Who's minding the store? New York State's ongoing quest to strengthen internal control.

• Author: Hapeman, Carolyn

It has been nearly 20 years since New York State first passed the Governmental Accountability, Audit and Internal Control Act of 1987. In so doing, the state created a new model for government accountability. The new law challenged those in charge of the Empire State's vast network of agencies and public authorities to certify that public resources were being used as efficiently and effectively as possible for the good of all New Yorkers. Internal control in this sense was used as a catch phrase for all the systems and practices that organizations routinely have in place to optimize productivity and diminish the likelihood of otherwise preventable crises.

With the 20th anniversary of the original legislation fast approaching, New York finds itself closer than ever to reaching its goal of 100 percent compliance with the groundbreaking law. The creation of a new in-state organization devoted expressly to helping agencies achieve their internal control compliance goals is evidence of New York's ongoing efforts to abide by the law, which sought to legislate ethical accountability into state government. This article gives an overview of the landmark legislation and the persistent challenges that accompany New York's ongoing quest for compliance.

LEGISLATING ACCOUNTABILITY

Who's minding the store? The question is as relevant today as it was in 1999 when the New York State Assembly Oversight, Analysis and Investigation Committee posed the question to the 95 New York State agencies and public authorities covered under the first-of-its-kind Internal Control Act of 1987. The original law, which was not made permanent until 1999 following the publication of the Assembly's report findings, sought to safeguard the integrity of state operations by making individual public officials responsible for the implementation and maintenance of regularly scheduled assessments and internal audits of their agencies' operations, with special emphasis on agencies' accounting and financial reporting operations.

The collective findings contained in the Assembly's 1999 report proved that "non-compliance with critical or essential provisions of the Act were pervasive." Further, the report concluded that "because internal control practices are not being implemented according to the law ... many agencies are not proving themselves accountable to the citizens of New York State, thus setting the stage for unethical behavior, inefficiency, fraud and abuse." (1) The Assembly, recognizing the importance of internal control as a means to counter such risk, further refined the concepts of the 1987 law to ensure that the provisions were consistent with professional internal control standards and the practices of private and public organizations, and then made the Act permanent.

In the years since the Assembly report was made public, New Yorkers and the rest of the world have witnessed the consequences that non-accountability can wreak on organizations that appear healthy on the surface. It can be argued that many of the nation's most notable business collapses can be traced back to the fundamental absence of a thriving internal control culture or control environment--the same conditions that were called into question in New York's legislative findings. Recognizing the potential for grave error as well as the public's (and the courts') growing intolerance for the "see no evil, hear no evil" defense in cases of fiscal malfeasance, New York State officials are once again asking state-run agencies and public authorities to certify that their people, products and operations--including financial operations--are in compliance with statutory internal control requirements and standards.

Bearing the brunt of New York's attempts to legislate accountability then and now are the top-line...