BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 117 HEARING: 7/3/13
AUTHOR: Cooley FISCAL: Yes
VERSION: 1/14/13 TAX LEVY: No
CONSULTANT: Ewing
INDEPENDENT MONITORING OF STATE AGENCIES' ACCOUNTING AND
ADMINISTRATIVE CONTROLS
Directs the Department of Finance to develop guidelines to
maintain independence and objectivity of staff charged with
assessing adequacy of internal accounting and
administrative controls.
Background and Existing Law
The Financial Integrity and State Manager's Accountability
Act (FISMA) of 1983 (AB 1840, Baker, 1983) established the
statutory responsibility of managers to implement and
monitor systems of internal accounting and administrative
control. Under FISMA, all levels of management are
responsible for assessing and strengthening internal
controls to minimize fraud, errors, abuse, and waste of
public funds. Internal control systems must include a
staffing and organizational plan, access controls for
accounting, recordkeeping and expenditure systems, and
systems of internal review.
FISMA requires the director of each department, every two
years, to prepare a report on the adequacy of internal
controls, including recommendations for improvement. Each
department director is required to submit those reports,
along with the director's response to any recommendations,
to the agency Secretary, which oversees the department, and
the Department of Finance. Copies are to be submitted to
the Legislature, the Governor, the Bureau of State Audits,
and the State Library where they are made available to the
public.
Where internal weaknesses are identified, departments are
required to provide a plan and schedule for corrective
action, with updated reporting every six months until
deficiencies are addressed (AB 1806, Committee on Budget,
AB 117 -- 1/14/13 -- Page 2
2006).
FISMA directs the Department of Finance, in consultation
with the Auditor and the Controller, to develop a framework
for departments to comply with the Act. In 2011, the
Legislature updated FISMA, calling for more active
monitoring systems and structures, greater independence and
objectivity among employees charged with that monitoring,
and periodic updates to the state's internal reporting
system and framework for internal reviews (SB 617,
Calderon, 2011).
Some officials are concerned that the existing system for
assessing the adequacy of internal controls is not
sufficiently rigorous and needs greater independence and
objectivity to preserve the public's interest.
Proposed Law
Assembly Bill 117 directs the Department of Finance, in
consultation with the Controller and State Auditor, to
establish guidelines on how to maintain the independence
and objectivity of persons charged with monitoring the
strength of internal controls, including staffing
requirements, the use of training programs, identifying
chain-of-command reporting relationships, and identifying
best practices in professional development, and independent
monitoring.
AB 117 also declares that monitoring systems are vital to
the development of recommendations to improve program
efficiency, through consolidation or restructuring, without
undermining effectiveness, quality or customer
satisfaction.
State Revenue Impact
Unknown.
Comment
Purpose of the bill . Assembly Bill 117 directs the
Department of Finance to update its guidelines under the
Financial Integrity and State Manager's Accountability Act
AB 117 -- 1/14/13 -- Page 3
to ensure that state employees charged with assessing the
adequacy of internal accounting and administrative controls
have the independence and objectivity needed to improve
internal controls and protect the public's interests. AB
117 directs the department to identify strategies,
including staffing, reporting and chain-of-command
provisions, training and use of best practices, to ensure
that administrative controls are appropriate and reliable
and periodic monitoring results in enhancements to those
controls when and where warranted.
Assembly Actions
Assembly Accountability and Administrative Review13-0
Assembly Appropriations 17-0
Assembly Floor 76-0
Support and Opposition (6/27/13)
Support : State Controller John Chiang.
Opposition : Unknown.