Objective

To assess the extent of implementation of the eight recommendations included in our initial audit report, Purchasing and Procurement Practices (Report 2020-S-67).

About the Program

The New York Racing Association, Inc. (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. In September 2008, upon renewal of its exclusive Franchise Agreement (Agreement), NYRA entered into a bankruptcy settlement agreement conveying all rights, titles, and interests in its racetracks to the State. In return, the State forgave nearly all of NYRA’s debt obligations and a Franchise Oversight Board (FOB) was established to oversee NYRA’s financial operations.

From January 1, 2022 to December 31, 2022, NYRA spent approximately $385 million for the purchase of goods and services. The Agreement sets out requirements that NYRA must meet, including a requirement that NYRA keep its expenses at commercially reasonable levels and in accord with racing and wagering industry standards. Because NYRA operates its racing operations at a deficit, it is imperative that its purchasing practices result in obtaining goods and services at the best available prices, primarily through competition. In 2009, NYRA officials developed a Purchasing Policy and Procedures Manual (Manual) that included requirements for competitive bidding and the purchasing of goods and services at various dollar thresholds. The Manual was last approved by the FOB in 2010.

The objective of our initial audit, issued on March 16, 2022, was to determine whether NYRA procured goods and services competitively and in accordance with its policies and procedures. The audit covered the period from January 2018 through December 2020. The audit found that NYRA needed to improve its monitoring and oversight of its purchasing and procurement process to fully promote sufficient competition. NYRA made a significant number of purchases without competitive bidding, instead using Bid Exception Memos (BEMs) for purchases using single and sole source exceptions. Documentation to justify NYRA’s use of BEMs was generally very limited. Additionally, there were weaknesses in NYRA’s purchasing system and processes, a lack of segregation of duties, and a lack of risk assessment and analysis.

Key Findings

NYRA officials have made some progress in addressing the issues identified in the initial audit report; however, more work needs to be done. Of the initial report’s eight audit recommendations, three were implemented, two were partially implemented, and three were not implemented.

Key Recommendation

Officials are given 30 days after the issuance of this report to provide information on any actions that are planned to address the unresolved issues discussed in the follow-up.