BILL ANALYSIS �
AB 1237
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Date of Hearing: April 17, 2013
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
K.H. "Katcho" Achadjian, Chair
AB 1237 (Garcia) - As Amended: April 1, 2013
SUBJECT : Local government finance.
SUMMARY : Establishes the Committee on City Accounting
Procedures, specifies the membership of the Committee, requires
the State Controller, in consultation with the Committee, to
prescribe uniform accounting and reporting procedures for
cities, and establishes the City Budget Act. Specifically, this
bill :
1)Establishes the Committee on City Accounting Procedures
(Committee), consisting of
10 members appointed by the Controller, including:
a) Four city finance officers;
b) Three city managers, one from each the northern,
southern, and central California region;
c) One city representative from a rural area;
d) One county auditor-controller; and,
e) One member appointed by the California Society of
Certified Public Accountants.
2)States that the members of the Committee shall serve without
compensation, but shall be reimbursed for their necessary
traveling and other expenses incurred in attending the
meetings of the Committee, to be paid for by the city or
county of which the member is an officer.
3)Requires the Controller to designate a member of the Committee
to serve as chairperson, and specifies that the Committee
shall meet at the call of the chairperson, with written notice
of the meeting given at least 10 calendar days prior to the
date of the meeting.
4)Requires the Controller, in collaboration with the Committee,
to prescribe uniform accounting and reporting procedures that
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conform to generally accepted accounting procedures for
cities.
5)Requires the Controller to promulgate any rules, regulations,
and classification deemed necessary to establish these
accounting procedures to secure standards of uniformity among
various cities.
6)Requires the procedures to be adopted after consultation with
the Committee by a majority vote of the total membership of
the Committee.
7)Allows the Committee to conduct the vote by mail, at the
discretion of the chairperson, unless one or more members
request a meeting for the purpose of voting.
8)Establishes the "City Budget Act" which details specific
content and format that must be included in the budget and the
procedures that city councils must follow to adopt an annual
budget.
9)Requires the Controller to prescribe the forms to be used in
presenting required information in the budget document, after
consultation with the Committee, and allows any city to add to
the information required, subject to review and approval by
the Controller.
10)Defines adopted budget to mean the budget document formally
approved by the city council after required public hearing and
deliberation on the recommended budget, and requires the
adopted budget to include the following:
a) Estimated or actual amounts of specified fund balances
and financing sources;
b) Data for each budget unit to include for each position
classification, the salary rate or range and the total
allocated positions approved by the council;
c) Budget amount, at a minimum within the object of capital
assets, to be reported for land, structures and improvement
for each project, equipment, infrastructure, and intangible
assets;
d) Additional financing sources to be classified by source,
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specified in format for comparative purposes; and,
e) A schedule showing the managerial budget of each service
activity financed by a proprietary fund, expected
operations of the activity for revenues, expenses, and
reserves.
11)Requires the funding sources to equal the financing uses, in
both the adopted and final budget.
12)Allows the budget to contain appropriation(s) for
contingencies, in amounts the council deems sufficient.
13)Requires the city in a resolution to adopt the budget to
specify the following:
a) Appropriations, by objects of expenditure within each
budget unit;
b) Other financing uses, by budget unit;
c) Intrafund transfers, by budget unit;
d) Transfers out, by fund;
e) Appropriation for contingencies, by fund;
f) Provision for nonspendable restricted, committed, and
assigned fund balances, by fund and purpose; and,
g) Means of financing the budget requirements.
14)Allows the adoption of the budget by resolution, if the
specified requirements are met in the budget document.
15)Requires the appropriate city official to file a copy of the
adopted budget, in the form prescribed by the Controller, with
the Controller by December 1 each year.
16)Requires the city to forfeit to the state $1,000 if the city
official, after receipt of written notice from the Controller,
fails to transmit a copy of the adopted budget within 20 days.
17)Requires the appropriate city official to file a copy of the
audited comprehensive annual financial report, for the next
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fiscal year, with the Controller by March 31 each year.
18)Applies the provisions of the bill to cities, dependent
special districts, and other agencies whose affairs and
finances are under the supervision and control of the city
council or governing body.
19)Provides that, if the Commission on State Mandates determines
that this bill contains costs mandated by the state,
reimbursement to local agencies and school districts for those
costs shall be made pursuant to current law governing state
mandated local costs.
EXISTING LAW :
1)Establishes the Committee on County Accounting Procedures,
consisting of 10 members appointed by the State Controller, to
serve at the pleasure of the Controller, as follows:
a) Five of the members shall be county auditors;
b) Three shall be county administrative officers; and,
c) Two shall be members of a county board of supervisors.
2)States that the members of the Committee on County Accounting
Procedures shall serve without compensation but shall be
reimbursed for their necessary traveling and other expenses
incurred in attending meetings of the committee, and such
expenses shall be paid by the county of which the member is an
officer.
3)Requires the Controller to prescribe for counties uniform
accounting procedures conforming to the Generally Accepted
Accounting Principles (GAAP) and requires the procedures to be
adopted under the provisions in code related to administrative
regulations and rulemaking by the Office of Administrative
Law.
4)Requires the Controller to prescribe such procedures after
consultation with and approval by the Committee on County
Accounting Procedures.
5)Requires the Controller to appoint an advisory committee
consisting of seven local governmental officers to assist him
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or her in developing complete and adequate records.
6)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.
7)Requires the Controller to 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, and requires
the reports to include the appropriations limits and the total
annual appropriations subject to limitation of the counties,
cities, and special districts.
8)Requires the Controller to prescribe uniform accounting and
reporting procedures applicable to special districts, except
for those that substantially follow a system of accounting
prescribed by the Public Utilities Commission or the Federal
Power Commission, and requires the Controller to prescribe
these procedures only after consultation with and approval of
a local governmental advisory committee, as described in 5)
above.
FISCAL EFFECT : Unknown
COMMENTS :
1)This bill, sponsored by State Controller John Chiang, creates
the Committee on City Accounting Procedures and requires the
State Controller, in consultation with the new Committee, to
prescribe uniform accounting and reporting procedures for
cities. The bill mirrors provisions in existing law
established for counties. This bill also establishes the City
Budget Act which specifies requirements for an adopted budget
to report funds in a uniform way.
2)According to the author, "The imposition of uniform accounting
procedures will result in more reliable, transparent, and
effective financial reporting and management of California's
cities. The reports received by the State Controller's Office
will be higher quality and comparability across cities will be
improved providing users and stakeholder groups more accurate
and meaningful information or research and decision making.
Uniform accounting procedures will also help increase the
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public's confidence in the fiscal integrity of California's
cities."
3)The creation of the Committee in this bill is directly modeled
off of existing law for counties. The Controller has had the
authority to prescribe county accounting procedures since 1959
(Chapter 1883, Statutes of 1959). This same 1959 statute also
created the Committee on County Accounting Procedures,
specified the membership of the Committee, and specified
reimbursement procedures for members of the Committee.
The Controller has similar authority in existing law with
respect to special districts. The Controller collects
financial transaction reports from counties and cities
pursuant to existing law. This authority was expanded to
include special districts in 2003 [SB 1068 (Committee on Local
Government), Chapter 126]. While the Controller's office
provides special districts with guidelines, they do not
prescribe formal standards, like those for counties.
4)Current law requires local agencies to provide a report of all
the financial transactions of the local agency during the
previous fiscal year to the Controller. Current law also
requires the Controller to compile and publish reports of the
financial transactions of each county, city, and special
district. The annual financial transactions data published by
the State Controller is the most comprehensive, and in some
cases, the only source of financial data for California's
local governments. The Legislature, Legislative Analyst's
Office, local officials, grand juries, policy organizations,
and other observers all rely on these reports.
5)The sponsor argues "because uniform accounting procedures are
not required of cities, reports submitted may appear
comparable when in fact, they may be based on greatly varying
assumptions, methodologies, and classifications." This bill,
which is substantially similar to requirements in existing law
for counties, details specific reporting criteria broken down
by type of fund, appropriation, or other expense and
requirements for the reporting amount.
6)The first section of this bill is substantially similar to AB
253 (Smyth, 2011) which passed out of this Committee on a 9-0
vote. The bill later died in the Senate Governance and Finance
Committee.
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In addition to the provisions contained in AB 253 (Smyth),
this bill establishes the City Budget Act which mirrors
existing requirements for counties. This bill spells out
specific financial information that cities must include in
their budget and procedures they must follow when adopting the
budget. This bill requires detailed and specific information
that must be included with no regard to the existing
accounting procedures of cities. This bill permits a city to
add to the required information as prescribed by this bill,
but only upon review and approval by the Controller.
The Committee may wish to consider if the requirements in this
bill are too prescriptive and will lead to fiscal and
practical implementation issues for cities.
7)Support arguments : While current law requires cities to submit
annual financial reports, it does not require them to adhere
to the same standards of accounting. Supporters argue that
uniform accounting practices and additional oversight of local
finances will result in more reliable, transparent and
effective financial reporting and management in California's
cities.
Opposition arguments : There are currently 482 cities in
California that vary widely in their financial structure,
level of services, and provision of services, in addition to
other characteristics like size and population. Opponents may
argue that this bill presents a one size fits all approach
which is overly prescriptive.
REGISTERED SUPPORT / OPPOSITION :
Support Opposition
State Controller's Office [SPONSOR]None on file
Bell Association to Stop the Abuse (BASTA)
CalTax
Howard Jarvis Taxpayers Association
Analysis Prepared by : Misa Yokoi-Shelton / L. GOV. / (916)
319-3958
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