Audit

UNDERSTANDING SCHOOL FINANCIAL AUDITS

According to law, school districts should establish systems and processes that provide for transparency and accountability in the conduct of district business, as well as, provide for adequate oversight.

In 2004, New York’s Office of State Comptroller (OSC) developed legislation to strengthen auditing, training and financial oversight by school district officials and boards. The state put the regulations into effect in 2005.

As a result, the law established an internal audit function and created audit committees in each district, as well as allows for regularly audits of school districts by OSC. These audits generally focus on financial controls and operations but could include any part of school district operations, depending on the situation at the time of audit.

TYPES OF AUDITS

Internal – Internal audits are part of the responsibility of the district’s board of education to make sure a district remains financially healthy. They are done by the claims auditor and internal auditor and focus on making sure bills are properly submitted and only legitimate claims are paid, and performing risk assessments that ensure proper internal controls are in place to prevent fraud, theft and misconduct.

External – External audits are done yearly to review the district’s financial statements and practice standards.

OSC audit – Audits by the Office of State Comptroller review internal controls, financial practices and operations of the district to ensure adequate protection against fraud, theft or misconduct. These are also referred to as accountability audits.

 

WHO DOES WHAT?

Claims auditor – The claims auditor approves bills submitted to the district by the treasurer before they are paid and makes sure only legitimate claims are paid by ensuring that the bills are properly itemized, documented and authorized and are for a proper district purpose. The claims auditor reports to the school board.

Internal auditor – The internal auditor ensures that proper internal controls are in place and working, such as risk assessments and recommendations to reduce identified risks. The internal auditor reports to the school board.

Audit Committee – The Audit Committee manages the district’s annual external financial audit. District employees cannot serve on this committee.

External Auditor – An external auditor is an independent public accountant or certified public accountant hired by the district to determine if the district’s financial statements are accurate and consistent with accounting standards so that the board can have confidence in using them to assess the financial condition of the district. (State law requires each district to prepare a corrective action plan in response to any finding contained in the audit report or management letter.)

OSC auditor – The Office of State Comptroller Division of Local Government and School Accountability’s auditor conduct performance audits that review internal controls, financial practices and operations of the district to ensure adequate protection against fraud, theft or misconduct.

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