Brookhaven development agency failed to properly monitor job creation, collect $7G in fees, audit finds

The Brookhaven Town Local Development Corp. failed to properly monitor job creation at construction projects it helped to finance and neglected to collect about $7,000 in annual fees from an applicant, state auditors said in a report released this month.

The office of state Comptroller Thomas P. DiNapoli said the nonprofit Brookhaven LDC, which awards tax-exempt bonds to schools, health care facilities and other not-for-profit corporations, did not properly approve some applications and failed to establish specific job creation targets for about half a dozen projects, making it impossible for officials to determine whether employment goals were met.

Among the projects were construction of new or expanded facilities at Mather Hospital in Port Jefferson, Long Island Community Hospital in East Patchogue and the Jefferson's Ferry retirement community in South Setauket, the July 15 report said.

The report said the LDC should collect fees, adopt written policies for approving and monitoring projects and include "clear and measurable goals" when it approves bonds.

LDC chief executive Lisa M.G. Mulligan told Newsday the agency would adopt the recommendations, but added the errors cited in the report were relatively minor.

“We hadn’t done anything wrong," Mulligan said Tuesday. "I’ve seen [state] audits where they found major problems [at other government agencies], and the only problem that they found [at Brookhaven LDC] was that our resolutions should be more specific. That’s a nuance.”

Mulligan said the LDC had collected $7,000 in annual administrative fees from Mather Hospital after the audit was completed. The comptroller's report said those fees had not been collected at the time of the audit.

The audit covered an 18-month period from January 2020 to June 2021, when the LDC approved two projects worth $165 million in bonds and monitored six projects carrying about $105 million in debt, state auditors said.

The report said resolutions approved by the LDC board authorizing bond financing for those projects "used the same vague and nonspecific language when defining project goals," such as employment and health benefits for Brookhaven Town residents.

"Consequently, the board could not determine whether the projects were meeting their intended purposes," the report said.

While written reports from the nonprofits to the LDC included job creation figures, the audit said, LDC officials "did not determine whether the self-reported employment information was reliable."

In a sharply worded written response, Mulligan and Brookhaven LDC chairman Frederick C. Braun III defended the agency and questioned the audit's conclusions.

"Each bond financing is thoroughly and [exhaustively] negotiated, vetted and approved by the LDC's staff, bond counsel and general counsel before it is sent to the [LDC] board for approval," they wrote in the letter, which is included in the 17-page audit report.

"To state that our projects are not properly approved is incorrect," they wrote.

They said that Jefferson's Ferry and Long Island Community Hospital are two of Brookhaven's largest employers, adding that auditors' "insistence that a goal must be 'measurable' is narrow and misses [the] value of having not-for-profits providing services."

By Carl MacGowan

carl.macgowan@newsday.comCarlMacGowan

Carl MacGowan is a Long Island native who covers Brookhaven Town after having previously covered Smithtown, Suffolk County courts and numerous spot news and feature stories over his 20-plus year career at Newsday.