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New York City Comptroller William C. Thompson, Jr. has issued an audit finding that First Tee of Metropolitan New York, Inc. failed to accurately report all revenues and submitted “questionable” receipts stemming from its operation of the Mosholu Golf Course in the Bronx.

“My auditors identified internal control weaknesses in the manner in which First Tee recorded $537,482 in revenue that was reported to the City,” Thompson said.  “The City must make sure that First Tee complies with the terms of its license agreement.”

In June 2004, the Department of Parks and Recreation signed the sole source agreement with First Tee to operate and maintain the course, driving range, snack bar and pro-shop in Van Cortlandt Park. Under the agreement, First Tee must pay the City the greater of a minimum annual fee or an annual percentage of gross receipts.

First Tee operates as the local chapter of a non-profit organization dedicated to providing young people with free golf instruction, developmental and educational programs.

First Tee also is required to reconfigure and make temporary improvements to the golf course after portions of the concession premises were selected by the City’s Department of Environmental Protection and Parks as the site of a new water treatment plant. The agreement stipulates that the City will reimburse First Tee quarterly for the revenue that would be lost as a result of disruptions caused by the treatment plant’s construction.

The audit – which can be viewed at www.comptroller.nyc.gov – determined whether First Tee properly calculated gross receipts and license fees due the City, and paid these license fees on time; complied with requirements for obtaining reimbursements for undertaking temporary improvements and for recovering lost revenue; and complied with other major requirements of its agreement. The audit covered January to December 2006.

For CY 2006, First Tee reported receiving $537,482 in gross receipts and surcharges and paid the minimum required $140,000 in fees.

Auditors noted that First Tee generally complied with license agreement requirements pertaining to paying utility bills on time, submitting the required security deposit, maintaining proper insurance coverage, submitting on time a report of rounds of golf played and a statement of gross receipts. 

However, auditors found that the amount of gross receipts that First Tee reported to Parks for that year - $537,482 - was inaccurately reported, and should have included an additional $18,704 in gross receipts from program fees.

Furthermore, auditors questioned an additional $21,245 in receipts because they lacked adequate supporting documentation to qualify as sponsorships, which would have permitted their exclusion from gross receipts. 

Nevertheless, Thompson noted, the additional receipts would not have resulted in the $140,000 minimum annual fee threshold being exceeded, and would not have affected the $52,111 in surcharges paid by First Tee to Parks. However, the additional receipts do affect the reimbursements that First Tee received for lost revenue. 

Additionally, First Tee improperly calculated the amount of revenue that was lost as a result of disruptions caused by construction of the water treatment plant.  First Tee understated its excess gross revenue and was overpaid $157,556 in reimbursements for lost revenue in CY 2006.

Moreover, given that First Tee did not provide documentation to substantiate an additional $21,245 in revenue, First Tee may actually have been overpaid $178,801 in reimbursements.

Thompson noted that First Tee also did not deposit in a required interest bearing account additional reimbursements it received for making temporary improvements to the golf course, and so the City was not credited with up to $53,115 in interest revenue.  

Lastly, First Tee did not have the required insurance endorsements, did not submit on time the required income and expense statement or financial statements with a summary comparing actual gross receipts with the receipts that it anticipated as a result of disruptions from the treatment plant’s construction. 

Thompson made 13 recommendations, asking First Tee in part to obtain prior Parks approval for all sponsorship agreements that are being used for charitable purposes and include all revenue from programs fees when reporting gross receipts. He also asked First Tee to credit the City up to an additional $178,801 for excess gross receipts earned during operating year 2006, and Parks to ensure that First Tee complies with its agreement.

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