BILL ANALYSIS Ó
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UNFINISHED BUSINESS
Bill No: SB 617
Author: Calderon (D), et al.
Amended: 9/8/11
Vote: 21
SENATE GOVERNMENTAL ORGANIZATION COMM : 13-0, 04/12/11
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
accountability
SOURCE : Author
CONTINUED
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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
business;
The competitive advantages or disadvantages to
California businesses;
The increase or decrease in investment in the
state;
The incentives for innovation in products,
materials or processes; and,
The benefits to the health, safety and welfare of
Californians.
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
analysis.
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.
Background
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
organizations.
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
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California Chamber of Commerce
California Construction and Industrial Materials
Association
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
Contractors
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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