[Independent Auditors Report on National Park Service Financial
Statements for Fiscal Year 1999]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 00-I-621

Title: Independent Auditors Report on National Park Service Financial
       Statements for Fiscal Year 1999

 
  Date: August 8, 2000

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  E-IN-NPS-008-99-R

  August 8, 2000
  
  INDEPENDENT AUDITORS REPORT
  
  Memorandum
  
  To:  Director, National Park Service
  
  Subject:  Independent Auditors Report on National Park Service Financial Statements for
  Fiscal Year 1999 (No. 00-I-621)
  
                             SUMMARY
  
  In our audit of the National Park Service's (NPS) financial statements for fiscal year 1999,
  we found the following:
  
  -  The principal financial statements were fairly presented in all material respects.  NPS's
  principal financial statements consist of the Consolidated Balance Sheet as of September 30,
  1999; the Consolidated Statement of Net Cost, Consolidated Statement of Changes in Net
  Position, and Consolidated Statement of Financing for the fiscal year ended September 30,
  1999; and the Combined Statement of Budgetary Resources for the fiscal year ended
  September 30, 1999.
  
  -  Our tests identified no internal control weaknesses that we consider to be reportable
  conditions.
  
  -  Our tests of compliance with laws and regulations identified one instance of
  noncompliance with the United States Code (16 U.S.C.  1a-8) that requires NPS to develop
  and implement a comprehensive, standardized maintenance management system and one
  instance of noncompliance with Statement of Federal Financial Accounting Standards No. 4,
  "Managerial Cost Accounting Concepts and Standards for the Federal Government," that
  relates to NPS not calculating the unit costs of its outputs.
  
  Our conclusions are detailed in the sections that follow.
  
  OPINION ON FINANCIAL STATEMENTS
  
  In accordance with the Chief Financial Officers Act of 1990, we audited NPS's principal
  financial statements for the fiscal year ended September 30, 1999 as contained in  NPS's
  accompanying Accountability Report for fiscal year 1999.  These financial statements are
  the responsibility of  NPS, and our responsibility is to express an opinion, based on our audit,
  on these financial statements.
  
  Our audit was conducted in accordance with the "Government Auditing Standards," issued
  by the Comptroller General of the United States, and with Office of Management and Budget
  (OMB) Bulletin 98-08, "Audit Requirements for Federal Financial Statements," as amended.
  These audit standards require that we plan and perform the audit to obtain reasonable
  assurance as to whether the accompanying principal financial statements are free of material
  misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts
  and disclosures contained in the principal financial statements and the accompanying notes. 
  An audit also includes assessing the accounting principles used and  the significant estimates
  made by management.  We believe that our audit work provides a reasonable basis for our
  opinion.
  
  In our opinion, the principal financial statements (pages 77 to 95) present fairly, in all
  material respects, the consolidated financial position of NPS as of September 30, 1999, its
  combined budgetary resources and outlays for the fiscal year ended September 30, 1999, and
  its consolidated net cost, changes in net position, and financing for the fiscal year ended
  September 30, 1999  in conformity with generally accepted accounting principles.  
  
  Our audit was conducted for the purpose of forming an opinion on the consolidated and
  combined principal financial statements taken as a whole.  The accompanying consolidating
  and combining information is presented for purposes of additional analyses of the
  consolidated and combined principal financial statements.  The consolidating and combining
  financial statements for fiscal year 1999 (pages 110 to 113) were subjected to the auditing
  procedures applied in the audit of the consolidated and combined principal financial
  statements and, in our opinion, are fairly stated in all material respects in relation to the
  consolidated and combined principal financial statements taken as a whole.
  
  The required supplementary stewardship information (pages 97 to 108) is not a required part
  of the principal financial statements but is supplementary information required by the Federal
  Accounting Standards Advisory Board.  We have applied certain limited procedures,
  including discussions with management, on the methods of measurement and presentation
  of the supplementary information.  However, we did not audit the information and therefore
  do not express an opinion on it.
  
  REPORT ON INTERNAL CONTROLS
  
  Our audit was conducted in accordance with the "Government Auditing Standards," issued
  by the Comptroller General of the United States, and with Bulletin 98-08.
  
  Management of NPS is responsible for establishing and maintaining an internal control
  structure which provides reasonable assurance that the following objectives are met:
  
   -  Transactions are properly recorded, processed, and summarized to permit the preparation
  of the principal financial statements and required supplementary stewardship information in
  accordance with Federal accounting standards. 
  
  -  Assets are safeguarded against loss from unauthorized acquisition, use, or disposition.
  
  -  Transactions are executed in accordance with (1) laws governing the use of budget
  authority and other laws and regulations that could have a direct and material effect on the
  principal financial statements or required supplementary stewardship information and (2) any
  other laws, regulations, and Governmentwide policies identified by OMB.
  
  -  Transactions and other data that support reported performance measures are properly
  recorded, processed, and summarized to permit the preparation of performance information
  in accordance with criteria stated by management.
  
  Because of inherent limitations in any internal control structure, errors or fraud may occur
  and not be detected.  Also, projections of any evaluation of the internal controls over
  financial reporting to future periods are subject to the risk that the internal controls may
  become inadequate because of changes in conditions or that the degree of compliance with
  the policies or procedures may deteriorate.
  
  In planning and performing our audit, we considered NPS's internal controls over financial
  reporting by obtaining an understanding of NPS's  internal controls, determined whether
  these controls had been placed in operation, assessed control risks, and performed tests of
  controls in order to determine our auditing procedures for the purpose of expressing an
  opinion on the principal financial statements and not to provide assurance on the internal
  controls over financial reporting.  Accordingly, we do not provide an opinion on internal
  controls.
  
  Our consideration of the internal controls over financial reporting would not necessarily
  disclose all matters in the internal control structure over financial reporting that might be
  reportable conditions.  Under standards established by the American Institute of Certified
  Public Accountants and by Bulletin 98-08, reportable conditions are matters coming to our
  attention relating to significant deficiencies in the design or operation of the internal controls
  that, in our judgment, could adversely affect NPS's ability to record, process, summarize,
  and report financial data consistent with the assertions made by management in the financial
  statements.  Material weaknesses  are reportable conditions in which the design or operation
  of one or more of the internal control components does not reduce to a relatively low level
  the risk that misstatements in amounts that would be material in relation to the financial
  statements being audited may occur and not be detected within a timely period by employees
  in the normal course of performing their assigned functions.  However, we did not note any
  matters involving the internal controls and their operation that we considered to be material
  weaknesses as defined previously.
  
  STEWARDSHIP AND PERFORMANCE MEASURES
  
  We considered NPS's internal controls over the required supplementary stewardship
  information (pages 97 to 108) by obtaining an understanding of NPS's internal controls
  relating to the preparation of the required supplementary stewardship information to
  determine whether these internal controls had been placed in operation, assessed the control
  risk, and performed tests of these controls as required by Bulletin 98-08.  However,
  providing assurance on these internal controls was not an objective of our audit, and
  accordingly, we do not provide assurance on such controls.
  
  With respect to the internal controls related to performance measures reported in NPS's
  Overview (pages 11 to 13), we  obtained an understanding of the design of significant
  internal controls related to the existence and completeness assertions, as required by
  Bulletin 98-08.  Our procedures were not designed to provide assurance on  internal controls
  over reported performance measures,  and accordingly, we do not provide an opinion on such
  controls.
  
  REPORT ON COMPLIANCE WITH LAWS AND REGULATIONS
  
  Our audit was conducted in accordance with the "Government Auditing Standards," issued
  by the Comptroller General of the United States, and with Bulletin 98-08.
  
  Management of  NPS is responsible for complying with laws and regulations applicable to
  NPS.  As part of obtaining reasonable assurance as to whether NPS's principal financial
  statements are free of material misstatement, we performed tests of NPS's compliance with
  certain provisions of laws and regulations, noncompliance with which could have a direct
  and material effect on the determination of the  principal financial statements amounts and
  certain other laws and regulations specified in Bulletin 98-08, including the requirements
  referred to in the Federal Financial Management Improvement Act of 1996.  However,
  providing an opinion on compliance with certain provisions of laws and regulations was not
  an objective of our audit, and accordingly, we do not express such an opinion.
  
  The results of our tests of compliance with laws and regulations discussed in the preceding
  paragraph, exclusive of the Federal Financial Management Improvement Act, disclosed two
  instances of noncompliance that are required to be reported under the "Government Auditing
  Standards" or Bulletin 98-08.  
  
  A.  Lack of a Maintenance Management System
  
  As discussed in the Prior Audit Coverage section of this report, the Office of Inspector
  General's March 1998 report "Followup of Maintenance Activities, National Park Service"
  (No. 98-I-344) said that NPS had not successfully implemented and maintained an NPS-wide
  maintenance management system which provides complete data and/or information for
  prioritizing maintenance projects, monitoring and measuring maintenance activities, or fully
  supporting budgetary requests for maintenance backlog funding.
  
  In 1985, 16 U.S.C.  1a-8 required NPS to develop and implement a comprehensive,
  standardized maintenance management system.  Through 1992, the Secretary of the Interior's
  Annual Statement and Report to the President and the Congress identified the lack of a
  formal systematic methodology for managing maintenance operations as a material
  weakness.  In 1993, NPS informed the Department that implementation of its standardized
  maintenance management system had eliminated this weakness.  In 1998, we found,
  however, that the system was no longer used on an NPS-wide basis.  We recommended that
  NPS maintain a maintenance tracking system in accordance with 16 U.S.C.  1a-8 and report
  the lack of a standardized maintenance management system as a material management
  control weakness in accordance with the requirements of the Federal Managers' Financial
  Integrity Act.  During our current audit of the principal financial statements for fiscal year
  1999, we noted that NPS did not have an NPS-wide standardized maintenance management
  system and  did not report the lack of a standardized maintenance management system as a
  material management control weakness in accordance with the recommendations contained
  in our March 1998 report.
  
  Recommendation
  
  We recommend that the Director, NPS, implement and maintain a standardized maintenance
  management system in compliance with 16 U.S.C.  1a-8.
  
  NPS Response: In the June 20, 2000 response (Appendix 1) to the draft report from NPS's
  Chief Financial Officer, NPS did not agree with the original recommendation to report the
  lack of a standardized maintenance management system as a material internal control
  weakness, stating that the Department of the Interior has reported the lack of a system as a
  "material internal control weakness for the Department . . . as a whole."  NPS also said that
  it is "working on a pilot program to standardize a maintenance management system" and that
  the Congress has authorized NPS "to pursue a pilot demonstration program for the recently
  selected Servicewide Facility Management Software System."
  
  Office of Inspector General Reply: We acknowledge that the Department has reported
  inadequate maintenance management as a Departmentwide material weakness, which
  resolves the issue of reporting in accordance with the Federal Managers' Financial Integrity
  Act.  Based on the response, we have revised the recommendation to clarify this matter and
  believe that NPS's response meets the intent of the revised recommendation.
  
  B.  Noncompliance With Managerial Cost Accounting Standards
  
  Statement of Federal Financial Accounting Standards No. 4  requires management of each
  reporting entity to define and establish their responsibility segments and to perform
  managerial cost accounting to measure and report the costs of each segment's outputs.
  Standard No. 4 also  requires, for each segment, that managerial cost accounting "define and
  accumulate outputs, and if feasible, quantify each type of output in units; accumulate costs
  and quantitative units of resources consumed in producing the outputs; and assign costs to
  outputs, and calculate the cost per unit of each type of output."  For fiscal year 1999, NPS
  did define, accumulate, and measure in units some of the outputs reported in its overview;
  however, NPS did not calculate the unit costs of those outputs.
  
  Recommendation
  
  We recommend that the Director, NPS, develop an action plan with a timetable to assign
  costs to outputs and calculate the unit costs of outputs.
  
  NPS Response:  NPS said that it "concurs in principle" with this recommendation and that
  it would "continue to work to include data that reflects the costs of outputs [reported in the
  Overview section of its accountability report] and will calculate the unit costs of those
  outputs."  NPS also said that "until a realignment of NPS' budget and program structure can
  take place many outputs cannot be assigned to the unit level."
  
  Compliance With Federal Financial Management Improvement Act
  Requirements
  
  Under the Federal Financial Management Improvement Act, we are required to report
  whether  NPS's financial management system is in substantial compliance with requirements
  for Federal financial management systems, Federal accounting standards, and the
  U.S. Government Standard General Ledger at the transaction level.  To meet these 
  requirements, we performed tests of compliance using the implementation guidance for the
  Federal Financial Management Improvement Act included in Appendix D of Bulletin 98-08.
  The results of our tests disclosed no instances in which NPS's financial management system
  was not in substantial compliance with these three requirements.
  
  CONSISTENCY OF OTHER INFORMATION
  
  We reviewed the financial information presented in NPS's management's discussion and
  analysis information (pages 1 to 75) and in the required supplementary information (pages
  97 to 116) to determine whether the information was consistent with the principal financial
  statements.  Based on our review, we determined that the management's discussion and
  analysis information and the required supplementary information was consistent with the
  principal financial statements.
  
  PRIOR AUDIT COVERAGE
  
  We  reviewed  prior Office of Inspector General and General Accounting Office audit reports
  related to NPS's financial statements to determine whether these reports contained any
  unresolved or unimplemented recommendations that were significant to NPS's financial
  statements or internal controls.  We found that there were no General Accounting Office
  reports which contained significant unresolved or unimplemented recommendations related
  to NPS's financial statements or internal controls.  However, the Office of Inspector General
  has issued two audit reports that had significant unresolved or unimplemented
  recommendations which we considered to be reportable weaknesses as follows:
  
  -  The report "Followup of Maintenance Activities, National Park Service" (No. 98-I-344),
  issued in March 1998, said that NPS had not taken sufficient actions to implement two prior
  audit report recommendations relating to successfully operating a viable NPS-wide
  maintenance management system which provided complete data and information for
  prioritizing, monitoring, and measuring maintenance projects and activities or for fully
  supporting budget requests for funding a maintenance backlog.  In addition, the report said
  that NPS had not actively pursued opportunities to modify concession maintenance
  agreements, which defined each party's maintenance responsibility, and to have
  concessioners perform or pay for all maintenance related to the facilities they used; allowed
  Lake Mead National Recreation Area maintenance personnel to perform road maintenance
  for cabin lessees without reimbursement of costs from the lessees; and had not maintained
  a standardized maintenance management system which contained all seven elements
  legislatively mandated by 16 U.S.C.  1a-8.  The report contained four recommendations
  relating to modifying concessioner agreements to reflect maintenance responsibilities,
  maintaining a maintenance tracking system in accordance with 16 U.S.C.  1a-8,
  discontinuing maintenance that provides special benefits to cabin lessees unless costs are
  reimbursed, and reporting the lack of a standardized maintenance management system as a
  material management control weakness in accordance with the requirements of the Federal
  Managers' Financial Integrity Act.  Although NPS was requested to provide written
  comments to the draft report, no response was provided.  As of September 30, 1999, NPS
  reported that it had implemented the recommendation to discontinue performing
  unreimbursed  maintenance on leased cabins, but the remaining three recommendations were
  unresolved.
  
  -  The report "Auditors Report on National Park Service Financial Statements for Fiscal
  Years 1998 and 1997" (No. 99-I-916) was issued in September 1999.  In the report, NPS
  received an unqualified opinion on its financial statements, but the report also identified two
  internal control weaknesses relating to the construction-in-progress account and deferred
  maintenance reporting and one issue of noncompliance for not reporting the lack of a
  standardized maintenance management system as a material management control weakness
  in NPS's annual assurance statement on management controls for fiscal year 1998, as
  required by the Federal Managers' Financial Integrity Act.  The report contained five
  recommendations relating to (1) amending NPS's fixed assets manual to require the cost of
  projects for nongeneral property, plant, and equipment to be recorded as an expense in the
  period incurred; (2) establishing and implementing policies and procedures for management
  oversight to ensure that field offices identify, in the accounting system, the project
  capitalization category to allow a capitalization determination upon project approval;
  (3) accounting for construction projects based on the project capitalization category to ensure
  that the construction-in-progress subsidiary ledger includes only those construction projects
  that will be capitalized when placed in service and that nongeneral property, plant, and
  equipment costs are charged to expenses on a current basis; (4) validating the adjustments
  made to the control and subsidiary construction-in-progress account to estimate the fiscal
  year 1998 ending balance for projects that would be capitalized when placed in service; and
  (5) establishing policies and procedures for conducting periodic condition assessment
  surveys and for estimating the deferred maintenance needs of NPS, including the requirement
  that the data and the methodologies used to compute the estimates should be documented and
  reviewed and approved by supervisors.  As of September 30, 1999, NPS had implemented
  the recommendations related to accounting for construction projects and validating the
  adjustments made to the construction-in-progress accounts but had not implemented the
  remaining three recommendations.  Regarding compliance, we determined that NPS had not
  reported the lack of a standardized maintenance management system in its annual assurance
  statement on management controls for fiscal year 1999.
  
  OBJECTIVE, SCOPE, AND METHODOLOGY
  
  Management of  NPS is responsible for the following:
  
  -  Preparing the principal financial statements and the required supplementary information
  referred to in the Consistency of Other Information section of this report in conformity with
  generally accepted accounting principles and for preparing the other information contained
  in the 1999 Accountability Report.
  
  -  Establishing and maintaining an internal control structure over financial reporting.  In
  fulfilling this responsibility, estimates and judgments are required to assess the expected
  benefits and related costs of internal control structure policies and procedures.
  
  -  Complying with applicable laws and regulations.
  
  We are responsible for the following:
  
  -  Expressing an opinion on  NPS's principal financial statements.
  
  -  Obtaining an understanding of  the internal controls based upon the internal control
  objectives contained in Bulletin 98-08, which requires that transactions be properly recorded,
  processed, and summarized to permit the preparation of the principal financial statements and
  the required supplementary information in accordance with Federal accounting standards;
  that assets be safeguarded against loss from unauthorized acquisition, use, or disposal; and
  that transactions and other data which support reported performance measures be properly
  recorded, processed, and summarized to permit the preparation of performance information
  in accordance with criteria stated by management.
  
  -  Testing NPS's compliance with selected provisions of laws and regulations that could
  materially affect the principal financial statements or the required supplementary
  information.
  
  To fulfill these responsibilities, we took the following actions:
  
  -  Examined, on a test basis, evidence supporting the amounts disclosed in the  principal
  financial statements.  
  
  -  Assessed the accounting principles used and the significant estimates made by
  management.
  
  -  Evaluated the overall presentation of the principal financial statements.
  
  -  Obtained an understanding of the internal control structure related to safeguarding assets;
  compliance with laws and regulations, including the execution of transactions in accordance
  with budget authority;  financial reporting; and certain performance measures reported in the
  Overview.
  
  -  Tested relevant internal controls over the safeguarding of assets; compliance with laws and
  regulations, including the execution of transactions in accordance with budget authority; and
  financial reporting.
  
  -  Tested compliance with selected provisions of laws and regulations.
  
  We did not evaluate all of the internal controls relevant to the operating objectives as broadly
  defined in the Federal Managers' Financial Integrity Act, such as those controls related to
  preparing statistical reports and ensuring efficient operations.  We limited our internal
  control testing to those controls needed to achieve the objectives outlined in our report on
  internal controls.
  
  Based on NPS's June 20, 2000, response (Appendix 1), we consider Recommendations A.1
  and B.1 resolved but not implemented.  Accordingly, the recommendations will be referred
  to the Assistant Secretary for Policy, Management and Budget for tracking of
  implementation. 
  
  Since the recommendations are considered resolved, no further response to the Office of
  Inspector General is required (see Appendix 2).
  
  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.
  
  This report is intended for the information of management of NPS and OMB and the
  Congress.  However, this report is a matter of public record, and its distribution is not
  limited.
  
  
  
  Roger La Rouche
  Acting Assistant Inspector General for Audits
  
  
  [CONTACT THE NATIONAL PARK SERVICE FOR INFORMATION ON ITS
  FINANCIAL STATEMENTS FOR FISCAL YEAR 1999, WHICH ARE NOT
  INCLUDED.]   APPENDIX 1
                                                               
  
  Response from Chief Financial Officer, National Park Service Not included
  APPENDIX 2
  
  
  STATUS OF AUDIT REPORT RECOMMENDATIONS
  
  
  
                                     Findings/Recommendation Reference: 
  A.1 and B.1
  
                                     Status:                            
  Resolved; not implemented.
  
                                Action Required:              
  No further response to the Office of Inspector General is required.  The recommendations
  will be forwarded to the Assistant Secretary for Policy, Management and Budget for
  tracking of implementation.  The target dates and titles of the officials responsible for
  implementation should be provided to the Office of Financial Management.