HomeMy WebLinkAbout4D - Midewest Cablevision Gross Revenue Audit
DATE:
INTRODUCTION:
BACKGROUND:
DISCUSSION:
4 (d)
RALPH TESCHNER FINANCE DIRECTOR
CONSIDER APPROVAL OF MIDWEST CABLEVISION GROSS
REVENUE AUDIT
OcrOBER 4, 1993
The purpose for this agenda item is for the Council to consider approval of
a joint revenue audit of Midwest Cablevision gross receipts to be
conducted on behalf of the Cities of Prior Lake and Savage.
The City entered into its initial Cable Franchise Agreement with North
American Communications in 1983. Subsequently the cable franchise was
transferred to Star Cablevision in 1988 and ultimately to the present
operator of Midwest Cablevision in 1992. Usted below is a revenue track
of franchise fees received since inception:
YEAR
1984
1985
1986
1987
1988
1989
1990
1991
1992
AMOUNT
$2,035.57
$8,979.06
$9,166.14
$13,200.63
$17,825.33
$19,588.89
$22,279.35
$24,745.23
$40,448.06
Our cable franchise ordinance requires that a franchise fee equivalent to
5% of gross revenues be paid to the City annually. There has been some
concern expressed by Staff as to how accurately revenues are being
reported to ensure that the City is being paid appropriately.
It would appear that working together would be mutually beneficial since
both the Cities of Prior Lake and Savage share the same provider, physical
cable plant and financial records. The general purpose of the revenue audit
would accomplish the following:
1. Cost savings would be realized due to cost efficiencies in
performing a dual audit by the same company.
2. Verification that all possible revenues are being properly
accounted for and credited to each city's account.
3. Model reporting format would be designed for reporting
gross revenue by Midwest Cablevision in the future.
4629 Dakota S1. S.E., Prior Lake, Minnesota 55372 / Ph. (612) 4474230 / Fax (612) 447-4245
AN EQUAL OPPORTUNITY EMPlOYER
"
Attached is a Request for Proposal for such services that has been
prepared by the City of Savage's cable consultant based upon issues
discussed by both cities. Such information provided by a gross revenue
audit should provide valuable financial disclosure that our cities may rely
upon in reviewing franchise payments henceforth.
The estimates that have been received for a single audit range between
$1700 and $2500. Staff consensus is that if the total cost of a dual audit
were shared equally between our two cities on the basis of subscriber
count, the individual cost would be less than indicated above.
RECOMMENDATION: Payback of this investment could be significant given the compounding of
time over the period of the next several years even if only small
discrepancies are revealed. Based upon these assumptions and potential
benefits Staff would recommend that the Council authorize a joint revenue
audit of Midwest Cablevision in the scope of the enclosed RFP as
indicated.
ACTION REQUIRED: A motion to approve as part of the consent agenda is in order.
CABLE I. WRf
Cities of Savage & Prior Lake
Audit of Gross Cable TV Revenues
Request For Proposals
SCOPE:
The Cities of Savage, Minnesota, and Prior Lake, Minnesota, are seeking proposals to perform
the following functions:
* An audit of gross revenue derived directly or indirectly by Midwest Cablevision, its
affiliates, subsidiaries, parent, and any person in which Midwest has a financial
interest of five percent (5 %) or more from or in connection with the operation of the
SavagelPrior Lake Cable TV system for the one year time period from July 1, 1992,
through June 30, 1993;
* A report for each city, specific to each city, detailing any discrepancies between
reported gross revenues and audit verified gross revenues;
* A category by category report that can be used as a model for the reporting of gross
revenue by the cable TV provider;
* Determine whether the cable operator's allocable revenues were equitably apportioned
between Savage and Prior Lake;
* Determine whether there are any incomes derived from the SavagelPrior Lake area that
are paid directly to the parent company.
DATA:
* Though owned by an MSO, Intermedia Partners, the physical cable system operated by
Midwest is limited to the two cities of Savage and Prior Lake.
* Each city has a separate franchise agreement with Midwest.
* There are approximately 4935 subscribers in Savage and in Prior Lake.
* The Cities of Savage and Prior Lake were served by two operators during 1992; Star
Cablevision from January 1 through June 30, and Midwest Cablevision from July I
through December 31.
* Communication between Midwest and Savage concerning gross revenue computation is
enclosed.
REQUIREMENTS:
Audit should be performed in accordance with generally accepted auditing standards.
FOR QUESTIONS:
Christopher Oace
Cable Consultant
1255 Laurel Ave
St. Paul, MN 55104
(612) 645-0334
or
Mark McNeill
City Administrator
6000 McColl Drive
Savage, MN 55378
(612) 890-1045