Authorizes the comptroller and each examiner of municipal affairs to examine the financial affairs of certain organizations controlled by local government entities

1 Co-sponsor

• Joseph Morelle

BILL NUMBER:A11088

Title of bill

An act to amend the general municipal law, in relation to audits by the state comptroller of certain organizations controlled by local government entities

Purpose

This bill would expand the State Comptroller's express audit authority to include auditing organizations that are controlled by local government entities.

Summary of provisions

This bill would amend section 34 of the General Municipal Law to authorize the State Comptroller to examine into the financial affairs of local government subsidiary organizations. The term local government subsidiary organization" would mean any organization, other than an entity already subject to audit by the Comptroller, that is controlled by one or more municipal corporations or other local government entities. subject to audit by the Comptroller' pursuant to the General Municipal Law. The circumstances under which an organization is considered to be under the control of one or more municipal corpo- rations or other local government entities would include, but not be limited to, any situation where municipal or local government officials select or serve as either a majority of the organization's highest poli- cy-making body or the organization's chief executive officer.

Justification

In recent years, municipal corporations and other local government entities have relied on a variety of separate and legally distinct organizations to perform various functions (e.g. local develop- ment corporations organized under Section 1411 of the Not-For-Profit Corporation Law; a limited liability company organized under the Limited Liability Company Law; a for-profit corporation apparently organized under the Business Corporation Law). Under current law, when a municipal corporation or other local government entity has a financial or business relationship with another legally distinct organization, the Comptroller may examine that relationship, but only as part of an audit of the municipal corporation or other local government entity. Even, in the context of such an audit, there is no authority for the Comptroller to look beyond the financial or business relationship, to examine the organizations overall finances and operations.

Similarly, there is no express authority for the Comptroller to sepa- rately audit the overall finances or operations of such an organization. This bill would expand the Comptroller's express audit authority to include audits of such organizations having a financial or business relationship with a municipal corporation or other local government entity, but only when the organization is under the control of one or more municipal corporations or other local government entities.

This expansion of the Comptroller's audit authority is necessary promote and increase transparency in municipal and local government finances and operations because an - organization that is under the control of a municipal corporation or local government entity functions as an instru- mentality of that municipal corporation or local government entity.

Thus, in order to fully understand- the financial condition and oper- ations of a municipal corporation or other local government entity, it is necessary to examine the finances and operations of organizations controlled by the municipal corporation or local government entity. To avoid creating incentives or disincentives to the use of any particular type of organization, this bill would apply to every type of Organiza- tion that is under the control of a municipal corporation or other local government entity, except an organization already subject to audit by the Comptroller.

The Comptroller urges the passage of this legislation.