S1626

SENATE, No. 1626

STATE OF NEW JERSEY

INTRODUCED OCTOBER 28, 1996

By Senator LaROSSA

An Act concerning local accounting, amending various sections of statutory law, supplementing chapter 5 of Title 40A of the New Jersey Statutes, and making an appropriation.

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

1. Section 11 of P.L.1962, c.134 (C.40:33-13.13) is amended to read as follows:

11. The treasurer of the board of trustees shall receive and hold, in behalf of the board, all funds of the library and shall pay out or transfer such funds, as directed by resolution of the board of trustees, by check signed by him and countersigned by the president of the board of trustees or other trustee or trustees designated by the board of trustees. The treasurer shall give adequate bond or bonds, conditioned for the faithful performance and discharge of his duties, payable to the board of trustees and to the participating counties, in an amount or amounts required by the board of trustees. All accounts and financial transactions of the regional library shall be audited annually by a registered municipal accountant of New Jersey or a certified public accountant of New Jersey and filed with the Director of the Division of Local Government Services on or before May 31.

(cf: P.L.1962, c.134, s.11)

2. Section 12 of P.L.1946, c.276 (C.40:37-95.12) is amended to read as follows:

12. The commission shall at all times keep or cause to be kept full and accurate accounts of its receipts and expenditures, and of its resources and liabilities, and shall prepare or cause to be prepared detailed annual statements thereof, and shall employ the services of the Division of Local Government Services of the State Department of [Taxation and Finance] Community Affairs or of a competent registered municipal accountant of New Jersey or a certified public accountant of New Jersey to audit, annually, the books, accounts and statements of the commission, and shall cause copies of said annual audits, when completed, to be preserved as part of its permanent records and shall transmit certified copies of such audits to the board of chosen freeholders of said county.

(cf: P.L.1946, c.276, s.12)

3. R.S.40:62-2 is amended to read as follows:

40:62-2. Any municipality engaged in the business of operating any light, heat or power plant or works or engaged in the business of transportation, shall, with respect to such business and the property and plant used by it: a. keep its books, records and accounts in the same manner as provided by statute for keeping other books, records and accounts of a municipality, and file with the Board of Public Utility Commissioners a copy of its Annual Report of Audit by a registered municipal accountant of New Jersey or a certified public accountant of New Jersey if the municipality provides light, heat or power only within the limits of the municipality;

b. keep its books, records and accounts and make reports to the board in a manner and form and to the same extent as the board shall from time to time require of other public utilities in similar businesses in all other situations;

c. comply with all rules, regulations and recommendations as to reasonable standards and service to the same extent as the board shall from time to time require of other public utilities engaged in other similar businesses. The Board of Public Utility Commissioners shall have power and authority to enforce the provisions of this section.

(cf: P.L.1973, c.277, s.1)

4. N.J.S.40A:5-4 is amended to read as follows:

40A:5-4. The governing body of every local unit shall cause an annual audit of its books, accounts and financial transactions to be made and completed within six months after the close of its fiscal year. The governing body of every local unit may by resolution petition the Director of the Division of Local Government Services in the Department of Community Affairs for an extension to complete and file the annual audit with the division. Upon good cause being shown the director may grant an extension upon whatever terms or conditions he may deem reasonable. The determination of the director in the granting of an extension is final.

The governing body of every local unit shall employ a registered municipal accountant of New Jersey or a certified public accountant of New Jersey to prepare its annual audit or it shall enter into an agreement with the Director of the Division of Local Government Services for an annual audit to be made by qualified employees of the division. The director shall establish a fee based upon the time spent and other expenses incurred by qualified employees of the division when conducting the annual audit for a local unit. The local unit shall upon request for payment for audit services, forward a check to the director, payable to the State Treasurer.

(cf: P.L.1991, c.216, s.1)

5. (New section) Notwithstanding the provisions of P.L.1971, c.198 (C.40A:11-1 et seq.), or any other law, rule or regulation to the contrary, the governing body of every local unit shall award any contract for the provision of financial reporting services after public advertising for bids and bidding therefor. A contract for the provision of auditing services shall be awarded not less than once every five years for a duration not to exceed five years. The award shall be made that will be most advantageous to the local government unit, price and other factors considered. For the purposes of this section, "financial reporting services" means preparation of a comprehensive annual financial report in accordance with Generally Accepted Accounting Principles established by the Governmental Accounting Standards Board and audits conducted in accordance with Generally Accepted Government Auditing Standards promulgated by the Comptroller General of the United States.

6. N.J.S.40A:5-5 is amended to read as follows:

40A:5-5. Each local unit shall have a registered municipal accountant of New Jersey or a certified public accountant of New Jersey prepare a comprehensive annual financial report in accordance with Generally Accepted Accounting Principles established by the Governmental Accounting Standards Board. Each audit shall embrace the books, accounts and transactions of the local unit and every board, body, officer or commission supported and maintained wholly or in part by funds appropriated by the local unit, unless otherwise provided by statute or regulations of the board. Each audit shall cover a complete fiscal year and, in addition, shall include a verification of all cash and bank balances as of the date of the audit thereof and an audit of the accounts to such date. Each audit conducted pursuant to this section shall be prepared by a registered municipal accountant of New Jersey or a certified public accountant of New Jersey in accordance with Generally Accepted Government Auditing Standards promulgated by the Comptroller General of the United States.

(cf: N.J.S.40A:5-5)

7. N.J.S.40A:5-6 is amended to read as follows:

40A:5-6. Every such registered municipal accountant and every such certified public accountant shall file the original report of his audit and recommendations with the clerk and shall, within 5 days thereafter, file a certified duplicate copy thereof, over his signature, in

the office of the director.

(cf: N.J.S.40A:5-6)

8. N.J.S.40A:5-7 is amended to read as follows:

40A:5-7. A synopsis of all audits, together with the recommendations made by the registered municipal accountant or certified public accountant, shall be prepared and published by the clerk of the local unit at least once in the official newspaper of the local unit, if there be one, or if there be none, in a newspaper published in the local unit. If there is no newspaper published within the local unit, it shall be published in a newspaper having a general circulation in the local unit.

If the clerk fails to have such publication made within 30 days after receipt of the report of audit and recommendations, he shall be subject to a fine of $10.00 payable to the local unit for each day after the expiration of the 30 days that such publication fails to appear.

(cf: N.J.S.40A:5-7)

9. N.J.S.40A:5-9 is amended to read as follows:

40A:5-9. Audit by registered municipal accountant

Every audit required under this chapter shall be completed by an accountant or auditor who holds an uncanceled license as a registered municipal accountant of New Jersey or a certificate as a certified public accountant of New Jersey. [Such] A registered municipal accountant's license shall be issued [annually] biennially by the New Jersey State Board of [Public Accountants, shall be dated September 1 and run until August 31 of the following year, unless sooner canceled or revoked by the said State Board of Public Accountants] Accountancy, pursuant to P.L.1977, c.176 (C.45:2B-33 et seq.). Pursuant to the provisions of section 2 of P.L.1977, c.176 (C.45:2B-34), a license as a registered municipal accountant of New Jersey shall not be issued to any person on or after the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill) unless that person held an uncanceled license as a registered municipal accountant of New Jersey on the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill).

Every report of audit shall be signed by the certified public accountant or the registered municipal accountant making the audit, or in charge thereof, who shall be the person authorized by the local unit to make the audit. In case any license shall be revoked, such revocation shall not be construed to affect any agreement which may be made by any local unit with any other registered municipal accountant or any other certified public accountant, even though such accountant shall have been associated with the person whose license has been revoked.

(cf: N.J.S.40A:5-9)

10. N.J.S.40A:5-10 is amended to read as follows:

40A:5-10. Upon proof that any registered municipal accountant or any certified public accountant shall have knowingly omitted to report any error, omission, irregularity, violation of law or discrepancy found in the books or accounts, or shall have issued false reports of the audit of any local unit, or of such a nature as not to comply with the requirements of the director, or if such registered municipal accountant or certified public accountant shall fail to file such report and recommendations as herein directed, or neglect or refuse to carry out any agreement for audit, his registration license or certificate may be canceled or revoked by the State Board of [Public Accountants] Accountancy . It shall be the duty of the director to notify the State Board of [Public Accountants] Accountancy of any matters coming to his attention relative to any of the foregoing. Upon cancellation or refusal of a license, a person aggrieved thereby shall have the right to a review by the Superior Court in a proceeding in lieu of prerogative writ.

(cf: N.J.S.40A:5-10)

11. Section 2 of P.L.1977, c.176 (C.45:2B-34) is amended to read as follows:

2. The New Jersey State Board of Accountancy shall make all rules and regulations governing examinations and the issue of licenses to registered municipal accountants , except that a license as a registered municipal accountant shall not be issued to any person on or after the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill) unless that person held an uncancelled license as a registered municipal accountant on the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill).

(cf: P.L.1982, c.96, s.3).

12. Section 4 of P.L.1977, c.176 (C.45:2B-36) is amended to read as follows:

4. Any person who shall make, or begin to make, any audit of accounts of any municipality or county as required by this chapter, contrary to the provisions hereof, or without a license [therefor] as a registered municipal accountant or a certificate as a certified public accountant in full force and effect, shall be liable to a penalty of $100.00 for every audit of account so made, to be recovered in an action at law instituted by the New Jersey State Board of Accountancy in any court having jurisdiction.

(cf: P.L.1982, c. 96, s. 5).

13. Section 5 of P.L.1977, c.176 (C.45:2B-37) is amended to read as follows:

5. All reports of audit of accounts of municipalities or counties shall be signed by the auditor or accountant making the audit or in charge of the same, holding a license as herein provided or a certificate as a certified public accountant of New Jersey, whether such audit or statement of account is made by any person employing such auditor or accountant, or otherwise, and the licensing or the revocation of the license of any such auditor shall not be construed to affect the contracting with any municipality or county by any person employing auditors or accountants; but upon the revocation of the license of an auditor or accountant for the purposes herein specified and authorized, such person shall not employ in such work such auditors or accountants but only such persons as may be licensed as herein required or certified as certified public accountants of New Jersey, except that the auditor or accountant whose license may have been revoked may be employed in a subordinate capacity.

If any person shall willfully employ any person not holding a license as a registered municipal accountant as herein required or a certificate as a certified public accountant of New Jersey in full force and effect as auditor or accountant in municipal work within the purview of this chapter and other laws in which audits shall be subject to the supervision and orders of the Bureau of Financial Regulation and Assistance in the Department of the Treasury, the said bureau may direct the municipalities or counties to refuse to employ such person in such work during the continuance of such violation.

(cf: P.L.1977, c. 176, s. 5)

14. (New section) The Division of Local Government Services in the Department of Community Affairs shall provide such technical assistance and advice as shall be necessary to enable local units to comply with the provisions of this act.

15. There is hereby appropriated a sum of $6,000,000 from the General Fund to the Department of Community Affairs to assist local governments with the implementation of the provisions of this act. The moneys shall be distributed in accordance with regulations promulgated by the department pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.).

16. This act shall take effect immediately, but shall be applicable to annual financial reports and annual audits issued for fiscal years beginning or or after January 1, 1996.

STATEMENT

This bill would require that all local government units have either a registered municipal accountant or a certified public accountant prepare comprehensive annual financial reports which conform with Generally Accepted Accounting Principles established by the Governmental Accounting Standards Board. The bill would require that all audits be conducted in accordance with Generally Accepted Government Auditing Standards promulgated by the Comptroller General of the United States. The bill would be applicable to annual financial reports and annual audits issued for fiscal years beginning on or after January 1, 1996.

The bill also permits audits of other entities, such as regional libraries and county park commissions, which by law are required to be performed by registered municipal accountants, to be performed by certified public accountants.

The bill phases out the position of registered municipal accountant. It permits registered municipal accountants who hold uncanceled licenses as registered municipal accountants on the bill's effective date to continue to be issued the yearly license and to continue to perform the functions and duties of registered municipal accountants. No licenses will be issued to any additional persons, however. Under the bill, certified public accountants will be authorized to perform the audits performed by registered municipal accountants.

The bill also requires that any contracts entered into by local government units for financial reporting services be competitively bid at least once in every five year period for a maximum duration of five years. The bill would require that, like the award of State contracts, the award of a contract for financial reporting services be that which is most advantageous to the local government unit, price and other factors considered.

The bill appropriates a sum of $6,000,000 from the General Fund to the Department of Community Affairs to assist local governments with the implementation of the provisions of this act. The money is to be distributed in accordance with regulations promulgated by the department.

Requires auditing by local government units in accordance with Generally Accepted Accounting Principles; appropriates $6 million.