Audit Report on the Compliance of N.B.K.L Corporation With Its Permit Agreement, And its Payment of Fees Due the City

AUDIT REPORT IN BRIEF

The Comptroller’s Office performed an audit of the permit agreement between N.B.K.L. Corporation (N.B.K.L.) and the Department of Parks and Recreation (Parks). Under the terms of the agreement, N.B.K.L. is to manage, maintain, and operate an amusement park on Shore Parkway, Brooklyn, to provide the public with such activities as miniature golf, rides, food, beverages, and souvenirs. The permit requires that N.B.K.L. pay the City an annual minimum fee from $150,000 in Year 1 to $200,000 in Year 10, or 20 percent of its gross receipts, whichever is greater. In addition, the agreement requires that N.B.K.L. expend $625,000 on capital improvements; carry proper insurance coverage naming the City as an additional insured; remit a $50,000 security deposit to the City; and pay all required taxes and utility charges related to the facility.

N.B.K.L. had adequate controls over revenue generated at the amusement park. Specifically, N.B.K.L.:

• Used cash registers to record sales at the ticket booth, snack bar, and novelty stand.
• Issued pre-numbered tickets to patrons in sequential order.
• Maintained lists of issued tickets.
• Properly segregated responsibilities for collecting and depositing cash and reconciling daily cash receipts.
• Performed appropriate reconciliations of daily cash receipts.
• Maintained adequate records supporting revenue generated from parties held at the amusement park.
• Deposited cash receipts in a timely manner.

However, the audit disclosed several mathematical errors on N.B.K.L.’s books and records that resulted in N.B.K.L. owing the City $24,113 in additional fees and related interest and penalties.

N.B.K.L. complied with the non-revenue requirements of its permit agreement (e.g., carried the required liability insurance and paid its utility charges).

To address these issues the report recommends that:

• N.B.K.L. pay the City $24,113 in additional fees and related interest and penalties.
• Parks issue a Notice to Cure to N.B.K.L. requiring that it implement the above recommendation.