Division of Military and Naval Affairs

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NYS Comptroller

THOMAS P. DiNAPOLI

Division of Military and Naval Affairs
Arrochar Meats, Inc.
(Issued: 7/29/2015)


Purpose

The objectives of our examination were to determine whether the Division of Military and Naval affairs (DMNA) conducted appropriate procurements, paid appropriate prices, and received the quality and quantity of goods and services it procured during its response to Superstorm Sandy. 


Background

During emergencies, the National Guard provides relief services under the day-to-day direction and oversight of DMNA.  Arrochar Meats is a food catering business located in Staten Island, New York, that regularly provides food to the New York Army National Guard (National Guard).  We reviewed seven vouchers totaling $94,610 related to fuel and 16 vouchers totaling $78,062 related to food DMNA purchased from Arrochar Meats during the period October 29, 2012 through November 13, 2012 to support its response to Sandy.


Key Findings

We found that DMNA did not follow, or did not have the documentation to support it followed, State procurement requirements when purchasing fuel from Arrochar Meats.  Specifically, we found DMNA staff: (i) did not purchase this fuel from existing State contract fuel vendors or justify why the State contracts did not meet its form, function or utility, (ii) lacked documentation to support how it selected Arrochar Meats to provide fuel, and (iii) was unable to support how it determined the price paid to Arrochar Meats for the fuel was reasonable. 

DMNA purchased 18,960 gallons of fuel from Arrochar Meats days from October 31, 2012 through November 9, 2012.  To fulfill this order, we found Arrochar Meats purchased 13,960 gallons of fuel from Burke Heat at an average of $3.71 per gallon, and 5,000 gallons of fuel from People’s Oil at an average of $3.87 per gallon.  Arrochar Meats then resold the fuel to DMNA for $4.99 per gallon and had People’s Oil or Burke Heat deliver the fuel directly to DMNA’s facilities.   As a result, Arrochar Meats earned $19,594 in ten days acting solely as middleman. 

When we sought to determine how Arrochar Meats was selected to provide fuel to DMNA, all the managers and staff at DMNA we interviewed denied knowledge about who directed the purchase of fuel from Arrochar Meats.

We also selected a sample of 16 vouchers for food purchases DMNA made from Arrochar Meats totaling $78,062.  We found all 16 vouchers in our sample were priced appropriately.  We did not conduct further tests on the food purchases.


Key Recommendations

  • Conduct procurements in accordance with all applicable laws, rules, and regulations.
  • Establish controls for emergency procurements for items such as fuel to ensure DMNA:
    • Has a sound basis to select vendors with which to procure.
    • Pays a reasonable price.
    • Records all items received.
    • Pays only for the items received.
  • Evaluate other records to support whether Arrochar Meats’ suppliers actually provided all the fuel for which DMNA paid.  Recover any amount for fuel that was not received.
  • Develop a list of approved vendors from which to purchase items such as fuel during times of disaster.
  • Ensure Burke Heat is aware that the outstanding balance associated with the “NY National Guard” account (i.e., Arrochar Meats) is not an obligation of the State of New York.
  • Refer our findings related to the excessive prices Arrochar charged to the New York State Office of the Attorney General for its review.

For a complete copy of Report 2013-0003 Arrochar Meats Inc., click here.

 


Division of Contracts and Expenditures
Bernard J. McHugh, Director of State Expenditures

Phone: (518) 474-4868 Email: stexpend@osc.state.ny.us
Address: Office of the State Comptroller, Division of Contracts and Expenditures
110 State Street, 10th Floor; Albany, NY 12236