Comptroller Stringer Audit: School Construction Authority’s Shoddy Oversight of $100 Million “Miscellaneous” Checking Account Leads to Lost Dollars
January 18, 2018
SCA Failed to Follow State Law Investment Requirements
Comptroller Stringer Calls for Strict Measures to Improve Financial Transparency and Performance
(New York, NY) — According to a new audit released by Comptroller Scott M. Stringer, the City-funded School Construction Authority (SCA) has kept more than $100 million in an obscure– and inadequately managed – “miscellaneous” checking account. The audit examined a two-year period and discovered inadequate controls over the account – which could lead to waste or abuse – as well as a failure to follow a State law requiring investment of public dollars entrusted to the SCA in order to ensure maximum returns.
The SCA is funded largely through the City’s capital budget, but it also receives money from other sources, ranging from lease payments to insurance and litigation settlements. For those external dollars, the SCA created a special account called the “Other Funds Account” (formerly known as the “Miscellaneous Checking Account”). The Comptroller’s office found that the account’s balance grew dramatically—from $20 million to $104 million—between Fiscal Years 2007 and 2016.
When auditing the account for Fiscal Years 2015 and 2016, Comptroller Stringer found that the SCA’s internal controls over it were insufficient to ensure proper accountability and transparency. In addition, the audit found that rather than investing the funds as authorized by State law, the SCA kept them in a checking account that earned minimal interest from May 2015 through June 2016 – a missed opportunity to earn better returns. That failure to follow State law and invest those dollars as prescribed by law, means that hundreds of thousands of dollars that could be going to improving school facilities have been left on the table.
“When the bureaucracy can’t get its house in order, taxpayers lose and our kids miss out on the facilities they deserve. The SCA’s bungling of financial records potentially cost the City millions. When we could’ve earned a significant return by investing tens of millions of dollars, the SCA knowingly left money on the table. That incompetence comes at the expense of our children,” said New York City Comptroller Scott M. Stringer. “Hundreds of thousands of critical, additional dollars that could have been put toward supporting our schools, our kids, and facilities were ultimately lost. That’s unacceptable. The SCA must immediately implement controls that will allow for stronger oversight of public funds in the future.”
Comptroller Stringer issued a series of recommendations as part of the audit, including:
- Deposit the funds maintained in the Other Funds Account not needed for immediate use in an investment account in accordance with the General Municipal Law.
- Implement controls to ensure that it accurately and consistently records the funding source classifications and use designations (dedicated or discretionary) of Other Funds Account funds in all of the SCA’s financial records.
To see Comptroller Stringer’s audit, click here.