State Comptroller Need Not Give Reasons for Auditing Local Government Units

Larkins v. Solter, 450 N.J. Super. 519 (App. Div. 2017).  The Office of the State Comptroller (“OSC”) was established by the Legislature in 2007, in order to subject governmental financial activities to uniform, meaningful, and systematic public scrutiny.  N.J.S.A. 52:15C-1 et seq.  Among the OSC’s powers is the ability to audit, among other agencies, units of local government.

This case arose from the decision of the OSC sought to do a performance audit of the North Bergen District Board of Education.  Unhappy to have been selected for such an audit, the Board declined to cooperate unless the OSC gave reasons for the audit.  The OSC would not do so, and instead filed suit for a declaratory judgment that it had “unfettered authority” to conduct such an audit, without preconditions.  The OSC moved for summary judgment, and the Law Division granted that motion, ruling that the Board could not impose conditions on its compliance with the audit.  After a motion for reconsideration failed, the Board appealed.  In an opinion by Judge Fasciale, the Appellate Division affirmed.

Judge Fasciale first addressed a preliminary issue as to the procedural path of the case.  The OSC never issued a final order.  Instead, the OSC filed suit in the Law Division and invoked the summary proceedings rule, Rule 4:67.  The portion of that rule on which OSC at one point relied was inapplicable, but Judge Fasciale ruled that the case was correctly filed under Rule 4;67-1(b).

The panel then turned to the merits of the legal issue, applying the de novo standard of review to the Law Division’s ruling.  Judge Fasciale applied fundamental principles of statutory interpretation in determining whether, under its enabling statute, the OSC was obligated to give reasons for its audits.

The intent of the Legislature, as shown by the ordinary meaning of the language that the Legislature used, is paramount.  Judge Fasciale concluded that “[t]he plain text of the Act demonstrates that unconditional cooperation by an auditee is essential to the State Comptroller fulfilling his statutory duties and responsibilities.  Unconditional cooperation is also fundamental to achieving the goal of “subject[ing] governmental financial activities to uniform, meaningful, and systematic public scrutiny.  N.J.S.A. 52:15C-1.”  Indeed, N.J.S.A. 52:15C-14(a) requires that “boards of education and their employees shall provide full assistance and cooperation with any audit, performance review or contract review by the State Comptroller.”  Only by rewriting the statute could a requirement of reasons for an audit be imposed, and the panel declined to do that.

The Board had cross-moved in the Law Division for discovery that would have revealed the “protocol, procedure, and/or process” that led the OSC to select the Board for an audit.  The OSC invoked the deliberative process privilege, and the Law Division denied the cross-motion.  Judge Fasciale affirmed that result.
Allowing discovery of that type would “arm auditees with the ability to hinder performance audits,” a result directly contrary to the Legislature’s intent.