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ALBANY---Citing the need for greater accountability and transparency in the State's public authorities, State Comptroller Alan G. Hevesi issued sweeping draft regulations that will require more transparent, timely and accurate financial reporting by the 215 public authorities in New York State that are statewide in scope or have regional significance.
The regulations represent a major reform of public authority budgeting. The new rules will also require implementation of new investment guidelines. The Comptroller's Office issued similar regulations for the MTA last year which have resulted in significantly improved financial reporting, and worked with the Long Island Power Authority to improve its budgeting as well.
"Public authorities are an immense shadow government that have offered continuous and unambiguous proof of the truism that, when no one is watching, the increase in mismanagement and corruption is dramatic," Hevesi said. "The regulations we are proposing today, and which will be implemented after a thorough administrative review and comment period, will set a new standard for financial reporting and will require public authorities to make basic financial information available to the public. These rules are a step towards making public authorities fully accountable to the public they serve."
Hevesi also released an analysis of data gathered from public authorities showing that spending and debt are growing. The Comptroller's Office surveyed 255 public authorities that are statewide in scope or affiliated with a State agency, including smaller entities such as SUNY and CUNY auxiliary corporations not covered by the new regulations.
The survey, which covered authority fiscal years ending in 2004-05, found:
-- Spending and debt service increased 10 percent over two years.
-- Overall, spending at all 255 public authorities totaled more than $31.3 billion.
-- Outstanding debt at all 255 public authorities surveyed now totals $125.3 billion, with the 18 largest public authorities accounting for more than 95 percent ($120.4 billion) of that debt. Debt service amounted to $5.48 billion in 2004-05.
--The authorities had 107,613 employees.
-- In 2004-05, the 46 public authorities and subsidiaries that submit annual procurement data to the Comptroller entered into 10,404 contracts valued at $5.5 billion. These same entities made payments of $4.8 billion pursuant to contracts in 2004-05. Unlike state agencies, with few exceptions public authority contracts are not subject to approval by the State Comptroller before they can become effective.
"In the absence of legislation or regulations requiring public authorities to submit information to the Office of the State Comptroller, my staff relied on self-reported data that we requested," Hevesi said. "It is absolutely absurd that these public authorities are still not answerable to any public body, and that even after all the irregularities we have uncovered, there remains no central accounting for the billions of dollars that flow through these entities. The public deserves to know how all this money is being spent and whether decisions are proper and appropriate."
Hevesi's regulations include the following:
Budget and Financial Plan Requirements--Currently, there are no uniform standards by which public authorities present their budgets or rules for financial planning. These new regulations will require consistency of presentation, development of four-year financial plans, document preparation in accordance with Generally Accepted Accounting Principles and greater transparency, with detailed estimates of revenues and expenditures, quarterly updates to each Board, and certifications signed by each Chief Operating Officer.
Expanded Reporting--The new rules will increase the number of entities required to report financial information annually to the Office of the State Comptroller to 215 when subsidiaries reporting with a parent agency are considered. (Forty of the 255 entities noted above are smaller auxiliary corporations not covered by the new regulations). The 215 will be required to provide financial statements, procurement reports, investment reports and annual reports, among other information as detailed in the annual data request.
Stronger Investment Guidelines--Although public authorities are required to develop guidelines governing the investment of money, there has been no consistent standard for all authorities to follow and minimal oversight of investment practices. These regulations will require each governing board and authority management to develop written investment policies, to review them annually, and to follow prudent investor standards. They also will require each authority to establish a pre-qualified list of firms eligible to transact business with them.
Accounting and Reporting for Authorities That Issue State-Supported Debt. $44.6 billion of outstanding State debt is issued by public authorities. This is in addition to the authorities own debt of $80.7 billion. Late and incomplete filing of required information by public authorities that issue State-supported debt has hindered the Comptroller's Office from meeting statutorily-imposed reporting requirements. The new regulations will require timely release of budgetary and debt information to allow more timely and complete reporting to the public of financial information. With the announcement of the new regulations, Hevesi initiated the formal rulemaking process. The proposed regulations will be posted on the State Comptroller's website (www.osc.state.ny.us), and a summary will be printed in the State Register. Affected entities and the public will have a minimum of 45 days to offer comment as required by the State Administrative Procedures Act. If significant changes are to be made to the proposed regulations in response to comments, the Comptroller's Office will present new draft regulations for further comment. When the review and comment period is complete, the Comptroller will publicly announce final adoption of the regulations.
While Wednesday marks the beginning of the formal review process, the Comptroller's Office has already conducted an informal review to ensure that the proposed regulations are both practical and effective. An early draft has already been shared with officials at a number of authorities and their comments were considered in drafting the proposed regulations. The new regulations are based on regulations already developed in conjunction with and implemented by the MTA.
The Comptroller's Office is mandated to review all contracts from state agencies, and last year reviewed 13,707 contracts and 27,591 contract amendments valued at more than $28 billion. However, only two of the major public authorities, the Long Island Power Authority and the Thruway Authority, are required to obtain Comptroller approval for their contracts. Last year, these two entities entered into a total of 208 contracts valued at $2.6 billion. An additional 44 authorities do not submit their contracts for approval, but at least report their procurement activities to the Office of the State Comptroller on an annual basis. In 2004-05, these entities entered into 10,196 contracts valued at more than $2.8 billion. However, there are dozens of other authorities entering into contracts without reporting them to any oversight body. The Office of the State Comptroller will continue to pursue oversight and approval of public authority contracts as proposed in the omnibus reform legislation advanced by Hevesi and Attorney General Eliot Spitzer.
In addition to serious financial irregularities uncovered at the Metropolitan Transportation Authority and the Long Island Power Authority, Hevesi audits have detailed financial and operating irregularities at numerous public authorities, including the Canal Corporation, Hudson River/Black River Regulating District, the New York State Bridge Authority, the New York State Power Authority, and the Nassau Health Care Corporation, among others.
Document Links
Public Authority Data
Regulatory Action to Improve Accountability of Public Authorities
Proposed Accounting, Reporting and Supervision Requirements For Public Authorities
Proposed Budget and Financial Plan Format, Supporting Documentation and Monitoring - Public Authorities
Proposed Accounting And Reporting for Public Authorities that Issue State-Supported Debt
11-16-05
© 2005 North
Country Gazette
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