BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 1487|
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THIRD READING
Bill No: AB 1487
Author: Assembly Budget Committee
Amended: 8/21/12 in Senate
Vote: 21
SENATE BUDGET & FISCAL REVIEW COMMITTEE : 9-3, 8/23/12
AYES: Leno, Alquist, DeSaulnier, Hancock, Lowenthal,
Negrete McLeod, Simitian, Wolk, Wright
NOES: Emmerson, Fuller, Gaines
NO VOTE RECORDED: Anderson, Evans, La Malfa, Liu
ASSEMBLY FLOOR : Not relevant
SUBJECT : Budget Act of 2012: Trailer Bill: financial
reports and reconciliation
SOURCE : Author
DIGEST : This bill clarifies and expands the requirements
for financial reporting regarding state funds and requires
certain financial control actions by the State Controller'
Office (SCO) and the Department of Finance (DOF).
ANALYSIS : California has in excess of 500 special funds
that have specific funding sources and specific
programmatic program responsibilities. These funds range
from very large transportation-related funds to small
specialized accounts. Different state special funds are
accounted for using differing methods of accrual as well as
having different measurement focuses. A key component of
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fund accounting is the determination of fund balances
within reach account. Generally, the fund balance is based
on the amount derived by subtracting fund liabilities from
fund assets.
Various financial reports are prepared at different times
of year for different purposes. Some of the major
financial reports are: Budgetary-Legal Basis Annual Report,
prepared by the SCO, prepared on the same basis as the
Governor's budget document and released after the end of
each fiscal year; Comprehensive Annual Financial Report,
prepared by the SCO to represent financial results in
compliance with generally accepted accounting principles
(GAAP), released after the end of each fiscal year; and,
Governor's Budget Fund Condition Statements, prepared in
conjunction with the January Budget and the May Revision ,
prepared on a budgetary basis. The financial documents
prepared by the SCO and the budget documents cannot be
directly compared without significant adjustments since
they are prepared using different methods.
The DOF's recent review of special funds revealed
significant discrepancies in the fund balances,
particularly for a few funds. Overall, a total of $3.9
million in accounting differences were detected. The DOF
balance was lower in some accounts totaling $1.7 billion,
and higher for other accounts totaling $2.1 billion, for a
net impact of about $415 million lower. Although some of
the differences were due to mistakes or the situation with
State Parks, about 80% of the differences were the result
of methodological and timing issues largely stemming from
different information being provided by departments to DOF
and the SCO.
This bill addresses certain aspects of the state's
financial reporting and fund reconciliation requirements.
This bill provides greater clarity with respect to
financial accounting and reporting. This bill:
1. Requires that the SCO Budgetary-Legal Basis Annual
Report be prepared on the same basis as the applicable
Governor's Budget and the Budget Act;
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2. Clarifies that an additional annual report be prepared
by the SCO in accordance with GAAP;
3. Requires the dissemination of financial reports by the
SCO through print and posting to the agency's website;
4. Requires departments and agencies to make consistent
reporting to the SCO and DOF according to methods and
bases provided in regulations, budget letters or other
directives of DOF;
5. Provides that the adoption, amendment, or repeal of
regulations, budget letters, or other directives related
to the reporting requirements are exempt from
Administrative Procedure Act;
6. Stipulates that DOF and SCO consult regarding
significant changes to financial and accounting methods,
unless such changes are otherwise specified in law;
7. Directs DOF to implement procedures to facilitate annual
reconciliation of General Fund and special fund
balances provided to SCO and DOF;
8. Makes an appropriation to DOF for implementation of the
provisions of this bill.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
Appropriates $1,000 to the DOF from the General Fund for
purposes of implementing this bill.
DLW:k 8/25/12 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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