Audit Report on the Compliance of Cablevision Systems New York City Corporation for the Brooklyn with Its Franchise Agreement

AUDIT REPORT IN BRIEF

In 1998, the City, through the Department of Information Technology and Telecommunications (DoITT) renewed the Cablevision Systems New York City Corporation for Brooklyn (Cablevision-Brooklyn) franchise agreement for 10 years. The agreement requires that Cablevision-Brooklyn pay the City five percent of its annual gross revenues, less the mandatory payments that Cablevision-Brooklyn makes to the New York State Public Service Commission (PSC). Cablevision-Brooklyn is also required to carry a $50 million combined insurance policy for property damage and bodily injury, naming the City as an additional insured; deposit $4.38 million with the City Comptroller’s Office as security; and provide $4.60 per subscriber annually to support the Community Access Organization (CAO).

This audit determined whether Cablevision-Brooklyn: maintained adequate internal controls over recording and reporting of gross revenues; accurately reported its total gross revenues, and calculated and paid the City the appropriate franchise fees due on time; and complied with certain non-revenue-related requirements of its agreement. For the period January 1, 2001, through December 31, 2002, Cablevision-Brooklyn reported gross revenues amounting to $385.7 million, and paid the City fees totaling $18.9 million. In addition, Cablevision-Brooklyn paid the New York State Public Service Commission $426,114.

Cablevision had an adequate system of internal controls over its recording and reporting of revenues. Cablevision accurately reported its revenues to the City, and accurately calculated and paid its fees to the City on time. In addition, Cablevision maintained the required $50 million insurance coverage, which named the City as an additional insured; remitted the appropriate security deposit to the Comptroller’s Office; and made all required payments to the PSC and the CAO.

However, Cablevision overstated its allowable sales tax deductions by $276,334 on its Quarterly Gross Revenue Statements to the City for 2001. Consequently, Cablevision owes the City $14,804 in additional franchise fees and calculated interest for the period, January 1, 2001, through December 31, 2002.