How Is This Bill Enforced
Verbatim statutory text on the left; plain-language analysis and a per-section checklist on the right. Numbered markers cross-link to the matching checklist row.
(c)(2) The board shall adopt regulations as necessary to implement, interpret, and make specific the peer review requirements for firms that conduct local educational agency financial and compliance audits, including that the peer review team has at least one team member with experience conducting local educational agency financial and compliance audits and that a local educational agency financial and compliance audit is included in the engagements selected for peer review.
Section 1 amends Business and Professions Code § 5076 to add a new paragraph (c)(2) requiring the California Board of Accountancy to adopt peer review regulations specific to firms conducting local educational agency financial and compliance audits. The new regulations must ensure that the peer review team includes at least one member with experience conducting such audits and that a local educational agency audit engagement is included in the sample selected for peer review.
(d) The Controller shall conduct a quality control review after an authorized certified public accountant or public accountant listed in the Certified Public Accountants Directory Service (1) completes its first local educational agency financial statement and compliance audit or (2) completes its first local educational agency financial statement and compliance audit after three or more years of not having completed an audit.
(e) The Controller shall conduct a quality control review of certified public accounts and public accountants conducting financial statement and compliance audits of charter schools every three years to ensure that all certified public accountant firms and public accountant firms are periodically reviewed.
(g) The county superintendent of schools, the chartering authority, the Controller, or the Superintendent may refer an independent auditor of a local educational agency to the California Board of Accountancy for action described in paragraph (2) of subdivision (c) if any of the following circumstances exist: (1) An audit of a local educational agency was conducted in a manner that may constitute unprofessional conduct as defined by Section 5100 of the Business and Professions Code, including, but not limited to, gross negligence resulting in a material misstatement in the audit. (2) Material deficiencies are discovered in the quality control review conducted pursuant to this section. (3) Material deficiencies are discovered in the peer review conducted in accordance with the Government Auditing Standards. (4) The continuing education and prior experience requirements of Section 41020 are not met.
(h) For purposes of this section, "local educational agency" means a school district, county office of education, or charter school.
Section 2 amends Education Code § 14504.2 to expand the Controller's quality control review obligations and broaden the entities authorized to refer auditors to the California Board of Accountancy. New subdivision (d) requires a quality control review after an auditor completes its first local educational agency audit or its first audit after a gap of three or more years. New subdivision (e) mandates quality control reviews of charter school auditors every three years. Subdivision (g) expands referral authority to include chartering authorities, the Controller, and the Superintendent of Public Instruction, and adds new referral triggers for material deficiencies discovered in quality control or peer reviews and for failure to meet continuing education requirements.
(f)(4)(A)(i) Commencing with the 2026–27 fiscal year, and every two years thereafter, certified public accountant firms, certified public accountants or public accountants, and audit staff that conduct audits of local educational agencies shall comply with both of the following: (I) Complete 24 hours of continuing education in governmental accounting, auditing, or related subjects specific to local educational agencies and the most current Guide for Annual Audits of K–12 Local Education Agencies and State Compliance Reporting. The continuing education shall include both of the following: (ia) Training on the specific requirements included in the most current Guide for Annual Audits of K–12 Local Education Agencies and State Compliance Reporting. (ib) Training on compliance topics that include pupil attendance, independent study, charter schools, nonclassroom-based instruction, school calendars, and instructional minutes. (II) Have prior experience conducting financial and compliance audits for local educational agencies or have gained the necessary competence through training or other professional development activities in accordance with generally accepted auditing standards and generally accepted government auditing standards prior to conducting local educational agency annual financial statement and compliance audits.
(f)(4)(A)(ii) The continuing education and prior experience required pursuant to this paragraph shall be evidenced by a certification to the Controller from the certified public accountant firm or the public accountant firm that the firm and their staff have met those requirements.
(f)(4)(B) The Controller shall convene and lead a broad-based workgroup for purposes of subclause (I) of clause (i) of subparagraph (A) to recommend local educational agency-specific training topics. Those topics may include, but are not limited to, the topics described in sub-subclauses (ia) and (ib) of subclause (I) of clause (i) of subparagraph (A). The workgroup shall include representatives from all of the following: (i) The department. (ii) CalCPA. (iii) County offices of education. (iv) The County Office Fiscal Crisis and Management Assistance Team. (v) The California Association of School Business Officials.
(f)(5) The requirements of this subdivision shall apply to audits of local educational agencies regardless of whether the local educational agency is a governmental agency or a nonprofit organization.
Section 3 amends Education Code § 41020 to add new auditor qualification requirements beginning with the 2026–27 fiscal year. New paragraph (f)(4) requires certified public accountant firms, individual auditors, and audit staff conducting local educational agency audits to complete 24 hours of continuing education every two years on governmental accounting, auditing, and compliance topics specific to local educational agencies, and to demonstrate prior experience or equivalent competence in conducting such audits. The Controller is directed to convene a workgroup with representatives from the Department of Education, CalCPA, county offices of education, the County Office Fiscal Crisis and Management Assistance Team, and the California Association of School Business Officials to recommend training topics.