Court Opinion

ID: 5485871
Source: CourtListenerOpinion
Date Created: 2022-01-10 02:12:20.64025+00
Date Added: 2024-06-11T08:33:40.989598
License: Public Domain

Graffeo, J. (concurring).
I agree with the majority that the 2005 legislation directing the Comptroller to audit charter schools to the same extent as public school districts violates article § 1 of the New York Constitution. I do not believe academic performance audits fall within the administrative duties that are incidental to the Comptroller’s supervision of political *135subdivisions, which include school districts. But I do not subscribe to the majority opinion to the extent it suggests that article V § 1 prohibits the Legislature from assigning any audit function to the Comptroller. I write separately to express my belief that article V, § 1 grants the Legislature some flexibility in authorizing the Comptroller to conduct more limited, purely financial audits of the public funding provided to charter schools.
Under article V, § 1 of the New York Constitution, the Legislature may assign to the Comptroller the “supervision of the accounts of any political subdivision of the state” as well as “administrative duties” that are “incidental to the performance” of the Comptroller’s functions. This constitutional provision “designates the Comptroller as the independent auditing official for the affairs of the State” (Matter of Dinallo v DiNapoli, 9 NY3d 94, 101 [2007] [internal quotation marks and citation omitted]), whose fundamental duty is “to [superintend the fiscal concerns of the state” (Blue Cross & Blue Shield of Cent. N.Y. v McCall, 89 NY2d 160, 166 [1996] [internal quotation marks and citation omitted]). We have described article Y, § 1 as the “wellspring of the Comptroller’s authority” and recognized the authority of “the Legislature to delegate to the Comptroller both supervision of the accounts of any political subdivision of the State and administrative duties incidental thereto” (Matter of McCall v Barrios-Paoli, 93 NY2d 99, 105 [1999]).
Although the Legislature has broad power to assign tasks to the Comptroller, this authority is not without limitation inasmuch as article Y, § 1 prohibits the Legislature from “assigning to the Comptroller administrative tasks that are not incidental to his duty to superintend the fiscal concerns of the State” (Dinallo, 9 NY3d at 103). In Dinallo, for example, we held that the Legislature could not direct the Comptroller to audit the New York State Insurance Department Liquidation Bureau because the rehabilitation or liquidation of distressed insurers—the sole purpose of the Liquidation Bureau, an arm of the Superintendent of Insurance in his separate capacity as court-appointed receiver on behalf of private businesses—“has no impact on the state fisc” (id. at 102). Similarly, in Blue Cross, we concluded that the Legislature could not require the Comptroller to audit private not-for-profit health insurance companies that were subject to state regulation.
The controversy before us focuses on legislative action in 2005, when the Legislature directed the Comptroller to audit *136each school district, board of cooperative educational services (BOCES) and charter school at least once by 2010 (L 2005, ch 267; see also General Municipal Law § 33 [2]; Education Law § 2854 [1] [c]).1 The legislation was prompted by the misappropriation of millions of dollars in several school districts in which the independent auditor—described as the “linchpin of the existing system”—failed to disclose “blatant and ongoing fraud” (see Budget Rep on Bills, Bill Jacket, L 2005, ch 267).2 The legislation granted the Comptroller the authority to audit charter schools in the same manner as school districts (see General Municipal Law § 33 [2] [b]).
There is no doubt that the Legislature’s delegation of comprehensive auditing functions to the Comptroller regarding school districts was constitutional. The Comptroller is empowered to conduct both fiscal and performance audits of “political subdivisions” of the State under article V, § 1 (see Barrios-Paoli, 93 NY2d at 108), which include school districts.
The question here is whether the Legislature could require that the Comptroller undertake the very same uncircumscribed audits of charter schools—which the Comptroller does not assert to be political subdivisions in their own right—as “incidental” to the audits of school districts. The majority opinion, correctly in my view, finds that it could not. As the trial court below observed, characterizing “the Legislature’s grant of full fiscal and programmatic audit authority over the 200 charter schools authorized by the [Charter Schools Act]—including evaluation of student educational performance—as ‘incidental’ puts far more weight on the term than it reasonably can bear” (20 Misc 3d 235, 268 [Sup Ct, Albany County 2008]). Clearly, one of the purposes in creating charter schools was to foster more innovative and experimental education environments. It is therefore a statutory responsibility of the Board of Regents and charter entities to evaluate the instructional objectives and academic achievements of charter schools (see Education Law *137§ 2853 [2]; § 2857 [2]). Nevertheless, based on the unique status of charter schools and the manner in which they receive substantial public financing, I believe that the Legislature could, within the parameters of the Constitution, direct the Comptroller to conduct limited fiscal audits if it chose to do so.
As recognized by the Appellate Division majority, the operation of charter schools implicates both the significant governmental function of providing a public education and large amounts of taxpayer funds. First, by constitutional mandate, the Legislature is required to provide children with a free education (see NY Const, art XI, § 1). Although the Legislature historically discharged this responsibility through the creation and maintenance of public schools, it now fulfills this duty in part through the funding of charter schools. Indeed, “[t]he powers granted to a charter school . . . constitute the performance of essential public purposes and governmental purposes of this state” (Education Law § 2853 [1] [d]). And while charter schools operate apart from school districts, the Charter Schools Act does not create a purely private status for charter schools; rather, the Act makes clear that they are part of the “public school system” (Education Law § 2850 [2] [e]). This distinguishes their status from private entities, as we addressed in Blue Cross.
Second, charter schools are financially linked to school districts in that public funds flow to charter schools through school districts. Specifically, the school district of residence for each charter school student must pay that student’s “basic tuition” amount directly to the charter school (see Education Law § 2856 [1] [a]).3 Because payments to charter schools are based on enrollment figures, any improper documentation of such figures would negatively affect school districts by reducing available revenues. In more general terms, any money a school district pays over to a charter school diminishes the revenue available to the school district to fund its own operations. A vital financial nexus therefore exists between charter schools and school districts.
Given the special character of charter schools and their relationship to the public school system, in conjunction with the *138broad authority envisioned by article Y § 1, I conclude that the Legislature could constitutionally direct the Comptroller to perform fiscal audits of the public funding that charter schools receive as “incidental” to his comprehensive oversight of school districts themselves. Although financial controls are already in place for both school districts and charter schools, the legislative history underlying the 2005 amendments indicates that preexisting independent audits of school districts were problematic, necessitating additional oversight by the Comptroller. Charter schools cannot be considered immune from financial mismanagement problems nor are they unable to benefit from fiscal audit recommendations.4 I therefore would not foreclose the Legislature from granting the Comptroller appropriately limited auditing authority with respect to charter schools.
Judges Read, Smith and Jones concur with Judge Ciparick; Chief Judge Lippman concurs in result in a separate opinion; Judge Graffeo concurs in result in another opinion in which Judge Pigott concurs.
Order reversed, etc.

. The legislation also permits the Comptroller to conduct further audits of these entities “based upon a risk assessment process conducted by the comptroller which may include investigations of alleged improprieties, previous audit findings and recommendations, or other financial performance indicators” (General Municipal Law § 33 [2] [a]).

. According to respondents, although the Comptroller previously possessed the authority to audit school districts and BOCES (see General Municipal Law § 33 [1]), he discontinued the practice of regularly auditing them in the 1970s due to budget cutbacks and in reliance on the annual independent audits—which are now still required in addition to the Comptroller’s audits.

. The school district is further obliged to “pay directly to the charter school any federal or state aid attributable to a student with a disability attending charter school in proportion to the level of services for such student with a disability that the charter school provides directly or indirectly” (Education Law § 2856 [1] [b]).

. In their brief, respondents state that charter school audits (of non-petitioner schools) conducted before the commencement of this litigation revealed fiscal problems “that had not been previously discovered or disclosed by the independent audits, including spending for a lavish retreat and substantial unauthorized payments to staff and others.” They further assert that “in an audit of the New York City Department of Education that preceded the audits involved here, the Comptroller found that the Department was not fully monitoring the 23 charter schools that it oversees.”