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<br />, "" <br />. INFORMATION <br /> CITY OF ARDEN HILLS <br /> MEHE1lNDUM <br /> mTE: May 21, 1992 <br /> ro: Mayor and City council <br /> ~therine J. Iago, Acting Clerk 1\dmini.strator <br /> FRCM: -ff'tf. Terry Post, Tarporary City 1lcoountant <br /> SUBJECT : Charitable Gambling <br /> When I first began my accounting assigrnnent at the City, one of the <br /> first areas of investigation was charitable gambling receipts. '!he <br /> initial scope of my work was to detennine if licensees were cu=ent in <br /> their ten percent contrib.1tion payments to the city am if receipts-to- <br /> date were tracking against b.Jdgeted revenues. I satisfied myself that <br /> there does not appear to be a collection problem am estimted annual <br /> revenue expected to marginally exceed b.Jdgeted revenue ($85,000). <br />. However, as I broadened my scope to detennine if licensees were <br /> calculatiIlCl their contrib.1tion payments to the City as pres=ilied by <br /> local Ordinance, I identified another set of issues that ultimtely will <br /> require your consideration for resolution. <br /> ORDINANCE FORMUIA VS. FORMUIA USED: <br /> City Ordinance clearly defines the formula f= calculating net profit as <br /> being gross profit less allowable expense. In actual practice, most <br /> organizations have also been deducting "lawful expenses" (Le.; federal <br /> state, am local taxes) fram gross profit. My interpretation of our <br /> Ordinance, as seconded by City Attorney Filla, is that most of the <br /> licenses organizations are not in corrpliance with our Ordinance (see <br /> attachment) . I conservatively estimte the dollar inpact to the city of <br /> nOl1CCRllpliance to be approximately 50 to 70 percent of contrib.1tion <br /> payments made, or about $60,000 to $70,000 annually. <br /> It should also be noted that I could find nothing issued by the City, <br /> aside from the Ordinance itself, that encourages corrpliance such as a <br /> calculation worksheet that clearly defines the basis of calculation am <br /> serves as an audit trail. <br /> I believe the options available regarding this issue are as follavs: <br /> 1- Aggressively pursue collection of underrep:>rted contrib.1tions <br />. since date of initial licensing. 'lhis approach would constitute <br /> enforcement on a retroactive basis. <br />