Purpose

To determine if the Hudson River-Black River Regulating District’s (District) financial management practices in the areas of revenue collection, payroll, procurement, asset and equipment management, cash management, budgeting, and board governance reasonably ensure its operations are efficient and effective. The audit covers from July 1, 2011 through March 15, 2014.

Background

The District regulates the flow of the Hudson River and the Black River to reduce flooding caused by excess run-off and to augment river flow at times of drought. Organized as a public benefit corporation, it has a broad spectrum of legal powers to accomplish its mission, including the authority to build and operate reservoirs, issue bonds, and apportion costs to its beneficiaries to finance construction, maintenance, and operations. The District funds its operations primarily through assessments levied on beneficiaries along the two watersheds. In addition, the District collects permit fees for access rights to the Great Sacandaga Lake and assesses fees to power companies for dam usage to generate electricity.

Key Findings

• Revenue from statutory beneficiaries, hydropower agreements, and permit holders has not been sufficient to cover the District’s annual needs. Specifically, the District’s past due assessments receivable balance has grown significantly and its reserves have been liquidated to cover significant liabilities resulting from litigation.
• Since September 2009, the District has had a significant backlog of capital projects because of funding limitations, including one project that had been mandated by the Federal Energy Regulatory Commission (FERC) in 2007 for public safety reasons.
• The District has cut spending and taken other steps to balance its annual budgets. However, it could potentially generate more revenue and become more efficient by strengthening its practices over past-due assessments, facility maintenance, equipment inventories, time and attendance, and procurement.

Key Recommendations

• Evaluate the collectability of outstanding accounts turned over to counties and adjust budgets to reflect uncollectible accounts.
• Continue to pursue acceptable outcomes in negotiations and litigation, in accordance with FERC’s Headwater Benefit Determination.
• Take the necessary steps to promptly meet applicable Federal and State dam safety requirements.

Other Related Audits/Reports of Interest

Olympic Regional Development Authority: Selected Financial Management Practices (2013-S-18)
Thoroughbred Breeding and Development Fund: Selected Operating Practices (2011-S-36)