[Survey Report on Collection and Use of Franchise Fees, National Park Service]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 01-I-116

Title: Survey Report on Collection and Use of Franchise Fees, National
       Park Service

 
Date:  January 11, 2001

**********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) 219-3841.
******************************

U.S. Department of the Interior Office of Inspector General 

EXECUTIVE SUMMARY

Collection and Use of Franchise Fees, 
National Park Service 
Report No. 01-I-116
January 2001

The National Park Service Concessions Management Improvement Act of 1998 (16 U.S.C.  ï¿½5951) authorized the National Park Service (NPS) to retain franchise fees that park concessioners had formerly deposited into the U.S. Treasury's General Fund. Of the fees deposited, 80 percent were to be available for expenses of the park at which the fees were collected and 20 percent were to be available for NPS-wide activities. The Act said that the fees could be used to finance visitor services and to pay for high priority and "urgently necessary resource management programs and operations."  The objective of our review was to determine whether NPS developed adequate regulations for the use of franchise fees, collected and used the fees in accordance with laws and guidance, and converted amounts that were in accounts for concessioner improvements to funds available for park use. We did not, however, review NPS's use of franchise fees because only $6,600 had been spent by the parks at the time of our review.

We found that NPS developed procedures to implement the Act and issued internal guidelines regarding the collection, accounting for, and use of the franchise fee funds.

NPS, however, needed to revise its guidelines to eliminate the requirement that concession-related needs is to be the top priority for fund usage and to permit the use of funds for salaries on approved projects. Also, funds in concessioners' improvement accounts were not made available for NPS use because NPS extended expired contracts without negotiating a change in the authorized use of the funds.  

We recommended that NPS revise its guidelines on fund usage. We also recommended that the concessioner improvement accounts be eliminated when new contracts are issued.  

AUDITEE COMMENTS AND OIG EVALUATION

NPS concurred with the report's two recommendations. Based on the response and subsequent information provided by NPS, one recommendation was considered resolved and implemented and one recommendation was considered resolved but not implemented.  



C-IN-NPS-011-00-D


January 11, 2001

SURVEY REPORT

Memorandum

To:  Assistant Secretary for Fish and Wildlife and Parks

From:  Roger La Rouche
Acting Assistant Inspector General for Audits

Subject:  Survey Report on Collection and Use of Franchise Fees, National Park Service (No. 01-I-116)

This report presents the results of our survey of the National Park Service's (NPS) collection and use of franchise fees.  The objective of the review was to determine whether NPS (1) developed adequate regulations to govern the use of franchise fees; (2) collected and used franchise fees in accordance with applicable laws, regulations, and guidance; (3) converted amounts deposited into concessioner improvement accounts to funds available for park use if authorized to do so; and (4) accurately reported its accomplishments of performance goals related to collecting and using franchise fees. We concluded our work at the completion of the survey and did not conduct the review as planned because only a relatively small amount of funds collected for park use had been spent and because we did not identify any significant issues.


RESULTS OF SURVEY


We found that NPS developed procedures to implement the National Park Service Concessions Management Improvement Act of 1998.  Overall, NPS issued implementing regulations effective May 17, 2000 to comply with the Act's requirements regarding the solicitation, award, and administration of concession contracts.  In addition, NPS prepared and issued internal guidelines covering collecting, accounting for, and using both NPS-wide and park-specific franchise fee funds. We found, however, that the guidelines for the park-specific funds needed to be revised to change the priorities for how the funds may be used and to permit the use of the funds for salaries incurred on approved projects.  Additionally, NPS had not taken action to eliminate concessioner improvement accounts when contracts expired. These accounts were to be eliminated when new contracts were issued.  NPS had not eliminated the accounts because it had not awarded new contracts. Instead, NPS extended expiring contracts pending issuance of the new regulations.  Finally, because NPS did not establish specific performance goals related to the collection and use of franchise fees, we did not perform any work in that area.  

Priorities on Use of Fees

The September 1999 guidelines for the park-specific funds set priorities on how the funds were to be used and stated, "If concession related needs exist, they shall be addressed first."  We believe that this stipulation unnecessarily restricts the use of these funds because the Act states that 80 percent of the franchise fees are to be used by the collecting unit "for visitor services and for purposes of funding high-priority and urgently necessary resource management programs and operations."  While concession-related needs fall under the purview of visitor services, all visitor service needs are not concession related.  Consequently, under these guidelines, NPS would not consider using funds for those projects that were not concession related.

In addition, NPS's guidelines indicated that specific guidance would be forthcoming regarding the use of the park-specific franchise fees for salaries of seasonal and temporary staff on projects funded by the fees.  Use of the funds for salaries was not permitted until such guidance was issued.  NPS has not yet issued this guidance.  While officials at both parks visited said that they intended to comply with the guidelines, they also said that some economies and efficiencies could be lost in completing approved projects because of the salary restriction.

We discussed these issues with the NPS Concessions Program Manager, who agreed that NPS should revise the guidelines.  The Manager stated, however, that since other revisions to the guidelines were also needed, she wanted to make all the necessary changes at one time rather than to make one change at a time. 

Conversion of Concessioner Improvement Accounts

Prior to the Act, NPS had contractually authorized certain park concessioners to deposit a portion of the franchise fees into concessioner improvement accounts rather than deposit all of the fees into the General Fund of the U.S. Treasury.  The funds in these improvement accounts were to be used to finance improvements to concessioner-related facilities in the respective parks.  Deposits into the concessioner improvement accounts and use of the funds are controlled by provisions of the individual concessions contracts.

During November 1998 through May 2000, 17 concession contracts had expired with concessioners that had concession improvement accounts.  NPS officials stated that, at the time the contracts expired, the new concession regulations had not been issued and  NPS was unable to award new contracts.  Consequently, NPS extended the existing contracts.  When granting the extensions, however, according to the officials, NPS took no action to eliminate the concessioner improvement accounts.  NPS officials stated that they could not "unilaterally change" the terms of the contracts without concessioner concurrence.  The extended contracts state that any remaining balance in these accounts will either be used for authorized projects or be turned over to the Secretary of the Interior when the contracts are terminated.  NPS officials further stated that the concessioner improvement accounts would be eliminated when new contracts are issued.

Recommendations 

We recommend that the Director, NPS:

	1.  Ensure that the guidelines for the use of the park-specific funds are revised to eliminate the stipulation that concession-related needs are to be the top priority for fund usage and to allow the use of the funds for salaries of temporary and seasonal staff on approved projects.

	2.  Ensure that the concessioner improvement accounts are eliminated when new contracts are issued.

NPS Response and Office of Inspector General Reply

In the November 1, 2000 response (Appendix 1) to the draft report from the NPS Director, NPS concurred with our two recommendations.  Subsequent to the response, NPS provided a revised target date of January 15, 2001 for implementation of Recommendation 1.  Based on the response and subsequent information, we consider Recommendation 1 resolved but not implemented and Recommendation 2 resolved and implemented (see Appendix 2). Accordingly, Recommendation 1 will be referred to the Assistant Secretary for Policy, Management and Budget for tracking of implementation.

BACKGROUND

On November 13, 1998, the Congress enacted the National Park Service Concessions Management Improvement Act of 1998  (16 U.S.C. ï¿½ 5951).  The Act authorized NPS to retain concessioner-paid franchise fees that the concessioners had formerly deposited into the General Fund of the U.S. Treasury.  Specifically, the Act provided that, beginning in fiscal year 1999, all franchise fees payable under concessions contracts were to be deposited into special accounts.  Of the fees deposited, 20 percent were to be available for NPS-wide activities regardless of the park at which the fees were collected, and 80 percent were to be available for the expenses of the park at which the fees were collected.  According to the Act, the fees could be used to finance visitor services and to pay for high priority and "urgently necessary resource management programs and operations."   Additionally, the Act required the Secretary of the Interior to issue implementing regulations for all matters covered in the Act.  

NPS issued guidelines for the franchise fees that stated that the NPS-wide funds would be used for operational costs of the Concessions Management Advisory Board (a board established by the Act to advise the Secretary and NPS on matters relating to concessions management in the National Park System), contracts for concession program services, and assistance to parks to meet concession-related needs.  The guidelines for the park-specific fees designated concession-related needs as the highest priority use of the funds, followed by environmental and energy efficiency projects, enhancement to other visitor services, and then high priority resource management programs. 

During fiscal year 1999, NPS collected $14.5 million in franchise fees ($2.9 million was the NPS-wide portion and $11.6 million was the park-specific portion).  At the time of our review, NPS had made almost $2.4 million of the NPS-wide franchise fees available for projects such as possessory interest appraisals,1 financial analyses, the Concessions Management Advisory Board, and selected park-specific needs.  The parks had obligated only $6,600 of the $11.6 million available for park-specific activities because the funds were only released to the parks in November 1999.
 
SCOPE AND METHODOLOGY

We performed our survey during March through June 2000 at NPS's headquarters office in Washington, D.C.; the Accounting Operations Center in Herndon, Virginia; the Intermountain Regional Office in Lakewood, Colorado; and Carlsbad Caverns National Park in New Mexico and Mesa Verde National Park in Colorado.  We also contacted the Concessions Program Center in Lakewood and the Northeast Regional Office in Philadelphia, Pennsylvania.  We selected the Intermountain Region for our survey because it had the most sites with concessions operations among the seven NPS regions and had the second highest concessioner fee collections during fiscal year 1999.  Within the Intermountain Region, Carlsbad Caverns and Mesa Verde were two of the three sites with the largest number of approved projects to be accomplished with the park-specific franchise fees.

Because a relatively small amount ($6,600) of the funds collected for park use had been spent and because we did not identify any other significant issues regarding the collection and administration of franchise fees, we concluded our work at the completion of the survey phase and did not conduct a review of collections and expenditures as originally planned.   We conducted the survey 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.  We did not perform an in-depth evaluation of the internal controls over the use of franchise fees because of the limited financial activity.  Nonetheless, we believe that the guidelines and the processes that NPS had developed should provide reasonable assurance that the franchise fees will be used properly.

In addition, we reviewed the Departmental Report on Accountability for fiscal year 1999, which includes information required by the Federal Managers' Financial Integrity Act, and NPS's annual assurance statement on management controls for fiscal year 1999 and determined that there were no reported material weaknesses regarding the collection and use of franchise fees.  We also determined that neither the Office of Inspector General nor the General Accounting Office has issued any audit reports on the collection and use of franchise fees by NPS during the past 5 years.

Since the report's recommendations are 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.


APPENDIX 1

NPS response to Draft Report