School District Financial Accountability

Updated: November 2005

In April 2005, the Office of the State Comptroller (OSC) issued its audit of the Roslyn School District on Long Island. Roslyn Union Free School District - Anatomy of a Scandal enumerated over $11 million in alleged fraud over several years, and our report on the Roslyn School District outside auditor, Miller, Lilly and Pearce, uncovered numerous deficiencies in their audit process. Subsequent audits of other school districts on Long Island and around the State have found other instances of improprieties and mismanagement.

In response to taxpayer concerns, the State Comptroller’s Office worked with a coalition of school and professional organizations, including the New York State School Boards Association, the New York State Society of Certified Public Accountants, the New York State Council of School Superintendents, the New York State Association of School Business Officials and the State Education Department (SED) to develop policy solutions to improve the internal control structures in school districts and increase the effectiveness of financial oversight mechanisms.

As a result of these efforts, new State legislation was enacted in July 2005 that will strengthen auditing, training and financial oversight by school district officials and boards. The new law includes the following key provisions:

• Requires six hours of training for school board members on their financial oversight responsibilities.
• Establishes an internal audit function within each school district.
• Creates audit committees in school districts.
• Mandates a competitive RFP process for selecting audit firms at least every five years.
• Improves the effectiveness of annual external audits by requiring direct school board involvement and a formal response to issues raised in the audit.

In addition, OSC was provided funding to audit all school districts, BOCES and charter schools statewide during the next five years. OSC audits will generally focus on financial controls and operations, but could include any part of school district operations depending on the situation at the time of audit. Together with the coalition that helped develop the Five-Point Plan, OSC has prepared a school district auditing information guide. The Comptroller has also issued guidance on creating an audit committee charter and information on what to expect from an audit generally.

The State Education Department is working in consultation with OSC to approve a school board training curriculum and to develop regulations regarding internal audit requirements. OSC has collaborated with SED to develop guidance for school districts to help strengthen their external financial audits. OSC has also developed guidance for school district officials on procuring external audit services, and SED has developed an RFP template for districts that prefer to use it rather than developing their own.