SB414 - School accountability: Office of the Education Inspector General: school financial and performance audits: charter school authorization, oversight, funding, operations, and networks: flex-based instruction: local educational agency contracting.

Enrolled September 17, 2025 Passed IN Senate September 13, 2025 Passed IN Assembly September 13, 2025 Amended IN Assembly September 09, 2025 Amended IN Assembly September 02, 2025 Amended IN Assembly July 18, 2025 Amended IN Assembly July 08, 2025 Amended IN Senate May 01, 2025 Amended IN Senate March 26, 2025 CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION Senate Bill No. 414 Introduced by Senator Ashby February 14, 2025 An act to amend Sections 14500, 14502.1, 14504, 14504.2, 14505, 14506, 14507, 14508, 41020, 41020.2, 41020.3, 41020.5, 41020.8, 42238.024, 43521, 44258.9, 45037, 45125.1, 46211, 47604.1, 47604.3, 47604.32, 47604.5, 47605, 47605.1, 47612.5, 47612.7, 47613, 47614.5, 47616.7, 47634.2, 51744, 51745.6, 51747, and 51747.5 of, to amend and repeal Section 47607.2 of, to add Sections 14500.5, 14502, 41020.4, 41020.6, 46149, 47600.1, 47604.6, 47605.05, and 47634.3 to, to add and repeal Section 33309.5 of, to add Article 7 (commencing with Section 47670) to Chapter 6 of Part 26.8 of Division 4 of Title 2 of, and to add Article 11 (commencing with Section 51820) and Article 11.5 (commencing with Section 51827) to Chapter 5 of Part 28 of Division 4 of Title 2 of, the Education Code, and to amend Section 17518 of the Government Code, relating to school accountability. LEGISLATIVE COUNSEL'S DIGEST SB 414, Ashby. School accountability: Office of the Education Inspector General: school financial and performance audits: charter school authorization, oversight, funding, operations, and networks: flex-based instruction: local educational agency contracting. (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 the governing board of each school district and each office of the county superintendent of schools to include specified provisions in their contracts for audits and requires financial and compliance audits to be performed in accordance with specified standards. If the governing board of a school district has entered into a contract for an independent audit of its financial statements and the audited financial statements have not been filed with the county superintendent of schools on or before a specified due date, existing law authorizes the county superintendent of schools to, among other things, investigate the causes for the delay, as provided. This bill would expressly apply the above-described provisions to educational joint powers authorities and charter schools. The bill, among other things, would require those financial and compliance audits of local educational agencies to be conducted in accordance with specified filing deadlines and would revise requirements regarding which entity is responsible for providing an audit if a local educational agency has not provided for an audit of their respective books and accounts to include the Controller or a chartering authority, as provided. The bill would require, instead of authorize, a county superintendent of schools to investigate the causes for an above-described delay. The bill would require a local educational agency to post the local educational agency’s annual financial and compliance audits on its internet website. Existing law requires the Controller to, among other things, on an annual basis, review and monitor the audit reports performed by independent auditors, determine whether audit reports are in conformance with specified reporting provisions, and notify each local educational agency, the responsible county superintendent of schools, the Superintendent, the Department of Finance, and the auditor regarding each determination. Existing law authorizes the Controller to perform quality control reviews of audit working papers to determine whether audits are performed in conformity with those specified standards. Existing law requires the Controller to annually report to the State Department of Education to apprise the department of school districts and offices of county superintendents of schools that are not in compliance with applicable statutes and regulations related to audits and requires the Controller to make recommendations as to what action should be taken by the department. The bill would require the Controller to, if applicable, notify the responsible chartering authority of each determination made, as referenced above, and would require notification to applicable entities to be made within 6 months of the audit report due date or the audit report issue date, whichever is later. The bill would require the Controller to establish and publish as part of the audit guide a weighted risk-based criteria that considers auditor experience and quality factors in determining which audit engagements are required to undergo a quality control review, as provided. The bill would require the Controller to report and provide recommendations to the Superintendent, instead of the department, of entities not in compliance with applicable statutes and regulations and would include educational joint powers authorities and charter schools as reported entities. The bill, commencing with the 2027–28 fiscal year Guide for Annual Audits of K–12 Local Education Agencies and State Compliance Reporting, would require the Controller to include, among other things, instructions requiring specified supplemental information and schedules in audit report components for local educational agency audits and an appendix with the Controller’s desk review checklist that is used to determine whether audit reports are in conformance with specified reporting requirements, as provided. 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 audits to be made by a certified public accountant or a public accountant, licensed by the California Board of Accountancy, and selected by a 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. In order to be added to, or remain on, the Controller’s directory of certified public accountants and public accountants as described above, the bill would require, commencing with the 2027–28 fiscal year, and every 2 years thereafter, audit engagement partners and certified public accountants or public accountants responsible for local educational agency audits to, among other things, complete 16 hours of continuing education, demonstrate specified experience, and maintain compliance with the California Board of Accountancy requirements to keep applicable licenses in active status and good standing, as provided. The bill would also apply the continuing education requirement to audit staff who perform audit procedures of local educational agencies. 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. To the extent the bill would impose additional duties on local educational agencies or local officials, the bill would impose a state-mandated local program. (2) The bill, until January 1, 2034, would establish the Office of the Education Inspector General. The bill would provide for the appointment of the Education Inspector General by the Governor from a list of 3 qualified individuals nominated by the Joint Legislative Audit Committee, subject to confirmation by a majority of the Senate. The bill would require the Office of the Education Inspector General to, among other things, (A) conduct and supervise forensic audits and investigations relating to the programs and operations of the department, local educational agencies, and entities managing a charter school related to fraud, misappropriation of funds, and other illegal practices and (B) annually report to the appropriate policy committees of the Legislature on investigations and audits of the programs and operations of the department, local educational agencies, and entities managing a charter school. (3) 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. (4) Existing law requires the Commission on Teacher Credentialing to establish standards for the issuance and renewal of credentials, certificates, and permits. Existing law requires the commission and the department to enter into a data sharing agreement for the department to provide the commission with educator assignment data necessary to annually identify educator misassignments and vacant positions at local educational agencies, as provided, as part of the State Assignment Accountability System. Existing law requires the commission to annually use data it receives from the department to produce an initial data file of vacant positions and educator assignments that do not have a clear match of credential to assignment and requires the commission to notify local educational agencies and monitoring authorities of the opportunity to access and review the initial data file of potential misassignments, as defined, and vacant positions. Existing law grants the commission the authority to make a final determination for all potential misassignments. Existing law requires, commencing with the 2020–21 school year, the commission to make annual educator assignment, misassignment, and vacant position data publicly available on its internet website. This bill would require teachers employed by a local educational agency and offering certain courses to hold the certificate, permit, or other document required by the commission for that assignment and be monitored. To the extent that this provision would create new duties for county superintendents of schools and local educational agencies, it would constitute a state-mandated local program. (5) Existing law requires state funding to be calculated and withheld from a school district or county office of education for any fiscal year in which a person renders service as a teacher in kindergarten or any of grades 1 to 12, inclusive, who does not have a valid certification document, as provided. This bill would apply the above-described provisions relating to the penalties for a person rendering services as a teacher who does not have a valid certification document to charter schools, as provided. (6) Existing law requires any entity that has a contract with a school district, county office of education, or charter school to ensure that any employee who interacts with pupils, outside of the immediate supervision and control of the pupil’s parent or guardian or a school employee, has a valid criminal records summary, as specified. This bill would require an entity that has a contract with a local educational agency to instead ensure any employee who interacts with pupils has a valid criminal records summary without regard to whether the interaction takes place outside of the immediate supervision and control of the pupil’s parent or guardian or a school employee. (7) 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. The act prohibits, from January 1, 2020, to January 1, 2026, inclusive, the approval of a petition for the establishment of a new charter school offering nonclassroom-based instruction, as specified. This bill would extend that prohibition to instead continue through June 30, 2026. This bill would require the governing body of a charter school, by January 31, 2026, and by January 31 of each year thereafter, 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. (8) 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 require that monitoring to also include 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 b [Text truncated for display. Full text available on Congress.gov.]