01/12/2005 1:00AM

NYRA expenses criticized

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OZONE PARK, N.Y. - In the first of what could be four critical audit reports, the New York Racing Association has been admonished by State Comptroller Alan Hevesi for paying more than $1 million for "inappropriate, unsupported, and excessive travel and entertainment expenses."

The audit, covering Jan. 1, 2002, through May 31, 2004, was released Tuesday and says that NYRA also improperly deducted many of these expenses - including country club memberships and the costs of a golf outing for the wives of executives - from its tax returns. The audit also says that the travel and entertainment practices reduced by $500,000 the amount that NYRA, which operates Aqueduct, Belmont, and Saratoga, should have paid the state. However, several NYRA officials contend that since NYRA lost money during the period covered by the audit, the state actually was not shortchanged.

"I would say there were some conclusions that were drawn that are in a vacuum," said Charlie Hayward, who took over as NYRA president in November. NYRA now operates under the direction of a federally appointed monitor, Getnick and Getnick, as part of a deferred prosecution agreement after NYRA was indicted on conspiracy to commit tax fraud in connection with cash policies in the mutuel room.

"Past NYRA executives operated in a culture that routinely violated laws and regulations, shortchanging the state and taxpayers over and over again," Hevesi said in a statement. "Our previous audits show a long history of management so lax that it led to criminal investigations and the indictment not only of NYRA officials, but of NYRA itself."

In the audit released Tuesday, Hevesi noted that NYRA spent $42,672 for country club membership costs for two former executives - president Terry Meyocks and chief financial officer Alexander Ingle - and deducted these costs from its tax returns, a violation of the tax code. NYRA paid $1,190 to a country club for various expenses in the name of a NYRA executive, including one charge for $802 for "golfing wives." NYRA paid and deducted $190,140 for lunches for members of the media covering NYRA racing events in 2002 and 2003. Only 50 percent is deductible for federal tax purposes.

Although Hevesi recognized NYRA's new management team "for its stated commitment to reform," he said that current policies are still not comprehensive or consistent with tax code requirements. The controller's office said that Hevesi is conducting an audit of NYRA's procurement practices and will soon commence a franchise fee audit for 2002 and 2003, to be followed by an audit of NYRA's backstretch operations. A previous Hevesi audit found that NYRA understated franchise fees for 2000 and 2001 by a combined $15.3 million.

"I've seen some preliminary drafts of the procurement practices audit, and I think it's safe to conclude . . . that prior NYRA management will be criticized and even some current practices," Hayward said. "The threshold of what should have been bid out and put into a [request for proposal] process was not followed."