-City still fails to collect $7.2 million despite comprehensive audit findings-

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New York City Comptroller William C. Thompson, Jr. today charged that New York City agencies are routinely failing to adequately monitor private entities granted franchise, concession and lease agreements - costing taxpayers at least $23.8 million.

In a new report that compiled findings from 41 audits Thompson conducted since 2002, the Comptroller takes aim at agencies that have regularly fallen down on the job and failed to thoroughly monitor their agreements with vendors that have won often lucrative concession, franchise and lease agreements from the City.

The City Charter requires that City agencies granting franchises, leases and concessions shall monitor the performance and enforce the terms and conditions of these agreements.

“The results of the majority of the audits raise the question as to the attitude of the agencies in their role as the City’s oversight body charged with monitoring the activities of the entities granted these agreements,” Thompson said. “It appears that as long as these agreements provided any revenue whatsoever to the City, lax or no monitoring occurred from the oversight agency.”

This analysis – which can be viewed at www.comptroller.nyc.gov - was based on 41 audits issued from January 1, 2002 to June 30, 2006, on entities that secured franchise, concession, license and lease agreements with the City. Overall, the audits found that City agencies were remiss in collecting $23,804,840 in revenue owed to New York City.

Astonishingly, of the $23,804,840 in revenue Thompson identified in the audits, the agencies only collected $16,627,231 in revenue as a result – leaving another $7,177,609 uncollected.

Thompson named six agencies for allowing the $24 million to initially go uncollected and in a number of cases for failing to monitor whether capital work was being performed according to their agreements with the City. Some of the agencies are:

• Parks and Recreation - Of 26 six audits that were conducted involving concessions, leases and permits, 20 found that the city was owed $8,990,700. Of this amount, the City collected $7,909,967.
  
  
• Department of Information Technology and Telecommunications - Audits of franchise agreements determined that Time Warner Cable and Cablevision owed the City $7,756,259. The two subsequently paid all of the money. An audit of the franchise agreement of Telebeam Telecommunications Corporation determined that Telebeam and 14 other public pay telephone operators owed the City $5,250,706, of which Telebeam owes $1,547,456 in fees and related interest.
  
  
• Economic Development Corporation - Two audits of lease agreements found that the Staten Island Yankees should have paid the City $373,517 and $570,202 - and still owe the City $570,202.
  
  
• Department of Transportation - An audit determined that $418,902 was owed by Viacom for significantly underreporting bus-stop shelter advertising revenue. Viacom subsequently paid the City the entire amount.

“In the majority of audits, the auditors determined that the entity had inadequate internal controls and poor record-keeping,” Thompson said, noting that his auditors often had to conservatively calculate how much revenue was actually earned. “In fact, because of such poor recordkeeping, the money that was actually earned and the dollars owed to the City could have been substantially higher.”

Of the 41 audits, 21 covered agreements requiring capital improvements or maintenance to property - and the vendors involved were to complete $24.4 million in capital work. In six of the audits - more than a third - the entity failed to do so or to expend the amount required.

In the four audits in which the entity did not complete the capital work, there was a total of $5.4 million in improvements not completed out of a total of $8.2 million required.

Under the Charter, the Comptroller conducts audits of concession, franchise, and lease agreements granted by City agencies. The audits - which provide a snapshot to evaluate the performance of an entity- evaluated payments made by cable television franchises, sports teams and concessionaires licensed to operate on parkland and other City property.

“The Mayor’s Office must institute uniform policies and procedures that all agencies must follow to ensure that entities granted concession, franchise and lease agreements are adequately monitored by each respective oversight agency,” Thompson said.

“These policies and procedures should include steps that each agency should perform to ensure that the private entity is complying with the provisions of the agreement, and could include periodic reviews of revenue collections and internal controls.”

Further, Thompson noted that agencies should also review when capital improvements are required in the agreements and periodically inspect properties to ensure the adequate completion of improvements.

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