Audit Report On The Compliance Of P&O Ports North America, Inc. With Its Operating And Reimbursement Agreement

AUDIT REPORT IN BRIEF

Since 1997, P&O Ports North America, Inc., (P&O) has been the exclusive operator of terminal management services for the Manhattan Cruise Terminal (MCT) on the Hudson River between 46th and 54th Streets. P&O operates under an agreement with the New York City Economic Development Corporation (EDC). On January 1, 2007, a new 10-year agreement was signed, expiring December 31, 2011, with an option to renew for one additional five-year period ending on December 31, 2016.

Under the agreement, P&O is responsible for billing and collecting all fees from the cruise lines. P&O is required to remit to EDC revenue from a per-passenger fee charged for each passenger embarking or disembarking a cruise vessel. P&O is allowed to keep revenues from parking and other facility use. P&O is responsible for pier repair costs up to an annual maximum of $275,000 and for other expenditures, such as insurance and utility charges, in connection with the operations of the MCT. Capital improvements at the piers are funded by EDC.

Audit Findings and Conclusions

P&O improperly calculated the per-passenger fee amount for calendar year 2005 and as a result underpaid a total of $74,826 in fees to EDC. Also, P&O has not paid the City $77,795 in outstanding water and sewer charges from October 2006 through August 2008.

With the exception of the above two findings, we concluded that P&O remitted to EDC the fees due on a timely basis and complied with the other major requirements of its agreement. P&O properly charged EDC the repair and security-service expenses, and carried the necessary insurance coverage.

Audit Recommendations

We recommend that P&O:

Pay EDC an additional per-passenger fee of $74,826.

Pay the outstanding balance in water and sewer charges of $77,795.

We recommend that EDC:

Ensure that P&O pays the additional fee of $74,826.

Ensure that P&O pays $77,795 in outstanding water and sewer charges.

Monitor P&O compliance with all the agreement terms.

Ensure that revenue from incremental dockage and wharfage is allocated to related capital improvements.

Discussion of Audit Results

We received written responses from P&O and EDC on November 6, 2008. In their response, P&O officials agreed with the report findings and provided copies of payments made to EDC and to the NYC Water Board as recommended by this audit. EDC officials responded that they received a payment from P&O and confirmed that P&O paid all outstanding water and sewer charges. With regard to recommendation #6, EDC stated that “All fees, including dockage and wharfage at the PST [Passenger Ship Terminal] are governed by the terms and conditions of EDC’s Maritime Contract with the City.”