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An audit released today by New York City Comptroller William C. Thompson Jr. found a series of fiscal weaknesses at the World Fair Marina Restaurant and Banquet Hall in Queens, prompting the Department of Parks and Recreation (Parks) to consider imposing a City-selected monitor to ensure proper accounting takes place at the facility.

“I am glad that in the face of the problems my auditors uncovered that the Parks Department and the vendor, Food Craft, Inc., are taking steps to remedy these troubling issues,” Thompson said.

Thompson’s audit can be viewed at www.comptroller.nyc.gov

Thompson’s findings spurred the Parks Department to consider imposing a City-selected monitor to ensure Food Craft’s ongoing compliance with its responsibilities under the agreement.  If selected, the monitor would be paid for by Food Craft.

The Parks Department has a license agreement with Food Craft to renovate and operate the World Fair Marina Restaurant and Banquet Hall in Flushing, Queens. The agreement requires Food Craft spend a minimum of $293,900 on capital improvements, post a $120,000 security deposit with the Comptroller’s Office, maintain insurance coverage, submit monthly statements of gross receipts to Parks, and pay all required taxes and utility charges on the property.

For the period under audit, March 1, 2007 through September 30, 2008, a modified license agreement required Food Craft to pay the City the greater of either an annual license fee of $138,600 plus ten percent of the gross receipts in excess of $700,000 or the total license fees paid in the prior operating year.

Auditors found that Food Craft had serious deficiencies in operations of the Queens restaurant and banquet hall that included significant internal control weaknesses in the collecting, reporting, and recording of revenue. Specifically, auditors found that Food Craft was unable to demonstrate that they accurately reported its total gross receipts to Parks and paid the appropriate license fees to the City. In addition, Food Craft:

• Did not have a cash register, point of sale system, or any other device to record its transactions from banquets and restaurant sales - a direct violation of their license agreement with the City;
• Maintained an incomplete and inaccurate cash receipts journal – the journal presented to auditors was missing information such as dates cash was received, dollar amounts received, and patron names, nor did Food Craft issue  pre-numbered  receipts from cash or check transactions;
• Did not have adequate controls over banquet contracts and invoices – contracts are not issued in sequential order and banquet invoices were not pre-numbered therefore, there is no  assurance that all the revenue collected at the location was recorded in their books and reported to Parks; and,
• Could not account for all guest checks – auditors dined at the restaurant on two occasions and were unable to locate their check numbers in Food Craft’s books.

Also, auditors said Food Craft was violating New York State Labor Law by withholding service charges/gratuities meant for wait staff.  Instead, Food Craft either held the service charge/gratuities or distributed them to other staff, including the General Manager and Restaurant Operator.

Auditors further found Food Craft in violation of its license agreement to operate a restaurant. In fact, officials told auditors that World Fair does not operate a restaurant, just a banquet hall. In addition, auditors who attempted to eat lunch or dinner at the location found a number of inconsistencies: At lunch they were told that the restaurant only serves parties of ten or more before they were finally seated by the owner. After dinner reservations were made and accepted for a Saturday night, World Fair Marina restaurant staff  told the auditors that the restaurant could not accommodate them due to the booking of two banquets, and were told that weekend reservations were unavailable and asked to return during the week. When the auditors returned on Thursday, they observed only two other people in the restaurant - a World Fair employee dining with an unidentified woman.

Auditors also found that Food Craft owes the City $18,646 in water and sewage charges and has failed to carry out 11 of the 29 required capital improvements to the existing structure as spelled out in the agreement.

Auditors observed a number of deficiencies at the facility including dysfunctional fountain plumbing including clogged drains, inoperable piping; damaged wood trim and railings; damaged caulking around dining area skylight; missing tiles at kitchen floor; and missing sprinkler heads.

Finally, Food craft reported $239,134 in capital improvements, of which Thompson questioned $229,134 due to the supporting documentation lacking one or more of the following: requests for work, invoices, records of payments, and written approval by Parks Department.

The audit made six recommendations apiece to Food Craft and Parks, including:

Food Craft

• Take immediate action to strengthen its internal controls over the financial operations of the restaurant, the bar, and banquet hall.  These actions should include: Creating and maintaining a complete and accurate cash receipts journal that records all individual transactions of receipts of cash that includes at least basic information such as the date cash was received, the dollar amount received, and the patron from whom the cash was received;  Installing and maintaining a cash register, point of sale system, or other device to record its banquet and restaurant sales; and, Issuing sequentially pre-numbered banquet contracts, invoices, and restaurant guest checks;

• Distribute all service charges to its wait staff who worked at each function, in accordance with Labor Law Section 196-d, Division of Labor Standards, New York State Department of Labor;
• Operate a restaurant at the facility, as required by its license agreement.
• Immediately, pay all outstanding water and sewer charges related to the licensed premises; and,
• Complete all required capital improvement work.

Parks

• Consider terminating the agreement;
• If for reasons presently unknown to us and Parks decides to continue this agreement, Parks should assign a Parks employee to closely monitor Food Craft’s operations through the remainder of the contract period to ensure that the appropriate license fees are paid;
• Issue a Notice to Cure mandating that Food Craft management: Establish and implement an adequate system of internal controls over the financial operations of the restaurant, the bar, and banquet hall; Distribute all service charges in accordance with the New York State Labor Law: and, Complete all required capital improvement work.
• Ensure that all modifications to capital improvement requirements are approved and documented with formal agreements with the concessionaire.

Despite taking exception to the audit’s findings, Food Craft’s Attorney stated that Food Craft agreed to implement or was already in the process of implementing five of the six recommendations directed at them. Food Craft Attorney’s stated that Food Craft disagreed with the remaining recommendation related to service charges, and wanted to review the position with City Counsel. Parks officials generally agreed with the recommendations directed at them.

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