New York Racing Association

Audit of Annual Franchise Fee

The New York Racing Association is a not-for-profit organization that is franchised by New York State to operate the Aqueduct, Belmont and Saratoga racetracks. According to the terms of the franchise, the Association must pay the State certain mandatory fees as well as an annual franchise fee that equals the Association's net income as defined by law. We audited the Association's financial reporting procedures and found that they provide reasonable assurance that the Association's financial statements fairly present the results of its financial activities. We also found that the Association uses the correct accounting methodology to calculate the annual franchise fee.

However, when we examined expenditure records for 1990 through 1994, we identified about $2.2 million in expenditures that were either unnecessary, extravagant, or unsupported by documentary evidence. For example, even though the Association reported no net income for 1991 through 1994, it paid 11 executives $574,000 in performance bonuses. The Association also paid a former executive $40,000 for consulting services that were not documented. We further found that the Association may be overly generous in its supplemental pension plan for selected administrative personnel. We note that, near the end of our audit period, the Association appointed a new chief executive officer, who stopped several of the questionable practices described in our report.

For a complete copy of 95-S-104 click here.
For a copy of the 90-day response click here.