BILL ANALYSIS Ó
AB 1035
Page 1
Date of Hearing: April 10, 2013
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
K.H. "Katcho" Achadjian, Chair
AB 1035 (Muratsuchi) - As Amended: April 4, 2013
SUBJECT : Local agencies: financial reports.
SUMMARY : Increases forfeiture amounts for local agencies that
fail to file their annual financial transaction reports with the
State Controller's Office in a timely manner, and requires the
Controller to conduct an independent financial audit report for
an agency that fails to file for three consecutive years.
Specifically, this bill :
1)Increases the forfeiture amounts for an officer of a local
agency, except a joint powers agency (JPA) that issues conduit
revenue bonds, 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, as follows:
a) Increases, from $1,000 to $2,500, for a local agency
with total revenue, in the prior year, of less than
$100,000, as reported in the Controller's annual financial
reports;
b) Increases, from $2,500 to $5,000, for a local agency
with total revenue, in the prior year, of at least $100,000
but less than $250,000, as reported in the Controller's
annual financial reports;
c) Increases, from $5,000 to $10,000, for a local agency
with total revenue, in the prior year, of at least
$250,000, as reported in the Controller's annual financial
reports;
d) Requires, 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 for two consecutive
years, that the fines specified above shall be doubled in
the second year; and,
e) Requires, 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 for three consecutive
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years, that the fines specified above shall be tripled in
the third year. In this case, the Controller must also
conduct or cause to be conducted an independent financial
audit report, as specified.
2)Requires that the agency reimburse the Controller for the cost
of complying with the provisions of the bill.
3)Provides that an agency that makes a forfeiture or payment
pursuant to the provisions of the bill shall still file the
financial transactions report.
EXISTING LAW :
1)Requires the officer of each local agency who has charge of
the financial records to furnish to the Controller a report of
all the financial transactions of the local agency during the
next preceding fiscal year.
2)Defines local agency to mean "any city, county, any district,
and any community redevelopment agency required to furnish
financial reports" pursuant to specified sections of existing
law.
3)Requires the report to be furnished within 90 days after the
close of each fiscal year and to be in the form required by
the Controller
4)Requires the report to contain specified contents and requires
the report to contain additional information for cities.
5)Provides that an officer of a local agency who fails or
refuses to make and file his or her report within twenty days
after receipt of a written notice of the failure from the
Controller shall forfeit to the state:
a) $1,000 in the case of a local agency with total revenue,
in the prior year, of less than $100,000, as reported in
the Controller's annual financial reports;
b) $2,500 in the case of a local agency with total revenue,
in the prior year, of at least $100,000 but less than
$250,000, as reported in the Controller's annual financial
reports; and,
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c) $5,000 in the case of a local agency with total revenue,
in the prior year, of at least $250,000, as reported in the
Controller's annual financial reports.
6)Provides for similar forfeiture amounts for JPAs that issue
conduit revenue bonds, and additionally requires fines to be
doubled in the second or more consecutive year of
non-compliance and requires an independent financial audit by
the Controller in the third or more consecutive year of
non-compliance.
FISCAL EFFECT : Unknown
COMMENTS :
1)This bill increases the forfeiture amounts for local agencies
that fail to file their annual financial transaction reports
with the Controller, and requires the Controller to conduct an
independent financial audit report if an agency fails to
report for three consecutive years. According to the author,
"The current penalty amounts were established in 1990 by SB
822 (Chapter No. 1608). However, in some instances, local
agencies falling behind in their mandatory filings have chosen
to pay the fines rather than file the required reports because
the fines are relatively low and have not changed for over 23
years. By not complying with existing law, a local agency
that does not file a financial transaction report or files
their report late, compromises the fiscal stability of that
local agency and may cause a troubled agency to slip into
financial crisis." This bill is sponsored by the California
Professional Firefighters.
2)Existing law requires the officer of each local agency, who
has charge of the financial records of the agency, to furnish
to the Controller a report of all the financial transactions
of the local agency during the next preceding fiscal year,
within 90 days of the close of each fiscal year. "Local
agency," for purposes of these financial reports, includes any
city, county, district, and specified community redevelopment
agencies. Under current law, the State Controller's Office
can assess penalties of up to $5,000 for local governmental
agencies that file late annual financial transactions reports
or agencies who fail to file the report at all. The
Controller's Office maintains a list of those that do not
file, and those that file late, including cities and special
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districts. Eleven local agencies failed to file their annual
transactions reports between 2008 and 2011, and eighteen local
agencies failed to file for fiscal year 2011-12, according to
data supplied by the Controller's Office.
3)According to the sponsor, in some cases local agencies have
been content to pay the fines rather than file the required
reports. This bill aims to stop this practice by increasing
penalties to a more meaningful level. In addition to
increasing the amount of fines in existing law, this bill also
doubles these fines if the agency fails to submit the report
to the Controller's Office for two consecutive years, and
triples the fines if the agency fails to report after three
consecutive years. After the third violation, this bill
requires the Controller to also conduct an independent
financial audit report of that agency. The increased
penalties apply to cities, counties, special districts, and
most JPAs.
However, this bill specifically exempts JPAs that issue
conduit revenue bonds. While a separate section of law
governs those entities and the forfeiture amounts they must
pay when they fail to file, the Committee may wish to consider
whether it is appropriate to impose increased forfeiture
amounts on all JPAs except those that issue conduit revenue
bonds.
4)This bill is substantially similar to AB 276 (Alejo, 2011),
which this Committee approved on a vote of 8-0 on April 27,
2011. AB 276 was subsequently amended to address an unrelated
topic.
5)Both this bill and AB 941 (Rendon), which has been referred to
this Committee, change the forfeiture amounts local agencies
must pay for failing to file their financial reports with the
Controller's Office. The author and sponsor may wish to
consider chaptering amendments to resolve this conflict.
6)Support arguments : This bill gives local agencies greater
incentives to comply with current-law reporting requirements,
thereby ensuring appropriate safeguards over taxpayer dollars
and better management of local agency finances.
Opposition arguments : This bill might not solve the problem
of non-reporting, because the person failing to file (the
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financial officer for the local agency) is probably not paying
the forfeiture amounts but, instead, the local agency is.
REGISTERED SUPPORT / OPPOSITION :
Support
California Professional Firefighters [SPONSOR]
California State Council of the Service Employees International
Union
California Labor Federation
Opposition
None on file
Analysis Prepared by : Angela Mapp / L. GOV. / (916) 319-3958