Audit Report on the Compliance of American Golf Corporation With its License Agreement for the Silver Lake Golf Course

EXECUTIVE SUMMARY

In 1987, the Department of Parks and Recreation (Parks) entered into a ten-year license agreement with the American Golf Corporation (American Golf) for the maintenance and operation of the Silver Lake Golf Course, in Staten Island. The license was renewed for two five-year periods; the first renewal expired on February 28, 2002, and the second renewal will expire on February 28, 2007.

The agreement requires that American Golf pay the City the greater of the minimum annual fee of $125,000, or 15 percent of revenue from greens fees and cart rentals, ten percent of food and beverage sales, five percent of Pro Shop sales, and 15 percent of miscellaneous income, which includes revenue from tournaments and promotional events.

In addition, the agreement requires that American Golf: perform $425,000 in specified capital improvements at the facility; remit a security deposit of $31,250 to the City; maintain proper types and levels of insurance coverage that names the City as an additional insured; and pay for its utilities.

This audit covered the period, January 1, 1997, through June 30, 2001. The audit determined whether American Golf maintained adequate internal controls over the recording and the reporting of its gross revenues; properly calculated its total gross revenues and fees due to the City, and paid those fees on time; and complied with the other major requirements of its license agreement (e.g., paid its utility charges and maintained proper insurance coverage.)

American Golf maintained adequate controls over the recording and reporting of its gross revenues, properly calculated fees due, and paid those fees in a timely manner to the City. In addition, American Golf maintained the required insurance, remitted the required security deposit, and spent $438,600 on capital improvements, in accordance with its agreement. Given these findings, this report makes no recommendations.

The matters covered in this report were discussed with officials from American Golf and Parks during and at the conclusion of this audit. A preliminary draft report was sent to American Golf and Parks officials on May 20, 2002. On May 29, 2002, American Golf decided that an exit conference would not be necessary. On May 30, 2002, we submitted a draft report to American Golf and Parks officials with a request for comments. We received a response from Parks officials on June 10, 2002, indicating that they were pleased with the results of the audit. We received a written response from an American Golf official on June 18, 2002, stating that given the report’s findings there are no issues that require a response.