Audit Report On The Compliance Of Wollman Rink Operations Llc With Its License Agreement And Payment Of License Fees Due

AUDIT REPORT IN BRIEF

            The Department of Parks and Recreation (Parks) has a license agreement with Wollman Rink Operations LLC (WRO) to operate two ice-skating facilities in Central Park, Wollman and Lasker rinks, from November 1, 2001, to April 30, 2012. The agreement requires WRO to operate, maintain, and provide at each rink such services as ice skating, rink rentals, instruction, a pro shop, and food services.  WRO is allowed to sublicense its food service operation, and to sublicense Wollman rink for the operation of a children’s amusement park during non-skating seasons, from May through September. In addition, the agreement provides for WRO to turn over the operation of the Lasker rink to Parks for use as a municipal swimming pool during non-skating seasons.

The audit determined whether WRO accurately reported all gross receipts derived from the operation of the facilities, properly calculated license fees due the City, and paid its license fees on time; and complied with certain major non-revenue terms of its license agreement (i.e., completing the required capital improvements, repairs and maintenance; carrying the required insurance; maintaining the appropriate security deposit; and paying its utility charges).

Audit Findings and Conclusions

WRO paid its minimum annual fees on time, maintained the required property and liability insurance that named the City as an additional insured party, contributed the required $456,803 as security deposit, paid required utility charges, and maintained the Wollman rink in accordance with specific terms of its license agreement. As part of the capital improvements completed, Parks issued a certificate of completion indicating that the Wollman rink improvements were completed in accordance with the agreement.

However, WRO does not have sufficient controls to ensure that all receipts are being recorded on its books and records and reported to the City. We found certain instances of unrecorded income and problems within WRO’s accounting records. Specifically, WRO does not maintain the daily sales and receipt records as required by the agreement and does not maintain sufficient records to support revenue derived from its ice-rental and ice-hockey activities.

WRO also made some errors on the revenue reports it submitted to Parks. WRO underreported revenue associated with rink rental, hockey leagues, and lessons by $106,608; and did not report several December 2004 transactions totaling $20,473 relating to skating operations and $25,106 in miscellaneous revenue.¹ Moreover, although we did not detect any improprieties, we found that WRO underreported the amount of food-service receipts it receives from its food service operator by $29,751, and that its method of accounting and reporting revenue from its food and beverage operator, children’s amusement park sublicensee, and special events did not comply with the terms of the agreement. As a result of the audit exceptions noted, WRO owes $146,396 in additional license fees and $50,634 in late charges.

We also found that significant delays in WRO’s submissions of plans and in Parks’ approvals resulted in several postponements of the renovation of the entry pavilion, stairs, and parapet wall at Lasker rink.  Also, WRO did not comply with two other provisions of its agreement. Specifically, beginning in the fourth year of operation, WRO did not spend $58,923 of the required $150,000 to maintain the Lasker facility, nor did it operate a pro shop at either facility.
Audit Recommendations

We make 17 recommendations—10 to WRO concerning the operation of Wollman and Lasker rinks and 7 to Parks concerning its oversight of this concession.  Compliance with these recommendations will ensure that Parks collects all license fees due; that controls over the operation are adequate for the recording of all gross receipts on WRO books and records and the accurate reporting of gross receipts to Parks; and that Parks will more closely monitor WRO’s compliance with the terms of the agreement.