State Government Accountability
Understanding the Audit Process
Your agency has been scheduled for an audit. As a public official entrusted with handling public resources, you are responsible for using those resources efficiently and effectively. The audit process is an integral part of providing an objective, independent review of your program stewardship and fostering accountability to the citizens of New York.
This booklet has been prepared to familiarize you with the audit process and provide insight into the key stages of its development, from the earliest stages to the final report. It describes what auditors look for and their professional auditing standards. The booklet is intended only to highlight some of the significant elements of the audit. Our staff will be happy to answer your questions as they come up during the process.
We respectfully request your cooperation during this process to ensure that the essential facts are expeditiously collected and accurately interpreted. Working cooperatively will help make this process easier for you and produce more meaningful results for your constituency.
Our staff will schedule periodic meetings with you or your liaison to keep you fully informed of our progress. In addition, you may contact the onsite examiner-in-charge or any member of our management team at anytime.
The Division of State Government Accountability’s mission is to improve government operations by conducting independent audits, reviews and evaluations of New York State and New York City taxpayer-financed programs.
To achieve our mission, we recommend policy directions and provide timely and accurate information for decision makers.
Constitutional and Statutory Authority
The Office of the State Comptroller has the constitutional authority (Articles V & X) to conduct financial, compliance and performance audits of all State and New York City agencies, including their associated facilities, institutions, board and program activities, as well as virtually all public benefit corporations (authorities). In addition to the Constitution, the legal basis for the Comptroller’s authority is contained in various statutes including the State Finance Law. The Comptroller also has the authority to audit the records of private firms and nonprofit organizations which are awarded contracts by, or receive funding from, these government entities.
During the audit, the Comptroller’s staff will require unrestricted access to records, files and other information to complete the audit effectively. This may include information that various laws define as confidential and/or proprietary. The Comptroller’s right to access this information required for audit purposes is derived from the State Constitution, State Finance Law and General Municipal Law. It is also essential that audit staff have access to appropriate agency officials to answer questions or respond to requests in a timely manner.
In doing our audits we are guided by professional government auditing standards issued by the Comptroller General of the United States. We also adhere to generally accepted auditing standards issued by various standard-setting bodies.
Our audits fall into three categories: performance, financial/compliance and attestation.
Performance Audit - provides an independent assessment of the performance of a government organization, program, activity, or function.
Financial/Compliance Audit - provides independent reports on whether an entity’s financial information is presented fairly, and/or on an entity’s internal controls and compliance with contracts, laws and regulations.
Attestation Engagement - consists of a review of an agreed upon procedure and a report on the results. These can cover a broad range of financial or nonfinancial subjects and can be part of a financial or performance audit.
A typical audit has several interrelated stages or activities. These include:
This is when agency officials are informed about the audit process and are offered an opportunity for input. During the opening conference, the following areas are addressed:
- Scope of the audit, which will include the program areas under review, and the period of time covered;
- Specific areas agency officials may want examined;
- Procedures for obtaining information and transmitting preliminary audit findings;
- Establishment of appropriate communication channels;
- Identification of any known improprieties that have occurred;
- Explanation of the required management representation letter stating that all records and pertinent data were made available to the auditors and that all relevant matters have been disclosed;
- Discussion of office space and equipment needed to conduct the audit;
- Review of standard reporting procedures for preliminary, draft and final reports, including the need for responses; and
- Agency emergency preparedness procedures that audit staff need to be informed about.
The audit team conducts a survey of organizational and program information before the major audit effort begins. The objective is to develop a more complete understanding of the organization and the areas that will be audited.
This phase consists of the focused audit effort and usually consumes the single largest amount of time. The examiner-in-charge supervises the day-to-day activities of the onsite audit team to ensure quality audit work is completed.
Preliminary Audit Findings
After completing the fieldwork phase, the examiner-in-charge or other audit staff will discuss the findings and conclusions with appropriate agency officials. After discussion, the team may prepare and submit an exception report detailing the tentative findings discussed, including agency feedback. Responses to these tentative (preliminary) findings should be provided and all factual differences resolved. Early implementation of audit recommendations is encouraged so that recognition of any corrective action can be reflected in the audit report.
Once audit fieldwork is completed, the team may prepare and submit a discussion document summarizing all of the tentative findings previously included in the exception reports, as appropriate. The discussion document should be reviewed by agency officials prior to the closing conference, and will serve as the basis for a formal draft report.
The audit team will meet with agency officials to discuss the audit results. Since most of the tentative findings will have been provided and discussed during the audit fieldwork, the closing conference will primarily be a broad summary of audit results, and may include additional comments from agency officials.
Draft Audit Reports
The head of the audited organization is provided with a draft report for his/her formal response. Within 30 days of receiving the report, the agency should formally respond with its official position concerning the audit findings or, at a minimum, should identify any factual differences with the report. Because we include your audit response in an appendix to the final audit report, it also adds balance to the report, as readers will be informed of your perspective on our findings and recommendations.
What Happens After We Receive Your Response?
Once we receive your response, we will evaluate it to see if it causes us to modify a finding or recommendation. The general content of your response (whether you agreed with our findings or not) will be summarized in the audit report, and the entire response letter will be included as an appendix to the final published audit report. However, we do not include voluminous attachments to responses in the final audit report. Therefore we suggest that you limit the amount of attachments to your response. If you have a significant quantity of documents that you feel are critical to our reported findings, you should contact the audit team and discuss the issues with them. We also recommend that you avoid including information in the audit response that is considered confidential or sensitive in nature.
What Happens If We Don’t Receive Your Response?
If you do not submit a response to the draft report, we will release the final audit report with a statement indicating that you did not submit a written response within the time required.
Corrective Actions by Agency
Within 90 days following the distribution of the final report, the head of a State agency or public authority must report to the State Comptroller the corrective action taken to implement the recommendations contained in the report, and if they are not implemented, the reason why. Additionally, the Executive Law requires State agencies and public authorities to report this information to the Governor, Legislative leaders, and Legislative fiscal committees.
Draft audit reports are distributed only to agency officials, with copies provided to the Director of the Division of the Budget and, for New York City audits, to the Mayor’s Office of Operations.
Final audit reports are public documents available to anyone requesting them, although they will be provided to the audited agency or organization before they are publicly distributed. All final reports are provided to media representatives.
About one year following the issuance of our final report, we may schedule a follow-up audit to assess the extent your organization has implemented the recommendations made in the final report. These audits generally take less time to complete. A draft report is not usually issued with follow-up audits.
We understand the audit process can be a trying time for you and your staff. Our auditors are always seeking ways to reduce disruption to your operations and to minimize the additional burden on our staff. Similarly, we would appreciate your staff providing full and timely cooperation with our auditors during the audit process.
Andrew A. SanFilippo
Executive Deputy Comptroller
H. Tina Kim
Acting Assistant Comptroller
John F. Buyce