Audit Report: Nevada Athletic Commission

Audit Report: Nevada Athletic Commission

Legislative Counsel Bureau Audit Division:

Audit Report on "Nevada Athletic Commission"

Brief Description of Nevada Athletic Commission

The Nevada Athletic Commission (NSAC), first established in 1941, is a five-member body appointed by the State Governor for a three-year term. It regulates all contests and exhibitions of unarmed combat within the state of Nevada, through issuance of licenses to hold contests or exhibitions where an admission fee is charged, and to all contestants, promoters, boxers, seconds, ring officials, managers, and matchmakers who participate in a professional contest or exhibition. "Unarmed combat" in Nevada includes sports such as boxing, professional wrestling, kickboxing, and martial arts. The Commission is the final authority on licensing matters, and has the powers to approve, deny, revoke, or suspend all licenses for unarmed combat. Due to Nevada's prominent role as a center for combat sports, the NSAC is often regarded as the preeminent state athletic commission in the United States.

The Commission meets its expenditures by collecting fees from the sale of tickets, and the sale or lease of radio, television, and motion picture rights. Its responsibilities also include ruling in disciplinary cases, and in disputes between contestants and their managers, which are brought to it. In addition, the NSAC is responsible for enforcing the Nevada State laws governing unarmed combat.

The Commission approves all championship bouts and special events and appoints the judges and referees to supervise the contest; it also determines befor hand that a contestant is not banned or suspeded by any athletic commission and ensures that a contest is not a gross mismatch.

The Findings of the Audit Report

The auditors found that the Nevada Athletic Commission needs to improve its financial and administrative practices in certain areas by clarifying regulations and improving agency revenue collection procedures. The audit report findings pointed out the following areas that needed improvement:

Defective Fee Reporting Process

Inequitable Fee Computation: Due to lack of adequate guidance in the Commission's regulations and procedures, the process of computing and collecting the promoters' event fees has become overly complex. The complexity has resulted in the fees not being always computed correctly. For example, the report found that when determining event fees, regulations allow promoters to exclude complimentary tickets totaling up to 4% of the seating capacity, but the procedures in place do not provide sufficient guidance on how the exemption is to be applied. This leaves room for errors, inconsistency, and inaccurate calculation of the payable fee. As a result, some promoters paid more than the required amount while some others paid less. In one instance, the Commission had allocated the exemption to the most expensive seats, thus reducing the amount paid for an event; in other instances, two promoters did not get the complimentary tickets exemption for not having provided sufficient detail, while two others who had provided the same level of detail were allowed the exemption. The auditors, therefore, recommended a standard fee reporting form.

Delayed Payments: The complex procedures results in the Commission's own staff, instead of the promoter, preparing the license fee filing reports. This often delays payments of the fees, besides being an inefficient use of the Commission's staff time. Delayed payments increase the chances of default on the part of the promoters. The audit report recommended that the overly-complex procedures should be simplified and the Commission's staff should discontinue preparing the promoters' license fee reports.

Inadequate Records: The auditors found that the Commission did not have sufficient records about the evnt fees due from promoters. The lack of documentation prevented the verification of correct amount payable by certain promoters on account of broadcasting rights. To rectify the shortcoming, the report recommends establishment of procedure to ensure prompt deposit of contracts for broadcasting rights etc.

Improper Use of Outside Bank Accounts

The Commission improperly used its outside bank account to deposit unauthorized revenue to pay employee overtime and inspector fees totaling $2,100. These expenditures should have been recorded in the Commission's budget account as the outside bank account is supposed to be used for payments to "licensed officials" such as referees, judges, timekeepers and ringside physicians rather than the Commission employees. The Commission also assessed some promoters for inspector fees and staff overtime despite being not authorized to do so.

The report recommends that promoters should only be assessed for the authorized amounts and the outside bank account should be used strictly for the required purpose.

Unclaimed Cash Deposit

The Commission was found to be holding cash performance deposits totaling $30,000 from promoters who are no longer in business or have not been licensed for more than 3 years. State law requires that the holder of unclaimed property should try to locate the owner, failing which the property should be promptly transferred to the State Treasurer.

The audit report recommends the immediate transfer of the cash to the State Treasurer.

Unreliable Performance Measures

The Report found that the Commission had not established procedures for developing performance measures. As a result, two out of four performance measures for the fiscal year 2002 reported in the Executive Budget were unreliable. For 2004 and 2005, the performance measures for the number of events regulated and licenses issued and were understated by 18% and 40%, respectively. Such unreliable performance measures can misrepresent the actual results of the Commission's operational and financial activities and affect key budget and policy decisions. The report recommends that proper procedures should be developed to ensure reliable performance measures.