Audit Report on the Department of Parks and Recreation’s Monitoring of and New York One’s Compliance with Its Contracts Covering City Carousels

New York One, LLC was authorized to manage and operate pushcarts or a snack bar and carousels in Central Park, Flushing Meadows Corona Park, and Forest Park under separate multiple-year agreements with the Department of Parks and Recreation (Parks). Under the terms of these agreements, New York One was required to: pay the higher of a percentage of gross receipts or a minimum fee; submit monthly certified, properly segregated statements of gross receipts to Parks; maintain specified sales records in a form suitable for audit; and retain these records for at least six years and make them available to the Office of the Comptroller and Parks on demand.

Additionally, the agreements stipulated that New York One perform specified capital improvements, sell only authorized items at Parks-approved prices, and maintain pushcarts or snack bars, restrooms, and surrounding areas. New York One was also required to obey all relevant laws and regulations, obtain all necessary permits and licenses, maintain certain types and amounts of insurance coverage, submit and maintain security deposits with the City, and pay utility charges.

Audit Findings and Conclusions

New York One lacked sales records and sound and effective internal controls over the collecting, recording, and reporting of revenues generated for its carousel operations. New York One did not provide us any admission, food, souvenir, and special events sales records for the Flushing Meadows Corona Park Carousel and provided us only limited records for the Forest Park Carousel. As a result, we could not determine whether New York One accurately and completely reported gross receipts and properly calculated fees due the City for the Flushing Meadows Corona Park and Forest Park Carousels.

Additionally, New York One sales reports for Central Park Carousel admissions, food, and souvenirs were not supported by detailed sales transaction and inventory records. Therefore, we could not determine the total gross receipts or the corresponding total payments due the City for these activities. New York One provided us special events sales records. However, we could not determine whether these records accurately and completely reflected special events sales. Nevertheless, we calculated minimum special events gross receipts based on agreements, credit card slips and merchant statements, and related records. For the period October 2008 to December 2009, we determined that, at minimum, New York One understated special events gross receipts by $58,424 or approximately 141 percent. Consequently, we have serious concerns about the accuracy of New York One’s reported gross receipts for its carousels’ operations and thus, New York One’s payments to Parks.

The audit also revealed that New York One failed to comply with other agreement provisions. For example, New York One did not perform capital improvements, repairs, and maintenance with an estimated value of $564,325; submit required security deposits totaling $100,000; and maintain pushcarts, snack bars, and surrounding areas in a sanitary and safe manner. New York One largely did not comply with or fulfill its contractual obligations, and Parks failed to adequately monitor several critical areas of New York One’s performance and failed to use all tools available to enforce in a timely manner the terms and conditions of its agreement, as required by the New York City Charter, Chapter 14, §365.

Additionally, Parks largely failed to charge and collect fees from New York One for revenues generated from Central Park Carousel admissions, food, souvenir, and special events sales from January through September 2008. The initial Parks contract with New York One for the Central Park Carousel expired on December 31, 2007. However, Parks did not enter into a new contract with New York One until August 20, 2008, and did not consistently charge it fees until October 1, 2008. Consequently, we estimate that Parks did not collect minimum concession revenues of between $124,375 and $151,375.

Parks also failed to incorporate minimum capital expenditures tendered in New York One’s proposals to operate the Flushing Meadows Corona Park and Forest Park Carousels in executed agreements in accordance with the Rules of the City of New York Title 12 § 1-13.

Audit Recommendations

To address these issues, we make 22 recommendations to New York One. As New York One’s agreements for the Central Park and Forest Park Carousels have either expired or were terminated, we generally address our recommendations solely to the Flushing Meadows Corona Park Carousel, still under an existing agreement. These recommendations include that New York One should:

• Record separately admission, food, and souvenir sales activities on cash registers or other income-recording devices.
• Issue and maintain copies of pre-numbered, sequential special events agreements and gift certificates.
• Retain all records for at least six years and make them available to the Office of the Comptroller and Parks on demand.
• Accurately and completely report gross receipts generated from all operations in accordance with its agreement.
• Perform all stipulated capital improvements and expend at least $110,000 as proposed.
• Immediately remit and maintain its security deposit of $20,000.
• Properly maintain pushcarts and surrounding areas.

With regard to the Central Park and Forest Park Carousels, we recommend only that New York one should immediately remit capital investments of $454,325 to the City as additional fees.

Additionally, we make 17 recommendations to Parks. With regard to its concession properties, Parks should:

• Charge and collect fees from all entities operating concessions.
• Contract with all entities operating concessions and do so in a timely manner.
• Ensure that agreements are consistent with winning proposals and incorporate all material proposal terms.

With regard to New York One’s overall performance for the Central Park, Flushing Meadows Corona Park, and Forest Park Carousels, Parks should:

• Consider issues identified by Parks and the Comptroller if and when New York One submits proposals to operate concessions on City-owned properties.
• Issue Notices to Cure, assess liquidated damages when permissible, and follow up on noncompliance.
• Complete Performance Evaluations and issue Advices of Caution in VENDEX.

With regard to the Central Park and Forest Park Carousels, Parks should:

• Seek legal remedies for New York One’s default on its capital investment commitments totaling $454,325.

With regard to the Flushing Meadows Corona Park Carousel, we made recommendations to Parks, including that it should:

• Ensure that New York One maintains sales records at the Flushing Meadows Corona Park Carousel in a form suitable for audit and retain sales records for at least six years.
• Ensure that New York One completes and submits the necessary documentation of capital improvements performed at the Flushing Meadows Corona Park Carousel.
• Immediately require New York One to submit a security deposit of $20,000, as stipulated in its agreement.
• Refer health and sanitation issues to the Department of Health and Mental Hygiene.

Responses

New York One generally refuted the audit findings and maintained that it provided sales records, performed required capital improvements, and complied with and fulfilled other contractual obligations. Nevertheless, New York One generally agreed to implement the audit recommendations with the exception of remitting the value of required capital improvements to the City as additional fees.

With the exception of findings and recommendations related to capital improvements, Parks generally agreed with the audits findings and recommendations, and directed New York One to implement recommendations addressed to it.