BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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          |SENATE RULES COMMITTEE            |                        AB 117|
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                                       CONSENT


          Bill No:  AB 117
          Author:   Cooley (D)
          Amended:  As introduced
          Vote:     21

           
           SENATE GOVERNMENTAL ORGANIZATION COMMITTEE  :  10-0, 6/11/13
          AYES:  Wright, Nielsen, Calderon, Cannella, Correa, De León,  
            Galgiani, Hernandez, Lieu, Padilla
          NO VOTE RECORDED:  Berryhill

           SENATE GOVERNANCE & FINANCE COMMITTEE  :  7-0, 7/3/13
          AYES:  Wolk, Knight, Beall, DeSaulnier, Emmerson, Hernandez, Liu

           SENATE APPROPRIATIONS COMMITTEE :  Senate Rule 28.8
           
           ASSEMBLY FLOOR  :  76-0, 4/25/13 (Consent) - See last page for  
            vote


           SUBJECT  :    State government:  financial and administrative  
          accountability

          SOURCE  :     Author


           DIGEST  :    This bill makes specified legislative findings and  
          directs the Department of Finance (DOF) to establish guidelines  
          for agencies to ensure proper internal monitoring, accounting,  
          and administrative controls within these agencies.

           ANALYSIS  :    Under the Financial Integrity and State Manager's  
          Accountability Act of 1983 (FISMA), the Legislature declares it  
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          to be the policy of the State of California that, among other  
          things, each state agency must maintain effective systems of  
          internal accounting and administrative control as an integral  
          part of its management practices, and that those systems be  
          evaluated on an ongoing basis through regular and ongoing  
          monitoring processes. 

          This bill makes legislative findings and directs DOF to  
          establish guidelines for agencies to ensure proper internal  
          monitoring, accounting, and administrative controls within these  
          agencies.  Specifically, this bill:

          1.Provides that the elements of a satisfactory system of  
            internal accounting and administrative control, shall  
            additionally include submittal, when appropriate, of  
            recommendations for how greater efficiencies in support of an  
            agency's mission may be attainable via the consolidation or  
            restructuring of potentially duplicative or inefficient  
            processes, programs, or practices where it appears such  
            changes may be achieved without undermining program  
            effectiveness, quality, or customer satisfaction. 

          2.Requires DOF to put in place guidelines for state agency  
            managers on how the role of independent monitor should be  
            staffed, structured, and its reporting function standardized  
            so it fits within an efficient and normalized agency  
            administrative framework.

           Background
           
          FISMA 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  

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          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.

          FISMA directs the Department of Finance, in consultation with  
          the State Auditor and the State 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.

          Comments
           
          According to the author's office, recent events have highlighted  
          and heightened the importance of continued progress in  
          strengthening the soundness of fiscal auditing and transparent  
          accountability of state operations.  This bill seeks to create  
          stronger guidelines for agencies' internal monitors ensuring  
          that the state follows the same best practices as required in  
          the private sector and gives an additional check on state  
          finances to ensure public funds are wisely spent.

          The author's office adds that this bill accomplishes this by  
          directing DOF to develop guidelines ensuring agency monitors are  
          independent and objective.  This includes the consideration of  
          how an independent monitor should be staffed, structured, and  
          utilized in a standardized way to ensure efficiency and fit  
          within an agencies normal administrative framework.

          Additionally, this bill directs state agency heads use financial  
          reports that include recommendations on how an agency may  
          achieve greater efficiencies without undermining its mission or  
          customer satisfaction.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    

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          Local:  No

           SUPPORT  :   (Verified  8/13/13)

          State Controller John Chiang

           ASSEMBLY FLOOR  :  76-0, 4/25/13
          AYES:  Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,  
            Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown,  
            Buchanan, Ian Calderon, Campos, Chau, Chávez, Chesbro, Conway,  
            Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox, Frazier,  
            Beth Gaines, Garcia, Gatto, Gomez, Gordon, Gorell, Gray,  
            Grove, Hagman, Hall, Harkey, Roger Hernández, Holden, Jones,  
            Jones-Sawyer, Levine, Linder, Logue, Maienschein, Mansoor,  
            Medina, Melendez, Mitchell, Morrell, Mullin, Muratsuchi,  
            Nestande, Olsen, Pan, Patterson, Perea, V. Manuel Pérez,  
            Quirk, Quirk-Silva, Rendon, Salas, Skinner, Stone, Ting,  
            Torres, Wagner, Waldron, Weber, Wieckowski, Wilk, Williams,  
            Yamada, John A. Pérez
          NO VOTE RECORDED:  Cooley, Lowenthal, Nazarian, Vacancy


          MW:nl  8/13/13   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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