BILL ANALYSIS                                                                                                                                                                                                    Ó


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                              UNFINISHED BUSINESS

          Bill No:  SB 617
          Author:   Calderon (D), et al.
          Amended:  9/8/11
          Vote:     21

          AYES:  Wright, Anderson, Berryhill, Calderon, Cannella, 
            Corbett, De León, Evans, Hernandez, Padilla, Strickland, 
            Wyland, Yee

           SENATE APPROPRIATIONS COMMITTEE  :  9-0, 05/09/11
          AYES:  Kehoe, Walters, Alquist, Emmerson, Lieu, Pavley, 
            Price, Runner, Steinberg

           SENATE FLOOR  :  37-0, 05/16/11
          AYES:  Alquist, Anderson, Berryhill, Blakeslee, Calderon, 
            Cannella, Corbett, Correa, De León, DeSaulnier, Dutton, 
            Emmerson, Evans, Fuller, Gaines, Hancock, Harman, 
            Hernandez, Huff, Kehoe, La Malfa, Leno, Lieu, Liu, 
            Lowenthal, Negrete McLeod, Padilla, Pavley, Price, Rubio, 
            Runner, Simitian, Steinberg, Vargas, Wolk, Wright, Yee
          NO VOTE RECORDED:  Strickland, Walters, Wyland

           ASSEMBLY FLOOR :  Not available

           SUBJECT  :    State government:  financial and administrative

           SOURCE  :     Author



                                                                SB 617

           DIGEST  :    This bill updates state government accounting 
          practices by requiring state agencies to implement ongoing 
          monitoring of internal accounting and financial controls.

           Assembly Amendments  (1) revise various provisions of the 
          Administrative Procedure Act, (2) require each state agency 
          to prepare a standardized regulatory impact analysis, as 
          specified, with respect to the adoption, amendment, or 
          repeal of a major regulation, as defined, that is proposed 
          on or after January 1, 2013, (3) require the that the 
          agency submit the analysis to the Department of Finance 
          (DOF) for review and comments, as specified, (4) require 
          the DOF, in consultation with other state entities, to 
          adopt regulations for conducting the standardized 
          regulatory impact analyses, as specified, (5) require, on 
          or before November 1, 2013, DOF to submit these adopted 
          regulations to the Senate and the Assembly Governmental 
          Organization Committee and publish the adopted regulations 
          in the adopted regulations in the State Administrative 
          Manuel, (6) add a co-author.

           ANALYSIS  :    Existing law establishes the Financial 
          Integrity and State Managers Accountability (FISMA) Act of 
          1983 to strengthen accounting practices and administrative 
          controls in state agencies. 

          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 


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            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, 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. 

          6.Adds a requirement that any state agency proposing to 
            adopt, amend or repeal a major regulation conduct an 
            economic impact analysis that assesses the proposed 
            regulation's impact on: 

                 The creation or elimination of jobs; 
                 The creation of new business or elimination of new 
                 The competitive advantages or disadvantages to 
               California businesses; 
                 The increase or decrease in investment in the 
                 The incentives for innovation in products, 
               materials or processes; and, 
                 The benefits to the health, safety and welfare of 

          1.Adds a requirement that the Department of Finance adopt, 
            by January 1, 2013, regulation describing the process for 
            agencies to conduct a standardized economic impact 

          2.Adds a requirement that agencies submit economic impact 
            analyses to the Department of Finance for review. 

          3.Adds a definition for major regulation as any proposed 
            adoption, amendment or repeal of a regulation that will 
            have an impact on California businesses in an amount 


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            exceeding $50 million. 

          According to the author's office, since enactment of FISMA 
          in 1983, both state and federal law regarding corporate 
          financial accounting has evolved but the laws requiring the 
          state to practice similar internal accountability and 
          controls have not.

          The author's office notes that FISMA's stated purpose is 
          clear - to promote sound state governmental operations via 
          a mandate for strong and effective systems of internal 
          accounting and agency administrative control.  However, in 
          the 28 years since FISMA was adopted, business and 
          financial accounting has witnessed significant change.  

          The author's office contends that Californians today are 
          keenly concerned for efficiency and accountability at all 
          levels of government however current state law has not yet 
          incorporated the lessons on improving ongoing financial 
          oversight which were gained over the past decade as a 
          result of the Enron financial collapse.  The author's 
          office notes that after the Enron financial debacle, 
          Congress passed the Sarbanes-Oxley "Corporate and Auditing 
          Accountability and Responsibility Act."  Among its reforms, 
          Sarbanes-Oxley introduced the element of ongoing monitoring 
          of internal accounting and administrative controls as vital 
          to ensure they remain fully effective in large 

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes   
          Local:  No

          According to the Assembly Appropriations Committee, this 
          bill will result in minor absorbable costs for state 
          government with possible savings on an ongoing basis. 

           SUPPORT  :   (Verified  9/8/11)

          California Asian Pacific Chamber of Commerce
          California Association of Bed & Breakfast Inns
          California Building Industry Association
          California Business Properties Association


                                                                SB 617

          California Chamber of Commerce
          California Construction and Industrial Materials 
          California Farm Bureau Federation
          California Grocers Association
          California Hotel & Lodging Association
          California Independent Oil Marketers Association
          California League of Food Processors
          California Manufacturers & Technology Association
          California New Car Dealers Association
          California Professional Association of Specialty 
          California Restaurant Association
          California Retailers Association
          Chemical Industry Council of California
          Consumer Specialty Products Association
          Industrial Environmental Association
          International Fragrance Association - North America
          Los Angeles Chamber of Commerce
          National Federation of Independent Business - California 
          Pacific Merchant Shipping Association
          Western States Petroleum Association

          PQ:nl  9/8/11   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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