BILL ANALYSIS �
Bill No: AB
1583
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Lou Correa, Chair
2013-2014 Regular Session
Staff Analysis
AB 1583 Author: Allen
As Amended: May 27, 2014
Hearing Date: June 10, 2014
Consultant: Art Terzakis
SUBJECT
State Controller: outside accounts
DESCRIPTION
AB 1583 requires the State Controller's Office (SCO) to
submit an annual report to the Legislature on all funds
maintained in accounts outside the State Treasury System.
Specifically, this measure:
1)Stipulates that the SCO must prepare and submit to the
Legislature and the Department of Finance an annual
report on bank accounts and savings and loan association
accounts outside the State Treasury System.
2)Requires the report to include all of the following for
each account: (a) the account name and balance; and, (b)
the source of the authorization for establishing the
account.
3)Also, provides that if a state agency receives revenues
for state costs under a cost recovery statute, the agency
must account for those revenues to the SCO for deposit
into the State Treasury.
EXISTING LAW
Existing law creates the State Treasury System to deposit
state money held by state agencies prior to expenditure.
Existing law requires the Controller to submit specified
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fiscal reports, including, among others, an annual report
to the Governor relating to the state's revenues and
expenditures during the preceding fiscal year and a
quarterly report to the Legislature on the General Fund
that compares state revenues and expenditures for that
quarter with the Budget Act, and other expenditures
authorized pursuant to statute.
Existing law provides that all money belonging to the state
received from any source by any state agency shall be
accounted for to the Controller at the close of each month,
or more frequently if required by the Controller or the
Department of Finance, in such form as he/she prescribes,
and on the order of the Controller be paid into the
Treasury and credited to the General Fund, provided that
amounts received as partial or full reimbursement for
services furnished shall be credited to the applicable
appropriation.
Existing law allows state agencies to seek approval from
the Department of Finance to open outside accounts that
have benefits and efficiencies not available through the
State Treasury System, such as the ability to process
credit card receipts.
BACKGROUND
California State Auditor Report: In an October 2013 report
titled Accounts Outside the State's Centralized Treasury
System, the California State Auditor discovered that of the
roughly $55 billion in the possession or control of the
State, 14% or $9.3 billion, was maintained in nearly 1,400
bank accounts outside the State Treasury System. 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.
Certain departments, agencies, and other entities may need
to establish outside accounts because they must deal with
funds held in trust for others or for the purpose of
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.
The California State Auditor's review of outside accounts
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noted the following key findings:
Most of the money in outside accounts is held in
accounts authorized by statute and a large number of
these accounts with large balances have been
established to hold money in trust for others.
While holding state money in outside accounts
provides for quick electronic funds transfers and
allows for efficiently processing credit card
transactions, there is an increased risk of
mismanagement and the potential for higher costs
related to these accounts.
Outside accounts are subject to fewer statewide
controls and there is risk that banks holding money in
outside accounts for state agencies may not maintain
the required level of collateral. Additionally, a
state agency with outside accounts may also incur
higher bank fees than necessary.
The control agencies do not adequately track which
state agencies have outside accounts nor do they
adequately ensure that all agencies report on such
accounts and, therefore, failed to identify some
omissions.
Although state agencies generally complied with
requirements for establishing outside accounts, they
did not always completely or accurately report outside
accounts as required - some failed to report the
balances of these accounts.
With the exception of the California Department of
Forestry and Fire Protection (Cal Fire), the state
agencies tested had established proper controls over
the handling of revenue. However, Cal Fire
established an outside account without statutory
authority or Department of Finance approval,
circumvented its accounting and budgeting processes,
and did not follow state policies for equipment
purchases.
Purpose of AB 1583: According to the author's office, this
measure is intended to implement one of the legislative
recommendations made by the California State Auditor and
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help remedy the identified problems cited in the review of
outside accounts. Additionally, the author's office notes
that AB 1583 would clarify that "cost recovery" funds are
to be spent according to state law.
Writing in support of this measure, the Orange County
Taxpayers Association states that "considering the amount
of taxpayers' money that flows in and out of state
government, it is imperative that we account for all of it
scrupulously. It is reasonable to presume that expanding
the reporting on outside accounts may help us achieve that
goal."
PRIOR/RELATED LEGISLATION
SB 1074 (Knight), 2013-14 Session. Would 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 transfer
or use state money outside of the State Treasury System,
except as authorized pursuant to a valid appropriation or
to the reversion requirements set forth in statute.
(Pending in Assembly policy committee)
SB 898 (Cannella), 2013-14 Session. Would require each
state agency, department, and entity to provide the
Treasurer's Office with its employer identification number
to be used to monitor those state bank accounts and money
authorized to be outside the centralized State Treasury
System. (Pending in Assembly policy committee)
SUPPORT: As of June 6, 2014:
Orange County Taxpayers Association
OPPOSE: None on file as of June 6, 2014.
FISCAL COMMITTEE: Senate Appropriations Committee
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