Perseverance Brings Results: Improving Accountability

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In early June, shortly before their summer recess began, the New York State Senate and Assembly passed a bill, sponsored by Assemblyman Thomas DiNapoli, which at press time was awaiting Governor Pataki’s signature. (Senator Stephen Saland had sponsored an identical bill in the Senate.) New York State school districts will be required to: have audit committees; conduct regular internal audits; ensure that school board and audit committee members receive training in their financial oversight responsibilities; seek competitive bids for outside auditors; and have school board audits presented at public meetings. The bill draws heavily from the five-point plan drafted by N.Y. State Comptroller Alan Hevesi’s School Accountability Coalition, in which the NYSSCPA participated.

Grassroots Activism Played Key Role

Because a CPA firm was considered part of the problem at the Long Island school districts whose financial scandals and alleged audit failures were the impetus for these bills, it is appropriate and noteworthy that CPAs have been part of a solution that improves both transparency and accountability in the financial management of the state’s school districts. The Assembly bill involved well-considered compromises on a number of points. For example, the original proposal was changed to eliminate the requirement of the rotation of lead and reviewing partners every five years on school district audits, with an additional five years if the district determines that another auditor within a reasonable geographic area would not be available. Many NYSSCPA members had expressed concern that any mandatory auditor rotation would have been harmful to small and mid-sized school districts.

Throughout the months leading up to the votes in early June, many NYSSCPA chapters, members, and members’ firms contacted and communicated with legislators concerning these proposals. The Mid-Hudson and Buffalo Chapters have held legislative breakfasts. In May, NYSSCPA members, including past and current officers, met with state legislators and legislative staff at a joint Nassau–Suffolk Chapter breakfast; a specific area of discussion was mandatory rotation.

Work Continues in Accountancy Reform

The Assembly and Senate have also passed separate but similar bills that would be the first substantive update in some 60 years to the state’s regulation of the practice of accountancy. Both bills would establish a peer review program and would make CPE mandatory for all CPAs, not only those in public practice. Both bills also expand the currently limited scope-of-practice provisions, although in different ways. The Assembly bill has conflict-of-interest provisions, while the Senate bill has substantial-equivalency provisions that would facilitate CPA practice across state lines. The Assembly bill would also extend some Sarbanes-Oxley Act provisions to auditors of publicly traded corporations and to government entities not currently covered by the federal law. It would also allow non-CPAs to perform compilations, as long as they don’t hold themselves out to be CPAs, a provision that the NYSSCPA has opposed.

The NYSSCPA will be talking to the New York Legislature to see how we can bring these two bills together and have the first meaningful modernization of accounting legislation in more than five decades.

Louis Grumet
Publisher, The CPA Journal
Executive Director, NYSSCPA
lgrumet@nysscpa.org