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June 13, 2007


DiNapoli Submits Testimony on Justice Court Reforms

Calls for More Incentives for Court Consolidation;
Urges Mandatory Consolidation Review for Small Courts

State Comptroller Thomas P. DiNapoli today submitted testimony to the New York State Special Commission on the Future of New York State Courts calling for measures to reform town and village justice courts including more incentives for court consolidation and mandatory review for consolidation of small courts. His full testimony is attached below.

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Dear Chairman Dunne and Members of the Special Commission on the Future of the New York State Courts:

Oversight of the financial operations of New York’s town and village justice courts by the office of the State Comptroller (OSC) is rooted in both the Constitution and various statutory provisions. My office audits justice courts, provides training to magistrates and clerks, and offers technical assistance. We also collect and distribute fee and fine revenue through the operations of the Justice Court Fund.

Justice courts hear civil and criminal cases, adjudicate misdemeanors and traffic violations, and impose and collect a wide range of fines, surcharges and civil fees. Local magistrates are responsible for overseeing their individual court’s financial transactions and remitting funds to either the Justice Court Fund or, in the case of electronic filing, to their chief fiscal officer on a monthly basis. This responsibility is significant as justice courts receive a substantial amount of government revenue – nearly $212 million was collected in 2006.

Our audits have, from time to time, uncovered issues of financial mismanagement in justice courts, including those related to inadequate internal controls, a lack of fiscal oversight and poorly trained staff. Occasionally we have found evidence of fraud. We also find good fiscal practices, as in the case of our division’s audit of the Town of Arkwright’s justice court in Chautauqua County, where the court employed strong internal controls and good fiscal management practices.

Nonetheless, many of the fiscal management problems faced by the State’s justice courts are the result of systemic conditions. For example, many justice courts are relatively small, have too few staff members to properly segregate financial duties and the justices receive limited training in fiscal matters to help them comply with sound financial practices.

While regular audits are a strong deterrent to mismanagement and fraud, they are most often performed after the fact and, therefore, cannot serve as the only method of ensuring fiscal accountability. Given the large and decentralized nature of our justice court system, we believe that the best way to strengthen financial oversight of justice courts is to pursue systemic reforms. It is important that we develop statewide standards for training, operations and oversight of this system.

In May 2006, my office released an audit (audit report 2005-MR-10) that found repeated deficiencies in accountability and internal controls resulting from the very structure of justice court operations. Accordingly, in addition to offering recommendations that justice courts could implement directly, the report made a number of suggestions for legislative consideration, including required training in financial management for justices and court clerks, as well as other structural changes.

In response to OSC’s report, last summer Chief Administrative Judge Jonathan Lippman announced the formation of a group to develop an action plan to address these issues. In support of that effort, OSC hosted a series of working meetings over the summer and fall of 2006 with representatives from the Office of Court Administration (OCA), the New York State Magistrates Association, the New York Conference of Mayors, the Association of Towns of the State of New York and the New York State Magistrates Court Clerks Association to study and suggest reforms in the areas of financial oversight and training, internal controls, electronic financial reporting and shared services.

Last November, Chief Judge Judith S. Kaye and Judge Lippman put forward a comprehensive reform plan for town and village justice courts. This “Action Plan for Justice Courts” addressed a wide variety of issues associated with justice court operations, including the financial oversight of court operations, and incorporated several of our recommendations. Together, these proposals make achievable recommendations that have the potential to change the structure of the local justice court system, improve training and provide more accountability.

In December and January, the Comptroller’s Office submitted testimony to the Assembly’s Judiciary and Codes committees and the Senate’s Judiciary Committee, respectively, detailing the basis and nature of our support for the comprehensive reform of the fiscal operations of the State’s justice courts. We were pleased to see that the Legislature provided additional resources to support OCA’s Action Plan and we hope this Commission will lend its support for continued funding in order to avoid any significant fiscal impact on local governments.

Clearly, now is the time to explore and implement reforms that strengthen our justice court system. As outlined in our previous testimony, my office is already working with OCA to implement the following measures:

A uniform statewide technology system for all justice courts, including case management software that is integrated with software used by OSC’s Justice Court Fund and will enable all justices to file reports electronically with the Fund.

  • Acceptance of credit card payments by all justice courts in order to strengthen financial accountability and security.
  • Expanded training for justices and court clerks to include proper financial management training.
  • Stronger town and village oversight of court financial records.
  • Creating a court clerk function within each court, including the use of shared services.

The systemic fiscal management issues brought to light by my office’s audits and OCA’s report demonstrate the need for the State to provide justice courts with the tools necessary to maintain complete and accurate financial records and enhance revenue collections. OSC believes that use of a uniform statewide technology system and case management software that includes financial transactions will address many of the internal control and accounting deficiencies cited in our reports and increase fiscal accountability.

Moreover, providing justice courts with proper fiscal technology and software will allow all justice courts to participate in OSC’s Invoice Billing Program, which provides for the electronic filing of reports with the Justice Court Fund. Electronic filing is fiscally and programmatically beneficial for several reasons. Specifically, electronic filing improves cash flow by allowing justice courts to send receipts directly to their municipality each month, provides each justice with a monthly distribution summary of cases and fines that can then be reviewed for accuracy, and improves the accuracy, efficiency and timeliness of financial reporting.

To ensure that the data reported to oversight agencies is accurate, we will advise OCA of appropriate controls that should be incorporated into software applications to guard against inadvertent or intentional misuse and help ensure that data is valid, properly authorized, accurately processed and available for reporting. We believe the inclusion of these controls will greatly improve the integrity of the information submitted to the State, localities and the court system.

While the OCA’s report stopped short of directly recommending changes to existing laws relating to the consolidation or dissolution of smaller courts, I think this is an area that warrants serious consideration. Many justice courts are small, have relatively little activity and generate comparatively little government revenue. In fact, according to 2006 data compiled by my office, out of 1,260 justice courts reporting, there were 210 courts (17%) that generated local revenues of $5,000 or less annually and 367 (29%) with local revenues under $10,000. While one size doesn’t fit all, consolidation may make fiscal and operational sense in certain areas of the State.

Current law permits villages to abolish their justice courts and towns to combine their justice courts but only under limited circumstances. Generally, the decision by the governing board to abolish an existing village court is subject to permissive referendum. As such, residents of the village may petition to require voter approval of this action. For towns, the merger of two adjacent town courts, either upon petition or upon motion of the town board, requires the consent of the voters of each town affected by the merger.

It is time to examine ways of facilitating consolidation and shared services for local governments that choose to take this step with their courts. There is currently legislation pending in the Legislature that would authorize two or more towns in a contiguous geographic area to establish a single court. In addition, the State’s Shared Municipal Services Incentive Program should be expanded to provide more incentives for justice court mergers, consolidations and the sharing of services. Similarly, triggers could be used to require a consolidation review when the size or activity of a particular justice court falls below set thresholds. These options could help increase the efficiency, effectiveness and fiscal integrity of our courts and, if properly structured, could be undertaken without endangering local court revenues or diminishing the public’s access to justice.

I intend to continue to look at these issues. My office will continue to provide analysis of the fiscal operations of these courts and identify ways in which the State can promote more efficient and effective court operations.

In summary, I believe that structural reform of justice court operations is the best way to correct the endemic financial weaknesses of that system. OCA’s plan to reform town and village justice courts addresses many of the issues uncovered by our audits and is a thoughtful, comprehensive approach that can move us forward on the road to a higher level of fiscal accountability. We stand ready to aid in this effort.

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