Audit Report on the Compliance of the Central Park Conservancy with Its Department Of Parks and Recreation Management Agreement

AUDIT REPORT IN BRIEF

The Central Park Conservancy (CPC) is a private, not-for-profit organization founded in 1980 that manages Central Park under a contract with the Department of Parks and Recreation (Parks). Under the terms of CPC’s management agreement, CPC agrees to raise and expend annually a minimum of $5 million with respect to maintenance, repairs, programs, landscaping, and renovation and rehabilitation of existing facilities in Central Park. In consideration for CPC’s services, Parks pays CPC an annual fee based on monies raised and expended by CPC in the prior fiscal year and on revenues received by Parks from its Central Park concessions in the prior fiscal year.

According to CPC’s certified financial statements for the year ended June 30, 2006, CPC expended $12.8 million on maintenance, repairs, programs, landscaping, and renovation and rehabilitation of existing facilities in Central Park (operating expenses). In consideration for these services, Parks paid CPC $4,282,200 ($2,000,000 of which were for the monies raised and expended) and supplied CPC with $100,000 worth of vehicles.

Audit Findings and Conclusions

CPC generally complied with its management agreement. In that regard, CPC exceeded its funding commitment, maintained Central Park in accordance with agreement standards, and complied with New York City Procurement Policy Board (PPB) and Parks purchasing rules. According to CPC’s certified financial statements for the year ended June 30, 2006, CPC expended $12.8 million on maintenance, repairs, programs, landscaping, and renovation and rehabilitation of existing facilities in Central Park. This sum is well in excess of the $7 million required to receive the maximum funding allowable based on monies raised and expended by CPC. (CPC must raise and expend $5 million to receive the first $1 million and an additional $2 million to receive another $1 million.) Parks Site Inspection Reports evidenced that Central Park was well maintained and that hazardous conditions noted by Parks inspectors were addressed and corrected by CPC in a timely manner.

However, CPC did not implement a system that would allow it to identify costs associated with its agreement. Further, Parks did not request and review any supporting documentation for expenses reported by CPC to ensure that CPC included only eligible expenses and maintained documentation to support those expenses. In the absence of a tracking system, CPC officials informed us that all expenses charged to its operations account and reported as horticulture, maintenance, and operations on its financial statements pertained to its agreement. However, CPC’s operations account included expenses that were ineligible under the terms of its agreement. These expenses were ineligible because they were: prohibited under the terms of CPC’s agreement, were not for operating expenses, were not incurred during Fiscal Year 2006, or lacked supporting documentation. Although these expenses were ineligible, they were generally in keeping with CPC’s mission of restoring, managing, and preserving Central Park. Nevertheless by including ineligible expenses in amounts used to support funding received from Parks, CPC could potentially increase the amount of funding it receives.

Parks also assigned permit fee revenue to CPC that Parks should have collected and deposited in the City’s General Fund and granted CPC the use of two City-owned properties in Central Park without a valid agreement or approval from the Franchise Concession and Review Committee (FCRC).

Audit Recommendations

We make four recommendations to CPC and eight recommendations to Parks, including the following.

CPC should:

• Establish and maintain accurate records and accounts that sufficiently and properly reflect all direct and indirect costs of any nature expended in the performance of its agreement.
• Include only expenses that are incurred in the prior fiscal year and directly related to the maintenance, repair, programs, landscaping, and renovation and rehabilitation of existing facilities in Central Park in the amounts used to support the funding received from Parks.

Parks should:

• Issue permits and collect permit fees for all events in Central Park.
• Enter into valid agreements for use of the Dairy and Conservatory Gardens.
• Adhere to FCRC rules and regulations and obtain FCRC approval when granting private use of City properties.