Water's Edge -- a popular Manhattan restaurant and catering hall -- is in a bit of trouble. The establishment is accused of a whole host of things, including underreporting income and failing to pay over $82,000 in rent to the City.
Here's a copy of the press release issued earlier today by New York City Comptroller William C Thompson :
THOMPSON AUDIT: WATER'S EDGE RESTAURANT AWASH IN FINANCIAL AND SAFETY PROBLEMS
-Audit uncovers unreported receipts, outstanding water, sewer and electric bills and failure to maintain the public pier -
New York City Comptroller William C. Thompson, Jr. today charged that the Quinn Restaurant Corporation failed to report all revenue, make rent payments on time, and properly maintain premises at the Water's Edge restaurant on the East River.
An audit by Thompson identified a number of lapses in compliance with major provisions of Quinn's lease agreement with the Department of Citywide Administrative Services (DCAS) to operate Water's Edge.
The audit - available at www.comptroller.nyc.gov - uncovered serious problems with Quinn's record-keeping and pointed out that Quinn could not even prove that it accurately reported all gross receipts and paid appropriate rent to the City.
"Since more than 700 invoices were missing for a thee-month period, the auditors could not thoroughly determine whether all revenue was collected from banquet activity," Thompson said. "Quinn could not provide all contracts for weddings and other banquets, and guest checks from the bar and restaurant as well. As a result, the $86,034 that Quinn now owes the City likely is not all the money that should be paid."
Quinn Restaurant Corporation entered into a 25-year lease agreement with the City in 1981 with an option to renew for an additional 10 years. The agreement required Quinn to construct, operate and maintain a restaurant on the Nott Avenue Pier at the foot of 44th Drive and the East River in Queens. Quinn subsequently constructed Water's Edge Restaurant at the site. The audit - which covered October 1, 2006 to September 30, 2007 - identified the following problems:
Lack of Controls over Banquet Contracts: Quinn does not issue pre-numbered contracts to patrons who schedule banquets at its facility. During the audited period, Quinn reported 128 banquets generating $1.2 million. Of the 128 banquets Quinn reported, there were no contracts on file for 25 of these events, which generated revenues totaling $111,815.
Lack of Accounting for Banquet Invoices: Quinn's records did not account for 701 invoices for a thee-month sample period. During the last three months of 2006, invoice numbers began with #10795 and ended with #11654. Thus, it would appear that 860 invoices were issued for banquet engagements. However, Quinn's records had only 127 invoices for 128 banquets on file. Of the remaining 733 invoices, 701 were missing. Further, auditors could not reconcile the dollar amount recorded on 44 of the 127 invoices with the amounts actually paid.
"Maintaining a complete accounting of all banquet invoices in sequential order provides assurance of the proper accounting of all banquet invoices," Thompson said. "Because of Quinn's lack of proper accounting of banquet invoices, a weakness in basic internal controls, there is no evidence that all banquet revenue was recorded on Quinn books and recorded reported to DCAS."
Other Internal Control Weaknesses Over Banquet Revenue: Auditors tested banquet records for a three month period and found a number of irregularities: actual events not recorded on quarterly gross receipts statements; events on banquet calendars but not on quarterly gross receipts statements; and events recorded on banquet calendars without any supporting documentation of the actual event, among other problems.
Lack of Accounting of Restaurant Guest Checks:
Over a three-month period, Quinn reported $517,375 in revenue from the restaurant and bar. But its records did not account for five check numbers during that period. Additionally, 576 (approximately 13.67 percent) guest check numbers were voided or canceled during the same period.
"Consequently, Quinn cannot demonstrate and we cannot be assured that all gross receipts from the restaurant and bar operations were recorded on Quinn's books and reported to DCAS," Thompson said, "and that appropriate fees were paid to the City."
Quinn Did Not Report All Sales and Took Improper Deductions from Gross Receipts: Quinn improperly deducted $507,249 from its gross receipts it reported to DCAS, and it did not report $604,620 in gross receipts from the sales of its florist, photographer, and musicians. Therefore, it underpaid the City $82,555 in rent and related interest and penalties over the audit period.
Further, Thompson charged that Quinn has not complied with other major provisions of the lease agreement regarding upkeep and maintenance of the property, specifically the pier in the public access area.
Inspections in October 2005 revealed that there was severe deterioration of many pilings and that the concrete pier deck was in poor condition, according to the audit. That review determined the pier should be repaired, and DCAS directed that the pier be closed to public access. Additionally, in November 2005, DCAS notified Quinn that the pier was in a state of disrepair, potentially hazardous, and not safe for public use, and demanded that Quinn prepare the required permit application and submit plans for repair by December of that year.
Since Quinn did not submit the required documentation, DCAS sent a Notice of Default to Quinn in February 2006, and then reiterated that it was Quinn's responsibility to repair the pier in follow-up letters in November 2006 and June 2007. To date, Thompson said, the pier remains closed.
Additionally, Thompson's audit pointed out that Quinn has a history of not adhering to the lease agreement concerning paying rent when it is due (and owed $224,083 in back rent and late charges as of December 1, 2007), has a history of not remitting timely payments for water and sewer charges (and owed $77,453 as of September 2007), owed Con Edison $43,506 as of January of this year (despite receiving three turnoff notices), and underfunded its security deposit by $1,450.
Thompson made 16 recommendations, eight to Quinn - including the payment of an additional $69,309 in rent and $16,725 in late charges - and eight to DCAS. DCAS generally agreed with all recommendations and Quinn disagreed with most.
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