2006 SACRS Legislative Proposal
Amend Brown Act
September 8, 2005
Page 1
YEAR 2005 SACRS LEGISLATIVE PLATFORM
LACERA #1
(Revised 09/08/05)
Title of Issue:Amend the Ralph M. Brown Act and the Public Records Act
Association:LACERA
Contact Person:Jan Barcus/David Muir
Phone #:626 564-2370/626 564-4340
Fax #:626 564-6110
Please answer the following questions as fully as possible:
- Description of issue.
Recent developments in the public and private sectors have underscored the value of internal operation security controls.
Congress passed the Sarbanes-Oxley Act of 2002 (SOX) to help prevent failures in the internal processes and procedures similar to those that occurred at companies like Enron and WorldCom.
The Association of Public Pension Fund Auditors endorses as a best practice the formation of a formal audit committee, and has reported a trend toward the creation of audit committees among an increasing number of public pension funds. Audit committees can enhance the independence of internal audits and provide a mechanism for reviews and special investigations.
The Boards of Retirement and Investments of the Los Angeles County Employees Retirement Association (LACERA) created an Audit Committee for LACERA in November 2003. A copy of the Charter outlining the Committee’s powers and duties is attached.
It is anticipated the Board or a Committee of the Board will occasionally need to meet in closed session in order to protect the assets of the system or avoid jeopardizing an ongoing investigation. For example, the Board or Committee may meet to oversee a special investigation involving financial statement fraud or allegations of embezzlement by a retirement system employee. Or discuss confidential internal operational security controls designed to prevent fraud.
Boards of Retirement and Investments hold a fiduciary duty to ensure that safeguards are in place to protect system assets. Discussing those safeguards in open session would minimize the effectiveness of the safeguards and would provide the perpetrators of fraud with sensitive information to help them circumvent security controls for harmful or unlawful purposes.
The proposed legislation would authorize a closed session only when the need was documented in writing, and would require that all decisions made in closed session be by rollcall vote recorded in closed session minutes of the meeting.
2.Recommended solution.
Amend the Ralph M. Brown Act and the Public Records Act to permit closed sessions of a board or committee of a public pension system.
3.Specific language that you would like changed in, or added to, ’37 Act Law, and suggested code section numbers.
Amend Section 54957.1 of the Government Code dealing with the reporting of actions taken in closed sessions by adding subdivision (7) as follows:
(7) Approval of an audit report or special investigation report considered in a closed session held pursuant to Section 54957.11 shall be reported upon completion of the audit or special investigation. The announcement need not identify particulars of the audit or investigation if to do so could result in financial harm to the system or harm to the integrity and security of the system’s operation.
Add Section 54957.11 to the Government Code, to read:
54957.11.(a) Notwithstanding any other provision of law, a retirement board and/or investment board of a public pension or retirement system or a committee composed exclusively of members of such board may hold closed sessions to discuss internal operational security issues of the pension or retirement system when, based on written advice from the system’s retirement administrator, chief executive officer, chief legal officer, or chief auditor, discussion in open session could result in financial harm to the system or harm to the integrity and security of the system’s operations. All decisions made during a closed session pursuant to this section shall be by rollcall vote entered into the closed session minutes of that meeting, as kept pursuant to Section 54957.2(a).
Amend Section 6254 of the Government Code by adding subdivision (cc) as follows:
(cc) The written advice provided pursuant to Section 54957.11 that discussion in open session by the board of a public pension or retirement system or its committee could pose a threat or potential threat of criminal activity against the personnel, property, buildings, facilities or equipment, including electronic data, owned or controlled by the retirement system that could result in financial harm to the system or harm to the integrity and security of the system’s operations.
4.Why should the proposed legislation be sponsored by SACRS rather than by your individual retirement association?
All systems would be benefited by the ability to discuss internal operational security controls in closed session.
5.Do you anticipate that the proposed legislation would create any major problems, such as conflicting with Proposition 162 or create a problem with any of the other 19 SACRS retirement associations?
Closed sessions are a politically sensitive subject and any legislation restricting public access is closely watched by the media and other First Amendment groups.
6.Who will support or oppose this proposed change in the law?
Media groups are likely to have concerns
7.Who will be available from your association to testify before the Legislature?
David Muir
Leg/06/Amend Brown Act.090805