BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 617|
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THIRD READING
Bill No: SB 617
Author: Calderon (D)
Amended: 5/4/11
Vote: 21
SENATE GOVERNMENTAL ORGANIZATION COMM : 13-0, 04/12/11
AYES: Wright, Anderson, Berryhill, Calderon, Cannella,
Corbett, De Le�n, Evans, Hernandez, Padilla, Strickland,
Wyland, Yee
SENATE APPROPRIATIONS COMMITTEE : 9-0, 05/09/11
AYES: Kehoe, Walters, Alquist, Emmerson, Lieu, Pavley,
Price, Runner, Steinberg
SUBJECT : State government: financial accountability
SOURCE : Author
DIGEST : This bill recasts and updates various provisions
within the Financial Integrity and State Managers
Accountability (FISMA) Act of 1983 in order to incorporate
best practices in financial accounting.
ANALYSIS : Existing law:
1.Under the FISMA, heads of state agencies and departments
are responsible for establishing and maintaining a system
or systems of internal accounting and administrative
control within their organizations.
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2.Under the FISMA, organization management is responsible
for documenting the system, communicating the system
requirements to employees, assuring that the system is
functioning as designed and modifying the system as
changes in conditions warrant.
This bill recasts and updates various provisions within the
FISMA Act of 1983 in order to incorporate best practices in
financial accounting: Specifically, this bill:
1.Renames FISMA as the State Government Fraud Prevention,
Detection and Financial Integrity Monitoring and
Accountability Act of 2011.
2.Expands upon existing legislative findings, as specified,
and declares that active oversight processes, including
regular and ongoing monitoring processes, for the
prevention and early detection of fraud and errors in
program administration are vital to the appropriate and
efficient use of public resources.
3.Adds the requirement that effective, independent, and
objective ongoing monitoring of the internal accounting
and administrative controls be included within each state
agency's system of internal accounting and control.
4.Stipulates that state agency heads must implement systems
and processes to ensure the independence and objectivity
of the monitoring of internal accounting and
administrative control as an ongoing activity.
5.Requires the Director of Finance to establish a framework
of recommended practices to guide state agencies in
conducting active ongoing monitoring of processes for
internal accounting and administrative control.
6.Sunsets on January 1, 2014, an existing reporting
requirement that directs state agencies to report on the
adequacy of their systems of internal accounting and
administrative control.
7.Makes other minor, conforming and clarifying changes.
Background
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According to the author's office, since enactment of FISMA
in 1983, both state and federal law regarding corporate
financial accounting has evolved but the laws requiring the
state to practice similar internal accountability and
controls have not.
The author's office notes that FISMA's stated purpose is
clear - to promote sound state governmental operations via
a mandate for strong and effective systems of internal
accounting and agency administrative control. However, in
the 28 years since FISMA was adopted, business and
financial accounting has witnessed significant change.
The author's office contends that Californians today are
keenly concerned for efficiency and accountability at all
levels of government however current state law has not yet
incorporated the lessons on improving ongoing financial
oversight which were gained over the past decade as a
result of the Enron financial collapse. The author's
office notes that after the Enron financial debacle,
Congress passed the Sarbanes-Oxley "Corporate and Auditing
Accountability and Responsibility Act." Among its reforms,
Sarbanes-Oxley introduced the element of ongoing monitoring
of internal accounting and administrative controls as vital
to ensure they remain fully effective in large
organizations.
The author's office emphasizes that SB 617 is simply
intended to update FISMA to include this element of ongoing
monitoring as vital to effective oversight and
accountability. The author's office also notes that SB 617
does not specify the form monitoring must take. Under the
existing Act, it is up to the Director of Finance, with
input from the State Auditor, the State Controller, and the
Treasurer, to recommend suitable controls. SB 617 maintains
this pattern by deferring to these agencies to recommend a
suitable monitoring framework.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
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Major Provisions 2011-12
2012-13 2013-14 Fund
Establish ongoing monitoring Likely minor costs
initially and ongoing;General/
of state accounting and potential savings and cost
avoidance Special
administrative controls within ongoing
existing system
PQ:nl 5/11/11 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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