Report on the Monitoring of Franchise, Concession, License and Lease Agreements by City Agencies

Table I Revenue Assessed by Agency Franchise, Lease, License, and Concession Audits January 1, 2002–June 30, 2006

The Comptroller’s Office conducts audits of concession and franchise agreements granted by City agencies pursuant to its authority under the City Charter. These audits provide a snap shot to evaluate the performance of the entity over the scope period of the audit.  The results of these audits do not ensure that the conditions found and the resulting findings were not present before the audits started or did not continue after the audit reports were issued to the public.

The audits of these agreements evaluate the payments made by such entities as cable television franchises, sports teams with leases to operate in public stadiums, and agreements between the City and concessionaires licensed to operate on parkland and other City property.  The audits determined whether these private entities paid the City the fees they owed in accordance with their agreements.  The audits cover a given time period within the term of the agreement.  Between January 1, 2002, and June 30, 2006, the Audit Bureaus have completed 41 audits of entities with City franchise, concession, license, and lease agreements.  This compilation report provides an anthology of the findings of the 41 audits and also makes an overall conclusion based on the results of these audits.

Findings and Conclusions

Between January 1, 2002 and June 30, 2006, the Audit Bureaus have completed 41 audits of entities with City franchise, concession, license, and lease agreements.  These audits resulted in the assessment of $23,804,840 million in additional revenue due the City.  The City has collected $16,627,231 in revenue as a result of the audit findings, and has the potential to realize an additional $7,177,609 in outstanding revenue.  The additional revenue can be collected if all recommendations identified in the audit reports are followed.  Table I, below, shows the amount of revenue assessed by agency from the franchise, concession, license, and lease audits completed by the Comptroller’s Office between January 1, 2002 and June 30, 2006.

In general, based on the results of the 41 audits of concession, franchise and lease agreements overseen by a number of City agencies, it is apparent that the agencies do not adequately monitor the parties granted these agreements, as required by the City Charter.  Moreover, 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.  It appears that as long as these agreements provided revenue to the City, lax or no monitoring occurred from the oversight agency.

Recommendations

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.  These policies and procedures should include steps that each agency should perform to ensure that the private entity granted the concession, franchise, or lease agreement is complying with the provisions of the agreement. These steps could include periodic reviews of revenue collections and internal controls, to help ensure that the entity had accounted for and reported all its revenue to the City and paid all the fees owed.  Monitoring agencies should also review when capital improvements are required in the agreements and periodically inspect properties to ensure the adequate completion of improvements.