New Jersey-2012-S1668-Introduced

An Act revising and expanding the duties and responsibilities of the State Auditor in the performance of certain audits and reviews, amending P.L.1979, c.8, P.L.2006, c.82, and chapter 24 of Title 52 of the Revised Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Section 10 of P.L.1979, c.8 (C.52:11-63) is amended to read as follows:

10. a. In addition to the duties imposed [upon the State Auditor] by the Constitution and R.S. 52:24-4 the State Auditor shall, [when requested or] not less than once every five years unless otherwise directed by [the Legislature or] the Legislative Services Commission or the presiding officer of either House of the Legislature, [shall make, or cause to be made by contract with independent firms or consultants, studies and reports] conduct or cause to be conducted an operational audit evaluating each accounting agency with respect to [the] its: (1) economy, (2) internal management control, (3) efficiency in the utilization of personnel, equipment, and facilities, and (4) compliance with applicable laws, rules, and regulations or any other legal requirements [of the operation of State or State-supported agencies and shall perform such other duties and functions as the commission shall, from time to time, direct or assign].

b. The State Auditor shall determine the scope, define the objectives, and develop the methodology employed in an operational audit conducted in accordance with subsection a. of this section; provided, however, that in defining the objectives of an operational audit the State Auditor shall, at a minimum, incorporate provisions which (1) ascertain whether sums appropriated have been or are being expended for the purposes for which such appropriations were made, and which (2) determine if waste, mismanagement, inefficiency, or fraud in the receipt, expenditure or accounting of funds has occurred.

c. [Audit reports] (1) The State Auditor shall submit a written report to the Legislature, pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), and to the Governor [shall provide full disclosure of] that describes the results of financial operations, adequate financial information needed in the management of State operations and effective control over income, expenditures, funds, property and other assets and whether the financial transactions have been consummated in accordance with laws, regulations or other legal requirements, and adequate internal financial control over operations is exercised. The report shall provide an assessment of
an accounting agency's efficiency in the utilization of personnel, equipment, and facilities, and shall, if necessary, recommend the elimination of duplicative, inefficient, wasteful, or excessive expenditures of State funds disclosed by an audit conducted in accordance with subsection a. of this section.

(2) The report shall be submitted to the Legislature and the Governor as promptly as possible upon the completion of an operational audit conducted or caused to be conducted by the State Auditor.

d. As used in this section, "accounting agency" means those entities deemed an "accounting agency" under R.S.52:24-4.

(cf: P.L.1985, c.162, s.8)

2. R.S.52:24-4 is amended to read as follows:

52:24-4. a. It shall be the duty of the State Auditor to conduct post-audits of all transactions and accounts kept by or for all departments, offices and agencies of the State Government, to report to the Legislature or to any committee thereof and to the Governor, and to the Executive Director of the Office of Legislative Services, as provided by this chapter and as shall be required by law, and to perform [such] other similar or related duties or functions [as shall, from time to time, be] required [of him] by law or directed or assigned by the Legislative Services Commission or the presiding officer of either House of the Legislature.

b. The State Auditor shall [personally or by any of his duly authorized assistants, or] , not less than once every five years unless otherwise directed by the Legislative Services Commission or the presiding officer of either House of the Legislature, conduct or cause to be conducted [by contract with independent public accountant firms], an [examine] examination and post-audit of all the accounts, reports and statements and make or cause to be made an independent [verifications] verification of all assets, liabilities, revenues and expenditures of the State, its departments, institutions, boards, commissions, officers, and any [and all] other State agencies[, now in existence or hereafter created,] hereinafter in this chapter called "accounting agencies."

c. The State Auditor shall [conduct], not less than once every five years unless otherwise directed by [at the direction of] the Legislative Services Commission or of the presiding officer of either [house] House of the Legislature [or on the State Auditor's own initiative], conduct or cause to be conducted a performance review audit of [any] each program of [any] each accounting agency, [any] each independent authority, [or any] and each public entity or grantee that receives State funds, in a manner that is consistent with the Government Auditing Standards for performance audits utilized by the United States Government Accountability Office or its successor.

d. The State Auditor shall determine the scope, define the objectives, and develop the methodology employed in a post-audit or performance review audit conducted in accordance with this section; provided, however, that in defining the objectives of a post-audit the State Auditor shall, at a minimum, incorporate provisions which (1) ascertain whether sums appropriated have been or are being expended for the purposes for which such appropriations were made, and which (2) determine if waste, mismanagement, inefficiency, or fraud in the receipt, expenditure or accounting of funds has occurred; provided, further, that in defining the objectives of a performance review audit the State Auditor shall, at a minimum, incorporate provisions which (1) evaluate the effectiveness of programs in achieving legislative intent and achieving a public purpose, including a measure of the average time taken for staff to provide the services the Legislature intended, which (2) compare allocation of resources to the cost of unmet needs of State government, and which (3) determine, if applicable, workload progress, including, but not limited to, cases opened, closed, carried over, unresolved and completed, with appropriate consideration of the efficiency of workload progress by members of the agency staff assigned to the workload.

e. When the State Auditor conducts any audit or performance review audit the accounting agency, or authority, entity or grantee, shall respond in writing to each item in the State Auditor's report and the State Auditor, at an appropriate time determined by him, shall conduct a post-audit review of the accounting agency's, or authority's, entity's, or grantee's, compliance with the State Auditor's recommendations.

f. The officers and employees of each accounting agency, or authority, entity, or grantee, shall assist the State Auditor, when and as required by him, and provide the State Auditor with prompt access to all records necessary for the State Auditor to perform his duties, notwithstanding any statutory or regulatory requirements of confidentiality with regard to the records, for the purpose of carrying out the provisions of this chapter. The State Auditor shall report the failure of any accounting agency, or authority, entity, or grantee, to provide prompt access to any relevant record to the presiding officer of each [house] House of the Legislature. The State Auditor shall not disclose a confidential record provided by an accounting agency, or authority, entity, or grantee, except as may be necessary for the State Auditor to fulfill his constitutional or statutory responsibilities. Working papers prepared by the State Auditor shall be confidential and shall not be considered government records under P.L.1963, c.73 (C.47:1A-1 et seq.).

[Notwithstanding any law to the contrary, post-audits and performance review audits shall be conducted within the limits of the resources and personnel available to the State Auditor. If resources and personnel are insufficient to conduct all such required post-audits and performance review audits, the State Auditor may prioritize certain audits and forgo others upon notice to the Governor and the presiding officer of each house of the Legislature.]

(cf: P.L.2006, c.82, s.1)

3. Section 5 of P.L.2006, c.82 (C.52:24-4.4) is amended to read as follows:

5. Prior to approving any request of a principal department or accounting agency in the Executive Branch of the State government, the Joint Budget Oversight Committee, or its successor, may require the department or agency to comply with any recommendation of the State Auditor made as the result of any audit or investigation, [or] performance review audit, or operational audit, conducted pursuant to section 10 of P.L.1979, c.8 (C.52:11-63), of that department or agency.

(cf: P.L.2006, c.82, s.5)

4. R.S.52:24-5 is amended to read as follows:

52:24-5. The examination and the frequency with which an examination is required by section 52:24-4 of this title shall extend, also, to a complete audit and verification of all moneys handled for the account of the [state] State government by all county and other officials [who are now or hereafter may be] charged with the duty of collecting fees or other moneys for or on behalf of the [state] State. For this purpose the books, papers and documents of all such officials shall be laid open and exposed on demand, to the examination of the [state auditor] State Auditor or [any of his] a duly authorized [assistants] assistant of the State Auditor.

(cf: R.S.52:24-5)

5. R.S.52:24-6 is amended to read as follows:

52:24-6. The State Auditor shall [report in writing] submit a written report to the Legislature, pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), or to any committee thereof, when so required, and to the Governor that describes the findings of any special condition and any recommendation for the elimination of duplicative, inefficient, wasteful, or excessive expenditures of State funds disclosed by [his audit] a post-audit [of the accounts of the State and of each accounting agency] conducted in accordance with R.S.52:24-4.

The State Auditor shall submit a written report to the Legislature, pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), and to the Governor that describes the findings of any [performance review audit] special condition and any recommendation for the elimination of duplicative, inefficient, wasteful, or excessive expenditures of State funds [conducted by the State Auditor to the Governor and to the Legislature pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1)] disclosed by a performance review audit conducted in accordance with R.S.52:24-4.

Such report shall be made by [him] the State Auditor and submitted to the Legislature and the Governor as promptly as possible after the conclusion of every audit and investigation or upon the completion of any performance review audit [made] conducted or caused to be [made by him or upon the completion of any performance review audit] conducted by the State Auditor.

(cf: P.L.2006, c.82, s.2)

6. R.S.52:24-7 is amended to read as follows:

52:24-7. The State Auditor shall immediately report [, forthwith,] to the Governor and the presiding officer of each [house] House of the Legislature any [and all instances] instance of malfeasance, misfeasance or nonfeasance [which may be] disclosed by [any] a post-audit or operational audit or investigation of the [said] accounts of an accounting agency or by [any] a performance review audit of a program of an accounting agency, an independent authority, or a public entity or grantee that receives State funds. The report shall enumerate each account, program, or operation found inaccurate or deficient as a result of malfeasance, misfeasance, or nonfeasance, and shall recommend to the Governor appropriate steps necessary to prohibit and enjoin the expenditure of State funds associated with an inaccurate or deficient account, program, or operation in accordance with section 22 of article 3 of P.L.1944, c.112 (C.52:27B-31).

[Any] A State officer or employee charged with the custody of State funds whose accounts, programs, or operations are found [by the State Auditor to be] inaccurate or deficient as a result of malfeasance, misfeasance, or nonfeasance shall be [automatically] suspended from [having any further] connection with and prohibited from access to [such] the inaccurate or deficient funds, programs, or operations until the audit is completed and the findings reported to the Governor and the presiding officer of each [house] House of the Legislature.

[Immediately upon] Upon receipt of such report from the State Auditor, the Governor shall fix a time and place for hearing such charges [as] the State Auditor may bring by giving not less than five days' notice thereof in writing to [such] an officer or head of a department so charged and to the State Auditor.

After due hearing, [he] the Governor shall take such action as may be necessary, in his judgment, including, but not limited to, the removal of any officer or head of a department found guilty of such charges or any of them, but if the right of removal [in any case] is vested exclusively in the Legislature, the Governor may suspend from further duty any such officer or head of a department so charged and shall transmit to the Legislature at the earliest possible date a written report of his findings [with his] and recommendations [thereon] for consideration and action by the [legislature] Legislature.

(cf: P.L.2006, c.82, s.3)

7. This act shall take effect immediately and apply to an audit or review conducted on or after January 1 next following the date of enactment.

STATEMENT

This bill revises and expands the duties and responsibilities of the State Auditor in the planning and performance of certain audits and reviews required to be conducted under current State law.

Under the bill, the spending, operations, and performance of all State offices and agencies will be examined on a five-year audit cycle. The bill provides that the State Auditor will be required to carry-out operational audits and financial post-audits of the State, its departments, institutions, boards, commissions, officers, and any other State agencies not less than once every five years, and will be required to conduct performance reviews of the programs of each accounting agency, independent authority, and public entity or grantee that receives State funds not less than once every five years.

The bill provides that the five-year audit cycle will similarly apply to the verification of monies handled on behalf of the State by county and local officials charged with the collection of certain fees and assessments. The bill provides that the Legislative Services Commission and the presiding officer of each House of the Legislature will retain the right to request, if necessary, more frequent audits and reviews of State departments and agencies.

The bill provides the State Auditor with greater authority in determining the scope, defining the objectives, and developing the methodology employed in an operational audit, financial post-audit, and performance review. The bill specifies, however, that in defining the objectives of an operational audit or financial post-audit the State Auditor must incorporate provisions which (1) ascertain whether sums appropriated have been or are being expended for the purposes for which such appropriations were made, and which (2) determine if waste, mismanagement, inefficiency or fraud in the receipt, expenditure or accounting of funds has occurred.

The bill provides that in defining the objectives of a performance review the State Auditor is required to incorporate provisions which: (1) evaluate the effectiveness of programs in achieving legislative intent and achieving a public purpose, including a measure of the average time taken for staff to provide the services the Legislature intended, (2) compare allocation of resources to the cost of unmet needs of State government, and (3) determine, if applicable, workload progress, including, but not limited to, cases opened, closed, carried over, unresolved and completed, with appropriate consideration of the efficiency of workload progress by members of the agency staff assigned to the workload.

In addition, the bill makes certain other changes to current law, including: (1) the expansion of the State Auditor's responsibility in carrying-out operational audits to ensure State agencies are evaluated with respect to their efficiency in the utilization of personnel, equipment, and facilities; (2) a revision of the current reporting procedures to ensure the State Auditor complies with section 2 of P.L.1991, c.164 (N.J.S.A.52:14-19.1) and provides recommendations for the elimination of duplicative, inefficient, wasteful, or excessive expenditures of State funds; and (3) the clarification of the State Auditor's duty to report malfeasance, misfeasance, or nonfeasance disclosed by an audit or review and the responsibility to recommend to the Governor steps to prohibit and enjoin the expenditure of State funds associated with inaccurate or deficient accounts, programs, or operations.

The purpose of this bill is to provide greater accountability and integrity in the spending of public tax dollars. The development of a routine, systematic approach to the audit and review of the spending, operations, and performance of State offices and agencies will help identify waste, fraud, and abuse, and will improve efficiencies and operational economies within each level of State government. In times of fiscal restraint, cost savings achieved through the elimination of wasteful practices and inefficient operations may be redirected to programs and initiatives that provide greater benefits to State tax payers.