Press Releases

SACRAMENTO — California State Controller Malia M. Cohen today thanked Governor Gavin Newsom for vetoing Senate Bill (SB) 414, a proposal that would have created a new Education Office of Inspector General to conduct forensic audits of charter schools.
“Governor Newsom’s veto of SB 414 preserves both fiscal responsibility and constitutional integrity,” said Controller Cohen. “While well-intentioned, this bill would have unnecessarily duplicated the powers and duties already vested in the State Controller’s Office (SCO)—California’s independent fiscal sentinel. The framers of our Constitution established this office to guard the public purse, audit every dollar collected and spent, and expose fraud before it festers. That mission already includes education audits and oversight.”

As the state’s chief fiscal officer, the Controller is constitutionally and statutorily authorized to audit the receipts and disbursements of all state funds, including those distributed under Proposition 98 for education. Each year, the SCO audits approximately 64 million disbursements totaling nearly $1 trillion.

“The SCO is authorized to perform compliance audits within the education system, develops the Education Audit Guide, and reviews the work of independent auditors to ensure school districts’ full compliance with state law,” Controller Cohen continued. “Creating a new, duplicative agency at a cost of hundreds of millions of dollars would not strengthen oversight—it would scatter it.”
“California’s children and families deserve more than a new sign on a new door,” said Controller Cohen. “They deserve vigilance that is proven, broad, and anchored in constitutional authority. By vetoing SB 414, the Governor affirmed that we must keep our fiscal guard strong, unified, and accountable to the people—not divided among duplicative bureaucracies. Together, we can ensure that every education dollar reaches its rightful destination—the classroom, the teacher, and the student so that we all can continue to move California forward.”

“I look forward to working with lawmakers, educators, and community stakeholders in the next legislative session to implement the findings of our charter school audit report,” Cohen concluded. “Together, we can modernize fiscal oversight in education, improve transparency, and build a stronger, more equitable system for students, parents, and taxpayers alike.”

Background 
In 2019, the San Diego District Attorney’s Office prosecuted 11 individuals associated with the Academic Arts and Action Education Network consisting of 19 charter schools. These individuals perpetrated a complicated scheme that defrauded California families and the State of California of approximately $400 million, representing the largest fraud in California’s 31-year history of operating charter schools.

After guilty pleas were entered, San Diego Superior Court Judge Robert C Longstreth signed a court order dated September 21, 2023, granting the Successor Receiver’s motion to approve and establish a multi-agency audits task force. The Court determined that a task force was necessary and appropriate due to evidence introduced at trial indicating a defect in the State of California’s audit guide which did not include adequate best practices provisions applicable to the unique structure of charter schools. The Task Force’s primary goal was to prevent future fraud and ensure accountability in the K-12 public school system, including charter schools.

In recognition of the State Controller’s role as California’s chief fiscal officer and auditor, Judge Longstreth appointed Controller Malia M. Cohen as the chair and the San Diego District Attorney and the Successor Receiver as Leading Parties of the Multi-Agency Charter School Audits Task Force. Judge Longstreth also named the organizations that would participate as Task Force members. The key constituency groups represented on the Task Force included the California Association of School Business Officials, California Charter Schools Association, California County Superintendents, California School Board Association, Fiscal Crisis and Management Assistance Team, California Department of Education, and various County Offices of Education and local school districts. Judge Longstreth named SCO as the lead task force agency even though we were not a party to the case. The Task Force met monthly for approximately ten months and issued a report to the Court in June 2024 consisting of 20 recommendations.

While the Task Force focused primarily on charter school audit functions, most of the recommendations adopted by the Task Force are equally applicable to all local education agencies, including school districts, county offices of education, and charter schools. In that regard, the recommendations provide opportunities for my office to strengthen audit oversight throughout the K-12 education system.