BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          AB 670 (Irwin) - Information technology security
          
           ----------------------------------------------------------------- 
          |                                                                 |
          |                                                                 |
          |                                                                 |
           ----------------------------------------------------------------- 
          |--------------------------------+--------------------------------|
          |                                |                                |
          |Version: June 23, 2015          |Policy Vote: G.O. 12 - 0        |
          |                                |                                |
          |--------------------------------+--------------------------------|
          |                                |                                |
          |Urgency: No                     |Mandate: No                     |
          |                                |                                |
          |--------------------------------+--------------------------------|
          |                                |                                |
          |Hearing Date: August 17, 2015   |Consultant: Mark McKenzie       |
          |                                |                                |
           ----------------------------------------------------------------- 


          This bill meets the criteria for referral to the Suspense File. 







          Bill  
          Summary:  AB 670 would require the Office of Information  
          Security (OIS), within the Department of Technology, to conduct  
          an independent security assessment of every state agency at  
          least once every two years, as specified.


          Fiscal  
          Impact:  
           The Department of Technology would incur costs of  
            approximately $2 million in 2016-17, and ongoing costs of  
            approximately $1.9 million for 12 PY of staff to conduct  
            security assessments.  Staff estimates that OIS would have  
            additional costs in the hundreds of thousands annually for  
            travel and other associated charges. (Technology Services  







          AB 670 (Irwin)                                         Page 1 of  
          ?
          
          
            Revolving Fund)

           Ongoing, potentially significant cost pressures for state  
            entities to make necessary IT improvements to address  
            vulnerabilities identified through security assessments.   
            However, these improvements would decrease the likelihood that  
            agencies would experience a future data breach, thereby  
            avoiding related costs in future years.  (General Fund and/or  
            Special Funds)

           Estimated Department of Technology costs in the range of  
            $100,000 to $150,000 to develop and adopt standards for the  
            OIS, Military Department, or entity conducting a security  
            assessment to follow when conducting those assessments and  
            reporting results.  These costs include necessary updates to  
            the State Administrative Manual. (Technology Services  
            Revolving Fund)


          Background:  Existing law provides that the Department of Technology is  
          generally responsible for the approval and oversight of state  
          information technology (IT) projects.  The OIS within the  
          Department of Technology is responsible for ensuring the  
          confidentiality and integrity of state data systems. The OIS is  
          required to establish policies, standards, and procedures for  
          state agencies to manage security and risk.  Existing law  
          authorizes the OIS to conduct independent security assessments  
          of any state agency, department, or office, and requires the  
          state entity whose systems are being assessed to pay for the  
          security assessment.  Existing state policy outlined in the  
          State Administrative Manual requires each state agency to  
          conduct a comprehensive IT risk assessment once every two years  
          and document the results in a risk assessment report.
          In 2013, the Governor administratively directed the Office of  
          Emergency Services (OES) and the Department of Technology to  
          create a Cyber Security Task Force comprised of specified  
          stakeholders, subject matter experts, and cyber security  
          professionals from public, private, academic, and law  
          enforcement sectors.  The mission of the Task Force is to  
          enhance the security of California's digital infrastructure and  
          to create a culture of cybersecurity through collaboration,  
          information sharing, and education and awareness.










          AB 670 (Irwin)                                         Page 2 of  
          ?
          
          
          Existing law provides that the California Military Department  
          manages the Computer Network Defense Team (CND-T) to assist  
          Department of Defense, federal, state, local government  
          partners, and critical infrastructure providers to provide  
          confidentiality, integrity, and availability of critical network  
          infrastructure.  The CND-T also provides support and assistance  
          through established partnerships with cyber security vendors,  
          academia, and government entities.  The 2014 Budget Act provided  
          6 PY of staff and $774,000 in ongoing funding to support the  
          CND-T with the goal of assisting agencies by providing  
          actionable products, assistance, and services designed to  
          improve overall cyber security compliance, reduce risk, and  
          protect the public.




          Proposed Law:  
            AB 670 would require the OIS to conduct, or cause to be  
          conducted, an independent security assessment of every state  
          agency, department, and office at least once every two years,  
          the cost of which is funded by the state entity being assessed.   
          Specifically, this bill would:
           Require the assessment to be conducted in compliance with  
            specified national standards and include, to the extent  
            practicable, vulnerability scanning, penetration testing, and  
            a report on the number, severity, and nature of identified  
            vulnerabilities and recommendations for remediation and risk  
            mitigation.
           Authorize the Military Department to perform required  
            independent security assessments, respond to a security  
            incident, or mitigate the impacts of a cyber attack, upon the  
            request of OES.
           Require OIS to report to the Department of Technology any  
            state agency found to be noncompliant with information  
            security program requirements.
           Authorize the Department of Technology to require an agency to  
            redirect any authorized funds within its budget to pay costs  
            of coming into compliance with recommendations made in a  
            security assessment.
           Require OIS, the Military Department, or any entity conducting  
            an assessment to transmit the results only to the agency being  
            that was the subject of the assessment, and to transmit  
            aggregated results of the assessment to the Department of  








          AB 670 (Irwin)                                         Page 3 of  
          ?
          
          
            Technology.
           Require the Department of Technology to adopt standards that  
            prescribe the manner in which the aggregate results of an  
            assessment are transmitted to the Department of Technology.   
            The standards must include specified information and must be  
            incorporated into the State Administrative Manual.
           Specify that transmission of the results of an independent  
            security assessment results must be restricted to state  
            government employees and approved contractors, but those  
            results, the aggregate of the results, and any related  
            information are subject to all disclosure and confidentiality  
            provisions of state law, as specified.
           Require that any data produced during the creation of a  
            security assessment be destroyed within one year, unless OES  
            determines it should be retained for a longer period for state  
            security purposes.


          Staff  
          Comments:  AB 670 is intended to increase the overall security  
          of state IT systems and networks by requiring OIS, within the  
          Department of Technology, to perform an independent security  
          assessment of every state agency under its jurisdiction every  
          two years.  While state policy, as outlined in the State  
          Administrative Manual, currently requires agencies to conduct  
          security assessments once every two years, there is no statutory  
          requirement, and many agencies have failed to comply.
          The bill requires OIS to conduct, or require to be conducted, an  
          independent security assessment of every state agency every two  
          years, and authorizes the Military Department to conduct  
          assessments, when directed by the Office of Emergency Services.   
          Since the bill mandates OIS to conduct the assessments, the  
          Department of Technology estimates it will need an additional 12  
          PY of staff, at an ongoing cost of approximately $1.9 million  
          annually, to conduct security assessments of approximately 75  
          state agencies each year.  There would be additional costs and  
          charges related to travel, meals, and lodging, as well as vendor  
          costs and project management and oversight charges.  All costs  
          would be charged to the agencies being assessed, so the bill  
          would result in costs to the funds of various agency budgets,  
          the revenues of which would be transferred to the Technology  
          Services Revolving Fund to support the OIS activities.










          AB 670 (Irwin)                                         Page 4 of  
          ?
          
          
          The costs to each individual agency would vary, depending on the  
          number of systems and critical applications, the complexity of  
          those systems, and the locations of facilities around the state  
          that would need to be accessed.  The Military Department  
          estimates that security assessments range in cost from $11,000  
          to $35,000, although it is unclear that these costs include all  
          required components specified in the bill.  Individual state  
          entities that have reported costs to the Committee, based on  
          previous assessments, indicate that costs can range from the low  
          tens of thousands to the low hundreds of thousands for each  
          department's security assessment.  In addition, the Department  
          of Technology has provided information with a sampling of recent  
          costs incurred by state agencies related to outsourcing  
          independent risk assessments to contractors, with smaller  
          agencies having total costs of $30,000 to $50,000 per  
          assessment, and large agencies having security assessment costs  
          ranging from $200,000 to $500,000.  Using these samples of  
          costs, total statewide costs could be as high as $10 million  
          annually, if security assessments were performed solely through  
          contracts with private vendors.  These costs are only presented  
          for illustrative and comparative purposes. 




                                      -- END --