Administering Local Finances

The financing of local government activities in New York takes place within a number of limitations. The State Constitution limits the amounts that most municipalities may raise annually from the real property tax. Similarly, the municipalities operate under limitations on debts, with a variety of provisions which limit borrowing power. The fiscal management of local government, spelled out in the Constitution and in statutes, is subject to certain prescriptions, reviews and audits by the state.

The previous chapter discusses local government expenditure trends, principal sources of revenues and aspects of intergovernmental fiscal relations. This chapter discusses the more prominent legal limitations upon local government financing, the basic features of municipal financial administration and state supervision of local finances.

Tax and Debt Limits

Tax Limits

Article VIII of the State Constitution imposes limitations upon the amounts which local governments may raise by tax upon real property. These limitations have a history that goes back more than a century. They have had a pronounced impact on the financing of local government in the State of New York, particularly with regard to state aid, local non-property taxes, education financing, general purpose assistance and special city aid. The real property tax limitation has evoked much debate over the years.

Against a background of increasing state involvement in local finances, an 1884 constitutional amendment declared:

“The amount hereafter to be raised by tax for county or city purposes, in any county containing a city of over one hundred thousand inhabitants or any such city of the state, in addition to providing for the principal and interest of existing debt, shall not, in the aggregate, exceed in any one year two percent of the assessed valuation of the real personal estate of such county or city …​”

Thus the tax limitation first applied only to the cities of New York, Brooklyn, Buffalo and Rochester, and to New York, Kings, Erie and Monroe counties. With the consolidation of New York City in 1898, a single 2 percent limit was accepted as applying to the whole city and later to the overlying county government. As a result of population growth, Syracuse, Albany and Yonkers came within the constitutional tax limit, and with them Onondaga, Albany and Westchester counties.

Tax Limit Developments

Many other cities of the state have been subject to tax limitation under special laws or local charters. By 1920 there were 33 cities in this category. Limitations ranged from 1 to 2 percent of assessed valuations or took the form of appropriation restrictions. In virtually every instance, taxes for school purposes and debt service, as well as other municipal functions in certain of the cities, were excluded from these limitations.

After the First World War, every city suffered from inflation, a serious factor in municipal finances even in the prosperous years of the 1920s. Some of the stringency experienced by the tax-limit cities, however, probably resulted from policies of under-assessment. At its outset, the depression created difficulties because it reduced the valuations by which taxing power was measured and imposed additional expenditures for public relief.

Amendment of 1938

A 1938 amendment revised the constitutional tax limitation by substituting five-year average valuations as the measure of taxing power for the then-current annual valuations. The 2 percent limit was extended in 1944 to all the cities and villages of the state, with the provision that the Legislature might exclude amounts raised by local property taxation for school purposes in the case of villages and of cities having a population of less than 100,000. The 1938 amendment granted the Legislature the power to further restrict the authority of any county, city, town, village or school district to levy taxes on real estate.

Current Limitations

Material changes were made in the tax limits contained in Article VIII of the State Constitution during the period following World War II. They were accompanied by a series of major moves in state-local fiscal relations as they related to the distribution of shared taxes, categorical assistance, school aid, local non-property taxes and city-school relations.

Tax limit provisions of the Constitution as amended in 1949, 1951, 1953 and 1985, now provided as follows:

  1. All Constitutional tax limits relate to the five year average of the full value of taxable real estate.

  2. The tax limit for New York City for combined city and school purposes is fixed at 2.5 percent.

  3. The tax limits for the other cities with populations of 125,000 or more are 2 percent for combined city and school purposes.

  4. In cities under a population of 125,000, the tax limit is 2 percent for city purposes alone.

  5. All counties outside New York City are subject to tax limits of 1.5 percent for county purposes; however any county may raise its limit to 2 percent by action of the county governing body in accordance with County Law.

  6. The limit for villages is 2 percent for village purposes.

  7. In certain instances, taxes levied for financing capital expenditures on a “pay-as-you go” basis and amounts raised for debt service are excluded from tax limitation.

  8. School districts in cities under a population of 125,000 and towns have no Constitutional tax limit.

It may be said that the Constitutional real estate tax limit has two major components: A percentage limitation for operating purposes as listed in items (a) through (f) above, and certain exclusions of amounts required for debt service and capital improvements. Together these may be referred to as the total real property taxing power of a municipality or a school district.

Tax Limit Exclusions Challenged

To enable school districts which are coterminous with, partly within or wholly within a city having a population less than 125,000 and the cities of Buffalo, Rochester and Yonkers to meet their fiscal needs, the legislature enacted a series of statutes permitting the exclusion of annual pension requirements and social security contributions from their respective tax limitations.

The constitutionality of the statute applicable to the City of Buffalo was contested in 1973 on grounds that pension payments are ordinary annual operating expenses and consequently subject to tax limitation. In Hurd v. City of Buffalo (34 NY2d 628, 355 NYS2d 369 (1974)), the Court of Appeals affirmed that the exclusionary statute specifically applying to Buffalo was unconstitutional. The court thereby cast a shadow over the other exclusionary legislation.

Beginning in 1974, the Legislature adopted a stopgap measure to forestall the immediate impact of what has come to be known as the Hurd ruling. A Temporary State Commission on Constitutional Tax Limitations (the Bergan Commission) was created to pursue the matter.

The commission published its findings at the beginning of 1975, recommending that the issue be handled through a constitutional amendment. An amendment excluding retirement and social security costs from the tax limit was submitted for voter approval at the 1975 general election. It was defeated.

The 1976 Legislature passed a bill (Emergency City and School District Relief Act) continuing temporary relief to the cities of Buffalo and Rochester and to certain school districts by permitting them to exclude from Constitutional tax limitations certain pension and social security contributions until 1980.

In early 1978, the Court of Appeals struck down the Emergency City and School District Relief Act of 1976 and left the door open for a suit demanding a refund of tax dollars collected under the faulty legislation. In response to this decision, a special Task Force on the Financing of City School Districts was created. The Legislature implemented two principal recommendations of the task force in 1978: (1) It instituted special equalization ratios for the impacted cities and school districts and, (2) it advanced state funds to finance the “gap” on a revolving basis.

The special equalization ratios initially reduced the gap from $112 million to $20 million. However, as the growth of the cities’ real property wealth has slowed down, the usefulness of these ratios has diminished. The state funds which were advanced to the districts impacted by Hurd were rolled over every year between 1978 and 1992-93. Pursuant to Chapter 53 of the Laws of 1991, advances to the districts were reduced by 50% a year and phased out in 2011-12. In addition, the state has provided these districts with grants since 1979.

Other recommendations of the Task Force were:

  • require city school districts receiving advances to make maximum use of sales and utility taxes;

  • redistribute or increase county sales taxes for city school district use;

  • reallocate functions;

  • adopt a statewide real property tax; and

  • submit constitutional amendments.

Debt Limits

The economic collapse of 1837 exposed serious weaknesses in the credit operations of local government and the speculative character of the public improvement debt of the period. One result was that the State Constitution of 1846 directed the Legislature to restrict the municipalities’ power of taxation, assessment and borrowing.

Unchecked growth in the debt of local governments continued. The Civil War was followed by inflation and great economic activity. New York City provided a special example of municipal extravagance. The unbridled expansion of local debt under Boss Tweed created acute difficulties for the city during the business depression of 1873.

Debt Limit Developments

The condition of local government finance became a matter of urgent interest to the state. A Constitutional amendment in 1884 imposed a debt limit of 10 percent of assessed valuation on cities with a population over 100,000 and on counties containing a city of the same size. In the case of New York City, the effect was a 10 percent limit on combined city and county debt, while in Brooklyn, Buffalo and Rochester the limit applied separately to city and county debt. Water debts extinguishable within 20 years were excluded.

In 1894, the 10 percent debt limitation was extended to all cities and counties in the state. No provision was made for the limitation of the indebtedness of towns, villages and school districts, although these units were restricted in their debt practices by statute.

Current Debt Limitations

In 1938, constitutional amendments extended debt limitation to towns and villages, prohibited the creation of new or novel units of local government possessing borrowing power, and required substantive guarantees for the repayment of municipal indebtedness.

Postwar changes in the debt provisions of the State Constitution have been numerous. The most significant occurred as a result of revisions in Article VIII which were approved in 1951. The 1938 and subsequent revisions resulted in the following features:

  • All Constitutional debt limitations tied to specified percentages of the average full valuations of taxable real estate on the last completed assessment rolls and the four preceding rolls, as follows:

    • 10 percent for Nassau County;

    • 7 percent for other counties outside New York City;

    • 10 percent for New York City for combined city and school purposes;

    • 9 percent for other cities with a population of 125,000 or more for combined city and school purposes;

    • 7 percent for cities with a population of less than 125,000 for city purposes, exclusive of schools;

    • 7 percent for towns;

    • 7 percent for villages; and

    • 5 percent for school districts coterminous with, partly within, or wholly within a city with a population of less than 125,000 (with provisions for increasing the limit under certain conditions).

  • A series of specific conditions governing the incurrence and management of municipal debt, such as:

    • prohibition upon the issuance of indebtedness beyond a period of probable usefulness or weighted period of probable usefulness to be specified by state law, and in no case to exceed 40 years;

    • issuance only of full faith and credit indebtedness and “tax increment financing” (Article XVI, section 6);

    • authorization for sinking fund bonds under certain circumstances and a requirement for the repayment of debt in installments, with no installment more than 50 percent in excess of the smallest prior installment, unless the governing body provides for substantially level or declining debt service payments as may be authorized by law;

    • requirement for the annual provision by appropriation for meeting principal and interest payments; and

    • prohibition upon the creation of municipal or other corporations (other than a county, city, town, village, school district, fire district or certain river regulation and drainage districts) possessing the power both to contract indebtedness and to levy or require the levy of taxes or benefit assessments upon real estate.

  • Exclusions of municipal indebtedness from constitutional debt limitation, including certain water and sewer debt, certain debt issued to finance “self-liquidating” public improvements, and, in the case of New York City, certain additional exclusions for various purposes.

  • Prohibitions upon the gift or loan of the credit of counties, cities, towns, villages or school districts to or in aid of any individual, public or private corporation or association or private undertaking with specified clarifications and an exception in the case of joint or certain cooperative undertakings among municipalities.

Article XVIII of the State Constitution prescribes the conditions under which a city, town, village or certain public corporations (other than a county) may aid certain low-income housing and nursing home accommodations, contract indebtedness, and provide for subsidies for these purposes. This article contains a separate 2 percent debt limit for cities, towns and villages computed on the basis of average equalized full valuations of taxable real property. Various conditions are attached to indebtedness incurred under Article XVIII.

Borrowings and Debt Management

Local Finance Law

To implement the 1938 constitutional amendments, the state undertook a comprehensive revision of the laws on local government financial affairs. In 1942, this effort produced the Local Finance Law. This statute regulates the issuance of municipal bonds and notes by local governments. It addresses the objects or purposes for which debt may be incurred, the maximum terms of indebtedness for various objects or purposes, the conditions of short-term loans, and the required content of municipal obligations.

Debt Management

While there are many legal requirements surrounding municipal debt procedures, they do not exhaust the subject of local debt management. The overlapping debt limits in the State Constitution and the safeguards and requirements of the Local Finance Law are necessarily controlling, but they are not substitutes for the exercise of prudence and sound judgment by local government officials.

Local officials may exercise discretion in debt management and borrowing policies in a number of vital respects. They make judgments as to the need for public improvements and their soundness from the standpoint of design, costs and architectural or engineering features. They decide whether such improvements are within the capacity of the community as measured by future annual costs for debt service and regular maintenance.

While state laws influence debt policies, the decisions of local officials have a direct bearing upon debt management. One feature of an orderly and manageable debt structure is early retirement of substantial amounts of outstanding debt. Another feature is to keep annual obligations for the payment of interest and principal within the limits of a reasonable relationship to total budgetary requirements. Local officials also find that it is good policy to make substantial contributions to the cost of public improvements from current revenue. Many capital outlays recur regularly, such as replacing motorized equipment or resurfacing streets, and borrowing for such purposes tends to effect on debt and debt charges.

The issuance and marketing of municipal obligations is a highly specialized subject. Since local officials wish to ensure the legality and marketability of the obligations and obtain the most favorable terms, they often utilize the services of bond counsel and other knowledgeable advisors.

Capital Programming

Capital programming and capital budgeting are recognized methods for implementing debt management policies. Practices among local governments in the state vary. In some cases there are detailed charter requirements for public improvement planning and financing. In other cases localities adhere to “paper” plans. Sometimes the local practice is to bring forward public improvements piecemeal and not necessarily in relation to each other, to separately authorize the funds necessary to pay for various improvements, and to defer into the future the question of how everything fits together.

A capital program, as the term is used by the Government Finance Officers Association (GFOA), is “a plan for capital expenditures to be incurred each year over a fixed period of years to meet the need for public improvements.” General Municipal Law, section 99-g contains express provision for capital programs. The capital program under section 99-g is submitted with the municipality’s regular annual budget. The capital program itself includes descriptions of proposed projects, the proposed method of financing for each project and an estimate of the effect, if any, on operating costs in the three years following the completion of the project. The factor of integration with the regular budget removes capital programming from the area of paper plans.

The goal of a capital program generally is to plan, in advance, how to pay for various improvements and how the improvements will affect the regular municipal budget in added debt service charges, appropriations from current revenue, and the annual expense of operating new facilities.

Local government indebtedness is evaluated on an individual basis according to criteria by which financial position is customarily evaluated. Some areas of concern are growth in the amount of debt over a number of years, and purposes for which the debt is being issued. Local budgets traditionally include expenditures for which indebtedness could be issued. When local governments take expenditures that have traditionally been financed from current appropriations and begin to issue debt to finance such expenditures, it may be an indication that current revenues are not keeping pace with expenditures.

Other criteria extend beyond amounts of borrowings and debt and involve a number of factors indicative of fiscal capacity. A few such factors are the ratio of net debt to full valuations, the extent to which municipal debt is wholly or partially self-supporting, the relative amount of the municipal budget used for tax-supported debt, the amount of overlying debt, and the municipality’s tax collection.

Municipal Finance Administration

The general laws of the state are fairly explicit as to the powers and duties of local officials having fiscal responsibilities in non-charter counties, towns and villages. These statutes provide options as to the manner in which these responsibilities are assigned or organized within the structure of local governments. Options include the establishment of the office of comptroller and purchasing agent in counties, the office of purchasing director in towns and the office of auditor in villages. Pursuant to home rule authority, cities, charter counties and charter villages have latitude to amend their charters with respect to organization for finance administration.

Local government accounting, bookkeeping and record management systems vary in sophistication from simple manual systems to individual personal computers, to client server and mainframe systems. Software includes off-the shelf applications and custom applications designed to accommodate specific needs. A wide variety of software products are available to provide basic aspects of fiscal management such as budget preparation, appropriation accounting, assessment rolls preparation, payrolls, master employee records, real property tax billing and water billing.

Earlier discussion touched upon real property tax administration and municipal debt management. Further phases of municipal finance administration include budgeting, accounting, treasury functions, purchasing and contracting and audit procedures.

Municipal Budgeting

Local officials often regard the annual budget as perhaps their greatest single obligation, since budget preparation and continuing administration may be labor intensive and time-consuming. General state law spells out the principal steps in budget preparation and adoption in most local governments. For counties, cities and villages that have charters, budget provisions are generally contained in such charters.

The budget process generally entails many choices. These tend to be most apparent on the expenditure side of the local budget, but many choices may also exist on the revenue side. They include:

  • magnitude of the real property tax levy and its relative burden expressed as a tax rate;

  • local non-property taxes, as authorized by state law and implemented by local action;

  • fees and earnings and use of special assessments, which are in the nature of charges against benefited properties in proportion to the benefit received, to defray the cost of certain municipal improvements or services;

  • payments from other governments in the form of grants-in-aid, shared revenues and reserve fund moneys for current or capital purposes (depending upon the character, scope and availability of these payments); and

  • indebtedness for authorized capital purposes, paying for improvements from current revenues (pay-as-you-go), or employing a combination of these methods of financing.

Budget Administration

Budget administration is generally preceded by the preparation and submission of departmental estimates. This process is usually followed by the formulation of the budget itself, which is a balanced plan of expenditures and revenues, normally prepared by or under the direction of the local government’s executive or budget officer. The budget is then submitted to the local legislative body for review, approval or amendment, and enactment of appropriation orders giving effect to the budget.

Beyond the legislative phase of budget review and adoption is the stage of budget administration and enforcement. This process involves the maintenance of appropriation control accounts and procedures for budget transfers or modifications.

Local Initiatives

In budget preparation, presentation and subsequent administration there are opportunities for local initiatives, consistent with the basic requirements of law. Initiatives may be expressed in budget format, supporting data and comparisons, and accompanying explanatory matter in the budget message. A budget is more than an array of figures — it is also a statement of public policy.

Quite often, budgetary allotments or expenditure quotas are established. These are often made on at least a quarterly basis, are formulated from work programs or activity schedules, and developed in consultation with operating officials. Newer developments in budgeting relate the provision of money more closely to the accomplishment of program objectives and to the efficiency with which municipal activities are performed.

Accounting Control

Another essential aspect of municipal finance administration is the maintenance of an accounting control system. Fund accounting is a basic characteristic of municipal accounting. A “fund” is a fiscal and accounting entity with a self-balancing set of accounts. It contains recorded cash, other assets and financial resources, together with all related liabilities and residual equities or balances. A fund is segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions or limitations.

Municipal accounting systems include a general fund and, depending upon the local government entity, such special revenue funds as highway funds, debt service funds, capital project funds, enterprise funds, internal service funds, and trust and agency funds. The central principle is that funds will be self-contained.

Accounting for municipal resources and expenditures should generally be on a modified accrual basis. A fundamental feature of budget administration is the maintenance of appropriation control accounts whereby appropriations are encumbered as obligations are incurred.

In this summary discussion, it is not feasible to outline a comprehensive system of municipal accounts or to describe prevailing practices in all the local governments of the state. For most of the municipalities the standard resource on governmental accounting procedures is the Office of the State Comptroller (OSC).

Financial Reporting

The systematic recording of financial information can be used “(1) as a basis for managing the municipality’s affairs, (2) as a control to prevent waste and inefficiency, (3) as a check on the fidelity of persons administering municipal funds, and (4) as a means of informing interested parties of the municipality’s financial condition and operations.” [1]

The municipal accounting system is the source of both the municipality’s fiscal year-end statements and the periodic internal reports that localities find important for management purposes. These periodic reports show whether revenues are coming in and expenditures are going out at the times and in the amounts projected by the budget plan. Monitoring of this information allows management to make appropriate budgetary modifications during the year.

General Municipal Law section 30 requires local governments to file a financial report annually with the OSC. Until 1996 the law required municipalities to file a paper report on forms provided by OSC, but an amendment in that year allowed for electronic filing. Beginning with the reporting for the fiscal year ending in 1996, counties, cities, towns, villages, school districts and joint activities have been able to transmit their reports electronically using the internet or through the Comptroller’s Assistance Network (a 24 hour electronic bulletin board). Filing electronically with the free software provided by OSC (or by the State Education Department for school districts), saves time, improves accuracy and reduces paperwork.

Other Financial Functions

Other leading aspects of local government finance administration include the functions of cash management, purchasing and property acquisition, insurance and risk management and post audit.

Cash Management

Some local governments carry cash balances in excess of those necessary for transactions. Carrying excess funds costs the income the funds would have earned if invested. In order to anticipate their cash balance needs, local government officials can prepare a cash flow analysis to forecast the cash position of the local government over the entire fiscal period. Proper cash management can provide maximum earnings and minimum borrowing for the local government. Local government officials should be aware of investment factors including legality, safety, liquidity and yield. The Office of the State Comptroller provides guidance to local officials regarding cash management and a wide variety of other topics on local government finance.

Purchasing and Property Acquisition

Other features of financial management relate to purchasing, contracting and storage, and the problem of how far these responsibilities can or should be brought under centralized procurement policies and procedures. Counties, cities, towns, villages, school districts and fire districts purchase goods, services and real property pursuant to procedures and requirements set forth in applicable law. To reduce their purchasing costs, localities sometimes participate in cooperative purchasing endeavors and utilize assistance available from the state.

The New York State Office of General Services (OGS) offers local governments the opportunity to purchase a wide range of goods at favorable prices under state contracts. In addition, OGS offers various kinds of technical assistance for local government purchasing, and assists localities with the procurement of products made by prisoners and the blind. Through OGS, local governments are assisted in the acquisition of surplus state personal and real property and surplus federal property.

Post Audit

Municipalities are subject to audit by various federal and state government agencies. In addition, municipalities may elect on their own to have general or selective audits. A post audit is an audit made after the event, when financial transactions have been recorded and completed. Municipalities’ internal auditors often conduct audits of subsidiary agencies within the municipal organization on a continuing basis.

Insurance and Risk Management

Decreasing resources and increasing insurance costs are putting greater emphasis on risk management. There is often a variance between the optimal and the maximum feasible amount of insurance coverage. While most localities need to have insurance coverage for catastrophic events, they may take a number of steps to reduce costs. An acceptable safety program, self-insurance, coinsurance, blanket insurance and competitive bids can sometimes reduce costs.

State Supervision of Local Finances

During the 1930s, there was a depression-born trend toward state scrutiny of municipal budgets and expenditure programs, review and approval of proposed municipal borrowings, and measures designed to assist in the marketing and acceptance of local bond issues. Municipal conditions inviting state intervention during these periods included persistent weaknesses in current accounts, the incurrence of large volumes of floating indebtedness, reliance upon borrowing for current expense to shore up sagging municipal budgets, debt readjustments and refunding, and actual or incipient defaults.

From these various factors and developments emerged the main ingredients commonly associated with state supervision of local finances: legal tax and debt limitation; debt regulation through uniform bond laws and their administration; reporting, auditing and accounting requirements; central review of debt proposals and expenditure programs; varying degrees of involvement in debt planning and issuance — all fortified by advisory and technical assistance.

Leading Features of State Supervision

Many of the leading features of state supervision of local finances in the State of New York derive from constitutional and statutory requirements previously discussed in this chapter. Chief responsibility for state supervision of municipal finance resides in the Office of the State Comptroller. Among other services, the OSC’s functions include:

  • providing ongoing assistance through the OSC Division of Local Government and School of Accountability to enable and encourage local government officials to:

    • continuously improve fiscal health

    • reduce costs and improve the effectiveness of their service delivery, and

    • to account for and protect their government’s assets.

This Division also performs periodic audits and reviews of local governments, conducts training for local officials and provides consulting services;

  • supervising compliance of local governments with legal tax and debt limitations and requiring submission by local governments of debt statements and annual budgets;

  • providing technical assistance, reviewing applications requesting approval of exclusions from the local debt limit exclusions, and the formation or extension of town improvement districts, fire districts and county special districts;

  • collecting and disseminating local government financial information including statistics on revenues, expenditures and debt;

  • developing uniform accounting systems and providing guidance on financial management practices;

  • administering the State and Local Government Employees’ Retirement Systems; and

  • providing advisory legal opinions to local governments pertaining to the powers and duties of the local government under state laws of general applicability including written advisory opinions on prospective actions of local government.

Annual Financial Report Reviews

A review of each local government’s annual financial report is performed by the OSC to assess compliance with minimum established standards. The information from this process becomes an integral part of a Uniform Risk Assessment Process (developed in 1999). Based upon analysis of identified risk areas, assistance to improve local government operations is offered as appropriate.

Deficit Financing Legislation

Occasionally local governments accumulate deficits to a point that the only recourse left is to obtain special state legislation that authorizes the local government to issue debt to finance the deficit. This action enables the local government to pay off a portion of the debt (through annual debt service payments) over a number of years. Such legislation generally requires the OSC to certify to the amount of the deficit before any such indebtedness can be issued. The OSC also reviews and makes recommendations on the proposed budgets of these municipalities during the period such financing is outstanding.

Oversight Boards

In extreme situations the State Legislature has determined that certain local governments needed additional oversight. This action has been prompted by periods of prolonged fiscal difficulty or, in rare instances, because the local government has lost access to financial markets. Oversight boards typically have powers to approve debt issuances, approve budgets and/or financial plans, approve contracts including employee contracts, and, in rare instances, assure the payment of obligations through the intercept of state aid and tax revenues. Legislation creating control boards usually provide for members to represent interested parties such as the Governor, State Comptroller, State Legislature and generally the local government and/or, local business leaders and local representatives. The legislation also establishes criteria to determine when the local government has regained its financial health. Typically, once the local government meets those criteria, the oversight board approval powers cease.

Local Government Data Base

The oversight activities rely heavily on an improved computerized data file known as the Local Government Data Base. This file is created and maintained by the OSC and contains comprehensive financial and other data on all local governments in the state from fiscal year 1977 onward. Much of this data is obtained from annual financial reports filed by each local government. The reports contain financial statement data (i.e., financial position and results of operations and changes in financial position) as well as detailed revenues and expenditures. This data file is regularly transmitted to the Division of the Budget, the Senate Finance Committee and the Assembly Ways and Means Committee to be used as the basis for much of the program analyses and fiscal impact studies regarding state and local relations.

Generally Accepted Accounting Principles (GAAP)

Since the early 1900’s the Office of the State Comptroller has prescribed Uniform Systems of Accounts for local governments. The purpose of these systems has been to provide a means of gathering financial data from local governments that is consistent in classification and content. This information is used by financial analysts in the Comptroller’s Office, other agencies and the State Legislature.

These systems do not set Generally Accepted Accounting Principles (GAAP). They are promulgated by the Governmental Accounting Standards Board (GASB). GAAP is a technical term used to describe the conventions, rules and procedures that constitute accepted accounting practices on a nationwide basis.

Since the late 1970’s the Office of the State Comptroller has determined that adherence to Generally Accepted Accounting Principles is in the best interest of New York State and its local governments. Consequently the Uniform Systems of Accounts prescribed by the Comptroller are periodically updated to reflect changes in GAAP. In addition, the Comptroller’s Office issues accounting bulletins and conducts training sessions for local officials.

Governmental Accounting Standards Board (GASB)

The Governmental Accounting Standards Board, which is the standard-setting body for establishing governmental accounting and financial reporting principles, from time to time will issue statements that prescribe accounting and financial reporting requirements for certain transactions. When a new accounting/financial reporting standard is issued by GASB, it must be critiqued by the Office of the State Comptroller to identify the accounting issues involved as well as what information is required in order to comply. As part of the accounting issues determination process, both financial reporting requirements and the affect on the State’s financial position must be identified. Input from the units, that may be impacted by the change, in OSC will be solicited. Based upon this information obtained, a decision is made whether to recommend implementation of the statement.

1. Municipal Finance Administration, Sixth Edition, International City Managers’ Association, Chicago, 1962, p. 205.

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