BILL ANALYSIS Ó
AB 1035
Page 1
ASSEMBLY THIRD READING
AB 1035 (Muratsuchi)
As Amended May 16, 2013
Majority vote
LOCAL GOVERNMENT 8-0 APPROPRIATIONS 16-1
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|Ayes:|Achadjian, Levine, Alejo, |Ayes:|Gatto, Harkey, Bigelow, |
| |Bradford, | |Bocanegra, Bradford, Ian |
| |Gordon, Melendez, Mullin, | |Calderon, Campos, Eggman, |
| |Frazier | |Gomez, Hall, Holden, |
| | | |Linder, Pan, Quirk, |
| | | |Wagner, Weber |
| | | | |
|-----+--------------------------+-----+--------------------------|
| | |Nays:|Donnelly |
| | | | |
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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 or more 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; and,
c) Increases, from $5,000 to $10,000, for a local agency
with total revenue, in the prior year, of at least
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$250,000, as reported in the Controller's annual financial
reports;
2)Requires 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 for two consecutive years to forfeit an
amount that is double the amount of the forfeitures described
above.
3)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 or more consecutive years, that
the forfeitures described above shall be tripled. In this
case, the Controller must also conduct or cause to be
conducted an independent financial audit report, as specified.
4)Requires that the agency reimburse the Controller for the cost
of conducting the independent financial audit report described
above.
5)Provides that a forfeiture or payment made pursuant to current
law and this bill shall not relieve an agency of its
obligation to file its financial transaction reports.
6)Requires, rather than allows, the Controller to waive the
forfeiture requirements of current law and this bill upon
satisfactory showing of good cause.
7)Increases forfeiture amounts for JPAs that issue conduit
revenue bonds in a manner identical to those described above.
8)Makes technical and conforming changes.
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.
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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 20 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,
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.
7)Allows the Controller to waive the penalties for late filing
for all agencies (including JPAs that issue conduit revenue
bonds) upon a satisfactory showing of good cause.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, there is negligible fiscal impact.
COMMENTS : 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
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(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.
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 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.
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 for three or more 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 JPAs.
This bill is substantially similar to AB 276 (Alejo) of 2011,
which the Assembly approved on a 76-2 vote on June 1, 2011. AB
276 was subsequently amended to address an unrelated topic.
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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 financial
officer for the local agency) is probably not paying the
forfeiture amounts but, instead, the local agency is.
Analysis Prepared by : Angela Mapp / L. GOV. / (916) 319-3958
FN: 0000550