Port Authority of New Yorl{ \ 

and New Jersey 

Management and Control of Employee 

Overtime Costs 

Report 2009-S-87 I 

Thotnas P. DiNapoli 
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Authot·ity Lettet· ................................................................................................................

........ 5 

Executive Summary .....................................•.......•.....................•.•......•.........................•............ 7 

Intt·oduction ...........•......................................•......................•......................••••......•............•..... 11 

Baclcground .........•....................................•.......•......................................•.......................... 11 

Audit Scope and Methodology .......................•................................................................. 12 

Authority ......................................................................................•.............•.•............•......... l3 

Repot·ting Requirements .........•..................•..•.......................•.••........................................ 13 

Contributors to the Report ..................................................................•.......................•••.. 13 

Audit Findings and Recommendations ................................................................................. 15 

Ovet·time Expense .....•••..................................••.................................................................. 15 

Unauthorized and Undocumented Ove1·time ................................................................. 16 

Management and Control of Overtime ........................................................................... 17 

Effect of Overtime on Pension Costs ............................................................................... 18 

Recommendations ..........................•.................................................................................. 19 

Exhibit A .................................................•.............•.................•.......•••.............................•.....•... 21 

Exhibit B •.........................•.................•.......................•...•........•..................•....•••.....•......•.......... 23 

Agency Comments ................................................................................................................... 25 

State Comptt·oller's Comments .............................................................................................. 31 

Division of State Government Accountability 
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Division of State Government Accountability 

August 17, 2011 

David Samson 

Chairman 

Port Authority of New York and New Jersey 

225 Park Avenue South, 181h Floor 

New York, NY 10003-1604 

Dear Chairman Samson: 

The Office of the State Comptroller is committed to helping State agencies, public authorities 

and local government agencies manage government resources efficiently and effectively and, 

by doing so, providing accountability for tax dollars spent to support government operations. 

The Comptroller oversees the fiscal affairs of State agencies, public authorities and local 

government agencies, as well as their compliance with relevant statutes and their observance 

of good business practices. This fiscal oversight is accomplished, in part, through our audits, 

which identify opportunities for improving operations. Audits can also identify strategies for 

reducing costs and strengthening controls that are intended to safeguard assets. 

Following is a report of our audit of the Port Authority of New York and New Jersey: 

Management and Control of Employee Overtime Costs. The audit was performed pursuant to 

the State Comptroller's authority as set forth in Section 7071 of McKinney's Unconsolidated 

Laws of New York. 

This audit's results and recommendations are resources for you to use in effectively managing 

your operations and in meeting the expectations of taxpayers. If you have any questions about 

this report, please feel free to contact us. 

Respectively submitted, 

Office of the State Comptroller 

Division ofState Government Accountability 

Division of State Government Accountability 
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Audit Objective 

The objective of our audit was to determine whether Port Authority of New York and New 

Jersey officials effectively managed and controlled employee overtime costs. 

Audit Results - Summal'y 

The Port Authority of New York and New Jersey (Authority) was established in 1921 to 

promote and protect the commerce of the bi-state port and to undertake port and regional 

improvements not likely to be financed by private enterprise or to be attempted by either state 

alone. The Authority's operating budget for 2010 was $2.48 billion, including payroll costs for 

6,977 staff. 

During 2010, the Authority paid $85.7 million of overtime to 5,360 employees. The majority 

of Authority overtime costs are incurred by the Port Authority Trans Hudson Railway (PATH) 

and the Public Safety Department. Over the approximate five-year period ended December 31, 

2010, the Public Safety Department and PATH accounted for $217.5 million and $85.4 million 

of overtime costs, respectively. These costs represented 66 percent of the $459.2 million of 

total overtime paid by the Authority during the period. 

We found that Authority officials have not effectively managed and controlled employee 

overtime costs and we noted numerous examples of overtime being earned in excess of $75,000 

annually by individuals whose salary base was at least $75,000. The following are among our 

key findings: 

• Port Authority retirees accounted for 71 (24 percent) of the 300 top pensioners in the 

New York State Retirement System as of December 31,2009. The annual pensions for 

these 71 employees ranged from $125,612 to $196,768 with an average annual pension 

of $143,253. Most of these retirees were in Authority positions (e.g., Public Safety) 

that typically would be receiving large amounts of overtime creditable to retirement 

pensions. 

• There were 24 PATH and Public Safety Department employees whose 2009 overtime 

earnings exceeded 100 percent of their respective salaries. For example, one employee 

Division of State Government Accountability 
in overtime, 66 Authority employees who earned more than $75,000 in overtime, 18 

Authority employees who earned more than $100,000 in overtime, and 77 Authority 

employees whose combined overtime and base salary exceeded $175,000. (See Exhibit 

B.) 

• The 2010 budget that the Authority submitted to the Governor of New York and the 

Governor of New Jersey specified that overtime would be reduced by 20 percent from 

the prior year. However, this cost savings goal was not communicated or implemented 

within the Authority and overtime costs for 2010 decreased by only 3 percent {$2.8 

million) from 2009 amounts, rather than being reduced by 20 percent ($17.7 million). 

• The Authority established an informal benchmark for each department that overtime 

should be no more than 15 percent of base salaries. Yet, PATH and the Public Safety 

Department each had overtime costs that, on average, doubled this limit over the past 

several years. 

• We examined one overtime payment transaction for each of the top 39 overtime 

earners {25 from PATH and 14 from the Public Safety Department). The sample 

of payments totaled $19,690. According to Authority policy, the sampled overtime 

transactions required the prior approval of the Authority's Deputy Executive Director 

because the employees had already received overtime exceeding 50 percent of their 

base salary. However, we found that the required prior approval was not documented 

and there was no written justification showing why the work needed to be assigned 

on an overtime basis. 

Moreover, the required signatures indicating supervisory approval were lacking on the time 

sheets for 5 of the 39 sampled employees who received overtime. For two of these five employees 

there was no record that the employees completed either the required sign in to begin their 

work day or the required sign out to end their work day. The lack of approvals on time sheets 

and the lack of required sign in and sign out greatly increase the risk that this overtime may not 

have been worked. 

To address these findings, Authority officials need to take a much more proactive approach to 

the management and control of overtime. Existing policy and goals to limit and reduce overtime 

need to be communicated, implemented and monitored for compliance. Also, internal control 

practices and procedures for documenting the need for overtime, approving the assignment of 

overtime, and verifying the completion of overtime work and proper preparation of time sheets 

need to be strengthened. 

Office of the New York State Comptroller 
to enhance their management and control over overtime costs. 

Auditor's Comments: 

Authority officials have the responsibility to weigh their various options and determine 

which strategies are most cost effective. If reducing staff results in overtime that increases 

overall payroll costs, then the Authority should rethink its approach. If overtime is the more 

economical option, the Authority still needs to adequately monitor its use and control its cost. 

This report, dated August 17, 2011, is available on our website at: http:/ /www.osc.state.ny.us. 

Add or update your mailing list address by contacting us at: (518) 474-3271 or 

Office of the State Comptroller 

Division of State Government Accountability 

110 State Street, 11th Floor 

Albany, NY 12236 

Division of State Government Accountability 
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is called the Port District, a bi-state region generally within 25 miles of 

the Statue of Liberty. 1he Authority's mandate is to promote and protect 

the commerce of the bi-state port and to undertake port and regional 

improvements not likely to be financed by private enterprise or to be 

attempted by either state alone. The Authority provides transportation 

and port commerce facilities to serve the New York-New Jersey 

Metropolitan region. 

The Authority is governed by a Board of Commissioners (Board) whose 

six New York members and six New Jersey members are each appointed 

to a six-year term by their respective Governors. The Board appoints 

an Executive Director who manages the Authority's daily operations. 

Authority departments include: the Port Authority Trans-Hudson 

Rail Road (PATH), Aviation, Tunnels, Bridges and Terminals, Port 

Commerce, World Trade Center (WTC), Construction, Real Estate and 

WTC Development, and Public Safety. The Authority's 2010 operating 

budget was $2.48 billion, including $1.2 billion for payroll costs for 6,977 

staff. 

Authority base salary costs for calendar years 2006 through 2010 totaled 

$2.86 billion, while overtime costs totaled $459.2 million. The Public 

Safety Department and PATH accounted for most of this overtime. 

Public Safety Department overtime totaled $217.5 million and its base 

salary cost was $727.4 million. PATH overtime totaled $85.4 million and 

its base salary cost was $349.3 million. 

The average base salary per employee for the Public Safety Department 

and for PATH was $81,049 and $63,102, respectively. Considering 

overtime and base salary, the total average compensation per employee 

for the Public Safety Department and for PATH was $102,4 74 and $81,046, 

respectively, for 2009. Accordingly, overtime, on average, accounted for 

20.1 percent of each Public Safety Department employee's compensation 

for 2009, and 22 percent of each PATH employee's compensation for 

2009. Public Safety Department employees are members of the New York 

State and Local Employee Retirement System. Their total compensation 

is creditable to their retirement benefit calculations. PATH Department 

employees are members of federal and union pension plans funded by the 

Division of State Government Accountability 
Calendar Year 

2006 

2007 

2008 

2009 

2010 

Total 

Audit Scope and 

Methodology 

Employee Overtime for Public Safety and PATH 

For Calendar Years 2006 through 2010 

Public Safety PATH Total 

$43,915,888 $14,400,260 $58,316,148 

$49,556,472 $15,183,698 $64,740,170 

$52,384,170 $17,410,378 $69,794,548 

$38,177,968 $19,343,850 $57,521,818 

$33,500,462 $19,034,923 $52,535,385 

$217,534,960 $85,373,109 $302,908,069 

We audited the Authority's management and control of employee 

overtime costs for the period January 1, 2006 through March 31, 2010. 

We accumulated salary and overtime cost information for calendar 

years 2006 through 2010. We focused on the overtime costs incurred 

by PATH and the Public Safety Department because they accounted for 

more than half of total Authority overtime costs during the audit period. 

To accomplish our objectives, we identified the top overtime earners 

to determine whether documentation supported that they worked the 

overtime that was reported for them and to determine whether there 

was written evidence that the work performed needed to be done on 

an overtime basis. We interviewed central office officials to determine 

existing overtime policies and we interviewed department officials 

to understand procedures for authorizing, scheduling and approving 

overtime. We also reviewed available supporting documents such as 

employee time and attendance records and related overtime requests 

and approvals. We made observations at selected work locations where 

employees were earning above average overtime, and we reviewed 

overtime-related reports prepared for management. 

We conducted our audit in accordance with generally accepted 

government auditing standards. Those standards require that we plan 

and perform the audit to obtain sufficient, appropriate evidence to 

provide a reasonable basis for our findings and conclusions based on 

our audit objectives. In this regard, Public Safety officials would not 

Office of the New York State Comptroller 
Authority 

Reporting 

Requirements 

Contributors 

to the Report 

pp

p

basis for our findings and conclusions based on our audit objective. 

In addition to being the State Auditot~ the Comptroller performs certain 

other constitutionally and statutorily mandated duties as the chief 

fiscal officer of New York State. These including operating the State's 

accounting system; preparing the State's financial statements; and 

approving State contracts, refunds, and other payments. In addition, 

the Comptroller appoints members to certain boards, commissions 

and public authorities, some of whom have minority voting rights. 

These duties may be considered management functions for purposes 

of evaluating organizational independence under generally accepted 

government auditing standards. In our opinion, these functions to do not 

affect our ability to conduct independent audits of program performance. 

We performed this audit pursuant to the State Comptroller's authority as 

set forth in Section 7071 of the Unconsolidated Laws of New York. 

The draft copy of this report was provided to Authority officials for their 

review and comment. Their comments were considered in preparing 

this final report and are attached in their entirety at the end of the report. 

Authority officials assert that their business model, which includes 

the judicious use of overtime, serves them well. Nevertheless, they are 

committed to continually improving their processes and have irritated a 

number of actions to enhance controls over overtime. Authority officials 

agree with our report recommendations but do not believe any corrective 

actions are necessary regarding the overtime transactions detailed in our 

report. 

Within 90 days of the final release of this report, we request that the 

Chairman of the Port Authority of New York and New Jersey report to the 

New York State Comptroller, advising what steps were taken to implement 

the recommendations contained herein, and where recommendations 

were not implemented, the reasons why. 

Major contributors to this report were Frank Patane, Michael Solomon, 

Randy Partridge, Orin Ninvalle, Elijah Kim, and Unal Sumerkan. 

Division of State Government Accountability 
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noted that this limit was not formalized in writing and was to be used as 

a benchmark. Nevertheless, results show that overtime costs routinely 

and significantly exceeded the benchmark limit. For Public Safety and 

PATH, the average overtime costs for the period 2006 through 2009 were 

35.5 percent and 26.4 percent, respectively, above annual base salary 

costs. (Public Safety base salary cost was $518.3 million and its overtime 

total was $184 million. PATH base salary cost was $251.7 million and its 

overtime total was $66.4.) 

Moreover, as illustrated in the following table, in calendar year 2009, there 

were 1,573 Public Safety Department and PATH employees (53 percent 

of total Public Safety staff and 58 percent of total PATH staff) who were 

paid overtime that exceeded the 15-percent benchmark limit, including 

914 employees whose overtime alone totaled at least 30 percent of their 

respective base pay. For 24 of these employees, overtime pay actually 

exceeded base salaries. (See Exhibit A.) In one instance, a "Power Rail 

Maintainer 1" in PATH was paid $108,033 of overtime on top of his base 

salary of $75,725. In another instance, a "Public Safety Police Sergeant;' 

was paid $153,530 of overtime on top of his base salary of $107,878. 

Moreover, payroll data indicated that the Power Rail Maintainer and the 

Police Sergeant, respectively, worked on average 38 hours and 34 hours 

of overtime every week during 2009. 

Public Safety Department and PATH 

2009 Overtime Pay as a Percentage of Base Salmy 

Annual 2009 Annual 2009 

Overtime Pay as a Percentage of Number of Salary Overtime 

Base Salary Employees (in millions) (in millions) 

Over 15%, but less than 30% 657 $53.4 $12.0 

At least 30%, but less than 50% 545 $46.4 $17.9 

At least 50%, but less than 100% 347 $30.3 $19.8 

At least 100 percent 24 $2.1 $ 2.3 

Total 1,573 $132.2 $52.0 

Division of State Government Accountability 
Unauthorized 

and 

Undocumented 

Overtime 

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hiring additional staff as part of a strategy to address costly overtime. 

Such steps should be taken to effectively manage and control employee 

overtime. 

To determine whether Authority overtime costs were supported and 

justified with documentation, we selected a judgment sample of 39 

overtime transactions for the Authority's top 39 overtime earners (25 

for PATH and 14 for Public Safety). These transactions totaled $19,690 

and were paid during the audit period. For each sampled transaction, we 

requested documentation to support that the work warranted overtime, 

rather than work during normal work hours, and that the overtime 

hours paid for were actually worked. We found that time and attendance 

records support the hours of overtime, but we found inadequate written 

support that the work was justified to be performed on an overtime basis. 

PATH 

The 25 PATH overtime transactions in our sample account for $11,348. 

We found sufficient time and attendance records to support the overtime 

hours that were paid. However, Authority policy requires the prior 

approval of the Authority's Deputy Executive Director for overtime 

to employees who have already received overtime pay that exceeds 

50 percent of their base salary. This was the case with each of the 25 

sampled transactions, yet the required prior approval was not obtained 

and documented for any of these overtime transactions. When we 

presented this finding to PATH management, officials indicated that they 

decided not to implement the policy because it was impractical. However, 

officials could not provide documentation supporting that the written 

policy should not apply to PATH or had been rescinded. Accordingly, a 

management control intended to justify and contain overtime cost was 

bypassed. 

When we examined the justification for performing the sampled work on 

an overtime basis, we found the available documentation was inadequate. 

For example, written reasons for overtime included vague notations such 

as "67 Switch" and "6vacation:' We were informed that these notations 

meant work was needed on the number 67 switch, and an employee was 

needed to cover for a worker on vacation. However, neither the notations 

Office of the New York State Comptroller 
Management 

and Control 

of Overtime 

sheets, coupled with the employees neither signing in nor out, greatly 

increases the risk that the overtime paid for was not worked. 

Public Safety 

The 14 Public Safety overtime transactions in our sample total $8,342. 

As with the PATH transactions, we found sufficient time and attendance 

records to support the overtime that was paid. However, there was no 

documentation of prior approval by the Deputy Executive Director as 

required when overtime in amounts above 50 percent of base salary would 

result. Also, there was no documented justification explaining why the 

work performed on an overtime basis could not have been performed 

during the employees' regularly scheduled work hours. In this regard, 

Authority officials cited confidentiality and security risks as the reasons 

why the justifications could not be provided to us. 

Although we understand the significance and the often necessary 

confidentiality associated with the work performed by the Public Safety 

staff, auditors are bound to maintain confidentiality of auditee records. 

As such, there is no valid reason for Authority officials to withhold this 

overtime documentation. 

Authority central office management is responsible for overseeing 

administrative and financial matters including setting goals, establishing 

and communicating policies and procedures, preparing budgets, and 

monitoring performance for compliance with requirements. Department 

level management is responsible for following central office directives 

and managing and controlling department operations, including the 

authorization, scheduling and payment approval for overtime. 

We found that Authority central office and department officials are not 

adequately managing and controlling employee overtime costs. For 

example: 

• Central office does not require, and departments do not prepare, 

overtime budgets using a "zero-based approach:' Instead, prior year expenditures set the base for the subsequent year's budget. The current 

Division of State Government Accountability 
Effect of 

Overtime on 

Pension Costs 

2010 Authority Budget as submitted to the Governor of New York and 

the Governor of New Jersey. As such, there was no communication 

or implementation effort made in response to this initiative. If the 

specified reduction had been planned for and implemented, the 

Authority may have realized overtime savings of $12 million for 

2010 as compared to 2009. PATH and Public Safety officials both 

maintained that they were unaware of the requirements provided for 

in the budget. 

• Auditors found no documentation showing that the Authority 

had analyzed the contributing factors of overtime costs, such as 

absenteeism and employee hiring policies. 

Most full-time employees of the Authority (e.g., Public Safety) are 

required to join one of two cost-sharing multiple-employer defined 

benefit pension plans: the New York State and Local Employees' 

Retirement System (ERS), or the New York State and Local Police and 

Fire Retirement System (PERFS). Collectively, these plans are referred to 

as the "Retirement System:' 

The Retirement System provides retirement benefits to employees based 

on their respective years of service and final average salary after a set 

period of credited public service. As such, Authority employee pension 

contributions and payouts are directly affected by overtime payments. In 

fact, 100 percent of an Authority employee's overtime earnings during 

the "pension qualified period" (generally the employee's final three years 

of service) are considered in calculating the employee's annual pension 

benefits. As a result, the more overtime an employee works in the years 

immediately preceding retirement, the higher the pension benefit for 

that employee. 

According to data we obtained from the Retirement System, 71 (or 24 

percent) of the 300 individuals receiving the highest pension benefits 

from the System are Authority retirees. The annual pensions paid to these 

individuals ranged from $125,612 to $196,768, with an average annual 

pension of $143,253. This average is in sharp contrast to the average 

annual New York State Retirement System benefit of $27,629, for nonPublic Safety retirees, and $67,048 for Public Safety retirees who retired 

during the fiscal year ended March 31, 2010. Furthermore, our analysis 

Office of the New York State Comptroller 
the Ret

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contributes to supplemental pension plans. Annual PATH contributions 

to these plans are defined in various collective bargaining agreements. 

Recommendations 1. The Authority needs to assess its business model and be proactive 

in the management and control of overtime costs. It should also 

study the use of overtime (e.g., overtime necessitated by employee 

absenteeism) and the policies and oversight measures affecting 

overtime in order to identify actions to reduce overtime costs. 

2. Develop and communicate plans, policies and procedures to achieve 

the 20-percent reduction of overtime called for in the 2010 budget. 

3. Require Authority departments to justify their annual overtime 

budgets each year, specifying the circumstances where limited and 

justifiable overtime use may likely occur and how these situations 

will be managed. Monitor department compliance with approved 

overtime budgets and scrutinize the propriety of the overtime 

expense. 

4. Follow up on the questionable overtime transactions identified in our 

audit and take corrective actions as appropriate, particularly regarding 

instances where consistent lack of justification and required approval 

was not documented. 

Division of State Government Accountability 
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*Police Sergeant PS-LaGuardia Police $153,530 $107,878 $261,408 

*Police Sergeant PS-JFK Police 122,232 111,260 233,492 

* Police Sergeant PS-Port Commerce Police 121,466 112,126 233,592 

* Police Sergeant PS-Newark Police 119,314 112,126 231,440 

*Police Sergeant PS-JFK Police 116,593 102,693 219,286 

*Police Officer PS-Special Operations Unit 111,525 89,733 201,258 

*Police Sergeant PS-JFK Police 109,675 100,177 209,852 

*Rail Maintainer I PATH Way & Structures 108,033 75,724 183,757 

*Po lice Sergeant PS-Special Operations Unit 107,054 106,633 213,687 

*Po lice Sergeant PS-PATH Police 106,906 99,923 206,829 

*Track Foreman II PATH Way & Structures 106,365 88,531 194,896 

Police Lieutenant PS-PABT Police 104,389 128,950 233,339 

Po lice Sergeant PS-PATH Police 104,058 107,703 211,761 

*Track Foreman II PATH Way & Structures 103,042 88,375 191,417 

Police Lieutenant PS-Central Police Pool 102,966 123,602 226,568 

Police Sergeant PS-LaGuardia Police 101,859 112,559 214,418 

Police Sergeant PS-PABT Police 101 ,551 107,463 209,014 

Police Lieutenant PS-PABT Police 100,859 115,953 216,812 

Police Sergeant PS-JFK Police 97,794 112,093 209,887 

Police Sergeant PS-Port Commerce Police 97,661 107,479 205,140 

*Police Officer PS-Special Operations Unit 95,342 88,927 184,269 

Police Sergeant PS-Newark Police 94,474 98,358 192,832 

Police Lieutenant PS-Central Police Pool 93,063 113,363 206,426 

*Police Officer PS-Special Operations Unit 90,948 89,646 180,594 

Police Lieutenant PS-GWB Police 90,361 112,927 203,288 

Police Sergeant PS-Headquarters Support Unit 90,321 107,723 198,044 

Police Lieutenant PS-Central Police Pool 90,084 113,944 204,028 

Police Sergeant PS-WTC Police 89,455 100,335 189,790 

Detective {CIB} PS-Investigative Svcs Bureau 89,198 105,104 194,302 

Police Sergeant PS-GWB Police 88,374 95,448 183,822 

Police Lieutenant PS-Professional Standards 87,514 115,998 203,512 

*Track Foreman II PATH Way & Structures 87,299 76,566 163,865 

Police Lieutenant PS-L T Police 86,825 122,021 208,846 

Police Lieutenant PS-HT Police 86,678 123,620 210,298 

Police Officer PS-JFK Police 86,066 89,646 175,712 

Division of State Government Accountability 
Police Lieutenant PS-GWB Police 85,187 113,911 199,098 

Police Sergeant PS-LaGuardia Police 85,028 105,069 190,097 

Police Sergeant PS-PATH Police 82,821 102,546 185,367 

*Foreman PATH Car Equip 82,760 79,318 162,078 

Police Lieutenant PS-LaGuardia Police 82,726 123,602 206,328 

*Rail Maintainer I PATH Way & Structures 82,675 72,241 154,916 

Police Sergeant PS-Newark Police 82,069 99,923 181,992 

Police Officer PS-GWB Police 81,925 89,820 171,745 

Police Officer PS-GWB Police 81,826 91,551 173,377 

Police Officer PS_ Special Operations 81,765 90,772 172,537 

*Track Foreman II PATH Way & Structures 81,634 78,702 160,336 

Police Lieutenant PS- PAST Police 81,620 123,621 205,241 Police Sergeant PS-HQ Support 81,595 96,916 178,511 

Police Sergeant PS-HT Police 81,288 102,678 183,966 

Police Sergeant PS-HQ Support 81,032 110,828 191,860 

PATH- Port Authority Trans Hudson 

PS - Public Safety 

*Represents 18 of the Authority's 25 employees whose overtime costs meet or exceed their base 

salaries. The other seven employees are not presented in this Exhibit as they are not among the top 50 

overtime earners for Public Safety and PATH. 

**Represents employee's overtime earnings plus base salary. 

Office of the New York State Comptroller 
2009 

Number of Employees 

Overtime Earnings Exceed Base Salary 25 

Overtime Earnings Exceed $50,000 281 

Overtime Earnings Exceed $75,000 66 

Overtime Earnings Exceed $100,000 18 

Combined Overtime Earnings and Base 77 

Salary Exceed $175,000 

Division of State Government Accountability 
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Jul) .!0. ::!0 II 

Mr. Frank Paton.: 

Audit Director 

Division of State (hi\ crnment /\ccountal->ility 

123 \Vi Ilium Str\'ct- 21 '1 Floor 

Ncw York. NY IOOJH 

Rc: Drnfl ,\udit Report 2009-S-87 

Ocar ivl r. Patom:: 

•' '· ... ' 

1 .,-'f •, I t 

·r hank you fiJr tht.' opportunity to .:~p nd to )OUr dran audit report wn:ring tho:: r.:1 ir11 "f 

The P11rt Authority 1.1f 1\.:11 York and New .Jrrse)·'s Managem.:nt and Control nf 

Employee Ovenimc Costs. \\'c pprc iat(' the efforts that you nd your stnffhavc t:~ cn to :1sscss the controls estnblislll'd by the Port Authority rdarivr to our m:tn:lgl'lll~ H of 

ovNtime costs. W..: wckllfll<:! :my input which can further cnhatH:e our busin..:ss 

proc:esst.'s. ~l c:n[ll n our controls or reduce our costs in funhemnce of our go~ Ito 

s:1 fcgu:1rd asS\'ts. 

With respect io our usc of overtime as n managcnu.:nt tl1t)l. the l'<wlllmltorit) opctat~s itt a sccut ~ scnsitiw. high y-un it~ni;,<'J. h<'.il'ily-n:gulated. 2-l-hour-a-d:t}, scven-,l.ty-a-11 e.:" 

..:r11 ir• >rmwnl. In l>t\kr Ill clfcctivcly !ll<Ut:tgl' <Uld L'P•'t:ttc in surh rut cuviro/Uncnt, 11c employ a 1->u ine~s rnodd clc<;rgncd tl1 optimize tltt us.: of nn cnt cso un.:c~. incl utl in~ thc judit.'i•tus usc 

of owttimc 11 hen opcmtional rcquir.:-rnt·nt:: dictate ~udt use. On:rall. 1w l'l i~w tlUr inc~~ rnoJclltas scrvctloLtr stakdtoltlcrs 11d l und contimtt.:s to :rllllW us to l:>c good siCII'ttrcls ol 

the :r~ ls and missitl!l entnrstcd to the i\uthorit~. t\s surh, IH' brlicvc ir important to the 

nbjl·c tivity of the uudit that rhc report tonsitkr thr busim•ss cn1·ironmcnt in 11hiclt tht• 

Poll i\utltority up.:ratcs. i\cn::tlhl'k>~. 1\t' arc: commiuc,lto cunti nu:rlly improving out processl's And. as dc ~i k·J in 

thl' aum:hcd cs e to your rc\otnrncHdntions, h:l\ c- t,t"t'n a number uf a~t ons lu furtht•r 

enhance controls over the usr and management of uvertirnt! ac:ros' th.:- :rg<'ncy. ~:J.~ 1l:1.k 1\1 -cntle Soutfi. hth ffnot 

Nct•;liJ•.\, l:l' IOVO.i 

T· .?12 ·135 7733 

Division of State Government Accountability 
II' you han: any illll or require additional inlonnation. please conl:tl't i\mlr~w Ll'l'in.:. A:-. ~llll Di rl.'ctor. AuJit Department. at 201-2 1 n-60-lS. 

Sincerdy, 

•fYL ' :.._.n ~· '-Lu:. ,"-A)- h<~e Fabinno 

Chid f-inancial Orti.:t!r 

t\ ttachmcm 

CC: f-l(ln. David S:uns0n, Chairman. Pr\NYNJ 

Hnn. D:wid S. Strincr. Clwirnwn of the Audit Committee, PANYi\'J 

C'lu istophcr U. \Vartl. Executive DirC'c tor, P:\ NYNJ 

Uill Baroni. Dcput) Exl·t.:utin: Dirt:t·tor, PANYNJ 

Office of the New York State Comptroller 
itccc .•. lilated hy employct' u/w:ltlcJt!i,\111) all{/ the f !C tlicie,, 11111/ orer.•·iglu mcosttrc•s affi:clillg Ol'I!I'/Wh' in on let 

11 • ti!e!lli/,i · actiCII:.• wn•duet• m·ei'fil'lt' costs 

liH: Pull utht opcmtt•s in :1 -llll!Ctlli l.:d. he\\\ ily-r.:gulatcd. -d:~) sc,·~.·n \\.;:;:h l'll\'ilulllllt'lll. In ord,·, k' ctTccti\'d) mnn:tgc :md opera!<' in such :m t:ll\ irt>mncnl. we ~.·m o~ .1 

11\00.:i designed lO optimi7.t' the USC fpt'!lllOIIl~nt r~:so uro.: including the judi r•u S~ OlCl\'CI1illlC 

\\hen op.:r::niomtl rcquircmcms dictate such usc. 

Signilicant wrrc•r:Ht! practices anJ processes arc in plact! governing the monagcmcnl unci s~: (tf 

ownimc at the p,,n Authority. Tho! Oflicc ()(' the Chief Operating Officer provides oversight for 

111unitoring conformonce with :~gc cy ovt!rlimo! guidantt! .md budget initiathes primarily through 

hi-monthly performance meetings with line dcpnrtmcnt and S:~ 0t) Dl·purtmcnt 

management starr. At these meetings. ovcllimc usage, including overtime statu~. reu~on \•l't-rlintc, well as namcs and num of employee:; earning ovcnimc. is discussed. The 

:Vlanagcmcnt and Oudgel Dcpnrtment rovid~:s additionul corporate oversight lhrnugh 

imf..:pcndcnt ys~:l cnndiiCled o r agency OVL:rlime C. In n~ccn yc·ars. we hn1·e made significant rcducti.ms lo our '"''C'ntlfUJcnt \\ork10rce. \\hi\'h is .:um.:nll) a! 

ib "-'" k1 .:-1 in -10 years. Yl'l lbpik• sw.:h r.:ductions. \\c ha\' ·· bcl'n able to eflcctivdy and cl1kicntly 

fuliill •tlll mission ami lllCd t)ur r.·giPn:Ji llhligatillllS, as Li te mudd\\<: l'rllplo) pmvidcs 11ith till' nc·~d,·d lk:\ihilily h' ~[l( llld ll' changing priorities uhing lrnm in ~ss lrat.:gic tcdHtuh,git'!> an,t changes in .:...:nnomic cnnditi\ln< 0\'t'rall, belie\ our t's~ llll1.lt'l htt$ 

s.:rwJ nur wkd1oldcr wd I and cont inucs lo allow us 10 good stewards or tht' ~sc and 

mi:;sion entrusted to the Authority. 

l'\'-' ' l!t1ht'lcss. 1\'C arc commillcd l\' miuut~ll improving our processes nnd havt: wkcn a number 

of .tctinns tu fu r1ho::r o.:nhancc controls O\'l!r the use and nHulagcmcnt or O\Trlimc ilt-ro~~ the 

ngcncy In the first quaner or this year. the agency undellook a rel'iew ol' controls and budgeting 

lor ovcrtilll(' anJ a CllllCllrr<'nt rc\ ~w ot' , ick <lnd injury on JuLy proc~dur.:-s. ,\llht>ugh that 

IC\'icw is still in ptogrcss. a rccomlllcndmiou thai emerged from the rcl'icw has hccu 

im plcn1elttC'd in C•lnjuuction with the cm-y' 20 12-20 I-I planning proc.:ss that is e~cn undc'rwa~ Et'fcctiVl' for 2012 Budget, <Ill dcpartm.:nti.l l budget suhrnis.sinns arc n.:q uircd lt> 

include 11pp documemmion lor the mwtime hours budgeted for each job title. nnd tltc nlli overtime is necessary. This will in1prDI'l' llil' tracking 3ntl nwnngctllL'Ill l1fovcrtimc 

and. as required. faci litntc adjusting om hu~ in~ ~s nwdcl to address cha ge~ in husin..:ss 

cnmlttinns 11r op.-ration:JI rc::yuirem.:nts. \V.: hal'c ubo implemt:llll.'d m.:i!sures LO bl!ll~r address 

Mn ff ntt':Jncics fi>r critical on·nimc eligible positions, and han : underw ken a number of 

initiativc::s in Public .S<t!i.: ty, whit: h. ns ad,nowkdgcd in the audit, tcsultcd iu O\'l'l tim,· being 

rcduc.:d hy in exc:ess of S!O million dtuing thL' auJi t pctiod. 

Division of State Government Accountability 
Wc tu adliew the rcuuctilln in m·cnimc as an Agency n:; 

p,11 1 ol'thc 2010 Gudgd procl.'sS in pmt dll<' ttl und npcrntirmnl not 

at the tii11L' the 20 I I) Uudg.:ot w:'L'> 11 hich occurred during lh'! sel'ond half nf2tJOIJ. 

In 20 I 0. a munlx:r oft"'JNiist incid,;onls l<10k place! througlwutlhe work! 11 hie h. gii'C!l tho..: 

high prn(i[e oi'tJUr !iu:ilitics. r<!::;ult0d in hcightcnecl $ecurity initia1iws that direct!) 

llh'rtimc. The!$<: induJecllhe l\ (,\sC<'W subway bombing. tltc Times 

Squ:1rc t'<lr bomb, tht bomh Jound on bound lt1r th<: U.S. lrcnn Yemen, and 

the discoi'CI)' of packaged in car1ridgcs. In uddition to thl'SC krTOr thr..:ats. n number of significant weather incidents also occnrrd in 20 I 0 which impacted 

l\1rt J\uthority ovc11imc lc\els. including the Europ.:;1n ush cloud nnd 1lw DcCL·muc'r 

bliu:mis. 

We recognize and ncknow!.:dgc the imponnnce or controlling and minimizing Ol't)lt ime 

costs. while the same time continuing to m:-rintain onr unJ op.:rating. standan.b. As 

such. lht• Agency is com milled to improving nur processes nnd streng1hen our L'Onlrols Ill 

addrc'ss th.; issues idcmifi.:"d iu thc t\udit Report. :Uld ha\'ll implcment<:d signilicant chan):tc'S 

for the 20 l_-10 14 rlnnning process that is currently und<'tway. As p:u·t oftlw new proce';.:;, 

all <kpnruncntnl budg<·t submissioJJs require supporting do..:umcntmion for the 

hours reqllin::d for l.'ao::hjob titk and tho:: reason for the overtime. These 

requirements have bl'cn communicmet.l agency-wide as part of the 2012·201 .J MultiYear and Caf'ital Planninl; Paiod fn.rrntcliom iss ued by till' i'vbn;Jgcment 

nnd Uudgct DcpartnK'nl. Requiring t.locum..:nm!lon3S pan of the budget 

proc..:ss 1\·ill allo\1' fur bclll'r oversight by thl! Onirc of the Chief Operating Officer and 

the i'v1anag_cmcnt and Budget Dcpartmenl. and sends a strong signal throughout the 

Agency that reducing overtime t!.'\pemlitures critical area on which there nlust be 

cnll;inCCJ focu.s. 

lhcommcnrlarion 3. Rl'quire .. Jutlwrity d<Jjlartmeul.rlojll.l'ii}i1 !heir mmuol 

Ol'<'l'lilllc hlll(f!.t!l.\' eodt )'Car .lyMd{yin:;; ill£• circwmroncc.\ '"here limited am/ iusrijiaNc. 

nrcrlillle 11.1\' occur tmd h<M these ,,iruorions will b,• mmrug,•d Moniror 

tfep,rrlllw/11 ro11tplitmce wit/1 appro1·ed O\'el'limc hudgeis a11d sc·rurinir c tliP propri,•ty 

nftlll• overli111e .r.q.\'IIW!. 

,\s no!L:d in 0ur response to RccllllllllendatiClns I and 2, eftecti\'t: lo r the 2012 Budget, all 

departmental budget submissions arc required to include supporting documentation lbr the overtime hours required for each job title and the lor 1hc overtime. The Ollicc of the 

Chief Operating Oflic<'r to P\·ersight for compliance with :l[!<'llCY o1·crtime 

policies and hudgctury and the Managl:'mcnt and Budget Department will prnvidc 

adtliti<mal corp< >r<ll<' ov<'r:;ight through indcpendem ;nwlyses of agency overtime use. 

2 

Office of the New York State Comptroller 
\\.: r,,, ie11i.'d •lran tctiPn:; k•n ili~d a,: quc, tionahl\! h~ the uudit and. ltllhuugh 11..: a~ro:c thJl in SOl IlL' ins!ll!l(' justi lkntion lor thl.' ll\\!t tim.- shvuld ha1·c b<.'<'n hellt'r ~ntd, \lc diJ notlinJ ar ~:~b 1\h~:rt· corr..:cti1·c aclivn (::IS opp ~d to ~:nnl im1in the li<'L'J fi•r h,•tt.:r d• ·tum.:nl.tlion ami hli hting l hl' n.:.:J li.1r potent in I J..'l.•licy 

adju.'Stmcms) was m:ce 11~ In an eOI1rl to IX'Her lrength.: m·crsight and documentation >upponing owrtim.: .ms we 11·ill impkm<'nl periodic ind.:Jx:ndcnl quality control ell~ tu cn~ure Co11llpliai1CC with 0\'L'Iiimc justifit';lliOII requir.:lllelllS. \\ C \\lill continue lO rllt:US ['4\lli.:uf:tr 

tmcmion 1111 individual iust:mccs 11l1<:rc m·cnimc is exceeding lilly 1x·rc.:nt or the 

in,lividu:ll's base salary as 1•:.: recognize that these instmtecs han: the potential to diminish 

tht' public pc.:rc.:-pti1m of thl.' !\~c.:n ~) a good ti.'II'J.rd of the assets and missio11 cnln1stcd 

toil. 

Othc·r 1\ la tter.; 

In the interest of' presenting n f':tir ;~nd objcctii'C assessment, we ulso r,·qu.:st that certain 

statcmcms contained in the dr:tfl rq1ort b.;: rlarificd as folloii'S. 

• ··Tit.: 2010 buJgcl tkn \uth rit~ :.ubmittcd to the Gov.::mor of New York ;~nd the 

Uo\crnur of Nc.:w ~cy specified tlut O\Wtillle would be reduced by 20 ~cn t'rl111l tlw 

prior yc.1r. I ft)llen:r, tht• policy was not cnmmunicmcd or impkmcmed 11 ithin the 

Authority and o1·crtime Ct'Sis lor 2t) I 0 dccr.::asc·d by only:> r ercclll (S2.8 million) lh •m 

2009 amounts, rather than being t(·duccd by 20 percent ($1 7.7 million).'' (p:~gc SJ * 

Comptroller's 'I he 20% n:duction in'" crt in It! lit! hopl:.'J IP achi<'l'<! \\'a. nm :J J1'1tf but rnth..:r a gualthc Comment ngcnc~ cst .. Iblishl'll in l'OI\iunc·tinn 11 ilh h~ ~0 I 0 Au.lgc"t. As nott:J in l>Ur r<'-'fX>IlSl'tll 

RI.'Willllll'IIJ:11i<>n :!. \\'l' 11~ ro: unuhle II• ;1chit!l'l:.' lh<• 20"1,, r.·dm:li•>n du.: to 5.:cwil) and o~x-rationn issuC's not ruuil:ij',lll'd at lhc· ti111c thl:' ~0 Ill BuJgct \\'as d..:1'Clopcd. ll'hich occur rrJ 

during the S(·eond lwlfof 2<lOlJ. 

Ad, lit iunall,v. the gL1Jito rcducc 01 cr tin 1c by :!fJ'h, 11as W11llllllllic:med .1\gcnc) _,,ide in the 20 111-

:2012 plnnning tru-:t ~d thr\\llgh dc.:p:lrlmental hudg.;t ~ub anJ 

in the bcclllivl' IJin::ctnr'> lladc:t.~tlo tbc gen~;y ;1!kr the 20 I 0-:2\l 12 Budgd a.~ appr<ll'l'll. 

''The tot:JI compo:nsalion is crL·Liitabk Ill th.: liys t<!m li>r both l'uhlit.: S:1 i'et) and 

1 

I'ATII employees.'' (p:Jgc I I) r---: •.-----, 

Comptroller's 

01'ertimc is nnt crcditnbk for PXfl l employees. Comment 

2 

3 

*See Stat e Comptroller's Comments, page 31. 

Division of State Government Accountability 
The auditors \Vt:n:. on numerous includ i11g at the exit cont

ercncc. provided 

and d;:tniling the rcn.;on:; thl.' Po;t ;-\utlwiity able to reduce 

Public Safc.ty ll\'e tti me in 2009. \\'c would be to provide this information ugain . 

''They indicated that dep;1rtmcnt management is provided with various man11gcmcnt 

report:-; that highli ght employee overiinw earnings.'' (page IIi) 

This slatement s1.•ems to imply that we were unnble to demonstrate to the the 

various reports used by Port Authority management to monitor overtime whcn, in a munbt'r of these reports furnished to them during the course oftltc review. These.---...,..---, * included spc:t:i fie preparl'd by lHir Management anu Budget Dqxlflmcnt that 

ov<:!rtime by dep;1rtme111 and employee, and lhnt me pro,·ided It-' the Chief' 

Opcraling Officer for discussion with c:1ch Department Director. 

4 

* See State Comptroller's Comments, page 31. 

Office of the New York State Comptroller 

Comptroller's 

Comment 

4 
3. We have deleted the statement from our audit report. 

4. We acknowledge prior receipt of these reports. We also acknowledge that Authority 

officials are correct in stating the concern that the Authority was unable to demonstrate 

how the reports were used to effectively monitor and control overtime. 

Division of State Government Accountability