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LIPA committee to review consultants' bills

Power lines are seen in Centereach. (Dec. 11,

Power lines are seen in Centereach. (Dec. 11, 2012) Photo Credit: Newsday/Thomas A. Ferrara

LIPA trustees have formed a special committee to review the findings of a state commission that discovered widespread instances of consultant overbilling and lack of controls.

At a Long Island Power Authority board meeting Thursday, chairman Lawrence Waldman said the authority would review the bills submitted by Chicago-based contractor Navigant Consulting and others to make sure money was not misspent.

"We cannot allow a penny of LIPA funds to be wasted," he said.

The review will examine findings by the state Moreland Commission that said LIPA had paid Navigant "exorbitant" consulting fees of from $300 to $500 an hour, along with large charges for executive-level travel and hotel stays. Navigant has said its employees adhere to the "highest industry standards of ethics and integrity," and that it was "reviewing the facts related to each question in detail" and would cooperate fully with any investigations.

Waldman noted that many of the alleged abuses took place years ago and said some new controls have been put in place since then.

Michael Taunton, LIPA's chief financial officer, agreed. "I think generally speaking our internal-control system is in pretty good shape," he told trustees.

The review committee will be composed of Waldman, Larry Belinsky and Peter Tully -- all appointees of the governor.

Waldman said the trustee committee will work with LIPA staff and an outside auditing firm to have a "fresh set of eyes" to "review the entire control process over disbursements of all professional services" payments. "We're going to examine all those invoices."

Belinsky noted that LIPA has worked in the past three years to reduce its reliance on outside consultants. The Moreland Commission report indicates that LIPA had reduced its payments to Navigant to $3 million in 2011 from $8.6 million in the prior two years.

Among new controls in the wake of the report, all invoices for professional services will need approval from the chief operating officer or chief financial officer, said John McMahon, the newly named COO.

He said LIPA is also considering additional restrictions on employees who leave LIPA to enter the private sector in ways that would address potential conflicts of interest, responding to the Moreland Commission charges of a "revolving door" in which top officials of LIPA went to work for Navigant and vice versa.

LIPA is reviewing its contractual relationship with Navigant, McMahon said, and reviewing internal controls of contracts and billing.

He said LIPA also would address other findings by the commission, including flawed formulas for determining rates and calculations for charging customers for power lost on system inefficiencies.

LIPA trustees, who normally have the summer off, are expected to work in coming weeks and months to review and approve an amended contract for PSEG of New Jersey to operate the Long Island electric grid. Gov. Andrew M. Cuomo's proposal to overhaul LIPA passed in the State Legislature last week, but Internal Revenue Service approval of LIPA's tax-exempt debt status is pending.

An administration official said the LIPA legislation has not yet been sent to the governor for his signature.

Matthew Cordaro, a LIPA trustee, has requested that trustees commission an outside company to review the costs of the 12-year PSEG contract in advance of approving it, to make sure it's in ratepayers' best interests.

"Our fiduciary duty as trustees does not allow us to make decisions on this unless we have that [cost] information," he said. The board has yet to decide on the matter.

Also Thursday, LIPA trustees approved the hiring of two Wall Street firms -- Goldman Sachs and Morgan Stanley -- to handle underwriting of bonds to refinance LIPA's debt.


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