INTERNAL CONTROLS AND INTERNAL AUDIT FUNCTION
Based on a review of current law and discussions with specialists in the area, the Audit
Committee has reached the following conclusions about internal controls and internal audit for
New York State public authorities.
Internal controls are the steps that an entity takes to provide reasonable assurance that the
entity’s objectives are achieved through effective and efficient operations, reliable financial
reporting and compliance with applicable laws and regulations.
Summary of Current Law:
New York state law sets forth specific requirements for internal controls for state agencies in the
Internal Control Act, Article 45, Section 950-951 and for certain public authorities in Public
Authority Law (Article 9), Title 8, Section 2930-2931. Both laws contain similar requirements.
With respect to “covered authorities”, the law requires the governing board of each covered
authority to establish and maintain internal control guidelines and a system of internal control,
designate an internal control officer and implement education and training of officers, directors
and employees.1 Only “covered authorities”, which are authorities and public benefit
corporations controlled by the governor, are subject to internal control requirements.2
The Budget Policy and Reporting Manual, B-350, “Governmental Internal Control and Internal
Audit Requirements”, issued October 21, 2003, elaborates on the requirements stated above.
The manual requires the head of each covered State agency and public authority to certify
compliance with internal control requirements by March 31 of each year and submit an annual
Internal Control Summary of the related activities undertaken during the previous year.3 The
manual clarifies that state agencies and covered authorities must design and maintain internal
control standards in conformance with generally accepted professional standards, including