NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A10616
SPONSOR: Simon TITLE OF BILL: An act to amend the workers' compensation law, in
relation to eliminating unconstitutional language relating to the pre-
audit of expenditures from the state insurance fund by the state comp-
troller
PURPOSE:
This bill eliminates unconstitutional language relating to the pre-audit
of expenditures from the state insurance fund by the state comptroller.
SUMMARY OF PROVISIONS:
There are two sections numbered 88 in the Workers' Compensation Law.
Section 1 of this proposal amends the Section 88 of the Workers' Compen-
sation Law that was amended by Chapter 635 of the Laws of 1996. The
amendment eliminates unconstitutional language relating to the pre-audit
of expenditures from the State Insurance Fund ("Fund") by the State
Comptroller and makes it clear that there can be no exemption from the
State Comptroller's constitutionally mandated pre-audit authority and
therefore, the payments made from the Fund are subject to such constitu-
tionally mandated authority.
Section 2 of this bill states that this act would take effect immediate-
ly.
PRIOR LEGISLATIVE HISTORY:
S.4034 and A.3732 (Passed Assembly) of 2013-2014
S. 7562 and A. 10316 - (Passed Assembly) of 2011- 2012
S.4925 and A.7505 - Passed Both Houses 2015 - Veto Message 240
S.7037 of 2016
S.4725 and A.7865 -Passed Both Houses 2017 -Veto Message 182
JUSTIFICATION:
Chapter 635 of the Laws of 1996 made major changes to the State's work-
ers' compensation system. As part of that chapter, Section 88 of the
Workers' Compensation Law was amended to provide that the Fund shall not
be considered a State agency or fund for purposes of Section 4 of the
State Finance Law, thus eliminating it from the appropriation require-
ment of that section, and eliminating approval of the Fund's budget by
the Budget Director. The amendment was intended, in part, to prevent
further transfers of the State Insurance Fund's moneys to the State's
general fund.
Apparently, as a corollary to eliminating the Fund from the appropri-
ation requirement of Section 4 of the State Finance Law, another of the
1996 amendments to Section 88 of the Workers' Compensation Law exceeded
the intended purpose by attempting to eliminate the constitutionally
mandated pre-audit of the Fund's funds by the Office of the State •
Comptroller ("OSC") pursuant to Article V, Section 1 of the State
Constitution and the statutory codification of such Constitutional
provision in Section 111 of the State Finance Law. However, the require-
ments of appropriation and pre-audit derive from two separate constitu-
tional provisions.
Section 4 of the State Finance Law, which requires appropriation of all
money "under the management of the State, or any agency or officer ther-
eof' is broader than the constitutional appropriation requirement of
Article VII, Section 7, as articulated by the • Court of Appeals. In
Anderson v. Regan (53 N.Y.2d 356) the Court indicated that "off budget"
funds (those deposited outside the State Treasury) are not subject to
the appropriation requirement of Article VII, Section 7. Therefore, it
is constitutionally permissible to remove off-budget State funds from
the appropriation requirement of State Finance Law Section 4. However,
it does not follow that off-budget funds can be removed from the consti-
tutional pre-audit requirement, which derives independently from Article
V, Section 1 of the New York State Constitution.
Article V, Section 1 mandates the pre-audit by the Comptroller of all
money of the State and all money under its control, and is not limited
to funds in the State Treasury. Section 111 of the State Finance Law is
merely a codification of that constitutional requirement. The exemption
of the Fund from the appropriation requirement of Section 4 of the State
Finance Law does not alter the fact that the Fund's moneys are both
money of the State and money under the control of the State for purposes
of Article V, Section 1 of the State Constitution.
Since 1996, in accordance with its constitutional duty, OSC has contin-
ued to audit the State Insurance Fund's administrative payments and the
Fund has continued to pay the administrative expenses required by
Section 88. The provisions of this proposal would simply remove the
unconstitutional impediment to audit payments from the Fund itself and
do not impose any significant or duplicative auditing requirements on
OSC or the Fund. Nor would this amendment impose an unreasonable burden
on the Fund given that the current practice granting OSC direct access
to necessary files streamlines the entire process. If, in addition to an
OSC audit, an audit is performed as a part of an internal control proc-
ess, there is a benefit to the auditee since such audits provide objec-
tive assurance on the audited area. However, performance of an internal
control audit cannot supersede a constitutionally mandated audit by the
State Comptroller and must viewed as an additional safety mechanism.
Further, a statute cannot eliminate the Comptroller's constitutional
responsibility to audit payments.
In 2015, the Governor signed into law Chapter 566 of the laws of 2015
authorizing an enterprise fraud prevention and detection system to be
established by the State Comptroller for the purpose of developing and
implementing techniques and technologies to detect and prevent fraud.
The new law directs state agencies to fully support and cooperate with
the State Comptroller by providing OSC with access to requested data, in
accordance with applicable state and federal law, in order to allow such
data to be integrated into such analytic efforts as the state comp-
troller may deem necessary for the purpose of detecting and preventing
fraud, waste and abuse and improper payments by state government. This
action is a clear example of the general agreement by the • Executive
that granting access to OSC is imperative if OSC is to continue to
perform its constitutionally mandated duties.
Accordingly, the Comptroller urges passage of this legislation.
BUDGET IMPLICATIONS:
This bill has no fiscal impact for the Office of the State Comptroller,
the State Insurance Fund or any other state entity because no signif-
icant requirements or activities are imposed by the proposal. The Comp-
troller currently audits the Fund and therefore no additional resources
would be necessary. The sole purpose of the bill is to eliminate uncon-
stitutional language from Section 88 of the Workers' Compensation Law.
EFFECTIVE DATE:
This bill would take effect immediately.
