BILL ANALYSIS �
AB 1248
Page 1
Date of Hearing: May 8, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 1248 (Cooley) - As Introduced: February 22, 2013
Policy Committee: Local
GovernmentVote:9-0
Urgency: No State Mandated Local Program:
Yes Reimbursable:
SUMMARY
This bill requires the State Controller to develop internal
control guidelines applicable to local agencies to prevent and
detect fraud, and requires local agencies to comply with the
guidelines beginning January 1, 2016. Specifically, this bill:
1)Requires the Controller to develop internal control guidelines
based on standards adopted by the American Institute of
Certified Public Accountants, with input from local agency
organizations, including the League of California Cities, the
California State Association of Counties, the California
Special Districts Association and the California State
Association of County Auditors.
2)Requires the Controller to post the completed internal control
guidelines on the Controller's Internet website, update the
internal control guidelines and maintain a current version on
the Internet website.
FISCAL EFFECT
The state would be responsible for mandated reimbursement claims
in the millions of dollars. The bill is intended to apply to
all cities, counties and special districts, approximately 6,000
entities.
COMMENTS
1)Purpose . According to the author's office, although the
economic recession has been especially difficult for local
AB 1248
Page 2
governments, leading to economic failures and bankruptcies
across the state, the results of audits conducted by the State
Controller show that not all of these failures were due to the
economic downturn. The author states the State Controller
found that in addition to economic and demographic factors, a
lack of internal controls and checks and balances at the local
government level allowed for fiscal and administrative errors
and mismanagement.
The author contends that while the slumping economy created
difficulties for local governments, the financial problems
began earlier because of the lack of proper internal controls.
2)Support. This bill is sponsor by the Controller, who seeks to
prevent financial errors, waste, fraud and abuse by requiring
local government agencies to establish a system of internal
controls.
3)Scope of bill. Although the bill is intended to apply to all
cities, it is unclear if charter cities would be subject to
the bill's provisions. Charter cities do not have to comply
with many of the state's general laws governing cities.
Instead, the charter can provide alternate requirements for
the city. Although charter cities can be made subject to
state legislation, courts have usually required specific
wording stating charter cities are subject to the legislation.
4)Previous legislation . A number of related bills have been
introduced in recent years:
SB 186 (Kehoe and DeSaulnier), 2012, would have expanded the
Controller's authority to perform discretionary audits of
local agencies to ensure compliance with local ordinances and
state law. This bill was held on this Committee's Suspense
File.
AB 162 (Smyth), 2011, would have required that, if an audit of
a local agency reveals certain financial irregularities, the
findings be sent separately to the Controller immediately
after the audit has been concluded. This bill was held in the
Assembly Local Government Committee.
AB 187 (Lara), Chapter 451, Statutes of 2011, authorizes the
State Auditor to establish a high-risk local government agency
audit program to identify, audit and issue reports on any
AB 1248
Page 3
local government agency the State Auditor identifies as being
at high risk for the potential of waste, fraud, abuse or
mismanagement.
AB 229 (Lara), 2011, would have expanded the Controller's
oversight of local governmental agencies to those that expend
less than $500,000 in federal funds and would have stipulated
standards for the performance of local government audits.
This bill was subsequently amended to a different subject.
AB 253 (Smyth), 2011, would have established the Committee on
City Accounting Procedures, specified the membership of the
Committee, and required the State Controller, in consultation
with the Committee, to prescribe uniform accounting and
reporting procedures for cities. This bill died in the Senate
Governance and Finance Committee.
SB 449 (Pavley), 2011, would have authorized the State
Controller to review the finances of cities, counties, special
districts, and redevelopment agencies, and would have allowed
the Controller to convene a local agency financial review
committee to provide assistance to local agencies that seek
help in averting or managing a financial problem. This bill
was held in Assembly Local Government Committee.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081