BILL NUMBER: SB 617 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY JUNE 14, 2011
AMENDED IN SENATE MAY 4, 2011
INTRODUCED BY Senator Calderon
( Coauthor: Senator Alquist
)
FEBRUARY 18, 2011
An act to amend Sections 13401, 13402, 13403, 13404, 13405, 13406,
and 13407 of the Government Code, relating to state government.
LEGISLATIVE COUNSEL'S DIGEST
SB 617, as amended, Calderon. State government: financial
accountability.
(1) The Financial Integrity and State Manager's Accountability Act
of 1983 provides that state agency heads are responsible for the
establishment and maintenance of a system or systems of internal
accounting and administrative control within their agencies, as
specified.
This bill would require that effective, independent, and ongoing
monitoring of the internal accounting and administrative controls of
state agencies be included within that system or systems.
(2) The act requires that the Director of Finance establish a
general framework to guide state agencies in conducting internal
reviews of their systems of internal accounting and administrative
controls.
This bill would require that the Director of Finance also
establish a general framework of recommended practices to guide state
agencies in conducting active ongoing monitoring of processes for
internal accounting and administrative control.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 13401 of the Government Code is amended to
read:
13401. (a) The Legislature hereby finds the following:
(1) Active oversight processes, including regular and ongoing
monitoring processes, for the prevention and early detection of fraud
and errors in program administration are vital to public
confidence and the appropriate and efficient use of public
resources.
(2) Fraud and errors in state programs are more likely to occur
from a lack of effective systems of internal accounting and
administrative control in the state agencies when active monitoring
measures are not maintained to ensure that accounting and
administrative controls are functioning properly.
(3) Effective systems of internal accounting and administrative
control provide the basic foundation upon which a structure of public
accountability must be built.
(4) Effective systems of internal accounting and administrative
control are necessary to ensure that state assets and funds are
adequately safeguarded, as well as to produce reliable financial
information for the agency.
(5) Systems of internal accounting and administrative control are
necessarily dynamic and must be routinely monitored, continuously
evaluated, and, where necessary, improved.
(6) Reports regarding the continuing adequacy of the systems of
internal accounting and administrative control of each state agency
are necessary to enable the executive branch, the Legislature, and
the public to evaluate the agency's performance of its public
responsibilities and accountability.
(b) The Legislature declares it to be the policy of the State of
California that:
(1) Each state agency must maintain effective systems of internal
accounting and administrative control as an integral part of its
management practices.
(2) The systems of internal accounting and administrative control
of each state agency shall be evaluated on an ongoing basis through
regular and ongoing monitoring processes and, when detected,
weaknesses must be promptly corrected.
(3) All levels of management of the state agencies must be
involved in assessing and strengthening the systems of internal
accounting and administrative control to minimize fraud, errors,
abuse, and waste of government funds, however, key monitoring
processes should be structured to ensure the independence and
objectivity of persons tasked with such monitoring.
SEC. 2. Section 13402 of the Government Code is amended to read:
13402. State agency heads are responsible for the establishment
and maintenance of a system or systems of internal accounting,
administrative control, and effective, independent, and objective
ongoing monitoring of the internal accounting and administrative
controls within their agencies. This responsibility includes
documenting the system, communicating system requirements to
employees, and ensuring that the system is functioning as prescribed
and is modified, as appropriate, for changes in conditions.
SEC. 3. Section 13403 of the Government Code is amended to read:
13403. (a) Internal accounting and administrative controls, if
maintained and reinforced through effective monitoring systems and
processes, are the methods through which reasonable assurances can be
given that measures adopted by state agency heads to safeguard
assets, check the accuracy and reliability of accounting data,
promote operational efficiency, and encourage adherence to prescribed
managerial policies are being followed. The elements of a
satisfactory system of internal accounting and administrative
control, shall include, but are not limited to, the following:
(1) A plan of organization that provides segregation of duties
appropriate for proper safeguarding of state agency assets.
(2) A plan that limits access to state agency assets to authorized
personnel who require these assets in the performance of their
assigned duties.
(3) A system of authorization and recordkeeping procedures
adequate to provide effective accounting control over assets,
liabilities, revenues, and expenditures.
(4) An established system of practices to be followed in
performance of duties and functions in each of the state agencies.
(5) Personnel of a quality commensurate with their
responsibilities.
(6) An effective system of internal review.
(b) State agency heads shall follow these standards of internal
accounting and administrative control in carrying out the
requirements of Section 13402.
(c) Monitoring systems and processes are vital to the following:
(1) Ensuring that routine application of internal controls do not
diminish their efficacy over time.
(2) Providing timely notice and opportunity for correction of
emerging weaknesses with established internal controls.
(3) Facilitating public resources and other decisions by ensuring
availability of accurate and reliable information.
(4) Facilitating production of timely and accurate financial
reports.
(d) State agency heads shall implement systems and processes to
ensure the independence and objectivity of the monitoring of internal
accounting and administrative control as an ongoing activity in
carrying out the requirements of Section 13402.
SEC. 4. Section 13404 of the Government Code is amended to read:
13404. As used in this chapter:
(a) "Governor" means the Governor of California.
(b) "Controller" means the Controller of California.
(c) "Director" means the Director of Finance.
(d) "Attorney General" means the Attorney General of California.
(e) "Treasurer" means the Treasurer of California.
SEC. 5. Section 13405 of the Government Code is amended to read:
13405. (a) To ensure that the requirements of this chapter are
fully complied with, the head of each state agency that the director
determines is covered by this section shall, on a biennial basis but
no later than December 31 of each odd-numbered year, conduct an
internal review and prepare a report on the adequacy of the agency's
systems of internal accounting, administrative control, and
monitoring practices in accordance with the guide prepared by the
director pursuant to subdivision (d).
(b) The report, including the state agency's response to review
recommendations, shall be signed by the head of the agency and
addressed to the agency secretary, or the director for agencies
without a secretary. Copies of the reports shall be submitted to the
Legislature, the State Auditor, the Controller, the Treasurer, the
Attorney General, the Governor, the director, and to the State
Library where they shall be available for public inspection.
(c) The report shall identify any material inadequacy or material
weakness in an agency's systems of internal accounting and
administrative control that prevents the head of the agency from
stating that the agency's systems comply with this chapter. No later
than 30 days after the report is submitted, the agency shall provide
to the director a plan and schedule for correcting the identified
inadequacies and weaknesses, which shall be updated every six months
until all corrections are completed.
(d) The director, in consultation with the State Auditor and the
Controller, shall establish, and may modify from time to time as
necessary, a system of reporting and a general framework to guide
state agencies in conducting internal reviews of their systems of
internal accounting and administrative control.
(e) The director, in consultation with the State Auditor and the
Controller, shall establish, and may modify from time to time as
necessary, a general framework of recommended practices to guide
state agencies in conducting active, ongoing monitoring of processes
for internal accounting and administrative control.
SEC. 6. Section 13406 of the Government Code is amended to read:
13406. (a) The head of the internal audit staff of a state agency
or a division, as specified by the director, or, in the event there
is no internal audit function, a professional accountant, if
available on the staff, designated as the internal control person by
the head of the state agency or a division, shall receive and
investigate any allegation that an employee of the agency provided
false or misleading information in connection with the review of the
agency's systems of internal accounting and administrative control or
in connection with the preparation of the biennial report on the
systems of internal accounting, administrative control, and
monitoring practices.
(b) If, in connection with any investigation under subdivision
(a), the head of the internal audit staff or the designated internal
control person determines that there is reasonable cause to believe
that false or misleading information was provided, he or she shall
report in writing that determination to the head of the agency or the
division.
(c) The head of the agency or division shall review any matter
referred to him or her under subdivision (b), shall take such
disciplinary or corrective action as he or she deems necessary, and
shall forward a copy of the report, indicating therein the action
taken, to the director within 90 days of the date of the report.
SEC. 7. Section 13407 of the Government Code is amended to read:
13407. Because sound internal accounting and administrative
controls and the regular and ongoing monitoring of those internal
controls significantly inhibits waste of resources and thereby
creates savings, the director and agencies and divisions shall carry
out the provisions of this chapter by using existing resources.