Gov. Code, § 53134

(a) Local agencies shall have the option, pursuant to the provisions of Section 53135, to provide for federally mandated financial and compliance audits of block grant funds received from state departments. If, however, a local agency does not elect to, or fails to provide for, federally mandated financial and compliance audits, or if it is determined by the administering state department that a local agency warrants assistance in this function, the state department shall notify the Controller, and the Controller shall identify appropriate methods for accomplishing federally required audits.

The decision of the Controller shall be based upon use of any existing state audit relationship, whenever appropriate in view of federal requirements, so as to avoid duplication and excess costs.

(b) The state shall rely on the audit arranged by the local agency if the audit is conducted in accordance with the standards promulgated by the state consistent with federal policy. Additional work shall not duplicate these audits and shall be conducted only upon approval of the Controller in consultation with the Department of Finance.

(c) Audits performed pursuant to this article shall be conducted not less frequently than every two years, or as specified by federal law, by qualified state or local government auditors or independent public accountants in accordance with the financial and compliance requirements of federal Standards for Audit of Governmental Organizations, Programs, Activities and Functions. These audits shall be completed no later than six months after the close of the audit period. If the provisions of this subdivision have not been met, the Controller shall immediately notify the Governor and the Legislature as to what corrective actions it intends to take.