Requires written responses to reports of examination by the office of the state comptroller, reports of external audits performed by independent public accountants or management letters prepared in conjunction with such external audits.
Ayes (4): Stewart-Cousins, Oppenheimer, Valesky, Thompson
Ayes W/R (1): Johnson C
Nays (2): Little, Bonacic
Excused (1): Morahan
Ayes (20): Kruger, Krueger, Stachowski, Oppenheimer, Montgomery, Duane, Parker, Stavisky, Dilan, Stewart-Cousins, Thompson, Breslin, Diaz, Espada, Klein, Perkins, Valesky, Peralta, Padavan, Leibell
Ayes W/R (7): DeFrancisco, LaValle, Saland, Farley, Hannon, Maziarz, Robach
Nays (6): Johnson O, Volker, Seward, Larkin, Nozzolio, Marcellino
BILL NUMBER: S4660
TITLE OF BILL : An act to amend the general municipal law, in relation to the writing of responses to audit findings and recommendations
PURPOSE OR GENERAL IDEA OF BILL :
To improve the efficacy of audits of municipal corporations, industrial development agencies (IDAs), districts, agencies by requiring written responses to reports of examination by the Office of the State Comptroller, reports of external audits performed by independent public accountants or management letters prepared in conjunction with such external audits.
SUMMARY OF PROVISIONS :
Section one of this bill would modify the current requirement for public notice of the filing of an audit report. Instead of language stating that the audited local entity or activity could, in its discretion, prepare a response, the notice would have to expressly state the requirement to respond, in writing, to the audit report.
Section two of the bill would require a written response by the governing board to audits of municipal corporations, industrial development agencies, districts, agencies. Presently, the governing boards, in their discretion, may provide such a written response, but are not required to do so. A response would be required for a report of examination prepared by the Office of the State Comptroller or an external audit report or management letter prepared by an independent public accountant. Governing boards would have to submit to the State Comptroller, and file in the office of the local clerk, a written response to the report or letter within 90 days after presentation of the report or letter to the governing board. The bill clarifies that the response must address any adverse opinion on the fair representation of financial statements.
In the case of entities subject to examination by the Commissioner of Education, the audit response would also be filed with the Commissioner. The bill deletes the requirement for a response by an IDA to be provided to the Commissioner of Education and instead, requires IDAs to file a copy of any response with the Commissioner of the Department of Economic Development.
In addition, section two of the bill continues the provisions, presently applicable to the discretionary audit response. The response must be in such form as the State Comptroller may prescribe, and must provide, with respect to each finding and recommendation, a statement of corrective actions taken or proposed to be taken. If no corrective action is taken or proposed, the response would contain an explanation of the reasons therefore. The response would also include a statement of the status of corrective actions taken with respect to unresolved findings and recommendations contained in previous reports or management letters.
Section three of this bill would address the State Comptroller's authority to enforce the audit response requirement. If the required response is not provided, the State Comptroller could give notice of the failure to provide a written response to the governing board, and the board would be required to make the notice a part of the official record of proceedings of its next meeting. In addition, the Comptroller could administer an oath to, and compel the appearance and attendance of, any officer or employee of the municipal corporation, industrial development agency, district, agency for the purpose of ascertaining the reasons for the failure to respond and the status of any corrective action or proposed corrective action. Section four of the bill provides for an effective date of January 1 following enactment and extends application of the act to all audit reports filed after the effective date.
Audit reports and management letters are important tools in the efficient management of local governments. They are utilized most effectively, however, when local officials promptly focus on audit findings and recommendations and, as appropriate, address any deficiencies in an effective manner. Written, public responses also help foster greater accountability to the taxpayers of the local governments. In recognition of these principles, Executive Law § 170 currently requires State agencies to respond to audits by the Comptroller, and the Federal Single Audit Act requires local governments subject to that Act to respond to federal single audits (31 USC, § 7502 i ). In addition, the U.S. General Accounting Office's Government Auditing Standards stress the benefit of, and the auditee's responsibility for, effective resolution of audit findings and recommendations (U.S. General Accounting Office, Government Auditing Standards, §§ 6.12, 6.13).
Chapter 376 of the Laws of 1988 amended GML § 35 to expressly authorize the governing boards of municipal corporations, districts, agencies to provide written responses to audits performed of those entities. The 1988 amendment also requires public notice of an audit, including a statement that the governing board may respond to the audit. Although this amendment represented a good first step and served to encourage the practice of responding to audits, many governing boards still do not prepare audit responses on a routine basis. During 1999 and 2000, for example, the Office of the State Comptroller received written audit responses, pursuant to section 35, from only 63% of the local government entities audited. This has been a source of frustration to taxpayers. For example, in 1995, a homeowners' association on Long Island comprised of 16 civic organizations unanimously passed a resolution urging the State Legislature to pass legislation "to insure that ... recommendations of the Comptroller's Office which are made after audits of such taxpayer funded organizations as local libraries, school districts, police and fire departments, etc. will not be ignored to the detriment and frustration of local communities and taxpayers." This proposal would ensure that audit recommendations are not ignored by requiring a response from the local governing board.
Often, it is only upon a subsequent audit or follow-up review that it is determined whether findings and recommendations of the previous audit have been addressed. A 1996 audit (96M - 297) of a village, for instance, cites criticism in a prior report of examination of lack of inventory control over unsold garbage bag tags which the village board of trustees failed to address. An inventory system could have detected substantial discrepancies identified in the subsequent audit. Specifically, our auditors found that village officials were unable to account for garbage bag tags which had a sales value in excess of $121,000. In addition, in 1998 an audit of a village (98M - 185) disclosed that certain revenues aggregating approximately $9,700 were not accounted for. Although our previous audit report (94M - 318) had indicated certain internal control weaknesses relating to revenue and cash receipts, a corrective action plan was not prepared addressing the weaknesses and the situation leading to the unaccounted for revenues went uncorrected or undetected until noted in the subsequent audit.
The preparation of audit responses entails the devotion of time and effort by local officials. However, the benefits and efficiencies accruing to the local government and its taxpayers through the
response to audit findings and recommendations far outweigh any increased administrative burden.
PRIOR LEGISLATIVE HISTORY :
A.11116 Rules (Sweeney) - Passed Assembly; 06/17/04 A3112 Sweeney - Passed Assembly; 01/30/06 3/17/08 - Passed Assembly
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS :
None to the State. Any additional administrative cost to local governments should be outweighed by increased efficiencies achieved through addressing or responding to audit comments.
EFFECTIVE DATE : This act shall take effect on the first of January next succeeding the date on which it shall have become a law and shall apply to reports of examination, reports of external audits and management letters filed, after the effective date, which the clerk or, if there is no clerk, the secretary of the municipal corporation, industrial development agency, district, agency or activity.
STATE OF NEW YORK ________________________________________________________________________ 4660 2009-2010 Regular Sessions IN SENATE April 27, 2009 ___________Introduced by Sen. FOLEY -- read twice and ordered printed, and when printed to be committed to the Committee on Local Government AN ACT to amend the general municipal law, in relation to the writing of responses to audit findings and recommendations THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Paragraph (a) of subdivision 2 of section 35 of the general municipal law, as amended by chapter 692 of the laws of 1989, is amended to read as follows: (a) Within ten days after the filing of a report of examination performed by the office of the state comptroller, a report of an external audit performed by an independent public accountant or any management letter prepared in conjunction with such an external audit with the clerk of the municipal corporation, industrial development agency, district, agency or activity, or with the secretary if there is no clerk, he OR SHE shall give public notice thereof in substantially the following form: "Notice is hereby given that the fiscal affairs of (name of municipal corporation, industrial development agency, district, agency or activity) for the period beginning on............... and ending on..............., have been examined by (the office of the state comptroller or an independent public accountant), and that the (report of examination performed by the office of the state comptroller or report of, or management letter prepared in conjunction with, the external audit by the independent public accountant) has been filed in my office where it is available as a public record for inspection by all interested persons. Pursuant to section thirty-five of the general municipal law, the governing board of (name of municipal corporation, district, agency or activity)
[may, in its discretion,]IS REQUIRED TO prepare a written response to ANY FINDINGS, INCLUDING ANY ADVERSE OPIN- ION ON THE FAIR PRESENTATION OF FINANCIAL STATEMENTS, AND ANY RECOMMEN- DATIONS IN the (report of examination performed by the office of theEXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD02837-01-9 S. 4660 2
state comptroller or the report of external audit or management letter by THE independent public accountant) and file
[any]such response in my office as a public record for inspection by all interested persons not later than (last date on which response may be filed)." S 2. Paragraph (b) of subdivision 4 of section 35 of the general municipal law, as amended by chapter 692 of the laws of 1989, is amended to read as follows: (b) (1) Not later than ninety days after presentation to the governing board of a report of examination performed by the office of the state comptroller, or receipt by the governing board of any report of an external audit performed by an independent public accountant or any management letter in conjunction with such an audit, the governing board [may, in its discretion,]SHALL provide to the comptroller, and file in the office of the clerk, or with the secretary if there is no clerk, of the municipal corporation, industrial development agency, district, agency or activity, a written response to [the]ANY findings, INCLUDING ANY ADVERSE OPINION ON THE FAIR PRESENTATION OF THE FINANCIAL STATE- MENTS, and ANY recommendations [, if any,]in the report or letter. In the case of municipal corporations, [industrial development agency,]districts, agencies or activities subject to examination by the commis- sioner of education, [any]THE written response shall also be provided to such commissioner. IN THE CASE OF INDUSTRIAL DEVELOPMENT AGENCIES, THE WRITTEN RESPONSE SHALL ALSO BE PROVIDED TO THE COMMISSIONER OF THE DEPARTMENT OF ECONOMIC DEVELOPMENT. (2) [A]THE written response prepared pursuant to subparagraph one of this paragraph shall be in such form as may be prescribed by the comp- troller and shall include, with respect to each finding or recommenda- tion, a statement of the corrective actions taken or proposed to be taken, or if corrective action is not taken or proposed, an explanation of the reasons therefor. [Any such]THE written response shall also include a statement on the status of corrective actions taken on find- ings or recommendations contained in any previous report of examination, or report of an external audit, or any management letter prepared in conjunction therewith, by an independent public accountant for which a written response was required. All officers and employees of the munici- pal corporation, industrial development agency, district, agency or activity shall fully cooperate with the governing board in the prepara- tion of the response by the governing board. S 3. Paragraph (c) of subdivision 4 of section 35 of the general municipal law is relettered paragraph (d) and a new paragraph (c) is added to read as follows: (C) IF A WRITTEN RESPONSE IS NOT PROVIDED AS REQUIRED BY THIS SECTION, THE COMPTROLLER MAY PROVIDE TO THE GOVERNING BOARD OF THE MUNICIPAL CORPORATION, INDUSTRIAL DEVELOPMENT AGENCY, DISTRICT, AGENCY OR ACTIVITY NOTIFICATION OF THE FAILURE TO PROVIDE A WRITTEN RESPONSE WHICH SHALL BE MADE A PART OF AND SET FORTH IN THE OFFICIAL RECORD OF THE PROCEEDINGS OF THE NEXT MEETING OF THE GOVERNING BOARD. THE COMPTROLLER, IN ACCORD- ANCE WITH EITHER SECTION THIRTY-FOUR OF THIS ARTICLE OR SECTION NINE OF THE STATE FINANCE LAW, ALSO MAY ADMINISTER AN OATH TO, AND COMPEL THE APPEARANCE AND ATTENDANCE OF, ANY OFFICER OR EMPLOYEE OF THE MUNICIPAL CORPORATION, INDUSTRIAL DEVELOPMENT AGENCY, DISTRICT, AGENCY OR ACTIVITY FOR THE PURPOSE OF ASCERTAINING THE REASONS FOR THE FAILURE TO PROVIDE A WRITTEN RESPONSE AND THE STATUS OF ANY CORRECTIVE ACTION TAKEN OR PROPOSED TO BE TAKEN. S 4. This act shall take effect on the first of January next succeed- ing the date on which it shall have become a law and shall apply toS. 4660 3
reports of examination, reports of external audits and management letters filed, after the effective date, with the clerk or, if there is no clerk, the secretary of the municipal corporation, industrial devel- opment agency, district, agency or activity.