Chapter 10.7Conduit Financing Transparency and Accountability

Section § 5870

Explanation

This section defines key terms related to 'conduit financing' within the chapter. 'Conduit financing' refers to issuing bonds known as conduit revenue bonds.

A 'conduit financing provider' is any public entity, such as a county or nonprofit, that issues one or more of these bonds. 'Conduit revenue bonds' are municipal securities whose proceeds are loaned to nongovernmental borrowers, like individuals or organizations, for purposes allowed by federal law for private activity bonds.

As used in this chapter, the following definitions apply:
(a)CA Government Code § 5870(a) “Conduit financing” means the issuance of conduit revenue bonds.
(b)CA Government Code § 5870(b) “Conduit financing provider” means any county, city, city and county, public district, public authority, public corporation, nonprofit corporation, joint powers authority, or other statutorily constituted public entity that issues one or more conduit revenue bonds.
(c)CA Government Code § 5870(c) “Conduit revenue bond” means any municipal security the proceeds of which are loaned to any nongovernmental borrower, including, but not limited to, persons, for-profit corporations, nonprofit corporations pursuant to Section 501(c)(3) of the Internal Revenue Code, partnerships, and other legal entities for purposes that are permitted for qualified private activity bonds under applicable federal law.
conduit financing conduit revenue bonds municipal security nongovernmental borrowers qualified private activity bonds public entities county city nonprofit corporation joint powers authority public corporation public authority public district Internal Revenue Code Section 501(c)(3) federal law requirements
(Added by Stats. 2009, Ch. 557, Sec. 1. (SB 99) Effective January 1, 2010.)

Section § 5871

Explanation

If a conduit financing provider has a website, they must make certain information publicly accessible there. This includes the agendas for their regular, special, and specific types of meetings, notices about these meetings, staff reports related to the meeting items, and the minutes from these meetings. They also need to post audits of their accounts and records, reports of annual financial transactions, and annual lists of approved financing applications for each fiscal year when at least one application is approved.

A conduit financing provider shall make the following information available on its Internet Web site, to the extent that it maintains an Internet Web site:
(a)CA Government Code § 5871(a) Agendas for regular meetings posted by a conduit financing provider pursuant to Section 54954.2.
(b)CA Government Code § 5871(b) Notices of special meetings posted by a conduit financing provider pursuant to Section 54956.
(c)CA Government Code § 5871(c) Notices of meetings of a conduit financing provider provided pursuant to Section 11125.
(d)CA Government Code § 5871(d) Staff reports on the items included on the agendas listed in subdivisions (a), (b), and (c).
(e)CA Government Code § 5871(e) Minutes of the meetings for which the agendas listed in subdivisions (a), (b), and (c) were produced.
(f)CA Government Code § 5871(f) Audits of the conduit financing provider’s accounts and records.
(g)CA Government Code § 5871(g) Copies of reports of the conduit financing provider’s annual financial transactions required pursuant to Section 12460 or 12463.
(h)CA Government Code § 5871(h) Annual lists of applications approved for financing by the governing body of the conduit financing provider for any fiscal year in which at least one application is approved.
conduit financing provider meeting agendas special meeting notices staff reports meeting minutes account audits financial transaction reports approved financing applications public information disclosure Internet Web site requirements Section 54954.2 Section 54956 Section 11125 Section 12460 Section 12463
(Added by Stats. 2009, Ch. 557, Sec. 1. (SB 99) Effective January 1, 2010.)

Section § 5872

Explanation

This law mandates that when an audit is required for a conduit financing provider, it must include specific disclosures. These include fees charged to borrowers, related expenses, the nature of these fees, the amount of unsold bonds, and issued versus outstanding debt during the audit period. These audits must be publicly accessible under the California Public Records Act. Moreover, the conduit financing provider is required to conduct an annual audit of its records and share the findings with the Controller, adhering to standards set by the Controller and generally accepted auditing practices.

(a)CA Government Code § 5872(a) When an audit of a conduit financing provider’s accounts and records is required by law, in addition to any other requirements, the audit shall include all of the following:
(1)CA Government Code § 5872(a)(1) A disclosure of fees imposed on borrowers by, or on behalf of, the conduit financing provider.
(2)CA Government Code § 5872(a)(2) A disclosure of expenditures related to those fees made by or on behalf of the conduit financing provider.
(3)CA Government Code § 5872(a)(3) The dollar amount and nature of these fees and expenses.
(4)CA Government Code § 5872(a)(4) A disclosure of the amount of bonds authorized but unsold at the end of the time period covered by the audit.
(5)CA Government Code § 5872(a)(5) A disclosure of the amount of debt the conduit financing provider has issued during the period covered by the audit and the amount of debt still outstanding at the end of the time period covered by the audit.
(b)CA Government Code § 5872(b) An audit of a conduit financing provider’s accounts and records shall be made publicly available pursuant to the California Public Records Act (Division 10 (commencing with Section 7920.000)).
(c)CA Government Code § 5872(c) Notwithstanding any other reporting periods permitted pursuant to subdivision (f) of Section 6505, Section 26909, or any other provision of law, a conduit financing provider shall annually conduct an audit of its accounts and records and report the results of that audit to the Controller. The minimum requirements of the annual audit and report shall be prescribed by the Controller and conform to generally accepted auditing standards.
conduit financing provider audit requirements borrower fees disclosure bond issuance outstanding debt public record access California Public Records Act annual audit Controller reporting auditing standards financial transparency expenditure disclosure unsold bonds disclosure debt outstanding disclosure financial accountability
(Amended by Stats. 2021, Ch. 615, Sec. 139. (AB 474) Effective January 1, 2022. Operative January 1, 2023, pursuant to Section 463 of Stats. 2021, Ch. 615.)