Recent Comptroller Audit Report Highlights Need for School Districts and BOCES to Develop and Manage a Comprehensive Investment Program, Including Annual Review and Re-Adoption of Investment Policy

In a recently issued audit report, the New York State Comptroller criticized a school district for failing to properly comply with General Municipal Law Section 39’s requirement that districts annually review and re-adopt an investment policy. See (2024M-63).

General Municipal Law § 39 (1) requires that each,

school district including boards of cooperative educational services… shall by resolution adopt a comprehensive investment policy which details… [its] operative policy and instructions to officers and staff regarding the investing, monitoring and reporting of funds of the local government. The investment policy shall be annually reviewed by the local government.

The Comptroller’s audit report found that the School District failed to comply with the statutory requirement to develop and manage a comprehensive investment program. The report noted that from July 1, 2022, through February 29, 2024, the District earned $321,316 from its 37 interest bearing bank accounts and 27 certificates of deposit. The audit projected that, had officials considered alternative legally permissible investment options, the District’s earnings might have been $738,137, or $416,821 more than actually realized.

While the Comptroller determined that the District’s investments “were legal, safe and generally liquid,” it found that the District failed to “develop a comprehensive investment program or adopt written investment procedures to provide the Treasurer with more direct instructions” regarding how the District’s funds should be invested. The audit report noted that while the Board had adopted an investment policy, the Board and District officials failed to review the policy annually.

The audit report concluded that because the Board and officials did not develop and manage a comprehensive investment program or have written procedures to provide specific actions to take, such as specifying how much of the available funds should be invested, the District missed an opportunity to earn additional revenues which would benefit its operations and reduce the financial burden for its taxpayers.

The Comptroller recommended that the board of education and district officials develop and manage a comprehensive investment program which includes written procedures for the investment program’s operation. The report referenced the four objectives of a comprehensive investment program – legality, safety, liquidity, and yield – and noted the importance of regularly monitoring investments to ensure funds are invested to meet each of those objectives. According to the report, school districts should periodically solicit interest rate quotes for its investments and obtain investment information from multiple financial institutions to ensure funds are invested appropriately.

The Comptroller further recommended that the District’s treasurer include cash flow forecasts in the cash flow statements.

The Comptroller also emphasized that the district’s board of education must, “annually review, make any necessary changes, and re-adopt its investment policy as required” by the General Municipal Law.

The audit report noted that the Comptroller’s office has a publication to assist district officials in prudent case management and investment practices. This publication is entitled, Local Government Management Guide: Investing and Protecting Public Funds. It is available online here.

Please contact us if you have questions about the legal requirements relating to your district’s comprehensive investment program.