New York Times
David W. Chen and Michael Barbaro
The comptroller, John C. Liu, said the agency, the Economic Development Corporation, had hoarded money it earned through leases on buildings in Times Square and the sale of city properties and had improperly held money in a dormant account.
Under a contract with the city, the agency was supposed to turn over the money to the city’s general fund, Mr. Liu said. “The E.D.C. should fork it over,” he said in an interview Tuesday.
In examining one of New York’s most powerful agencies, which is involved in projects in places like Coney Island in Brooklyn and Willets Point in Queens, Mr. Liu said he found a lack of transparency and loose internal controls. “It has become a powerhouse agency, but we have very little understanding of what comes in and out of it,” he said. “You cannot see anything that is going on.”
The audit represents a stinging critique of an agency that under Mr. Bloomberg has swelled in the size of its budget and in its importance as the primary vehicle for an aggressive development agenda. According to the audit, the agency collected inadequate rent from landlords, overpaid a contractor and approved unsubstantiated payroll records.
City officials took strong exception to the audit, setting up a potential clash with Mr. Liu, whose office must approve the corporation’s contract with the city every year.
In a detailed two-page rebuttal, the development agency defended its practice of keeping certain money, citing a supportive opinion from the city’s Law Department. The rebuttal belittled the comptroller’s findings, noting that the audit had found a “tiny fraction” of imprecise accounting by the corporation by amounts like 0.2 percent, 0.03 percent and 0.34 percent.
“We’re doing more in the last few years because the administration is focused on economic development and we’re the agency that carries out that vision, from investing in underserved neighborhoods to generating programs that help businesses and create jobs,” said David Lombino, a spokesman for the corporation. “We are carrying out our mission in a transparent manner, hosting public hearings and open meetings, disclosing our financials with the city on a quarterly basis, and submitting our audited financial statements to the comptroller’s office every year and posting them on our Web site.”
The corporation is a nonprofit organization with a president appointed by the mayor that offers financing, tax exemptions and other development programs.
Mr. Bloomberg has made the collection of money he believes is owed to the city a priority. A few months ago he accused the departing Manhattan district attorney, Robert M. Morgenthau, of maintaining unregistered bank accounts outside the city’s financial review process.
Mr. Morgenthau denied it, and the city later acknowledged that it also had thousands of unregistered accounts. But in March, Mr. Liu faulted Mr. Morgenthau’s office in an audit, saying it exhibited a “lack of transparency.” The finding was largely seen as a vindication of Mr. Bloomberg’s initial complaint.
This time, though, Mr. Liu pointed the finger at Mr. Bloomberg. The development corporation audit suggests that Mr. Liu, who built his campaign last year around opposition to Mr. Bloomberg’s overturning of term limits, plans to use his office as a counterweight to the mayor.
Mr. Liu, who served as a city councilman from 2002 to 2009 representing Flushing, Queens, made a name for himself as a persistent critic of the Metropolitan Transportation Authority and Mr. Bloomberg.
After his election last fall, Mr. Liu seemed to take aim at Mr. Bloomberg when he said that residents “long ago decided there would be no king or monarch in New York City.” He has since sought the authority to oversee revenue projections for the city, traditionally a mayoral power. He has also pledged to use his office to ferret out wasteful spending at City Hall, especially on no-bid contracts that he says have exploded under Mr. Bloomberg.
Mr. Liu, 43, an actuary who once worked at PriceWaterhouseCoopers, has given his auditors their own department and elevated its leader, H. Tina Kim, who oversaw the audit of the development corporation, to the new title of deputy comptroller for auditing. Mr. Liu also said he was focusing attention on the Education Department, whose overhaul Mr. Bloomberg considers a cornerstone of his tenure.
The audit found that the Economic Development Corporation did not hand over $98 million in lease payments from developers in a Times Square project, whose tenants include Condé Nast and Reuters; $16 million in proceeds from the sale of city-owned property in the Bronx, Brooklyn and Queens; and $10.6 million from the dormant fund.
The comptroller found smaller examples of what he said were waste and mismanagement. The corporation improperly accounted for more than $861,000 in loans intended to help small businesses. In one case, the agency gave $338,928 in excess energy credits to businesses as part of a cost savings program it operated with Consolidated Edison.
After reviewing 411 time sheets for workers at the corporation, auditors found that 183 were processed without proper documentation and 127 could not be substantiated. But all the workers were paid in full, the audit found.
In its rebuttal, the agency said its auditors had found nothing improper in the loans described in the audit. Regarding payroll, the agency said no employee had been overpaid and it had adopted a new time-sheet system.
Addressing energy credits to businesses, the agency said less than 1 percent of the accounts “do appear to have been over- or under-billed.” All told, Andrew Brent, a Bloomberg spokesman, said the city supported the agency’s position.
Still, Mr. Liu said he planned to conduct four follow-up audits. “I don’t think their arguments hold up,” he said.