Recent Trends in Comptroller Audits

The State Comptroller, as the fiscal watchdog for New York State, has broad audit powers.

The Comptroller audits school districts and BOCES through its Division of Local Government and School Accountability. The Division’s primary mission is to promote fiscal health by “increasing efficiency and effectiveness, managing costs, improving service delivery, and accounting for and protecting assets.”

Audits fall within two categories: Internal Control Audits and Performance Audits.

Internal Control Audits review and test policies and procedures to ensure that officials obtain, keep and use public resources properly.

Performance Audits assess how efficiently organizations run their programs, with the goal of identifying potential cost savings.

When an audit finds a deficiency, a District or BOCES must prepare a “corrective action plan” and file it with the Comptroller. By law, the Board-approved Corrective Action Plan must be implemented no later than the end of the next fiscal year.

Our review of recent Audit Reports illustrates some particular areas of interest for the Comptroller.

Information Technology.

Recent audits identified several failures to properly inventory and account for IT assets. These included laptops, tablets, Wi-Fi access devices, camcorders, and even a telecommunication switch. One audit concluded that 23 percent of a District’s inventory was not properly accounted for. Another audit revealed that the BOCES had not conducted a physical inventory for more than a decade.

Audits also revealed deficiencies in IT management. These included a failure to adopt an IT contingency plan and a failure to disable non-student network accounts for staff and third-party vendors that had not been needed or used for more than five years.

Procurement and Transportation.

Several recent audits concerned transportation-related issues.

One audit concluded that a District did not adhere to its own procurement policies when it failed to seek competition for fuel purchases, instead relying on a single vendor.

Another audit concluded that the District failed to adequately monitor, secure and protect its own fuel tanks from unauthorized use, and failed to maintain fuel inventory records.

The District also failed to adopt written policies for the use of EZ Pass tags, and failed to reconcile EZ Pass account statements to ensure accuracy and that the travel was for District purposes.

Finances.

Many audits deal with more typical financial issues such as banking, payroll and reserves.

One recent audit pointed out deficiencies in a District’s online banking practices. While the audit concluded that the online banking transactions were accurate, the District failed to adopt a formal online banking policy and failed to enter into an adequate written online banking agreement with its bank. The District also failed to provide adequate cybersecurity training to staff with access to its online banking, resulting in inadequate security for District funds.

Audits of payroll practices frequently examine whether overtime has been properly approved, monitored and paid. One recent audit concluded that 96% of District overtime was paid without written pre-approval and was for non-emergency routine job duties and planned events. Even where overtime was properly authorized and paid, another audit concluded that the District failed to develop realistic overtime budget estimates and failed to develop overtime policies and procedures or to monitor overtime costs.

Audits also examine the establishment and use of reserve funds. Where reserve funds were excessive and unused for an extended period, the Comptroller determined taxpayers were taxed more than necessary to fund District operations. Determining whether a given reserve fund is “excessive” can be challenging, particularly in unique circumstances – such as the risk of very large verdicts in Child Victims Act cases.

Comptroller audits can and will happen to Districts and BOCES notwithstanding the best policies, procedures and oversight. The best audit defense is a thorough and continuing review of policies and procedures to ensure that taxpayer funds are always properly secured and deployed. We have highlighted recent issues identified by the Comptroller to both give an idea of the Comptroller’s recent focus and to give an idea of procedures that may need to be tightened. If you have any questions regarding policies and practices to monitor financial accountability, please reach out to Peter Craig or Jeff Lewis.