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July 19, 2007

DiNapoli Audit Faults Niagara Power Coalition
for Unsupported Payments, Lax Oversight

The Niagara Power Coalition paid $530,000 for professional services without evidence that these services were actually provided and paid nearly $142,000 to its former executive director, his fiancée and his son that was incorrectly reported to the Internal Revenue Service (IRS), according to an audit released today by State Comptroller Thomas P. DiNapoli.

“There is a complete lack of financial oversight at the Niagara Power Coalition,” DiNapoli said. “The executive director authorized payments to himself, his son and his fiancée for undocumented work. The coalition made unauthorized payments and improperly reported payments to the IRS. No one was looking out for the public’s interests.”

In an audit that covered Niagara Power Coalition operations from July 2000 through May 2006, DiNapoli said that the coalition had virtually no internal financial controls or oversight. The coalition’s board routinely did not review and approve contracts or any payments made by the coalition. Instead former Executive Director Mark Zito authorized payments including those made to himself, his fiancée and his son.

In 2001, the board appointed Zito to serve, without compensation, as the executive director of the coalition. However, from 2001 to 2005, the coalition paid Zito, his fiancée and son, a total of $141,920. None of these payments were supported by itemized invoices or any other documentation detailing the services performed by these individuals. Auditors also found that Zito was paid in advance of providing services to the coalition. In addition, Zito and his fiancée were overpaid $2,000 but have not repaid this money to the coalition.

Auditors cautioned the coalition against awarding contracts to individuals in management because of the appearance of impropriety and urged the coalition to address this issue in its code of ethics. Auditors also found that Zito had possession of some coalition documents and urged the board to recover these documents.

Auditors found that the coalition spent $196,405 for legal services and about $192,000 for public affairs consulting with no detailed descriptions of what services were provided in the invoices for these services. One of the consulting contracts was not signed by the board president. Auditors noted that some of the services contracted for with the consultant appear to be functions that should have been fulfilled by the executive director.

Auditors recommended that the board recover the $2,000 overpaid to Zito and his fiancée, ensure that all necessary information is sent to the IRS, improve contract procedures, and ensure that claims and payments are properly reviewed. The coalition generally agreed with the audit findings and noted that it is preparing a plan of action to address the auditors’ recommendations. The coalition’s full response is included in the audit.

In 1997, the Niagara Power Coalition was created by the government entities impacted by the Niagara Power Project. The coalition is comprised of seven entities, Niagara County, City of Niagara Falls, towns of Lewiston and Niagara, school districts of Niagara Wheatfield, Niagara Falls City and Lewiston Porter. A representative from each entity serves on the coalition’s board. Members receive an annual payment from the New York Power Authority, who runs the power project, as well as reduced electric costs. Over the five year audit period, the seven entities contributed more than $1 million to finance the coalition’s operations.

Click here for a copy of the audit.


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