Opinion ID: 2560476
Heading Depth: 1
Heading Rank: 2

Heading: The 2005 Legislation and This Lawsuit

Text: In 2005, the Legislature adopted the school audit bill which directs the State Comptroller to audit all school districts, boards of cooperative educational services (BOCES) and charter schools operating within this state by March 31, 2010 ( see L 2005, ch 267; see also Education Law § 2854 [1] [c]; General Municipal Law § 33 [2]). The Legislature determined that additional audits should be conducted by the State Comptroller because [s]chool districts, BOCES and charter schools are all public entities that use taxpayer funds. As such, the taxpayers who support these enterprises have a right to know that they are managed effectively and that proper measures are in place to protect against fraud and waste. The recent school district financial scandals and the failure of the independent auditor in those districts have made it clear that these additional safeguards are not merely appropriate; they are a good investment that will protect State and local taxpayers from financial practices that do not meet State standards (Budget Report on Bills, Bill Jacket, L 2005, ch 267, at 5). As amended, Education Law § 2854 (1) (c) requires that charter schools be subject to the State Comptroller's audit just like other public schools. The Legislature also amended General Municipal Law § 33 to require that the Comptroller cause the accounts of every school district, BOCES and charter school in the state to be examined no later than March 31, 2010 (General Municipal Law § 33 [2]). As a result of the 2005 amendments, respondents, by letter dated July 1, 2007, notified 31 charter schools located in New York City that the Office of the State Comptroller had scheduled a performance audit of charter schools authorized by the New York City Department of Education. The State Comptroller cited General Municipal Law § 33 as his authority to conduct the performance audits of the charter schools pursuant to article V, § 1 of the New York State Constitution. The audits were to include an assessment as to the extent that New York City charter schools met quantitative academic achievement goals and complied with student selection procedures and criteria, as set forth in their charters. Upon receiving notice of the State Comptroller's intent to audit them, several charter schools, by letter dated August 3, 2007, questioned whether the Comptroller had the authority to conduct academic performance audits. The Comptroller responded by letter dated September 27, 2007, reiterating that his authority derived from the 2005 amendments to General Municipal Law § 33, and that this Court's decision in Matter of McCall v Barrios-Paoli (93 NY2d 99 [1999]) had clarified that the State Comptroller's audit authority includes the power to conduct both financial and performance audits. The Comptroller concluded that the audits were proper because the matters to be examined have clear fiscal implications for the public as well as the governmental entities that fund the charter schools and have programmatic and oversight responsibilities with respect to them (Letter from Office of State Comptroller, Sept. 27, 2007, record at 254). In December 2007, petitioners [7] commenced this combined CPLR article 78 proceeding and an action for declaratory and injunctive relief against respondents Thomas P DiNapoli, as Comptroller of the State of New York, the Office of the State Comptroller and the State of New York. In particular, petitioners seek a declaratory judgment that the Comptroller lacks the authority to conduct audits of charter schools because article V, § 1 of the New York State Constitution prohibits the Legislature from assigning to the Comptroller the power or duty of auditing charter schools since they are not political subdivisions of the State, nor is the task of auditing charter schools an administrative duty incidental to the Comptroller's constitutionally prescribed functions. Further, petitioners seek a judgment declaring that the grant of the Comptroller's audit authority over charter schools contained in General Municipal Law § 33 (2) and Education Law § 2854 (1) (c) is unconstitutional and seek a permanent injunction prohibiting the Comptroller from conducting audits of charter schools. Respondents answered and moved for summary judgment. Supreme Court denied respondents' motion for summary judgment, holding that insofar as General Municipal Law § 33 (2) and Education Law § 2854 (1) (c) authorize or direct the Comptroller to audit charter schools, they violate article V, § 1 of the New York State Constitution (20 Misc 3d 235 [2008]). The court permanently enjoined the Comptroller from conducting any further charter audits. [8] A divided Appellate Division reversed, holding that the Legislature did not violate NY Constitution, article V § 1 when it directed audits of charter schools by the Comptroller (60 AD3d 119 [2009]). The majority found that given the Legislature's broad delegatory authority regarding the Comptroller's authority and the significant public funding involved, the Comptroller's fundamental duty to supervise state fiscal matters was implicated. Therefore, the task of auditing charter schools was an administrative duty incidental to the Comptroller's constitutionally prescribed functions. Petitioners appeal as of right, pursuant to CPLR 5601 (b) (1), and we now reverse.