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Comptroller’s Audit of New York Power Authority Results in Generally Favorable Report but for $340,000 in Questionable Expenditures

August 13, 2011

Under the State Comptroller’s authority to audit New York’s public authorities, a recently published audit of the New York Power Authority revealed generally positive management practices resulting in appropriate expenditures but for approximately $340,000. 

These highlighted expenditures, over a two-year period, according to the report, “included amounts the Authority paid to host annual parties and picnics for employees, retirees and their children; for empathetic flowers and other gifts; and for other socially-oriented events. Specifically, the audit revealed that over a two-year period: $160,000 was spent on a total of 21 holiday parties and picnics for employees, retirees, and guests; $46,000 and $39,000, respectively, was spent on gifts for employee service and recognition; at least $57,000 was spent on service award or recognition ceremony expenses, mostly food and beverages; $21,000 was spent for complimentary AARP memberships for all retired employees; $10,000 spent for “empathetic” gifts, such as flowers, to employees and relatives; and $7,000 was spent in entrance fees and other expenses related to having staff participate in the Corporate Challenge road race. 

The Comptroller’s audit offered a single recommendation: “Limit or eliminate spending on nonessential items such as parties, ceremonies, gifts and memberships.”

In a July 22, 2011 letter from NYPA Chairman Michael Townsend (which is attached to the report), the Authority indicates that it will seek to reduce these costs, but the letter indicates that management believes it must retain the benefits from these types of programs in order to retain employees in what he describes as a highly competitive industry.  

Also worth noting is mention by the Comptroller’s Office that it limited the scope of its audit because Office of the State Inspector General was conducting a concurrent investigation of the Authority’s expenditures in the areas of grants, contributions and legal services contracts.

Created in 1931, the Power Authority is the country’s largest state-operated public power organization, with 17 generating facilities and more than 1,400 circuit-miles of transmission lines. The mission of the Power Authority is to “Provide clean, low-cost and reliable energy consistent with our commitment to the environment and safety, while promoting economic development and job development, energy efficiency, renewables and innovation, for the benefit of our customers and all New Yorkers.” 

According to the audit, the Authority had a net income in 2010 of $181 million; for the two years ended December 31, 2010, its expenditures included almost $3.2 billion to pay vendor invoices, $10 million for procurement card purchases, and almost $3 million for travel expenses; and the total debt outstanding as of December 31, 2010 was $1.94 billion of which $1.62 billion is long-term debt and $320 million is short-term debt (commercial paper).

The Comptroller’s audit was released on July 28, 2011.  Under New York Executive Law Section 170, within 90 days of the final release of the report, the Chairman of the Authority is required to report to the Governor, the State Comptroller, and the leaders of the Legislature and fiscal committees, advising what steps were either taken to implement the single recommendation in the report or why the recommendation was not implemented.

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