(1) Existing law requires county superintendents of schools to provide for an audit of all funds under their jurisdiction and control, and requires the governing board of each local educational agency to either provide for an audit of the books and accounts of the local educational agency or make arrangements with county superintendents of schools to provide for that auditing. Existing law requires those audits to 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.
Under existing law, once the Controller or county superintendent of schools makes a final determination that specified audits performed by a certified public accountant or public accountant were not performed in substantial conformity with provisions of an audit guide, or that the audit reports do not conform to the provisions of an audit guide, the certified public accountant or public accountant is ineligible to conduct specified audits for 3 years. Existing law requires the Controller to notify each school district and county office of education of those certified public accountants or public accountants determined to be ineligible pursuant to these provisions.
This bill would impose additional requirements on certified public accountants and public accountants relating to training specific to local educational agencies in order to, after the 2026–27 fiscal year, be added to or remain on the Controller's directory of certified public accountants and public accountants deemed qualified to conduct audits of local educational agencies, as provided.
The bill would require an auditor of a local educational agency to, among other things, ensure that all sampling of documents or records necessary for the audit are independently selected by the auditor and would require an auditor of a local educational agency that offers independent study to verify the pupil-to-teacher ratio of the school or program and include that information in the audit, as provided. The bill would extend the above-described rules related to the ineligibility of the certified public accountant or public accountant to audits of charter schools, as provided, and would additionally require the Controller to notify charter schools of those certified public accountants or public accountants determined to be ineligible to conduct audits, as provided.
(2) Existing law requires the Controller, in consultation with the Department of Finance and the State Department of Education, to develop a plan to review and report on financial and compliance audits, and with representatives of other entities, to recommend the statements and other information to be included in the audit reports filed with the state by local educational agencies, and to propose the content of an audit guide. Existing law requires the audit guide to include specified content, as provided.
This bill would require the Controller to consult with representatives of 2 additional specified entities and would require the audit guide to include a variety of additional content relating to audits of a local educational agency, as provided.
(3) The Charter Schools Act of 1992 requires each charter school to transmit a copy of its annual, independent financial audit report for the preceding fiscal year to the county office of education, the Controller, and the State Department of Education by December 15 of each year.
The act authorizes the establishment, operation, and governance of charter schools. Existing law authorizes a charter school that has an approved charter to receive funding for nonclassroom-based instruction only if a determination for funding is made by the State Board of Education, as specified.
By January 31, 2026, and by January 31 of each year thereafter, this bill would require the governing body of a charter school to review, at a public meeting as an item on the agenda, the annual audit of the charter school for the prior fiscal 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. By imposing additional requirements on charter schools, the bill would impose a state-mandated local program.
The bill would replace the term "nonclassroom-based instruction" with "flex-based instruction" and define a "flex-based charter school" as a charter school that receives a determination for funding from the state board, as described above. The bill would also make numerous nonsubstantive and conforming changes.
(4) Existing law requires each chartering authority to, among other things, monitor the fiscal condition of each charter school under its authority. Existing law authorizes the state board to, based upon the recommendation of the Superintendent of Public Instruction, take appropriate action when the state board finds, among other things, illegal or substantially improper use of charter school funds for the personal benefit of any officer, director, or fiduciary of the charter school, as provided.
This bill would include in the monitoring of the fiscal condition of a charter school a review of a sample of credit and debit card transactions of each charter school under its authority. The bill would require a chartering authority to provide the governing body of the charter school with feedback on any issues of concern identified in the review, as provided. The bill, if the chartering authority has reasonable suspicion that fraud, misappropriations of public funds, embezzlement, or other financial crimes, may be occurring, would require a chartering authority to notify the State Department of Education and the county office of education. The bill would require the state board, or the state board's designee, to promptly investigate allegations of false claims or misappropriation of public funds by charter schools if there is probable cause to believe that those crimes have occurred. By imposing additional requirements on charter schools and local educational agencies acting as chartering authorities, the bill would impose a state-mandated local program.
(5) Existing law provides for the apportionment of state funding to a charter school based on the average daily attendance that is generated by pupils engaged in nonclassroom-based instruction, as defined, in accordance with prescribed criteria and procedures.
This bill would authorize the State Board of Education to adjust the amount of funding to be allocated to a charter school if the state board makes a finding of demonstrable financial abuse, profiteering, or grossly excessive administrative expenses. The bill would require the state board to, on or before May 31, 2027, review and revise regulations governing the funding determination process for flex-based charter schools to be consistent with specified criteria, as provided.
(6) Commencing July 1, 2026, this bill would require a school district, county office of education, or charter school to only enter into an agreement for the provision or arrangement of educational enrichment activities with a vendor that is vetted and approved pursuant to the bill. The bill would authorize a local educational agency to expend public funds for the provision or arrangement of educational enrichment activities, provided that all educational enrichment activities, materials, and programs are nonsectarian.
The bill would require the governing board or body of a local educational agency, in approving any contract for vendor services for educational enrichment activities, to establish specified policies and procedures to ensure educational value, pupil safety, and fiscal reasonableness, and would further require that these policies ensure that vendor services for educational enrichment activities meet designated criteria. The bill would require auditing of approval of, and compliance with, policies and procedures established under the bill to be included in designated annual audit reports. The bill would require a vendor contract that will exceed $100,000 in a fiscal year to be approved by the governing board or body of the local educational agency in an open public meeting. The bill would also require any educational enrichment activity provided by a school to be approved and verified by the pupil's assigned teacher as relevant to specific educational assignments and educationally appropriate for that pupil.
(7) The Government Claims Act provides for the liability and immunity of a public entity, as defined, for its acts or omissions that cause harm to persons, and defines a public entity for these purposes.
This bill would expressly include charter schools within the definition of "public entity" for purposes of the act.
(8) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.

Statutes affected:
SB 414: 1 EDC
02/14/25 - Introduced: 1 EDC
03/26/25 - Amended Senate: 14502.1 EDC, 14502.1 EDC, 41020 EDC, 41020 EDC, 41020.5 EDC, 41020.5 EDC, 42238.024 EDC, 42238.024 EDC, 43521 EDC, 43521 EDC, 46211 EDC, 46211 EDC, 47604.1 EDC, 47604.1 EDC, 47604.3 EDC, 47604.3 EDC, 47604.32 EDC, 47604.32 EDC, 47604.5 EDC, 47604.5 EDC, 47605 EDC, 47605 EDC, 47605.1 EDC, 47605.1 EDC, 47612.5 EDC, 47612.5 EDC, 47612.7 EDC, 47612.7 EDC, 47613 EDC, 47613 EDC, 47614.5 EDC, 47614.5 EDC, 47616.7 EDC, 47616.7 EDC, 47634.2 EDC, 47634.2 EDC, 51744 EDC, 51744 EDC, 51745.6 EDC, 51745.6 EDC, 51747 EDC, 51747 EDC, 811.2 GOV, 811.2 GOV, 1 EDC
05/01/25 - Amended Senate: 14502.1 EDC, 41020 EDC, 41020.5 EDC, 42238.024 EDC, 43521 EDC, 46211 EDC, 47604.1 EDC, 47604.3 EDC, 47604.32 EDC, 47604.5 EDC, 47605 EDC, 47605.1 EDC, 47612.5 EDC, 47612.7 EDC, 47613 EDC, 47614.5 EDC, 47616.7 EDC, 47634.2 EDC, 51744 EDC, 51745.6 EDC, 51747 EDC, 811.2 GOV