Audit: Some Financial Controls Overlooked by Operator of Tommy Hilfiger Jones Beach T

[Night Owl]

August 10, 2005

Audit: Some Financial Controls Overlooked by Operator of Tommy Hilfiger Jones Beach Theatre

Contractor Beach Concerts, Inc. Gives Away $4.7 Million in Tickets Without Written Policies or Procedures; Parks Dept. On-Site Manager Could Not Account for Use of Complimentary Tickets He Received

The company that contracts with the State to manage the Tommy Hilfiger at Jones Beach Marine Theatre on Long Island has complied with most of the financial provisions of the contract, but there is little control over the thousands of complimentary tickets to events at the venue that are given away each year, according to an audit released today by State Comptroller Alan G. Hevesi.

Beach Concerts, Inc. – a subsidiary of Clear Channel Communications – runs the 53-year-old 15,200-seat outdoor theatre located in Jones Beach State Park under contract with the New York State Office of Parks, Recreation and Historic Preservation (OPRHP). The contract generates more than $3 million in revenues for the State each year.

While Beach Concerts had properly recorded and deposited ticket revenues and most contract payments were made to the State as required, auditors found that certain other required payments had not been made and some financial controls stipulated in the contract were not in place. Auditors also determined that OPRHP did not actively monitor Beach Concerts’ operations.

“The Jones Beach Theatre is truly one of the gems of the New York State park system and has attracted a wide range of top musical acts and other entertainment for more than half a century, but there have been many years when the Theatre ran a deficit,” Hevesi said. “Beach Concerts has helped make the Theatre a revenue source for the state. However, the Department of Parks, Recreation and Historic Preservation should be more diligent in managing its contract with Beach Concerts in order to maximize State revenues from the operation and ensure that the contractor has required financial controls in place.”

Beach Concerts, like other concert venue operators, issues “papering” tickets to help fill the theatre when ticket sales for an event are lower than expected. In 2002 and 2003, Beach Concerts issued a total of 102,727 complimentary tickets with an approximate value of $4.7 million. Auditors determined that neither Beach Concerts nor OPRHP has any written policies and procedures for issuance of complimentary tickets, and found no documentation for authorization relating to their use at the Theatre. Auditors noted that the issuance of complimentary tickets could effect the State revenue from the Theatre, since the contract with Beach Concerts stipulates that the company must pay the State five dollars for each ticket over 400,000 sold in the May-September concert season. OPHRP officials indicated that they would work with Beach Concerts to develop a system to account for the complimentary tickets.

The Theatre Manager, a OPRHP employee who is the on-site liaison with Beach Concerts, received six tickets for each of the 96 concerts in 2002 and 2003 – a total of 576 tickets valued at $25,417. Beach Concerts officials said it was a longstanding practice to provide these tickets to the Theatre Manager – which were reportedly used when patrons complained of broken or dirty seats or similar situations – but there was no provision in the contract to do so.

The Theatre Manager told auditors that he seldom used the tickets and discarded most of them. When auditors examined a sample of 120 of the tickets issued to the Theatre Manager, they found that although the Theatre Manager said that he had used only 20 of the tickets and had discarded the remainder, entry area ticket scanners showed that 48 of the tickets had been used. The Theatre Manager could not explain how the 28 additional tickets could have been used, and auditors noted that the Theatre Manager could have sold the tickets for personal gain. When auditors notified OPRHP officials of this situation, they instructed Beach Concerts to stop distributing the tickets to the Theatre Manager and referred the matter to the State Inspector General.

The Theatre Manager worked for OPRHP on a part-time hourly basis, and auditors found that he also held a full-time job as an appointed official in the Town of Islip, where he was scheduled to work 7.5 hours a day, Monday through Friday. On 38 concert days in the 2002 and 2003 seasons, the Theatre Manager worked more than 12 hours and as much as 23 hours in his two jobs. On 26 of the 38 days, he signed in for work at the Theatre at 3:30 p.m. Given the travel time between the two locations, auditors determined that the Theatre Manager would have had to start work in Islip on these days at 6:30 a.m., or left the Islip job early without charging leave accruals.

Auditors noted that the Theatre Manager’s supervisor, the State Parks Manager, worked at a different location and auditors questioned whether his time and attendance was monitored effectively. OPRHP officials said that a review of the Theatre Manager’s time and attendance records and related materials found no instances in which he was paid for time not worked.

Other findings of the audit included the failure by Beach Concerts to maintain required bank accounts, some lax controls in computerized box office operations and $35,294 in contract payments relating to police services that were not made to the state by Beach Concerts. Beach Concerts made the police service payment to the State after it was identified by auditors.

The audit covered the period from February 28, 2000, the inception date of the contract with Beach Concerts, through August 31, 2004.

[Night Owl]

from the audit:
Our tests revealed that ticket sales and other revenues received were properly recorded and deposited, and that Beach Concerts remitted most of the payments required by Contract X000381. However, we also found the contractor had not made deposits to the R&R and Maintenance accounts in a timely manner, and deviated from the contract requirement regarding account maintenance. We also found there are no written policies or procedures over the issuance and control of the thousands of complimentary tickets Beach Concerts issues each season. Without control over the authorization and distribution of such tickets, ticket revenue could be misappropriated.

http://www.osc.state.ny.us/audits/al...93005/04r2.pdf