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City Comptroller William C. Thompson, Jr. today called on operators of the Central Park Boathouse to pay a $381,000 tab after failing to report $2.4 million in gross receipts, including nearly $200,000 in free meals to guests.

Thompson’s audit of the license agreement between the New York City Parks & Recreation Department and the Central Park Boathouse, LLC, uncovered a troubling pattern of underreported revenues and sparked three dozen recommendations to remedy the problems.

“The Boathouse has persistently underreported its revenues, and poor oversight and mismanagement by the Parks Department has allowed it to shortchange the City,” Thompson said.  “For instance, when Boathouse management decides to lavish free meals on their customers – and in some cases those meals ranged from $800 to $2,600 apiece -- they shouldn’t expect the City to pick up the tab.

“Central Park is one of New York’s finest assets,” the Comptroller continued, “and doing business in the Park is not just a concession, but a privilege.  The Parks Department needs to do a much better job of managing its concessions to make sure the Boathouse fully complies with its lease agreement so that the City receives every dollar to which it’s entitled.”

The audit - which covered January 1, 2004 to December 31, 2005 - determined that the Boathouse failed to report $2,392,669 in gross receipts and therefore owes the City $381,070 in license fees and late charges.

Since June 2000, Central Park Boathouse, LLC, has been responsible for renovating, operating and maintaining the Boathouse restaurant, cafe, catering facility, outdoor bar, snack bar, boat and bike rentals, resource center and shuttle service under a 15-year license agreement. That deal requires the Boathouse to pay Parks either a minimum annual fee or percentage of gross receipts, whichever is greater each year. Gross receipts include all revenue except for sales taxes and gratuities paid directly or indirectly to employees and staff on top of salaries.

For the 2004 and 2005 operating years, the Boathouse reported $29,882,088 in gross receipts and paid Parks $4,469,935 in fees. However, auditors who reviewed the Boathouse books and made unannounced visits to the establishment detected a series of problems. Among the findings:

$255,302 in employee meals and complimentary guest meals were not reported in gross receipts, so the Boathouse owes $40,798.

Payroll registers identified $58,994 in meals provided to employees that the workers were charged for in the form of a payroll deduction. Auditors noted that these deductions should be treated as revenue and be included in gross receipts, and therefore the Boathouse underpaid Parks $9,439 in fees.

Auditors found that the Boathouse did not report $196,308 - the value of complimentary meals given to customers. Therefore the Boathouse owes $31,359 in license and late fees. The Boathouse does not document the recipients of the free meals, so auditors could not determine whether they were, in fact, prospective clients.

“We requested explanations for some of the larger deductions that were deducted from gross receipts reported to Parks, but the Boathouse would not provide us with any further information,” the Comptroller said.

Further, auditors noted that from October 2001 to December 2003 and from January to June 2006 the Boathouse did not report another $249,638 in complimentary meals, and from January to June 2006 another $23,894 in employee meal deductions – for a total of $273,532 that should have been included in receipts.

$412,012 in receipts from catering, film shoots, and bike-rental sales were underreported.

Auditors determined that the Boathouse underreported $400,344 in catering revenue, $10,598 in film-shoot revenue, and $1,070 in bike-rental sales (for a total of $412,012 in gross receipts). As a result, the Boathouse owes the City $65,922 in license fees and late charges.

The Boathouse failed to report 35 catered events, did not accurately report revenue from 11 events and did not include revenue from 10 events that were canceled but for which patron deposits were not refunded, resulting in $400,344 in underreported catering revenue.

The Boathouse failed to report an additional $10,598 from 15 film shoots held in 2004 and 2005 and so underpaid its license fee by $1,696. Additionally, invoices totaling $1,500 for three film shoots were not on file.

During two unannounced visits to the Boathouse, auditors determined $1,070 in bike-rental sales fees was not reported. Accordingly, the Boathouse owes Parks an additional $171 in license fees and late charges. Auditors noted that about 39 percent of total bike-rental receipts collected were not reported, applied that percentage to bike-rental sales totals in 2004 and 2005, and determined that an additional $190,611 in bike-rental sales may have been underreported and could result in an extra $30,498 in license fees.

“The Boathouse lacks controls to ensure that all revenue generated from bike rentals is reported in gross receipts,” Thompson said. “The Boathouse has one employee who handles all rentals and collects cash payments. There is no oversight of the bike attendant to ensure that the amount he collects daily is properly recorded.”

$1,513,950 was improperly deducted from reported gross receipts, so the Boathouse owes $241,911.

The Boathouse violated terms of its license agreement by deducting from gross receipts gratuity funds used to pay the salaries of a maitre d’, a commission to catering sales managers, and approximately 80 percent of the hourly wages to catering wait-staff. As a result, the Boathouse owes Parks an extra $241,911.

The terms of the license agreement and its amendment clearly allows for only the deduction of gratuities from gross receipts when the funds are distributed to employees as an addition to their regular salary. The Boathouse was unable to provide auditors with required documentation to substantiate its contention that their deductions were used to pay staff gratuities in addition to their regular salaries. Contrary to the Boathouse’s contention, auditors found that gratuities paid to Boathouse staff were used to fund a substantial portion of the promised hourly salary rate.

Auditors found that catering wait-staff were paid $66,541 in party pay for working 4,915 hours on days when there was either no catering event or there was an event at which no gratuities were collected from the patron hosting the event (This included 35 instances when there was no record of an event.).

Auditors found that $211,405 in revenue was not reported to Parks.

Of that amount, $185,988 in gross receipts were recorded on Boathouse records but not posted in monthly gross receipt reports submitted to Parks. As a result, the Boathouse underpaid Parks a total of $28,372.

Auditors also found that $25,417 from gift certificate sales since January 2005 was not reported, so $4,067 is owed. In fact, $7,371 in gift certificates was not redeemed within the 1-year redemption period and so is invalid. Auditors said the revenue from the gift certificate sales should have been included when they were sold.

The Boathouse lacked adequate controls over gondola-ride sales.

On the day that two auditors took a gondola ride they observed two other gondola rides. But when checking records, only two rides were reported for that day. Auditors asked to review the gondola’s reservation book, but the Boathouse claimed the gondolier took the book home and couldn’t find it.

Comptroller Thompson made 36 recommendations to the Boathouse and Parks Department, which Parks generally agreed with 27 and partially agreed with four. Parks has forwarded the issue concerning four other recommendations related to the deductibility of gratuities used to pay employees’ salaries to the City Law Department. Parks issued a Notice of Cure requiring the Boathouse to pay $113,854 in fees and interest, and required the Boathouse to implement the recommendations.

However, Parks refused to consider the Comptroller’s assessment of $31,359 for the value of free meals that was not included in gross receipts and indicated that these meals were “a cost to the Boathouse to conduct and promote its business.” Additionally, the Boathouse’s attorney agreed to some findings but disagreed with the largest assessment.

“The Boathouse attorney attempted to obfuscate a number of valid concerns raised by the auditors in this report by taking the most convenient and unsupported interpretations of the terms of the license agreement and its amendment, and by questioning widely accepted audit methodologies and practices,” Thompson said. “The Boathouse presented no documentation to prove that complimentary meals were, in fact, provided to potential customers and ultimately contributed to the restaurant’s business development and financial growth.”

You can view the audit at www.comptroller.nyc.gov.