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August 17, 2004

Lack of Governance laws in Nassau County

By Joe Narciso

Governance laws for education do not apply for all regions of New York State. So how is a county like Nassau, in Long Island, affected when approximately 60% of their total tax dollars account for school taxes and there are no regularly governance laws? Well the answer is very simple, financial scandal and poor oversight. There was one incident in Roslyn, which had received increased funding to improve education, where approximately seven to eight million dollars in spending were deemed questionable. If it wasn’t for public awareness of wanting to know where this money was going, there’s a good chance that the allocation of these funds would have not been questioned due to the lack of compliance and government regulation.

The question is how can Nassau County correct this problem. For starters, it is important to establish some sort of educational reform. New York City had similar problems a few years ago with not having regularly governance laws in the public school education system until legislation reforms were introduced and established, which are in effect today.

This legislation requires that New York City public school districts be regulated under the mandates of the New York State Consolidated Laws, which were established through educational legislative reforms. One option Nassau could exercise would be to legislate the similar educational reforms that New York City implemented in their educational system, or at least use their reforms as a model for their own purposes. Any governance laws that Nassau County would legislate should be performed under the Government Accounting Standards Board (GASB). GASB is to establish and improve standards of state and local governmental accounting and financial reporting that will result in useful information for users of financial reports and guide and educate the public, including issuers, auditors, and users of those financial reports. All accounting practices of Nassau school districts should adhere to the Generally Accepted Accounting Principles (GAAP). GAAP is the common set of accounting principles, standards and procedures. GAAP is a combination of authoritative standards (set by the boards) and the accepted ways of doing accounting. These are the rules that companies are expected to follow. For example, if a financial statement is not prepared using GAAP principles, suspicions arise. With that being said, GAAP is only a set of standards, there is plenty of room for unscrupulous accountants to distort figures, however dishonest accounting practices are more detected because of GAAP standards.

In order for Nassau County to regulate its accounting practices in its school districts to avoid financial scandals, it first has to establish an internal control policy and an ethics code. Under GASB, independent internal auditors, separate from State auditors, should be required to audit the accounting books of these school districts. Independent auditors are required to conduct audits under the generally Accepted Government Auditing Standards (GAGAS). Auditors should perform the following task when conducting an audit of Nassau school districts:

· Obtain a copy of the school district’s policy and procedures

· Meet and interview with superintendents of school districts to establish an understanding of their duties and functions

· Determine and allocate where funds derive from

· Review all expenditures made (either for the whole fiscal year, six months, etc, based on the scope of the audit) to determine what the funds were used for

· Obtain and review bank statements and cancelled checks to trace funds

· Conduct a physical inventory walk-through of items purchased (ex, computers, software, etc).

Any items in storage or inventory should be counted. Items or services purchased should only relate to educational purposes.

· Develop an audit report citing all findings that auditors found during the course of the audit

· Audit report should be made public

· Audits should be conducted every two years in accordance with GASB and GAGAS

Audits conducted every two years with the criteria above will maintain a stable level of oversight and will reduce and limit the possibility of various financial scandals involving Long Island school districts. Second, because the audit reports generated become a public document, residents in Long Island, such as Nassau County, will be aware of how their tax dollars and other funds are used in their school districts in terms of improving the quality of education.

Joe Narciso is employed as an auditor with the New York City Comptrollers office. The views expressed are his own and do not necessarily represent that of the New York City Comptroller’s office.