BILL ANALYSIS                                                                                                                                                                                                    







                      SENATE COMMITTEE ON PUBLIC SAFETY
                            Senator Loni Hancock, Chair              S
                             2013-2014 Regular Session               B

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          SB 801 (Roth)                                               
          As Amended April 17, 2013 
          Hearing date:  April 30, 2013
          Government Code
          AA:mc

                      STATE BUDGETING AND ACCOUNTING INFORMATION:

                                    CERTIFICATION  


                                       HISTORY

          Source:  Author

          Prior Legislation: None

          Support: Unknown

          Opposition:None known
           

                                         KEY ISSUE
           
          SHOULD THE DEPARTMENT OF FINANCE BE EXPRESSLY REQUIRED BY STATUTE TO  
          OBTAIN STATE ACCOUNTING AUDITS PURSUANT TO CERTIFICATION SIGNED  
          UNDER PENALTY OF PERJURY, AS SPECIFIED?    



                                       PURPOSE

          The purpose of this bill is to statutorily provide that the  




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          Department of Finance "annually require each officer whose duty  
          it is to audit the accounts of a state agency, department,  
          office, bureau, or other state entity to provide a  
          certification, signed under penalty of perjury, to the  
          department that the budgeting and accounting information  
          provided to the department reconciles to the year-end finance  
          reports submitted to the Controller's office."

           Current law  provides that there is in the State Government a  
          Department of Finance.  (Gov.  Code  13000.)

           Current law  provides that the Department of Finance has general  
          powers of supervision over all matters concerning the financial  
          and business policies of the State and whenever it deems it  
          necessary, or at the instance of the Governor, shall institute  
          or cause the institution of such investigations and proceedings  
          as it deems proper to conserve the rights and interests of the  
          State.  (Gov. Code  13070.)

           Current law  requires that the Director of Finance shall be  
          responsible for coordinating state agency internal audits and  
          identifying when agencies are required to comply with federally  
          mandated audits.  The Director of Finance, in coordinating the  
          internal auditors of state agencies, shall ensure that these  
          auditors utilize the "Standards for the Professional Practices  
          of Internal Auditing."  (Gov. Code  13071.)

           Current law  requires state agencies to "prepare and maintain  
          financial and accounting data for inclusion in the Governor's  
          Budget, Budget Act and related documents, and the  
          budgetary-legal basis annual report (as specified), according to  
          the methods and bases provided in regulations, budget letters,  
          and other directives of the Department of Finance. . . .  The  
          Department of Finance shall implement procedures, consistent  
          with this section, that facilitate annual reconciliations of  
          General Fund and special fund balances between those provided by  
          a state agency to the Department of Finance and to the  
          Controller.  In the Governor's Budget documents, appendices  
          thereof, or other directives, the Department of Finance shall  




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          ensure that adjustments of prior-year fund balances and  
          accounting methods are clearly noted in some fashion in order to  
          ensure the closest possible comparability of these documents  
          with past and future budgetary-legal basis annual reports."   
          (Gov. Code  13344.)

           Current law  provides that every person is guilty of a  
          misdemeanor who:

               (a) Fails or neglects to make, verify and file with the  
          Department of Finance any report required by this part.
               (b) Fails or neglects to follow the directions of the  
          Department of Finance in keeping the accounts of his office.
               (c) Refuses to permit the examination of or access to the  
          records, files, books, accounts, papers, documents or cash  
          drawers or cash of his office by a representative of the  
          Department of Finance or in any way interferes with such  
          examination.

          Conviction of any such misdemeanor is punishable by a fine of  
          not less than $100 nor more than $1,000, or by imprisonment in  
          the county jail for not less than 30 days, or both.  (Gov. Code
           13030.)

           Current law  provides that "(e)very officer whose duty it is to  
          audit and allow the accounts of other state, county, or city  
          officers shall, before allowing such accounts, require each of  
          such officers to make and file with him an affidavit or  
          certificate under penalty of perjury that he has not violated  
          any of the provisions of this article, and any individual who  
          wilfully makes and subscribes such certificate to an account  
          which he knows to be false as to any material matter shall be  
          guilty of a felony and upon conviction thereof shall be subject  
          to the penalties prescribed for perjury by the Penal Code of  
          this State."  (Gov. Code  1094.)

           Current law  provides that perjury is a felony punishable by  
          imprisonment for two, three or four years.  (Penal Code  126.)





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           This bill  would require the Department of Finance to "annually  
          require each officer whose duty it is to audit the accounts of a  
          state agency, department, office, bureau, or other state entity  
          to provide a certification, signed under penalty of perjury, to  
          the department that the budgeting and accounting information  
          provided to the department reconciles to the year-end finance  
          reports submitted to the Controller's office."


                    RECEIVERSHIP/OVERCROWDING CRISIS AGGRAVATION

          For the last several years, severe overcrowding in California's  
          prisons has been the focus of evolving and expensive litigation  
          relating to conditions of confinement.  On May 23, 2011, the  
          United States Supreme Court ordered California to reduce its  
          prison population to 137.5 percent of design capacity within two  
          years from the date of its ruling, subject to the right of the  
          state to seek modifications in appropriate circumstances.   

          Beginning in early 2007, Senate leadership initiated a policy to  
          hold legislative proposals which could further aggravate the  
          prison overcrowding crisis through new or expanded felony  
          prosecutions.  Under the resulting policy known as "ROCA" (which  
          stands for "Receivership/ Overcrowding Crisis Aggravation"), the  
          Committee held measures which created a new felony, expanded the  
          scope or penalty of an existing felony, or otherwise increased  
          the application of a felony in a manner which could exacerbate  
          the prison overcrowding crisis.  Under these principles, ROCA  
          was applied as a content-neutral, provisional measure necessary  
          to ensure that the Legislature did not erode progress towards  
          reducing prison overcrowding by passing legislation which would  
          increase the prison population.  ROCA necessitated many hard and  
          difficult decisions for the Committee.

          In January of 2013, just over a year after the enactment of the  
          historic Public Safety Realignment Act of 2011, the State of  
          California filed court documents seeking to vacate or modify the  
          federal court order issued by the Three-Judge Court three years  
          earlier to reduce the state's prison population to 137.5 percent  




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          of design capacity.  The State submitted in part that the, ". .  
          .  population in the State's 33 prisons has been reduced by over  
          24,000 inmates since October 2011 when public safety realignment  
          went into effect, by more than 36,000 inmates compared to the  
          2008 population . . . , and by nearly 42,000 inmates since 2006  
          . . . ."  Plaintiffs, who opposed the state's motion, argue in  
          part that, "California prisons, which currently average 150% of  
          capacity, and reach as high as 185% of capacity at one prison,  
          continue to deliver health care that is constitutionally  
          deficient."  In an order dated January 29, 2013, the federal  
          court granted the state a six-month extension to achieve the  
          137.5 % prisoner population cap by December 31st of this year.  































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          In an order dated April 11, 2013, the Three-Judge Court denied  
          the state's motions, and ordered the state of California to  
          "immediately take all steps necessary to comply with this  
          Court's . . . Order . . . requiring defendants to reduce overall  
          prison population to 137.5% design capacity by December 31,  
          2013."         

          The ongoing litigation indicates that prison capacity and  
          related issues concerning conditions of confinement remain  
          unresolved.  However, in light of the real gains in reducing the  
          prison population that have been made, although even greater  
          reductions are required by the court, the Committee will review  
          each ROCA bill with more flexible consideration.  The following  
          questions will inform this consideration:

                 whether a measure erodes realignment;
                 whether a measure addresses a crime which is directly  
               dangerous to the physical safety of others for which there  
               is no other reasonably appropriate sanction; 
                 whether a bill corrects a constitutional infirmity or  
               legislative drafting error; 
                 whether a measure proposes penalties which are  
               proportionate, and cannot be achieved through any other  
               reasonably appropriate remedy; and
                 whether a bill addresses a major area of public safety  
               or criminal activity for which there is no other  
               reasonable, appropriate remedy.


                                      COMMENTS

          1.  Stated Need for This Bill

           The author states:

               Last year it was discovered that the California  
               Department of Parks and Recreation amassed a secret  
               surplus of more than $20 million over 12 years.   
               Recently, it was also revealed that the California  




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               Department of Forestry and Fire Protection misreported  
               $3.6 million.  This money was hidden and misreported  
               at a time when the economic recession forced billions  
               in budget cuts to state programs affecting families  
               and Californians in need.

               In both instances, required reporting documents were  
               submitted to the state Department of Finance and money  
               desperately needed for specific programs and the  
               state's general fund during the severe economic  
               recession were misreported.  The Department of Finance  
               has audited other departments and more than $200  
               million were hidden in one way or another to protect  
               agencies facing state budget cuts.

               Senate Bill 801 would clarify that the Department of  
               Finance has the authority to require a certification,  
               signed under penalty of perjury, that the budgeting  
               and accounting information provided to the department  
               reconciles to the year-end finance reports submitted  
               to the State Controller's office.

          2.  Current Practice; What This Bill Would Do

           As explained in a Budget Letter dated March 8, 2013, to all  
          Agency Secretaries, Department Directors, Departmental Budget  
          Officers, Departmental Accounting Officers, and Department of  
          Finance Budget Staff, current Finance protocols require the  
          certification of past and prior year budgeting and accounting  
          information under penalty of perjury.  (See Forms DF-117A and  
          Form DF-117U; See also, Govt. Code 1094.)  Similarly, the State  
          Controller's Office requires that year-end financial reports be  
          certified under penalty of perjury.  Perjury is a felony  
          punishable by incarceration for two, three or four years.   
          (Penal Code  126.)  

          Government Code section 1094 requires certification under  
          penalty of perjury for specified government accounting audits.   
          As noted above, the Department of Finance now requires  











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          certification of past and prior year budgeting and accounting  
          information under penalty of perjury.  This bill would clarify  
          the statutory authority for this certification.


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