A00299 Summary:

BILL NO    A00299 

SAME AS    SAME AS S01601

SPONSOR    Sweeney (MS)

COSPNSR    Kavanagh

MLTSPNSR   Galef, Hooper, Jaffee, Weisenberg

Amd S35, Gen Muni L

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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A00299 Actions:

BILL NO    A00299 

01/09/2013 referred to local governments
01/29/2013 reported 
01/31/2013 advanced to third reading cal.14
02/05/2013 passed assembly
02/05/2013 delivered to senate
02/05/2013 REFERRED TO LOCAL GOVERNMENT
01/08/2014 DIED IN SENATE
01/08/2014 RETURNED TO ASSEMBLY
01/08/2014 ordered to third reading cal.19
01/22/2014 passed assembly
01/22/2014 delivered to senate
01/22/2014 REFERRED TO LOCAL GOVERNMENT
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A00299 Votes:

A00299 02/05/2013 126/18
AbbateYClarkYGanttERKavanagYMcKevitYRaiaYSolagesY
AbinantYColtonERGarbariNOKearnsYMcLaughYRamosYStecY
ArroyoYCookYGibsonYKellnerYMillerYReilichYSteckY
AubryYCorwinNOGiglioYKimYMillmanYRiveraYStevensY
BarclayYCrespoYGjonajYKolbYMontesaYRobertsYStirpeY
BarrettYCrouchNOGlickYLalorNOMorelleYRobinsoYSweeneyY
BarronYCurranYGoldfedYLavineYMosleyYRodriguERTediscoY
BenedetYCusickYGoodellYLentolYMoyaYRosaYTenneyNO
BlankenNOCymbrowYGottfriYLiftonYNojayNORosenthYThieleY
BorelliYDenDekkYGrafNOLope PDYNolanYRozicYTitoneER
BoylandYDinowitYGuntherYLope VJYOaksYRussellYTitusY
BraunstYDiPietrNOHawleyYLosquadYO'DonneYRyanYWalterNO
BrennanYDupreyYHeastieYLupardoYOrtizYSaladinYWeinsteY
BrindisYEnglebrYHennessYLupinacNOOtisYSantabaYWeisenbY
BronsonYEspinalYHevesiERMageeNOPalmesaNOScarborYWeprinY
Brook KYFahyYHikindYMagnareYPaulinYSchimelYWrightY
BuchwalYFarrellYHooperYMaiselYPeoplesYSchimmiNOZebrowsY
ButlerYFinchYJacobsERMalliotYPerryYSepulveYMr SpkrY
CahillYFitzpatYJaffeeYMarkeyYPretlowYSimanowY
CamaraYFriendNOJohnsYMayerYQuartYSimotasY
CastroYGabryszYJordanYMcDonalYRaNOSkartadY
CerettoYGalefYKatzNOMcDonouYRabbittNOSkoufisY

A00299 01/22/2014 113/21
AbbateYCookYGjonajYLalorNONojayNORosenthYTitoneY
AbinantYCorwinNOGlickYLavineYNolanERRozicYTitusY
ArroyoYCrespoYGoldfedYLentolYOaksNORussellERWalterNO
AubryYCrouchYGoodellYLiftonYO'DonneYRyanYWeinsteY
BarclayNOCurranYGottfriYLopezYOrtizYSaladinYWeisenbY
BarrettYCusickYGrafNOLupardoYOtisYSantabaYWeprinY
BenedetYCymbrowYGuntherYLupinacNOPalmesaNOScarborYWrightY
BlankenNODavilaYHawleyNOMageeYPalumboNOSchimelYZebrowsY
BorelliNODenDekkYHeastieYMagnareYPaulinYSchimmiNOMr SpkrY
BoylandABDinowitYHennessYMalliotERPeoplesYSepulveY
BraunstYDiPietrNOHevesiYMarkeyYPerryYSimanowY
BrennanYDupreyYHikindYMayerYPichardYSimotasY
BrindisYEnglebrYHooperERMcDonalYPretlowYSkartadY
BronsonYFahyYJacobsYMcDonouYQuartYSkoufisY
Brook-KYFarrellYJaffeeYMcKevitYRaNOSolagesY
BuchwalYFinchNOJohnsYMcLaughYRaiaYStecY
ButlerYFitzpatYKatzERMillerYRamosYSteckY
CahillYFriendNOKavanagYMillmanYRiveraYStirpeY
CamaraYGalefYKearnsYMontesaYRobertsYSweeneyY
CerettoYGanttYKellnerYMorelleYRobinsoYTediscoY
ClarkYGarbariNOKimYMosleyYRodriguYTenneyNO
ColtonERGiglioYKolbNOMoyaYRosaYThieleY

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A00299 Memo:

BILL NUMBER:A299

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 S 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,  S 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
S  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:
2004: A.11116 Rules (Sweeney) - Passed Assembly;
2005-06: A.3112  - Passed Assembly;
2007-08: A.5750 - Passed Assembly
2009-10 - A.2731 Passed Assembly
2011-12 - Passed Assembly

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.
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A00299 Text:

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

                                          299

                              2013-2014 Regular Sessions

                                 I N  A S S E M B L Y

                                      (PREFILED)

                                    January 9, 2013
                                      ___________

       Introduced  by M. of A. SWEENEY, KAVANAGH -- Multi-Sponsored by -- M. of
         A. GALEF, HOOPER, JAFFEE, WEISENBERG -- read once and referred to  the
         Committee on Local Governments

       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:

    1    Section 1. Paragraph (a) of subdivision 2 of section 35 of the general
    2  municipal law, as amended by chapter 692 of the laws of 1989, is amended
    3  to read as follows:
    4    (a) Within ten days after  the  filing  of  a  report  of  examination
    5  performed  by  the  office  of  the  state  comptroller,  a report of an
    6  external audit performed by an  independent  public  accountant  or  any
    7  management  letter  prepared  in conjunction with such an external audit
    8  with the clerk of  the  municipal  corporation,  industrial  development
    9  agency,  district, agency or activity, or with the secretary if there is
   10  no clerk, he OR SHE shall give public notice  thereof  in  substantially
   11  the  following  form: "Notice is hereby given that the fiscal affairs of
   12  (name of municipal corporation, industrial development agency, district,
   13  agency or activity)  for  the  period  beginning  on...............  and
   14  ending on..............., have been examined by (the office of the state
   15  comptroller  or  an independent public accountant), and that the (report
   16  of examination performed by the  office  of  the  state  comptroller  or
   17  report  of,  or  management  letter  prepared  in  conjunction with, the
   18  external audit by the independent public accountant) has been  filed  in
   19  my office where it is available as a public record for inspection by all
   20  interested  persons.  Pursuant  to  section  thirty-five  of the general
   21  municipal law, the governing board of (name  of  municipal  corporation,
   22  district,  agency  or activity) [may, in its discretion,] IS REQUIRED TO
   23  prepare a written response to ANY FINDINGS, INCLUDING ANY ADVERSE  OPIN-

        EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                             [ ] is old law to be omitted.
                                                                  LBD04610-01-3
       A. 299                              2

    1  ION  ON THE FAIR PRESENTATION OF FINANCIAL STATEMENTS, AND ANY RECOMMEN-
    2  DATIONS IN the (report of examination performed by  the  office  of  the
    3  state  comptroller  or the report of external audit or management letter
    4  by THE independent public accountant) and file [any] such response in my
    5  office  as  a public record for inspection by all interested persons not
    6  later than (last date on which response may be filed)."
    7    S 2. Paragraph (b) of subdivision 4  of  section  35  of  the  general
    8  municipal law, as amended by chapter 692 of the laws of 1989, is amended
    9  to read as follows:
   10    (b) (1) Not later than ninety days after presentation to the governing
   11  board  of  a  report of examination performed by the office of the state
   12  comptroller, or receipt by the governing  board  of  any  report  of  an
   13  external  audit  performed  by  an  independent public accountant or any
   14  management letter in conjunction with such an audit, the governing board
   15  [may, in its discretion,] SHALL provide to the comptroller, and file  in
   16  the  office of the clerk, or with the secretary if there is no clerk, of
   17  the municipal  corporation,  industrial  development  agency,  district,
   18  agency  or activity, a written response to [the] ANY findings, INCLUDING
   19  ANY ADVERSE OPINION ON THE FAIR PRESENTATION  OF  THE  FINANCIAL  STATE-
   20  MENTS,  and  ANY  recommendations[, if any,] in the report or letter. In
   21  the case of municipal  corporations,  [industrial  development  agency,]
   22  districts,  agencies or activities subject to examination by the commis-
   23  sioner of education, [any] THE written response shall also  be  provided
   24  to  such commissioner.   IN THE CASE OF INDUSTRIAL DEVELOPMENT AGENCIES,
   25  THE WRITTEN RESPONSE SHALL ALSO BE PROVIDED TO THE COMMISSIONER  OF  THE
   26  DEPARTMENT OF ECONOMIC DEVELOPMENT.
   27    (2)  [A] THE written response prepared pursuant to subparagraph one of
   28  this paragraph shall be in such form as may be prescribed by  the  comp-
   29  troller  and  shall include, with respect to each finding or recommenda-
   30  tion, a statement of the corrective actions  taken  or  proposed  to  be
   31  taken,  or if corrective action is not taken or proposed, an explanation
   32  of the reasons therefor. [Any such]  THE  written  response  shall  also
   33  include  a  statement on the status of corrective actions taken on find-
   34  ings or recommendations contained in any previous report of examination,
   35  or report of an external audit, or any  management  letter  prepared  in
   36  conjunction  therewith,  by an independent public accountant for which a
   37  written response was required. All officers and employees of the munici-
   38  pal corporation, industrial  development  agency,  district,  agency  or
   39  activity  shall fully cooperate with the governing board in the prepara-
   40  tion of the response by the governing board.
   41    S 3. Paragraph (c) of subdivision 4  of  section  35  of  the  general
   42  municipal  law  is  relettered  paragraph (d) and a new paragraph (c) is
   43  added to read as follows:
   44    (C) IF A WRITTEN RESPONSE IS NOT PROVIDED AS REQUIRED BY THIS SECTION,
   45  THE COMPTROLLER MAY PROVIDE TO THE  GOVERNING  BOARD  OF  THE  MUNICIPAL
   46  CORPORATION, INDUSTRIAL DEVELOPMENT AGENCY, DISTRICT, AGENCY OR ACTIVITY
   47  NOTIFICATION OF THE FAILURE TO PROVIDE A WRITTEN RESPONSE WHICH SHALL BE
   48  MADE  A  PART OF AND SET FORTH IN THE OFFICIAL RECORD OF THE PROCEEDINGS
   49  OF THE NEXT MEETING OF THE GOVERNING BOARD. THE COMPTROLLER, IN  ACCORD-
   50  ANCE  WITH EITHER SECTION THIRTY-FOUR OF THIS ARTICLE OR SECTION NINE OF
   51  THE STATE FINANCE LAW, ALSO MAY ADMINISTER AN OATH TO,  AND  COMPEL  THE
   52  APPEARANCE  AND  ATTENDANCE OF, ANY OFFICER OR EMPLOYEE OF THE MUNICIPAL
   53  CORPORATION, INDUSTRIAL DEVELOPMENT AGENCY, DISTRICT, AGENCY OR ACTIVITY
   54  FOR THE PURPOSE OF ASCERTAINING THE REASONS FOR THE FAILURE TO PROVIDE A
   55  WRITTEN RESPONSE AND THE  STATUS  OF  ANY  CORRECTIVE  ACTION  TAKEN  OR
   56  PROPOSED TO BE TAKEN.
       A. 299                              3

    1    S  4. This act shall take effect on the first of January next succeed-
    2  ing the date on which it shall have become a  law  and  shall  apply  to
    3  reports  of  examination,  reports  of  external  audits  and management
    4  letters filed, after the effective date, with the clerk or, if there  is
    5  no  clerk, the secretary of the municipal corporation, industrial devel-
    6  opment agency, district, agency or activity.
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