An Act expanding the duties of the State Auditor to include performance audits and amending P.L.1979, c.8.

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, when requested or directed by the Legislature or the Legislative Services Commission, shall make, or cause to be made by contract with independent firms or consultants, studies and reports with respect to the economy, internal management control, and compliance with laws and regulations 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.

Audit reports shall provide full disclosure of 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.

b. (1) Upon the request of a member of the Legislature, the State Auditor shall conduct, or arrange for the conduct of, a performance audit of any program of a State or State-supported agency. A performance audit shall be conducted without advance notice to the agency and shall examine the economy, efficiency and effectiveness of a program, or any one or any combination of these components. The scope and conduct of a performance audit shall be consistent with the generally accepted Government Auditing Standards promulgated by the Comptroller General of the United States. In conducting performance audits, the State Auditor shall, in addition to using the services of the State Auditor's staff, utilize the services of the "Performance Audit Committee" established by subsection c. of this section, or of as many members thereof as the State Auditor deems appropriate.

If the State Auditor determines that a request for a performance audit is beyond the capacity of the office of the State Auditor or otherwise unfeasible to fulfill, the State Auditor, within 30 days of receipt of the request, shall provide a written explanation thereof to the member who made the request. If, after receiving such explanation, the member nevertheless wants the performance audit conducted, and if the State Auditor and the member cannot agree on modifications to the proposed performance audit to make it feasible, the State Auditor shall refer the request, and the State Auditor's explanation, to the Legislative Services Commission for review. The commission shall, within 30 days of receipt of the request and explanation, determine whether the performance audit shall be conducted, conducted as modified by the commission, or not conducted.

(2) The State Auditor may initiate, at his or her discretion, a performance audit with the approval of the Legislative Services Commission.

c. There is established in the Office of the State Auditor a "Performance Audit Committee." The committee shall consist of eight members of the public appointed as follows: two members appointed by the President of the Senate; two members appointed by the Minority Leader of the Senate; two members appointed by the Speaker of the General Assembly; and two members appointed by the Minority Leader of the General Assembly. Members of the committee shall be selected on the basis of education and experience related to accounting, economics, or business administration. Members shall serve during the two-year term of the Legislature during which they are appointed and until their successors are appointed and qualify. Vacancies in the membership of the committee shall be filled in the same manner as the original appointments. Members of the committee shall serve without compensation, but shall be entitled to be reimbursed for all actual and necessary expenses incurred in the performance of their duties. No member of the committee shall hold any other public office or employment. It shall be the duty of the members of the Performance Audit Committee to assist the State Auditor in conducting performance audits of programs of State or State-supported agencies pursuant to subsection b. of this section.

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

2. This act shall take effect immediately.

STATEMENT

This bill would require the Office of the State Auditor, at the request of a member of the Legislature, to conduct an unannounced performance audit of any program of a State or State-supported agency. Currently, the Office of the State Auditor conducts financial audits of State or State-supported agencies. In contrast, a performance audit examines the economy, efficiency or effectiveness of a specific program of a State or State-supported agency. A single performance audit may examine some or all of these three components of a program.

The bill provides that if the State Auditor determines that a request for a performance audit is beyond the capacity of the office of the State Auditor or otherwise unfeasible, the State Auditor has 30 days to provide a written explanation to the member who initiated the request. If the State Auditor and the member cannot agree on modifications to the proposed audit to make it feasible, the request will be forwarded to the Legislative Services Commission for review. The commission will determine whether the audit will be conducted as requested, as modified by the commission, or not at all. The bill also permits the State Auditor to initiate a performance audit, at his or her own discretion, with the approval of the commission.

Finally, the bill provides that when conducting performance audits, the State Auditor will, in addition to using the services of the State Auditor's staff, utilize the services of members of the "Performance Audit Committee," established under the bill. The committee will consist of eight members of the public selected by legislative leadership based upon education and experience in the fields of accounting, business administration, or economics.

To require the State Auditor to conduct performance audits would not only make the auditing practices of this State consistent with those in other states but also strengthen the system of checks and balances between the Executive and Legislative Branches of State government by enabling the Legislature to monitor the effectiveness of individual State programs.