The Office of the State Auditor, which is in the legislative branch of government, was originally established in 1934 pursuant to P.L. 1933, c.295. A number of statutory amendments dealing with the powers and duties of the State Auditor were enacted in the ensuing years. The Office of the State Auditor is within the Office of Legislative Services under the provisions of the Legislative Services Act.
The State Auditor is a constitutional officer appointed by the Legislature for a term of five years and until a successor shall be appointed and qualified. On February 11, 2010, Mr. Stephen M. Eells, CPA was confirmed by a joint session of the Legislature as the State Auditor.
The organization of the office within the legislative branch permits the State Auditor to be independent of the executive and judicial branches of government. This independence is critical in terms of meeting professional standards and in providing fair and objective reviews and audits of governmental operations.
Under the provisions of Article VII, Section I, Paragraph 6 of the State Constitution and N.J.S.A. 52:24-1 et seq., the Office of the State Auditor is required to conduct post-audits of all transactions and accounts kept by or for all departments, offices, and agencies of state government. Reports are submitted to the Legislature, the Governor, and the Executive Director of the Office of Legislative Services.
The Public Laws of 2006, Chapter 82 authorized the State Auditor to conduct a performance review of any program of any accounting agency, any independent authority, or any public entity or grantee that receives state funds. The law also requires the State Auditor to conduct a follow-up review to determine compliance with our audit recommendations. In addition, at the request of the legislative leadership or the Legislative Services Commission, the State Auditor conducts studies on the operation of state and state-supported agencies with respect to their efficiency, internal management control, and compliance with applicable laws and regulations.
The State Auditor and his staff will approach all work in an independent, unbiased, and open-minded manner.
The State Auditor will provide timely reporting to the Legislature, agency management, and the citizens of New Jersey.
Reporting will be in clear and concise language so it is understood by all users of the report.
Reporting will include recommendations on how to improve the workings of government and how to strengthen agency internal controls.
Reporting will include assurances on the financial operations of the state.
The State Auditor and his staff will perform all work in a professional manner utilizing appropriate standards.
During calendar year 2016 we identified $75.9 million in new cost savings and revenue enhancements. The schedule of cost savings and revenue enhancements is presented on page 3 of our 2016 Annual Report. Our compliance review on findings related to audit reports issued during the fiscal year ended June 30, 2015 disclosed that 79 percent of the recommendations have been complied with or management has taken steps to achieve compliance. Over a two-year period, the rate of compliance for fiscal year 2014 recommendations rose to 82 percent. We continued to share training opportunities with other state government accountants through audio conferences in various topics at no charge to the individuals employing agency.
The office performs the annual financial audit of the state’s Comprehensive Annual Financial Report (CAFR). The CAFR engagement includes the audit of 140 funds and component units which had a full accrual accounting total asset value of $191 billion at June 30, 2016.
Financial audits are designed to provide reasonable assurance about whether the financial statements of an audited entity are fairly presented in conformity with generally accepted accounting principles. The primary annual financial audit conducted by the office is the opinion on the state’s Comprehensive Annual Financial Report (CAFR) which is published by the Department of the Treasury. In addition, we also publish the Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards which is an integral part of the CAFR opinion audit.
The objectives of this type of audit are to determine whether financial transactions are related to an agency’s programs, are reasonable, and are recorded properly in the accounting systems. This type of audit may also focus on specific performance issues. Where appropriate, these engagements may also provide economy and efficiency comments. Audits are selected using a risk-based approach. Larger departments are audited on a divisional, agency, or program basis rather than on a department-wide basis because of their size and complexity. We completed 15 performance audits in calendar year 2016. These audits encompassed $19.8 billion and $1.5 billion of expenditures and revenues, respectively.
Information Technology Audits
The objectives of this type of audit are to determine whether the data maintained by a particular computer system is reliable, valid, safeguarded, and recorded properly; whether agency networks are properly managed to provide for business continuity and the prevention of system abuse; and whether system development and maintenance is performed in accordance with guidelines and best practices. During calendar year 2016 we reported on the Information Technology Project Management and the Statewide Information Technology, Contingency Planning.
The office has trained all audit staff on the basics of integrated auditing, where field auditors learn how to review IT controls applicable to the scope of their audit. If the system they are reviewing has more complex controls, an IT auditor can be consulted or the system itself can be assigned to the IT unit as a separate audit. This effort will allow for review of a greater number of IT controls.
School District Audits
N.J.S.A. 18A:7F-6d authorizes the Office of the State Auditor to audit the accounts and financial transactions of any school district in which the state aid equals 80 percent or more of its net budget for the year. In addition, in accordance with N.J.S.A. 18A:7A-57, the State Auditor is authorized to perform a forensic audit of school districts with a general fund deficit and meeting additional specific criteria as stated in the statute. We audited two such school districts in calendar year 2016.
From time to time the Legislative Services Commission and Legislative Leadership request the State Auditor to conduct special projects of the fiscal practices and procedures of the state and state-supported agencies, and to report findings to the Commission.