Despite Improvements, NYRA Spending Still Questioned

The New York Racing Association has made improvements in its financial practices in recent years, but state auditors have questioned a number of big-ticket expenses, including money NYRA donated to charity but did not report to federal tax officials and consulting and lobbying expenses.

The audit, which raises concerns about payments made by NYRA for its franchise fee to operate in New York, said NYRA needs to pay an additional $332,000 for underpayments made to the franchise fee in 1998. It even went so far as to question the contract NYRA has for its backstretch horse-waste removal.

While NYRA has "improved their financial operations," state comptroller H. Carl McCall, in an audit released Friday, said his office "did find some areas where more work needs to be done to ensure that taxpayers are getting their fare share of the profits."

The news comes on the heels of a stinging review of NYRA's finances several years ago that raised serious questions about how the racing entity was spending some of its money. The new report said NYRA has since instituted a number of internal changes to address some of those earlier matters, such as perks given to employees and what the earlier audit revealed were excessive travel and entertainment expenses by some NYRA officials.

NYRA must pay an annual franchise fee to the New York State Thoroughbred Racing Capital Investment Fund in return for the right to operate Aqueduct, Belmont, and Saratoga racetracks. Though it cited improvements in how NYRA bases its franchise fee payments, the McCall audit said NYRA needs to increase the amount it paid to the fund in 1998 by $331,743. Part of that comes from NYRA's deduction of $118,795 in charitable contributions auditors say should not then be used to offset what NYRA owes in franchise fees.

NYRA president Terry Meyocks, in a written reply to McCall, disagreed with the amount that should be paid to the fund for 1998, insisting, among other things, that deductions for charitable contributions for years have gone into the franchise-fee formula.

The audit also questioned the payment of $306,670 to a consultant that included at least $38,612 in lobbying expenses. McCall said such lobbying expenses cannot be used to lower NYRA's franchise-fee payment, as NYRA did.

NYRA said the consultant -- Hinman, Straub, Pigors, and Manning -- does more than what McCall's office defines as lobbying. NYRA said it will not deduct lobbying expenses from the franchise-fee calculation.

The audit said it could not find supporting documents to justify some expenses by NYRA, including $20,000 to a law firm and $2,482 for 25 bottles of champagne that an invoice listed for "Trustee Room Expense." In addition, it said there was no independent review by NYRA to ensure that only qualified employees and retirees were receiving various NYRA benefits like health insurance, which total $1.1 million per month.

NYRA subsequently produced documents to explain the expenses, the audit said. In addition, NYRA has since turned over the job of examining employee benefits to its internal audit department.

McCall also questioned a five-year contract NYRA entered into in 1998 for removal of straw bedding, manure, and wood shavings from the backstretch at its tracks. During 1998 and 1999, NYRA paid $1.34 million to the vendor, which in turn sold some of the manure and straw bedding to mushroom farms. The vendor charged NYRA extra to remove the wood shavings compared to the straw and manure, because there is no market for the shavings.

Despite NYRA's explanation to McCall that more and more horsemen have come to prefer wood shavings, the audit said NYRA should, like other tracks surveyed, restrict the use of wood shavings except when a veterinarian has recommended the product.

In his written response, Meyocks said NYRA will investigate the backstretch waste situation when the current vendor's contract expires.