Audit Report On The Administration Of The 59th Street Recreation Center Open-Space Improvements And Fiduciary Account By The Department Of Parks And Recreation

AUDIT REPORT IN BRIEF

This audit determined whether the Department of Parks and Recreation (Parks) complied with the terms of the fiduciary agreement and the “Modification to the Restrictive Declaration.” A restrictive declaration is an agreement between the City and a party in which specific conditions are placed on a property’s future use and development.

The West 59th Street Recreation Center (Center) at 59th Street and West End Avenue is one of 15 City-operated recreational facilities in Manhattan that have been serving the public since 1906. The Center consists of two buildings and offers services including an indoor pool, a fitness room and gymnasium, and various after-school programs, such as basketball, cheerleading, and a climbers club.

In March 1993, a restrictive declaration was drafted by the Department of City Planning (City Planning) requiring a developer to make open-space improvements at the Center. The project did not advance until 1997, by which time Parks had decided against the open-space improvements originally called for and was looking into making larger scale alternative improvements to the Center. Subsequently, the declaration was modified on July 27, 2000, requiring the developer to contribute $2.7 million to a fiduciary account rather than make the improvements. The modification also required that Parks, the local City Council member, and Community Boards 4 and 7 were to coordinate in revising the scope of open-space improvements that Parks would be responsible for making at the Center.

As of June 30, 2006, the City’s Financial Management System reported a fiduciary account balance of approximately $3.3 million—the original contribution of $2.7 million plus interest earned.

Audit Findings and Conclusions

Although the fiduciary funds were accounted for in compliance with the terms outlined in the fiduciary agreement, Parks did not comply with the intent of the modification to the restrictive declaration, namely, to ensure the timely completion of open-space improvements at the 59th Street Recreation Center.

As of September 28, 2006, nearly 13 years after the restrictive declaration was drafted and 6 years after its modification, open-space improvements at the Center had not yet started. The open-space improvements were significantly delayed because, between 1993 and 1999, Parks failed to interact with the developer to ensure that improvements were completed as required by the restrictive declaration. During that time, Parks used City funds to make some of the improvements that should have been completed by the developer. Subsequently, Parks decided that the original scope of improvements no longer met the needs of the community and sought to modify the restrictive declaration.

The declaration’s modification required the developer to pay $2.7 million into a fiduciary account administered by Parks and required Parks to develop a revised scope of open-space improvements in consultation with the local City Council member, Community Boards 4 and 7, and users of the recreation center. It also permitted Parks to seek additional funding for multiple improvements to be included in the revised scope of open-space improvements. However, if additional funds could not be obtained through the adopted City Expense and Capital Budget for Fiscal Year 2003, Parks was to proceed with an alternative scope of work determined, together with the same consultative parties that primarily or exclusively used the fiduciary funds.

Parks officials state that they now have a plan for open-space improvements agreed upon by the consultative parties; have secured the additional funding to begin the open-space improvements; and towards the latter part of Fiscal Year 2007, anticipate spending approximately $6 million (which includes the $2.7 million of fiduciary account funds) on improvements at the Center. The open-space improvements will include construction of a multi-purpose room and expansion of the fitness center over the site of the outdoor pool.

Audit Recommendations

We make one recommendation:

Parks should immediately comply with the terms of the modification to the restrictive declaration that requires Parks to expend the fiduciary account’s $2.7 million for open-space improvements to the Center. In this regard, Parks should develop a written plan for carrying out the specific improvements to be made. The plan should include project start and completion dates, critical construction milestones (excavation, foundation, construction, etc.), and the costs associated with each milestone.