BILL ANALYSIS Ó
SB 1074
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Date of Hearing: July 2, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 1074 (Knight) - As Amended: June 23, 2014
Policy Committee: Accountability and
Administrative Review Vote: 13 - 0
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill 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 without statutory authority or Department
of Finance (DOF) approval.
FISCAL EFFECT
1)Unknown, likely minor costs to the courts (Trial Court Trust
Fund) for the expected few prosecutions for the new
misdemeanor.
2)Unknown, likely minor potential penalty revenue gains (various
funds).
COMMENTS
1)Purpose . According to the author, this bill seeks to ensure
state agencies like the California Department of Forestry and
Fire Protection (CDF) (see background below) are held
accountable by making it a misdemeanor for any state employee
to knowingly transfer state money into a private account
without appropriate authorization.
2)Background . While roughly $55 billion is in the possession or
control of the State and held in accounts in banks that
participate in California's Centralized Treasury System
(treasury system), 14% of all state money, or $9.3 billion, is
in nearly 1,400 bank accounts outside the treasury system.
SB 1074
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The treasury system was established to safeguard and maximize
the return on state money with control agencies such as the
Department of Finance, the State Controller, and the State
Treasurer all contributing to safeguarding these assets. State
departments, agencies, and other entities may need to
establish outside accounts to deal with funds held in trust
for others or to gain operational efficiencies. To do so
requires either express statutory authority or authorization
from the Department of Finance, and subjects the agency to
certain monitoring and reporting requirements.
3)Bureau of State Audits Report . In an October 2013 report, the
Bureau of State Audits (BSA) 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.
4)Related Legislation . The following bills have been introduced
this session in response to findings and recommendations in
the BSA report:
a) 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 state treasury
system. SB 1075 is before this committee today.
b) 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
state treasury system. SB 898 is before this committee
today.
c) AB 1583 (Allen) requires the Controller to submit an
annual report to the Legislature on all funds maintained in
accounts outside the STS. AB 1583 is pending on the Senate
Floor.
SB 1074
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Analysis Prepared by : Jennifer Swenson / APPR. / (916)
319-2081