New York Library Association 2010 Conference Survive a State Financial Audit Alex Gutelius Clifton Park-Halfmoon Library, Director Rob Lusak, The Smithtown Library, Director Kevin Verbesey, Suffolk Cooperative Library System, Director

Audits An audit is an independent assessment of the fairness by which a library's financial statements are presented by its management. It is performed by competent, independent and objective person or persons, known as auditors or accountants, who then issue a report on the results of the audit. Such systems must adhere to generally accepted standards set by governing bodies that regulate businesses. It simply provides assurance for third parties or external users that such statements present 'fairly' a company's financial condition and results of operations.

Types of State Audits Performance Audit - provides an independent assessment of the performance of the library. Financial/Compliance Audit - provides independent reports on whether a library’s financial information is presented fairly, and/or on a library’s internal controls and compliance with contracts, laws and regulations. Attestation Engagement - consists of a review of an agreed upon procedure and a report on the results. These can cover a broad range of financial or nonfinancial subjects and can be part of a financial or performance audit.

Audit Process Opening Conference The library is informed about the audit process, the following areas are addressed: Scope of the audit, program areas under review, and the time period covered; Specific areas to be examined; Procedures for obtaining information and transmitting findings; Establishment of appropriate communication channels; Identification of any known improprieties that have occurred; Explanation of the required management representation letter stating that all records and pertinent data were made available to the auditors and that all relevant matters have been disclosed; Agency emergency preparedness procedures that audit staff need to be informed about. Audit Survey The audit team conducts a survey of library and program information before the major audit effort begins. The objective is to develop a more complete understanding of the library and the areas that will be audited.

Audit Process, continued Fieldwork Phase This phase consists of the focused audit effort and usually consumes the single largest amount of time. The examiner-in-charge supervises the day-to-day activities of the onsite audit team to ensure quality audit work is completed. Preliminary Audit Findings After completing the fieldwork phase, the examiner-in-charge or other audit staff will discuss the findings and conclusions with library officials. Once audit fieldwork is completed, the team may prepare and submit a discussion document summarizing all of the tentative findings. Closing Conference The audit team will meet with library officials to discuss the audit results. Since most of the tentative findings will have been provided and discussed during the audit fieldwork, the closing conference will primarily be a broad summary of audit results, and may include additional comments from agency officials. Information from NYS Comptroller’s Website (

Responding to Audit Reports Draft Audit Reports The library director is provided with a draft report for his/her formal response. Within 30 days of receiving the report, the library should formally respond with its official position concerning the audit findings or, at a minimum, should identify any factual differences with the report. This response also adds balance to the report, as readers will be informed of the library’s perspective. What Happens After The Library Response? It may cause the Comptroller’s office to modify a finding or recommendation. The general content of the response (whether it agrees with the findings or not) will be summarized in the audit report, and the entire response letter will be included as an appendix to the final published audit report. Note: If you do not respond the final audit report will indicate that. Corrective Actions by Agency Within 90 days following the distribution of the final report, the library director must report to the State Comptroller the corrective action taken to implement the recommendations contained in the report, and if they are not implemented, the reason why.

Report Distribution & Follow Up Report Distribution Draft audit reports are distributed only to agency officials, with copies provided to the Director of the Division of the Budget. Final audit reports are public documents available to anyone requesting them, although they will be provided to the library before they are publicly distributed. All final reports are provided to media representatives. Follow Up About one year following the issuance of our final report there may be a follow-up audit to assess the extent to which the library has implemented the recommendations made in the final report. These audits generally take less time to complete. Information from NYS Comptroller’s Website (

What Does the Audit Look At Library Policies Library Board Minutes Internal Controls Financial Reports Warrants & Payroll Invoices IT Department Procedures Passwords Public Bids

Initial Request for Records and Information Minutes Annual Financial Reports Budgets Records, Policies and Other Documents: Cash Receipts Journals Bank Reconciliations Cash Disbursements Journals Investment Policy General Journals Security and Custodial Agreements General Ledgers Confirmation of Pledged Collateral Revenue Ledgers Duplicate Receipt Forms Appropriation Ledgers Code of Ethics Bank Statements Paid Vouchers or Claims Canceled Checks Abstracts, Audits or Warrants Copies of Deposit Slips

Parts of an Audit ANYTOWN PUBIC LIBRARY Table of Contents Page Independent Auditor’s Report 3 Management’s Discussion and Analysis 4-7 Basic Financial Statements Statement of Net Assets and Governmental Fund Balance Sheet 8-9 Statement of Activities and Governmental Fund Revenues, Expenditures and Changes in Fund Balance Notes to Financial Statements Required Supplementary Information Budgetary Comparison Schedule – General Fund 19-22

Records Retention A collection of well kept and well organized records (financial and others) are essential to the library’s ability to assure the taxpaying public that it is undertaking its responsibilities as it should. In general ALL financial records must be retained for a period of at least 6 years. Refer to Records Retention and Disposition Schedule MI-1 for specific documents.

Risk Assessment Identify and review risks Determine how the risks should be managed/controlled Two key factors: Likelihood of occurrence Significance of any impact A board may initiate plans, programs, or actions to address specific risks, or it may decide to accept a risk because of cost (cost/benefit analysis) or other considerations Each decision should be supported and documented