School Audit Bills Make Headway

School Audit Bills Make Headway

By Jay Dismukes

Continued from the Home Page

On June 2, the Senate passed and delivered to the Assembly S.5050, sponsored by Sen. Steven Saland (R-Poughkeepsie), which draws heavily from State Comptroller Alan Hevesi’s proposed five-point plan originally drafted in response to the financial scandals and alleged audit failures in Long Island’s public school system. S.5050 and the five-point plan developed by Hevesi’s School Accountability Coalition, in which the Society participated, call 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.

An Assembly bill that is very similar to S.5050, except for a rotation provision, also continued to advance, receiving its third reading on the floor as of June 14. The bill, A.6082-A, sponsored by Assemblyman Thomas DiNapoli (D-Great Neck), however, includes a provision that would require rotation of lead and reviewing partners every five years on school district audits, with an additional five years if the district determines a lack of availability of another auditor within a reasonable geographic area. CPAs previously interviewed have said that, in certain rural areas of the state, this requirement could create service-delivery problems and be cost prohibitive for schools.

At the time of press, S.5050, which the Society supports, had been referred to the Assembly’s Education Committee. Both houses will need to pass one of the bills or negotiate their differences before sending the accountability proposal to the governor to be signed into law.

Also in early June, the Senate passed S.890-A, sponsored by Carl Marcellino (R-Syosset), which would direct the comptroller’s office to conduct fiscal audits of each New York school district, board of cooperative educational services, and charter school every five years. The bill has been referred to the Assembly’s Education Committee.

The same day, June 2, the Senate passed S.2969-A, sponsored by Michael Balboni (R-East Williston), which would establish additional restitution to school districts for larceny by school officials. It has been referred to the Assembly’s Local Governments Committee. Another bill, S.909, sponsored by Sen. Kenneth LaValle (R-Port Jefferson), that would create a school inspector general, sits in the Senate’s Finance Committee, where it has been since January. This office, which would be independent of the State Education Department, would have the authority to audit and evaluate all financial transactions by school districts in cases where misappropriation of school funds has been suspected.

Statutory Reform

The Society also continues to monitor two major accounting reform bills in Albany. The Senate legislation, S.4642, sponsored by LaValle and supported by the Society, aims to expand the scope of practice, reduce conflicts of interest between auditors and their clients, and implement mandatory peer review. It had its third floor reading on May 17.

The Assembly legislation, A.8358, sponsored by Assemblyman Ron Canestrari (D-Cohoes), was reported to the Codes Committee on June 1. Though similar in some respects to the LaValle bill, A.8358 allows for non-CPAs to perform compilations as long as they don’t hold themselves out to be CPAs. It also bans any firm from performing an attestation for a public company or government entity if “the lead or coordinating attestation partner having primary responsibility for the attestation, or the attestation partner responsible for reviewing the attestation, has performed attestation services for that (client) in each of the five previous fiscal years.”

Should one of the bills or a negotiated version of them pass and be signed by the governor, it would mark the first major update to New York’s accounting statute since 1947. NYSSCPA President Stephen Langowski is optimistic.

“We are closer than we have ever been before, and we are down to a very short list of issues being worked on by the Society, the profession and legislative staff,” he said.