State Comptroller Opens New Year with Financial Management Audit

The New York State Comptroller has opened the new year by releasing a financial management audit of one of the State’s city school districts (the “District”), reviewing the District’s handling of fund balance and reserve funds from July 1, 2019, through June 30, 2024. The audit was very critical of the District’s budgeting practices.

The audit found that the District repeatedly adopted unrealistic budgets—overestimating appropriations, underestimating revenues, and making $67 million in unbudgeted year end transfers. These practices contributed to significant operating surpluses, inflated fund balance levels, and reserve funds that were unused or likely overfunded. In several instances, reserve transfers were made without prior Board approval, reducing transparency for taxpayers.

What School Districts Should Focus On: Key Standards in Comptroller Financial Management Audits

Although this audit focused on specific financial management practices of the city school district, it serves as a reminder of the standards the New York State Comptroller applies in every school district audit. These standards and areas of audit should be closely monitored in all school districts to ensure strong financial stewardship. The Comptroller’s Office conducts its audits in accordance with generally accepted government auditing standards (GAGAS)—a nationally recognized framework designed to ensure independence, objectivity, and reliability.

Below are the core areas the Comptroller consistently evaluates:

1. Internal Controls
Auditors assess whether a district has sound internal controls over budgeting, financial reporting, and reserve management. This includes reviewing policies, procedures, and documentation, as well as interviewing district officials. Strong internal controls support accurate planning and transparent decision making.

2. Budget Accuracy
Auditors examine whether the district adopts realistic budgets. By comparing budgeted revenues and expenditures to actual results over multiple years, auditors determine whether the district is consistently over or under budgeting and whether appropriated fund balance is being used as intended.

3. Fund Balance Management
Auditors evaluate whether surplus fund balance is maintained within statutory limits—typically 4 percent of the next year’s budget for school districts.

4. Reserve Fund Practices
The Comptroller reviews whether reserve funds are legally established, properly funded, and used for their intended statutory purposes.

5. Board Oversight
Auditors review Board minutes, financial reports, and resolutions to determine whether Board members receive sufficient information to exercise effective oversight. Strong governance remains a central expectation in every audit.

6. Evidence-Based Methodology
All audit conclusions must be supported by sufficient, appropriate evidence. The Comptroller’s methodology ensures that findings are accurate, transparent, and fair—standards that districts are encouraged to mirror in their own financial practices.

Source:
https://www.osc.ny.gov/local-government/audits/school-district/2026/02/06/newburgh-enlarged-city-school-district-financial-management-2025m-32

If you have questions about financial management audits conducted by the Comptroller’s Office, please contact our office.