Purpose

To assess Empire State Development Corporation's personal services contract with former New York State Council on the Arts Executive Director Heather Hitchens for necessity, propriety and compliance with State law and ESDC's internal contracting guidelines. The contract covered the period August 1, 2007 through December 31, 2010.

Background

The Empire State Development Corporation (ESDC) is a public benefit corporation whose mission is to promote a growing and vigorous economy and encourage job creation and economic opportunity. The New York State Council on the Arts (Council) is a State agency dedicated to preserving and expanding New York's rich cultural resources. In 2007, former New York State Governor Eliot Spitzer appointed Heather Hitchens to the position of Executive Director of the Council. Ms. Hitchens' appointment took effect August 1, 2007 at an annual salary capped by law at $109,800. In the same month Ms. Hitchens began work at the Council, ESDC began a consulting contract with her for cultural tourism services. Under this agreement, ESDC paid Ms. Hitchens $2,100 per month for these services, totaling $25,200 per year. As a result of this dual arrangement, her combined annual compensation by the State increased to $135,000. The initial one-year contract between ESDC and Ms. Hitchens ran from August 2007 through August 1, 2008, with three subsequent amendments that extended the contract until December 31, 2010, when it ended. ESDC paid Ms. Hitchens a total of $86,100 over the course of the contract term. Ms. Hitchens resigned from her Council position in May 2011.

Key Findings

• We found possible violations of law in the procurement of this contract with Heather Hitchens. We concluded the contract was initiated and continued primarily as a means to circumvent the salary for the position set by State law and increase Ms. Hitchens' compensation to a level she agreed to with former Governor Spitzer's office. As a result, she was paid $135,000 annually, instead of the $109,800 salary capped by law, for more than three years. The services Ms. Hitchens provided were already part of her existing job duties at the Council, and therefore unnecessary and wasteful as a separate ESDC contract.
• ESDC didn't comply with its own procurement guidelines in many steps of the contracting process, including assessing contractor performance and basic monitoring of deliverables.

Key Recommendations

• ESDC and the Council should work together to determine whether and to what extent funds were improperly paid and recover funds as appropriate and feasible.
• Change the control environment at ESDC to one that reinforces and demonstrates ethical decision-making, is transparent, and can withstand public scrutiny.
• The Council should ensure its employees and board members are aware of and comply with their responsibilities under the Public Officers Law.