School accountability: school financial and performance audits: chartering authorities: educational support activities: flex-based instruction.

Senator Ashby's legislation strengthens financial oversight and accountability in California's education system through comprehensive reforms to audit procedures, charter school oversight, and educational vendor requirements. The bill establishes new standards for financial audits, imposes additional qualifications for auditors, and creates a framework for regulating educational support activities.

Beginning in 2026-27, certified public accountants conducting school audits must complete specialized training in educational financial reporting and compliance testing. The bill requires auditors to independently select audit samples, verify pupil-to-teacher ratios, and review credit card transactions. Charter schools must publicly review their annual audits and address any exceptions identified.

The legislation creates new requirements for educational support vendors, mandating that activities enhance pupils' educational programs and receive teacher verification as academically appropriate. Local educational agencies may only contract with vetted vendors who demonstrate proper insurance, licensing, and background checks. Contracts exceeding $100,000 require approval in open meetings.

For charter schools offering flex-based instruction, the State Board of Education gains authority to adjust funding based on findings of financial abuse or excessive administrative expenses. The board must revise funding determination regulations by 2027 to ensure consistency with specified criteria regarding instructional expenses and reserves.

The bill enhances monitoring of related party transactions and requires separate financial tracking for charter schools within districts starting in 2027-28. New audit procedures will verify compliance with pupil-teacher ratios, attendance accounting, and vendor requirements. The Controller must incorporate these changes into annual audit guides and establish materiality thresholds for testing.

To implement these reforms, local educational agencies must develop policies ensuring educational value, pupil safety, and fiscal responsibility in vendor contracts. The legislation prohibits sectarian activities and requires verification of reasonable market pricing. Chartering authorities gain expanded oversight responsibilities, including reviewing samples of credit card transactions.