Five-Point School Financial Accountability Plan

A coalition of government, education and accounting groups worked together to develop a five-point plan to help every school district strengthen its ability to prevent or find fraud. Members of the coalition included the Comptroller’s Office, the New York State School Boards Association, the New York State Council of School Superintendents, the New York State Association of School Business Officials, the New York State Society of CPAs and the State Education Department. This plan was passed by the Legislature and was signed into law by the Governor (Chapter 263, Laws of 2005). The main components are:

• Strengthen the internal claims auditor function. Many boards of education delegate to an internal claims auditor the duties of reviewing and authorizing payment for district expenses. However, these boards ultimately are still responsible for approving all payments. The new law emphasizes this responsibility by requiring that the internal claims auditor report directly to the board of education.
• School board member financial oversight training. All school board members elected or appointed on or after July 1, 2005 must now complete at least six hours of training on their financial oversight, accountability, and fiduciary responsibilities. The training must be completed within a year of their election and can be provided by any SED-approved trainer.
• More rigorous external audit standards. The law requires that the external auditor present the annual audit report directly to the school board, and that the board prepare a corrective action plan in response to any findings from that report or a State Comptroller’s report. The law also requires all districts to use a competitive request for proposal (RFP) process for selecting external audit firms. After a district has selected an external audit firm, it may engage that firm annually for up to five years, at which point it must repeat the RFP process. The law does not forbid districts from hiring the same firm for consecutive five-year engagements as long as the RFP process is followed.
• New internal audit requirements. The law requires all districts to establish an internal audit function by July 1, 2006, to be in operation by no later than the end of the calendar year. This function must include developing, annually updating, and reporting on a risk assessment of district operations. At a minimum, the risk assessment must include a review of financial policies and procedures, and the testing and evaluation of district internal controls.
• Required audit committees. The law requires all districts to establish an audit committee by January 2006 to assist the school board with its financial oversight responsibilities. This committee may be made up of all or some of the members of the board of education, but it also can be made up in part or wholly of non-board members. In fact, so long as they have requisite experience, committee members do not need to be residents of the district.

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