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Not Returned to the City • Facts: NYCEDC is meant to – and of course legally permitted to - receive these amounts under our master contract with the City – a contract that the Comptroller’s Office has signed off on in each of the last 17 years. On an annual basis, NYCEDC returns to the City far more than the average amounts the Comptroller’s Office improperly identified, helping to pay for vital services and keep taxes down. In fact, during the same period examined by the Comptroller’s Office, NYCEDC has remitted more than $400 million to the City. • As they are received by NYCEDC, the funds are disclosed in NYCEDC’s Financial Plans that are reviewed by the City on a quarterly basis and are also disclosed in NYCEDC’s publicly-available audited financial statements, which, in addition to being supplied to the Comptroller’s Office every year, are also available on NYCEDC’s website.1 • The payments NYCEDC has retained help to support NYCEDC’s mission of spurring economic activity, creating jobs, and generating tax revenues. Audit Finding: $10,682,600 Funding from Inactive Public Purpose Fund Accounts Not Returned to City • Fact: NYCEDC cannot legally remit these funds to the City until a milestone set forth in an agreement between the City and State that has not yet occurred occurs. The contract was signed about two decades ago, and NYCEDC is not permitted to break it. Audit Finding: $16,533,843 from Sale of City Assets Not Remitted to the City Retained, i.e.: Queens Family Courthouse $7,870,000, Bronx Charter School $496,843 and Canarsie Plaza $8,167,000 • Facts: The Comptroller’s Office examined 36 other similar land sales conducted in the same manner by NYCEDC on behalf of the City and found no issues with the process in those cases. • With respect to the three land sales cited, it is NYCEDC’s legal right to retain the funds under the plain terms of the master contract that the Comptroller’s Office has registered in each of the last 17 years. NYCEDC may retain amounts it receives from a variety of sources, including the sale of Cityowned assets up to a cap. NYCEDC has never retained amounts in excess of that cap. • These sale proceeds are public; they are included in NYCEDC’s Financial Plans which are reviewed by the City on a quarterly basis and are also disclosed in NYCEDC’s publicly-available audited financial statements. Audit Recommendation: Provide for proper classification and enhance the transparency of its revenue amounts due to the City • Fact: While NYCEDC will continue to work with the City to refine and enhance its existing processes, it believes that these processes do generally classify its revenue amounts due to the City properly and are generally appropriately transparent. Audit Finding: PILOT Revenue Calculation Not Verified Site 8 42nd Street Project • Fact: The audit is simply incorrect. The plain language of the agreement is clear, and there have been no underpayments from the tenant. Audit Recommendation: Use the total funding balance of $10,079,415 as of June 30, 2008, from inactive Public Purpose Funds #12, #13, #18, #28, #30 and #31 in accordance with the terms and provisions of the respective funding and trust agreements. • Fact: NYCEDC has already spent more than 80% of that funding balance on appropriate economic development uses. NYCEDC will continue to work, as it has always done, with appropriate partners to find further appropriate economic development uses for the balance of these funds.
Audit Finding: Inadequate Controls over the Disposition of City Properties • Facts: Our processes and protocols for the sale of City-owned properties are very stringent, conforming with best practices in the private sector and at other economic development agencies nationwide. These processes and protocols ensure that the City receives the most advantageous value in dispositions, including, when appropriate, non-financial consideration such as community facilities, open space, or affordable housing requested by communities and local elected officials. • At the Queens Family Courthouse, NYCEDC negotiated a total purchase price of $8 million in cash ($2 million more than next highest bid), plus an agreement that the purchaser would undertake environmental remediation for which NYCEDC would’ve been responsible (valued at about $3.5 million). The original appraisal cited in the audit assumed “highest and best use” (i.e., development for market rate housing and offices), but the project actually undertaken included affordable housing and community space as requested by the community. A subsequent appraisal accounting for these more limited uses resulted in a valuation below what NYCEDC ultimately received. Audit Finding: Rental Income and Fees Not Collected • Fact: The alleged errors represent a tiny fraction (0.34%) of the rental income and fees NYCEDC collects annually. Where applicable, NYCEDC has or will correct any errors. Audit Finding: Energy Discount Improperly Calculated: NYCPUS – Energy Program • Fact: Out of a billing book of about $150 million for the three years the audit covered, the Comptroller’s audit findings imply that 99.2% of the accounts were billed correctly. Some of the accounts (representing about $400,000, or about 0.2%) may have been over-credited, and NYCEDC will review and reconcile the accounts, re-bill as appropriate, and credit any balances owed. Audit Finding: Loan Disbursements Improperly Recorded • Fact: In 2006, a complete review of this transaction was undertaken with NYCEDC’s independent auditors, Ernst & Young, which concluded that the loan disbursements were properly recorded. Audit Finding: Problems with Administering Capital Construction Contracts • Facts: NYCEDC has very rigorous systems in place to monitor staff salaries of contractors and approve rate increases on invoices, including regular internal audits. • With respect to the $200 million renovation of the Manhattan Cruise Terminal, the audit found that a contractor may have been over-compensated in the amount of $61,000 because it changed its Worker’s Compensation insurance after the project commenced. This amount represents 0.03% of the total project cost. If applicable, any overpayments will be recouped by December 2010. Audit Finding: EDC Did Not Enforce Client Employment and Construction Compliance Requirements • Fact: NYCEDC has a full-time compliance department that works to enforce all of the covenants and requirements of its agreements. Since 2002, NYCEDC has collected more than $34 million from private parties that have failed to comply with their agreements. Nonetheless, NYCEDC is constantly seeking to improve the accuracy of the information it collects and has made significant investment in personnel and computer systems to this end. Audit Finding: Problems with Employee Timesheets • Fact: The majority of NYCEDC employees are salaried, not paid per hour, and no one has been overpaid as a result of the issue cited in the Comptroller’s audit.