Audit Report on Tavern on the Green Limited Partnership’s Compliance With Its License Agreement

AUDIT REPORT IN BRIEF

The Comptroller’s Office performed an audit of Tavern on the Green Limited Partnership’s (Tavern) compliance with the license agreement awarded by the Department of Parks and Recreation (Parks). Under the agreement, Tavern pays the City license fees to operate a restaurant and catering facility located in Central Park. During the operating year ending October 7, 2001, Tavern paid the City $1,167,422 in license fees.

Our audit found that Tavern generally complied with the terms of its license agreement with Parks. Specifically, Tavern:

• had adequate internal controls over its revenue collection and recording functions;
• fairly reported its revenue and paid its corresponding license fees;
• maintained adequate insurance coverage;
• remitted to the City the required security deposit; and
• paid for its water and sewer use.

However, Tavern improperly deducted certain amounts from its reported gross receipts and underreported its taxable sales to New York State. Specifically, Tavern:

• deducted $111,793 in Tele-charge commissions resulting in additional franchise fees and late charges of $5,991; and
• accepted Resale Certificates that are not valid for food and beverage purchases under New York State Sales and Use Tax Law and Regulations. As a result, Tavern owes $20,914 in additional sales tax.

To address these issues, we recommend that Tavern should:

• Pay the City $5,991 in additional license fees and late charges owed;
• Cease deducting Tele-charge commission from gross receipts reported to Parks;
• Pay $20,914 in additional sales tax owed to New York State; and
• Cease accepting New York State Resale Certificates for food and beverages sales.

Additionally, we recommend that Parks should ensure that Tavern:

• Pays the City $5,991 in additional fees and late charges owed: and
• Pays the additional $20,914 in sales tax owed to New York State, and complies with the other recommendations in this report.