69522. (a) (1) The commission may establish an auxiliary
organization for the purpose of providing operational and
administrative services for the participation by the commission in
the Federal Family Education Loan Program, or for other activities
approved by the commission and determined by the commission to be all
of the following:
(A) Related to student financial aid.
(B) Consistent with the general mission of the commission.
(C) Consistent with the purposes of the federal Higher Education
Act of 1965 (Public Law 89-329) and amendments to that act.
(2) The activities approved by the commission under this
subdivision shall not include either of the following:
(A) The issuance of bonds.
(B) Loan origination or loan capitalization activities. This
paragraph shall not preclude the commission or the auxiliary
organization from undertaking either of the following:
(i) Other permitted activities that are related to student
financial aid in partnership with institutions that conduct loan
origination or loan capitalization activities.
(ii) Loan origination or capitalization activities authorized
pursuant to an agreement with the United States Secretary of
Education for the lender-of-last-resort program.
(b) The auxiliary organization shall be established and maintained
as a nonprofit public benefit corporation subject to the Nonprofit
Public Benefit Corporation Law in Part 2 (commencing with Section
5110) of Division 2 of Title 1 of the Corporations Code, except that,
if there is a conflict between this article and the Nonprofit Public
Benefit Corporation Law, this article shall prevail.
(c) (1) The commission shall maintain its responsibility for
financial aid program administration, policy leadership program
evaluation, and information development and coordination. The
auxiliary organization shall provide operational and support services
essential to the administration of the Federal Family Education Loan
Program and other permitted activities that are related to student
financial aid, if those services are determined by the commission to
be consistent with the overall mission of the commission.
(2) On or after the operative date of Article 2.4 (commencing with
Section 69521), the commission shall not authorize the auxiliary
organization to perform any new or additional services except those
deemed by the Director of Finance to be necessary or convenient
either for the operation of the state student loan guarantee program,
as defined in Section 69521.2, or to accomplish the goal of
maximizing the value of the state student loan guarantee program
assets and liabilities pursuant to Article 2.4 (commencing with
Section 69521).
(3) The implementation and effectuation of the auxiliary
organization shall be carried out so as to enhance the administration
and delivery of commission programs and services. The commission
shall conduct regular performance evaluations of the operation of
auxiliary organizations in furtherance of its fiscal and fiduciary
responsibilities for approved programs.
(d) (1) (A) The operations of the auxiliary organization shall be
conducted in conformity with an operating agreement approved annually
by the commission. On and after January 1, 2002, the commission may
approve an operating agreement for a period not to exceed five years.
Prior to approval, the commission shall provide a copy of the
proposed operating agreement to the Department of Finance and the
Joint Legislative Budget Committee for their review and comment. The
operations of the auxiliary organization shall be limited to services
prescribed in that agreement.
(B) On or after the operative date of Article 2.4 (commencing with
Section 69521), the commission shall not approve any operating
agreement that permits the auxiliary organization to perform any new
or additional services, except those deemed by the Director of
Finance to be necessary or convenient either for the operation of the
state student loan guarantee program, as defined in Section 69521.2,
or to accomplish the goal of maximizing the value of the state
student loan guarantee program assets and liabilities pursuant to
Article 2.4 (commencing with Section 69521).
(2) Prior to approval of any amendment to an existing operating
agreement or any new operating agreement with an auxiliary
organization or subsidiary auxiliary organization for the purpose of
delineating new services or activities authorized pursuant to
subdivision (a), the commission shall provide the Director of Finance
and the Joint Legislative Budget Committee with at least 45 days
advance notice in writing that includes a description of the proposed
operating agreement. If the Director of Finance or the Joint
Legislative Budget Committee notifies the commission regarding issues
of concern with the proposed operating agreement, the commission
shall convene a meeting of appropriate representatives from the
commission, the Department of Finance, and the Legislature to resolve
those issues.
(e) The commission shall oversee the development and operations of
the auxiliary organization in a manner that ensures broad public
input and consultation with representatives of the financial aid
community, colleges and universities, and state agencies.
69522.5. (a) Notwithstanding any other provision of law, employees
of the commission may be assigned to work for the auxiliary
organization to provide services pursuant to this article. While they
are assigned to work for the auxiliary organization, these employees
shall remain employees of the commission and the status, rights, and
benefits of these employees shall be based on their employment as
civil service employees of the commission.
(b) Employees of the auxiliary organization shall not be employees
of the State of California, and shall not be subject to the
requirements of Chapter 10.3 (commencing with Section 3512) of, or of
Chapter 10.5 (commencing with Section 3525) of, Division 4 of Title
1 of the Government Code. Employees of the auxiliary organization
shall have the right to representation consistent with the National
Labor Relations Act (29 U.S.C. Secs. 151 et seq.).
69523. (a) For purposes of this section, the following definitions
apply:
(1) "Executive employee" is any management employee with
responsibility for the development and execution of the auxiliary
organization's policy.
(2) "Full-time employee" is a person who is employed in a
permanent position for 40 hours per week or for the required number
of hours of a particular work shift, whichever is lesser. Persons
employed on a temporary, intermittent, irregular time base, or on a
limited-term basis, are not full-time employees unless those
employees are engaged on a continuing 12-month basis and are employed
for 40 hours per week or for the required number of hours of a
particular work shift, whichever is the lesser.
(3) "Temporary employee" is either of the following:
(A) An employee employed for a research project, workshop,
institute, or other special project funded by any grant, contract, or
gift.
(B) An employee whose contract of employment is for a fixed term
not exceeding three years.
(b) The operating agreement approved by the commission pursuant to
Section 69522 may include provisions requiring the board of
directors of the auxiliary organization to provide salaries, working
conditions, and benefits for the full-time employees of the auxiliary
organization that are comparable to those provided commission
employees performing similar services.
69524. Retirement benefits for employees of the auxiliary
organization may be provided under contract with the Public Employees'
Retirement System in accordance with the terms and conditions of the
Public Employees' Retirement Law (Part 3 (commencing with Section
20000) of Division 5 of Title 2 of the Government Code), or may be
provided by other than the Public Employees' Retirement System.
69525. (a) The auxiliary organization established pursuant to
Section 69522 shall be governed by a board of directors nominated and
appointed by the commission. One member of the board of directors
shall be an employee of the auxiliary organization, and one member of
the board of directors shall be a student enrolled in a California
public or private postsecondary educational institution. The
commission shall determine the composition of the remainder of the
board of directors, including both the size and categories of
membership of the board.
(b) The board of directors shall, during each fiscal year, hold at
least one business meeting each quarter. The board of directors
shall have the benefit of the advice and counsel of at least one
attorney admitted to practice law in this state and at least one
licensed certified public accountant. Neither the attorney nor the
certified public accountant need be members of the board.
(c) No member of the board of directors shall be financially
interested in any contract or other transaction entered into by the
board of which he or she is a member, and, except as provided in
subdivision (d), any contract or transaction entered into in
violation of this subdivision is void.
(d) No contract or other transaction entered into by the board of
directors is void under subdivision (c), nor shall any member of that
board be disqualified or deemed guilty of misconduct in office under
those provisions, if both of the following circumstances exist:
(1) The member's financial interest is disclosed or known to the
board of directors and noted in the minutes, and the board of
directors thereafter authorizes, approves, or ratifies the contract
or transaction in good faith by a vote sufficient for the purpose
without counting the vote or votes of that financially interested
member or members.
(2) The contract or transaction is just and reasonable as to the
auxiliary organization at the time it is authorized or approved.
(e) Subdivision (d) does not apply if any of the following
circumstances exists:
(1) The contract or transaction is between the auxiliary
organization and a member of the board of directors.
(2) The contract or transaction is between the auxiliary
organization and a partnership or unincorporated association of which
any member of the board of directors is a partner or in which he or
she is the owner or holder, directly or indirectly, of a
proprietorship interest.
(3) The contract or transaction is between the auxiliary
organization and a corporation in which any member of the board of
directors is the owner or holder, directly or indirectly, of 5
percent or more of the outstanding common stock.
(4) A member of the board of directors is interested in a contract
or transaction within the meaning of subdivision (c) and, without
first disclosing that interest to the board of directors at a public
meeting of the board, influences or attempts to influence another
member or members of the board to enter into the contract or
transaction.
(f) It is unlawful for any person to utilize any information, not
a matter of public record, that is received by him or her by reason
of his or her membership on the board of directors, for personal
pecuniary gain, regardless of whether he or she is or is not a member
of the board of directors at the time that gain is realized.
(g) (1) The board of directors of the auxiliary organization shall
conduct its business in public meetings in accordance with the
Bagley-Keene Open Meeting Act (Article 9 (commencing with Section
11120) of Chapter 1 of Part 1 of Division 3 of Title 2 of the
Government Code).
(2) Notwithstanding paragraph (1), the board of directors of the
auxiliary organization may hold a closed session to consider a matter
of a proprietary nature the discussion of which would disclose a
trade secret or proprietary business information that could
potentially cause economic harm to the auxiliary organization or
cause it to violate an agreement with a third party to maintain the
information in confidence if that agreement was made in good faith
and for reasonable business purposes.
(3) Notwithstanding any other law, the commission may hold a
closed session to consider a matter that may properly be considered
in closed session by the board of directors of the auxiliary
organization pursuant to paragraph (2).
69526. (a) The board of directors shall approve all expenditures
and fund authorizations of the auxiliary organization. Authorizations
of expenditure of funds for use outside of the normal business
operations of the auxiliary organization shall be approved by an
officer of the commission and in accordance with commission policy.
(b) On or after the operative date of Article 2.4 (commencing with
Section 69521), and, notwithstanding any approval by the commission
or any of its officers or employees or by the board of directors made
after August 1, 2007, any expenditure of funds held by the auxiliary
organization for the following purposes shall be subject to the
prior approval of the Director of Finance:
(1) Increases in compensation or benefits for officers of the
auxiliary organization, including discretionary bonuses and retention
bonuses.
(2) Outreach programs, public awareness campaigns, or
diversification of the auxiliary organization's business or data
processing systems that are not deemed by the Director of Finance to
be necessary or convenient either for the operation of the state
student loan guarantee program, as defined in Section 69521.2, or to
accomplish the purposes of Article 2.4 (commencing with Section
69521).
(3) Activities other than any of the following:
(A) Those directly related to providing guarantees under the
Federal Family Education Loan Program, which shall not be deemed to
include any of the activities set forth in paragraph (2).
(B) Those required to provide operational support services to the
commission pursuant to the operating agreement between the
commission and the auxiliary organization, which shall not be deemed
to include any of the activities set forth in paragraph (2).
(C) Those deemed by the Director of Finance to be necessary or
convenient either for the operation of the state student loan
guarantee program, as defined in Section 69521.2, or to accomplish
the purposes of Article 2.4 (commencing with Section 69521).
(c) The commission, in consultation with the Department of Finance
and the board of directors of the auxiliary organization, shall do
all of the following:
(1) Institute a standard accounting and reporting system for the
management and operations of the auxiliary organization.
(2) Implement financial standards that will ensure the fiscal
viability of the auxiliary organization. The standards shall include
proper provision for professional management, adequate working
capital, adequate reserve funds for current operations and capital
replacements, and adequate provisions for new business requirements.
(3) Institute procedures to ensure that transactions of the
auxiliary organization are consistent with the mission of the
commission.
(4) Develop policies for the expenditure of funds derived from
indirect cost payments not required to implement paragraph (2). The
use of those funds shall be regularly reported to the board of
directors.
(d) The auxiliary organization shall not accept any grant,
contract, bequest, trust, or gift, unless it is so conditioned that
it may be used only for purposes consistent with the policies of the
commission.
69527. (a) A certified public accountant shall be selected by the
auxiliary organization and shall audit all funds of the auxiliary
organization in accordance with applicable auditing and reporting
procedures developed by the commission and the Department of Finance.
The auxiliary organization shall contract for and receive the audit
annually, and shall submit the audit to the commission and the
Department of Finance. The auxiliary organization shall publish and
disseminate its annual audited statement and make it available to any
person upon request. Distribution of the published audited statement
of financial condition at a regularly scheduled meeting of the board
of directors shall be deemed compliance with this requirement.
(b) The Department of Finance may review the performance and
operation of the auxiliary organization.
69528. The auxiliary organization may contract with the commission
for the provision of support services, which may include, but are not
limited to, accounting, personnel, clerical, administrative support,
and other services necessary for the administration of the auxiliary
organization.
69529. The operating agreement with the board of directors of the
auxiliary organization, approved by the commission pursuant to
subdivision (d) of Section 69522, shall cover all of the following:
(a) Any support services provided or special programs administered
by the auxiliary organization.
(b) The sources of revenue available to the auxiliary
organization, including agreements concerning federal administrative
cost allowances, guarantee fees charged to borrowers, and retention
of funds obtained through collections on defaulted loans.
(c) Support and administrative services to be provided by
commission staff, including accounting, personnel, clerical,
administrative support, and other services necessary for the
administration of the auxiliary organization.
69529.5. (a) The commission shall report the following information
to the Legislature on April 1 of each year, with respect to the
operation of the auxiliary organization:
(1) A description of the services provided by the auxiliary
organization.
(2) The auxiliary organization's annual budget, funded activities,
and personnel, including the sources of revenue available to fund
its operations.
(3) Descriptions of changes made in the delivery of loans to
California students and enhancements to programs and activities
administered by the commission. The descriptions shall reflect all
changes, both positive and negative.
(4) The level of compensation of managers and executives of the
auxiliary organization.
(b) Commencing on April 1, 2005, and on April 1 of each year,
ending on April 1, 2010, the commission shall specifically describe
the actions taken, and report the costs incurred and the revenues
realized, by the auxiliary organization in disbursement services,
loan servicing and repayment, secondary market, and private lender
activities that the auxiliary organization undertakes pursuant to
subdivision (a) of Section 69522.
69522. (a) (1) The commission may establish an auxiliary
organization for the purpose of providing operational and
administrative services for the participation by the commission in
the Federal Family Education Loan Program, or for other activities
approved by the commission and determined by the commission to be all
of the following:
(A) Related to student financial aid.
(B) Consistent with the general mission of the commission.
(C) Consistent with the purposes of the federal Higher Education
Act of 1965 (Public Law 89-329) and amendments to that act.
(2) The activities approved by the commission under this
subdivision shall not include either of the following:
(A) The issuance of bonds.
(B) Loan origination or loan capitalization activities. This
paragraph shall not preclude the commission or the auxiliary
organization from undertaking either of the following:
(i) Other permitted activities that are related to student
financial aid in partnership with institutions that conduct loan
origination or loan capitalization activities.
(ii) Loan origination or capitalization activities authorized
pursuant to an agreement with the United States Secretary of
Education for the lender-of-last-resort program.
(b) The auxiliary organization shall be established and maintained
as a nonprofit public benefit corporation subject to the Nonprofit
Public Benefit Corporation Law in Part 2 (commencing with Section
5110) of Division 2 of Title 1 of the Corporations Code, except that,
if there is a conflict between this article and the Nonprofit Public
Benefit Corporation Law, this article shall prevail.
(c) (1) The commission shall maintain its responsibility for
financial aid program administration, policy leadership program
evaluation, and information development and coordination. The
auxiliary organization shall provide operational and support services
essential to the administration of the Federal Family Education Loan
Program and other permitted activities that are related to student
financial aid, if those services are determined by the commission to
be consistent with the overall mission of the commission.
(2) On or after the operative date of Article 2.4 (commencing with
Section 69521), the commission shall not authorize the auxiliary
organization to perform any new or additional services except those
deemed by the Director of Finance to be necessary or convenient
either for the operation of the state student loan guarantee program,
as defined in Section 69521.2, or to accomplish the goal of
maximizing the value of the state student loan guarantee program
assets and liabilities pursuant to Article 2.4 (commencing with
Section 69521).
(3) The implementation and effectuation of the auxiliary
organization shall be carried out so as to enhance the administration
and delivery of commission programs and services. The commission
shall conduct regular performance evaluations of the operation of
auxiliary organizations in furtherance of its fiscal and fiduciary
responsibilities for approved programs.
(d) (1) (A) The operations of the auxiliary organization shall be
conducted in conformity with an operating agreement approved annually
by the commission. On and after January 1, 2002, the commission may
approve an operating agreement for a period not to exceed five years.
Prior to approval, the commission shall provide a copy of the
proposed operating agreement to the Department of Finance and the
Joint Legislative Budget Committee for their review and comment. The
operations of the auxiliary organization shall be limited to services
prescribed in that agreement.
(B) On or after the operative date of Article 2.4 (commencing with
Section 69521), the commission shall not approve any operating
agreement that permits the auxiliary organization to perform any new
or additional services, except those deemed by the Director of
Finance to be necessary or convenient either for the operation of the
state student loan guarantee program, as defined in Section 69521.2,
or to accomplish the goal of maximizing the value of the state
student loan guarantee program assets and liabilities pursuant to
Article 2.4 (commencing with Section 69521).
(2) Prior to approval of any amendment to an existing operating
agreement or any new operating agreement with an auxiliary
organization or subsidiary auxiliary organization for the purpose of
delineating new services or activities authorized pursuant to
subdivision (a), the commission shall provide the Director of Finance
and the Joint Legislative Budget Committee with at least 45 days
advance notice in writing that includes a description of the proposed
operating agreement. If the Director of Finance or the Joint
Legislative Budget Committee notifies the commission regarding issues
of concern with the proposed operating agreement, the commission
shall convene a meeting of appropriate representatives from the
commission, the Department of Finance, and the Legislature to resolve
those issues.
(e) The commission shall oversee the development and operations of
the auxiliary organization in a manner that ensures broad public
input and consultation with representatives of the financial aid
community, colleges and universities, and state agencies.
69522.5. (a) Notwithstanding any other provision of law, employees
of the commission may be assigned to work for the auxiliary
organization to provide services pursuant to this article. While they
are assigned to work for the auxiliary organization, these employees
shall remain employees of the commission and the status, rights, and
benefits of these employees shall be based on their employment as
civil service employees of the commission.
(b) Employees of the auxiliary organization shall not be employees
of the State of California, and shall not be subject to the
requirements of Chapter 10.3 (commencing with Section 3512) of, or of
Chapter 10.5 (commencing with Section 3525) of, Division 4 of Title
1 of the Government Code. Employees of the auxiliary organization
shall have the right to representation consistent with the National
Labor Relations Act (29 U.S.C. Secs. 151 et seq.).
69523. (a) For purposes of this section, the following definitions
apply:
(1) "Executive employee" is any management employee with
responsibility for the development and execution of the auxiliary
organization's policy.
(2) "Full-time employee" is a person who is employed in a
permanent position for 40 hours per week or for the required number
of hours of a particular work shift, whichever is lesser. Persons
employed on a temporary, intermittent, irregular time base, or on a
limited-term basis, are not full-time employees unless those
employees are engaged on a continuing 12-month basis and are employed
for 40 hours per week or for the required number of hours of a
particular work shift, whichever is the lesser.
(3) "Temporary employee" is either of the following:
(A) An employee employed for a research project, workshop,
institute, or other special project funded by any grant, contract, or
gift.
(B) An employee whose contract of employment is for a fixed term
not exceeding three years.
(b) The operating agreement approved by the commission pursuant to
Section 69522 may include provisions requiring the board of
directors of the auxiliary organization to provide salaries, working
conditions, and benefits for the full-time employees of the auxiliary
organization that are comparable to those provided commission
employees performing similar services.
69524. Retirement benefits for employees of the auxiliary
organization may be provided under contract with the Public Employees'
Retirement System in accordance with the terms and conditions of the
Public Employees' Retirement Law (Part 3 (commencing with Section
20000) of Division 5 of Title 2 of the Government Code), or may be
provided by other than the Public Employees' Retirement System.
69525. (a) The auxiliary organization established pursuant to
Section 69522 shall be governed by a board of directors nominated and
appointed by the commission. One member of the board of directors
shall be an employee of the auxiliary organization, and one member of
the board of directors shall be a student enrolled in a California
public or private postsecondary educational institution. The
commission shall determine the composition of the remainder of the
board of directors, including both the size and categories of
membership of the board.
(b) The board of directors shall, during each fiscal year, hold at
least one business meeting each quarter. The board of directors
shall have the benefit of the advice and counsel of at least one
attorney admitted to practice law in this state and at least one
licensed certified public accountant. Neither the attorney nor the
certified public accountant need be members of the board.
(c) No member of the board of directors shall be financially
interested in any contract or other transaction entered into by the
board of which he or she is a member, and, except as provided in
subdivision (d), any contract or transaction entered into in
violation of this subdivision is void.
(d) No contract or other transaction entered into by the board of
directors is void under subdivision (c), nor shall any member of that
board be disqualified or deemed guilty of misconduct in office under
those provisions, if both of the following circumstances exist:
(1) The member's financial interest is disclosed or known to the
board of directors and noted in the minutes, and the board of
directors thereafter authorizes, approves, or ratifies the contract
or transaction in good faith by a vote sufficient for the purpose
without counting the vote or votes of that financially interested
member or members.
(2) The contract or transaction is just and reasonable as to the
auxiliary organization at the time it is authorized or approved.
(e) Subdivision (d) does not apply if any of the following
circumstances exists:
(1) The contract or transaction is between the auxiliary
organization and a member of the board of directors.
(2) The contract or transaction is between the auxiliary
organization and a partnership or unincorporated association of which
any member of the board of directors is a partner or in which he or
she is the owner or holder, directly or indirectly, of a
proprietorship interest.
(3) The contract or transaction is between the auxiliary
organization and a corporation in which any member of the board of
directors is the owner or holder, directly or indirectly, of 5
percent or more of the outstanding common stock.
(4) A member of the board of directors is interested in a contract
or transaction within the meaning of subdivision (c) and, without
first disclosing that interest to the board of directors at a public
meeting of the board, influences or attempts to influence another
member or members of the board to enter into the contract or
transaction.
(f) It is unlawful for any person to utilize any information, not
a matter of public record, that is received by him or her by reason
of his or her membership on the board of directors, for personal
pecuniary gain, regardless of whether he or she is or is not a member
of the board of directors at the time that gain is realized.
(g) (1) The board of directors of the auxiliary organization shall
conduct its business in public meetings in accordance with the
Bagley-Keene Open Meeting Act (Article 9 (commencing with Section
11120) of Chapter 1 of Part 1 of Division 3 of Title 2 of the
Government Code).
(2) Notwithstanding paragraph (1), the board of directors of the
auxiliary organization may hold a closed session to consider a matter
of a proprietary nature the discussion of which would disclose a
trade secret or proprietary business information that could
potentially cause economic harm to the auxiliary organization or
cause it to violate an agreement with a third party to maintain the
information in confidence if that agreement was made in good faith
and for reasonable business purposes.
(3) Notwithstanding any other law, the commission may hold a
closed session to consider a matter that may properly be considered
in closed session by the board of directors of the auxiliary
organization pursuant to paragraph (2).
69526. (a) The board of directors shall approve all expenditures
and fund authorizations of the auxiliary organization. Authorizations
of expenditure of funds for use outside of the normal business
operations of the auxiliary organization shall be approved by an
officer of the commission and in accordance with commission policy.
(b) On or after the operative date of Article 2.4 (commencing with
Section 69521), and, notwithstanding any approval by the commission
or any of its officers or employees or by the board of directors made
after August 1, 2007, any expenditure of funds held by the auxiliary
organization for the following purposes shall be subject to the
prior approval of the Director of Finance:
(1) Increases in compensation or benefits for officers of the
auxiliary organization, including discretionary bonuses and retention
bonuses.
(2) Outreach programs, public awareness campaigns, or
diversification of the auxiliary organization's business or data
processing systems that are not deemed by the Director of Finance to
be necessary or convenient either for the operation of the state
student loan guarantee program, as defined in Section 69521.2, or to
accomplish the purposes of Article 2.4 (commencing with Section
69521).
(3) Activities other than any of the following:
(A) Those directly related to providing guarantees under the
Federal Family Education Loan Program, which shall not be deemed to
include any of the activities set forth in paragraph (2).
(B) Those required to provide operational support services to the
commission pursuant to the operating agreement between the
commission and the auxiliary organization, which shall not be deemed
to include any of the activities set forth in paragraph (2).
(C) Those deemed by the Director of Finance to be necessary or
convenient either for the operation of the state student loan
guarantee program, as defined in Section 69521.2, or to accomplish
the purposes of Article 2.4 (commencing with Section 69521).
(c) The commission, in consultation with the Department of Finance
and the board of directors of the auxiliary organization, shall do
all of the following:
(1) Institute a standard accounting and reporting system for the
management and operations of the auxiliary organization.
(2) Implement financial standards that will ensure the fiscal
viability of the auxiliary organization. The standards shall include
proper provision for professional management, adequate working
capital, adequate reserve funds for current operations and capital
replacements, and adequate provisions for new business requirements.
(3) Institute procedures to ensure that transactions of the
auxiliary organization are consistent with the mission of the
commission.
(4) Develop policies for the expenditure of funds derived from
indirect cost payments not required to implement paragraph (2). The
use of those funds shall be regularly reported to the board of
directors.
(d) The auxiliary organization shall not accept any grant,
contract, bequest, trust, or gift, unless it is so conditioned that
it may be used only for purposes consistent with the policies of the
commission.
69527. (a) A certified public accountant shall be selected by the
auxiliary organization and shall audit all funds of the auxiliary
organization in accordance with applicable auditing and reporting
procedures developed by the commission and the Department of Finance.
The auxiliary organization shall contract for and receive the audit
annually, and shall submit the audit to the commission and the
Department of Finance. The auxiliary organization shall publish and
disseminate its annual audited statement and make it available to any
person upon request. Distribution of the published audited statement
of financial condition at a regularly scheduled meeting of the board
of directors shall be deemed compliance with this requirement.
(b) The Department of Finance may review the performance and
operation of the auxiliary organization.
69528. The auxiliary organization may contract with the commission
for the provision of support services, which may include, but are not
limited to, accounting, personnel, clerical, administrative support,
and other services necessary for the administration of the auxiliary
organization.
69529. The operating agreement with the board of directors of the
auxiliary organization, approved by the commission pursuant to
subdivision (d) of Section 69522, shall cover all of the following:
(a) Any support services provided or special programs administered
by the auxiliary organization.
(b) The sources of revenue available to the auxiliary
organization, including agreements concerning federal administrative
cost allowances, guarantee fees charged to borrowers, and retention
of funds obtained through collections on defaulted loans.
(c) Support and administrative services to be provided by
commission staff, including accounting, personnel, clerical,
administrative support, and other services necessary for the
administration of the auxiliary organization.
69529.5. (a) The commission shall report the following information
to the Legislature on April 1 of each year, with respect to the
operation of the auxiliary organization:
(1) A description of the services provided by the auxiliary
organization.
(2) The auxiliary organization's annual budget, funded activities,
and personnel, including the sources of revenue available to fund
its operations.
(3) Descriptions of changes made in the delivery of loans to
California students and enhancements to programs and activities
administered by the commission. The descriptions shall reflect all
changes, both positive and negative.
(4) The level of compensation of managers and executives of the
auxiliary organization.
(b) Commencing on April 1, 2005, and on April 1 of each year,
ending on April 1, 2010, the commission shall specifically describe
the actions taken, and report the costs incurred and the revenues
realized, by the auxiliary organization in disbursement services,
loan servicing and repayment, secondary market, and private lender
activities that the auxiliary organization undertakes pursuant to
subdivision (a) of Section 69522.
69522. (a) (1) The commission may establish an auxiliary
organization for the purpose of providing operational and
administrative services for the participation by the commission in
the Federal Family Education Loan Program, or for other activities
approved by the commission and determined by the commission to be all
of the following:
(A) Related to student financial aid.
(B) Consistent with the general mission of the commission.
(C) Consistent with the purposes of the federal Higher Education
Act of 1965 (Public Law 89-329) and amendments to that act.
(2) The activities approved by the commission under this
subdivision shall not include either of the following:
(A) The issuance of bonds.
(B) Loan origination or loan capitalization activities. This
paragraph shall not preclude the commission or the auxiliary
organization from undertaking either of the following:
(i) Other permitted activities that are related to student
financial aid in partnership with institutions that conduct loan
origination or loan capitalization activities.
(ii) Loan origination or capitalization activities authorized
pursuant to an agreement with the United States Secretary of
Education for the lender-of-last-resort program.
(b) The auxiliary organization shall be established and maintained
as a nonprofit public benefit corporation subject to the Nonprofit
Public Benefit Corporation Law in Part 2 (commencing with Section
5110) of Division 2 of Title 1 of the Corporations Code, except that,
if there is a conflict between this article and the Nonprofit Public
Benefit Corporation Law, this article shall prevail.
(c) (1) The commission shall maintain its responsibility for
financial aid program administration, policy leadership program
evaluation, and information development and coordination. The
auxiliary organization shall provide operational and support services
essential to the administration of the Federal Family Education Loan
Program and other permitted activities that are related to student
financial aid, if those services are determined by the commission to
be consistent with the overall mission of the commission.
(2) On or after the operative date of Article 2.4 (commencing with
Section 69521), the commission shall not authorize the auxiliary
organization to perform any new or additional services except those
deemed by the Director of Finance to be necessary or convenient
either for the operation of the state student loan guarantee program,
as defined in Section 69521.2, or to accomplish the goal of
maximizing the value of the state student loan guarantee program
assets and liabilities pursuant to Article 2.4 (commencing with
Section 69521).
(3) The implementation and effectuation of the auxiliary
organization shall be carried out so as to enhance the administration
and delivery of commission programs and services. The commission
shall conduct regular performance evaluations of the operation of
auxiliary organizations in furtherance of its fiscal and fiduciary
responsibilities for approved programs.
(d) (1) (A) The operations of the auxiliary organization shall be
conducted in conformity with an operating agreement approved annually
by the commission. On and after January 1, 2002, the commission may
approve an operating agreement for a period not to exceed five years.
Prior to approval, the commission shall provide a copy of the
proposed operating agreement to the Department of Finance and the
Joint Legislative Budget Committee for their review and comment. The
operations of the auxiliary organization shall be limited to services
prescribed in that agreement.
(B) On or after the operative date of Article 2.4 (commencing with
Section 69521), the commission shall not approve any operating
agreement that permits the auxiliary organization to perform any new
or additional services, except those deemed by the Director of
Finance to be necessary or convenient either for the operation of the
state student loan guarantee program, as defined in Section 69521.2,
or to accomplish the goal of maximizing the value of the state
student loan guarantee program assets and liabilities pursuant to
Article 2.4 (commencing with Section 69521).
(2) Prior to approval of any amendment to an existing operating
agreement or any new operating agreement with an auxiliary
organization or subsidiary auxiliary organization for the purpose of
delineating new services or activities authorized pursuant to
subdivision (a), the commission shall provide the Director of Finance
and the Joint Legislative Budget Committee with at least 45 days
advance notice in writing that includes a description of the proposed
operating agreement. If the Director of Finance or the Joint
Legislative Budget Committee notifies the commission regarding issues
of concern with the proposed operating agreement, the commission
shall convene a meeting of appropriate representatives from the
commission, the Department of Finance, and the Legislature to resolve
those issues.
(e) The commission shall oversee the development and operations of
the auxiliary organization in a manner that ensures broad public
input and consultation with representatives of the financial aid
community, colleges and universities, and state agencies.
69522.5. (a) Notwithstanding any other provision of law, employees
of the commission may be assigned to work for the auxiliary
organization to provide services pursuant to this article. While they
are assigned to work for the auxiliary organization, these employees
shall remain employees of the commission and the status, rights, and
benefits of these employees shall be based on their employment as
civil service employees of the commission.
(b) Employees of the auxiliary organization shall not be employees
of the State of California, and shall not be subject to the
requirements of Chapter 10.3 (commencing with Section 3512) of, or of
Chapter 10.5 (commencing with Section 3525) of, Division 4 of Title
1 of the Government Code. Employees of the auxiliary organization
shall have the right to representation consistent with the National
Labor Relations Act (29 U.S.C. Secs. 151 et seq.).
69523. (a) For purposes of this section, the following definitions
apply:
(1) "Executive employee" is any management employee with
responsibility for the development and execution of the auxiliary
organization's policy.
(2) "Full-time employee" is a person who is employed in a
permanent position for 40 hours per week or for the required number
of hours of a particular work shift, whichever is lesser. Persons
employed on a temporary, intermittent, irregular time base, or on a
limited-term basis, are not full-time employees unless those
employees are engaged on a continuing 12-month basis and are employed
for 40 hours per week or for the required number of hours of a
particular work shift, whichever is the lesser.
(3) "Temporary employee" is either of the following:
(A) An employee employed for a research project, workshop,
institute, or other special project funded by any grant, contract, or
gift.
(B) An employee whose contract of employment is for a fixed term
not exceeding three years.
(b) The operating agreement approved by the commission pursuant to
Section 69522 may include provisions requiring the board of
directors of the auxiliary organization to provide salaries, working
conditions, and benefits for the full-time employees of the auxiliary
organization that are comparable to those provided commission
employees performing similar services.
69524. Retirement benefits for employees of the auxiliary
organization may be provided under contract with the Public Employees'
Retirement System in accordance with the terms and conditions of the
Public Employees' Retirement Law (Part 3 (commencing with Section
20000) of Division 5 of Title 2 of the Government Code), or may be
provided by other than the Public Employees' Retirement System.
69525. (a) The auxiliary organization established pursuant to
Section 69522 shall be governed by a board of directors nominated and
appointed by the commission. One member of the board of directors
shall be an employee of the auxiliary organization, and one member of
the board of directors shall be a student enrolled in a California
public or private postsecondary educational institution. The
commission shall determine the composition of the remainder of the
board of directors, including both the size and categories of
membership of the board.
(b) The board of directors shall, during each fiscal year, hold at
least one business meeting each quarter. The board of directors
shall have the benefit of the advice and counsel of at least one
attorney admitted to practice law in this state and at least one
licensed certified public accountant. Neither the attorney nor the
certified public accountant need be members of the board.
(c) No member of the board of directors shall be financially
interested in any contract or other transaction entered into by the
board of which he or she is a member, and, except as provided in
subdivision (d), any contract or transaction entered into in
violation of this subdivision is void.
(d) No contract or other transaction entered into by the board of
directors is void under subdivision (c), nor shall any member of that
board be disqualified or deemed guilty of misconduct in office under
those provisions, if both of the following circumstances exist:
(1) The member's financial interest is disclosed or known to the
board of directors and noted in the minutes, and the board of
directors thereafter authorizes, approves, or ratifies the contract
or transaction in good faith by a vote sufficient for the purpose
without counting the vote or votes of that financially interested
member or members.
(2) The contract or transaction is just and reasonable as to the
auxiliary organization at the time it is authorized or approved.
(e) Subdivision (d) does not apply if any of the following
circumstances exists:
(1) The contract or transaction is between the auxiliary
organization and a member of the board of directors.
(2) The contract or transaction is between the auxiliary
organization and a partnership or unincorporated association of which
any member of the board of directors is a partner or in which he or
she is the owner or holder, directly or indirectly, of a
proprietorship interest.
(3) The contract or transaction is between the auxiliary
organization and a corporation in which any member of the board of
directors is the owner or holder, directly or indirectly, of 5
percent or more of the outstanding common stock.
(4) A member of the board of directors is interested in a contract
or transaction within the meaning of subdivision (c) and, without
first disclosing that interest to the board of directors at a public
meeting of the board, influences or attempts to influence another
member or members of the board to enter into the contract or
transaction.
(f) It is unlawful for any person to utilize any information, not
a matter of public record, that is received by him or her by reason
of his or her membership on the board of directors, for personal
pecuniary gain, regardless of whether he or she is or is not a member
of the board of directors at the time that gain is realized.
(g) (1) The board of directors of the auxiliary organization shall
conduct its business in public meetings in accordance with the
Bagley-Keene Open Meeting Act (Article 9 (commencing with Section
11120) of Chapter 1 of Part 1 of Division 3 of Title 2 of the
Government Code).
(2) Notwithstanding paragraph (1), the board of directors of the
auxiliary organization may hold a closed session to consider a matter
of a proprietary nature the discussion of which would disclose a
trade secret or proprietary business information that could
potentially cause economic harm to the auxiliary organization or
cause it to violate an agreement with a third party to maintain the
information in confidence if that agreement was made in good faith
and for reasonable business purposes.
(3) Notwithstanding any other law, the commission may hold a
closed session to consider a matter that may properly be considered
in closed session by the board of directors of the auxiliary
organization pursuant to paragraph (2).
69526. (a) The board of directors shall approve all expenditures
and fund authorizations of the auxiliary organization. Authorizations
of expenditure of funds for use outside of the normal business
operations of the auxiliary organization shall be approved by an
officer of the commission and in accordance with commission policy.
(b) On or after the operative date of Article 2.4 (commencing with
Section 69521), and, notwithstanding any approval by the commission
or any of its officers or employees or by the board of directors made
after August 1, 2007, any expenditure of funds held by the auxiliary
organization for the following purposes shall be subject to the
prior approval of the Director of Finance:
(1) Increases in compensation or benefits for officers of the
auxiliary organization, including discretionary bonuses and retention
bonuses.
(2) Outreach programs, public awareness campaigns, or
diversification of the auxiliary organization's business or data
processing systems that are not deemed by the Director of Finance to
be necessary or convenient either for the operation of the state
student loan guarantee program, as defined in Section 69521.2, or to
accomplish the purposes of Article 2.4 (commencing with Section
69521).
(3) Activities other than any of the following:
(A) Those directly related to providing guarantees under the
Federal Family Education Loan Program, which shall not be deemed to
include any of the activities set forth in paragraph (2).
(B) Those required to provide operational support services to the
commission pursuant to the operating agreement between the
commission and the auxiliary organization, which shall not be deemed
to include any of the activities set forth in paragraph (2).
(C) Those deemed by the Director of Finance to be necessary or
convenient either for the operation of the state student loan
guarantee program, as defined in Section 69521.2, or to accomplish
the purposes of Article 2.4 (commencing with Section 69521).
(c) The commission, in consultation with the Department of Finance
and the board of directors of the auxiliary organization, shall do
all of the following:
(1) Institute a standard accounting and reporting system for the
management and operations of the auxiliary organization.
(2) Implement financial standards that will ensure the fiscal
viability of the auxiliary organization. The standards shall include
proper provision for professional management, adequate working
capital, adequate reserve funds for current operations and capital
replacements, and adequate provisions for new business requirements.
(3) Institute procedures to ensure that transactions of the
auxiliary organization are consistent with the mission of the
commission.
(4) Develop policies for the expenditure of funds derived from
indirect cost payments not required to implement paragraph (2). The
use of those funds shall be regularly reported to the board of
directors.
(d) The auxiliary organization shall not accept any grant,
contract, bequest, trust, or gift, unless it is so conditioned that
it may be used only for purposes consistent with the policies of the
commission.
69527. (a) A certified public accountant shall be selected by the
auxiliary organization and shall audit all funds of the auxiliary
organization in accordance with applicable auditing and reporting
procedures developed by the commission and the Department of Finance.
The auxiliary organization shall contract for and receive the audit
annually, and shall submit the audit to the commission and the
Department of Finance. The auxiliary organization shall publish and
disseminate its annual audited statement and make it available to any
person upon request. Distribution of the published audited statement
of financial condition at a regularly scheduled meeting of the board
of directors shall be deemed compliance with this requirement.
(b) The Department of Finance may review the performance and
operation of the auxiliary organization.
69528. The auxiliary organization may contract with the commission
for the provision of support services, which may include, but are not
limited to, accounting, personnel, clerical, administrative support,
and other services necessary for the administration of the auxiliary
organization.
69529. The operating agreement with the board of directors of the
auxiliary organization, approved by the commission pursuant to
subdivision (d) of Section 69522, shall cover all of the following:
(a) Any support services provided or special programs administered
by the auxiliary organization.
(b) The sources of revenue available to the auxiliary
organization, including agreements concerning federal administrative
cost allowances, guarantee fees charged to borrowers, and retention
of funds obtained through collections on defaulted loans.
(c) Support and administrative services to be provided by
commission staff, including accounting, personnel, clerical,
administrative support, and other services necessary for the
administration of the auxiliary organization.
69529.5. (a) The commission shall report the following information
to the Legislature on April 1 of each year, with respect to the
operation of the auxiliary organization:
(1) A description of the services provided by the auxiliary
organization.
(2) The auxiliary organization's annual budget, funded activities,
and personnel, including the sources of revenue available to fund
its operations.
(3) Descriptions of changes made in the delivery of loans to
California students and enhancements to programs and activities
administered by the commission. The descriptions shall reflect all
changes, both positive and negative.
(4) The level of compensation of managers and executives of the
auxiliary organization.
(b) Commencing on April 1, 2005, and on April 1 of each year,
ending on April 1, 2010, the commission shall specifically describe
the actions taken, and report the costs incurred and the revenues
realized, by the auxiliary organization in disbursement services,
loan servicing and repayment, secondary market, and private lender
activities that the auxiliary organization undertakes pursuant to
subdivision (a) of Section 69522.
