(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.

(Amended by Stats. 2007, Ch. 182, Sec. 3. Effective August 24, 2007. Repealed conditionally by Stats. 2007, Ch. 184, Secs. 1 and 3.)