BILL ANALYSIS
AB 1447
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Date of Hearing: April 22, 2009
ASSEMBLY COMMITTEE ON INSURANCE
Joe Coto, Chair
AB 1447 (John A. Perez) - As Amended: April 13, 2009
SUBJECT : State Compensation Insurance Fund: audits.
SUMMARY : Declares the State Compensation Insurance Fund (SCIF)
to be a state agency for purposes of authorizing the Bureau of
State Audits to conduct financial and performance audits of
SCIF.
EXISTING LAW :
1)Establishes the State Compensation Insurance Fund (SCIF) as a
public enterprise fund for the purpose of transacting workers'
compensation insurance that insures employers, and provides
employees and their dependents with workers' compensation
benefits. SCIF is required to be fairly competitive with
other insurers and is directed to be self-supporting. SCIF is
administered by an 11-member board of directors, 9 of whom are
appointed by the Governor.
2)Specifies that in some respects SCIF is considered a state
agency, but in other respects it is not considered a state
agency. The following are examples:
a) The employees of SCIF are part of state civil service
(except the 7 top officers) and may select an exclusive
employee organization to be their representative in
employer-employee relations matters. Also, SCIF is subject
to the California Public Records Act.
b) Generally, SCIF is not subject to the provisions of the
Government Code made applicable to state agencies unless
the section of law specifically names SCIF as an agency to
which the provision applies.
c) The SCIF board of directors is required to appoint
several key officers including a president, a chief
financial officer, a chief operating officer, and a chief
investment officer. These positions are not subject to the
state civil service laws. For this purpose, SCIF is not
considered a state agency.
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d) The state is not liable for the obligations of SCIF and
any advertising by SCIF shall include the disclaimer: "The
State Compensation Insurance Fund is not a branch of the
State of California."
3)Establishes the Bureau of State Audits under the direction of
the Milton Marks "Little Hoover" Commission on California
State Government Organization and Economy. The bureau is
independent of the executive branch and legislative control.
The State Auditor is the head of that bureau and is appointed
by the Governor from a list of three qualified individuals
nominated by the Joint Legislative Audit Committee.
4)Requires the Bureau of State Audits to examine and report
annually upon the financial statements prepared by the
executive branch of the state and to perform other related
assignments, including performance audits. The Bureau of
State Audits conducts audits of governmental agencies as
directed by statute and as requested by the Joint Legislative
Audit Committee.
5)Authorizes the State Auditor to have access to examine a wide
range of books, accounts, reports, vouchers, other records,
bank accounts, money and other property of any agency of the
state, any local agency including any city, county, school or
special district, and publicly created entity, for any audit
or investigative audit.
6)Provides in one section of law (Insurance Code Section 11873)
that SCIF is subject to the authority of the Bureau of State
Audits
FISCAL EFFECT : Undetermined.
COMMENTS :
1)Purpose. According to the author, the purpose of the bill is
to clarify existing law by stating that the State Compensation
Insurance Fund (SCIF) is a state agency for purposes of being
audited by the Bureau of State Audits.
2)Background. The author provides the following information as
background on the bill:
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The people of California are best served when state
agencies conduct their operations openly and transparently.
The State Auditor's primary responsibility is to ensure
that government agencies are conducting their business in
an appropriate manner.
SCIF is public entity created by the state of California
and employed with civil servants. As such, it should be
subject to audits by the State Auditor. But existing law
does not clearly state that SCIF is a state agency that is
subject to the State Auditor. This ambiguity is caused
from the Insurance Code exempting SCIF from many provisions
in the Government Code and multiple cross-referencing of
the definition of a state agency within the Government and
Insurance Codes. Clarification is needed to address this
ambiguity.
This bill will clarify that SCIF is a state agency as
defined in Government Code Section 11000, and is subject to
the same oversight as other state agencies, in order to
insure the proper operation of the agency responsible for
providing workers' compensation to employees injured on the
job.
3)Previous legislation. In 2006, legislation was enacted that
specified in the Insurance Code that SCIF is subject to being
audited by the State Auditor (SB 1452 (Speier), Chapter 452,
Statutes of 2006).
4)The correct code. The issue of this bill seems to center on
what code needs to specify that SCIF is subject to auditing by
the Bureau of State Audits. Already a section of the
Insurance Code includes this authority, but one reading of the
existing law can be interpreted to mean that a specific
section of the Government Code must specify that SCIF is
subject to auditing by the Bureau of State Audits. This bill
specifically adds a section to the Government Code to
accomplish this.
REGISTERED SUPPORT / OPPOSITION :
Support
None received.
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Opposition
None received.
Analysis Prepared by : Manny Hernandez / INS. / (916) 319-2086