It may be about another month before the New York State Comptroller's office issues its long-awaited audit of the Roslyn School District's finances.

In the meantime, that office recently released a scathing report on its audit of Miller, Lilly & Pearce, the East Setauket-based CPA firm which itself was the auditor for the Roslyn district.

"The work of Miller, Lilly, & Pearce was so appallingly inadequate that it would shock anyone associated with the auditing profession and certainly the taxpayers who depend on the firm to safeguard their money," State Comptroller Alan Hevesi said at a Jan. 6 press conference in Mineola.

"Our auditors found fraud so pervasive that it would have taken significant effort not to uncover it," Hevesi continued. "Even a rudimentary review of disbursements and cancelled checks would have revealed many instances of wrongdoing. I am extremely troubled by our findings, and I urge the State Board for Public Accountancy and the Nassau County District Attorney's Office to pursue this matter aggressively."

The audit of the CPA firm is all part of an investigation into the embezzlement scandal in the Roslyn district, one that involved up to $7.8 million being allegedly stolen from various budgets over the past several years. So far, the scandal has seen the arrests of three former school district employees, including Dr. Frank A. Tassone, the district's longtime superintendent; Pamela Gluckin, a former superintendent for business and finance, and Debra Rigano, a former accounting clerk. All three have been charged with Grand Larceny.

A release issued by Hevesi's office listed its criticism of the auditing firm's work. The comptroller claims that the auditing firm failed to meet "nine mandatory professional standards for conducting audits." For instance, the CPA firm, Hevesi charged, did not find all the inappropriate payments made by the school district once a whistleblower alerted them of possible wrongdoing.

Further, the firm, Hevesi claimed, did not look at cancelled checks while conducting audits. Finally, Hevesi said that the two partners in the firm sold financial and other software to the Roslyn district. According to Hevesi, such transactions "create a conflict of interest and violate professional standards requiring auditors to be independent."

More specifically, Hevesi said that when "questionable disbursements" were revealed to the firm by a district whistleblower, auditors with Miller, Lilly & Pearce found $223,136 in "inappropriate payments." When State auditors did the same research, they found $1.6 million in "questionable payments."

In addition, two of the three partners in Miller, Lilly & Pearce had 55 percent ownership in the company that sold the Roslyn district its financial management software, a company called "Finance Manager."

Hevesi also criticized the CPA firm for not taking steps to increase testing once fraud had occurred; for not testing the district's computerized accounting system; for not investigating the district's "weak internal controls" over assets; for not looking at the "unusually large number of budget changes" that were taking place within the district; for lack of documentation in audit conclusions; and finally, for not looking at cancelled checks. Hevesi said it is "elemental" that all CPA firms look at such latter discrepancies, while he added that the large number of budget changes that were occurring "should catch your eye."

"This is a total failure of one of the key safeguards to protect public monies," Hevesi said of his department's findings. "The system of districts' hiring independent auditors must be strengthened and augmented by review from the Office of the State Comptroller in order to ensure that adequate financial controls are in place. That's why I have asked the Governor and Legislature for $5.4 million to hire 89 auditors to look at every school district around the state on a routine basis."

A spokeswoman for Miller, Lilly & Pearce said that the firm has no comment on the report.

At the press conference, Hevesi was joined by State Senator Michael Balboni. The senator called the findings "another sad chapter" in the ongoing embezzlement scandal, while adding that it was also a matter of "the fox in charge of the henhouse."

Balboni said that three things should be taken into consideration as reform efforts go forward. First, he said, everyone should realize that the problem is "bigger than Roslyn." Second, board of education members need at least some rudimentary knowledge in finances. And third, the State legislature needs to support State auditors with enough resources to do their job.

To support Balboni's claim, on the same day that Hevesi made his findings public, it was also revealed that the assistant superintendent of finance and operations for the Mineola District had been arrested and charged with Grand Larceny.

Balboni was also alluding to the fact that Miller, Lilly & Pearce audited finances for 53 other school districts in New York State, all but two of which are located on Long Island. In Nassau County, those districts include Herricks, Manhasset, Garden City, Glen Cove, Port Washington, New Hyde Park, Syosset, Bethpage, Hempstead, Island Trees, West Hempstead, Levittown and Massapequa.

Further, there are 100 school districts in the entire state that are currently using Financial Manager software.

(Editors note: At the reorganization meeting in July 2004 the Manhasset Board of Education decided not to rehire Miller, Lilly & Pearce as the district's auditors.)