BILL ANALYSIS Ó SB 801 Page 1 Date of Hearing: July 3, 2013 ASSEMBLY COMMITTEE ON ACCOUNTABILITY AND ADMINISTRATIVE REVIEW Jim Frazier, Chair SB 801 (Roth) - As Amended: June 26, 2013 SENATE VOTE : 36-0 SUBJECT : Department of Finance: reports: crimes. SUMMARY : Directs the Department of Finance (DOF) to annually require each department head, or designee, responsible for auditing the accounts of a state entity, as specified, to certify under penalty of perjury that the budgeting and accounting information provided to the DOF reconciles to the year-end finance reports submitted to the State Controller's Office (SCO). Subjects an individual who willfully makes and subscribes a certification that he or she knows to be false to the penalties for perjury established in the Penal Code. EXISTING LAW : 1)Provides the DOF with general powers of supervision over all matters concerning the financial and business policies of the state. 2)Makes the Director of the DOF responsible for coordinating state agency internal audits and identifying when agencies are required to comply with federally mandated audits. Requires the Director of the DOF, in coordinating the internal auditors of state agencies, to ensure that these auditors utilize the "Standards for the Professional Practices of Internal Auditing." 3)Requires state agencies to prepare and maintain financial and accounting data for inclusion in the Governor's Budget, Budget Act, and related documents, as specified, according to the methods and bases provided in regulations, budget letters, and other directives of the DOF. 4)Directs the DOF to implement procedures that facilitate annual reconciliations of General Fund and special fund balances between those provided by a state agency to the DOF and to the SCO, as specified. SB 801 Page 2 5)Deems every person guilty of a misdemeanor who fails or neglects to make, verify, and file any report as required by the DOF; who fails or neglects to follow the directions of the DOF in keeping the accounts of his/her office; or, who refuses to permit the examination of, or access to, the records, files, books, accounts, papers, documents or cash drawers of his/her office by a representative of the DOF or in any way interferes with such examination. 6)Requires specified public auditing officers, pursuant to Government Code section 1094, to require certification under penalty of perjury for specified government accounting audits, and makes any individual who willfully makes and subscribes a certification which he/she knows to be false guilty of a felony and, upon conviction, subject to the penalties prescribed for perjury in the Penal Code. 7)Makes perjury a felony punishable by imprisonment for two, three, or four years, depending on the underlying offense. FISCAL EFFECT : The current version of this bill has not yet been analyzed by a fiscal committee. COMMENTS : According to the author, this bill is intended to improve accountability with regard to state agencies' finances. The author states that the recent underreporting of funds by the Department of Parks and Recreation and the Department of Forestry and Fire Protection underscores the need to ensure that state agencies have appropriate controls in place to provide accurate financial information to the DOF and the SCO. As the Governor's chief fiscal policy adviser, the DOF directs the efforts of preparing the annual Governor's Budget while the SCO compiles the State's financial statements. Both agencies report fund balance information in annual reports that are based on information prepared by state departments. According to a March 2013 Budget Letter from DOF, it is critical that departments' submittal to the SCO reflects correct and reconciled information. The budget letter states that departments are responsible for ensuring that data included in both the budget schedules and year-end financial statements are identical unless permitted by law or DOF has approved a difference. Current DOF protocols require department heads or designees to SB 801 Page 3 certify under penalty of perjury that past and prior year budgeting and accounting information provided to DOF reconciles to year-end financial reports submitted to the SCO. The SCO also requires year-end financial reports to be certified under penalty of perjury. While Government Code section 1094 requires certification under penalty of perjury for specified government accounting audits, this bill would explicitly clarify that DOF has the statutory authority to require these certifications. REGISTERED SUPPORT / OPPOSITION : Support None on file Opposition None on file Analysis Prepared by : Cassie Royce / A. & A.R. / (916) 319-3600