LOSAP Audit Requirements


In November 2005 and May 2006, the Long Island-based newspaper Newsday published articles about Length of Service Award Programs (LOSAPs), in particular, their relatively poor funded status. Partly in reaction to these articles, a bill was introduced in 2006 that was eventually signed into law. This new legislation, GML §219-a(3) required a LOSAP to be audited annually by an independent certified public accountant (CPA). The justification for the bill stated, in part, the following:


“Annual audits will help ensure that programs are adequately funded, allow program sponsors to adjust contributions and increase transparency.”


The new statute required the audits to commence effective with the program sponsor’s fiscal year ending on/after June 30, 2007. Although the original deadline for the completion of the audit was 90 days, it was subsequently increased to 270 days. However, for reasons discussed below, the deadline for fire districts that prepare audited financial statements is 180 days. The audit report must be submitted to the Office of the State Comptroller (OSC).

Our observation is that the audit requirement has made LOSAP sponsors generally more educated about the financial state of their program, but more progress must still be made. Penflex is proactively working with CPAs, statewide associations, and other professionals serving LOSAP sponsors to increase awareness about the need to more closely monitor these programs.  

Compliance & Model Footnote

The text of the statute is somewhat vague and open ended. To clarify how a LOSAP sponsor is to comply with this requirement, the OSC established guidelines in a 2008 memorandum which outlined two options. The first option is aimed towards LOSAP sponsors that already have their financial statements audited by an independent CPA. These sponsors can include a footnote of information about the LOSAP in its financial statements. The CPA will then audit the footnote and LOSAP as part of the overall financial statement audit. The second option is to engage a CPA to perform a LOSAP-only audit in compliance with the AICPA Audit and Accounting Guide for Employee Benefit Plans. With either option, the LOSAP information is to be presented using the model footnote format and submitted to the OSC. Note that fire districts that are required to have their financial statements audited must submit the financial statements to the OSC by June 30th, making the effective filing date for these fire districts 180 days, not 270.

The footnote is to state basic program provisions and benefits provided. It must describe how the program assets are managed and what vendors have been hired to assist the sponsor in its fiduciary role, including asset management and third-party administration. It also requires disclosure of the financial condition of the program, which includes the investment allocation of the program assets and changes in the assets during the year, liabilities, contributions required and made during the year, fees paid to vendors for administration, actuarial and/or investment management services, and actuarial assumptions (for defined benefit programs). 


The LOSAP audit must be filed with the OSC by the required deadline. Based on our discussions with OSC staff and information we requested on LOSAP audits reported to the OSC, it appears that LOSAP audits are not being transmitted to the OSC even though they are likely being completed by the CPA. In 2013 (the most recent year available), the OSC received 307 LOSAP audits. Although information about the LOSAP (i.e., LOSAP footnote) is submitted with the Annual Update Document (AUD), this submission does not satisfy the LOSAP audit requirement because it is not one of the two compliance options outlined above.

According to the most recent fire district financial data available on the OSC website, there are 386 fire districts that report an annual expenditure for LOSAP. This does not include villages, towns, and cities that sponsor LOSAPs. Knowing this, we estimate that 307 LOSAP audits likely represents a filing compliance rate no better than 50% of all LOSAP sponsors. Although we believe that the LOSAP statute requires the CPA to file the audit report with the OSC directly, we understand in speaking to CPAs that there are certain restrictions that do not always make this a practical procedure. We recommend that each sponsor work with its CPA to ensure that the audit is being filed with the OSC, either by the CPA or the sponsor. It can be electronically filed to afrfile@osc.state.ny.us. In addition, we suggest that the sponsor review the results of the audit with the CPA and ask to be alerted of any problems or concerns. If the CPA ever has questions about actuarial or administrative work performed by Penflex, the CPA is encouraged to contact us directly to have these questions answered.


Penflex LOSAP Audit Package

To assist our clients in complying with the audit requirement, Penflex developed an optional LOSAP Audit Package service. After consulting with several CPAs, the LOSAP Audit Package was modeled to provide all the necessary information to fulfill the audit requirements for the sponsor. Essentially, Penflex completes the model footnote on behalf of the sponsor and provides the necessary documentation for the CPA to verify its accuracy – annual report, asset statements, fees paid, and other supporting materials. The LOSAP Audit Package is emailed to the CPA and sponsor. Penflex answers any questions from the CPA about the LOSAP or the package. Most CPAs find this package helpful in that it gives them direct access to the necessary information from Penflex rather than having to piece it together from multiple sources. Our clients benefit from a more streamlined process that reduces their effort and improves the accuracy of the disclosures. However, before asking Penflex to prepare the LOSAP Audit Package, please discuss it with the CPA to determine if the goal of the package will be achieved.

While our LOSAP audit package is comprehensive in its content, it cannot function as the audit itself. The audit must be performed by the CPA, and the results of the audit must be submitted to the OSC.

What you need to know…

  • The LOSAP audit is an annual requirement that must be filed with the OSC within 270 days of the end of the sponsor’s fiscal year (180 days for most fire districts).
  • The Penflex LOSAP Audit Package is an optional service and provides the necessary disclosures but does not satisfy the audit disclosure requirements.
  • The sponsor must retain an independent CPA to perform the annual audit.
  • There are two audit options – the CPA can help the sponsor determine which approach is best.
  • Attaching the footnote to the AUD does not satisfy the audit requirement.