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State Finance and Governance Oversight Board

SECTION 4.   (A) Chapter 6 of the General Laws is hereby amended by striking out sections 97 and 98 and inserting in place thereof the following 2 sections:-
Section 97. (a) As used in this section and section 98, the following terms shall have the following meanings:
"Board", the state finance and governance oversight board established by subsection (b).
"Derivative financial products", financial instruments with values derived from or based upon the value of other assets or on the level of an interest rate index including, but not limited to, a call option on a bond, interest rate swaptions, caps, floors, collars, inverse floaters and auction rate securities, but not including fixed-rate, long-term borrowing.
"State entity", the commonwealth, a state authority or another state entity with responsibility for managing and overseeing public funds.
"Secretary", the secretary of administration and finance.
"Trust", the State Finance and Governance Oversight Trust established by subsection (c).
(b) There shall be a state finance and governance oversight board, to consist of the state treasurer and 4 members appointed by the governor. Upon the expiration of the term of a member, a successor shall be appointed for a term of 4 years. At least 2 members appointed by the governor shall be persons with expert knowledge of the field of public finance. The governor shall, from time to time, designate one of the members as chairman. The members shall serve without compensation but shall receive their necessary expenses incurred in the discharge of their official duties. The secretary shall provide the board with appropriate staff and other assistance, and may engage professionals to advise the board. (c) There shall be established and set up a separate account to be known as the State Finance and Governance Oversight Trust. The secretary shall be the trustee of the trust and may expend funds in the trust without further appropriation to support the purposes of the board, including the appropriate staff and other assistance provided under subsection (b). The secretary, after consulting the board, may assess state entities fees for their new debt issuance and their assets under management, and shall deposit the proceeds of these fees in the trust.

Section 98. (a) The board shall promote transparency, public accountability and adherence to best practices by all state entities with respect to proper governance of state entities and investments, borrowing or other financial transactions made or entered into by state entities and involving public funds. The board shall make an annual written report to the secretary, the state treasurer, the state auditor, the house and senate committees on ways and means and the senate and house committees on bonding, capital expenditures and state assets with respect to its findings regarding investments, borrowing and other financial transactions carried out by state entities and its activities to promote proper governance, transparency, public accountability and best practices. If the board so requests, the secretary shall provide the board with copies of reports and other information about the accountability and transparency of state authorities, provided to the secretary under section 29K of chapter 29.
(b) The board shall conduct a review, before its execution, of any transaction relating to derivative financial products, proposed to be entered into by a state entity. All state entities shall submit to the board the terms of the proposed transaction and any supporting documents. The board shall complete its review of the proposed transaction and notify the submitting entity of its conclusions within a reasonable period of time after receiving the proposal.
(c) In order to carry out its duties, the board may:
(1) adopt regulations or guidelines requiring state entities to report, adopt appropriate policies and adhere to best practices with respect to governance, investments, borrowing and other financial transactions;
(2) make recommendations to state entities or state officers and propose legislative changes to improve governance practices or the management of public funds;
(3) conduct oversight hearings with respect to governance practices, investment, borrowing and other financial transactions made or entered into by state entities; and
(4) conduct meetings, conferences, or training sessions, maintain a website, publish materials, or other activities to disseminate best practices to state officials, board members and managers of state entities and the public.

(B) The present members of the finance advisory board shall continue in office as members of the state finance and governance oversight board, established by subsection (A), until their terms expire and their successors are qualified. References to the finance advisory board in any statute, regulation or other document shall be taken to mean the state finance and governance oversight board.

This section renames the Finance Advisory Board as the State Finance and Governance Oversight Board and broadens its mission to enhance oversight of and ensure best practices for finances and governance at state entities that manage public funds.