BILL ANALYSIS Ó
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 1583|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
CONSENT
Bill No: AB 1583
Author: Allen (R), et al.
Amended: 6/26/14 in Senate
Vote: 21
SENATE GOVERNMENTAL ORGANIZATION COMMITTEE : 8-0, 6/10/14
AYES: Correa, Cannella, De León, Galgiani, Hernandez, Padilla,
Torres, Vidak
NO VOTE RECORDED: Berryhill, Lieu, Vacancy
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 75-2, 5/29/14 - See last page for vote
SUBJECT : State Controller: outside accounts
SOURCE : Author
DIGEST : This bill requires the State Controller's Office
(SCO) to include specified information in the budgetary-legal
basis annual report on all funds maintained in accounts outside
the State Treasury System (STS).
ANALYSIS :
Existing law:
1.Creates the STS to deposit state money held by state agencies
prior to expenditure.
CONTINUED
AB 1583
Page
2
2.Requires the State Controller to submit the budgetary-legal
basis annual report to the Governor containing a statement of
the funds of the state, its revenues, and the public
expenditures during the preceding fiscal year; and specifies
that the report be prepared in a manner that will account for
prior year adjustments, fund balances, encumbrances, deferred
payroll, revenues, expenditures, and other components on the
same basis as that of the applicable Governor's Budget and the
applicable Budget Act, as determined by the Director of the
Department of Finance (DOF) in consultation with the State
Controller.
3.Provides that all money belonging to the state received from
any source by any state agency shall be accounted for to the
State Controller at the close of each month, or more
frequently if required by the State Controller or DOF, in such
form as he/she prescribes, and on the order of the Controller
be paid into the State Treasury and credited to the General
Fund, provided that amounts received as partial or full
reimbursement for services furnished shall be credited to the
applicable appropriation.
4.Allows state agencies to seek approval from DOF to open
outside accounts that have benefits and efficiencies not
available through the STS, such as the ability to process
credit card receipts.
This bill:
1.Stipulates that the SCO must include the following information
in the budgetary-legal basis annual report on bank accounts
and savings and loan association accounts outside the STS:
(a) the account name and balance; and (b) the source of the
authorization for establishing the account.
2.Provides that if a state agency receives revenues for state
costs under a cost recovery statute, the agency must account
for those revenues to the SCO for deposit into the State
Treasury.
Background
California State Auditor (CSA) report . In an October 2013
report titled Accounts Outside the State's Centralized Treasury
AB 1583
Page
3
System, the CSA discovered that of the roughly $55 billion in
the possession or control of the state, 14% or $9.3 billion, was
maintained in nearly 1,400 bank accounts outside the STS. The
STS was established to safeguard and maximize the return on
state money with control agencies such as DOF, the State
Controller, and the State Treasurer all contributing to
safeguarding these assets. Certain departments, agencies, and
other entities may need to establish outside accounts because
they must deal with funds held in trust for others or for the
purpose of operational efficiencies. To do so requires either
express statutory authority or authorization from DOF, and
subjects the agency to certain monitoring and reporting
requirements.
The CSA's review of outside accounts noted the following key
findings:
Most of the money in outside accounts is held in accounts
authorized by statute and a large number of these accounts
with large balances have been established to hold money in
trust for others.
While holding state money in outside accounts provides for
quick electronic funds transfers and allows for efficiently
processing credit card transactions, there is an increased
risk of mismanagement and the potential for higher costs
related to these accounts.
Outside accounts are subject to fewer statewide controls and
there is risk that banks holding money in outside accounts for
state agencies may not maintain the required level of
collateral. Additionally, a state agency with outside
accounts may also incur higher bank fees than necessary.
The control agencies do not adequately track which state
agencies have outside accounts nor do they adequately ensure
that all agencies report on such accounts and, therefore,
failed to identify some omissions.
Although state agencies generally complied with requirements
for establishing outside accounts, they did not always
completely or accurately report outside accounts as required -
some failed to report the balances of these accounts.
AB 1583
Page
4
With the exception of the Department of Forestry and Fire
Protection (CAL FIRE), the state agencies tested had
established proper controls over the handling of revenue.
However, CAL FIRE established an outside account without
statutory authority or DOF approval, circumvented its
accounting and budgeting processes, and did not follow state
policies for equipment purchases.
Comments
According to the author's office, this bill is intended to
implement one of the legislative recommendations made by the CSA
and help remedy the identified problems cited in the review of
outside accounts. Additionally, the author's office notes that
this bill clarifies that "cost recovery" funds are to be spent
according to state law.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 6/26/14)
Orange County Taxpayers Association
ARGUMENTS IN SUPPORT : The Orange County Taxpayers Association
states that "considering the amount of taxpayers' money that
flows in and out of State Government, it is imperative that we
account for all of it scrupulously. It is reasonable to presume
that expanding the reporting on outside accounts may help us
achieve that goal."
ASSEMBLY FLOOR : 75-2, 5/29/14
AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Chávez, Conway, Cooley, Dababneh,
Dahle, Daly, Dickinson, Donnelly, Fong, Fox, Frazier, Beth
Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell, Gray,
Grove, Hagman, Hall, Roger Hernández, Holden, Jones, Levine,
Linder, Logue, Lowenthal, Maienschein, Mansoor, Medina,
Melendez, Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan,
Patterson, Perea, John A. Pérez, V. Manuel Pérez, Quirk,
Quirk-Silva, Rendon, Ridley-Thomas, Rodriguez, Salas, Skinner,
Stone, Ting, Wagner, Waldron, Weber, Wieckowski, Wilk,
Williams, Yamada, Atkins
AB 1583
Page
5
NOES: Eggman, Jones-Sawyer
NO VOTE RECORDED: Chesbro, Harkey, Vacancy
MW:e 6/26/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****