August 24, 2009: Transparency and Accountability, Two Critical Concepts Often Ignored in NJ

This Monday Minute represents the first in a series that will track how New Jersey makes use of its federal stimulus money. An estimated $17 billion in new federal funds is expected to be invested in New Jersey this year and next through the American Recovery and Reinvestment Act of 2009. Approximately $10 billion of these funds will be used for critically needed services and infrastructure investment; the rest will be targeted tax cuts.

These funds represent a real opportunity for the state to make critical investments if used wisely; if wasted, they will have no lasting value. Understanding where and how funds are being used is paramount. The state has set up a website to help taxpayers who want to keep track how these funds are being used.

Three state level organizations are in charge of overseeing the use of New Jersey’s resources. First and oldest is the Office of the State Auditor which is part of the Office of Legislative Services. The Office of the State Auditor has duties set forth in the State Constitution that require it to conduct post-audits of all transactions and accounts for all departments, offices and agencies of the state government and to report them to the Legislature and to the Governor.

In 2004, The Office of the Inspector General was set up by executive order and later made permanent in 2005. It was set up to provide increased accountability, integrity and oversight to all recipients of state funds. It receives and investigates complaints concerning alleged fraud, waste, abuse or mismanagement. It’s Inspector General, Mary Jane Cooper, is appointed with the advice and consent of the Senate to a five-year term.

In 2007, the Office of the State Comptroller was created to conduct routine, periodic and random audits of the executive branch and its subdivisions and to make assessments of the performance and management of programs and the extent to which they are achieving their goals and objectives. The State Comptroller is appointed by the Governor with the advise and consent of the senate for a term of six years and reports directly to the Governor.

In February 2009 the governor set up a task force, led by his Chief of Staff Ed McBride and State Comptroller Matthew Boxer, to oversee the use of stimulus money in New Jersey. The comptroller’s office has said that it is training staff and distributing written guidance on the appropriate use of the funds. It also plans to work with other state overseers including the inspector general, Medicaid inspector general, and auditors in various departments, to keep an eye on stimulus spending.

In a new report from the Legislative Auditor’s Office, Assistant State Auditor Stephen M. Eells raised concerns about how the state is tracking the federal stimulus money. In a recent review of 14 municipalities, seven counties, and eight housing authorities, the Auditor’s Office flagged those that have shown past financial problems and reporting discrepancies and noted that if the historical risks identified in past audit reports are not addressed, “one can expect similar transparency, accountability and grant compliance issues to occur with these and other [stimulus] program funds.”

In a recent letter to Governor Corzine and legislative leaders, Eels also noted that controls over preparing financial statements were “absent or ineffective in preventing or detecting material misstatements in the preparation of these statements,” adding that records used to prepare the statements did not provide reliable information.

New Jersey now has in place offices with the ability to oversee how the state spends its money. Given the extraordinary amount of federal stimulus funds available, transparency and accountability are paramount. In the future, New Jersey Policy Perspective hopes to follow the money and see what this state will make of these investment opportunities.