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Auditor briefs council on 'not to exceed' contract amounts and compliance with state finance rules
Summary
An auditor explained a 2017 change aligning NJ statutory and administrative rules requiring explicit award amounts and discussed how 'not to exceed' language improves transparency but increases administrative tracking burdens for finance offices.
The Township of Washington suspended its regular agenda Feb. 2 to take a detailed briefing from an auditor, identified in the record as Mr. Swisher, on how municipalities should set and document "not to exceed" contract amounts under New Jersey law.
Mr. Swisher said a 2017 change revealed a disconnect between state statutes (NJSA) and the administrative code: statutes required award descriptions but did not require a clear maximum dollar amount, while the administrative code requires certification by the chief financial officer for encumbrances. To bridge the two, many municipalities now include a "not to exceed" or maximum-dollar figure in award resolutions to provide transparency and allow proper CFO certification.
"This provides a greater transparency, ensuring that the public can more effectively monitor the cost of contracts being awarded," Mr. Swisher told the council. He recommended that the administration consider adding a clarifying caveat in resolutions to show that the listed maximum is a reasonable estimate and that further authorizations would be sought if the estimate is exceeded.
Council members pressed Mr. Swisher on practical effects: how estimates are set, whether escrow accounts or applicant escrows cover likely expenditures, and whether the township’s financial software can track encumbrances for a variety of contract types. Mr. Swisher said encumbrance tracking is required and can be burdensome for finance and clerk offices; he noted widely used municipal systems (e.g., Edmunds) can support standard tracking but that some items (planning/zoning board escrows) can be more complicated. He offered to follow up with the state division for clarifying guidance and to share sample resolutions redacted of client names.
The council asked administration to review Mr. Swisher’s suggested language and to bring any amended resolution language back for consideration at a future meeting. Mr. Swisher agreed to send sample language and to relay any clarifications from the state Division of Local Government Services.
Next steps: administration will work with the township attorney on amending resolution language where needed and will circulate Mr. Swisher’s samples for review.
