Audit Report on the Compliance of Hammonds Cove Marina, Inc. With Its License Agreement

AUDIT REPORT IN BRIEF

On April 2, 2003, the City of New York , through the Department of Parks and Recreation (Parks), entered into a License Agreement (or agreement) with Hammonds Cove Marina, Inc., to operate and manage Hammonds Cove (the marina). The agreement is for 15 years, with an option for an additional five years. The marina is in the Bronx , bordered by Pennyfield, Longstreet, and Harding Avenues. This licensee, as Locust Point Marina, Inc., had previously operated Locust Point marina at the same site from October 2002 to March 2003 under a temporary License Agreement with Parks.

This audit determined whether Hammonds Cove Marina, Inc., (Hammonds Cove), complied with its License Agreement with Parks by maintaining adequate internal controls over the recording and reporting of gross receipts, properly calculated and paid all required license fees when due, and complied with the other major terms of its agreement, pertaining to capital improvements, documentation, authorizations, and approvals. From April 2003 to September 2004, Hammonds Cove officials reported gross receipts of $792,389 and paid license fees to the City totaling $153,000. This amount included $102,000 for the license period April 2003 to March 2004 and $51,000 from April to September 2004.

Audit Findings and Conclusions

Hammonds Cove management violated a number of major provisions in its agreement with the City. Its books and records were inaccurate and incomplete, and it had inadequate internal controls over the financial operations of the marina. There was no segregation of duties and little or no oversight by management to ensure that all gross receipts and fees collected were accounted for and reported to Parks. As a result, for the period April 2003 to September 2004, Hammonds Cove management underreported gross receipts to Parks and consequently owes the City license fees of $26,157 and late charges of $2,627. In addition, sales tax due the City was either not collected or not submitted. Hammonds Cove officials also underreported gross receipts under the temporary permit in place from October 2002 through March 2003 and owes the City additional license fees of $17,885 and late charges of $6,796.

Further, Hammonds Cove management did not maintain adequate records to substantiate whether the licensee spent $200,000 on capital improvements, as required. During fieldwork we found that Hammonds Cove did not have a reliable Accounts Receivable system and could not easily account for moneys owed for boat storage. Hammonds Cove management also did not obtain the required approval from Parks to incorporate the snack bar as a separate entity, subcontract the operation of the bait and tackle shop and change its rates and fees. Finally, Hammonds Cove management did not submit all the required documents to Parks.

Audit Recommendations

To address these issues, we make 36 recommendations: 26 to Hammonds Cove and 10 to Parks. The most significant recommendations are that Hammonds Cove should:

• Pay the City the additional $26,157 in license fees and $2,627 in late charges due.

• Establish and implement internal controls over the financial operations of the marina. In that regard, Hammonds Cove should separate the duties of individuals who record and report accounting transactions from those who collect and deposit cash receipts. Hammonds Cove officials should also closely supervise and monitor the financial operations of the marina, including the collection, recording and reporting of gross receipts.

• Maintain accounting records properly and accurately. This includes ensuring that all gross receipts are properly and accurately recorded; and that all cash receipts collected are recorded and deposited in the marina’s bank account.

• Ensure that the operators of the snack bar and bait and tackle shop maintain the cash register tapes, reconcile the sales on a daily basis, and record the daily receipts; also ensure that the snack bar receipts are deposited in the marina’s bank account.

• Maintain a list of all boats stored at the marina by registration number or any other identifier to establish a link between each boat, the rental agreement, and the boat’s owner.

• Ensure that all future sales taxes due the City are collected, accurately calculated, and paid.

• Maintain complete and accurate records to support all capital improvement expenditures and accurately report these expenditures to Parks according to the terms of the License Agreement.

Pay the City the additional $17,885 in license fees and $6,796 in late charges due, related to Locust Point marina.