Amended in Assembly April 23, 2013

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, begin delete 12464, end delete begin insert 12463.3, end insert 53890, begin delete and end delete 53895 begin insert , and 53895.7 end insert of, begin insert to amend, repeal and add end insert begin insert Section 12464 of, end insert to add Article 6 (commencing with Section 12486) to Chapter 5 of Part 2 of Division 3 of Title 2 of, and to repeal begin delete Sections end delete begin insert Section end insert 53895.5 begin delete and 53895.7 end delete 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 begin insert , including redevelopment agency reports, end insert 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 begin insert , until January 1, 2019, end insert authorize the Controller to perform an audit or investigation of any county, city, begin delete or end delete special district, begin insert or community redevelopment agency, end insert 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 begin delete remove other specified provisions that provide end delete begin insert increase end insert penalties for an agency that fails to submit a report begin insert , as specified end insert .

This bill would also make technical, nonsubstantive begin insert , and conforming end insert changes begin delete and remove references to redevelopment agencies end delete .

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 begin delete and is responsible for the
administration of the agreement end delete .

(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.

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Section 12463.3 of the end insert begin insert Government Code end insert begin insert is amended
to read: end insert

12463.3.  

On or before May 1 of each year, the Controller shall
compile and publish annually reports of the financial transactions
of each begin delete community redevelopment end delete agency created pursuant to
Division 24 (commencing with Section 33000) of the Health and
Safety Code. The Controller shall make the data available to the
Legislature and its agents upon request, on or before April 1 of
each year. The Controller shall publish this information for each
project area of each begin delete redevelopment end delete agency. The reports shall be
made in the time, form, and manner prescribed by the Controller,
after consultation with the Department of Housing and Community
Development and the advisory committee created pursuant to
Section 12463.1.

begin delete SEC. 2. end delete
begin insert SEC. 3. end insert   

Section 12464 of the Government Code is amended
to read:

12464.  

(a) If the begin insert reports of a end insert county, city, begin delete or end delete special district
begin delete reports end delete begin insert , or agency, created pursuant to Division 24 (commencing
with Section 33000) of the Health and Safety Code end insert 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, begin delete or end delete special
district, begin insert or agency, end insert the accounts of which were investigated. If a
similar investigation has to be made of the accounts of any county,
city, begin delete or end delete special district, begin insert or agency, end insert 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 begin delete or end delete begin insert , end insert special district begin insert , or agency end insert investigated is
situated, or, if the begin insert special end insert district begin insert or agency end insert is situated in more
than one county, in the county in which any portion of the special
district begin insert or agency end insert 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 Division 2 of Title 5, 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 begin insert or 12463.3 end insert shall be
borne by the county, city, begin delete or end delete special district, begin insert or agency end insert and shall
be a charge against any unencumbered funds of the county, city,
begin delete or end delete special district begin insert , or agency end insert . 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 begin delete 53895.5 end delete begin insert 53895.7 end insert . Any costs incurred by the
Controller in excess of the forfeiture imposed shall be a charge
against any unencumbered funds of the county, city, begin delete or end delete special
district begin insert , or agency end insert .

(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.

begin insert

(e) This section shall remain in effect only until January 1, 2019,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2019, deletes or extends that date.

end insert

begin insert

begin insert SEC. end insert begin insert 4. end insert   

end insert

begin insert Section 12464 is added to the end insert begin insert Government Code end insert begin insert , to
read: end insert

begin insert

begin insert 12464. end insert   

(a) If the reports of the county, city, special district,
or agency created pursuant to Division 24 (commencing with
Section 33000) of the Health and Safety Code 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 the investigation, and a copy
shall be filed with the legislative body of the county, city, special
district, or agency the accounts of which were investigated. If a
similar investigation has to be made of the accounts of any county,
city, special district, or agency 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, special district, or agency investigated is
situated, or, if the special district or agency is situated in more
than one county, in the county in which any portion of the special
district or agency is situated.

(b) 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 or 12463.3 shall be borne by the county,
city, special district, or agency and shall be a charge against any
unencumbered funds of the county, city, special district, or agency.
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 53895.7. Any
costs incurred by the Controller in excess of the forfeiture imposed
shall be a charge against any unencumbered funds of the county,
city, special district, or agency.

(c) This section shall become operative on January 1, 2019.

end insert

begin delete SEC. 3. end delete
begin insert SEC. 5. end insert   

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 53760) of Chapter 4 of Part 1 of Division 2 of Title
5, 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.

begin delete SEC. 4. end delete
begin insert SEC. 6. end insert   

Section 53890 of the Government Code is amended
to read:

53890.  

As used in this article, “local agency” means any city,
county, begin delete and end delete special district begin insert , and agency, created pursuant to
Division 24 (commencing with Section 33000) of the Health and
Safety Code, end insert required to furnish financial reports pursuant to
Section 12463 begin insert or 12463.3 end insert .

begin delete SEC. 5. end delete
begin insert SEC. 7. end insert   

Section 53895 of the Government Code is amended
to read:

53895.  

(a) An officer of a local agency begin insert to which Section
53895.7 does not apply end insert 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.

begin delete

(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.

end delete begin delete

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

end delete begin delete

(c)

end delete

begin insert (b) end insert  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
begin delete assessed end delete pursuant to begin delete paragraphs end delete begin insert paragraph end insert (1), (2), begin delete and end delete begin insert or end insert (3) of
subdivision (a) begin delete in the second year end delete shall be doubled.

begin delete

(d)

end delete

begin insert (c) end insert  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 begin insert or more end insert consecutive years,
the forfeiture begin delete or fine assessed end delete pursuant to begin delete paragraphs end delete begin insert paragraph end insert
(1), (2), begin delete and end delete begin insert or end insert (3) of subdivision (a) begin delete in the third year end delete shall be
tripled.

begin delete

(e)

end delete

begin insert (d) end insert   begin delete An end delete begin insert Notwithstanding any amount forfeited pursuant to
subdivision (a), (b), or (c), the end insert agency begin delete that is assessed a forfeiture
pursuant to this section end delete shall begin delete still end delete be required to file the report
pursuant to Section 53891.

begin insert

(e) (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.

end insert begin insert

(2) Upon satisfactory showing of good cause to the Controller,
the forfeiture provided in this section shall not be imposed.

end insert

begin delete SEC. 6. end delete
begin insert SEC. 8. end insert   

Section 53895.5 of the Government Code is repealed.

begin delete

SEC. 7.  

Section 53895.7 of the Government Code is repealed.

end delete

begin insert

begin insert SEC. 9. end insert   

end insert

begin insert Section 53895.7 of the end insert begin insert Government Code end insert begin insert is amended
to read: end insert

53895.7.  

(a) For the purpose of this section, “agency” means
any agency or entity formed pursuant to the Joint Exercise of
Powers Act (Article 1 (commencing with Section 6500) of Chapter
5 of Division 7 of Title 1) that issues conduit revenue bonds.

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

(1)  begin delete One end delete begin insert Two end insert thousand begin insert five hundred end insert dollars begin delete ($1,000) end delete begin insert ($2,500) end insert
in the case of an 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)  begin delete Two end delete begin insert Five end insert thousand five hundred dollars begin delete ($2,500) end delete begin insert ($5,500) end insert
in the case of an 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)  begin delete Five end delete begin insert Ten end insert thousand dollars begin delete ($5,000) end delete begin insert ($10,000) end insert in the case of
an 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.

(c) An officer of an 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 in the second begin delete or more end delete consecutive
year shall forfeit to the state:

(1)  begin delete Two end delete begin insert Five end insert thousand dollars begin delete ($2,000) end delete begin insert ($5,000) end insert in the case of
an 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)  begin delete Five end delete begin insert Eleven end insert thousand dollars begin delete ($5,000) end delete begin insert ($11,000) end insert in the case
of an 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)  begin delete Ten end delete begin insert Twenty end insert thousand dollars begin delete ($10,000) end delete begin insert ($20,000) end insert in the case
of an 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.

(d) In the case of an agency that fails or refuses to make and
file its report within 20 days after receipt of a written notice of the
failure from the Controller begin delete in the third end delete begin insert for three end insert or more
consecutive begin delete year, the end delete begin insert years, the forfeiture pursuant to paragraph
(1), (2), or (3) of subdivision (b) shall be tripled. The end insert Controller
shall conduct, or cause to be conducted, an independent financial
audit report consistent with the requirements of Section 6505. The
agency shall reimburse the Controller for the cost of complying
with this subdivision.

(e) (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 begin delete cause, end delete begin insert cause to end insert the
Controller begin delete may waive the penalties for late filing end delete begin insert , the forfeiture end insert
provided in this section begin insert shall not be imposed end insert .

(f)  begin delete An end delete begin insert Notwithstanding any amount forfeited pursuant to
subdivision (a), (b), (c), or (d) the end insert agency begin delete that makes a forfeiture
or payment pursuant to this section end delete shall begin delete still file the report end delete begin insert be end insert
required begin insert to file the report required end insert pursuant to Section 53891.