Amended in Assembly April 1, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 941

Introduced by Assembly Member Rendon

February 22, 2013

An act to amend Sections 12463, 12464, 53890, and 53895 of, to add Article 6 (commencing with Section 12486) to Chapter 5 of Part 2 of Division 3 of Title 2 of, and to repeal Sections 53895.5 and 53895.7 of, the Government Code, relating to state and local government.

LEGISLATIVE COUNSEL’S DIGEST

AB 941, as amended, Rendon. Controller: reports.

(1) Existing law requires the Controller to annually compile and publish reports of the financial transactions of each county, city, and school district within the state, together with other matters he or she deems of public interest.

This bill would change the definition of a special district subject to the reporting requirements of the Controller to include a public entity, agency, or board provided for by a joint powers agreement that is separate from the parties to the agreement and is responsible for the administration of the agreement.

(2) Existing law provides that if the county, city, or district reports are not made in a specified manner, or there is reason to believe that the report is false, the Controller is required to appoint a qualified accountant to make an investigation and to obtain the information required for the annual report of financial transactions. Existing law provides that if a similar investigation is made of any county, city, or district for 2 successive years, then a copy of the results of those investigations shall be transmitted to the grand jury of the county investigated or in which the local agency investigated is situated. Existing law requires any costs incurred by the Controller in carrying out those audits to be paid by the local agency.

This bill would also authorize the Controller to perform an audit or investigation of any county, city, or special district, if the Controller has made findings, supported by documentation, that the local agency is not complying with the financial requirements in state law, state grant agreements, local charters, or local ordinances and require the Controller to prepare a report of the results of the audit or investigation and to file a copy with the local legislative body, as specified. This bill would require that if the results of those audits determine that the financial report filed by the local agency did not contain false, incomplete, or incorrect information, then the Controller shall waive the costs of the investigation, and would authorize the Controller to establish a payment program, as specified, to assist a local agency to pay for any costs that cannot be waived.

(3) Existing law provides that an officer of a local agency who fails or refuses to make and file his or her financial report within 20 days after receipt of a written notice of the failure from the Controller forfeits to the state a specified amount depending on the amount of total revenue of that local agency. Existing law raises these amounts in the case of a community redevelopment agency and a joint powers agency that issues conduit revenue bonds in the 2nd and 3rd consecutive year.

This bill would raise the forfeiture amounts for all local agencies, as specified. The bill would double these fines if the agency fails to submit the report to the Controller for 2 consecutive years, and would triple the fines if the agency fails to submit the report to the Controller for 3 consecutive years. This bill would remove other specified provisions that provide penalties for an agency that fails to submit a report.

This bill would also make technical, nonsubstantive changes and remove references to redevelopment agencies.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 12463 of the Government Code is
amended to read:

12463.  

(a) The Controller shall compile and publish reports
of the financial transactions of each county, city, and special
district, respectively, within this state, together with any other
matter he or she deems of public interest. The reports shall include
the appropriations limits and the total annual appropriations subject
to limitation of the counties, cities, and special districts. The reports
to the Controller shall be made in the time, form, and manner
prescribed by the Controller.

(b) Effective January 1, 2005, the Controller shall compile and
publish reports of the financial transactions of each county, city,
and special district pursuant to subdivision (a) on or before August
1, September 1, and October 1 respectively, of each year following
the end of the annual reporting period. The Controller shall make
data collected pursuant to this subdivision available upon request
to the Legislature and its agents, on or before April 1 of each year.

(c) The Controller shall annually publish, on the Internet Web
site of the Controller, reports of the financial transactions of each
school district within this state, together with any other matter he
or she deems of public interest. The reports shall include the
appropriations limit and the total annual appropriations subject to
limitation of the school district. The reports to the Controller shall
be made in the time, form, and manner prescribed by the Controller.

(d) As used in this section, the following terms have the
following meanings:

(1) “School district” means a school district as defined in Section
80 of the Education Code.

(2) “Special district” means any of the following:

(A) A special district as defined in Section 95 of the Revenue
and Taxation Code.

(B) A public entity, agency, commission, or board provided for
by a joint powers agreement pursuant to Chapter 5 (commencing
with Section 6500) of Division 7 of Title 1 that is separate from
the parties to the agreement and is responsible for the
administration of the agreement.

(C) A nonprofit corporation that is any of the following:

(i) Was formed in accordance with the provisions of a joint
powers agreement to carry out functions specified in the agreement.

(ii) Issued bonds, the interest on which is exempt from federal
income taxes, for the purpose of purchasing land as a site for, or
purchasing or constructing, a building, stadium, or other facility,
that is subject to a lease or agreement with a local public entity.

(iii) Is wholly owned by a public agency.

SEC. 2.  

Section 12464 of the Government Code is amended
to read:

12464.  

(a) If the county, city, or special district reports are not
made in the time, form, and manner required or there is reason to
believe that a report is false, incomplete, or incorrect, the Controller
shall appoint a qualified accountant to make an investigation and
to obtain the information required. The accountant appointed shall
report to the Controller the results of investigation, and a copy
shall be filed with the legislative body of the county, city, or special
district, the accounts of which were investigated. If a similar
investigation has to be made of the accounts of any county, city,
or special district, for two successive years, a certified copy of the
results of the investigation last made shall be transmitted to the
grand jury of the county that was investigated or in which the city
or special district investigated is situated, or, if the district is
situated in more than one county, in the county in which any
portion of the special district is situated.

(b) (1) If the Controller has made findings pursuant to
subdivision (c) that a county, city, or special district is not
complying with the financial requirements in state law, state grant
agreements, local charters, or local ordinances, he or she may audit
or investigate the issue if he or she determines that sufficient funds
exist within his or her budget to conduct the audit or investigation.

(2) The Controller shall prepare a report of the results of the
audit or investigation that shall include detailed documentation of
the material basis for the findings included in the audit or
investigation. A copy of the report shall be filed with the legislative
body of the city, county, or special district subject to the audit or
investigation. A finding of illegal acts or fraud shall be
communicated to the appropriate authorities, including the county
grand jury.

(c) (1) Prior to an audit or investigation being conducted
pursuant to subdivision (b), the Controller, after consultation with
the local agency, shall make written findings that explain the legal
and factual basis supporting the decision to conduct the audit or
investigation and the Controller shall give the local agency a
reasonable opportunity to respond to these findings.

(2) (A) In cases in which the Controller seeks to audit or
investigate compliance with the financial requirements in local
charters or local ordinances, the Controller shall first share with
the local agency documentation of evidence relied upon in
determining the need for the audit or investigation and provide the
local agency the opportunity to conduct its own audit or
investigation of the matter in a reasonable period of time. If the
local agency elects to conduct an audit or investigation, the local
agency shall provide the results to the Controller promptly upon
completion. If the Controller subsequently proceeds with his or
her own audit or investigation, he or she shall make specific written
findings concerning the evidence relied upon in determining the
need for the audit or investigation and confirming that each issue
to be audited or investigated has not been or is not likely to be
addressed by local means, which may include, but are not limited
to, a grand jury or district attorney.

(B) The Controller shall not audit or investigate compliance
with the financial requirements in local charters or local ordinances
if the matter involves a pending policy or administrative decision,
such as adoption of a budget, negotiations of labor or other
contracts, or a pending decision on an unpaid claim. The Controller
shall not audit or investigate the matter until a final decision has
been adopted by the local agency.

(C) The Controller shall not audit or investigate compliance with
the financial requirements of local charters or local ordinances if
the matter is the subject of actual or completed litigation.

(3) For purposes of this subdivision, documentation means a
writing, photograph, photostat, email or facsimile transmission,
or any other means of recording upon a tangible thing in any form
of communication or representation, including letters, words,
pictures, sounds, or symbols, or combinations thereof, or a record
thereby created, regardless of the manner in which the record has
been stored.

(4) The Controller shall not initiate or conduct an audit or
investigation pursuant to subdivision (b) or (c) of a local agency
that falls within the date the local agency has initiated the neutral
evaluation process, pursuant to Article 5 (commencing with Section
53760) of Chapter 4 of Part 1 of begin delete Title 2, end delete begin insert Division 2 of Title 5, end insert and
the date that process has been completed.

(d) (1) Any costs incurred by the Controller pursuant to
subdivision (a), including contracts with, or employment of,
certified public accountants or public accountants, in compiling a
financial report pursuant to Section 12463 shall be borne by the
county, city, or special district, and shall be a charge against any
unencumbered funds of the county, city, or special district. Any
forfeiture imposed by Section 53895 may be offset up to the total
costs incurred by the Controller. Any remaining balance shall be
forfeited in accordance with Sections 53895 and 53895.5. Any
costs incurred by the Controller in excess of the forfeiture imposed
shall be a charge against any unencumbered funds of the county,
city, or special district.

(2) If an investigation conducted pursuant to subdivision (a)
determines that the financial report filed by the county, city, or
special district did not contain materially false, incomplete, or
incorrect information, the Controller shall waive the costs of the
investigation. The Controller may establish a payment program,
with interest, for up to five years to assist a local agency to pay
for the costs that cannot be waived.

SEC. 3.  

Article 6 (commencing with Section 12486) is added
to Chapter 5 of Part 2 of Division 3 of Title 2 of the Government
Code, to read:

 

Article 6.  Voluntary Local Agency Financial Review

 

12486.  

(a) At the written request of the governing body, chief
administrative officer, or chief executive of a local agency, the
Controller may convene a local agency financial review committee
to provide assistance to the local agency in reviewing and assessing
its financial condition and related internal controls to avert or
manage a serious financial problem.

(b) The request shall include a description of the factors that
warrant the need for review and assessment.

(c) The local agency shall reimburse the Controller for any costs
incurred by the Controller in conducting a review pursuant to this
section. The Controller may establish a payment program for up
to five years, with interest.

(d) A local agency financial review committee shall be chaired
by the Controller and both state and local government
representatives selected by the Controller. The Controller shall
allow at least two local government representatives to serve on the
committee, selected as follows:

(1) If the local agency is a city, representatives selected by the
League of California Cities.

(2) If the local agency is a county, representatives selected by
the California State Association of Counties.

(3) If the local agency is a special district, representatives
selected by the California Special Districts Association.

(e) The Controller shall use the services of a consultant that has
extensive financial management and accounting experience with
local agencies in the state to assist the local agency financial review
committee in evaluating and assisting the local agency.

(f) In consultation with the local agency requesting assistance,
the local agency financial review committee shall provide a written
report to the local agency, which may include its recommendations
and an assessment of the local agency’s financial practices and
conditions and internal controls related to its financial condition.

(g) Assistance provided pursuant to this section shall not include
direct financial payments or loans to local agencies that are not
otherwise authorized by statute.

(h) If the local agency notifies the Controller that it has initiated
the neutral evaluation process pursuant to Article 5 (commencing
with Section begin delete 53780 end delete begin insert 53760 end insert ) of Chapter 4 of Part 1 of begin delete Title 2, end delete
begin insert Division 2 of Title 5, end insert the Controller shall suspend all activities
under this section, unless the local agency requests that the
activities be continued. The local agency shall be liable for costs
under subdivision (c).

12487.  

For purposes of this article, “local agency” means a
city, county, city and county, or special district.

SEC. 4.  

Section 53890 of the Government Code is amended
to read:

53890.  

As used in this article, “local agency” means any city,
county, and special district required to furnish financial reports
pursuant to Section 12463.

SEC. 5.  

Section 53895 of the Government Code is amended
to read:

53895.  

(a) An officer of a local agency who fails or refuses to
make and file his or her report within 20 days after receipt of a
written notice of the failure from the Controller shall forfeit to the
state:

(1) Two thousand five hundred dollars ($2,500), in the case of
a local agency with total revenue, in the prior year, of less than
one hundred thousand dollars ($100,000), as reported in the
Controller’s annual financial reports.

(2) Five thousand five hundred dollars ($5,500) in the case of
a local agency with total revenue, in the prior year, of at least one
hundred thousand dollars ($100,000) but less than two hundred
fifty thousand dollars ($250,000), as reported in the Controller’s
annual financial reports.

(3) Ten thousand dollars ($10,000) in the case of a local agency
with total revenue, in the prior year, of at least two hundred fifty
thousand dollars ($250,000), as reported in the Controller’s annual
financial reports.

(b) (1) Upon the request of the Controller, the Attorney General
shall prosecute an action for the forfeiture in the name of the people
of the State of California.

(2) Upon a satisfactory showing of good cause, the Controller
may waive the penalties for late filing provided in this section.

(c) If an officer of a local agency fails or refuses to make and
file his or her report within 20 days after receipt of a written notice
pursuant to subdivision (a) for two consecutive years, the forfeiture
assessed pursuant to paragraphs (1), (2), and (3) of subdivision (a)
in the second year shall be doubled.

(d) If an officer of a local agency fails or refuses to make and
file his or her report within 20 days after receipt of a written notice
pursuant to subdivision (a) for three consecutive years, the
forfeiture or fine assessed pursuant to paragraphs (1), (2), and (3)
of subdivision (a) in the third year shall be tripled.

begin insert

(e) An agency that is assessed a forfeiture pursuant to this
section shall still be required to file the report pursuant to Section
53891.

end insert

SEC. 6.  

Section 53895.5 of the Government Code is repealed.

SEC. 7.  

Section 53895.7 of the Government Code is repealed.