Copyright 2014 Albuquerque Journal
Albuquerque Journal (New Mexico)
Internal auditors examining Albuquerque's municipal golf courses found poor management and a "fundamental breakdown in common business practices" that have cost the city hundreds of thousands of dollars, according to a recent report.
In one case, auditors said, a 2008 arrangement resulted in the city's forgoing $1.5 million in revenue in exchange for a point-of-sale checkout system that would have cost $60,000.
Meanwhile, the city's inspector general is investigating "potential fraud allegations" and will issue a separate report addressing allegations of fraud, waste and abuse.
Maintenance of grounds and facilities at Albuquerque's four municipal golf courses is the city's responsibility, but independent contractors manage the business operations and concessions for a share of the revenue from liquor, food, merchandise, equipment sales and the like. All greens fees must go to the city.
Westside Golf Inc. runs Ladera; New Mexico Golf Ltd. runs Arroyo del Oso and Puerto del Sol; and Los Altos Golf Course Concessions Inc. runs Los Altos, according to auditors.
Those companies, representatives of whom disputed the findings Tuesday, have been on the job since at least 1995. One contractor, New Mexico Golf, traces its first city work to 1969.
The internal auditors say many of the problems have been clear since a 2002 audit, yet the city's Golf Management Division appears reluctant to "enforce contractual obligations and impose sound business controls on concessionaires."
Mayor Richard Berry's administration said the city is making improvements already, partly through new contracts being negotiated with the concessionaires. That work started before the recent report, said John Soladay, the chief operations officer at City Hall.
"We're already tightening controls and oversight within" the golf division, Soladay said Tuesday. "I'm confident that each and every one of the issues pointed to within this audit will be fully and completely addressed to pretty much anybody's satisfaction."
The city's internal auditors outlined their conclusions in a 12-page report known as a "special administrative review," issued June 16. The city's Office of Internal Audit conducted the review at the request of the city administration, after a tip about problems in golf-course operations.
The Golf Management Division is part of the Parks and Recreation Department.
"Overall, the city's golf operations are deficient because of a fundamental breakdown in common business practices," auditors said.
The concessionaires strongly dispute that they have any sense of entitlement or fail to carry out contractual requirements.
"I have no idea what they mean," Sam Zimmerly, president of Westside Golf, which runs Ladera, said of the audit. "We can't make a move without Golf Management telling us what to do."
The number of rounds played at Ladera fell sharply with the deterioration and then reconstruction of the golf course, he said.
"I'm barely surviving," Zimmerly said, "but we've had a great relationship with Golf Management."
Tony Hidalgo, president of New Mexico Golf, said his company has "absolutely" followed every rule in its contract.
"The city checks on it," he said. "It's not like they just let things go."
As for a feeling of entitlement among concessionaires, Hidalgo said, "I don't believe that at all."
He praised the city golf courses.
"Being a golf pro, I've played golf all over the United States, and the city of Albuquerque's golf courses - the way they're run and the conditions of them - are second to none," Hidalgo said.
Debra Yoshimura, director of the Office of Internal Audit, defended her team's work.
"Our report is accurate," she said.
Operating at a loss
The golf program has operated at a loss over the past three fiscal years examined by auditors, with each year's operating expenses outpacing revenue by at least $129,000, the report said. The city's general-fund budget, supported by taxpayers, makes up the difference, Soladay said.
Auditors, meanwhile, said the city has forgone revenue that could have been used to better maintain the golf courses.
In 2008, the city bartered for a point-of-sale checkout system, in exchange for greens fees and golf cart use at the courses, auditors said.
The transaction "resulted in foregone revenue of approximately $1.5 million in exchange for a (point of sale) system that would have cost the city" about $60,000, auditors said in their report.
Auditors didn't identify the vendor that provided the system, but the company was able to market "these tee times online and profit from the proceeds," the report said.
The transaction should have involved competitive bidding and a contract approved by the City Council, auditors said.
Soladay said the company that provided the checkout system, called Easy-Links, "is used by the industry everywhere. ... What we had here, while it met industry standards, our audit pointed (out) that it wasn't a best business practice."
The city is now installing its own point-of-sale checkout system.
Zimmerly said he believes auditors overestimated the lost revenue and underestimated the value of the system. The tee times the company got were the least desirable, such as afternoons on a hot day, he said.
Auditors said the city's Golf Management Division also handled other transactions by exchanging golf rounds for goods or services.
A company hired to re-stripe parking lots, for example, was paid in greens fee gift cards, a transaction that "was effectively off book," auditors said. "... When it was discovered that re-work was required, the city lacked recourse because the vendor had already received the gift cards."
Soladay said the city is working hard to improve oversight for golf-course operations. New cameras have been installed to allow close monitoring of concessionaires, he said.
Much of what the auditors found - questions about the use of banquet rooms and such - doesn't amount to a "huge loss of revenue," he said. "The city golf courses are the best value in town," Soladay said. "It's excellent recreation."
Details of golf shortcomings
In their report to the city administration, internal auditors said:
The city's Golf Management Division hasn't adequately managed the golf program and "the city's concessionaires have developed a false sense of entitlement regarding their contracts and contractual obligations." That's hindered the city's ability to collect the revenue needed to sustain golf operations.
The city parks department has known about many of the operational problems since a 2002 audit but appears reluctant to fix them. "Likewise, concessionaires have continued deficient contractual and business practices. Contractual obligations appear to be taken as suggestions and this attitude has been perpetuated by (the Golf Management Division's) reluctance to enforce contractual obligations."
Concessionaires have issued paper gift certificates, a practice not approved by the city or addressed in contracts. As of June 6, there were about $50,000 in outstanding unauthorized gift certificates.
Concessionaires have participated in interviews to hire a city golf superintendent, a "clear conflict of interest."
No new concessionaire has taken over a golf course since 1995, and there hasn't been competitive bidding for the work.
Concessionaires, in turn, told auditors that "inconsistent care of greens and fairways are ongoing issues."