Purpose

To determine whether the New York State Environmental Facilities Corporation’s discretionary spending complied with guidelines and expenses were reasonable, adequately supported, and properly approved. The audit covers the two fiscal years ended March 31, 2012.

Background

New York State Environmental Facilities Corporation (EFC) was created in 1970 to provide low-cost capital and expert technical assistance for environmental projects in New York State. Its two major programs are the Clean Water State Revolving Fund and the Drinking Water State Revolving Fund. These programs help communities throughout the State by lowering the costs of financing projects that prevent water pollution and provide safe drinking water.

During the audit period, we identified expenditures of approximately $5.2 million that were discretionary in nature. Each public authority and benefit corporation should have formal policies and procedures identifying discretionary costs that are appropriate and dollar thresholds for each. In addition, the policies should include the supporting documentation and formal approvals necessary for such costs.

Key Findings

• We sampled 152 payments totaling $69,038 and questioned 35 discretionary payments totaling $22,926. Included in the expenditures we questioned are payments for travel to conferences that were not properly documented in accordance with EFC procedures.
• EFC did not have written policies or procedures that identified appropriate discretionary spending, permissible dollar thresholds, necessary justifications, and required formal approvals and supporting documentation. The absence of such internal controls increases the risk that unnecessary discretionary spending that is inappropriate for the mission of EFC may occur.

Key Recommendation

Establish written policies and procedures for EFC discretionary spending. The policies and procedures should include (but not be limited to): the definitions of such costs, the required written justification, the dollar thresholds where appropriate, and the formal approvals and supporting documentation required.

Other Related Audit/Report of Interest

Battery Park City Authority: Selected Aspects of Discretionary Spending (2012-S-158)