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September 22, 2011


DiNapoli: Monroe County Audit Reveals Irregularities in LDC Contract

Will Forward Findings to State Attorney General For Review

Monroe County officials wasted millions in taxpayer dollars when they created Upstate Telecommunications Corp. (UTC); a local development corporation (LDC), to support the county's information system needs, according to an audit released today by New York State Comptroller Thomas P. DiNapoli.

"It is hard to see how the use of an LDC in this instance was in any way good for Monroe County taxpayers," DiNapoli said. "There were no discernible savings for county taxpayers, and UTC's creation resulted in back-door borrowing of several million dollars by the county. It also placed $8 million of taxpayer money outside of county control and reduced the transparency of a basic county operation."

DiNapoli forwarded his report to New York State Attorney General Eric Schneiderman to review how UTC spent the $1.9 million in the management fees it received from the county. The Comptroller and Attorney General are also investigating another Monroe County LDC in relation to a $224 million upgrade of the county's emergency communications system.

In March 2004, Monroe County created UTC to issue bonds to support the county's information systems' needs prior to requesting proposals. That December, the county legislature adopted a resolution authorizing the county executive to contract with UTC to lease and maintain new information technology (IT), telecommunications, and network systems; to maintain the systems over time and to provide technology for the county's website and other systems. In February 2005 the county entered into a 16-year, $99.2 million contract with UTC.

DiNapoli's auditors determined that the county's request for proposals (RFP) was flawed and perfunctory and gave a vendor – one with significant connections to current and former county officials – a distinct advantage over competitors. Other potential vendors were not informed of the existence of the LDC or the intent to use the LDC as a conduit for the contract; all but assuring Siemens Building Technologies would win the deal. Siemens later assigned the contract to Navitech Corp., a newly formed venture whose chief operating officer was a former top county official.

Under scrutiny by DiNapoli's auditors, county officials could produce no evidence the UTC contract would save $5 million as had been estimated. In fact, the county paid UTC $8 million more than the corporation expended from February 2005 through December 2009, putting that money outside county control.

Additionally, auditors found the county sold $2.5 million in IT assets to UTC, and then leased the same assets back. This will result in county taxpayers paying more for equipment they had already owned and is an apparent violation of county law which says municipal property may not be sold unless it is no longer needed or necessary for public use.

Auditors also faulted the county for approving a contract with an excessive duration that may bind future governing boards without their input on the contract's terms and conditions.

DiNapoli's auditors recommended that county officials:

  • Adhere to state law and county procurement policies to make sure procurements are not influenced by favoritism or corruption and that goods and services are bought in the most economical manner;
  • Thoroughly review and analyze all proposals during the RFP process using formal criteria and document their recommendation prior to awarding contracts;
  • Ensure that assets to be sold are no longer useful and that the county receives the proper value for the assets;
  • Analyze UTC's total annual expenses and compare them to the contract payment to monitor the value of goods and services received from UTC;
  • Monitor the service performance of the existing UTC contract.

For a copy of the full report go to:

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