[Audit Report on Concessions Managed by the Bureau of Reclamation]
[From the U.S. Government Printing Office, www.gpo.gov]
Report No. 00-I-376
Title: Audit Report on Concessions Managed by the Bureau of Reclamation
Report No. 00-I-376
Title: Concessions Managed By the
Bureau of Reclamation (BOR)
Date: MAY 2000
**********DISCLAIMER**********
This file contains an ASCII representation of an OIG report. No attempt has been made to
display graphic images or illustrations. Some tables may be included, but may not resemble
those in the printed version.
A printed copy of this report may be obtained by referring to the PDF file or by calling the Office
of Inspector General, Division of Acquisition and Management Operations at (202)208-4599.
********************************* U.S. Department of the InteriorOffice of the Inspector General
EXECUTIVE SUMMARY
Concessions Managed by the
Bureau of Reclamation
Report No. 00-I-376
May 2000
BACKGROUND
The Bureau of Reclamation (BOR) is responsible for overseeing or managing 310 recreation
areas established on BOR project lands that are visited each year by about 90 million people
for camping, swimming, boating, picnicking, and other recreational activities. The Congress
has enacted legislation that requires BOR to "ensure the protection, comfort, and well-being
of the public (including the protection of public safety) with respect to the use of
Reclamation lands" and "ensure the protection of resource values."
Historically, BOR sought Federal partners such as the National Park Service and non-Federal
partners such as state and local governments to develop, operate, and maintain recreational
sites and facilities for the visiting public. In 1998, approximately 218 concessions provided
commercial services and facilities for the public on BOR project lands, consisting of
110 concessions operated by Federal partners, 87 concessions operated by non-Federal
partners, and 21 concessions managed directly by BOR.
Prior to 1995, BOR-managed concessions were not covered by BOR-wide policies,
standards, and directives. However, in 1995, BOR issued interim guidance for concessions
management and, in 1998, formally issued policies and standards and directives to guide
BOR officials in planning, developing, and managing concessions operations.
OBJECTIVE
The objective of our audit was to determine whether BOR had adequate policies and
procedures for managing its concessions operations and protecting the public with respect
to its use of public lands. In addition, at BOR's request, we evaluated BOR's 21 concession
contracts to determine whether the provisions in these contracts met BOR's newly adopted
policies, directives, and standards and to provide recommendations to improve BOR's
administration of current and future concession contracts.
RESULTS IN BRIEF
Overall, we concluded that BOR s newly adopted concession policies, directives, and
standards will provide an adequate framework, when fully implemented, for managing its
concessions operations and protecting the public with respect to its use of public lands.
However, BOR had not effectively managed its existing concessions operations, primarily
at the Canyon Ferry Reservoir and at Lake Berryessa, because of inadequate contract
provisions, mainly in the areas of contract default and operation and maintenance plans, and
because it had not enforced existing contract provisions in the areas of building
improvements, health and safety inspections, and prices charged the public. Although BOR
has acknowledged that concessions management is a priority, it has not developed
procedures to fully implement the new policies, directives, and standards or taken sufficient
actions or allocated sufficient resources to address known deficiencies in its concessions
operations. As a result, long-standing health and safety deficiencies have not been corrected,
and BOR land and water resources have been degraded. Furthermore, we concluded that
BOR will continue to be hampered in its efforts to manage its concessions effectively
because all of BOR's 21 concession contracts did not have one or more of the key provisions
required by BOR's new policies, directives, and standards for concessions management.
RECOMMENDATION
We recommend that the Commissioner, BOR, establish and implement an oversight process
to ensure that concessioners comply with existing contract provisions; complete and issue
detailed guidance and procedures to fully implement the new policies, directives, and
standards; develop a formal action plan to assess and correct the health and safety
deficiencies and degradation of land and water resources within the concessioners' areas of
operations at the Canyon Ferry Reservoir and Lake Berryessa; establish a review process to
ensure that all new concessions and newly issued and reissued contracts are in compliance
with BOR's policies, directives, and standards; develop a formal action plan to bring
BOR-managed contracts into compliance with BOR's new policies, directives, and
standards; and obtain a Solicitor's opinion on whether the concessioners at Lake Berryessa
have the legal authority to charge entrance fees for entering the concession area and whether
the fees collected are due the Government. Based on the opinion, actions should be taken
as appropriate.
AUDITEE COMMENTS AND OIG EVALUATION
BOR agreed with the report's six recommendations. Based on the response, we considered
one recommendation resolved and implemented and five recommendations resolved but not
implemented. W-IN-BOR-003-98-R
May 8, 2000
AUDIT REPORT
Memorandum
To: Assistant Secretary for Water and Science
From: Roger La Rouche
Acting Assistant Inspector General for Audits
Subject: Audit Report on Concessions Managed by the Bureau of Reclamation
(No. 00-I-376)
INTRODUCTION
This report presents the results of our audit of concessions managed directly by the Bureau
of Reclamation (BOR), which was conducted in response to a request from BOR. The
objective of our audit was to determine whether BOR had adequate policies and procedures
for managing its concessions operations and protecting the public with respect to its use of
public lands. In addition, at BOR's request, we evaluated BOR's 21 concession contracts
to determine whether the provisions in these contracts met BOR's newly adopted policies,
directives, and standards and to provide recommendations to improve BOR's administration
of current and future concession contracts.
BACKGROUND
BOR is responsible for overseeing or managing about 310 recreation areas established on
BOR project lands. These areas are visited each year by about 90 million people for
camping, swimming, boating, picnicking, and other recreational activities. In 1992, the
Congress enacted the Reclamation Recreation Management Act (Public Law 102-575),
which requires BOR to "ensure the protection, comfort, and well-being of the public
(including the protection of public safety) with respect to the use of Reclamation lands" and
"ensure the protection of resource values." The Omnibus Parks and Public Land
Management Act of 1996 (Public Law 104-333) also emphasized the need for water-based
recreation and established a commission appointed by the President to review the demand
for recreation at Federally constructed lakes and reservoirs. In addition, BOR identified
recreation management as a significant issue in its Strategic Plan for 1997-2002.
Historically, when completing water projects, BOR has sought Federal partners such as the
National Park Service and non-Federal partners such as state and local governments to
develop, operate, and maintain recreational sites and facilities for the visiting public. These
partners would then provide commercial services such as restaurants, boat ramps, docks, and
fuel stations by contracting with concessioners. Under these concession arrangements,
BOR s role is limited to monitoring the activities of its partners and, in certain instances, to
approving third-party contracts.
In 1998, approximately 218 concessions provided commercial services and facilities for the
public on BOR project lands. Of the 218 concessions, 110 were operated by Federal
partners, 87 were operated by non-Federal partners, and 21 were managed directly by BOR.
For the 21 concessions managed directly by BOR, 15 contracts were developed by BOR
personnel, and 6 contracts were developed by non-Federal partners. The length of the term
for the contracts ranged from 1 year to 50 years (see Appendix 3).
Prior to 1995, BOR-managed concessions were not covered by BOR-wide policies,
standards, and directives. An April 1992 report entitled "Report of the Concessions
Management Task Force Regarding Commercial Recreational Activities on Federal Land,"
prepared by an interagency task force for the Secretary of the Interior, contained
21 recommendations for improving management over concessions and other recreational
activities on Federal lands. In a January 13, 1993, memorandum, the Secretary directed BOR
to implement the 21 recommendations. As a result, in 1995, BOR issued interim guidance
for concessions management and, in 1998, formally issued policies (LND P02) and standards
and directives (LND 04-01) to guide BOR officials in planning, developing, and managing
concessions operations.
SCOPE OF AUDIT
Our review was completed in October 1999 and included BOR's and concessioners'
activities occurring from fiscal years 1994 through 1999 for the 21 BOR-managed
concessions, which are located in Arizona, California, Idaho, Montana, Nevada, North
Dakota, Oregon, and Utah.
Our audit was made, as applicable, in accordance with the "Government Auditing
Standards," issued by the Comptroller General of the United States. Accordingly, we
included such tests of records and other auditing procedures that were considered necessary
under the circumstances. To accomplish our objective, we reviewed (1) relevant laws,
legislative histories, and legal opinions to obtain an understanding of the basis for BOR s
past and current practices with regard to concessioners' activities; (2) correspondence and
other documents maintained at BOR offices to identify key actions and decisions of BOR
officials concerning the award of concession contracts and the management and oversight
of BOR concessioners; (3) BOR's April 1998 policies (LND PO2) and directives and
standards (LND 04-01); and (4) the contracts for the 21 BOR-managed concessions to
determine whether the provisions in these contracts met the intent of BOR's newly adopted
policies, directives, and standards. We also interviewed BOR officials and employees at the
Great Plains, Pacific Northwest, Lower Colorado, Upper Colorado, and Mid-Pacific
Regional Offices; BOR area and field offices; and BOR's Office of Policy in Lakewood,
Colorado. BOR and concessioner locations that we visited or contacted are in Appendix 1.
As part of our audit, we evaluated BOR s system of internal controls related to overseeing
and managing concession contracts to the extent we considered necessary to accomplish our
audit objective. We found weaknesses in BOR's approval of concessioner building
improvements, public health and safety inspections, and oversight of prices charged the
public. These weaknesses and the recommended corrective actions are discussed in the
Results of Audit section of this report. We also reviewed the Departmental Reports on
Accountability for fiscal years 1997 and 1998, which included information required by the
Federal Managers Financial Integrity Act of 1982, and BOR s annual assurance statements
on management controls for fiscal years 1997 and 1998 and determined that no material
weaknesses were reported which directly related to the objective and scope of our audit.
PRIOR AUDIT COVERAGE
During the past 5 years, the General Accounting Office has not issued any audit reports on
BOR's concessions management practices. However, the Office of Inspector General has
issued three reports related to concessions activities within BOR as follows:
- The report "Proposed Contract No. 8-07-30-L0470 With DynaSim for the Design,
Installation, and Operation of a Water Education Theater at Hoover Dam, Bureau of
Reclamation" (No. 99-I-308), issued in March 1999, stated that BOR s Lower Colorado
Region did not plan and develop the proposed concession contract for a water education
theater in compliance with BOR s concession policies, directives, and standards. BOR
concurred with our two recommendations and terminated negotiations with DynaSim and
agreed to ensure that all subsequent actions to acquire additional customer services at Hoover
Dam would be in compliance with BOR's concession policies, directives, and standards.
- The report "Selected Concessioner Fees, Mid-Pacific Region, Bureau of Reclamation"
(No. 95-I-1364), issued in September 1995, stated that five of the six concessions operations
reviewed at Lake Berryessa, California, owed additional fees of $10,389. The report also
stated that we were unable to determine whether gross receipts and exemptions reported by
the remaining concessioner were computed in accordance with contract terms because of the
lack of internal controls over revenues and inadequate record retention. The report did not
contain any recommendations because BOR took action to collect the additional fees due.
- The report "Recreation Management Activities at Selected Sites, Bureau of
Reclamation" (No. 95-I-870), issued in May 1995, stated that BOR had limited success in
its attempts to eliminate or reduce private, exclusive use of the recreation lands for long-term
mobile home sites. BOR policy required that BOR lands be managed to benefit as many
people as possible, and BOR and Departmental policies required that the private, exclusive
use of public lands be phased out when the lands are needed for public recreational use. In
addition, these policies allowed the permittees to invest in dwellings and associated
improvements because BOR had not established definitive guidelines for determining when
BOR lands were needed for public use and for amortizing investments made on BOR lands.
BOR agreed with the report's three recommendations, which were to (1) extend the
application of BOR policies for long-term recreation management to all state and local
government entities, (2) establish guidelines for determining when recreation lands used for
private long-term sites are needed for public use, and (3) establish a system of amortization
for the private improvements on BOR lands. According to information provided by BOR,
Recommendations 1 and 2 were considered resolved but not implemented, and
Recommendation 3 was considered resolved and implemented.
RESULTS OF AUDIT
Overall, we concluded that BOR s newly adopted concession policies, directives, and
standards will provide an adequate framework, when fully implemented, for managing its
concessions operations and protecting the public with respect to its use of public lands.
However, BOR had not effectively managed its existing concessions operations, primarily
at the Canyon Ferry Reservoir and at Lake Berryessa, because of inadequate contract
provisions, mainly in the areas of contract default and operation and maintenance plans, and
because it had not enforced existing contract provisions in the areas of building
improvements, health and safety inspections, and prices charged the public. According to
BOR's 1998 Annual Report, its mission is to "manage, develop and protect water and related
resources in an environmentally and economically sound manner in the interest of the
American public." Also, in enacting the Reclamation Recreation Management Act of 1992,
the Congress requires BOR to ensure that land and water resources are protected while it
carries out its recreation responsibilities. Although BOR has acknowledged that concessions
management is a priority, it has not developed procedures to fully implement the new
policies, directives, and standards or taken sufficient actions or allocated sufficient resources
to address known deficiencies in its concessions operations. As a result, long-standing health
and safety deficiencies have not been corrected, and BOR land and water resources have
been degraded. Furthermore, we concluded that BOR will continue to be hampered in its
efforts to manage its concessions effectively because all of BOR's 21 concession contracts
did not have one or more of the key provisions required by BOR's new policies, directives,
and standards for concessions management (see Appendix 2).
Inadequate Contract Provisions
We found that all of BOR's 21 concession contracts did not have one or more of 10 key
provisions for effective contract management in the areas of contractor default, operation and
maintenance plans, building improvements, title to fixed assets, franchise fees, exclusive use,
prices charged for services, safety program, record keeping, and operations review and
evaluation (see section "Evaluation of Contract Provisions" and Appendix 2). Although the
contracts had been developed before the issuance of BOR's new policies, directives, and
standards, we believe that the 10 provisions are essential for managing concessions
operations in accordance with sound business practices and ensuring that the interests of the
public and the Government are adequately protected. We found that the lack of adequate
contract provisions hindered BOR personnel from taking corrective actions against improper
concession practices and from adequately overseeing the operation and maintenance actions
performed by concessioners.
Contractor Default. We found that all 21 concession contracts contained termination
clauses but did not have contract provisions to require surety bonds and to collect penalties
and administrative charges for concessioner nonperformance. BOR could remedy
concessioner nonperformance only by issuing letters of default and then taking expensive
legal and administrative steps to terminate the contract. In addition, provisions addressing
termination were inconsistent, including three contracts that allowed the concessioner 1 year
to correct health and safety problems and seven contracts that did not specify a time frame
for remedying performance problems, even when the problems were identified by BOR
personnel. For example, we noted that a concessioner at Lake Berryessa which had been
cited for significant health and safety deficiencies related to a deficient sewer system was
allowed 1 year to correct the deficiencies before BOR could take action to terminate the
contract. BOR records indicated that during this time, the deficient sewer system continued
to degrade the land and water resources at Lake Berryessa by allowing raw sewage to flow
untreated into the Lake. We believe that had this contract specified a shorter time frame for
correction, BOR may have been able to limit the degradation of its land and water resources.
Operation and Maintenance Plans. We found that none of the 21 concession contracts
required annual operation and maintenance plans. A concessions operation plan specifies the
responsibilities of the concessioner, such as the types of facilities needed to provide goods
and services requested by the public users. In addition, an operation plan should clearly
identify the lands assigned to the concessioner, including the boundaries for long-term
mobile homes placed on Government land. A maintenance plan specifies how the facilities
and Government lands are to be maintained and delineates the maintenance responsibilities
between the concessioner and BOR personnel. We found that the lack of operation and
maintenance plans or incomplete plans hindered BOR personnel from effectively managing
concessions operations. For example, at the Mid-Pacific Region's Lake Berryessa Resource
Office, BOR personnel had difficulty resolving boundary disputes between mobile home
owners because boundary lines were not adequately documented in an operation plan. In
addition, we noted that BOR personnel at the Great Plains Region and the Montana Area
Office were not aware of all the facilities that had been constructed by concessioners at the
three concessions on the Canyon Ferry Reservoir. As such, BOR could not ensure that
needed maintenance was performed.
Enforcement of Contract Provisions
BOR did not adequately enforce existing contract provisions in the areas of building
improvements, health and safety inspections, and prices charged for services at its
concessions operations, primarily at the Canyon Ferry Reservoir in western Montana and at
Lake Berryessa in northern California.
Building Improvements. We found that all 21 contracts had general provisions
requiring BOR to approve all building improvements made to concession facilities and
grounds, such as new buildings, room additions to mobile homes, boat docks, toilets, and sea
walls. According to BOR officials, the approvals were necessary to ensure that
improvements were in compliance with all Federal, state, and local building requirements
and that the improvements did not adversely affect land and water resources and the visiting
public. We found, however, that BOR personnel had not generally enforced existing contract
provisions related to building improvements as follows:
- At the Great Plains Region, we found 43 mobile homes at Goose Bay Marina and
Kim's Marina on the Canyon Ferry Reservoir near Helena, Montana, that had significant
improvements made that were unauthorized. In addition, during a visit to the Yacht Basin
Marina, we observed that the concessioner was beginning the process of installing
above-ground fuel tanks. Regional and Montana Area Office personnel who accompanied
us during the visit told us that they were unaware of this planned installation of the fuel
tanks, and we were unable to locate any documentation indicating that the concessioner had
submitted plans or had received BOR approval for the installation of the tanks, as required
by the contract.
- The Mid-Pacific Region's Lake Berryessa Resource Office did not adequately review
and authorize building improvements to approximately 1,496 mobile homes and mobile
home sites at Lake Berryessa for seven concessioners to ensure that degradation to the land
and water resources did not occur. Although we were unable to determine the full extent of
unauthorized improvements because of the lack of documentation, the responsible
concession specialist said that about one-half of the 1,496 mobile home owners had made
unauthorized improvements to their homes and sites over the last 40 years. During our site
visit at the Lake, we found newly constructed improvements that BOR's concession
specialist stated would not be allowed under its existing policy. These improvements
included extended decks that hung over embankments, railings and stairways that extended
onto the Lake's shoreline, and unauthorized concrete sea walls constructed by mobile home
owners at the Putah Creek concession. In one instance, a newly constructed concrete wall
was crumbling, leaving broken parts of concrete lying on the shoreline. At the Spanish Flat
concession (see Figure 1), we found a large-scale infrastructure that had been constructed to
allow mobile homes and decks to significantly extend over the shoreline embankments. In
addition, stairways were constructed and attached to these decks that allowed home owners
exclusive access to the Lake's shoreline.
Health and Safety Inspections. We found that 14 of the 21 contracts had general
provisions requiring concessioners to protect the visiting public from health and safety
hazards. In addition, 12 contracts authorized BOR to conduct annual inspections of the
concessions operations and the facilities and grounds assigned to the concessioners.
However, we found that these authorized inspections were not always conducted. For
example, four of the six contracts at the Great Plains Region authorized annual inspections,
but Regional personnel had conducted only one health and safety inspection since March
1994 (the Goose Bay Marina, located on Canyon Ferry Reservoir, had been inspected in
March 1999 just prior to our visit). In addition, three of the seven contracts at Lake
Berryessa authorized annual inspections, but the Mid-Pacific Region's Putah Resource
Office had not conducted complete health and safety inspections at any of the concessions
since October 1994. As such, health and safety deficiencies, such as a mobile home
extending over an eroding embankment that we found during a visit to Lake Berryessa, were
not detected (see Figure 2).
Prices Charged for Goods and Services. We found that 17 of the 21 contracts had
general provisions requiring BOR approval of prices charged the public, but BOR personnel
did not always review and approve these prices. For example, at the Great Plains Region,
we found that four of the six contracts required BOR approval but that these approvals had
not been obtained. At the Mid-Pacific Region's Lake Berryessa Resource Office, BOR
personnel did not review and approve prices charged for food and merchandise for its seven
concession contracts. Although the concession specialist told us that he had seen a
40 percent increase in the prices charged the public over the past 5 years, he said that these
reviews were a low priority and therefore were not conducted because of insufficient
resources.
We also found that the seven concessioners at Lake Berryessa charged the visiting public
between $8 and $12 per automobile to enter the concession area. Based on our review of the
contracts and related documents, we did not find any authority for charging such fees.
Although BOR did not have documentation showing when the concessioners began to charge
the fees, BOR personnel told us that the fees had been charged for more than 30 years. We
estimated that current annual revenues from these entrance fees are approximately $180,000.
Concession Priorities and Resources
BOR has addressed concessions management in its strategic planning documents. For
example, BOR's Strategic Plan for 1997-2002 states:
Reclamation recognizes the need for placing greater emphasis on protecting
and enhancing the environment, particularly those resources dependent upon
Reclamation s management of water and land resources. . . . By 2000, [BOR
should] identify and prioritize recreation facilities directly managed by
Reclamation which need to be improved to meet public health, safety, and
accessability standards [and] by 2002, rehabilitate 50 percent of [the]
facilities identified as most critical.
In addition, BOR s Annual Performance Plans for fiscal years 1999 and 2000 generally
restated the Plan's goals and added a requirement for fiscal year 2000 to prioritize 75 percent
of the facilities identified as needing improvement. A BOR official indicated that BOR's
area offices were identifying the recreation facilities which will require improvements to
meet the health and safety and accessibility standards. However, as of October 1999, this
identification process had not been completed.
BOR issued policies, directives, and standards for concessions management on April 3, 1998.
Subsequently, the Commissioner stated that recreation was one of BOR's top 10 issues and
formed a Recreation Policy Advisory Team to help resolve recreation issues. However, we
found that while the policies, directives, and standards will assist BOR personnel in awarding
more effective concession contracts and in managing concessioners' activities, BOR
headquarters, regional, and area offices had not taken sufficient actions to improve
management of existing concession operations and to ensure the protection of BOR's land
and water resources and the public's health and safety. Although an Interagency Task Force
and other sources such as audit reports, newspaper articles, and internal documents have
notified BOR of the serious problems at its concessions, BOR has not taken effective actions
to remedy the deficiencies. For example, we found that BOR officials had been aware of
concession deficiencies at Lake Berryessa for at least 27 years. Specifically, a 1972 General
Accounting Office report entitled "Public Recreational Facilities Not Adequately Developed
at Lake Berryessa, California A Bureau of Reclamation Project" (No. B174172) questioned
the extensive development of mobile home parks by the concessioners at Lake Berryessa,
including the improvements made to these home sites. However, during our current review,
we found that the same conditions existed at Lake Berryessa 27 years later. We also found
that mobile home owners were still making unauthorized improvements to their mobile
homes and home sites and that these improvements had significantly degraded the Lake s
shoreline. In addition, we noted that BOR had not assessed the full extent of the
unauthorized improvements so that a formal plan with definable goals and objectives could
be developed to correct these deficiencies.
We also found that BOR had not allocated sufficient resources to concessions management
or ensured that concessions management personnel were adequately trained. Specifically,
BOR personnel assigned to oversee concessions operations generally were not assigned to
work on concession issues on a full-time basis, had additional high priority work
commitments, and were not trained as concession specialists but instead were outdoor
recreational planners or natural resource specialists. For example, BOR did not employ any
concession specialists at the Upper Colorado, Lower Colorado, and Great Plains Regions.
At the Mid-Pacific Region, one concession specialist was responsible for overseeing seven
major concessions at Lake Berryessa. However, the concession specialist did not have
adequate training in the areas of developing concession contracts and overseeing the prices
charged the public. The concession specialist at Lake Berryessa told us that he did not have
time to complete all of his assigned duties. Based on our review, we believe that one
concession specialist could not effectively address the numerous problems associated with
the operations of the seven concessioners and the 1,496 mobile homes. In comparison, the
National Park Service s Lake Mead National Recreational Area in Arizona and Nevada has
five concession specialist positions to manage 11 major concessions with about 850 mobile
homes. We believe that BOR officials should ensure that BOR personnel responsible for
managing concessions operations are provided with sufficient resources and training to help
them (1) plan for needed concessions, including planning and developing adequate
concession contracts; (2) oversee the operation and maintenance of buildings and grounds
assigned to the concessioner; (3) approve all building improvements made on Government
land; and (4) oversee prices charged the public.
Impact on Concessions Operations
As a result of inadequate concession contracts, ineffective management of concessions, and
inadequate resources, long-standing health and safety deficiencies at the Canyon Ferry
Reservoir and at Lake Berryessa have not been corrected and new deficiencies have
occurred. At both Federally constructed lakes, we compared conditions identified in the
1994 inspection reports with current conditions. At the Canyon Ferry Reservoir, the Goose
Bay Marina's 1994 inspection report cited numerous health and safety deficiencies, such as
improper battery storage; inadequate fire protection; and decaying wooden decks, slips, and
walkways. The March 3, 1999, inspection report, based on a health and safety inspection
performed by the Great Plains Regional Industrial Hygienist for Goose Bay Marina, stated,
"Overall, there are widespread problems with wiring, fire safety, slips/trips/falls [hazards],
propane fuel [storage], housekeeping, grounds keeping, and hazardous waste [disposal]." The
1999 inspection report further stated that lumber, lead/acid batteries, equipment, debris, and
trash were scattered throughout the property (see Figure 3). The report also cited
deficiencies such as decaying and broken structural lumber on the concessioner's docks.
At Lake Berryessa, we found, based on our review of BOR planning documents and other
documents, that degradation of the land and water resources began in about 1960 and existed
as of October 1999. Specifically, we noted numerous unauthorized mobile home
improvements, such as concrete sea walls, retaining walls, and stairways, along the shoreline.
In addition, at the Putah Creek concession, BOR documents indicated potential soil
contamination from underground storage tanks and from the improper storage of 50 gallons
of mixed paint, 50 gallons of used oil, and other chemicals. Further, we observed an
improper trash site on Federal land (see Figure 4) that included 400 to 500 used tires (see
Figure 5), a burnt fiberglass boat, piles of wood, and abandoned mobile homes. These items
were on the hillsides near the sewage ponds.
The most serious deficiency we noted was the discharge of effluent from the sewage ponds
onto a hillside adjacent to Lake Berryessa. According to BOR documents, this discharge
began in October 1996 and came to BOR's attention in a complaint filed with BOR about
two sewage spills at the Putah Creek concession. According to BOR's documents, in
July 1997, a mobile home owner stated that sewage-contaminated soil was untreated for
weeks. The documents also showed that a mobile home owner near the sewer pump house
said that concession employees caused an "unbearable stench" when they unplugged the
large hose containing raw sewage from the sewer pump house, which allowed raw sewage
to spill directly into Lake Berryessa. The documents further indicated that repeated spills
had occurred over the past 2 years. While we did not find any studies addressing the
degradation of water at Lake Berryessa, we noted that the Napa County Department of
Environmental Management and the California Regional Water Quality Control Board had
investigated these spills but that as of October 1999 had not determined whether this
situation had been corrected. We noted that the Lake Berryessa Resource Office had
attempted to terminate the contract with this concessioner because of these deficiencies but
had not been successful.
Evaluation of Contract Provisions
Based on a request from BOR officials, we evaluated BOR's 21 concession contracts to
determine whether the provisions contained in these contracts met BOR's April 1998
policies, directives, and standards. Each of the 21 contracts was developed prior to the
formal issuance of BOR's new guidelines. Although the guidelines addressed more than
20 contract provisions, we limited our discussion in this report to the 10 major contract
provisions that we believe are the most significant for effective management of concessions
operations. These 10 contract provisions relate to contractor default, building improvements,
operation and maintenance plans, title to fixed assets, franchise fees, exclusive use, prices
charged for services, a safety program, record keeping, and operations review and evaluation.
Contractor Default. Concession contracts are required by LND 04-01, 4.D(4) to include
provisions that address contractor default, penalties, and termination. These provisions allow
BOR to require a surety or performance bond, collect penalties and administrative costs for
default and nonperformance, and terminate the contract. As previously discussed, we
determined that all 21 contracts contained termination clauses but did not have contract
provisions to require surety bonds and to collect penalties and administrative charges for
concessioner nonperformance.
Building Improvements. All designs for construction are required by LND 04-01,
4.D(7), to be approved by BOR and to be in compliance with applicable environmental
regulations and building code requirements, including those for accessibility and historical
preservation. The directives also state that BOR may provide appropriate standards when
no construction standards are available and that building permits when required must be
obtained from local authorities by the concessioner prior to construction. According to a
BOR official, the directives and standards allow BOR to ensure that all facilities are
"harmonious" with the surrounding landscape; meet accessability, environmental, and health
requirements; and adequately protect BOR's land and water resources and the visiting public.
We determined that all 21 contracts contained general provisions authorizing BOR to
approve the design and construction of new concession facilities but that 19 of the provisions
were not in compliance with the standard because they did not have specific contract
requirements for accessibility and environmental compliance.
Operation and Maintenance Plans. Concession contracts are required by LND 04-01,
4.D(8), to contain provisions (1) stipulating that concessioners prepare an annual operation
and maintenance plan that has to be approved by BOR and (2) specifying what the plan will
contain. We found that none of the 21 contracts included provisions requiring operation and
maintenance plans. While we found that certain provisions in the contracts did address
operation and maintenance requirements, the discussions were vague, did not address all
aspects of the concessioner's operation and maintenance requirements, and did not require
the plans. For example, the Lower Colorado Region manages a concession on the Salton Sea
in southern California. Section 12 of the concession contract states, "Grantee [concessioner]
shall, at its own cost and expense, keep in a state of good repair all improvements located on
the leased premises." This contract provision relating to maintenance requirements does not
describe how and when each facility at this concession, such as restrooms, will be
maintained, nor does it describe how and when Government lands assigned to the
concessioner will be maintained.
Title to Fixed Assets. Concession contracts are required by LND 04-01, 4.D(10), to
contain provisions stipulating that (1) the title to fixed assets, such as facilities placed on the
Federal lands, be conveyed to the United States or the facilities will be removed as directed
by the contract; (2) concessioners have a right to compensation for existing facilities which
remain on Federal lands when the contract is sold, transferred, or expires; and
(3) compensation for new facilities be based on actual costs less depreciation over the life
of the contract. Although we found that 20 of the 21 contracts contained provisions
addressing this requirement, we determined that provisions for 10 of the 21 contracts did not
adequately address the disposition of title to improvements placed on Federal lands by a
concessioner or specify the basis for compensation for these facilities.
Franchise Fees. BOR is require by LND 04-01, 4.D(13), to determine and recover fair
compensation for the use, rights, and privileges granted under a concession contract. The
request for proposal is to describe the methods used to determine fair compensation such as
a graduated scale to determine total benefits. We determined that all 21 contracts contained
general provisions requiring concessioners to pay a franchise fee to the Government but that
the provisions for 3 of the 21 contracts did not require the franchise fee to be based on a
percentage of gross receipts, which we believe when properly determined is "fair
compensation." The franchise fees for these three contracts were based on a predetermined
annual fixed amount, such as $400 a year. To illustrate, an Upper Colorado Region
concession contract that expires in June 2036 requires a $400 annual franchise fee. Based on
the concession's 1998 gross receipts, this fee is a return to the Government of 1/2 of 1
percent.
Exclusive Use. Contract language is required by LND 04-01, 4.D(15), which ensures
that new exclusive use will not occur and which stipulates that any existing exclusive use
facility, service, or site be removed if the facility, service, or site is identified for removal in
the request for proposal; is abandoned or not used for the purpose for which it was
authorized; is condemned or identified as a public health or safety hazard; is destroyed by
fire, flood, or other acts of nature; or is vandalized beyond reasonable repair. The directives
and standards also require a provision that prohibits the replacement or relocation of an
exclusive use facility, service, or site. Although we found that 9 of the 21 contracts
contained provisions that addressed exclusive use, we determined that 19 of the 21 contracts
did not contain provisions that prohibited the exclusive use of recreational sites or that
required the removal of an existing exclusive use site in those circumstances identified in the
directives.
Prices Charged for Goods and Services. Prices charged by concessioners for services,
food, lodging, and merchandise are required by LND 04-01, 4.D(16), to be comparable to
those prices charged by the private sector in similar situations. The directives and standards
further state that approved rates will ensure a fair return to the concessioner and a reasonable
cost to the public and that BOR will approve such rates or rate schedules on an annual basis.
Although we found that 17 of the 21 contracts contained provisions that addressed this
requirement, we determined that 16 of the 21 contracts were not in compliance with the
standard, in that the contracts did not require BOR to approve the rates on an annual basis.
Safety Program. Concession contracts are required by LND 04-01, 4.D(17), to contain
provisions that hold concessioners responsible for ensuring a safe and healthy environment
by developing, implementing, and administering health, safety, and hazardous materials
programs that are approved and periodically reviewed by BOR. Although 14 of the
21 contracts contained general provisions addressing the public s health and safety, we
determined that 19 of the 21 contracts did not meet BOR's standard because they did not
require the concessioner to implement a safety program.
Record Keeping. Concession contracts are required by LND 04-01, 4.D(19), to contain
provisions that require concessioners to establish and maintain a system for record keeping
that uses generally accepted accounting principles and an acceptable system of account
classification codes. The standard also requires each concessioner to (1) complete and
submit BOR's annual financial report forms, (2) have a financial review completed by an
independent certified public accountant when a concessioner's annual gross revenues are
more than $250,000 but less than $1,000,000, and (3) have a financial audit conducted by
an independent certified public accountant when a concessioner's annual gross revenues
exceed $1,000,000. Although 20 of the 21 contracts contained general provisions addressing
these record-keeping requirements, we determined that provisions for 12 of the 21 contracts
did not require the concessioners to obtain a financial review or audit.
Operations Review and Evaluation. Concession contracts are required by LND 04-01,
4.D(23), to contain a provision requiring the local BOR office to conduct and document an
evaluation of the concessioner's operations on an annual basis, prepare a performance rating
for the concessioner, and send a copy of the completed annual review and rating to the
regional office and the concessioner. The standard further states that in-depth reviews will
be conducted and documented by an integrated team of specialists from BOR offices other
than the local BOR office directly responsible for oversight of the concessions. In addition,
the in-depth review will be conducted at least once for contracts with a term of 5 years or
less, while the in-depth review will be conducted at least once every 5 years for contracts
with a term of 5 years or more. Also, a copy of the review will be sent to the area and
regional offices and the concessioner. We determined that provisions for 15 of the
21 contracts did not require complete evaluations of the concessions operations and facilities
by the local office.
While we concluded that the BOR's newly adopted concession policies, directives, and
standards will provide an adequate framework, when fully implemented, for managing its
concession operations, we believe that detailed guidance and procedures should be
completed to assist BOR employees in implementing the new policies, directives, and
standards. In addition, a formal action plan should be completed to bring BOR's 21
concession contracts into compliance with this new guidance, and a review process should
be established to ensure that new and reissued concession contracts are in compliance with
the new policies, directives, and standards.
Recommendations
We recommend that the Commissioner, BOR:
1. Establish and implement an oversight process to ensure that concessioners comply
with existing contract provisions, especially in the areas of building improvements, annual
inspections, and prices charged the public by the concessioners.
2. Complete and issue detailed guidance and procedures to fully implement the new
policies, directives, and standards.
3. Develop a formal action plan to assess and correct the health and safety deficiencies
and degradation of land and water resources within the concessioners' areas of operations
at the Canyon Ferry Reservoir and Lake Berryessa.
4. Establish a review process to ensure that all new concessions and newly issued and
reissued contracts are in compliance with BOR's policies, directives, and standards.
5. Develop a formal action plan to bring the 21 BOR-managed contracts into
compliance with BOR's new policies, directives, and standards.
6. Obtain a Solicitor's opinion on whether the concessioners at Lake Berryessa have the
legal authority to charge entrance fees for entering the concession area and whether the fees
collected are due the Government. Based on the opinion, actions should be taken as
appropriate.
BOR Response and Office of Inspector General Reply
In the April 3, 2000, response (Appendix 4) to the draft report from BOR's Commissioner,
BOR concurred with the report's six recommendations. Based on the response, we consider
Recommendations 1, 2, 3, 4, and 6 resolved but not implemented and Recommendation 5
resolved and implemented. Accordingly, the unimplemented recommendations will be
referred to the Assistant Secretary for Policy, Management and Budget for tracking of
implementation.
Since the report's recommendations are considered resolved, no further response to the
Office of Inspector General is required (see Appendix 5).
Section 5(a) of the Inspector General Act (5 U.S.C. app. 3) requires the Office of Inspector
General to list this report in its semiannual report to the Congress. In addition, the Office of
Inspector General provides audit reports to the Congress.