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The Role of the California State Controller

The Controller is a member of numerous financing authorities including the Franchise Tax Board and Board of Equalization

By Chris Micheli, August 19, 2019 6:30 am

As the chief fiscal officer of California, the fifth largest economy in the world, the Controller is responsible for accountability and disbursement of the state’s financial resources, and conducts independent audits of government agencies that spend state funds. This position also administers the payroll system for state government employees and California State University employee, and the Controller serves on 70 boards and commissions with authority ranging from state public land management to crime victim compensation.

In addition, the Controller is a member of numerous financing authorities, as well as fiscal and financial oversight entities including the Franchise Tax Board and Board of Equalization. The Controller also serves on the boards of the nation’s two largest public pension funds. The Controller’s Office also handles the state’s unclaimed property work.

Article 1 provides general provisions in Section 12402 – 12406. The Controller may organize his or her office and appoint deputy controllers, division chiefs and other subordinate officers and employees to carry out the official duties. (Section 12402) The Controller may designate any employees to administer oaths for documents that are required to be filed with his or her office. (Section 12403)

All deputy controllers, chiefs and others are civil executive officers. The Controller may designate other officers or employees of the office to serve as civil executive officers while performing their duties. (Section 12404) The Controller is the head of a department and that department is the Controller’s Office. (Section 12405) The Governor must appoint three deputies in the Controller’s office who are exempt from state civil service. (Section 12406)

The duties of the Controller are set forth in Article 2 found in Sections 12410 – 12431. The Controller is in charge of the fiscal concerns of the state and the Controller must audit all claims against the state and may audit state disbursements. (Section 12410) The Controller must receive every audit report prepared for any local agency in compliance with the federal Single Audit Act of 1984 and must transmit the report to the designated state agency. (Section 12410.5)

An audit for any local agency must be made by a certified public accountant licensed and in good standing with the California Board of Accountancy. (Section 12410.6) The Controller must suggest plans for improving and managing the public revenues. (Section 12411) The Controller must keep and state all accounts in which the State is interests and keep a separate account for each appropriation. (Section 12412)

The Controller must account for expenditures under the Budget Act, as well as all federal funds. The files must be made available for the fiscal data system. (Section 12412.1) The Controller must keep an account between the state and Treasurer. (Section 12413) The Controller may require any person to be sworn before him or her. (Section 12415)

The Controller must require all persons who have received any money belonging to the State. (Section 12416) The Controller may require all persons who have received monies must render statements. (Section 12417) The Controller must direct and superintend the collection of all monies due to the State and sue in its name. (Section 12418) The Controller must state an account with specifies persons. (Section 12419) The Controller must develop an account with certain persons. (Section 12419)

The Controller must develop a program with the Franchise Tax Board to provide for multiple offsets with adjustable priorities and the ability to cross-match the liable person’s social security number. (Section 12419.2) The Controller must offset delinquent accounts against personal income tax refunds that have been certified by the FTB.  (Section 12419.3) The State has a lien for any taxes due to the State from a person or entity upon their personal property. (Section 12419.4)

The Controller may offset any amount due to a state agency from a person or entity against any amount owing that person or entity by a state agency. (Section 12419.5) The Controller may, in his or her discretion, offset any amount due a state agency from a person or entity, against any amount owing that person or entity by any state agency. (Section 12419.5)

An amount due a state agency from a person or entity must include any amount due a community college district from a person for repayment of student financial assistance or any other proper financial obligation due to the district or a college. (Section 12419.7) The Controller may, in his or her discretion, offset any amount due a city, county, or special district from a person or entity. (Section 12419.8) An amount due a state agency from a person or entity must include any amount due an educational institution from a person for repayment of federally subsidized student loans. (Section 12419.9)

The Controller must, to the extent feasible, offset any amount overdue and unpaid for a fine, penalty, assessment, bail, vehicle parking penalty, or court-ordered reimbursement for court-related services, from a person or entity, against any amount owing the person or entity by a state agency on a claim for a refund from the Franchise Tax Board under the Personal Income Tax Law or the Bank and Corporation Tax Law, from winnings in the California State Lottery, or a cash payment of a claim for unclaimed property held by the state. (Section 12419.10)

The Labor Commissioner must submit a request to the Controller to offset amounts due from a person or entity as the result of any judgment issued that is not satisfied within 90 days of the issuance of a final judgment. (Section 12419.11)

The Controller must, to the extent feasible, offset any amount overdue and unpaid for a bridge toll or a high-occupancy toll lane fee and any interest, fine, penalty, bail, collection fee, or other charge on account of nonpayment of the bridge toll or high-occupancy toll lane fee as and when due to a government entity entitled thereto, from a person or entity, against any amount owing the person or entity by a state agency on a claim for a refund from the Franchise Tax Board under the Personal Income Tax Law or the Bank and Corporation Tax Law or from winnings in the California State Lottery. (Section 12419.12)

The Controller must, upon execution of a reciprocal agreement between the State Board of Equalization or the Franchise Tax Board, and any other state imposing a sales and use tax, an income tax, or tax measured by income, offset any delinquent tax debt due to that other state from a person or entity, against any refund under the Sales and Use Tax Law, the Personal Income Tax Law, or the Corporation Tax Law owed to that person or entity. (Section 12419.13)

The Controller must establish special accounts for any state officer or employee requesting salary or wage deductions in order that sufficient funds may be accumulated to his or her credit for the purchase of United States savings bonds or similar United States obligations. (Section 12420.1)  

The Controller may purchase annuity contracts on behalf of any state employer under the uniform state payroll system, excluding the California State University System, that employs persons eligible to participate in an annuity contract and custodial account. (Section 12420.2) The Controller must authenticate with his official seal all warrants drawn by him, and all copies of papers issued from his office. (Section 12421)

The Controller must summon county auditors to meet with the Controller or his or her duly authorized representatives, at least once each year, as may be designated by the Controller for the purpose of discussion of problems dealing with county budget procedure, reporting of financial transactions of the counties, allocation of property tax revenues, including the Special District Augmentation Fund, and to promote uniformity of procedure in all matters pertaining to the duties of county auditors, throughout the state. (Section 124202)

The Controller must shall develop internal control guidelines applicable to each local agency to prevent and detect financial errors and fraud. (Section 12422.5) The Controller must summon county tax collectors and redemption officers or the authorized representative of any county tax collector or redemption officer to meet with the Controller or his duly authorized representatives as may be designated by the Controller for the purpose of discussion of tax collection, enforcement of taxes, and problems relating thereto, in order to promote uniformity of procedure in the collection of taxes on real and personal property throughout the State. (Section 12423)  

The Controller may render service pertinent to financial, budgetary and taxation problems and procedures for any county, city, city and county, any other political subdivision, or any district of the State upon such terms and conditions as may be agreed upon between the Controller and the governing body. (Section 12424)

Upon the submission of claims by a state agency, with the approval of the Department of General Services, the Controller may pay, from appropriations available therefor, money to the United States for costs of a project undertaken by the United States for and in behalf of, or in cooperation with, the State of California, prior to the commencement or completion of the project. (Section 12425)

Each state agency must reimburse the Controller for the costs associated with any accounting of expenditures incurred in connection with any revenue bonds, not otherwise covered. (Section 12427) In the event either the Governor or the Legislature should obtain federal approval to transfer programs receiving federal support for persons with an intellectual disability or a mental health disorder from one state department to another state department, the Controller must, upon approval of the Director of Finance, transfer to a department designated by the Governor the parts of the appropriation of the other departments that are related to programs for persons with an intellectual disability or a mental health disorder. (Section 12428)

The Controller may, with the approval of the Department of Finance, seek recovery from the federal government of Social Security contribution overpayments made with regard to the compensation of employees who were on approved leaves of absence on account of sickness. (Section 12429) Prior to the payment of any claim from funds, the Controller must require the claimant to certify in writing that it has attempted to recover its costs. (Section 12431)

Article 2.3 deals with the discharge of a state entity from a duty to collect and is set forth in Sections 12433 – 12439. Any state agency or employee required to collect any state taxes, licenses, fees, or money owing to the state for any reason that is due and payable may be discharged by the Controller from accountability for the collection of the taxes, licenses, fees, or money if the debt is uncollectible or the amount of the debt does not justify the cost of its collection. (Section 12433)

The application for a discharge under this law must be filed with the Controller and include specified information. (Section 12434) The Controller must audit the applications. (Section 12435) The Controller may discharge from accountability a state agency for accounts that do not exceed an amount specified. (Section 12436) 

A discharge granted pursuant to this law to a state agency or employee does not release any person from the payment of any tax, license, fee, or other money that is due and owing to the state. (Section 12437) A state agency is not required to collect taxes, licenses, fees, or money owing to the state for any reason if the amount to be collected is five hundred dollars or less. (Section 12438)  

The Controller may discharge the Department of Water Resources from accountability for collection of the loan issued to the Arrowhead Manor Water Company in 1980 under the California Safe Drinking Water Bond Law of 1976. (Section 12438.1) The Controller may investigate, inquire, and, if necessary, conduct hearings concerning property in the possession of the Treasurer which has escheated to the state from the estates of deceased persons pursuant to a judgment of escheat or pursuant to a distribution to the state under Section 11900 of the Probate Code. (Section 12439)

Article 3 deals with warrants and is set forth in Sections 12440 – 12440.7. The Controller must draw warrants on the Treasurer for the payment of money directed by law to be paid out of the State Treasury. (Section 12440) The trustees, in conjunction with the Controller, must implement a process that allows any campus or other unit of the university to make payments of obligations of the university from its revolving fund directly to all of its vendors. (Section 12440.1)

Article 4 deals with reports and is set forth in Sections 12460 – 12468. The Controller must submit an annual report to the Governor containing a statement of the funds of the Controller in the time, form, and manner prescribed by him or her. (Section 12460) The Controller shall release an annual report that includes specified information. (Section 12461)

The Controller must prepare a quarterly report on the General Fund comparing state revenues and expenditures for that quarter with the Budget Act, and other expenditures authorized pursuant to statute, in effect during that quarter. The reports must be submitted to the Legislature within 30 days after the end of the quarter. (Section 12461.1)  

If any state agency, department, board, or commission, which is required by statute or regulation to furnish a financial statement or report to the Controller fails to furnish a complete and accurate financial report or statement within 20 days of the date prescribed, the Controller may withhold any or all operating funds from the agency, department, board, or commission, upon 30 days prior notification in writing to the chairperson of the committee in each house which considers appropriations. (Section 12461.2)

Upon request, the Controller must give information in writing to either house of the Legislature relating to the fiscal affairs of the State or the duties of his office. (Section 12462) The Controller must include specified information on bank accounts and savings and loan association accounts outside the treasury system in the budgetary-legal basis annual report. (Section 12462.5)

The Controller must compile, publish, and make publicly available on the Controller’s Internet Web site, in a format that may be printed and downloaded, reports of the financial transactions and information on annual compensation of each county, city, and special district, respectively, within this state, together with any other matter he or she deems of public interest. (Section 12463)  

The Controller must make available annually, in a separate report, published in an electronic format on the Controller’s Web site, certain financial information about selected special districts. (Section 12463.1) The Controller must include in reports compiled and published information relating to the imposition of each locally assessed parcel tax including specified information. (Section 12463.2)

On or before May 1 of each year, the Controller must compile and publish annually reports of the financial transactions of each community redevelopment agency created pursuant to the Health and Safety Code. (Section 12463.3) On or before July 1, 2019, the Controller must publish on the Controller’s Internet Web site a comprehensive list of special districts. (Section 12463.4) If the county, city, or district reports are not made in the time, form, and manner required or there is reason to believe that a report is false, incomplete, or incorrect, the Controller must appoint a qualified accountant to make an investigation and to obtain the information required. (Section 12464)

When they are in excess of five years old, reports from county and city officials and individuals, claims, canceled and paid warrants, payroll documents, and other records may be destroyed by the Controller, with the concurrence of the Director of General Services. (Section 12465) On the first business day of each month, the Controller must furnish the Department of Finance with a statement of the amount of money in each fund of the Treasury, and the total amount as it appears upon the books of his office, together with the amount of warrants issued by him but not paid by the Treasurer, and for the payment of which there is money in the Treasury. (Section 12466)  

The Legislature finds and declares that the General Fund has experienced significant deficits in recent years due to economic factors and extraordinary demand for public services supported by the General Fund. (Section 12467) The Controller must regularly audit the apportionment and allocation by counties of property tax revenue pursuant to the Revenue and Taxation Code. (Section 12468)

Article 5 deals with the uniform state payroll system and is set forth in Sections 12470 – 12481. In conformity with the accounting system prescribed by the Department of Finance, the Controller must install and operate a uniform state payroll system for all state agencies except the California Exposition and State Fair and the University of California. (Section 12470) The uniform state pay roll system must provide adequate accounting procedures to enable each state agency to properly account salary and wage expenditures under the uniform state accounting system. (Section 12471) 

The uniform state payroll system may provide for the fixing of staggered payroll periods, and designated days of the month on which permanent monthly salaried employees shall be paid for the preceding payroll period. (Section 12472) On and after January 1, 2010, payments to employees made through the Uniform State Payroll System for master payroll paid on June 30 of each year must be issue dated on July 1, provided that employees shall, in any event, be paid promptly. (Section 12472.5)

The pay roll period of employees of a state agency must not be changed by inclusion of the agency into the uniform state pay roll system or by any revision or modification of the system unless notice of the proposed change has been given to each employee who will be affected by such change in the form and manner prescribed by the Controller not less than 60 days prior to the effective date of the change. (Section 12473)

The Controller must establish and maintain a payroll roster of all persons employed by every state agency except the University of California and may establish and maintain a roster of all established positions. (Section 12474) Each appointing power must correctly and promptly certify to the Controller all changes, modifications, additions and deletions to the pay roll roster in compliance with all applicable civil service, fiscal, and other pertinent laws, rules, and regulations. (Section 12475) 

The Controller may audit the uniform state pay roll system, the State Pay Roll Revolving Fund, and related records of state agencies within the uniform state pay roll system, in such manner as the Controller may determine. (Section 12476) Rules and regulations adopted under this must be distributed in the form and manner as the Controller determines. (Section 12477)

Upon receipt of proof, satisfactory to the Controller, that a payroll warrant issued by the Controller has been lost or destroyed prior to its delivery to the employee to whom it is payable, the Controller must, upon certification by the payee’s appointing power, issue a replacement warrant in payment of the same amount, without requiring a bond from the payee, and any loss incurred in connection therewith shall be charged against the account from which the payment was derived. (Section 12478)  

An employee of the state may file with his or her appointing power a designation of a person or persons for receipt of employee warrants upon death. The designation shall control who is entitled to receive the warrants that would have been payable to the decedent had he or she survived. (Section 12479) Officers and employees of the state may authorize the direct deposit by electronic fund transfer of their salary or wages, after any withholding required by law and authorized deductions, into an account at the financial institution of their choice under a program for direct deposit by electronic transfer. (Section 12480)  

The Controller must make an agreement with one or more financial institutions participating in the Automated Clearing House pursuant to the local rules, and must establish a program, for direct deposit by electronic fund transfer of the salary or wages, after any withholding required by law and authorized deductions, of officers and employees of the state who authorize the direct deposit thereof by electronic fund transfer into the person’s account at the financial institution of his or her choice. (Section 12481)

Chris Micheli

Chris Micheli is a lobbyist with Aprea & Micheli, as well as an Adjunct Professor of Law at the University of the Pacific McGeorge School of Law.

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