Audit Report on the Compliance of Luna Parks Associates, Inc., With Its License Agreement and Its Payment of License Fees Due the City

AUDIT REPORT IN BRIEF

The Comptroller’s Office performed an audit of the license agreement between Luna Park Associates (Luna) and the Department of Parks and Recreation (Parks), to manage, maintain, and operate a restaurant facility in Union Square Park, Manhattan. The license requires that Luna pay the City the greater of a minimum annual lease fee ranging from $25,000 to $35,177, or a percentage of gross receipts that ranges from 3.5 percent to 6 percent from sales of all food and beverages. In addition, Luna is required to make $150,000 in capital improvements; carry certain types and amounts of insurance coverage that names the City as an additional insured; remit a $8,794 security deposit to the City; and pay all required taxes, fees, and utility charges related to the facility. For the two-year audit period––September 1, 1999, through August 31, 2001––Luna reported $3,305,674, and paid the City $198,341.

The audit found that Luna generally complied with the terms of its license agreement with Parks. Specifically, Luna had adequate internal controls over the recording and reporting of its revenue, carried the proper types and amounts of insurance coverage, remitted the required security deposit to the City, and completed the required capital improvements. However, based on Luna’s books and records, Luna underreported its gross receipts by $190,582 in September 2000, and did not report a deposit for $37,514 received in September 1999. As a result, Luna owed the City $13,835 in additional license fees, of which Luna paid $11,716 to Parks in July 2002. Moreover, Luna did not name the City as an additional insured on its automobile insurance policy.

To address these issues the report recommended that Luna should:

• Pay the City the remaining $2,251 in license fees.
• Ensure that all revenue is reported to Parks and that all appropriate fees are paid, in accordance with its agreement.
• Name the City as an additional insured on its automobile insurance policy.

The report also recommends that Parks ensure that Luna complies with above recommendations.