06/15/2005 12:00AM

New York audit raps NYRA

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The New York Racing Association did not follow state laws or its own procedures when making major purchases or awarding some contracts to third-party vendors, the New York state comptroller, Alan Hevesi, contended in an audit released on Wednesday.

The audit, which covered a two-year period from January 2002 to December 2004, said that of 58 deals scrutinized by auditors, 49 transactions worth $3.5 million "contained one or more violations of the Racing Law or NYRA's procurement policy." The 58 transactions were handpicked by the auditing staff from total spending by NYRA over the two-year period of $230 million, the audit said.

One of the transactions that auditors scrutinized was a contract that paid $797,913 to a computer-services company owned by the son-in-law of NYRA's former chief executive, Barry Schwartz, who resigned at the end of 2004. The audit said that NYRA could produce no evidence that the contract was bid out to three or more companies, as required by law. The audit also criticized NYRA's accounting procedures and what the audit called "excessive" spending on trophies for owners and transportation for horses.

In a May 9 response to the audit, NYRA's chief executive, Charles Hayward, said that NYRA officials "agree in principle with your assessments and recommendations." Hayward said NYRA plans to hire a contracting and procurement director and has put in place several reforms to address the findings.

NYRA is operating under the scrutiny of an independent monitor as part of a deferred prosecution agreement on charges that the association facilitated tax fraud by personnel in its mutuel department. In a statement Wednesday, Hayward pointed to parts of the audit that said that NYRA has improved its procedures.

The audit is certain to increase pressure on NYRA, which is seeking to retain its franchise to operate Aqueduct, Belmont, and Saratoga, as well as a slot-machine operation at Aqueduct that will likely open next year. The 4,500 machines are expected to generate $1 billion a year in revenue.

NYRA's franchise, which is awarded by the state legislature, expires at the end of 2007. The audit is the second of four that Hevesi has said he plans to release concerning NYRA.