New York City's Economic Development Corp. has reacted strongly to a new audit by the city comptroller that says the agency allowed locally-based Turner Construction Co. to rack up more than $3 million in "dubious" payments on a construction and facilities management contract.

The comptroller says the contract had ballooned to nearly $74 million from $7.5 million in three years. It involved a variety of projects, including a garage and pedestrian protection during pier repairs.

"We are disappointed that after a 16-month review, the Comptroller's Office has issued an audit report that is flawed, misleading and draws unsupported conclusions,” said EDC in a written statement.

The EDC statement said that “20 of the 21 completed projects included in this audit came in under budget-for a net aggregate savings of $2.7 million."

City Comptroller John Liu seems to have anticipated that his 86-page audit, released last month, would set off a firestorm. The lengthy document, which includes EDC responses to every recommendation, acknowledges that there is extensive disagreement in the "amount of opposing detail now included in this report."

Yet the controversy seems to have overshadowed the contents of the audit, including the construction projects criticized and allegations by. Liu that years of EDC inaction on construction hazards endangered public safety in three instances.

The audit states that Turner was overpaid on a number of municipal projects, and criticized the contractor, and EDC, for inaccurate installations, "poor quality work" and "incorrect labor rates."

The audit alleges "[u]nnecessary costs for material loading, storage and transportation," the installation of temporary roofing, insurance paid prior to work cancellation and "[e]xcessive construction management costs," totaling more than $1.4 million.

The comptroller also claims there was a lack of pre-payment auditing, improper reimbursement, poor documentation and improper use of allowance, totaling close to $1.8 million.

The audit offers 31 recommendations on how EDC can resolve "significant weaknesses" of its contract oversight, 19 of which the corporation said it was already complying with. However, it disagreed wholly or partially with nine recommendations and emphatically denied that its actions “endangered public safety."

But Liu was unmoved. “In these cases, the Corporation's belated approach for compelling Turner to undertake critical and timely repairs of city facilities indicates [its] lackluster approach in providing effective oversight and monitoring," the audit states.

EDC claims that the positive results of municipal projects it managed “speak for themselves," but the audit contends the agency “cannot absolve itself from its overall [contract management] responsibility."

A Turner spokesman said that the company has complied fully with the audit and cooperated with the EDC.

“While EDC has provided a full response to the Comptroller's report, we can reiterate that Turner's "on-call" facility management and construction management services are being performed with a full-commitment to quality, safety and integrity,” says a company statement. “With the established ‘on-call’ agreement we have with the EDC, we are able to quickly mobilize staff and resources to respond to their needs as projects are identified and funds are made available.”

This story has been revised at 12:25pm on March 4, 2011.