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New York City Comptroller William C. Thompson, Jr. today issued an audit finding that the operator of two Central Park snack bars had significant internal control weaknesses over the collecting, recording, and reporting of revenues.

“My auditors found serious issues in Sweet Concessions’ performance of its agreement with the New York City Department of Parks and Recreation,” Thompson said. “Indeed, the extensive lack of records was a red flag that raised the question of fraud.”

Under a contract with the Parks Department, Sweet Concessions managed, operated and maintained two snack bars (near the model boat pond in Central Park) collectively known as the Sweet Café. The agreement covered March 31, 2001 to March 31, 2008.

The contract required that Sweets Concession pay the higher of $172,897 or 24 percent of gross receipts and $180,912 or 25 percent of gross receipts for the respective years ending March 31, 2007 and March 31, 2008. The agreement also required Sweet Concessions to spend a minimum of $75,000 on capital improvements, sell only authorized items at Parks Department approved prices, and maintain snack bars, restrooms and the surrounding area.

In addition to Sweet Café, Sweet Concessions has operated concessions in other locations, and provides catering and event planning services.

Thompson’s audit - available at www.comptroller.nyc.gov- examined whether Sweet Concessions accurately reported gross receipts, properly calculated permit fees due the City and paid permit fees on time, and whether the Parks Department adequately monitored and enforced the terms of its agreement. The audit covered April 1, 2006 to March 31, 2008.

Thompson’s auditors found that Sweet Concessions generally paid its minimum annual fees on time, performed capital improvements, maintained the required security deposit and liability insurance, paid utility charges, and returned equipment to Parks upon the expiration of its agreement.

However, they also found that Sweet Concessions had significant internal control weaknesses over the collecting, recording, and reporting of revenues. Sweet Concessions did not record all sales activities on cash registers or other income-recording devices; did not maintain an inventory of and could not provide access to cash registers used at the Sweet Café; did not maintain detailed cash register tapes; did not keep separate books and records for the Sweet Café; did not formally reconcile its daily cash and credit card sales to its food and beverage inventory; and, moved inventory among its sites.

Consequently, auditors could not ascertain whether all of the revenue earned at Sweet Café was in fact recorded in its cash registers and books and records, and accurately and completely reported to the Parks Department. Auditors also could not determine whether Sweet Concessions paid all fees due to the Parks Department.

“The Parks Department raised serious issues in its 2005 audit of Sweet Concessions, including the failure to provide critical records such as detailed cash register tapes and daily sales reconciliation,” Thompson noted. “The fact that Sweet Concessions continued to violate its agreement with the Parks Department even after it had been cited for these serious issues demonstrates Sweet Concessions’ disregard for the terms of its contract.”

Auditors also found that Sweet Concessions sold liquor in violation of its agreement, charged customers more than amounts approved by the Parks Department, and did not maintain its snack bars and restrooms in a sanitary manner.

Sweet Café, failed initial and follow-up compliance inspections conducted by the Department of Health and Mental Hygiene (DOHMH) in September and October of 2007, respectively. As a result, a Notice and Order was issued on October 29, 2007, indicating that the next failed inspection would result in the closing of the café.

DOHMH and Sweet Café management reports both noted persistent rodent problems. However, Parks Department inspection reports failed to note the presence of rodents and instead focused primarily on conditions of the restrooms and the area surrounding the snack bars.

Because Sweet Concessions’ permit with the Parks Department was not awarded again, the Comptroller directed his recommendations to the Parks Department. Among them:

• Ensure that future snack bar concession agreements with fees based on gross receipts clearly stipulate that concessions maintain adequate systems of internal control and keep complete and accurate records, which show in detail the total business transacted by the concessionaire and the gross receipts derived there from;

• Monitor concessionaire’s performance and enforce the terms and conditions of their agreements, as required by the New York City Charter; and,

• Consider issuing Advices of Caution in the City’s Vendor Information Exchange System regarding concessionaires that do not comply with or fulfill agreement provisions.

The Parks Department agreed with five recommendations and partially agreed with another one.

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