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New York City Comptroller William C. Thompson, Jr. today issued an audit faulting Caffe-on-the-Green for poor fiscal controls over its restaurant and banquet operation, deficiencies so “severe” that the Comptroller could not determine whether all gross receipts have been actually reported to the New York City Department of Parks and Recreation.

“My auditors uncovered significant lapses in how revenue generated from the restaurant and banquet operations was documented, making it virtually impossible to determine how much money was legitimately owed to the City,” Thompson said.

Under its agreement with the City, the Merissa Restaurant Corporation – which manages Caffe-on-the-Green - is required to pay a minimum annual fee and an additional 10 percent of gross receipts in excess of $750,000 in each operating year. The payments must be made to the New York City Department of Parks and Recreation.

Additionally, Merissa is required to post a security deposit, maintain certain types of insurance coverage, and submit statements of gross receipts and annual income and expense statements and pay all utility charges and applicable taxes. During operating years 2006 and 2007, Merissa reported $9,785,410 in gross receipts and paid $958,541 in license fees.

Auditors uncovered a pattern of significant operational deficiencies with respect to Merissa’s recordkeeping. Specifically, auditors found that:

• Merissa’s point-of-sales system does not report all transactions.
  
  
• Merissa indicated that it did not use and therefore could not provide banquet event calendars for calendar years 2005 and 2006 to evidence that all banquet revenue was reported to Parks.
  
• Merissa did not maintain the point-of-sales system deletion reports for more than 10 days, which would have allowed auditors to determine whether any restaurant transactions were inappropriately deleted thereby reducing the revenue reported to Parks.
  
  
• Merissa could not provide a la carte party contracts to show that all of the parties were entered in the point-of-sales system. A la carte party contracts are used for small parties held in the restaurant instead of in the banquet rooms.

“Astoundingly, Merissa officials claimed that they discard these contracts a week after the events take place,” Thompson said.

Despite the limited documentation that was provided, auditors were still able to determine that Merissa took $900,182 in improper deductions from gross receipts resulting in $120,607 in additional fees and related late charges owed to the City.

The Comptroller made seven recommendations to Merissa and two to Parks. Merissa officials strongly disagreed with the report.

However, Thompson said: “We continue to believe that the evidence is clear: Merissa cannot demonstrate that all gross receipts are properly recorded and reported to the City. The deficiencies are so severe that it appears evident that Merissa may have circumvented controls in order to misreport transactions within its restaurant and banquet operation.”

Added Thompson: “Merissa simply refuses to accept the findings of this audit. It is for this reason that Parks must closely monitor Merissa’s operations through the remainder of the limited contract period.”

Parks, meanwhile, agreed with all recommendations and has now required Merissa to pay the full audit assessment of $120,607 in additional license fees and late charges. Parks added that it “will monitor Merissa’s operations and periodically audit their financial records to verify that Merissa is complying with all the internal control recommendations issued in the report.”

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