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August 9, 2006

WEITZMAN AUDIT FINDS NASSAU COLISEUM MANAGER
SHORTCHANGED COUNTY ON REVENUES

SMG, a County Contractor, Withheld $900K, Mostly From Souvenir Sales

An audit released today by Comptroller Howard Weitzman has found that the manager of the Nassau Coliseum, Spectacor Management Group (SMG), has significantly underpaid Nassau County for concessions, parking and other items since at least 2002. 

The underpayments during the audit period of July 2002 though September 2005 total nearly $900,000.

“Under a deal signed in 1979, SMG leases the Nassau Veterans Memorial Coliseum from the county,” Comptroller Weitzman said.  “This arrangement puts the county at a disadvantage compared to other municipalities whose arenas are managed by SMG under straight operating agreements.  For example, the lease agreement with Nassau requires the county to maintain the building but allows SMG to keep the bulk of the concession and parking revenues.

“Now our audit has determined that the company has shortchanged the county by nearly $900,000 on its share of those concession and parking revenues, and in other areas as well.

We have forwarded our report to the County Attorney and have asked her to take appropriate action to recoup these underpayments.”

In the most serious finding, the audit found that SMG shortchanged the county on its share of revenues from the sale of souvenirs by $823,677 from July 2002 through December 2004, apparently basing its computations on a 1984 amendment to a concessionaire agreement, when a third-party company operated souvenir concessions for SMG.  Since SMG operated its own souvenir concessions during the audit period, the county should have received 25 percent of total gross receipts for souvenirs, excluding permitted deductions, the audit says.

In addition to the underpayments on concession revenue, the audit found that SMG understated its commissions from Aramark, a food concessionaire, in some cases reporting commissions to the county that were less than the amounts Aramark reported to SMG.  This resulted in an underpayment to the county of $12,330.   SMG also excluded concession revenues from 18 events, resulting in an underpayment to the county of $3,353.

“Our auditors also found that SMG did not properly calculate and remit revenues from its parking fees,” Comptroller Weitzman said.  “Out of approximately $2 million per year the company collects in parking revenues, the lease requires SMG to pay the county 12.75 percent.  Our audit determined, however, that SMG failed to report revenues earned through prepaid season parking vouchers used by hockey patrons.  SMG also under-reported other types of parking revenues, resulting in a total underpayment of $39,328.

“Moreover, SMG uses an outdated, manual system to collect parking fees, and its internal controls over the revenue collections are inadequate.  In their examination of 51 events, our auditors found that, on average, 43 percent of the gates reported cash shortages when compared to the number of vehicles parking, an unacceptable error rate,” Comptroller Weitzman said.

In a third major finding, auditors found that SMG did not pay the entertainment tax of $1.50 per ticket on complimentary tickets.  In tests of 13 out of 116 events held during the audit period, auditors found that SMG did not pay the $1.50 tax on 13,924 complimentary tickets issued, for a total underpayment of $20,886.

“We are asking SMG to review all the events held at the Nassau Coliseum in order to determine the number of complimentary tickets and the full extent of the underpayment, and to correct the tax returns SMG files with the county,” Comptroller Weitzman said.  “This matter as well will be referred to the County Attorney.”

The audit also reported that SMG was consistently late in making lease payments to the county, finding that:

  • concession revenues were paid nine to eleven months late;
  • rental payments and expense reimbursements were paid an average of three to four months late; and
  • parking revenues were paid two months late.

Nassau County entered into the Coliseum lease agreement with Spectacor Management Group in 1979.  The original 30-year lease was extended in 1986 to July 31, 2015.

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SMG - Audit Report