Audit Report On The Compliance of Sunny Days in the Park, Inc., With Its License Agreement and Payment of fees Due

We performed an audit of the license agreement between the Department of Parks and Recreation (Department) and Sunny Days in the Park, Inc. (Sunny Days) to operate an outdoor café in the Rotunda at the West 79th Street Boat Basin in Riverside Park, Manhattan. According to the agreement, Sunny Days is required to pay the City the greater of a minimum annual fee or an annual percentage of gross receipts consisting of 12 percent of the sale of beverages, food, and all other sources of revenue from the operation of the premises (e.g., parties and events, gratuities). For operating year 2009, the minimum annual fee was $290,000.

The license agreement also requires Sunny Days to maintain the proper amounts of insurance, deposit $72,500 with the New York City Comptroller’s Office as security, and pay all utility charges, including electricity, gas, water, and sewer charges. For operating year 2009, Sunny Days reported receiving $3,704,275 in gross receipts and surcharges and paid a percentage of gross receipts totaling $444,513.

Sunny Days uses the Squirrel computerized point-of-sale system for recording and reporting gross receipts.

Audit Findings and Conclusions

Sunny Days did not properly calculate its total gross receipts and license fees due to the City and did not pay these fees on time. As a result, Sunny Days owes the City $3,394 in fees and $653 in late fees.

Furthermore, we cannot conclude with assurance that Sunny Days accurately recorded and reported all gross receipts and paid all required fees to the Department because of internal control deficiencies for the manner in which Sunny Days uses the Squirrel point-of-sale system to record and report gross receipts. Specifically, cash sales from the bar are not automatically recorded in the gross revenue file; cash sales from a mobile bar are not recorded in the point-of-sale system; revenue derived from an auditor observation was not properly recorded; the records of actual and voided transactions, pre-paid bar gratuities, party deposits, and check transfers are reported separately, precluding the ability to properly trace and reconcile guest checks; and parties and events could not always be reconciled with Sunny Days’ general ledger.

Sunny Days complied with license agreement requirements pertaining to paying utility bills on time, submitting the required security deposit, and maintaining proper insurance coverage. Additionally, Sunny Days complied with the required insurance endorsements indicating the City and the Department as additional insured entities.

Audit Recommendations

This report makes a total of 12 recommendations. The major recommendations are that Sunny Days’ should:

• Ensure that the point-of-sale system automatically records all cash sales from all bars on the premises at the time of sale.
• Adapt the point-of-sale system to properly record and report all transactions.
• Ensure that all revenue from mobile bars is accurately recorded in the point-of-sale system.
• Immediately remit to the Department $3,394 in additional license fees consisting of $2,190 in fees related to revenue from promotions and discounts, and $1,204 in fees related to understated revenue from party deposits and unreported party gratuities.
• Immediately pay the Department $653 for late fees due.
• Ensure that all future promotions and discounts are reported in gross receipt reports submitted to the Department.
• Ensure that all gross receipts and late charges are calculated in accordance with the terms of the license agreement and that such payments are made on a timely basis.

The Department should:

• Issue a Notice-to-Cure to Sunny Days requiring it to pay $4,047 in additional license fees and late charges.
• Reconcile the amount of license fees and late charges previously collected with the information contained in this report.