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May 5, 2009

 

DiNapoli: Lax Oversight Allowed Newburgh Courthouse Project Costs to Spiral Out of Control

The City of Newburgh did not sufficiently plan for or monitor its courthouse project, causing more than $5 million in cost overruns, according to an audit released by State Comptroller Thomas P. DiNapoli. The audit covered the period of the project from February 2004 to September 2008.

“It’s always important for officials to keep a close eye on the bottom line – especially when cities have growing needs but dwindling resources to meet them,” said DiNapoli. “But now more than ever, local governments have to manage resources carefully. I understand the immense challenge of replacing city facilities that have outlived their usefulness, but it’s critically important that officials take steps to avoid unnecessary expenses.”

The audit found that the council did not reassess the originally authorized $12.2 million project cost when the scope changed from building a new courthouse to reconstructing an existing building, resulting in the council having to pass an additional bond resolution totaling $5.2 million. Although the cost escalated to $17.4 million by the end of the audit period in 2008, DiNapoli expects the cost of the project will exceed even that amount when it is finally completed.

DiNapoli’s auditors found that:

  • the project’s budget did not include the known cost of $2.7 million for the purchase of the building (Broadway School) where courts would be housed, or any escalation of construction costs from 2004 to 2006;
  • the budget did not include any money for unforeseen events such as the excavation of a cemetery site and the $2.5 million in additional costs for asbestos abatement;
  • the city manager did not provide the council with periodic updates on escalating costs, and the council did not compel the city manager to provide that information;
  • although the council approved an additional bond resolution totaling $5.2 million in September 2008, the new amount of $17.4 million will not be sufficient to cover all the costs by the time the project is completed;
  • based on data available in October 2008, the city may ultimately overspend the authorized amount by more than $1.2 million; and
  • city officials had no documentation showing they solicited competition through a request for proposal (RFP) or quotation process for engineering services. The city has used the same firm for over 18 years, to which it paid approximately $833,000 for the courthouse project.

DiNapoli recommended that city officials:

  • properly oversee and monitor city operations;
  • ensure that capital projects are planned, monitored, and accounted for properly;
  • ensure that enough time is available to provide for proper planning;
  • ensure that adequate funding is available to minimize the potential for cost overruns;
  • not initiate a project unless sufficient funding has been identified and secured;
  • ensure that the council receives financial reports that show the authorization for each capital project, expenditures and encumbrances to date, and available authorizations; and
  • obtain multiple proposals or quotations when competitive bidding is not required, and ensure that goods and services are procured in accordance with GML and the established city policies and procedures.

City officials with some exception generally agreed with DiNapoli’s findings an indicated they would take corrective action.

Click here for a copy of the audit.


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