Proposed Legislation Targets Corruption, Waste and Mismanagement

Proposed Legislation Targets Corruption, Waste and Mismanagement
Proposed Legislation Targets Corruption, Waste and Mismanagement

By Jay Dismukes

Continued from the Home Page

With Attorney General Eliot Spitzer’s backing, New York State Comptroller Alan G. Hevesi last month issued sweeping legislation that would put a bridle on public authorities, which a Hevesi-sponsored study concluded are responsible for approximately 90 percent, $35.4 billion, of total outstanding state-supported debt yet answer to virtually no one. This figure is more than seven times the amount it was in 1985, at $5.7 billion.

“…Authorities have become a semisecret fourth branch of government with little or no accountability and many have developed a culture of arrogance,” Hevesi said in a press release put out by his office. “It’s time for major reform to bring authorities under control.”

Public authorities provide services and manage facilities New Yorkers rely on every day, from the Metropolitan Transportation Authority (MTA) to the New York State Power Authority to public universities, and pay for through rates, tolls and fees, with taxes offsetting authority-related tax exemptions and covering the debt service on authority-issued bonds. Public authorities number more than 640 at the state and local level and vary widely in their degree of scrutiny, leaving many of them ripe for abuse, according to the comptroller’s study.

The proposed omnibus legislation, made a priority in light of the study, was originally born in part from resistance to government audits of authority finances and initiatives and to legislative questioning of authority decisions. It seeks to strengthen board governance, increase accountability and prevent misconduct, waste and inefficiency.

To meet these objectives, the legislation proposes new laws that are intended to: improve the procurement process, requiring approval of contracts by the comptroller and the governing boards; limit the activities and influence of lobbyists; establish boards composed of a majority of independent members; and prohibit public authorities from issuing new debt or restructuring existing debt in a way that prolongs the obligation without consent by the state legislature.

The legislation, also referred to as the Public Authority Reform Act of 2004, would broadly define and classify public authorities into four categories that would report to a temporary commission. The commission would review the mission and operations of each authority and, depending on the category the authority fell under, could have the authority to consolidate or eliminate the authority or could recommend other needed changes.

“There has been enormous growth in the number of authorities, but there has been no systematic effort to provide oversight or review existing authorities and make sure their mission still makes sense,” the press release quoted Hevesi as saying. “That’s the purpose of the proposed commission.”

The commission would comprise 11 individuals appointed by a number of state officials, including the governor, Senate majority leader and Assembly speaker, and is estimated to cost $1.5 million a year for three years.

The act would permit the comptroller to designate a deputy comptroller to supervise public authorities, too.

The legislation also contains provisions similar to those found in the Sarbanes-Oxley Act, such as mandatory audit rotation. (The Trusted Professional will examine these provisions in the next issue.)

“Over the last year the comptroller has done a number of audits that have revealed tremendous problems with various public authorities in New York state, particularly the MTA and NYRA (New York Racing Association)” said Comptroller Press Secretary Jeffrey Gordon on the reasons for conducting the comprehensive study.

The study found that as of Dec. 31, 2002, the 17 public authorities that have issued $100 million or more in debt have $105 billion in total debt outstanding, of which approximately $34 billion is state-supported. Of these, the Dormitory Authority of the State of New York and the MTA have the largest amounts of total debt, at $30 billion and $11 billion, respectively.

To view the proposed legislation or the comptroller’s study, go to www.osc.state.ny.us and click on the “Press Releases” link at the left of the page.