Audit Report On The Compliance Of Sweet Concessions With Its Department Of Parks And Recreation Contract

AUDIT REPORT IN BRIEF

Sweet Concessions manages, operates, and maintains two snack bars near the model boat pond in Central Park (off Fifth Avenue between 73rd and 74th Streets), under a contract with the Department of Parks and Recreation (Parks). The agreement covers the seven-year period March 31, 2001–March 31, 2008. Under the terms of the agreement, Sweet Concessions agreed to pay the higher of $172,897 or 24 percent of gross receipts and $180,912 or 25 percent of gross receipts for the years ending March 31, 2007, and March 31, 2008, respectively. Sweet Concessions must submit specified documentation to Parks to substantiate reported gross receipts. During operating years 2007 and 2008, Sweet Concessions paid the minimum permit fees of $172,897 and $180,912.

Additionally, the permit agreement requires Sweet Concessions to spend a minimum of $75,000 on capital improvements, sell only authorized items at Parks approved prices, and maintain snack bars, restrooms, and the surrounding area. It must also post a security deposit of $45,228 with the City, maintain certain types and amounts of insurance coverage, pay utility charges, and return equipment to Parks or replace it upon the expiration of its agreement.

Audit Findings and Conclusions

Sweet Concessions generally paid its minimum annual fees on time, performed capital improvements, maintained required security deposit and liability insurance, paid utility charges, and returned equipment to Parks upon the expiration of its agreement. However, Sweet Concessions had significant internal control weaknesses over the collecting, recording, and reporting of revenues. For example, Sweet Concessions: did not record all sales activities on cash registers or other income-recording devices, did not maintain an inventory of and could not provide access to cash registers used at the Sweet Café, did not maintain detailed cash register tapes, did not keep separate books and records for the Sweet Café, and did not formally reconcile its daily sales according to its cash register tapes and its credit card sales to daily sales based on its food and beverage inventory and moved inventory among the various Sweet Concessions sites. As a result of these weaknesses, we could not ascertain whether all of the revenue earned at the Sweet Café was in fact recorded in Sweet Café’s cash registers and books and records, and accurately and completely reported to Parks. Nor could we determine whether Sweet Concessions paid all fees due Parks. Furthermore, the internal control weaknesses and lack of records are red flags that were so extensive as to raise the question of potential fraud.

The audit also revealed that Sweet Concessions sold unauthorized items, charged customers more than amounts approved by Parks, and did not maintain the snack bars and restrooms in a sanitary manner. Sweet Concessions did not comply with and fulfill these contractual obligations, and Parks failed to adequately monitor Sweet Concessions’ performance and enforce the terms and conditions of its agreement, as required by the New York City Charter, Chapter 14, §365.

Audit Recommendations

Ordinarily we would address our recommendations to Sweet Concessions, but its permit has expired and was not awarded again. Therefore, we address our recommendations solely to Parks.

We make one recommendation with regard to Sweet Concessions, that Parks consider issuing an Advice of Caution in VENDEX regarding Sweet Concessions.

We make five recommendations with regard to future snack bar concessions, including that Parks should:

• Ensure that future snack bar concession agreements with fees based on gross receipts clearly stipulate that concessionaires maintain adequate systems of internal control and keep complete and accurate records as well as books of account and data, including daily sales and receipt records, which show in detail the total business transacted by the concessionaire and the gross receipts derived therefrom.
  
• onitor concessionaires’ performance and enforce the terms and conditions of their agreements, as required by the New York City Charter, Chapter 14, §365.
• onsider issuing Advices of Caution in the City’s VENDEX regarding concessionaires that do not comply with or fulfill agreement provisions.