New Jersey Appellate Division Judge Douglas Fasciale
New Jersey Appellate Division Judge Douglas Fasciale (Carmen Natale)

The New Jersey Office of the State Comptroller has nearly unfettered authority to conduct random audits of any government agency, and does not have to explain its reasons for conducting an audit, a state appeals court said Thursday.

In a published opinion, a three-judge Appellate Division panel rejected arguments made by the North Bergen Board of Education that the comptroller should be required to explain why he wanted to conduct an audit of the board’s operations and finances before the board turned over relevant documents.

“An auditee is … unambiguously required to fully cooperate and assist the state comptroller with any audit,” Appellate Division Judge Douglas Fasciale wrote. “Such cooperation and assistance is mandatory.”

Appellate Division Judges Joseph Yannotti and Robert Gilson joined in the ruling.

The Office of the State Comptroller, established in 2007, is an independent agency charged with auditing spending and practices of state and local government bodies at all levels.

The case involves a dispute between the comptroller and the North Bergen school board that began in March 2015, when then-Comptroller Marc Larkins told the district that it would be subjected to a random audit, in which it would be required to provide a wide range of documents detailing its spending practices and costs, and a host of other business practices.

The board supplied a large number of documents, the ruling said, but also demanded an explanation of why it was being singled out for a random audit.

The comptroller’s office said it had decided to choose one district from northern New Jersey and another from southern New Jersey to audit; following that explanation, the board still declined to provide the comptroller with all of the information demanded, according to the decision.

The comptroller went to the Superior Court and asked for an order to show cause requiring the board to comply with the request for documents. Hudson County Superior Court Judge Hector Velazquez agreed with the comptroller, and the board appealed.

“[W]e hold that the enabling statute [N.J.S.A. 52:15C-1 to -24] does not impose any such requirement” on the comptroller, Fasciale said. “To hold otherwise would undermine the purpose of the act, render meaningless an auditee’s unambiguous statutory obligation to provide full assistance and cooperation with any audit, and unduly delay the conduct of the audit.”

The comptroller, Fasciale said, is under no obligation to provide a justification for his or her decision to conduct an audit of a government agency.

“The state comptroller enjoys broad powers under the act,” he said.

Current Comptroller Philip Degnan issued a brief statement after the ruling. “We are pleased with the court’s decision today, reaffirming the Office of the State Comptroller’s authority and recognizing the proprietary nature of the office’s audit selection criteria,” he said.The attorney general’s office represented the comptroller’s office.

The board’s attorney, Michael Witt of Chasan Leyner Mallon & Cappuzzo in Secaucus, said the board has, during the course of the appeal, complied with the comptroller’s demands.
“It is troubling, however, that there exists a state agency with the power to spend not only its own public funds, but to demand that other agencies spend their public funds as well, and yet no one is allowed to ask whether such expenditures are necessary or appropriate,” Witt said.
“Indeed, apparently no one is allowed to question whether that agency is even acting in a legal manner,” he added. “This surely cannot be what our Legislature intended when it created the comptroller’s office.”
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