Purpose

To determine whether Roosevelt Island Operating Corporation’s discretionary spending complied with its guidelines and expenses were reasonable, adequately supported, and properly approved. Our audit covers from April 1, 2010 through December 31, 2012.

Background

The Roosevelt Island Operating Corporation of the State of New York (RIOC) is a public benefit corporation and a political subdivision of the State of New York. RIOC was created by the New York State Legislature in 1984 to take responsibility, pursuant to a General Development Plan (GDP), for the development and operation of the 147 acres comprising the former Welfare Island, located in New York City’s East River. RIOC assumed the role of the New York State Urban Development Corporation as lessee under a 99-year Master Lease (running until 2068) from the City of New York.

During our audit period, we identified approximately $1.7 million of RIOC spending that was discretionary in nature. Each public authority should have formal policies and procedures specifying the types of discretionary costs that are appropriate and the dollar thresholds, supporting documentation, and formal approvals that are necessary to be accountable for such costs.

Key Findings

• We reviewed 156 payments totaling $144,856 and questioned 98 payments totaling $83,419. Included in the expenditures we questioned were payments for personal travel, out-of-state and conferences in another country, training of non-RIOC employees, and gifts to non-employees.
• RIOC lacked written policies and procedures clarifying what constituted appropriate discretionary spending and specifying permissible dollar thresholds, necessary justifications, and required formal approvals and supporting documentation. The absence of such internal controls increases the risk that not all discretionary spending is necessary and appropriate for the mission of the authority.

Key Recommendations

• Exercise increased restraint over discretionary spending and discontinue any spending that is not consistent with RIOC’s mission.
• Establish written policies and procedures for discretionary spending, including requirements for necessary justifications, dollar thresholds, formal approvals, and supporting documentation.

Other Related Audits/Reports of Interest

Battery Park City Authority: Selected Aspects of Discretionary Spending (2012-S-158)
State University Construction Fund: Selected Aspects of Discretionary Spending (2013-S-14)