Executive Summary

The New York Power Authority (NYPA) is a public authority created in 1931 by Title 1 of Article 5 of the Public Authorities Law (PAL). Chapter 469 of the Laws of 1989 requires the State Comptroller to conduct an audit of NYPA’s management practices at least once every five years. Our audit encompasses a review of three areas: ReCharge New York, Disposition of Personal Property, and the Energy Efficiency Program.

A. ReCharge New York
Purpose

To determine whether NYPA managed the ReCharge New York program according to statute, accurately reported job creation goals and other program metrics, and phased out customers of the former discounted energy programs as provided in the ReCharge New York law.

Background

On April 14, 2011, the Governor of New York signed into law the ReCharge New York (RNY) power program as part of Chapter 60 (part CC) of the Laws of 2011 (Law). RNY power is to be allocated to businesses and not-for-profits that commit to retain or increase New York State jobs and agree to make capital investments in their business in accordance with legislative guidelines. RNY makes available 910 megawatts (MW) of economic development power, 50 percent to be purchased by NYPA on the open market and 50 percent from its own hydropower.

Applications for the RNY power program are incorporated into an online Consolidated Funding Application (CFA) maintained by Empire State Development Corporation (ESDC). NYPA’s Business Power Allocation and Compliance group (BPAC) extracts applications in batches from ESDC where it is reviewed by NYPA staff and competitively scored using two models (one for job retention and one for job expansion), which apply the 12 criteria detailed in the Economic Development Law, Section 188a.

NYPA’s staff makes an allocation recommendation to the Economic Development Power Allocation Board (EDPAB). EDPAB presents the recommended allocations to NYPA’s Board of Trustees (Board). RNY power is then officially allocated by the action of the Board.

Key Findings

• NYPA made errors in the method used to rank applicants for power allocations and treated applicants with the same score differently based upon when their applications were processed. These errors and inconsistent application of the RNY model resulted in applicants’ scores being ranked incorrectly.
• NYPA reported certain information to the public that is incomplete and therefore may lead the public to draw incorrect conclusions about the program. For example, NYPA publicly reports power allocations that it offers to RNY applicants, but not the power they actually accept. NYPA also reports job commitments and includes businesses that were awarded a power allocation, but are in pending status because they have not signed a contract. In some cases, these businesses later declined the contracts. In June 2015, this resulted in an overstatement of job commitments reported by 29,795 or 7.7 percent.
• NYPA’s primary mechanism for monitoring compliance with job commitments is flawed. In 12 cases, NYPA allowed customers to refuse to provide required documentation to confirm reported job retention numbers, without consequences. In addition, NYPA has not met its own yearly target for compliance reviews.

Key Recommendations

• Identify resources available within NYPA that can conduct an independent and objective review of the models for accuracy and completeness before the results are recommended to EDPAB for approval.
• Exclude businesses that have received an allocation but have not signed a contract from any reporting of RNY program results, or footnote/disclose the “results” owing to pending customers.
• Take action to reduce contract power allocations when customers do not meet power utilization or base employment levels or hinder verification of compliance requirements provided by contract terms. In such instances, when NYPA chooses not to reduce power allocations, document the reasons for the decisions.

B. Disposal of Personal Property
Purpose

To determine if NYPA disposed of personal property valued over $5,000 in accordance with its procedures.

Background

Section 2896 of the PAL requires NYPA to publish a report, not less frequently than annually, of all personal property valued in excess of $5,000 that was disposed of during the reporting period. For purposes of this audit, personal property is all property other than real property. From January 1, 2011 to May 31, 2015, NYPA reported revenues of $3.96 million from personal property disposals. 

Key Findings

• NYPA sold scrap metal and plant equipment (valued at over $900,000) from two locations without appropriate controls to ensure they were properly accounted for and that appropriate value was received.
• NYPA had poor controls over the disposition of fleet vehicles. For example, NYPA uses the National Automobile Dealers Association (NADA) to value its vehicles. However, out of ten vehicles we reviewed, NYPA’s contracted auctioneer appraised nine below NADA average trade in values by a total of $58,487 and sold nine vehicles below the NADA values by a total of $33,187. Also, NYPA did not document that these vehicles were properly advertised to enable an appropriate sales price.

Key Recommendations

• Establish controls over the valuation and sale of scrap metal. Improve controls over fleet assets sales.
• Improve controls over fleet assets sales.

 C. Energy Efficiency Project
Purpose

To determine if Energy Efficiency project savings reported as of April 9, 2015 were properly supported.

Background

NYPA began Energy Efficiency (EE) programs for its government customers in New York City and Westchester County in 1990. The programs were expanded to State-operated facilities in 1991, Long Island public schools in 1992, community colleges statewide in 1993, and county and municipal governments in 1994.

As of April 9, 2015, NYPA financed $1.8 billion in EE projects, which it claims will produce savings of $103.3 million. While some projects have reported savings, others do not have savings. The projects without savings include feasibility studies, energy audits, and projects that improve the energy system reliability. As of April 9, 2015, NYPA completed 334 out of 565 projects, at a cost of $814.5 million and reported savings of $44.8 million. 

Key Finding

• EE savings in NYPA’s April 9, 2015 report were not always properly supported. We sampled 25 EE projects, of which 21 reported energy savings of $16.5 million. However, available documentation fully supported energy savings for only 11 of the 21 projects. Savings for seven projects were only partially supported, and savings for the remaining three projects were not supported. Supported savings totaled $13.6 million, and the remaining $2.9 million ($16.5 million - $13.6 million) was unsupported. 

Key Recommendation

• Require project managers to prepare and maintain records to properly support the EE savings reported.

Authority Comments

In their response to our draft report, NYPA officials disagreed with most of our findings and asserted that our recommendations reflected processes that NYPA already had in place. Unfortunately, however, NYPA’s response included a range of inaccurate and misleading comments, and it also reflected a demonstrable misunderstanding of professional auditing standards. Based on NYPA’s comments, we made certain technical corrections to the report. Nonetheless, we maintain that the report’s findings, conclusions, and recommendations are correct. Consequently, we encourage NYPA officials to react positively to our report and implement its recommendations to improve the efficiency and effectiveness of the program functions it addresses.