Bureau of Audit
Audit Report On Department Of Parks And Recreation Oversight Of Capital Improvements By Ferry Point Partners, LLC
October 25, 2007
AUDIT REPORT IN BRIEF
Download the Partial Audit Report with Response Pages 1 to 51 (pdf 755 KB)
Download the Partial Audit Report with Response Pages 52 to 95 (pdf 1.33 MB)
Download the Partial Audit Report with Response Pages 96 to 140 (pdf 1.09 MB)
We performed an audit of the Department of Parks and Recreation’s (Department) oversight of capital improvements by Ferry Point Partners, LLC. Under the terms of a May 31, 2000 license agreement with the Department, Ferry Point Partners LLC (i.e., the concessionaire) was granted a concession that required it to develop, operate, and manage the Ferry Point Golf Course in the Bronx. The agreement required the concessionaire to complete, by January 1, 2003, at least $22,470,000 in capital improvements and pay the City the greater of a $1.25 million annual fee or a percentage of gross receipts.
The concessionaire commenced capital improvement work in August 2000 by importing fill material to shape and contour the premises, formerly the site of a New York City municipal landfill. After excessive levels of methane gas—a hazardous substance—were detected in 1999, the concessionaire undertook its remediation. The City’s Franchise and Concession Review Committee authorized the Department to expend up to a total of $8.60 million for the remediation. As of September 2006, the Department had reimbursed the concessionaire $7.24 million. In addition, the Department modified the original agreement’s ending date from January 1, 2003, to April 15, 2004.
In November 2006, while this audit was in progress, the Department informed the Comptroller’s Office that it was preparing to terminate its license agreement with the concessionaire. The Department did not provide an explanation for its decision.
Audit Findings and Conclusions
The Department has not effectively monitored remediation costs submitted by the concessionaire to determine whether they were substantiated, reasonable, and necessary, and did not determine whether scheduled capital improvement work was being performed in accordance with the license agreement and modification. As a result, the City overpaid the concessionaire almost $6 million and lost more than $3 million in revenue from forgone license fees. Moreover, the Department permitted the concessionaire’s contractor to collect fees that could have been remitted to the City, thereby defraying the cost of the remediation.
Furthermore, the Department did not have written procedures to ensure the adequacy of documentation submitted to substantiate the reasonableness of costs and to approve the work as required remediation. In that regard, the Department did not prepare written descriptions of specific remediation items required and estimates of their associated costs. These would have aided the Department in determining whether the work items paid for by the Department were part of the required remediation and whether the costs were reasonable.
This report makes a total of 11 recommendations. The major recommendations are as follows:
The Department should:
- Review all concessionaire invoices to identify which specific work items are included in the $7.24 million reimbursements. For those items for which the concessionaire is not entitled to reimbursement, the Department should revoke the improperly granted reimbursements and recoup the excess payments.
- Ensure that City funding is used solely for the purposes for which it has been authorized.
- Track the progress of capital improvements against start and completion dates prescribed in the agreement.
- Assess the concessionaire all appropriate liquidated damages.
- Prepare a written scope of work and an itemized breakdown of costs for all required activities.
- Prepare and adhere to written policies and procedures that govern the review of invoices, canceled checks, and other related documentation.
- Prohibit concessionaires that have concession agreements with the City from collecting and retaining any type of fees before the commencement of concession operations.