Audit Report on the Compliance of Food Craft, Inc. (World Fair Marina Restaurant and Banquet) with Its License Agreement and Payment of License Fees Due the City

AUDIT REPORT IN BRIEF

The Department of Parks and Recreation (Parks) has a license agreement with the Food Craft, Inc., (Food Craft) to renovate and operate a restaurant and catering facility, the World Fair Marina Restaurant and Banquet Hall (World Fair), in Flushing Meadows, Queens. The agreement also requires that Food Craft spend a minimum of $293,900 on capital improvements, post a $120,000 security deposit with the Comptroller’s Office, maintain certain types and amounts of insurance coverage, submit monthly statements of gross receipts to Parks, and pay all required taxes and utility charges related to the leased premises. According to the license agreement, gross receipts are to include all funds received, excluding collected sales taxes and gratuities paid directly or indirectly to employees in addition to their regular salaries.

This audit determined whether the Food Craft accurately reported its total gross receipts to Parks, properly calculated the annual license fees due the City, and paid license fees when they were due, and Complied with certain non-revenue-related requirements of the license agreement.

Audit Findings and Conclusions

Food Craft generally paid its minimum license fees on time, maintained the required liability insurance that named the City as additional insured party, maintained the required security deposit, and paid utility charges.

However, Food Craft had significant internal control weaknesses over the collecting, recording, and reporting of revenue. As a result of these weaknesses, we could not ascertain whether all of the revenue earned at the World Fair Marina Restaurant and Banquet was in fact recorded in Food Craft’s books and records, and accurately and completely reported to Parks. Nor could we determine whether Food Craft paid all license fees due Parks. Furthermore, the internal control weaknesses and lack of records were so extensive as to raise red flags concerning the potential of fraud.

Food Craft also violated provisions of New York State Labor Law and its license agreement by not distributing all service charges/gratuities collected to its wait staff. Moreover, Food Craft did not complete all the capital improvements to the licensed premises as stipulated in its license agreement.

Audit Recommendations

We make 12 recommendations, six to Food Craft and six to Parks, concerning the operation of World Fair and the oversight of this license agreement by Parks. In fact, we recommend that Parks consider terminating this 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. In any case, compliance with these recommendations will ensure that Parks collects from Food Craft all license fees that is due; controls over the operations of World Fair are adequate to ensure that all gross receipts collected by Food Craft are reported to Parks; Food Craft complies with all laws, including the New York State Labor Law; operates a restaurant at the facility; pays its water and sewer charges; and, completes all required capital improvement work.