BILL ANALYSIS Ó
SB 1074
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Date of Hearing: June 18, 2014
ASSEMBLY COMMITTEE ON ACCOUNTABILITY AND ADMINISTRATIVE REVIEW
Jim Frazier, Chair
SB 1074 (Knight) - As Amended: June 12, 2014
SENATE VOTE : 36-0
SUBJECT : State government: state funds
SUMMARY : Makes it a misdemeanor, punishable by up to one year
in a county jail, or a $2,500 fine, or both, for a state
employee to knowingly transfer or use state money outside of the
State Treasury System (STS) without authorization from statute
or the Department of Finance (DOF).
EXISTING LAW :
1)Establishes the STS to deposit state money held by state
agencies prior to expenditure.
2)Requires the State Controller (Controller) to submit certain
fiscal reports containing information on the state's revenues
and expenditures during the preceding fiscal year to the
Governor and Legislature.
3)Provides that all money belonging to the state received from
any source by any state agency must be accounted for to the
Controller at the close of each month, or more frequently if
required, and be paid into the STS and credited to the General
Fund.
4)Requires department heads, or designees, responsible for
auditing state accounts 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 Controller. Subjects an individual who knowingly makes a
false certification to the penalties for perjury established
in the Penal Code.
5)Specifies, in the Penal Code, that each state or local officer
and every other person who receives, transfers, or disburses
public money without proper authority as prescribed by law is
punishable by imprisonment for two to four years and
disqualified from holding office.
SB 1074
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6)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.
FISCAL EFFECT : According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS : In an October 2013 report, the Bureau of State
Audits (BSA) noted that, of the roughly $55 billion in the
possession or control of the state, 14% or $9.3 billion, is in
nearly 1,400 bank accounts outside the STS. The STS was created
to safeguard and maximize the return on state money with control
agencies such as DOF, the Controller, and the State Treasurer
(Treasurer) all contributing to safeguarding these assets.
State departments, agencies, and other entities may establish
outside accounts to deal with funds held in trust for others or
to gain operational efficiencies. Establishing an outside
account requires either express statutory authority or
authorization from DOF, and subjects the agency to certain
monitoring and reporting requirements. The Controller currently
information on outside accounts, including account names, source
of authorization and balances, and annually provides a
comprehensive listing of this information in the Budget/Legal
Basis Analysis Report.
The BSA report found that, while state agencies generally
complied with requirements for establishing outside accounts,
they did not always completely or accurately report outside
accounts as required and some failed to report the balances of
these accounts. The BSA concluded that the state agencies it
reviewed properly created and had proper controls over their
outside accounts, with the exception of the California
Department of Forestry and Fire Protection (CDF), which
established an outside account without statutory authority or
DOF approval and circumvented its accounting and budgeting
processes.
According to the author, this bill seeks to ensure state
agencies like CDF are held accountable by making it a
misdemeanor for any state employee to knowingly transfer state
money into a private account without appropriate authorization.
SB 1074
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RELATED LEGISLATION : The following bills have been introduced
in response to findings and recommendations in the BSA report:
1)SB 1075 (Knight) requires CDF to make an annual report to the
Legislature regarding any monies recovered in a civil action
and specifies that any monies recovered by CDF in a civil
action must be deposited into the STS.
2)SB 898 (Cannella) requires each state agency, department, and
entity to provide the Treasurer with its employer
identification number to be used to monitor those state bank
accounts and money authorized to be outside the STS.
3)AB 1583 (Allen) requires the Controller to submit an annual
report to the Legislature on all funds maintained in accounts
outside the STS.
PRIOR LEGISLATION : SB 801 (Roth), Chapter 281, Statutes of 2013,
gives DOF statutory authority to require department heads or
designees to 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
Controller.
SUGGESTED TECHNICAL AMENDMENT : To avoid redundant language, the
committee suggests deleting the phrase "other than pursuant to a
valid act of appropriation or the reversion requirements
described in Section 16303" in lines 10 and 11.
REGISTERED SUPPORT / OPPOSITION :
Support
Howard Jarvis Taxpayer Association
Opposition
None on file.
Analysis Prepared by : Cassie Royce / A. & A.R. / (916)
319-3600