"The Parks Department needs to monitor the company to ensure taxpayers are getting their due or find someone who is up to the job.” - City Comptroller John C. Liu.
The Parks Department's concession and revenue division is run by Mayor Bloomberg friend Betsy Smith.
Central Park Carousel was one of three Parks Department concessions run by New York One - owned by the conversional Makkos brothers - which City Comptroller accused of numerous violations.
Manhattan/Queens
The Parks Department's monitoring of its concession contracts has once come under fire by a City Comptroller. Yesterday John C. Liu released an audit that found a company that ran three Parks Department carousels overcharged customers, maintained little or no records of its cash transactions, and violated health codes. According to the audit New York One, LL Vendor operated off the books, and owes the City $454, 325, for Repairs and Maintenance.
According to the audit, the vendor, New York One, was required to pay the City whichever was higher — either a flat fee or a percentage of its sales. Without fail, the company reported the flat fee was the higher amount. But the company kept such poor sales records that it was impossible to determine if it paid the City what it owed in 2008 and 2009. Auditors could not find any evidence to back New York One’s claims of its cash revenue from rides, hot dogs, and souvenirs.
The Central Park carousel contract was cancelled by the Parks Department and taken over by Donald Trump. Forest Park has been closed since 2008. Last week the City took the unusual step of issuing an RFP for the carousel in Flushing Meadows Corona Park whose current license agreement is not set to expire until March 30, 2012. New York One is owned by the conversional Makkos brothers who run multiple Parks Department food concessions.
The Parks Department's concession and revenue division is run by Mayor Bloomberg friend Betsy Smith.
– Geoffrey Croft
Additional financial issues
- Auditors found the operator owes the City $454,325 for restoration and repairs that were not made at the Central Park and Forest Park carousels.
- Auditors found the operator underreported its take from special events at the Central Park carousel by at least $58,424.
- Auditors found the operator charged more than Parks Department guidelines for admissions, food, and souvenirs at the Flushing Meadows Corona Park carousel.
- Auditors found the operator should spend $110,000 on capital improvements at the Flushing Meadows Corona Park carousel.
- Auditors found that the Parks Department failed to collect up to $151,375 in operating fees from New York One when the vendor ran the Central Park carousel without a contract from January to September 2008.
Health issues
- Auditors found that the operator’s employees built a makeshift toilet in the Central Park carousel’s mechanical room using buckets and a funnel.
- Auditors found that the operator did not maintain the three carousels’ pushcarts, snack bars, and surrounding areas in a safe and sanitary manner.
- Auditors found that the operator continued to use a dirty popcorn machine and hot dog roller at the Central Park carousel despite a Parks Department order to halt sales.
- Auditors found that the operator’s food carts at the Flushing Meadows Corona Park carousel were not properly licensed by the Department of Health.
The audit determined that the Parks Department failed to properly monitor the carousel operator or promptly use the tools at its disposal to enforce the terms and conditions of the contracts.
New York One currently runs only the Flushing Meadows Corona Park carousel. The Parks Department cut short the company’s contract to operate the Central Park carousel in February 2010 when it failed to improve its operations. The Forest Park carousel has been closed since the operator gave up its contract in 2009.
According to the Annual Concession Report of the City Chief Procurement Officer September 2010, New York One and its related entities operated 25 concessions for which the City received gross revenues of approximately $5 million in fiscal year 2010.
The Parks Department agreed with the majority of the audit finding and recommendations. New York One disagreed with most of the audit findings, but agreed with most of its recommendations to get proper licenses and maintain records.
Comptroller Liu credited Deputy Comptroller for Audit H. Tina Kim and the Audit Bureau for presenting the findings. The full report is available at http://comptroller.nyc.gov/audits.
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Audit Report on the Department of Parks and Recreation’s Monitoring of and New York One’s Compliance with Its Contracts Covering City Carousels
FK10-108A
April 14, 2011
April 14, 2011
AUDIT REPORT IN BRIEF
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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.
http://comptroller.nyc.gov/bureaus/audit/audits_2011/04-14-11_FK10-108A.SHTM
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