State Comptroller Thomas DiNapoli said Wednesday that problems with capital planning still persist for the New York Racing Association, which controls three racetracks in the state: Aqueduct, Belmont and Saratoga.
The comptroller’s auditors say the NYRA lacks “adequate documentation to support its annual capital plans.” The association also failed to formally estimate project costs funded by video lottery terminal revenue, the report said.
The capital plans lacked information on resources needed to complete projects and the support for estimated costs, according to the report, Gannett’s Nick Muscavage reports.
“Sound business practices include both long-term and short-term capital project planning, but my auditors discovered that NYRA’s planning was weak,” DiNapoli said in a statement.
Between Jan. 1, 2012 and June 30, 2014, NYRA received about $259 million in revenue from the rasino at Resorts World at Aqueduct, including $74 million for its capital program. During the audit period, NYRA spent $36.3 million on capital projects.
The NYRA did not have any long-term plans providing an overall vision for the organization and did not explain how the projects listed on the plans related to long-term goals, DiNapoli said.
The findings come after a reorganization effort intended to strengthen the association’s finances and operations. The reorganization was a response to the bankruptcy the NYRA filed for in 2006.
In Sept. 2008, NYRA entered into a bankruptcy settlement that conveyed all rights, titles and interests in the racetrack properties to the state. In return, the state forgave nearly all of the association’s debt, totaling $54.1 million.
The recent findings are similar to those of an audit released in June 2007, prior to NYRA’s reorganization under bankruptcy court protection, the report said.
“An organization that has recently emerged from bankruptcy protection needs to do a much better job of minding its finances and seeing to its most pressing capital needs,” DiNapoli said in a statement.
The report showed that auditors examined a sample of 25 projects totaling $7 million, finding that not all of the projects were listed on any of the annual plans and each of the annual plans listed projects that were not done during the audit period.
According to NYRA officials, certain projects were not undertaken due to delays in obtaining the required building permits.
The auditors found NYRA spent a total of $7.4 million — $3.8 million in 2012 and $3.6 million in 2013 — on 198 capital projects that were not part of the annual plans for these years, with no evidence that NYRA’s Board of Trustees formally approved any of these projects.
Auditors also identified another 114 projects–valued at $13 million–on NYRA’s approved annual plans for 2012 and 2013 that were not initiated anytime during the audit period.
An NYRA agreement with Genting to construct a sports bar at Aqueduct Racetrack called Longshots stated the company was to finance up to $5 million of the facility’s construction costs and NYRA would finance project costs above that amount.
The initial project was estimated to cost $7.1 million, according to the contractor’s application for payment. However, after 35 changes were made to the project totaling $2.3 million, Longshots’ total cost was $9.4 million, or 32 percent more than what was originally estimated, according to auditors.
NYRA’s total financial obligation for Longshots could be about $4.4 million, and it is probable that many of the costs NYRA is now facing could have been avoided with better planning, DiNapoli’s office said.
DiNapoli recommended NYRA develop multi-year capital plans outlining how available capital program funds will be used to reach long-term capital program and operational goals.
He also recommended NYRA details projects’ timeframes and justification more thoroughly and said it should also develop a formal project management system to monitor the status of projects.
The association should minimize the extent to which video lottery terminal revenue is used to fund noncapital purposes, he recommended.
NYRA has since agreed with the audit’s conclusions regarding controls in place over video lottery terminal funds, the report said, but did not agree with his office’s conclusions regarding deficiencies the association’s long-term and short-term capital planning efforts.