audit report, describing the specific actions that are planned to be taken, or that have been taken, to correct the problem identified by the auditor. The descriptions of specific actions to be taken or that have been taken shall not solely consist of general comments such as “will implement,” “accepted the recommendation,” or “will discuss at a later date.” (h) (1) Not later than December 15, a report of each local educational agency audit for the preceding fiscal year shall be filed with the county superintendent of schools of the county in which the local educational agency is located, the department, and the Controller. The Superintendent shall make any adjustments necessary in future apportionments of all state funds to correct any audit exceptions revealed by those audit reports. (2) The audit report referenced in paragraph (1) for the 2020–21 fiscal year shall instead be filed no later than January 31, 2022. (3) The extension for the audit report referenced in subdivision (m) of Sections 47605 and 47605.6 for the 2020–21 fiscal year shall instead be filed no later than January 31, 2022. (i) (1) Commencing with the 2002–03 audit of local educational agencies pursuant to this section and subdivision (d) of Section 41320.1, each county superintendent of schools shall be responsible for reviewing the audit exceptions contained in an audit of a local educational agency under their jurisdiction related to attendance, inventory of equipment, internal control, and any miscellaneous items, and determining whether the exceptions have been either corrected or an acceptable plan of correction has been developed. (2) Commencing with the 2004–05 audit of local educational agencies pursuant to this section and subdivision (d) of Section 41320.1, each county superintendent of schools shall include in the review of audit exceptions performed pursuant to this subdivision those audit exceptions related to use of instructional materials program funds, teacher misassignments pursuant to Section 44258.9, and information reported on the school accountability report card required pursuant to Section 33126, and shall determine whether the exceptions are either corrected or an acceptable plan of correction has been developed. (j) Upon submission of the final audit report to the governing board of each local educational agency and subsequent receipt of the audit by the county superintendent of schools having jurisdiction over the local educational agency, the county office of education shall do all of the following: (1) Review audit exceptions related to attendance, inventory of equipment, internal control, and other miscellaneous exceptions. Attendance exceptions or issues shall include, but not be limited to, those related to local control funding formula allocations pursuant to Section 42238.02, as implemented by Section 42238.03, and independent study. (2) (A) If a description of the correction or plan of correction has not been provided as part of the audit required by this section, the county superintendent of schools shall notify the local educational agency and request the governing board of the local educational agency to provide to the county superintendent of schools a description of the corrections or plan of correction by March 15. (B) In audit reports for the 2020–21 fiscal year, the description of the corrections or plan of correction referenced in subparagraph (A) shall instead be filed no later than April 15, 2022. (3) Review the description of correction or plan of correction and determine its adequacy. If the description of the correction or plan of correction is not adequate, the county superintendent of schools shall require the local educational agency to resubmit that portion of its response that is inadequate. (k) (1) Each county superintendent of schools shall certify to the Superintendent and the Controller, not later than May 15, that the county superintendent of schools’ staff has reviewed all audits of local educational agencies under the county superintendent of schools’ jurisdiction for the prior fiscal year, that all exceptions that the county superintendent was required to review were reviewed, and that all of those exceptions, except as otherwise noted in the certification, have been corrected by the local educational agency or that an acceptable plan of correction has been submitted to the county superintendent of schools. In addition, the county superintendent shall identify, by local educational agency, any attendance-related audit exception or exceptions involving state funds, and require the local educational agency to which the audit exceptions were directed to submit appropriate reporting forms for processing by the Superintendent. (2) For audit reports for the 2020–21 fiscal year, the deadline for certification referenced in paragraph (1) shall instead be filed no later than June 15, 2022. ( l ) In the audit of a local educational agency for a subsequent year, the auditor shall review the correction or plan or plans of correction submitted by the local educational agency to determine if the exceptions have been resolved. If an exception has not been resolved, the auditor shall immediately notify the appropriate county office of education and the department and restate the exception in the audit report. After receiving that notification, the department shall either consult with the local educational agency to resolve the exception or require the county superintendent of schools to follow up with the local educational agency. (m) (1) The Superintendent is responsible for ensuring that local educational agencies have either corrected or developed plans of correction for any one or more of the following: (A) All federal and state compliance audit exceptions identified in the audit. (B) Exceptions that the county superintendent of schools certifies as of May 15 have not been corrected. (C) Repeat audit exceptions that are not assigned to a county superintendent of schools to correct. (2) In addition, the Superintendent is responsible for ensuring that county superintendents of schools and each county board of education that serves as the governing board of a local educational agency either correct all audit exceptions identified in the audits of county superintendents of schools and of the local educational agencies for which the county boards of education serve as the governing boards or develop acceptable plans of correction for those exceptions. (3) The Superintendent shall report annually to the Controller on the Superintendent’s actions to ensure that school districts, county superintendents of schools, and each county board of education that serves as the governing board of a school district have either corrected or developed plans of correction for any of the exceptions noted pursuant to paragraph (1). (n) To facilitate correction of the exceptions identified by the audits issued pursuant to this section, the Controller shall require auditors to categorize audit exceptions in each audit report in a manner that will make it clear to both the county superintendent of schools and the Superintendent which exceptions they are responsible for ensuring the correction of by a local educational agency. In addition, the Controller annually shall select a sampling of county superintendents of schools, perform a followup of the audit resolution process of those county superintendents of schools, and report the results of that followup to the Superintendent and the county superintendents of schools that were reviewed. (o) County superintendents of schools shall adjust subsequent local property tax requirements to correct audit exceptions relating to local educational agency tax rates and tax revenues. (p) If a governing board or county superintendent of schools fails or is unable to make satisfactory arrangements for the audit pursuant to this section, the Controller shall make arrangements for the audit and the cost of the audit shall be paid from local educational agency funds or the county school service fund, as the case may be. (q) Audits of regional occupational centers and programs are subject to this section. (r) This section does not authorize examination of, or reports on, the curriculum used or provided for in any local educational agency. (s) Notwithstanding any other law, a nonauditing, management, or other consulting service to be provided to a local educational agency by a certified public accounting firm while the certified public accounting firm is performing an audit of the agency pursuant to this section shall be in accord with Government Accounting Standards, Amendment No. 3, as published by the United States General Accounting Office.

Cal. Education Code - EDC § 41020.1. Section 41020.1.

Reports of audits previously filed with the county clerk pursuant to Section 41020 shall be disposed of by the county clerk or returned to the respective superintendent of schools.

Cal. Education Code - EDC § 41020.2. Section 41020.2.

(a) If a school district governing board has entered into a contract for an independent audit of its financial statements in accordance with Section 41020 and the audited financial statements have not been filed with the county superintendent of schools on or before the due date established under Section 41020, the county superintendent of schools may investigate the causes for the delay and initiate one of the following actions that will provide the required audited financial statements in the most effective manner: (1) The county superintendent of schools may, after consultation with the school district governing board and the auditors under contract to the district, and with the consent of the Controller’s office and the Superintendent, grant an appropriate extension for the completion of the audit and the filing of the audited financial statements. An extension does not waive the legal deadline, but permits the filing of the report after the deadline. An extension shall be appropriate if the extension adheres to all of the following requirements: (A) An extension shall be the shortest amount of time reasonable given the extenuating circumstances justifying the extension. (B) Extensions shall be in increments of no longer than 45 calendar days. (C) Extensions shall not exceed a total of 90 calendar days from the due date established pursuant to Section 41020. (2) The county superintendent of schools may, after consultation with the school district governing board, the auditors under contract to the district, and the Controller’s office, contract with another qualified certified public accountant or public accountant to obtain the required audited financial statements and charge the cost of the audit to the funds of the district. The county superintendent of schools shall, to the extent feasible, assist the district in initiating action to avoid payment to the auditors under contract who did not complete the original audit. (3) The county superintendent of schools may request the Controller’s office to investigate the situation and initiate action as provided in subdivision (b). (b) If the audited financial statements required by Section 41020 have not been filed by a school district or county superintendent of schools with the Controller’s office on or before the due date established under Section 41020, the Controller’s office shall determine the most advantageous method of obtaining the required audited financial statements. The Controller’s office may do any of the following: (1) Accept the action of the county superintendent of schools permitted by subdivision (a). (2) Conduct the audit and prepare the auditor’s report, utilizing the staff available within that office and charge the cost of the audit to the next regular apportionment from the State School Fund to the district or county superintendent of schools. (3) Contract with any qualified certified public accountant or public accountant, utilizing the appropriate contracting procedures, for the conduct of the audit and preparation of the audited financial statements and charge the cost of the audit to the next regular apportionment from the State School Fund to the district or county superintendent of schools. (4) Grant a reasonable extension of the time for filing the report if, in the judgment of the Controller’s office, this will provide the required audited financial statements within the shortest time period. The extension of the time for filing does not waive the legal deadline, but permits the filing of the report after the deadline. The Controller’s office shall consult with the district governing board, the county superintendent of schools, and the auditors under contract to the district or county superintendent of schools before making the determination of the method to be used in obtaining the audited financial statements. The Controller’s office shall, to the extent feasible, assist the district or county superintendent in initiating action to avoid payment to the auditors under contract who did not complete the original audit. (c) Notwithstanding any extension granted under paragraph (1) of subdivision (a) or paragraph (4) of subdivision (b), the Controller’s office may determine at any time after the due date for filing of audit reports established by Section 41020 that the audited financial statements not yet filed with that office are delinquent and that the audit will be performed under paragraph (2) or (3) of subdivision (b).

Cal. Education Code - EDC § 41020.3. Section 41020.3.

(a) By January 31 of each year, the governing body of each local educational agency shall review, at a public meeting, the annual audit of the local educational agency for the prior year, any audit exceptions identified in that audit, the recommendations or findings of any management letter issued by the auditor, and any description of correction or plans to correct any exceptions or management letter issue. This review shall be placed on the agenda of the meeting pursuant to Section 35145. (b) During the 2021–22 fiscal year, the annual audit for the 2020–21 fiscal year and its relevant components, as identified pursuant to subdivision (a), shall instead be reviewed by February 28, 2022.

Cal. Education Code - EDC § 41020.5. Section 41020.5.

(a) If the Controller determines by two consecutive quality control reviews pursuant to Section 14504.2, or if a county superintendent of schools determines, that audits performed by a certified public accountant or public accountant under Section 41020 were not performed in substantial conformity with provisions of the audit guide, or that the audit reports, including amended reports, submitted by February 15 following the close of the fiscal year audited, for two consecutive years do not conform to provisions of the audit guide as required by Section 14504, the Controller or the county superintendent of schools, as appropriate, shall notify in writing the certified public accountant or public accountant and the California Board of Accountancy. If the certified public accountant or public accountant does not file an appeal in writing with the California Board of Accountancy within 30 calendar days after receipt of the notification from the Controller or county superintendent of schools, the determination of the Controller or county superintendent of schools pursuant to this section shall be final. (b) If an appeal is filed with the California Board of Accountancy, the board shall complete an investigation of the appeal within 90 days of the filing date. On the basis of the investigation, the board may do either of the following: (1) Find that the determination of the Controller or county superintendent of schools should not be upheld and has no effect. (2) Schedule the appeal for a hearing, in which case, the final action on the appeal shall be completed by the board within one year from the date of filing the appeal. (c) If the determination of the Controller or county superintendent of schools under subdivision (a) becomes final, the certified public accountant or public accountant shall be ineligible to conduct audits under Section 41020 for a period of three years, or, in the event of an appeal, for any period, and subject to the conditions, that may be ordered by the California Board of Accountancy. Not later than the first day of March of each year, the Controller shall notify each school district and county office of education of those certified public accountants or public accountants determined to be ineligible under this section. School districts and county offices of education shall not use the audit services of a certified public accountant or public accountant ineligible under this section. (d) For the purposes of this section, “certified public accountant or public accountant” includes any person or firm entering into a contract to conduct an audit under Section 41020. (e) This section shall not preclude the California Board of Accountancy from taking any disciplinary action it deems appropriate under other provisions of law.

Cal. Education Code - EDC § 41020.8. Section 41020.8.

Notwithstanding any other provision of law, the auditor conducting the annual audit pursuant to Section 41020 shall, upon request, provide the county superintendent or the Superintendent of Public Instruction with fiscal information on a school district within his or her jurisdiction if the county superintendent of schools determines, pursuant to Section 42127.6, that a school district may not be able to meet its obligations of the current or subsequent fiscal year. Information provided by an auditor to a county superintendent or the Superintendent of Public Instruction pursuant to this section shall be submitted simultaneously to the named district and shall not constitute a violation of auditor-client confidentiality.

Cal. Education Code - EDC § 41020.9. Section 41020.9.

(a) Notwithstanding Section 41020, for the 2019–20 fiscal year, a local educational agency shall provide for an audit by July 15, 2020, and if a local educational agency fails to provide for an audit by July 15, 2020, the county office of education having jurisdiction over the local educational agency shall provide for an audit of the local educational agency by July 31, 2020. (b) Notwithstanding subdivision (h) of Section 41020 or subdivision (m) of Section 47605, for audit reports for the 2019–20 fiscal year, a local educational agency shall file an annual audit report with the county superintendent of schools of the county in which the local educational agency is located, the Superintendent, the Controller, and, if applicable, to its chartering authority, by March 31, 2021, and notwithstanding subdivision (k) of Section 41020, the county superintendent of schools shall submit the required certification to the Superintendent and the Controller by July 15, 2021. (c) Notwithstanding subdivision (k) of Section 41020, for audit reports for the 2018–19 fiscal year, a county superintendent of schools shall submit the required certification to the Superintendent and the Controller by July 15, 2020. (d) Notwithstanding subdivision (d) of Section 41344, for audits certified by the Controller between March 1, 2020, and July 15, 2020, inclusive, a local educational agency may appeal a finding contained in a final audit report within 120 days of the date on which the local educational agency receives the final audit report resulting from an audit or review, or within 30 days of receiving a determination of a summary review pursuant to subdivision (e). (e) Notwithstanding subdivision (d) of Section 41344.1, for audits certified between March 1, 2020, and July 15, 2020, inclusive, a local educational agency may request a summary review within 90 days of the date on which the local educational agency receives the final audit report resulting from an audit or review.

Cal. Education Code - EDC § 41021. Section 41021.

The governing board of every school district shall require each employee of the district, whose duty it is to handle funds of the district, and may, in its discretion, require employees of the district, whose duty it is to handle property of the district, to be bonded under a suitable bond indemnifying the district against loss. Such bond may be a name schedule bond, schedule position bond or blanket bond, and shall be in such amount and type as the board shall consider necessary and desirable. The boards shall pay from the funds of the district the cost of the premium necessary to provide the bond.

Cal. Education Code - EDC § 41022. Section 41022.

Except as provided in this section, any election held for the purpose permitting a school district to exceed the expenditure of school district funds fixed by the Constitution or by the statutes of the state shall be called, held, and conducted as nearly as possible as are elections for the issuance of school district bonds. The notice of election shall contain only the following: (a) The time and place or places of holding the election. (b) The names of the officers appointed to conduct the election. (c) The hours during the day in which the polls will be open. (d) The amount by which it is proposed to increase the expenditures of the district during the school year. (e) The total amount of proposed expenditures of the district, including the proposed increase, for the school year. The ballots used at the election shall contain the following language: “Shall the total authorized expenditures of the district be increased from ____ (naming the sum) to ____ (naming the sum) for the school year ____ (naming the school year)?” The hours during which the polls at the election are open shall be fixed in accordance with Section 14212 of the Elections Code.

Cal. Education Code - EDC § 41023. Section 41023.

(a) Any agency organized pursuant to Article 1 (commencing with Section 6500) of Chapter 5 of Division 7 of Title 1 of the Government Code, the parties of which consist solely of school districts and county offices of education, shall be subject to the same restrictions as are applicable to school districts and county offices of education, under that chapter, including the preparation of budget and financial statements required by Article 1 (commencing with Section 42100) and this article; the certifications required by Article 3 (commencing with Section 42130) of Chapter 6 of Part 24; the accounting and auditing requirements prescribed by Article 1 (commencing with Section 42100) and this article; and the expenditure and appropriation controls prescribed by Chapter 9 (commencing with Section 42600) of Part 24. This section does not apply to joint powers agreements that are for the performance of the powers described in Section 17567. (b) Each agency described in subdivision (a) shall annually report to their participating school districts and county superintendents of schools on forms prescribed by the Superintendent of Public Instruction.

Cal. Education Code - EDC § 41024. Section 41024.

(a) (1) Commencing April 1, 2017, a local educational agency that receives any funds pursuant to the Leroy F. Greene School Facilities Act of 1998 (Chapter 12.5 (commencing with Section 17070.10) of Part 10 of Division 1 of Title 1) shall annually report a detailed list of all expenditures of state funds, including interest, and of the local educational agency’s matching funds for completed projects until all state funds, including interest, all of the local educational agency’s matching funds, and savings achieved, including interest, pursuant to Section 17070.63, are expended in accordance with the requirements of the Leroy F. Greene School Facilities Act of 1998, associated regulations, and any accompanying grant agreement signed by a local educational agency. A local educational agency’s detailed list of expenditures shall identify expenditures on a project-by-project basis, reflect completed projects that were reimbursed within that fiscal year, and shall clearly indicate the list of projects that have been completed. (2) For purposes of this section, the determination that a project is complete shall be in accordance with the regulations adopted pursuant to the Leroy F. Greene School Facilities Act of 1998 (Chapter 12.5 (commencing with Section 17070.10) of Part 10 of Division 1 of Title 1). (3) The total amount of interest earned on the state funds shall be reported on the final expenditure report upon completion of a project. For the purposes of determining the total amount of interest earned on the state funds, interest shall be considered to accrue from the time state funds are deposited in the local educational agency’s account until the time the local educational agency submits the final expenditure report to the Office of Public School Construction. (4) Commencing April 1, 2017, a local educational agency participating in the school facilities program shall ensure that it retains all financial accounts, documents, and records necessary for an audit of completed projects pursuant to Section 16026 of Title 5 of the California Code of Regulations. For purposes of this paragraph and in compliance with any applicable state and federal standards, a local educational agency may maintain records electronically. (5) Any project identified on a local educational agency’s detailed list of expenditures pursuant to paragraph (1) that is reported complete during the 2017–18 fiscal year shall be audited in accordance with the audit guide required by Section 14502.1 for the 2018–19 fiscal year. All other completed projects shall be audited in accordance with the audit guide required by Section 14502.1 for the fiscal year in which the project is reported complete. (6) The audit described in this section shall be completed within one year of project completion as determined by Section 1859.104 of Title 2 of the California Code of Regulations. (b) (1) Commencing with audits of the 2018–19 fiscal year, the Controller shall include instructions in the audit guide required by Section 14502.1 that include, but are not necessarily limited to, procedures for determining all of the following: (A) Whether funds identified by a local educational agency on its detailed list of expenditures pursuant to paragraph (1) of subdivision (a) have been expended in accordance with the requirements of the Leroy F. Greene School Facilities Act of 1998 (Chapter 12.5 (commencing with Section 17070.10) of Part 10 of Division 1 of Title 1), associated regulations, and any accompanying grant agreement signed by a local educational agency. Any funds not expended in accordance with these requirements shall be disallowed and considered an audit finding. (B) That savings achieved, including interest, pursuant to Section 17070.63, are used for other high priority capital outlay purposes identified by the local educational agency or returned to the Office of Public School Construction, and are used in accordance with the requirements of the Leroy F. Greene School Facilities Act of 1998 (Chapter 12.5 (commencing with Section 17070.10) of Part 10 of Division 1 of Title 1), associated regulations, and as specified in any accompanying grant agreement. (C) Adjustments to the grant amounts received by a local educational agency for site acquisition costs based upon the local educational agency’s final approved expenditures as required pursuant to Sections 1859.105 and 1859.106 of Title 2 of the California Code of Regulations. (D) Adjustments to the grant amounts received by a local educational agency associated with the substantial progress requirements reflected in the program reporting requirements pursuant to Section 1859.104 of Title 2 of the California Code of Regulations. (2) Any amounts or adjustments identified pursuant to subparagraphs (C) and (D) of paragraph (1) shall be identified within a local educational agency’s audit, but shall not be considered an audit finding for purposes of this section. (c) (1) The auditor conducting the audit pursuant to this section shall file the audit with the Controller within 60 days of the completion of the audit. The Controller shall be allowed access to audit working papers. Adjustments pursuant to paragraph (2) of subdivision (b) shall not be appealable to the Education Audit Appeals Panel pursuant to this section. (2) Within 60 days of the receipt of the certified audit, and after determining that the audit conforms with the reporting standards contained in the audit guide, the Controller shall do both of the following: (A) Provide the department a copy of the certified audit. (B) Notify the Office of Public School Construction of any audit findings pursuant to this section and any amounts or adjustments identified pursuant to clause (iii) and provide the Office of Public School Construction with a copy of the certified audit identifying the amounts to be adjusted if, as a result of the audit conducted in accordance with the requirements of subdivisions (a) and (b), the auditor determines any of the following: (i) A local educational agency has unspent funds for the project not identified as savings pursuant to Section 17070.63 that shall be returned pursuant to subparagraphs (C) and (D) of paragraph (1) of subdivision (b), and any accompanying grant agreement signed by a local educational agency. (ii) A local educational agency is subject to an increase or decrease in funds provided pursuant to subparagraphs (C) and (D) of paragraph (1) of subdivision (b), and any accompanying grant agreement signed by a local educational agency. (iii) A local educational agency did not expend funds in accordance with the Leroy F. Greene School Facilities Act of 1998 (Chapter 12.5 (commencing with Section 17070.10) of Part 10 of Division 1 of Title 1) and any accompanying grant agreement signed by a local educational agency. (3) Upon receipt of the certified audit, the Office of Public School Construction shall present any grant adjustments required pursuant to clauses (i) and (ii) of subparagraph (B) of paragraph (2) for a specified project to the State Allocation Board for an adjustment to the project apportionment. Funds identified for purposes of clauses (i) and (ii) of subparagraph (B) of paragraph (2) shall be apportioned from, or returned to, the appropriate funds, as established in the State Treasury pursuant to Section 17070.40 or 17070.41, as applicable. If a school district is required to return unspent funds, the fund source for returned funds shall be the county school facilities fund established pursuant to subdivision (a) of Section 17070.43. (4) A local educational agency may appeal the audit finding pursuant to the timelines and process established in subdivision (d) of Section 41344. The procedures set out in subdivision (d) of Section 41344.1 do not apply to the audit required by this section. (5) The Office of Public School Construction shall ensure that the local educational agency has corrected the audit finding by implementing a required penalty payment of funds equal to the amount of funds disallowed in the audit finding pursuant to the process specified in subdivision (d). (d) (1) If, as the result of the audit, a local educational agency is required to pay funds pursuant to clause (iii) of subparagraph (B) of paragraph (2) of subdivision (c), the Office of Public School Construction shall recover the funds from the local educational agency. (2) If the local educational agency has submitted an appeal to the Education Audit Appeals Panel pursuant to subdivision (d) of Section 41344, the Office of Public School Construction shall not recover funds until following the determination of the appeal. (3) A local educational agency may use any local fund source to pay the disallowed amount pursuant to clause (iii) of subparagraph (B) of paragraph (2) of subdivision (c) so long as there is no legal prohibition regarding the use of those funds for this purpose. (4) A local educational agency may request from the Office of Public School Construction a repayment plan within 90 days of receiving the final audit report, or within 30 days of withdrawing or receiving a final determination regarding an appeal pursuant to subdivision (d) of Section 41344 and subdivision (b) of Section 41344.1, as applicable. The Office of Public School Construction and the Director of Finance, or their designees, jointly shall establish a plan for payment. The payment plan shall be established in accordance with the following: (A) If the executive officer of the Office of Public School Construction and the Director of Finance, in consultation with the department, concur that repayment of the disallowed amount in the current fiscal year would constitute a severe financial hardship for the local educational agency, they may jointly approve a plan of equal annual payments over a period of up to eight years. The plan may include interest on each year’s outstanding balance at the rate earned on the state’s Pooled Money Investment Account during that year. The executive officer of the Office of Public School Construction and the Director of Finance jointly shall establish this plan. At the time the local educational agency is notified, the Controller also shall be notified of the plan by the executive officer of the Office of Public School Construction. The Controller shall withhold the annual amount established pursuant to the plan from the local educational agency’s principal apportionment or Education Protection Account payments. (B) Notwithstanding subparagraph (A), if the executive officer of the Office of Public School Construction and the Director of Finance, in consultation with the department, concur that repayment of the disallowed amount over an eight-year period would require the local educational agency to request an emergency apportionment pursuant to Article 2 (commencing with Section 41320) of, and Article 2.5 (commencing with Section 41325) of, Chapter 3, they may approve a plan of equal annual payments over a period of up to 20 years. The plan shall include interest on each year’s outstanding balance at the rate earned on the state’s Pooled Money Investment Account during that year. The Controller shall withhold the annual amount established pursuant to the plan from the local educational agency’s principal apportionment or Education Protection Account payments. (C) If a payment plan submitted pursuant to this section is not approved by the executive officer of the Office of Public School Construction and the Director of Finance, in consultation with the department, or is not requested by the local educational agency, the executive officer of the Office of Public School Construction shall invoice the local educational agency for the entire disallowed amount. If the local educational agency does not remit payment for the invoice within 120 days of issuance, the executive officer of the Office of Public School Construction shall request that the Controller withhold the entire disallowed amount from the local educational agency’s principal apportionment or Education Protection Account payments. (D) (i) Funds recovered by the executive officer of the Office of Public School Construction or withheld by the Controller pursuant to this section shall be deposited into the appropriate state school facilities fund, as established in the State Treasury pursuant to Section 17070.40 or 17070.41, as applicable. (ii) Funds remitted to the Office of Public School Construction by a local educational agency from local fund sources, as authorized by paragraph (3), shall be deposited into the appropriate state school facilities fund, as established in the State Treasury pursuant to Section 17070.40 or 17070.41, as applicable. (e) As used in this section, “audit or review” and “local educational agency” shall have the same meaning as the terms are defined in paragraphs (1) and (2) of subdivision (e) of Section 41344. (f) The State Allocation Board shall not waive all or any part of this section, any grant agreement or provisions of a grant agreement signed by a local educational agency that receives any funds pursuant to the Leroy F. Greene School Facilities Act of 1998 (Chapter 12.5 (commencing with Section 17070.10) of Part 10 of Division 1 of Title 1), or any regulation adopted that implements a provision of this section. (g) In any appeal filed pursuant to Section 41344 and this section, the Office of Public School Construction, the Department of Finance, and the department may timely move to intervene as a party. (h) If the Office of Public School Construction chooses not to intervene in an appeal, the administrative law judge conducting the hearing, or the Education Audit Appeals Panel, may request that the Office of Public School Construction issue and file in the appeal an objective interpretation of any applicable law, regulation, or term of the grant agreement within 30 days of the request or such longer period as the administrative law judge or the Education Audit Appeals Panel deems reasonable. The Office of Public School Construction’s filing shall not argue or seek to resolve issues of fact, but may state how a particular law, regulation, or grant agreement term applies to competing factual contentions. The agent of the Office of Public School Construction shall be precluded from acting as a party once a request pursuant to this subdivision is made. (i) Notwithstanding subdivision (a), this section shall not apply to any school facilities project that was apportioned before July 1, 2017.

Source: CA Legislative Counsel Bulk DataURL: https://downloads.leginfo.legislature.ca.gov/pubinfo_2025.zipFetched: 6/27/2026