Letter Report on World Ice Arena, LLC’s Compliance with Its License Agreement

Audit Report In Brief

Introduction

On August 6, 2008, the Departments of Parks and Recreation (Parks) entered into a 20-year license agreement with World Ice Arena, LLC (World Ice) to operate an ice-skating facility located in Flushing Meadows Corona Park in Queens, New York.  World Ice is required to operate and manage an indoor skating rink, skate rental, pro shop, and snack bar facility.

This audit determined whether World Ice accurately reported its gross receipts, properly calculated the license fees due, paid its license fees on time, and complied with certain other major non-revenue terms of the license agreement (i.e., capital improvements, insurance coverage, security deposit, and utility charges). The audit covered operating year 2011 (February 1, 2011, to February 29, 2012).  For operating year 2011, World Ice reported $2,750,244 in gross receipts and paid $337,306 in license fees to the City.

Results

World Ice generally maintained adequate controls over the recording and reporting of its gross revenues, properly calculated license fees due, and paid those fees in a timely manner to the City.  World Ice also maintained the required liability insurance that named the City as an additional insured party, maintained the required security deposit, and paid utility charges. Furthermore, World Ice has implemented seven of eight recommendations made in an audit conducted by Parks. However, World Ice does not use pre-numbered contracts for group events—a recommendation by Parks. Group Reservation Forms are issued for group events consisting of 15 or more individuals and include the option of renting a locker, ordering food, and obtaining group lessons. During our sample period from December 1, 2011, through February 29, 2012, World Ice issued sequentially numbered birthday party contracts, but still used the unnumbered Group Reservation Forms.

In addition, World Ice, despite receiving from Parks a Certificate of Completion for its required capital improvements, did not purchase two new ice resurfacing machines (combined value in excess of $250,000) as required by its license agreement. In 2009, World Ice informed Parks that refurbished ice resurfacing machines needed to be purchased in order to open the ice rink in a timely manner. However, World Ice’s agreement with Parks specifically required two new machines. In a letter dated July 29, 2009, Parks approved the use of the refurbished machines, but stipulated World Ice was still required to purchase two new machines during the term of the agreement.

Although Parks did not make a recommendation regarding the refurbished ice resurfacing machines, the issue was again addressed in the findings section of its audit report.  During the fieldwork stage of this audit, World Ice provided a quote and a canceled check supporting a deposit for one new ice resurfacer. According to World Ice’s project manager, the new machine should be delivered by the end of 2012.

The report recommended that World Ice:

• use press-printed pre-numbered forms for group events, and
• follow through with the purchase of two new ice resurfacing machines.

In their responses, Parks and World Ice Arena agreed with the report’s findings and recommendations and described the steps they have taken or will take to implement the report’s recommendations.