New York City Off-Track Betting Corporation

Staff Study: Allocation of Administrative Overhead and Its Effect on Branch Profitability

Off-track betting in New York State is authorized at locations administered by regional public benefit corporations. Revenue from these operations is distributed to the State's racing industry as well as to local governments. Off-track betting in New York City is administered by the New York City Off-Track Betting Corporation. At the time of our study, more than 70 branch offices were operated by the Corporation.

We reviewed the procedures used by the Corporation to allocate administrative overhead expenses to these branch offices. We found that while an acceptable methodology is used (overhead is allocated to each branch office in proportion to the branch's operating revenue), it tends to mask the performance of unprofitable branches. If overhead were allocated instead on the basis of branch expenses, management would be more likely to be alerted that certain branches might be unprofitable and in need of greater management attention. When we allocated the Corporation's 1995 overhead on the basis of branch expenses rather than revenue, we found that 16 additional branches were unprofitable. We suggest that Corporation officials consider allocating overhead to branches on the basis of branch expenses.

For a complete copy of Report 96-N-10 click here.
For a copy of the associated follow-up report click here.
For a copy of the 90-day response click here.