January 27, 2004
LIPA'S Actual Spending On Its Own Operations Grew Twice As Fast As Budgeted Spending
Authority Does Not Report Its Spending In A Way That's Easy For Public To Understand
LIPA Agrees To Implement Budget Reforms
In its budget reports, the Long Island Power Authority in several ways has been hiding its actual spending, both its internal spending on its own operations and total spending, including the costs of delivering electricity, according to a report issued today by State Comptroller Alan Hevesi. The Authority hides its internal spending by mixing it with total spending and only reports to the public on its budget, not on its actual spending.
This first ever review of LIPA's internal spending found that:
"LIPA has the most control over its own internal spending, but it has not been reporting on that spending to the public in a clear and easy to understand way. The Authority's prime reason for existing is to keep electric rates on Long Island down. LIPA should work to keep that spending down, so funds can be used to hold down electric rates. I am pleased that LIPA has agreed to implement the budget reforms we recommended and has taken the first steps in its most recent budget," Hevesi said.
In 2002, LIPA's total spending amounted to $2.4 billion. However,
most of that was for fuel, purchased energy, taxes, interest and other
costs over which LIPA has little control. LIPA relies on KeySpan to
provide day-to-day management of the electricity transmission system
and other activities, for which KeySpan was paid $782.5 million in
But even in its reports on its total spending, LIPA's reports hide important information. Until now its public budget reports have only shown the amount budgeted each year. Generally, budget reports should show comparisons between the amount budgeted and what was actually spent. LIPA said that while this data is not available in its budget documents or on its website, it was available upon request and was presented at meetings of LIPA's Board and of its Finance and Audit Committee. Initially, LIPA staff told the Comptroller's staff that meetings of the Finance and Audit Committee were not open to the public, which would violate the State's Open Meetings Law. Later, they changed their position and said meetings were open.
"Actual spending by the end of the year almost always differs from the budget presented at the beginning of the year. But when reporting to the public, government bodies usually compare planned spending for the new year with what was actually spent in prior years. For LIPA, that information has only been available if you know it's missing and know where to look. That makes it difficult for ratepayers to know how well LIPA is controlling its spending. Misleading budgeting is not acceptable," Hevesi said.
LIPA released its proposed budget for the 2004 fiscal year on January 22, 2004. It calls for a 4.5 percent increase in overall rates. Public hearings on the LIPA budget begin on Tuesday, January 27. The report notes that the authority repeatedly failed to comply with State law that requires it to submit actual receipts and expenditures to state officials 60 days before the end of its fiscal year and did not provide the public with adequate time to review its proposed budget before it was adopted.
The Comptroller's report covers 2000 to 2002, and does not include a detailed analysis of this recently issued budget. However, the Comptroller's Office provided a draft of the report to LIPA and some of the recommendations from this report are reflected in the new LIPA budget.
"LIPA officials were very cooperative in the course of conducting this review, and officials agreed with most of our recommendations for improvements and promised to implement them. For example, the just released budget includes some estimates of 2003 revenues and expenses, as suggested by my Office, and a five-year projection that lays out LIPA's future plans," Hevesi said.
"Additionally, our study found many areas that LIPA should explore to cut costs and to provide assurances that it is providing ratepayers with the best value possible," Hevesi said.
The review of spending practices found:
The report included a number of recommendations, including:
The Comptroller's Office conducted an initial review of LIPA in July
2003 after it was revealed that LIPA's public opinion polls included
many questions of a political nature. An audit issued in 2001 concluded
that LIPA needed to improve oversight of its contract with Keyspan.