July 31, 2009
DiNapoli: Improvements Still Needed in Thruway Authority's Debt Process
DiNapoli Available to Discuss Audit in Buffalo Today at 10:30 AM
The New York State Thruway Authority has made insufficient progress in how it manages debt issuances after a 2005 audit identified questions about how firms were hired to sell debt and whether best prices were obtained, according to a follow up audit released today by State Comptroller Thomas P. DiNapoli. As of December 31, 2008, the Thruway Authority had $12.6 billion in outstanding debt — nearly $5 billion was reviewed by auditors during the follow up audit.
“In 2005, our office told the Thruway Authority to do a better job of managing how it issues debt,” DiNapoli said. “There were too many unanswered questions and poorly documented procedures. Four years later, a lot of those questions remain unanswered. This is just more evidence that the Thruway Authority needs to take a hard look at how it operates. Now more than ever, every level of government has to manage better and watch taxpayer dollars closer.
“The Thruway has already raised its tolls, but it hasn’t raised the confidence of New Yorkers. We still can’t be sure if the Thruway could have kept tolls down by managing its operations better.”
DiNapoli’s office has conducted a series of eight audits examining the operations of the Thruway Authority. A January 2008 audit of proposed toll hikes recommended the Thruway Authority hold off on toll hikes until it had conducted a thorough analysis of its expenses and operations. Another audit found that the Thruway Authority’s capital plan was behind schedule and could cost significantly more to complete, but also raised questions on whether toll hikes were needed.
The initial audit report on the Thruway’s debt practices, released in August 2005, examined the Thruway Authority’s policies and procedures for obtaining underwriting and other debt services to determine whether it received those services at the most reasonable cost. Auditors found that the Thruway Authority did not document how firms were selected to manage its debt sales. Auditors found that a relatively small number of firms managed the majority of the Thruway Authority’s debt sales and earned the largest share of fees. In addition, the board did not review contracts pre-approved by the executive director for up to $150,000 until a year later.
When auditors followed up on the prior audit, they found the Thruway Authority had only fully implemented one of nine recommendations from the prior audit and partially implemented three other recommendations. The Thruway Authority still has not changed its policies or procedures to outline its criteria for selecting underwriters and bond counsel, nor is it fully documenting why particular firms were assigned work.
The board also continues to allow the executive director to execute contracts up to $150,000; therefore contracts could be in effect for a year before the board ratifies a contract. In addition, the Thruway is not documenting or quantifying the reasons for its choice of sales method nor has it developed policies requiring board approval of the method of sale.
DiNapoli is available to discuss the audit today, July 31, at 10:30 a.m. at 65 Court Street in Buffalo.
Click here to view a copy of the initial audit report.