Objective

To determine whether the New York Racing Association, Inc. (NYRA) procured goods and services competitively and in accordance with its policies and procedures. Our audit covered the period from January 2018 through December 2020.

About the Program

Organized in 1955, NYRA is a not-for-profit corporation that holds the exclusive franchise rights to operate New York State’s three major thoroughbred racetracks: Aqueduct Racetrack, Belmont Park, and Saratoga Race Course.

Section 208 of the Racing, Pari-Mutuel Wagering and Breeding Law requires all contracts entered into by NYRA for the procurement of goods or services to be pursuant to a competitive bidding purchasing policy approved by the New York State Franchise Oversight Board (FOB). NYRA’s Purchasing Policy and Procedures Manual (Manual), approved by the FOB in 2010, specifically states that “Company employees who are entrusted to purchase goods and services are expected to spend the Company’s money in a prudent manner.” Between January 1, 2018 and December 31, 2020, NYRA’s expenditures were about $250.3 million for goods and services.

Key Findings

Our audit found NYRA does not have adequate monitoring and oversight over its purchasing and procurement process; consequently, sufficient competition is not fully promoted, and overspending may have occurred. Specifically:

• NYRA made a significant number of purchases without competitive bidding, instead using Bid Exception Memos (BEMs) for purchases using single or sole source exceptions. Documentation to justify NYRA’s use of BEMs and the circumvention of competitive bidding was generally very limited.
• Contrary to Manual requirements, over 15,000 transactions under $1,000 each, totaling approximately $4.79 million, were made to purchase goods or services from suppliers outside of the approved vendor list without the Purchasing Department questioning why the approved vendors could not supply the goods or services.
• NYRA could not provide copies of change orders to support the payment of $787,517 to a construction contractor. As a result, we could not determine whether the additional payments were justified.
• Some of NYRA’s procurement practices deviated from the requirements in the Manual. These deviations allowed a NYRA employee to select his company to do business with NYRA and receive payments totaling almost $200,000.
• We found weaknesses in NYRA’s purchasing system and processes, a lack of segregation of duties, and a lack of risk assessment and analysis.

Key Recommendations

• Strengthen the integrity of the purchasing and procurement process by updating the Manual and obtaining FOB approval, and adhere to the approved policy when procuring goods and services.
• Monitor purchases and analyze historical purchasing data to identify categories of items that, in the aggregate, are budgeted for greater than $50,000 and obtain competitive bids.
• Conduct periodic risk assessments of procurement operations to identify vulnerabilities and take action to address, as necessary.
• Conduct periodic audits of NYRA’s purchasing and procurement process.