California Governor Signs Bill to Encourage Timely Financial Reporting by Cities

California Gov. Gavin Newsom speaks in Los Angeles on Sept. 25, 2024. John Fredricks/The Epoch Times

Commentary

There are specific due dates for filing and paying one’s income taxes, with late filings or payments resulting in penalties and interest. Taxpayers have strict requirements. But, tax eaters often do not.

Previously, a city in California could take forever to prepare and post an annual audited financial statement. That may all change for California’s 483 cities with the passage of Senate Bill 595, which was signed by Gov. Gavin Newsom on Oct. 3.

The city of Fort Jones in northern California has yet to post its 2019 financial statement on its website. At least it has responded to email requests by stating the audits are in process. The city of San Joaquin, which has not posted its 2020 annual comprehensive financial report, hasn’t returned telephone voicemail messages.

If you’re late on your property tax payment even by one day in the Golden State, you will be assessed a 10 percent penalty. But cities are allowed to scoot. One wonders how they can prepare budgets without balance sheets.

SB 595, authored by Republican state Sen. Steven Choi from Irvine and sponsored by the California Policy Center, puts some teeth into encouraging more prompt reporting. It went through the California State Legislature without one vote in opposition—a rare feat for a bill carried by a Republican.

What does this bill do? According to the Senate Analysis, it “revises the timeframe for the [State Controller’s Office] to impose penalties on local agency officials for failing to file financial transaction reports. Specifically, this bill allows for penalties if a local agency fails to file reports within 10 months of the end of the agency’s fiscal year, or within the time prescribed by the Controller, whichever is later, rather than 20 days after receiving a notice from the SCO of its failure to file.”

Why was this legislative effort pursued? According to Senator Choi, “Almost every city, county and state in the country is required have an audit of their financial statements performed by an independent Certified Public Accounting firm. It has become the normal industry standard to complete the financial audit within six months of the end of a fiscal year, so that the information can be reported and published in their Annual Comprehensive Financial Report.

“However, there are a handful of municipalities in California that are extremely delinquent in their report submissions, and have not completed audits for the fiscal year ending June 30, 2022. SB 595 requires the officer in charge of filing their agency’s mandatory financial audit report with the State Controller within ten months of the end of the local agency’s fiscal year. If the report is not filed within that timeframe, the individual officer would be required to forfeit up to $5,000 to the state, depending on the total revenue of the local agency.”

This is a good first step. It could be stronger. As was previously reported in The Epoch Times, in the month of May, “Texas Governor Greg Abbott signed Senate Bill 1851 into law, a bill that flew through the Texas legislature, implementing a severe penalty for cities that did not file their annual audits within 180 days of the end of the fiscal year.”

In previous columns, I have provided rankings of the 483 cities in California by regions, based mostly on Caltrans (California Department of Transportation) districts.

Orange County (District 12) has 34 cities and all of them have completed their annual comprehensive financial reports (ACFRs) for 2024. Los Angeles County (District 7) has 88 cities and is current for the fiscal year 2023, but still has eight cities that have not posted their 2024 ACFRs.

San Diego County, with eighteen cities, is current for the fiscal year 2023, but is waiting on the cities of La Mesa and National City to post their 2024 ACFRs. Although San Diego County shares Caltrans District Number 11 with Imperial County, because Imperial County’s cities are so delinquent, its seven cities were separated out.

The most recent ranking for Imperial County was for 2019. Holtville finally completed its 2020 ACFR, but I’m waiting on Calipatria to finish its 2021 ACFR in order to prepare a multi-year report on this small county at least up to the year 2022.

The Inland Empire’s cities in Riverside and San Bernardino Counties (District 8) are current for the fiscal year 2022. Apple Valley is holding up the 2023 rankings.

The most recent ranking for Ventura, Santa Barbara, San Luis Obispo and Kern Counties (portions of District 6 and 7) is for the year 2021. However, the city of Taft has had serious budget concerns and has fallen way behind on its reporting.

Central California includes parts of Districts 5—Monterey, San Benito and Santa Cruz—and 6—Madera, Fresno, Tulare and Kings—and all of Districts 9—Inyo and Mono—and 10—Alpine, Amador, Calaveras, Mariposa, Merced, San Joaquin, Stanislaus and Tuolumne. The last ranking feasibly possible to complete was for 2019. One wonders why some of these cities insist on staying incorporated.

The city of San Joaquin is tardy with its financials and hasn’t returned phone calls. Hopefully, SB 595 will incentivize its elected officials to get off the dime and provide the last five years of statements, and soon.

The county of San Joaquin recently birthed the 483rd city in California, Mountain House, which means that this area now has 79 cities. Let’s hope it sets the right example for fiscal transparency, as neighboring cities Huron and Ione need to post their 2021 and subsequent ACFRs. And Avenal, Hollister, Orange Cove and Plymouth need to post their 2022 and following reports.

Caltrans District 4, the Bay Area, is current through 2021, as Portola Valley, supposed home of the wealthy, is derelict in its reporting requirement for 2022 and following. The counties represented are Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano and Sonoma.

Northern California’s Districts 1 include Del Norte, Humboldt, Mendocino and Lake counties; 2 includes Lassen, Modoc, Plumas, Shasta, Siskiyou, Tehama and Trinity counties; and 3 includes Butte, Colusa, El Dorado, Glenn, Nevada, Placer, Sacramento, Sierra, Sutter, Yolo and Yuba counties. The city of Fort Jones still needs to cough up its 2019 financial statements.

For the year of 2020, add Tulelake to the list. For 2021, add Etna. For 2022, add Davis and Isleton.

If every city reported in a timely manner, then rankings could be done sooner rather than later. Since it is frustrating to use prior year numbers and then update the listings later, we quietly wait on the laggards. If a reporter has a slow day, interviewing the finance directors of these cities should provide an interesting read for the excuses provided.

There you have California’s 58 counties and 483 cities. Now, let’s hope the slowpokes get their proverbial acts together and issue their financial statements in a timely manner. Hopefully, with a little prodding from the State Controller and the financial penalty instituted by SB 595, things will improve. One can only hope.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.