BILL ANALYSIS Ó AB 1035 Page 1 Date of Hearing: May 1, 2013 ASSEMBLY COMMITTEE ON APPROPRIATIONS Mike Gatto, Chair AB 1035 (Muratsuchi) - As Amended: April 4, 2013 Policy Committee: Local GovernmentVote:8-0 Urgency: No State Mandated Local Program: No Reimbursable: SUMMARY This bill increases forfeiture amounts for local agencies that do not 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 does not 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 does not file within 20 days after receipt of a written notice from the Controller. a) Doubles the existing penalties of $1,000 to $10,000, the penalties varying depending on the annual revenues of the local government. b) Requires, if a local agency does not file its report for two consecutive years, the specified fines shall be doubled. c) Requires, if a local agency does not file its report for three consecutive years, the specified fines shall be tripled. In these cases, the Controller must also conduct or cause to be conducted an independent financial audit report, as specified. 1)Requires that the agency reimburse the Controller for the cost of complying with the provisions of the bill. 2)Provides that an agency that makes a forfeiture or payment AB 1035 Page 2 pursuant to the provisions of the bill shall still file the financial transactions report. FISCAL EFFECT Negligible fiscal impact. COMMENTS 1)Purpose . According to the author, AB 1035 helps ensure that local agencies properly manage their finances and protect taxpayer dollars. The author argues this bill holds local agencies accountable for failing to report financial records to the State Controller, and applies the same penalty structure to all local agencies who fail to file their annual financial transactions reports with the State Controller. 2)Support . The California Association of Firefighters, the sponsor of the bill, argues it is important to maintain an accurate picture of a local agency's fiscal health to better inform budget decisions, especially given the difficult budget decisions facing local governments. The sponsor argues local agencies who do not file a financial transaction report or files late, compromises the local agency's fiscal stability. They also note that a troubled agency may slip into financial crisis without the aid of the State Controller or other audit experts to examine the financial condition and help the agency manage the ongoing fiscal crisis. 3)Background . 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 within 90 days after the close of each fiscal year. "Local agency," for purposes of these financial reports, includes any cities, counties, special districts 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 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 AB 1035 Page 3 data supplied by the Controller's Office. 4)Related legislation . AB 941 (Rendon), among its other provisions, contains very similar language as AB 1035. 5)Previous legislation . This bill is substantially similar to AB 276 (Alejo, 2011), which was subsequently amended to a different subject in the Senate. 6)There is no registered opposition to this bill. Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081