Existing law prescribes the powers and duties of the city treasurer.

This bill would revise those powers and duties by deleting gender-specific personal pronouns and by making other conforming changes.

Existing law requires the city treasurer to comply with all laws governing the deposit and securing of public funds and the handling of trust funds in his or her possession.

This bill would require the city treasurer, if the city has issued bonds, to use a system of accounting and auditing that adheres to generally accepted accounting principles.

Existing law prescribes the powers and duties of the city treasurer.

This bill would revise those powers and duties by deleting gender-specific personal pronouns and by making other conforming changes.

Existing law requires the city treasurer to comply with all laws governing the deposit and securing of public funds and the handling of trust funds in his or her possession.

This bill would require the city treasurer, if the city has issued bonds, to use a system of accounting and auditing that adheres to generally accepted accounting principles.

Existing law requires the city treasurer to comply with all laws governing the deposit and securing of public funds and the handling of trust funds in his or her possession.

This bill would require the city treasurer, if the city has issued bonds, to use a system of accounting and auditing that adheres to generally accepted accounting principles. This bill would also make nonsubstantive changes to this provision.

Existing law requires the city treasurer to comply with all laws governing the deposit and securing of public funds and the handling of trust funds in his or her possession.

This bill would require the city treasurer, if the city has issued bonds, to use a system of accounting and auditing that adheres to generally accepted accounting principles. This bill would also make nonsubstantive changes to this provision.

 UNFINISHED BUSINESS  

Bill No: SB 742

Author:

:

Vote:

SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 4/19/17

AYES: McGuire, Nguyen, Beall, Hernandez, Hertzberg, Lara, Moorlach

SENATE FLOOR: 36-0, 4/27/17 (Consent)

AYES: Allen, Anderson, Atkins, Bates, Beall, Bradford, Cannella, De León, Dodd, Fuller, Gaines, Galgiani, Glazer, Hernandez, Hertzberg, Hill, Jackson, Lara, Leyva, McGuire, Mendoza, Mitchell, Monning, Moorlach, Morrell, Newman, Nguyen, Nielsen, Pan, Roth, Skinner, Stern, Stone, Wieckowski, Wiener, Wilk

NO VOTE RECORDED: Berryhill, Hueso, Portantino, Vidak

ASSEMBLY FLOOR: 73-0, 6/29/17 - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST:

This bill requires the city treasurer, if the city has issued bonds, to use a system of accounting and auditing that adheres to generally accepted accounting principles.

Assembly Amendments

remove gender-specific pronouns from sections describing the powers and duties of city treasurers.

ANALYSIS:

Existing law:

1. Requires the city treasurer to do the following:
   1. Receive and safely keep all money coming into the hands of the treasurer;
   2. Comply with all laws governing the deposit and securing of public funds and the handling of trust funds in their possession;
   3. Pay out money only on warrants signed by legally designated persons;
   4. Submit, at least once each month, to the city clerk a written report and accounting of all receipts, disbursements, and fund balances, and file a copy with the legislative body; and,
   5. Perfom duties relative to the collection of city taxes and license fees.
2. Authorizes the city treasurer to appoint deputies, as specified.

This bill:

1. Requires the city treasurer, if the city has issued bonds, to use a system of accounting and auditing that adheres to generally accepted accounting principles.
2. Replaces the terms "he" and "his" with "his or her" and "the city treasurer" in sections of code describing the powers and duties of city treasurers.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 6/30/17)

State Treasurer’s Office

Howard Jarvis Taxpayers Association

League of California Cities

OPPOSITION: (Verified 6/30/17)

None received

ASSEMBLY FLOOR: 73-0, 6/29/17

AYES: Acosta, Aguiar-Curry, Travis Allen, Arambula, Baker, Berman, Bigelow, Bloom, Bonta, Burke, Caballero, Cervantes, Chau, Chávez, Chen, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Dababneh, Dahle, Daly, Eggman, Flora, Frazier, Friedman, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez Fletcher, Grayson, Harper, Holden, Irwin, Jones-Sawyer, Kalra, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Quirk, Quirk-Silva, Reyes, Ridley-Thomas, Rodriguez, Rubio, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Voepel, Waldron, Wood, Rendon

NO VOTE RECORDED: Bocanegra, Brough, Calderon, Fong, Gomez, Gray, Weber

Prepared by:

6/30/17 10:41:52

**** END ****

SENATE THIRD READING

STR Bill Id:SB 742

Author:(Moorlach)

As Amended Ver:June 19, 2017

Majority vote

SENATE VOTE: 36-0

SUMMARY: Requires the city treasurer, if the city has issued bonds, to use a system of accounting and auditing that adheres to generally accepted accounting principles. Specifically, this bill:

1. Requires the city treasurer, if the city has issued bonds, to use a system of accounting and auditing that adheres to generally accepted accounting principles.
2. Replaces the terms "he" and "his" with "his or her" and "the city treasurer".

EXISTING LAW:

1. Requires the city treasurer to do the following:
   1. Receive and safely keep all money coming into the hands of the treasurer;
   2. Comply with all laws governing the deposit and securing of public funds and the handling of trust funds in their possession;
   3. Pay out money only on warrants signed by legally designated persons;
   4. Submit, at least once each month, to the city clerk a written report and accounting of all receipts, disbursements, and fund balances, and file a copy with the legislative body; and,
   5. Perfom duties relative to the collection of city taxes and license fees.
2. Authorizes the city treasurer to appoint deputies, as specified.

FISCAL EFFECT: None

COMMENTS:

1. Background and Bill Summary. The Governmental Accounting Standards Board, a national nonprofit organization, develops standards for preparing financial statements and other financial reporting that local governments may follow, known as generally accepted accounting principles (GAAP). The GAAP establishes uniform minimum standards and practices for financial accounting and reporting, such as the financial data that should be tallied and disclosed in a financial statement and the manner in which that data is compiled and presented.

California does not uniformly require GAAP for all local governments. The State Controller's Office establishes uniform accounting procedures that must conform to GAAP, but these accounting procedures only apply to counties and special districts, not cities. Existing law requires annual financial reports that local governments file with the Controller to contain underlying data from audited financial statements prepared in accordance with GAAP, if this data is available.

This bill requires the city treasurer, if the city has issued bonds, to use a system of accounting and auditing that adheres to GAAP. This bill is author-sponsored.

1. Author's Statement. According to the author, "…standards were recently updated to require the reporting of public pension obligations in financial reports. Many cities throughout California have large unfunded pension liabilities and should report those obligations in the consistent and transparent manner that GAAP standards require. Full knowledge of all debts and liabilities is imperative to making an informed choice on whether or not to purchase city bonds. Without the requirement to follow GAAP, cities may fail to disclose future pension obligations, leaving investors with the potential for a highly inaccurate understanding of the city's financial situation. Senate Bill 742 would provide investors and the public with this necessary transparency and consistency in cities' financial records."
2. Arguments in Support. California State Treasurer, John Chiang states, "This requirement would provide investors and the public with necessary transparency and consistency in cities' financial records. Under current California Government Code, there is no requirement for cities to follow GAAP. In absence of requirements to comply with GAAP, cities may be permitted to adopt an alternative method of accounting. This lack of uniformity in accounting methods can cause confusion when evaluating or comparing cities. Additionally, since cities can change their accounting methods, financial information may be inconsistent and therefore less transparent to the public."
3. Arguments in Opposition. None on file.

Analysis Prepared by: Misa Lennox / L. GOV. / (916) 319-3958 FN: 0000995

Date of Hearing: June 14, 2017

ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT

Cecilia Aguiar-Curry, Chair

SBPCA Bill Id:SB 742

Author:(Moorlach) – As Introduced Ver:February 17, 2017

SENATE VOTE: 36-0

SUBJECT: City treasurers.

SUMMARY: Requires the city treasurer, if the city has issued bonds, to use a system of accounting and auditing that adheres to generally accepted accounting principles. Specifically, this bill:

1. Requires the city treasurer, if the city has issued bonds, to use a system of accounting and auditing that adheres to generally accepted accounting principles.
2. Replaces the terms "he" and "his" with "his or her" and "the treasurer".

EXISTING LAW:

1. Requires the city treasurer to do the following:
   1. Receive and safely keep all money coming into the hands of the treasurer;
   2. Comply with all laws governing the deposit and securing of public funds and the handling of trust funds in their possession;
   3. Pay out money only on warrants signed by legally designated persons;
   4. Submit, at least once each month, to the city clerk a written report and accounting of all receipts, disbursements, and fund balances, and file a copy with the legislative body; and,
   5. Perfom duties relative to the collection of city taxes and license fees.
2. Authorizes the city treasurer to appoint deputies, as specified.

FISCAL EFFECT: None

COMMENTS:

1. Background and Bill Summary. The Governmental Accounting Standards Board, a national nonprofit organization, develops standards for preparing financial statements and other financial reporting that local governments may follow, known as generally accepted accounting principles (GAAP). The GAAP establishes uniform minimum standards and practices for financial accounting and reporting, such as the financial data that should be tallied and disclosed in a financial statement and the manner in which that data is compiled and presented.

California does not uniformly require GAAP for all local governments. The State Controller’s Office establishes uniform accounting procedures that must conform to GAAP, but these accounting procedures only apply to counties and special districts, not cities. Existing law requires annual financial reports that local governments file with the Controller to contain underlying data from audited financial statements prepared in accordance with GAAP, if this data is available.

This bill requires the city treasurer, if the city has issued bonds, to use a system of accounting and auditing that adheres to GAAP. This bill is author-sponsored.

1. Author's Statement. According to the author, "…standards were recently updated to require the reporting of public pension obligations in financial reports. Many cities throughout California have large unfunded pension liabilities and should report those obligations in the consistent and transparent manner that GAAP standards require. Full knowledge of all debts and liabilities is imperative to making an informed choice on whether or not to purchase city bonds. Without the requirement to follow GAAP, cities may fail to disclose future pension obligations, leaving investors with the potential for a highly inaccurate understanding of the city’s financial situation. Senate Bill 742 would provide investors and the public with this necessary transparency and consistency in cities’ financial records."
2. Policy Consideration and Committee Amendments. The statutes which govern the duties of a city treasurer have not been updated since 1949. The Committee may wish to consider, beyond the scope of this bill, if these statutes should be modernized to more closely reflect the duties of a city treasurer and to recognize that changes in technology alone warrant an examination of these statutes. Additionally, the Committee might wish to note that the pronouns "he" and "his" are used in reference to a city treasurer in several sections of existing law surrounding the provision amended by this bill.

The Committee may wish to ask the author to accept amendments to strike references to "he" and "his" referring to a city treasurer in Government Code Sections 41001 through 41007.

1. Arguments in Support. California State Treasurer, John Chiang states, "This requirement would provide investors and the public with necessary transparency and consistency in cities' financial records. Under current California Government Code, there is no requirement for cities to follow GAAP. In absence of requirements to comply with GAAP, cities may be permitted to adopt an alternative method of accounting. This lack of uniformity in accounting methods can cause confusion when evaluating or comparing cities. Additionally, since cities can change their accounting methods, financial information may be inconsistent and therefore less transparent to the public."
2. Arguments in Opposition. None on file.

REGISTERED SUPPORT / OPPOSITION:

Support Opposition

Hon. John Chiang, California State Treasurer None on File

Howard Jarvis Taxpayers Association

League of California Cities

Analysis Prepared by: Misa Lennox / L. GOV. / (916) 319-3958

 CONSENT 

Bill No: SB 742

Author: Moorlach (R)

Introduced: 2/17/17

Vote: 21

SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 4/19/17

AYES: McGuire, Nguyen, Beall, Hernandez, Hertzberg, Lara, Moorlach

SUBJECT: City treasurers

SOURCE: Author

DIGEST: This bill requires city treasurers to adhere to generally accepted accounting principles if their city issues bonds.

ANALYSIS:

Existing law:

1. Establishes a city treasurer as an officer in each general law city, charged with the collection, disbursement, safekeeping, and accounting of city funds.
2. Requires local agencies file annual financial transaction reports with the State Controller’s Office that document their revenues, expenditures, long-term indebtedness, appropriation limits, and total annual appropriations subject to those limits.
3. Requires the State Controller to prepare and publish annual reports on the financial transactions of cities, counties, and special districts, along with any other information deemed to be of public interest.
4. Directs the State Controller to develop accounting standards for counties and special districts.

This bill requires a city treasurer to use a system of auditing and accounting that adheres to generally accepted accounting principles (GAAP), if that city has issued bonds.

Background

Accounting practices vary across governmental entities in California. The Governmental Accounting Standards Board, a national nonprofit organization, develops standards for preparing financial statements and other financial reporting that local governments can choose to follow, known as generally accepted accounting principles. The GAAP establish uniform minimum standards and practices for financial accounting and reporting, such as the financial data should be tallied and disclosed in a financial statement and the manner in which that data is compiled and presented. Because they follow these standards, GAAP provide the public, elected officials, investors, and creditors with confidence that government’s financial accounting is being performed accurately and correctly. As a result, government agencies that follow GAAP can see lower interest rates when they borrow money.

California does not uniformly require GAAP for all local governments. The State Controller’s Office sets uniform accounting procedures that must conform to GAAP, but these accounting procedures only apply to counties and special districts, not cities. More than three-quarters of the cities in the state had issued bonds as of the end of 2015. The author wants city treasurers in cities that issue bonds to comply with GAAP.

Comments

Purpose of the bill. As the finances of government agencies have gotten more complex, standards for accounting procedures have evolved as well. The current best practice for local agencies is to conform to GAAP, and state law already requires counties and special districts to meet these standards by following the uniform accounting procedures established by the State Controller. However, cities are not currently subject to these requirements. Although many cities voluntarily conform to GAAP, some do not. As a result, they can face consequences such as higher borrowing costs and lower public confidence in their finances. SB 742 closes this gap by requiring city treasurers to conform to GAAP if they issue bonds. This is already a best practice; SB 742 ensures that these practices are uniformly adopted by cities across the state.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 4/21/17)

State Treasurer’s Office

League of California Cities

OPPOSITION: (Verified 4/21/17)

None received

Prepared by: Anton Favorini-Csorba / GOV. & F. / (916) 651-4119

4/21/17 12:50:37

**** END ****

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Mike McGuire, Chair

2017 - 2018 Regular

City treasurers

Requires city treasurers to adhere to generally accepted accounting principles if their city issues bonds.

Background

State law establishes a city treasurer as an officer in each general law city. City treasurers are elected by default, but general law cities can make the city treasurer an appointed position upon approval by voters. Charter cities may provide for a different structure, as specified by their charter. The city treasurer is charged with the collection, disbursement, safekeeping, and accounting of city funds and must comply with all laws governing the deposit, securing, and handling of those funds. Each month, the city treasurer must submit an accounting of all receipts, disbursements, and fund balances to the city clerk and the city council, along with a written report.

Since the 1940s, local agencies have been required to file annual financial transaction reports with the State Controller’s Office. These reports document local agencies’ revenues, expenditures, long-term indebtedness, appropriation limits, and total annual appropriations subject to those limits. The Controller is required to prepare and publish annual reports on the financial transactions of cities, counties, and special districts, along with any other information deemed to be of public interest (SB 1138 Fletcher, 1945).

Accounting practices vary across governmental entities in California. The Governmental Accounting Standards Board, a national nonprofit organization, develops standards for preparing financial statements and other financial reporting that local governments can choose to follow, known as generally accepted accounting principles (GAAP). The GAAP establish uniform minimum standards and practices for financial accounting and reporting, such as the financial data should be tallied and disclosed in a financial statement and the manner in which that data is compiled and presented. Because they follow these standards, GAAP provide the public, elected officials, investors, and creditors with confidence that government’s financial accounting is being performed accurately and correctly. As a result, government agencies that follow GAAP can see lower interest rates when they borrow money.

California does not uniformly require GAAP for all local governments. The State Controller’s Office sets uniform accounting procedures that must conform to GAAP, but these accounting procedures only apply to counties and special districts, not cities. The financial reports that local governments must file with the Controller must contain underlying data from audited financial statements prepared in accordance with GAAP, if this data is available.

More than three-quarters of the cities in the state had issued bonds as of the end of 2015. The author wants city treasurers in cities that issue bonds to comply with GAAP.

Proposed Law

Senate Bill 742 requires a city treasurer to use a system of auditing and accounting that adheres to generally accepted accounting principles, if that city has issued bonds.

State Revenue Impact

No estimate.

Comments

1. Purpose of the bill. As the finances of government agencies have gotten more complex, standards for accounting procedures have evolved as well. The current best practice for local agencies is to conform to GAAP, and state law already requires counties and special districts to meet these standards by following the uniform accounting procedures established by the State Controller. However, cities are not currently subject to these requirements. Although many cities voluntarily conform to GAAP, some do not. As a result, they can face consequences such as higher borrowing costs and lower public confidence in their finances. SB 742 closes this gap by requiring city treasurers to conform to GAAP if they issue bonds. This is already a best practice; SB 742 ensures that these practices are uniformly adopted by cities across the state.

2. Time for an update? The statutes that govern city treasurer duties have not been updated in any manner since 1949. SB 742 modifies one of the seven provisions of law outlining city treasurer duties to reflect the modern consensus on how to properly keep a city’s books, but it leaves the others unchanged. For example, current law requires the city treasurer to submit to the city clerk and the city council a written report and accounting of all receipts, disbursements, and fund balances. This requirement may be outdated given the technology available to local governments for electronic transmittal of records. But these laws are still on the books. It may be time to revisit these statutes more comprehensively.

Support and Opposition

(4/13/17)

Support: State Treasurer’s Office.

Opposition: Unknown.

-- END --