Report 2012-117 Recommendation 9 Responses

Report 2012-117: State Athletic Commission: Its Ongoing Administrative Struggles Call Its Future Into Question (Release Date: March 2013)

Recommendation #9 To: Athletic Commission, State

To ensure that it accurately collects revenue, the commission should calculate the pension assessment by counting all the complimentary tickets issued, except for working complimentary tickets, not merely the complimentary tickets that are redeemed. If the commission does not agree that it should calculate the pension assessment by counting all the complimentary tickets issued, it should seek a change in its regulations to calculate the fee based only on the number of complimentary tickets redeemed.

Annual Follow-Up Agency Response From November 2019

Commission regulations require promoters to "contribute 88 cents ($.88) on every ticket, excluding a working complimentary ticket as described in section 264, up to a maximum contribution of $4,600 per show" to fund the boxing pension plan. (Calif. Code Reg. tit. 4, section 403, subdiv. (a).) The term "every ticket" is not defined in commission regulation, creating a grey area requiring interpretation of the pension assessment regulation. By longstanding interpretation and practice, the commission has construed the term to mean tickets sold and complimentary tickets redeemed for admission except for working complimentary tickets. This interpretation is consistent with the overall scheme for calculating general revenue provisions. Specifically, when calculating the revenue provisions, only the number of sold and admitted tickets are considered in the calculations. (Bus. & Prof. Code section 18824, subdiv. (a)(2)(D); Calif. Code Reg. tit. 4, section 403, subdiv. (a).) Further, deference on how to interpret regulations is given to the commission. Specifically, under section 408(b) of Title 4 of the California Code of Regulations, the commission, maintains broad power and discretion to construe the terms of its pension regulations and to determine all questions arising in connection with the pension plan. The regulations further state that the commission's determinations on such questions are conclusive and binding upon all persons. (Calif. Code Reg. tit. 4, section 408, subdiv. (b).)

While the commission has the power and authority to conclusively interpret its pension regulations, the commission recognizes that an amendment to the pension assessment regulation replacing the term "every ticket" with the term "tickets sold and non-working complimentary tickets redeemed for admission" would be the prudent course. Thus, the commission intends to consider putting forth an amendment to the regulations.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement

Annual Follow-Up Agency Response From October 2018

As CSAC responded on September 26, 2014, it does not agree with Auditors interpretation of CSAC's rules. Furthermore, the Auditor's interpretation would devastate the industry, as comp tickets are used to market events. Counting the complimentary tickets issued, rather than the complimentary tickets redeemed, is not the intent of the regulation and would lead to an unreasonable result.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement

Annual Follow-Up Agency Response From November 2017

To ensure that it accurately collects revenue, the commission should calculate the pension assessment by counting all the complimentary tickets issued, except for working complimentary tickets, not merely the complimentary tickets that are redeemed. If the commission does not agree that it should calculate the pension assessment by counting all the complimentary tickets issued, it should seek a change in its regulations to calculate the fee based only on the number of complimentary tickets redeemed.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement

The commission did not provide an explanation as to why it will not implement this recommendation. Rather, it simply reiterated our recommendation.

Annual Follow-Up Agency Response From October 2016

The Commission does not agree that it should calculate the pension by counting all the complimentary tickets. It is a common industry business practice for promoters to have a small reserve of complimentary tickets that are used and given away to encourage attendance and to promote the boxing event to the general public. Not all of the printed complimentary tickets are redeemed. The pension assessment should be based on redeemed tickets since the redeemed tickets reflect the actual attendance of people at the event who actually watched the contests. Fees due to the Commission for pension fund contributions are based on the amount actually paid for admission (Bus. & Prof. Code 18824(a)(2)(C).) Consequently, the fee assessment should be based upon the number of actual tickets that were redeemed. For purposes of regulatory clarity, the Commission may seek a change its regulations to clearly specify that the fee owed is based on the number of tickets redeemed.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

The commission is seeking a change to its regulations related to the pension assessment and, based on documentation it submitted as part of its annual response, anticipates the changes will become law in early 2017. Until this occurs, we will report the status of this recommendation as pending.

Annual Follow-Up Agency Response From September 2015

As the Commission responded on 9/26/14, it does not agree with Auditors interpretation of the Commission's rules. In addition, the Commission's interpretation of its rules is correct.

Furthermore, the Auditor's interpretation would devastate the industry, as comp tickets are used to market events. Counting the complimentary tickets issued, rather than the complimentary tickets redeemed, is not the intent of the regulation and would lead to an unreasonable result.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement

Annual Follow-Up Agency Response From September 2014

Upon further review, the Commission does not agree with this interpretation of it's rules. The Commission is the interpreter of its rules and it believes that this is not correct.

This interpretation would devastate the industry, as comp tickets are used to market events. Counting every comp ticket issued, rather than comp tickets actually redeemed is not the intention of the regulation.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement

1-Year Agency Response

The Executive Officer and the Chairman discussed this recommendation and respectfully disagree with the interpretation of Bureau of State Audits. This recommendation is on the October 7th, 2013 Commission agenda to provide a regulation fix to avoid further confusion on how to calculate complimentary tickets that are not redeemed. Please see attachment 6.

Update: The Commissioners agreed to adopt new language related to the complimentary ticket assessment and regulations will be drafted within two months.

California State Auditor's Assessment of 1-Year Status: Pending

6-Month Agency Response

The Executive Officer and the Chairman discussed this recommendation and respectfully disagree with the interpreation of Bureau of State Audits. This recommendation is on the October 7th, 2013 Commission agenda to provide a regulation fix to avoid further confusion on how to calcualate complimentary tickets that are not redeemed. Please see attachment 6.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

The commission is pursuing changes in its regulations to ensure it is compliant with state law. In addition, the commission is working with Consumer Affairs' legislative staff to clarify state law.

California State Auditor's Assessment of 60-Day Status: Pending

All Recommendations in 2012-117

Agency responses received after June 2013 are posted verbatim.