senate Bill S1601

Requires written responses to reports of examination by the office of the state comptroller and reports of external audits

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Bill Status


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed/Vetoed by Governor
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actions

  • 09 / Jan / 2013
    • REFERRED TO LOCAL GOVERNMENT
  • 08 / Jan / 2014
    • REFERRED TO LOCAL GOVERNMENT

Summary

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.

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Bill Details

See Assembly Version of this Bill:
A299
Versions:
S1601
Legislative Cycle:
2013-2014
Current Committee:
Senate Local Government
Law Section:
General Municipal Law
Laws Affected:
Amd §35, Gen Muni L
Versions Introduced in Previous Legislative Cycles:
2011-2012: S3312, A3214
2009-2010: S4660, A2731
2007-2008: A5750

Sponsor Memo

BILL NUMBER:S1601

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.

JUSTIFICATION:
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 D. 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, SS 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 1999 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
A.3112 Sweeney - Passed Assembly; 01/30/06
3/17/08 - Passed Assembly
2009-10 - A.2731 Passed Assembly
2011-12 - 8.3312 Referred to Local Government

FISCAL IMPLICATIONS FOR ST ATE 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.

view bill text
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  1601

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                               (PREFILED)

                             January 9, 2013
                               ___________

Introduced  by Sen. GRISANTI -- 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-

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD04610-01-3

S. 1601                             2

DATIONS  IN  the  (report  of examination performed by the office of the
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. 1601                             3

  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  to
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.

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