BILL ANALYSIS Ó SB 617 Page 1 SENATE THIRD READING SB 617 (Calderon) As Amended June 14, 2011 Majority vote SENATE VOTE :37-0 ADMINISTRATIVE REVIEW 11-0 APPROPRIATIONS 17-0 ----------------------------------------------------------------- |Ayes:|Dickinson, Garrick, |Ayes:|Fuentes, Harkey, | | |Block, Buchanan, Cook, | |Blumenfield, Bradford, | | |Silva, Grove, Huber, | |Charles Calderon, Campos, | | |Mitchell, Pan, Portantino | |Davis, Donnelly, Gatto, | | | | |Hall, Hill, Lara, | | | | |Mitchell, Nielsen, Norby, | | | | |Solorio, Wagner | |-----+--------------------------+-----+--------------------------| | | | | | ----------------------------------------------------------------- SUMMARY : This bill updates state government accounting practices by requiring state agencies to implement ongoing monitoring of internal accounting and financial controls. Specifically, this bill : 1)Enacts legislative findings that active oversight of accounting practices is critical to prevent and detect fraud and errors at state agencies and to ensure efficient use of public funds. 2)Requires that each state agency head develop processes to monitor internal accounting and financial controls. 3)Describes elements of a satisfactory system of internal accounting and financial control, including a plan of organization that assigns accounting duties, limits access to state agency assets to authorized personnel, describes recordkeeping procedures, and includes an effective system of internal review. 4)Requires that the head of each state agency conduct a biennial report on the adequacy of the agency's systems of internal accounting and monitoring practices and submit the report to the Legislature, State Auditor, State Controller, State Treasurer, SB 617 Page 2 the Attorney General, the director of the Department of Finance, the Governor and the State Library. 5)Allows the director of the Department of Finance, in consultation with the State Auditor and State Controller, to establish and modify recommended practices to guide state agencies in conducting ongoing monitoring of accounting practices. EXISTING LAW establishes the Financial Integrity and State Managers Accountability (FISMA) Act of 1983 to strengthen accounting practices and administrative controls in state agencies. FISCAL EFFECT : According to the Assembly Appropriations Committee, this bill will result in minor absorbable costs for state government with possible savings on an ongoing basis. COMMENTS : According to the author, FISMA requires updating, particularly in light of the Enron financial debacle of 2002, and subsequent federal legislation, the Sarbanes-Oxley "Corporate and Auditing Accountability and Responsibility Act." The federal act calls for ongoing monitoring of internal accounting and administrative controls to ensure organizations remain effective and efficient. The author argues that state law should be updated to reflect this new best practice in auditing. Analysis Prepared by : Mark Martin/ A. & A.R. / (916) 319-3600 FN: 0002041