Almost half the money owed by the Crystal Ball Group, which signed a 20-year license agreement with the city Department of Parks in 1998, consists of missing receipts and the erroneous categorization of expenses for construction and renovation, the audit found.
The office of City Comptroller William Thompson conducted the audit, a routine practice to review the operations of concessions using Parks Department land.
The comptroller claims that Crystal Ball Group, a consortium of New York-area business organizations, was obligated to perform $8 million in capital improvements on Terrace on the Park by April 2000 and to pay the city the unused portion of that sum.
The audit concluded that as of May 15, 2003, only $5.3 million in improvements had been made. Of this sum, the comptroller defined approximately $800,000 as expendable improvements, such as tables, chairs and draperies, that were not structural changes and therefore should not have been counted as capital improvements. An additional $800,000 of capital improvements was unaccounted for by receipts, according to the audit.
Terrace on the Park did not return calls seeking comment.
Crystal Ball Group's lawyer, Lawrence S. Lawrence, disputed the city's findings. In a letter to Thompson's office dated Nov. 24, 2003, he said "Crystal Ball has complied with and fulfilled all of its obligations under the license agreement; has paid all license fees due; and to date has expended more than $7,000,000 on Capital improvements."
Lawrence charged that the audit's figures are not accounted for by documentation and disputed the city's claim that the company had agreed to a fixed completion for the improvements.
The Parks Department is standing behind Crystal Ball Group on the main points of contention and has verified that as of November 2003, $5.5 million in capital improvements made to the facility was accounted for by documentation and on-site inspection. The overhaul includes a new cafe and new elevators, renovated ballrooms, asbestos removal, and landscaping changes.
"The improvements that they have made to the facility so far are really evident and we're pleased with the work they've done," said Megan Sheekey, spokeswoman for the Parks Department. "We've received a lot of positive feedback from customers."
Sheekey said the April 2000 deadline for the construction projects was just a time frame. She said the Parks Department had set a deadline of Dec. 31, 2005 for completing capital improvements before the audit was released.
But a spokesman for the comptroller said the April deadline was, in fact, a deadline.
"We believe these to be firm agreements with firm start and end dates that should have been upheld by the Parks Department," he said. The comptroller's office, the spokesman said, hopes parks will try to get the money listed in the audit returned, though the office has no enforcement powers to do so itself.
A letter written by the Parks Department in response to a draft audit report agreed that Crystal Ball Group should improve its future documentation efforts while setting Dec. 31, 2005 as the deadline for completing capital improvements.
The letter stated that the only money the Parks Department is seeking to recover, however, stems from Crystal Ball Group's improper deductions to gross receipts, a percentage of which the company is required to pay yearly.
The audit found that among other improprieties, over $400,000 in wages paid between April 1, 1999 and March 31, 2002 were misclassified as "tips" in order to be excluded from the gross receipts total. The Parks Department concluded in its letter that the fee owed for these inappropriate deductions, just over $100,000, should be charged to Crystal Ball Group.
Crystal Ball attorney Lawrence said the comptroller's office ignored comments he submitted after seeing the initial draft of the audit. He said the report was incorrect and would hurt business.
"I don't see how this is beneficial to the city and the Queens community," Lawrence said.
As for the $100,000 that Parks claims it is owed, Lawrence said he would be discussing the situation with the department soon.
"We respectfully disagree with Parks," he said.
©2004 Community News Group
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