LEAGUE ANALYSIS

A2 - Establishes an independent Office of State Comptroller and consolidates financial audit and performance reviews of State and local government units.

The League of Municipalities opposes A-2.

While we appreciate the many improvements that have been made in this latest version of the bill, the League of Municipalities still opposes the State Comptroller legislation. 

The bill will create a powerful new bureaucracy – accountable only to the Governor - that will duplicate current state regulation of local fiscal affairs; that will slow down and add uncertainty and costs to local contracts; that will cost the people of New Jersey at least $9 million from day one; and that has not been subjected to careful committee consideration or objective fiscal analysis.

We have no objections to a State Comptroller. But, we must, first, be assured that no new administrative burdens are imposed on local governments, which are already subject to stringent financial regulation by the Division of Local Government Services, in DCA, and to substantial regulation in other areas by various State Departments, Divisions, Offices, Boards and Commissions. And, we must, second, be assured that all of the bill’s costs are accurately estimated and that the benefits to be provided justify those costs.

Current State law requires municipalities to file the following documents with the Division of Local Government Services: an annual audit performed by an independent Registered Municipal Accountant (a CPA with added testing), filed within 6 months after the close of the fiscal year; an annual financial statement, filed shortly after the close of the fiscal year (usually prepared by the Chief Financial Officer); an annual budget on forms issued by the Division, which is then subject to approval by the Division; a statement of debt issued during the previous year and a debt capacity calculation;  and, on an ongoing basis, filings related to emergency appropriations, budget amendments, and various other documents. Further, the Division sets municipal and county standards for filing annual audits and annual financial reports; regulates accounting and internal controls practices; enforces and promulgates budget preparation and state approval procedures for all local units; reviews and approves various debt issuances of local units; supervises finances (to various degrees) of local units in unsound financial condition; provides technical assistance and guidance for compliance with budget, financial reporting, procurement, and other laws; and oversees the audit process and provides guidance on audit procurement, rotations, and conflicts.

Historically, New Jersey laws have traditionally provided a higher level of fiscal oversight of local units than other states. We are the only state that requires budget reviews as a preventive oversight measure.

In recognition of these facts, one of the Senate amendments provides that the Comptroller will not, as a general rule, impose new audit requirements on local government. Instead, the Comptroller will ‘audit the audits.’ In other words, the Comptroller will review the audits that we must already experience to see that they were done thoroughly and properly. The Comptroller could conduct a fresh audit, if asked to do so by, e.g., the Department of Community Affairs.

We sincerely appreciate this amendment. We thank the sponsor, Senator Kenny, for accepting it. And we thank Senator Joe Doria for his strong defense of this amendment on the Senate floor. Senator Doria spoke passionately about the already existing regulatory layers of government and the State’s failure to adequately fund the Division of Local Government Services and the Department of Education’s oversight functions.

While the current bill does represent a significant improvement over previous version, we fear it is still too vague and open to reinterpretation by future Administrations.

Statement language could help to clarify legislative intent and provide us with a higher level of confidence. That language should specifically state that:

The Comptroller will first focus on State and State Agency and Authority fiscal procedures and that will remain the Office’s primary focus;
The Comptroller will only audit local matters pursuant to the ‘audit of the audit’ or when requested by DCA, D of Ed or appropriate State regulatory body; and
The Comptroller will coordinate its efforts with DCA, D of Ed., etc. – not the other way around.