FOR RELEASE:

Hudson River – Black River Regulating District Audit Finds Lax Oversight, Improper Practices By Board

The Board of Directors of the Hudson River - Black River Regulating District – which manages watershed areas in Northern New York – provided insufficient oversight of District operations, lacked basic financial controls to ensure money was spent appropriately, and provided extensive health benefits to Board members who should not have received them, according to an audit released today by State Comptroller Alan G. Hevesi.

“The Board of Directors of the Hudson River - Black River Regulating District should act as the first line of defense, ensuring that the District operates appropriately and effectively and provides careful financial oversight of public monies,” Hevesi said. “Unfortunately, as we have seen at other public authorities that we have examined around New York State, the Board has fallen short in its duties.”

The audit found District Board meetings lacking in substantive discussions about important budget matters. For example, the 2003 budget approved by the Board included $1.6 million in fee increases for access permits to Great Sacandaga Lake. The fee hike should not have been approved by the Board before legally-required information was presented to the public and public hearings were held, as required by law. Once the public learned of the planned increases – from $43 - $56 to as much as $400, or nearly 700% – and expressed strong opposition to them, the Board abandoned the plan.

“Had the Board fulfilled its responsibility to New Yorkers and properly solicited public opinion on its proposed fee hikes, Board members would have been aware of the widespread opposition to the increases,” Hevesi added. “The lack of diligence by the Board nearly resulted in unconscionable fee increases. Worse, the need for fee increases appears to be driven by questionable actions of the Board and a lack of financial controls by the District.”

Auditors also found that a Secretary/Treasurer and a Legal Counsel, who were hired by and reported to the District Board, received full-time salary and benefits for part-time work and that neither individual submitted timesheets or other records of time worked to the staff member in
charge of District payroll. Auditors determined that the Secretary/Treasurer was paid nearly $62,000 annually but worked only on average four hours per week, and that the Legal Counsel was paid $75,000 annually but worked only on average 18 hours per week for the District. The District reported full-time service credits to the New York State Retirement System for both individuals and both also received full medical, dental and vision benefits.

Auditors noted that the District also provides full medical, dental and vision benefits for Board members, despite the fact that the District’s enabling legislation states that Board members should receive only necessary expenses incurred in the performance of their duties and should not receive salary or other compensation.

The provision of full-time salary for part-time work was referred to the Comptroller’s Division of Investigation for review. The Comptroller’s Office is also reviewing the propriety of the District’s actions relative to the reporting of full-time service credit to the Retirement System.

Auditors also identified other areas where the District lacked internal financial controls:

• There was inadequate documentation and justification for some credit card and other purchases – including purchase of a $21,203 vehicle -- in violation of District procedures.
• Although District checks require two signatures, some checks included only one or two signature stamps. The use of stamped signatures suggests that proper disbursement procedures may not have been followed and creates a risk of improper use of the checks.
• The District has no formal policies relating to cash disbursements, billing and collection activities, accounts receivable, handling check and cash receipts, payroll, time and attendance and budgeting.
• There is no separation of important accounting functions among different employees, a widely-accepted internal control practice to ensure adherence to proper procedures and prevent malfeasance.

Auditors also noted that the District Board has not established a code of ethics for themselves or for District staff. The Board should develop a Code of Ethics because it provides the framework within which business and professional activities by board members and employees operate.

The audit released today is part of the Comptroller’s statewide examination of authorities. The initiative includes smaller authorities with more defined missions such as the Hudson River - Black River Regulating District, as well as larger organizations such as the New York State Thruway Authority and the New York Power Authority.

The Hudson River - Black River Regulating District was created in 1959 to regulate the flow of waters in the neighboring Hudson River and Black River watershed areas. The District, which employs 27 people and has an annual budget of $6.8 million, operates the Conklingville Dam, Stillwater Reservoir, the Sixth Lake Dam, Indian Lake and the Old Forge Dam. The District has offices in Albany, Watertown and Mayfield.

In its response to the audit, the District noted that a wide-ranging plan to improve internal controls and address other management issues was launched in January 2004, under new District management.

Click here for a copy of the audit.

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