NYRA Criticized Again in New State Audit
by Tom Precious
Date Posted: 1/24/2012 1:07:54 PM
Last Updated: 1/24/2012 3:36:31 PM
The New York Racing Association is masking financial troubles and is not taking steps state auditors have urged in the past to right its fiscal condition, the state’s chief fiscal watchdog said Jan. 24.
State Comptroller Thomas DiNapoli criticized NYRA for not controlling staff and outside consultant costs, and said any financial breaks NYRA will catch this year from revenue from video lottery terminals at Aqueduct will only serve to cover up its structural budget problems.
“More than a year after my office’s last audit and real-time financial monitoring of NYRA, the organization still has much work to do to carry out the reforms we recommended,” DiNapoli said.
The comptroller said NYRA is poised to “squander” VLT revenue, in part because the racing corporation has failed to conduct his idea of a “top-to-bottom” review of its operations.
NYRA has not fully carried through on nine recommendations state auditors previously identified as areas for NYRA to improve. The comptroller noted NYRA is expecting to lose $19.7 million on its racing operations in 2012—that number is not specifically contained in the actual audit report—but said its overall net revenue is expected to increase by $48 million as a result of VLT funding from the Aqueduct casino that opened last fall.
DiNapoli said NYRA took a number of steps, including cutting staff and ending an expensive contract with an outside “integrity” counsel, but that it failed to perform an analysis, for example, on what kind of staffing levels would be appropriate for each of its departments.
He said NYRA, while it has cut some costs in the area, still needs to look into charging horse owners for transporting horses to and from its three tracks. The audit said NYRA has also not implemented in any substantial way “surprise” cash counts of mutuel department clerks.
NYRA took issue with some of the conclusions in the report, in the following statement that was issued Jan. 24:
"The New York Racing Association, Inc. took very seriously the recommendations that were made in the two 2010 audit reports from the Office of the New York State Comptroller.
"NYRA has and will continue to maintain financial discipline.To implement all of the recommendations made in the 2010 audit reports inside of a year would have required more money and resources than NYRA could prudently spend at that time, but we fully understand the importance of this process and remain committed to completing it.
"However, as the actual audit report notes, NYRA has made strides in implementing the 2010 recommendations, including plans to enhance revenues, staffing analysis and cuts in overall staffing, the termination of our former integrity counsel and the awarding of a more cost-effective integrity counsel, cost savings on the transportation of horses between NYRA tracks, and several other cost-cutting initiatives.
"In the statement, the comptroller’s office references that the audit found that NYRA expects a $19.7 million loss from racing operations in 2012. This figure is misleading. It should be noted that the 2012 budget was not within the scope of nor was it referenced in the audit, and was never discussed with NYRA management. Furthermore, NYRA’s 2012 budget contemplates approximately $19 million of net income, not a net loss. Additionally, operating income solely from current racing operations, and without giving effect to Video Lottery Terminal proceeds for operations and capital expenditures, is projected to be $1.4 million.
"The comptroller’s statement expresses concern regarding how NYRA will use the money from VLTs. As a reminder, the use of VLT proceeds is regulated by statute and primarily allocated to purse money and capital expenditures. NYRA conducts a rigorous annual budget review and approval process and NYRA’s budget is reviewed by the Franchise Oversight Board. Furthermore, NYRA’s financial results and internal controls are routinely audited. NYRA is committed to the highest standards of corporate governance, integrity and management."
While noting some fiscal improvements, DiNapoli’s auditors raised ongoing worries.
“We are concerned with the limited responsiveness to our prior audit report recommendations, particularly because NYRA may have less incentive to be attentive to cost savings initiatives as its financial condition improves with the influx of VLT revenues,” the audit report said.
The audit raised the recent error by NYRA—uncovered during an ongoing state audit of the New York State Thoroughbred Breeding and Development Fund—of overcharging bettors on pari-mutuel takeout over a 15-month period. The embarrassing mistake brought in $2 million in additional revenue to NYRA, which is being required to pay back what it can to bettors.
“That such an error could remain unchecked by NYRA for such a period of time further increases our concerns over NYRA’s fiscal management,” the audit states.