ALBANY -- The state's Franchise Oversight Board, citing a lack of cooperation from the New York Racing Association and concerns about its proposed budget, has asked New York's inspector general to examine its operations.

In a letter yesterday to NYRA president Charles Hayward, board chairman Robert Megna said there remain "significant and unacceptable gaps" in the board's ability to obtain and analyze information, including reports that senior executives and others got raises despite a projected $11 million deficit.

Compensation is projected to increase more than 5 percent in total, and that has to be justified in light of fiscal realities, he wrote.

NYRA spokesman Dan Silver had no immediate comment.

After filing for bankruptcy protection, NYRA entered into a settlement agreement in 2008 in which it conveyed to the state all ownership rights to the tracks at Aqueduct, Belmont and Saratoga in return for financial help.

Megna, also the state budget director, noted that the oversight board can recommend ending NYRA's state franchise agreement to run New York's three thoroughbred tracks for performance breaches such as failure to comply with the board's requests.

"I continue to have substantial concerns about NYRA's ability to bring racing operations into the black," Megna wrote.

"Your budget assumes that overall handle on NYRA races will drop by 1.4 percent, while total operating expenses will increase by 7.9 percent. Even with VLT revenue beginning to flow," he added, referring to video lottery terminals, "it is not clear after extrapolating current trends that racing operations are sustainable without significant restructuring."

A spokesman for Inspector General Ellen Biben said "significant issues" have been raised and her office will seek answers.

Racino operators say they're looking at opening the first phase at Aqueduct, with 2,500 VLTs, in late summer.

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