BILL ANALYSIS �
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THIRD READING
Bill No: SB 633
Author: Huff (R), et al.
Amended: 1/13/12
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 9-0, 1/11/12
AYES: Wolk, Huff, DeSaulnier, Fuller, Hancock, Hernandez,
Kehoe, La Malfa, Liu
SUBJECT : Bonds: unauthorized use
SOURCE : Author
DIGEST : This bill enacts a provision authorizing the
Department of Finance, once it determines that any state
board, department, or agency misused bond funds, with the
authority to bar the administering entity from further
allocating bond funds until the agency adopts or implements
a corrective action plan prescribed by the department to
remedy prior misuses.
ANALYSIS : State General Obligation Bond Law requires
bond acts to set the amount of bonds to sell, create a
finance committee generally chaired by the State Treasurer
that enacts a resolution that causes the bonds to be sold,
and designate an agency that requests the finance committee
to sell the bonds. In either case, the State Treasurer
sells the bonds to investors, and then remits the bond
proceeds to the fund authorized in the bond act. The state
promises investors purchasing a general obligation bond
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payment of principal and interest regardless of the
proceeds' use.
The State Controller's Office may audit any disbursement of
state funds, and occasionally audits bond expenditures.
After an audit by the Department of Finance (DOF)
determines the misuse of bond funds, and the entity does
not take the corrective action within the time frame
prescribed by DOF, this bill grants DOF the authority to
bar the administering entity from further allocating bond
funds until the entity adopts or implements a corrective
action plan prescribed by DOF to remedy prior misuses.
Comments
According to the author, "California has grown increasingly
reliant on bond money during the ongoing fiscal crisis, as
voters have authorized the sale of $54 billion dollars in
general obligation bonds over the past six years alone.
This massive amount of bond money creates many
opportunities for waste and fraud. However, according to a
report published by Little Hoover Commission in June 2009,
the state lacks sufficient oversight of bond fund
administration. Moreover, state law does not provide
adequate remedies to ensure administering entities take
appropriate corrective action."
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 1/23/12)
Association of California Water Agencies
Little Hoover Commission
AGB:mw 1/23/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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