BILL ANALYSIS �
AB 941
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Date of Hearing: May 15, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 941 (Rendon) - As Amended: April 23, 2013
Policy Committee: Local
GovernmentVote:9-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill expands the State Controller's authority to address
local government financial or administrative issues through
audits, investigations and technical assistance. Specifically,
this bill:
1)Authorizes the Controller, until January 1, 2019, to conduct
an audit or investigation if the Controller makes specified
findings 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, and if
the Controller determines that sufficient funds exist within
his or her budget to conduct the audit or investigation. This
section becomes inoperative on January 1, 2019.
2)Requires the Controller, before conducting an audit or
investigation, to consult with the local agency and make
written findings that explain the legal and factual basis
supporting the decision to conduct the audit or investigation.
The Controller must give the local agency a reasonable
opportunity to respond to these findings.
3)Requires any costs incurred by the Controller regarding an
investigation into financial reports related to redevelopment
project areas, as specified, to be borne by the county, city,
special district or JPA and to be a charge against any
unencumbered funds of the entity.
4)Authorizes the Controller, at the written request of the
governing body, chief administrative officer, or chief
executive of a local agency, to convene a local agency
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financial review committee (LAFRC) 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.
5)Increases the penalties for an officer of a local agency who
fails to file financial transactions report within 20 days of
receipt of a written notice from the Controller:
FISCAL EFFECT
The bill grants the Controller considerable flexibility, so
costs are likely to vary, but can be expected to be in the range
of about $1 million. Reimbursements from audited entities will
reduce the use of state resources. The bill specifically states
the Controller can undertake the new activities only if there
are sufficient funds existing within his or her budget. The
Controller has noted that since the problems of the City of Bell
and County of Modoc have come to light the office has been
flooded with complaints indicating the problems of these two
local governments are not isolated. If there are more
widespread problems and existing resources are used, this will
create cost pressure to augment the Controller's budget.
COMMENTS
1)Purpose . According to the author, the City of Bell was just
one example of how the failure of some local officials to
conduct the public's business transparently and responsibly
can lead to financial consequences that ultimately burden
other local agencies and the state. The author contends
circumstances such as those in the City of Bell are discovered
only when the local government entity is in danger of a major
financial crisis, such as defaulting on private debt.
2)Support . The Controller, the bill's sponsor, states since
uncovering the financial problems of the City of Bell and
County of Modoc, his office has received a number of
complaints, raising concerns a growing number of local
governments in California are facing severe financial
distress. The Controller contends AB 941 will give the
Controller's Office the authority to quickly respond to
concerns about mismanagement or violations of state law
affecting local, state and federal funding.
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According to the Controller, local agencies failing to comply
with laws requiring financial transaction reports is a
persistent problem. Each year, about $250,000 in penalties
are assessed on local agencies for filing their financial
disclosures late or failing to file at all. Since current
fines are low, these non-filers find it easier to pay the fine
than go through the trouble of complying with the law. In more
egregious cases, there are local government agencies that have
not complied for over three years.
3)Related legislation . AB 1035 (Muratsuchi) increases the
penalties on local agencies for failing to file their
financial reports with the Controller's Office. This bill is
on the Assembly floor.
4)Previous legislation . AB 941 is similar to SB 186 (Kehoe and
DeSaulnier) of 2012. SB 186 was held in the Assembly
Appropriations Committee.
5)There is no registered opposition to this bill.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081