OPINION OF THE COURT
Thе central issue on this appeal is whether the New York State Comptroller has the constitutional and/or statutory authority to audit the New York State Insurance Department Liquidation Bureau. We hold that the Comptroller does not possess such authority.
I.
The Superintendent of Insurance serves in two distinct capacities: (1) as supervisor and regulator of New York State’s insurance industry as a whole (see Insurance Law §§ 201, 301); and (2) as a court-appointed receiver on behalf of distressed insurers (see Insurance Law §§ 7402, 7404). As to the latter role, the Legislature, by statutory enactment, bestowed upon the Superintendent broad fiduciary powers to manage the affairs of distressed domestic insurers and to marshal and disburse their assets (see Corcoran v Ardra Ins. Co.,
As a court-appointed receiver, the Superintendent is authorized to either rehabilitate or liquidate a domestic insurer that meets the definition of “insolvency” as defined by Insurance Law § 1309 (see Insurance Law § 7402 [a]; § 7404). An order of
Upon entry of an order of liquidation, the Superintendent is “vested by operation of law with the title to all property, contracts and rights of action of such insurer” (Insurance Law § 7405 [b]). He has the discrеtionary authority to dispose of assets and compromise claims of a distressed insurer, pursuant to statutory claim priorities and subject to the approval of Supreme Court (see Insurance Law §§ 7428, 7434). Supreme Court, in turn, is charged with directing “the manner in which payments and dividends to creditors shall be made” (Matter of Knickerbocker Agency [Holz],
The Superintendent enforcеs orders of rehabilitation and liquidation through the New York State Insurance Department Liquidation Bureau (Bureau), a separate office of the Insurance Department which conducts the day-to-day operations of the distressed insurer (see Gillis and Calareso, Litigators. Must Prepare for Risk that Insurers May Go Into Rehabilitation or Liquidation, 75 NY St BJ 20 [Mar./Apr. 2003]). The Burеau routinely retains personnel from the distressed insurer to assist it in the liquidation process, a practice sanctioned by Insurance Law § 7422 (a). Such individuals are compensated “out of the funds or assets of such insurer” (Insurance Law § 7422 [b]) and are not employees of the State (see e.g. Matter of Kinney,
In January 2004, the Comptroller sought to audit the financiаl management and operating practices of the Bureau. The Bureau rejected the Comptroller’s request, asserting that the Bureau was not a “state agency” subject to oversight by the Comptroller. After several months of unsuccessful negotiations concerning the scope of the audit, the Comptroller issued nine testimonial subpoenas seeking an examination of the Superintendent and eight Bureau officials. The purpose of the audit was to: (1) “determine whether the financial management and operating practices of the Liquidation Bureau are effective in carrying out its responsibility to liquidate and settle the affairs of insolvent insurance companies”; and (2) “establish the accuracy and completeness of the abandoned property reports the Liquidation Bureau has filed with the Comptroller under the Abandoned Property Law.” The Comptroller’s asserted authority to audit the Bureau was premised on article V, § 1 of the New York Stаte Constitution, the State Finance Law, and the Abandoned Property Law. Specifically, the Comptroller contended that his audit authority originated from his constitutional and statutory powers to audit all official accounts, moneys under the control of state officials, and the books, records and documents of entities required to file abandoned property reports with the Comptroller.
The Comptroller also served a subpoena duces tecum seeking production of documents concerning, among other things, the financial records of distressed insurers in liquidation and records from the Bureau’s abandoned property account involving open and closed rehabilitated and liquidated estates. The Comptroller’s asserted authority and purpose for the production of the documents was premised on the same constitutional and statutory authority set forth in the testimonial subpoenas.
The Superintendent
Supreme Court quashed the subpoenas, holding that article V § 1 of the New York State Constitution, State Finance Law § 111 and Abandoned Property Law § 1412-a did not permit the Comptroller to pre-audit Bureau expenditures, рost-audit the financial management and operations of the Bureau, or empower him to audit the property of insolvent insurers (see Matter of Serio v Hevesi,
III.
The Comptroller asserts that his constitutional and statutory authority to pre-audit Bureau expenditures and post-audit the financial management and operational practices of the Bureau is derived from article Y § 1 and State Finance Law § 111, respectively. Both provisions relate to the Comptroller’s express authority to pre-audit certain expenditures. The Comptroller’s asserted authority to post-audit is derived from his “implicit constitutional authority to post-audit payments of funds under statе control and his express constitutional power to audit all official accounts.”
The Comptroller’s constitutional authority to pre-audit certain enumerated expenditures originates from article V § b which provides, in pertinent part, that:
“The comptroller shall be required: (1) to audit all*101 vouchers before payment and all official accounts; (2) to audit thе accrual and collection of all revenues and receipts; and (3) to prescribe such methods of accounting as are necessary for the performance of the foregoing duties. The payment of any money of the state, or of any money under its control, or the refund of any money paid to the state, except upon audit by the comptroller, shall be void, and may be restrained upon the suit of any taxpayer with the consent of the supreme court in [the] appellate division on notice to the attorney-general. In such respect the legislature shall define the powers and duties and may also assign to him or her: (1) supervision of the accounts of any political subdivision of the state . . . The legislature shall assign to him or her no administrative duties, excepting such as may be incidental to the performance of these functions, any other provision of this constitution to the contrary notwithstanding.”
The aforementioned constitutional рronouncement designates the Comptroller as the “independent auditing official for the affairs of the State” (Patterson v Carey,
In 1939, the Legislature passed what is now State Finance Law § 111, the statutory counterpart to article V, § 1, to further delineate and designate the Comptroller’s pre-audit authority. That provision states that:
“No moneys of the state, including moneys collected in its behalf, and no moneys in the possеssion, custody or control of any officer, agent, or agency of the state in his or its representative capacity, and no moneys in or belonging to any fund or depositary, title to which is vested in the state, shall hereafter be paid, expended or refunded except upon audit by the comptroller” (emphasis supplied).
Since the passage of article V, § 1 and State Finance Law § 111, the Comptroller has, on certain occasions upon the
We now hold that because the liquidation of a distressed insurer has no impact on the state fisc, it does not implicate the Comptroller’s constitutional and statutory authority to superintend the fiscal affairs of the State and therefore the Comptroller lacks the authority to audit the Bureau.
We recognize that the statutory framework of the Insurance Law grants the Superintendent legal title to the assets of the insolvent insurer (see Insurance Law § 7405 [b]); however, equitable title remains with the distressed insurer for distribution to the creditors and policyholders (see Matter of Kinney,
IV
Nor do we agree that the Bureau is a “state agency” subject to audit by the Comptroller pursuant to State Finance Law § 8 (2-b) (a). Section 8 (2-b) (a), which was enacted as part of the State Governmental Accountability, Audit and Internal Cоntrol Act, permits the Comptroller to audit the “internal controls and operations of state agencies.” A “state agency” is defined as “[a]ny . . . board, bureau, division, commission, committee, council, office or other governmental entity performing a governmental or proprietary function for the state” (State Finance Law § 2-a [3] [emphasis supplied]). The Bureau does not perform a governmental or proprietary function “for the state,” but rather runs the day-to-day operations of private businesses in liquidation pursuant to Supreme Court order. The Bureau is not part of the Insurance Department’s budget, operates without the benefit оf state funds, maintains its own errors and omissions coverage, and is represented by its own private counsel, not the Attorney General, as is normally the case when a state agency is sued. Thus, the Bureau is not a “state agency” within the ambit of State Finance Law § 8 (2-b) (a). To hold otherwise would be to contravene article V¡ § l’s prоhibition against the Legislature assigning to the Comptroller administrative tasks that are not incidental to his duty to superintend the fiscal concerns of the State (see Blue Cross & Blue Shield,
V
Finally, the Comptroller lacks the authority under the Abandoned Property Law to conduct the broad audit functions he seeks to implement in this case. Therefore, Supreme Court properly determined that the subpoenas issued here were overly broad.
Based on the foregoing, the Appellate Division’s order should be reversed, with costs, and the judgment of Supreme Court should be reinstated.
Chief Judge Kaye and Judges Ciparick, Graffeo, Read, Smith and Jones concur.
Order reversed, etc.
Notes
. This proceeding was originally commenced by then-Superintendent of Insurance Gregory V Serio against then-Comptroller Alan G. Hevesi. Since thаt time, Mr. Serio has been replaced by Eric R Dinallo, and Mr. Hevesi has been replaced by Thomas E DiNapoli.
. This holding is not meant to imply that the Superintendent may not be subject to an independent audit. Although the Legislature does not have the authority under our holding in Blue Cross & Blue Shield to assign to the Comptroller the task of auditing the Bureau, it does have the authority to require the Bureau to retain independent auditors.