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January 24, 2012

 

DiNapoli: NYRA Continues to Gamble on its Financial Future

Fails to Implement Significant Financial Reforms After Bankruptcy


After two highly critical post-bankruptcy state audits of the New York Racing Association, NYRA still has not conducted a top-to-bottom review of its financial operations and taken necessary steps to curb costs, particularly for staffing and consulting contracts, according to a follow up audit released today by State Comptroller Thomas P. DiNapoli. Without significant changes to the way it operates, NYRA will use the windfall from the Video Lottery Terminals (VLTs) it will gain this year to mask ongoing financial problems and inefficiencies.

“More than a year after my office’s last audit and real-time financial monitoring of NYRA, the organization still has much work to do to carry out the reforms we recommended,” DiNapoli said. “NYRA stands to squander significant revenue from the recently opened VLT franchise at Aqueduct. I will continue to closely monitor NYRA to ensure it reins-in unnecessary spending and does not waste the new money coming in from the Aqueduct racino.”

The follow up audit released today found that NYRA failed to fully implement any of the nine recommendations made by DiNapoli’s auditors in two audits released in 2010. The Comptroller’s office routinely conducts follow up audits to determine if an organization has taken action to correct the problems identified and acted on the auditors’ recommendations.

In audit 2009-S-89, released in July 2010, auditors found that NYRA waited for more than a year after it emerged from bankruptcy before starting any reforms of its operations.

The follow up audit released today found:

  • NYRA projected an $11.5 million deficit for calendar year 2011 and expects a $19.7 million loss from racing operations in 2012. Only by gaining new VLT revenues will NYRA be able to show an overall profit this year.
  • NYRA cut its overall staffing by 3 percent from 2009 to 2010, but failed to prepare a staffing analysis for each of its departments outlining the optimal number of employees in each, as auditors recommended.
  • While NYRA ended its contract with its former integrity counsel and awarded a new, more cost-effective, contract to a different counsel, it failed to examine the cost effectiveness of either its existing or prospective contracts for personal and miscellaneous services.
  • Although NYRA officials have reduced their horse transportation costs by approximately $92,000 annually by in-sourcing this operation, NYRA still needs to evaluate whether the practice of transporting horses between NYRA tracks at no cost to horse owners is necessary for it to remain competitive. NYRA officials also asserted that they do not pay for any practices that deviate from industry practice, but have not supported their assertion with any documentation supporting this approach.

Immediately following the July 2010 report, DiNapoli initiated another audit to provide real-time monitoring of NYRA’s financial condition and operations to determine whether NYRA needed an influx of revenue from the state to keep operating. Released in August 2010, audit 2010-S-54 recommended NYRA:

  • undertake efforts and initiatives to achieve reforms that save costs;
  • conduct periodic cash counts and other verification activities on a surprise basis;
  • require concessions to utilize appropriate systems to establish accountability over sales and periodically verify that those systems are being used as intended; and
  • develop an automated system to provide an accurate and up to date inventory of all concession operations, which is periodically verified on a surprise basis.

While NYRA has launched some cost containment initiatives, the follow up audit released today found it failed to follow through fully on any of the other recommendations listed above.

In December, DiNapoli’s office discovered NYRA was keeping a larger takeout percentage from exotic wagering than it was allowed to, depriving bettors of their rightful winnings. That finding led the Racing and Waging Board to take public action against NYRA.  

For a complete copy of the follow up report, go to: http://www.osc.state.ny.us/audits/allaudits/093012/11f16.pdf


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