N.J. Admin. Code § 5:31-7.7

Current through Register Vol. 56, No. 11, June 3, 2024

Section 5:31-7.7 - Discovery of fraud or illegal acts

(a) The Division of Local Government Services has the prerogative to take full charge of the auditing of any authority or special district where there is any shortage, embezzlement or fraud. Where there is detection of an illegal act, shortage or irregularity, the Division shall be notified at once by means of a special confidential report. Notwithstanding, guidance on the independent auditor's responsibility for the detection of illegal acts and irregularities in an audit of financial statements is provided by generally accepted auditing standards.

(b) Confidential report blanks shall be submitted in triplicate; one copy for filing in this Division, one copy for filing with the authority/ special district and the third copy for the auditor's files. Blanks can be procured upon request and may be secured either in advance or immediately upon the discovery of any condition requiring a special report. The special confidential report (see Appendix D, incorporated herein by reference) shall be prepared as follows:

1. Section One is a preliminary report and must be filed with the Division within forty-eight hours after the discovery of any irregularity or shortage regardless of whether or not the facts have been definitely established;

2. Section Two shall be filed immediately after the auditor has completed the work or after the auditor has completed the preliminary work to a point where the auditor can make a fair determination as to the amount involved. The auditor shall file supplements or preliminary reports from time to time pending the filing of section two in completed form.

3. Section Three shall be filed upon final disposition of the case.

(c) In connection with every shortage there shall be an immediate report to the Division of Local Government Services, Bureau of Authority Regulation, and the governing body. The governing body shall make immediate report to the bonding company upon presentation of the preliminary report of the auditor. It is the duty of the governing body to report the discovery of any shortage or irregularity involving public moneys to the County prosecutor serving the County in which the entity is located. The Director is not a prosecuting officer, but shall render a report to the responsible Deputy Attorney General. The independent auditor shall follow up these matters in each and every instance and keep the Division informed as to progress and procedure.

N.J. Admin. Code § 5:31-7.7