Bill Text: CA SB617 | 2011-2012 | Regular Session | Introduced

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: State government: financial and administrative

Spectrum: Partisan Bill (Democrat 3-0)

Status: (Passed) 2011-10-06 - Chaptered by Secretary of State. Chapter 496, Statutes of 2011. [SB617 Detail]

Download: California-2011-SB617-Introduced.html

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BILL NUMBER: SB 617	INTRODUCED
	BILL TEXT


INTRODUCED BY   Senator Calderon

                        FEBRUARY 18, 2011

   An act to amend Sections 13400, 13401, 13402, 13403, 13404, 13405,
13406, and 13407 of the Government Code, relating to state
government.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 617, as introduced, Calderon. State government: financial
accountability.
   The Financial Integrity and State Manager's Accountability Act of
1983 provides that state agency heads are responsible for the
establishment and maintenance of a system or systems of internal
accounting and administrative control within their agencies, as
specified.
   This bill would rename that act the State Government Fraud
Prevention, Detection, and Financial Integrity Monitoring and
Accountability Act of 2011, and require that effective, independent,
and ongoing monitoring of the internal accounting and administrative
controls of state agencies be included within that system or systems.

   Existing law requires state agencies to prepare and submit a
report to the Legislature and other state officials on the adequacy
of the agency's systems of internal accounting and administrative
control by December 31 of each odd-numbered fiscal year and to
identify any material inadequacy or material weakness in these
systems and implement a plan and schedule for corrections.
   This bill would sunset that reporting requirement by January 1,
2014, unless a later enacted statute extends that date.
   Existing law requires that the Director of Finance establish a
general framework to guide state agencies in conducting internal
reviews of their systems of internal accounting and administrative
controls.
   This bill would require that the Director of Finance also
establish a general framework of recommended practices to guide state
agencies in conducting active ongoing monitoring of processes for
internal accounting and administrative control.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 13400 of the Government Code is amended to
read:
   13400.  This act shall be known and may be cited as the  State
Government Fraud Prevention, Detection, and  Financial
Integrity  Monitoring  and  State Manager's
 Accountability Act of  1983   2011
 .
  SEC. 2.  Section 13401 of the Government Code is amended to read:
   13401.  (a) The Legislature hereby finds  that 
 the following  : 
   (1) 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.  
   (1) 
    (2)  Fraud and errors in state programs are more likely
to occur from a lack of effective systems of internal accounting and
administrative control in the state agencies  when active
monitoring measures are not maintained to ensure that accounting and
administrative controls are functioning properly  . 
   (2) 
    (3)  Effective systems of internal accounting and
administrative control provide the basic foundation upon which a
structure of public accountability must be built. 
   (3) 
    (4)  Effective systems of internal accounting and
administrative control are necessary to assure that state assets and
funds are adequately safeguarded, as well as to produce reliable
financial information for the agency. 
   (4) 
    (5)  Systems of internal accounting and administrative
control are necessarily dynamic and must be  routinely monitored,
 continuously evaluated  ,  and, where necessary,
improved. 
   (5) 
    (6) Reports regarding the  continuing  adequacy
of the systems of internal accounting and administrative control of
each state agency are necessary to enable the executive branch, the
Legislature, and the public to evaluate the agency's performance of
its public responsibilities and accountability.
   (b) The Legislature declares it to be the policy of the State of
California that:
   (1) Each state agency must maintain effective systems of internal
accounting and administrative control as an integral part of its
management practices.
   (2) The systems of internal accounting and administrative control
of each state agency shall be evaluated on an ongoing basis 
through regular and ongoing monitoring processes  and, when
detected, weaknesses must be promptly corrected.
   (3) All levels of management of the state agencies must be
involved in assessing and strengthening the systems of internal
accounting and administrative control to minimize fraud, errors,
abuse, and waste of government funds  , however, key monitoring
processes should be structured to ensure the independence and
objectivity of persons tasked with such monitoring  .
  SEC. 3.  Section 13402 of the Government Code is amended to read:
   13402.  State agency heads are responsible for the establishment
and maintenance of a system or systems of internal accounting  ,
  and  administrative control  , and
effective, independent, and objective ongoing monitoring of the
internal accounting and administrative controls  within their
agencies. This responsibility includes documenting the system,
communicating system requirements to employees, and assuring that the
system is functioning as prescribed and is modified, as appropriate,
for changes in conditions.
  SEC. 4.  Section 13403 of the Government Code is amended to read:
   13403.  (a) Internal accounting and administrative controls ,
if maintained and reinforced through effective monitoring systems and
processes,  are the methods through which reasonable assurances
can be given that measures adopted by state agency heads to
safeguard assets, check the accuracy and reliability of accounting
data, promote operational efficiency, and encourage adherence to
prescribed managerial policies are being followed. The elements of a
satisfactory system of internal accounting and administrative
control, shall include, but are not limited to, the following:
   (1) A plan of organization that provides segregation of duties
appropriate for proper safeguarding of state agency assets.
   (2) A plan that limits access to state agency assets to authorized
personnel who require these assets in the performance of their
assigned duties.
   (3) A system of authorization and recordkeeping procedures
adequate to provide effective accounting control over assets,
liabilities, revenues, and expenditures.
   (4) An established system of practices to be followed in
performance of duties and functions in each of the state agencies.
   (5) Personnel of a quality commensurate with their
responsibilities.
   (6) An effective system of internal review.
   (b) State agency heads shall follow these standards of internal
accounting and administrative control in carrying out the
requirements of Section 13402. 
   (c) Monitoring systems and processes are vital to the following:
 
   (1) Ensuring that routine application of internal controls do not
diminish their efficacy over time.  
   (2) Providing timely notice and opportunity for correction of
emerging weaknesses with established internal controls.  
   (3) Facilitating public resources and other decisions by ensuring
availability of accurate and reliable information.  
   (4) Facilitating production of timely and accurate financial
reports.  
   (d) State agency heads shall implement systems and processes to
ensure the independence and objectivity of the monitoring of internal
accounting and administrative control as an ongoing activity in
carrying out the requirements of Section 13402. 
  SEC. 5.  Section 13404 of the Government Code is amended to read:
   13404.  As used in this chapter:
   (a) "Governor" means the Governor of California.
   (b) "Controller" means the Controller of California.
   (c) "Director" means the Director of Finance. 
   (d) "Attorney General" means the Attorney General of California.
 
   (e) "Treasurer" means the Treasurer of California. 
  SEC. 6.  Section 13405 of the Government Code is amended to read:
   13405.  (a) To ensure that the requirements of this chapter are
fully complied with, the head of each state agency that the director
determines is covered by this section shall, on a biennial basis but
no later than December 31 of each odd-numbered year, conduct an
internal review and prepare a report on the adequacy of the agency's
systems of internal accounting  ,   and 
administrative control  , and monitoring practices  in
accordance with the guide prepared by the director pursuant to
subdivision (d).
   (b) The report, including the state agency's response to review
recommendations, shall be signed by the head of the agency and
addressed to the agency secretary, or the director for agencies
without a secretary. Copies of the reports shall be submitted to the
Legislature, the State Auditor,  the Controller, the Treasurer,
the Attorney General,  the Governor, the director, and to the
State Library where they shall be available for public inspection.
   (c) The report shall identify any material inadequacy or material
weakness in an agency's systems of internal accounting and
administrative control that prevents the head of the agency from
stating that the agency's systems comply with this chapter. No later
than 30 days after the report is submitted, the agency shall provide
to the director a plan and schedule for correcting the identified
inadequacies and weaknesses, which shall be updated every six months
until all corrections are completed.
   (d) The director, in consultation with the State Auditor and the
Controller, shall establish, and may modify from time to time as
necessary, a system of reporting and a general framework to guide
state agencies in conducting internal reviews of their systems of
internal accounting and administrative control. 
   (e) The director, in consultation with the State Auditor and the
Controller, shall establish, and may modify from time to time as
necessary, a general framework of recommended practices to guide
state agencies in conducting active, ongoing monitoring of processes
for internal accounting and administrative control. 
   (f) (1) The requirement for submitting a report imposed under
subdivision (b) is inoperative on January 1, 2014, unless a later
enacted statute extends that date.  
   (2) A report to be submitted pursuant to subdivision (b) shall be
submitted in compliance with Section 9795. 
  SEC. 7.  Section 13406 of the Government Code is amended to read:
   13406.  (a) The head of the internal audit staff of a state agency
or a division, as specified by the director, or, in the event there
is no internal audit function, a professional accountant, if
available on the staff, designated as the internal control person by
the head of the state agency or a division, shall receive and
investigate any allegation that an employee of the agency provided
false or misleading information in connection with the review of the
agency's systems of internal accounting and administrative control or
in connection with the preparation of the biennial report on the
systems of internal accounting  ,   and
administrative control  , and monitoring practices  .
   (b) If, in connection with any investigation under subdivision
(a), the head of the internal audit staff or the designated internal
control person determines that there is reasonable cause to believe
that false or misleading information was provided, he or she shall
report in writing that determination to the head of the agency or the
division.
   (c) The head of the agency or division shall review any matter
referred to him or her under subdivision (b), shall take such
disciplinary or corrective action as he or she deems necessary, and
shall forward a copy of the report, indicating therein the action
taken, to the director within 90 days of the date of the report.
  SEC. 8.  Section 13407 of the Government Code is amended to read:
   13407.  Because sound internal  accounting and administrative
 controls and the  regular and ongoing  monitoring of
those internal controls significantly inhibits waste of resources and
thereby creates savings, the director and agencies and divisions
shall carry out the provisions of this chapter by using existing
resources.