School Accounting Reform Bills Introduced in Legislature

School Accounting Reform Bills Introduced in Legislature
Bills Mostly Include Widely Supported Provisions

State legislators have submitted two bills picking up on suggestions by a coalition of reformers to improve public school district audits.

Both bills, S-5050, sponsored by Sen. Stephen Saland (R/C–Poughkeepsie), and A-6082, sponsored by Assemblyman Thomas DiNapoli (D/I/WF–Great Neck), include the five points recommended in January by the coalition of state officials, legislators and the New York State Society of CPAs.

That coalition, which includes Sen. Kenneth LaValle (R-Port Jefferson), who held a hearing on the matter in January, called for requiring training of school board members in their financial oversight responsibilities, establishing an internal audit function in school districts, creating audit committees, mandating competitive bids when schools engage outside auditors, and involving school boards more closely in the auditing process and in maintaining internal controls.

The legislation proposed by the coalition originally arose in response to school accounting scandals, specifically in the Roslyn School District, which was bilked out of $11.2 million, according to audits conducted by New York State Comptroller Alan Hevesi. He, DiNapoli, Saland and other legislators, education groups and the Society hammered out the proposed legislation.

The Society lauded the legislation but took issue with one requirement in the Assembly bill on auditor rotation. The Society has submitted a letter to the bill’s sponsor asking for swift passage of the legislation but without the auditor rotation requirement, which could be costly to schools and troublesome to firms that would be forced to end their audit relationship with school district clients. The coalition recommended a request-for-proposal process but did not include auditor rotation in its five-point plan.

Society members saw the Senate version as pointing in the right direction for school audit reform.

“I think it’s a very positive step,” said Kevin McCoy, of the Society’s Legislative Task Force. “We were able to gain an understanding with some Senate proposers that the use of auditor rotation would not be practical, particularly in rural and suburban upstate areas, because of the limited number of firms who have the capability.”

Under the Senate bill, school trustees or voting members of a board of education beginning after July 1 would have to complete within their first year six hours of training on financial oversight, accountability and fiduciary responsibility.

The bill requires the external auditor to make a presentation to the board of an annual report, already required by law, and requires the school to use a competitive request-for-proposal process when engaging or renewing engagement with an external auditor. Contracts will be for five years. Under the Senate bill, auditors can re-apply for a new contract, while the Assembly bill states that no CPA can perform such services for more than five consecutive years.

The Senate Education Committee, chaired by Saland, was schedulued to vote on S-5050 on May 3.