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New York City Comptroller William C. Thompson, Jr. today released an audit of the West 79th Street Boat Basin finding a series of fiscal irregularities that raise serious concerns about the possibility of fraud.

“The Parks Department has dropped the ball and seriously failed to properly monitor one of its operations,” Thompson said. “The fact that the Parks Department was asleep at the switch has left the door wide open to potential fraud. We need to make sure that the City gets every dollar that it’s due.”

Specifically, the Comptroller’s auditors found a complete disregard for internal controls over the collecting, recording, and reporting of revenues generated from all sources, including dockage, mooring, storage, parking, and boater services. 

The Parks Department’s Marine Division manages, operates, and maintains the Boat Basin in Riverside Park; the Boat Basin offers seasonal and transient dockage, seasonal and transient mooring, monthly and daily parking, and storage for kayaks and canoes. Fees are charged for these services, as well as other boater services, and forwarded to the Parks Department’s Revenue Division.

Marine Division officials, including the Marina Director and the Chief Dockmaster, run the Boat Basin, and the Revenue Division records and reports on Boat Basin transactions. For Fiscal Years 2005 and 2006, reported revenues for the Boat Basin were about $874,147 and $949,064 respectively.

Thompson’s new audit - which can be viewed at www.comptroller.nyc.gov – spanned January 2005 to December 2006.

“During the course of the audit, a number of red flags were raised,” Thompson said. “The number and magnitude of these red flags raised the question of whether fraud occurred at the Boat Basin.”

The Comptroller pointed to a number of “fraud indicators,” such as:

• The Chief Dockmaster was responsible for generating agreements and parking passes, signing agreements, and accepting payments. The Chief Dockmaster should not have performed all of these duties because it violates the segregation of duties principle and allows for fraud and misappropriation.

• Twenty-three customers, responding to a survey, informed auditors that they paid parking fees totaling $66,250 for calendar year 2005. The Boat Basin, however, recorded only $22,750 in payments from these customers.

• Twenty-five customers informed auditors that they paid fees totaling $71,000 for calendar year 2006; however, the Boat Basin recorded only $57,750 in payments for these customers. The disparity between the fees customers reported paying and the fees reported by the Parks Department was far less in 2006 than in 2005.  This coincides with the period when cash transactions were phased out and with the period of the Comptroller’s audit, which further illustrates that fraud may have occurred at the Boat Basin.

• An unauthorized order for a two-year supply of customer receipts was placed in September 2006 and subsequently canceled in November 2006. The Parks Department had no record of this order. Further, the order invoice indicated payment with an American Express card; however, according to Parks Department officials, the Parks Department stopped using American Express in July 2005.   

• Auditors encountered obstacles and extensive delays in obtaining basic documentation that should have been readily available. These obstacles and delays were highly unusual and beyond common business practice. In some cases, documents requested by auditors were not received for more than 11 months after the initial request, as in the case of unused cash receipt books.

Additionally, auditors discovered a number of other troubling issues. The Boat Basin failed to ensure that its customers maintained the insurance and registration required by the Rules of the City of New York. As well, the Parks Department failed to institute rates for charter and educational vessels, and its Revenue Division lacked segregation of duties and a reliable accounts receivable system. Thompson also noted that the Parks Department’s Counsel’s Office lacked controls over the Boat Basin’s waiting list.

Comptroller Thompson made 26 recommendations. He asked the Parks Department to:

• Establish and implement a system of internal controls over the financial operations of the Boat Basin to ensure that all fees are accounted for, collected, and reported to the Parks Department.

• Closely supervise and monitor the Boat Basin’s financial operations, including the collection, recording, and reporting of gross receipts.

• Separate the responsibilities for authorizing transactions, processing and recording transactions, reviewing transactions, and handling any related assets at both the Boat Basin and the Revenue Division.

• Ensure that all vessels entering the Boat Basin are properly insured and registered.

• Institute rates for charter and educational vessels.

• Ensure that the Parks Department Revenue Division receives copies of all agreements and uses them to post customer charges accurately and promptly.

• Ensure that the Parks Department Counsel’s Office systematically files and maintains all documentation pertaining to the Boat Basin waiting list and removes from the waiting list applicants that defer two offers for dockage.

In response to the audit, the Parks Department agreed with 20 recommendations, partially agreed with three, and disagreed with three of the 26 recommendations, dismissing the Comptroller’s concerns about fraud and noting that the Boat Basin has generated increased revenue.

In response, Thompson wrote in his audit: “However, given that rates were only nominally increased and the facility did not substantially expand, the extraordinary increase in Boat Basin revenue only underscores our point that fraud may have occurred. The dramatic revenue increase is even more suspect since it coincided with the phasing out of cash transactions by Parks.”

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