(a) The purchasing alliance shall furnish an annual financial audit to the commissioner on the forms provided by the commissioner. The annual financial audit may be filed either on a calendar year basis on or before March 31, or, if approved in writing by the commissioner in respect to any individual purchasing alliance, on a fiscal year basis on or before 90 days after the end of the fiscal year. The deadline for filing the annual audit may be extended by the commissioner for good cause, as determined by the commissioner for a period not to exceed 60 days. Failure to submit an audit on time, or within any extended time that the commissioner may grant, shall be grounds for an order by the commissioner to prohibiting the alliance from accepting any new business pursuant to this section. The audits shall be private, except that a synopsis of the balance sheet on a form prescribed by the commissioner may be made available to the public upon request. The audits shall be conducted and prepared in accordance with generally accepted auditing standards by an independent certified public accountant or independent licensed public accountant whose certification or license is in good standing at the time of the preparation. The fee for filing of the audit shall be three hundred thirteen dollars ($313). Any purchasing alliance that fails to file any audit or other report on or before the date it is due shall pay to the commissioner a penalty fee of one hundred eighteen dollars ($118) payable within 30 days of the due date of the audit and on failure to pay that fine or any fee or file the audit required by this section, shall forfeit the privilege of accepting new business until the delinquency is corrected. The commissioner may refuse to accept an audit or order a new audit for any of the following reasons:

(1) Adverse result in any proceeding before the California Board of Accountancy affecting the auditor’s license.

(2) The auditor has an affiliation with the purchasing alliance or any of its officers or directors that could prevent his or her reports on the purchasing alliance from being reasonably objective.

(3) The auditor has been convicted of any misdemeanor or felony based on his or her activities as an accountant.

(4) Judgment adverse to the auditor in any civil action finding him or her guilty of fraud, deceit, or misrepresentation in the practice of his or her profession.

(b) Financial and performance audits or examinations of the purchasing alliance shall be conducted by the commissioner once every two years. The cost of the examinations or audits are to be paid by the purchasing alliance. The commissioner may impose conditions on registration, or continued registration to remedy compliance or performance problems.

(c) At any time the commissioner determines, after notice and hearing, that a purchasing alliance registered under this article has willfully failed to comply with any of the provisions of this section, the commissioner shall make his or her order prohibiting the purchasing alliance from conducting its business for a period not to exceed one year.

Any purchasing alliance violating an order made under this subdivision is subject to seizure under Article 14 (commencing with Section 1010) of Chapter 1 of Part 2 of Division 1, is guilty of a misdemeanor, and may have its certificate of registration revoked by the commissioner. Any person aiding and abetting any purchasing alliance in violation of that order is guilty of a misdemeanor.

The purpose of this section is to maintain the solvency of the purchasing alliance subject to this article and to protect the public by preventing fraud and requiring fair dealing. The audit shall be designed to ensure that the purchasing alliance is not a risk-bearing entity, to ensure sound financial controls and money management, and to prevent mismanagement or misappropriation of funds either through neglect or malfeasance. In order to carry out those purposes the commissioner shall make reasonable rules and regulations to govern the conduct of the business of the purchasing alliance subject to this chapter.

(d) The commissioner shall establish fees for initial registration of a purchasing alliance and for renewal of registration of a purchasing alliance in an amount sufficient to cover the costs of administering this chapter. A purchasing alliance shall pay the initial registration fee at the time of application for registration, and the renewal fee at the time of application for renewal.

(Amended by Stats. 2000, Ch. 1055, Sec. 49. Effective September 30, 2000.)