[Audit Report on Reservation Revenue Remittance Activities Associated With the Servicewide Reservation System Contract, National Park Service]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 97-I-880

Title: Audit Report on Reservation Revenue Remittance Activities
       Associated With the Servicewide Reservation System Contract,
       National Park Service

Date: June 16, 1997

                  **********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.
                  ******************************

United States Department of the Interior

Attached for your information is a copy of the subject foal quick-reaction audit report. The
overall objective of the audit was to determine whether: (1) the National Park Service
received the appropriate amount of revenues from its Servicewide Reservation System
contractor, Destine& and (2) Destinet and the Park Service established adequate
administrative and accounting controls over these revenues. This quick-reaction report is
being issued because, during our audit, we found that immediate action was needed to ensure
that Reservation System revenues were remitted in a timely manner. We plan to issue a
separate report on the administrative and accounting controls over the Reservation System's
revenues.

We found that reservation revenues collected by Destinet for Park Service campsite use and
guided tours had not been remitted to the U.S. Treasury in a timely manner and that the Park
Service had not adequately monitored Destinet's activities to ensure that timely remittances
were made. We also found that the Park Service had not enforced the contractual
requirement that Destinet should obtain a performance bond. As a result, the Government
had not received campsite and tour revenues totaling about $608,596 that Destinet had
retained for up to 120 days. Also, the Government was at risk of nonpayment of reservation
           ,
revenues in the absence of a performance bond. We recommended that the Park Service
initiate immediate action to recover delinquent reservation revenues, enforce requirements
for timely remittances, and require the existing and any future contractor to secure a
performance bond.

Based on the Park Service's response, we considered the report's four recommendations
resolved and implemented.

If you have any questions concerning this matter, please contact me at (202) 208-5745 or
Mr. Robert J. Williams, Assistant Inspector General for Audits, at (202) 2084252.

Attachment


W-IN-NPS-003-96A

United States Department of the Interior

OFFICE OF INSPECTOR GENERAL
    Washington, D.C. 20240

QUICK-REACTION AUDIT REPORT

Memorandum

To:  Assistant Secretary for Fish and Wildlife and Parks
 
From:     Robert J. Williams
     Assistant Inspector General for Audits

Subject:  Audit Report on Reservation Revenue Remittance Activities Associated With the
Servicewide Reservation System Contract, National Park Service (No. 97-I-880)

INTRODUCTION

During our audit of the National Park Service's Servicewide Reservation System contract,
we found that the Park Service's contractor was not remitting reservation revenues due the
Federal Government in a timely manner. Specifically, as of February 18, 1997, the amount
in arrears, according to contractor and Park Service records, was $608,596. In addition, the
Park Service had not enforced the requirement that the contractor should obtain a
performance bond to protect the Government's interest in the event of nonpayment. We are
issuing this quick-reaction report so that the Park Service can take prompt action to address
these matters.

BACKGROUND

On September 17, 199 1, the Park Service awarded a negotiated fixed-percentage-of-sales
contract (No. CX-0001-1-0029) to Mistix Corporation, a subsidiary of Home Shopping
Network, Inc.  The contract required Mistix to design, develop, and implement a
computerized reservation system for the Park Service. The initial contract was for 1 year and
included four 1 -year options, which extended the contract through September 16, 1996. In
1995, Mistix changed ownership and became Destine& a subsidiary of the Call Home
Corporation of Ontario, Canada. At the expiration of the contract, the Park Service awarded
Destinet a sole source contract (No. CX-0001-97-001) for the period of October 1, 1996,
through September 30, 1997.

Destinet operates a toll-free telephone reservation system for campsites at 15 national park
units and for guided tours at Mammoth Cave National Park in Kentucky and at Frederick
Douglass National Historic Site in Washington, D.C. (see Appendix 1). Destinet also has

its own reservation personnel at 9 of the 17 park units. Customers can make reservations for
campsites and tours up to 5 months in advance. Reservations can be arranged through
Destinet's toll-f?ee telephone service, by mail, or in person at national parks that are under
the Servicewide Reservation System. When advance reservations are made, customers pay
Destinet the full fee for the campsites or the tours. Under the terms of its contract with the
Park Service, Destinet receives a commission of 35 percent of gross reservation revenues
collected at the nine parks where Destinet personnel are located and 25 percent of gross
reservation revenues collected at the other seven parks. Destinet also receives a 25 percent
commission on reservation revenues for guided tours at Mammoth Cave and a $1 service
charge for each tour ticket sold at Mammoth Cave and Frederick Douglass. The contract
also provides for Destinet to receive a $10 fee for each campsite reservation cancellation and
a $1 fee for each tour cancellation. Before remitting receipts to the Government, Destinet
deducts its commissions and fees from the gross revenues collected.

OBJECTIVE AND SCOPE

This quick-reaction report addresses the timeliness of Destinet's remittance of reservation
revenues to the Government. This segment of our audit was conducted in February 1997 as
part of our audit of the Park Service's Servicewide Reservation System contract. The overall
objective of the audit, which was requested by the Park Service, is to determine whether:
(1) the Park Service received the appropriate amount of revenues from Destinet and
(2) Destinet and the Park Service established adequate administrative and accounting
controls over these revenues. This portion of the audit covered reservation revenues
collected by Destinet on the Government's behalf from October 1, 1995, through
February 18, 1997. We reviewed Park Service and Destinet records provided to the Park
Service and conducted interviews with Park Service officials at their headquarters in
Washington, D.C., and at their Accounting Operations Center offices in Reston, Virginia.

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. Because of the limited scope of this part of the review, we assessed
the internal controls only to the extent necessary to evaluate Destinet's revenue remittances.
We plan to issue a separate report that will provide more comprehensive coverage of the Park
Service's accounting and administrative controls over its Servicewide Reservation System
revenues.

We also reviewed the Secretary's Annual Statement and Report to the President and the
Congress, which is required by the Federal Managers' Financial Integrity Act of 1982, for
calendar year 1995 and determined that no material weaknesses directly related to the
objective and scope of our audit were reported.

2

 
PRIOR AUDIT COVERAGE

Neither the Office of Inspector General nor the General Accounting Office has issued any
reports on the Park Service's Servicewide Reservation System contract within the past
5 years.

RESULTS OF AUDIT

We found that reservation revenues collected by Destinet on behalf of the National Park
Service were not remitted to the U.S. Treasury promptly and that the Government's interests
were not protected against nonpayment of these revenues. These conditions occurred
because the Park Service had not adequately monitored Destinet's activities to ensure that
remittances were made in accordance with contract provisions, Park Service guidelines, and
Federal law and had not enforced the contractual requirement that Destinet should obtain a
performance bond. As a result, the Government had not received park campsite and tour
reservation revenues that totaled about $608,596 at February 18, 1997. Also, in the absence
of a performance bond, the Government is at risk of nonpayment of these outstanding
reservation revenues that were collected by Destinet up to 120 days ago.

Destinet has not remitted reservation revenues to the Government promptly. Based on our
analysis of reservation revenues recorded during the period of October 1, 1995, through
November 8, 1996, we found that Destinet typically remitted revenues due the Government
as many as 60 days after the corresponding reservation transaction had occurred. Moreover,
Destinet did not make any remittances from November 9, 1996, through January 13,1997,
which further delayed the Government's receipt of revenues. Destinet resumed making
payments on January 14, 1997. However, by February 18, 1997, it had retained reservation
revenues of $608,596 for up to 120 days after the date of the related reservation transaction.
Destinet had no incentive to make timely remittances to the Government because its contract
with the Park Service for reservation services did not contain a provision for the assessment
of interest or penalties for late payment and the Park Service had not taken action to enforce
timely payments. The contract contains a provision for the collection and remittance of

reservation revenues which states that "[mlonies collected by the Contractor, minus
deduction of commissions and/or reservation fees, cancellation fees, change in reservation
fees and refunds, will be remitted and/or deposited in accordance with procedures identified"
by the Park Service.  However, the Park Service had not established procedures for

contractors that collect monies on behalf of the Government.

The Park Service also has not enforced provisions of Federal law that pertain to the
collection of Government funds. For example, neither the contract nor Park Service
procedures require the contractor to comply with Title 3 1, Section 3302(c)(l), of the United
States Code, which contains specific requirements for timely remittance of Government
revenues. According to the Code, custodians of public money are required to deposit the
money collected on the Government's behalf in a Treasury account "not later than the third
day after the custodian receives the money." Although the contract requires the contractor

3

 
to report the date of the reservation transaction, it does not require the contractor to report
the date that the revenues are received. As such, the Park Service does not have the
information needed to fully enforce the Code's provisions governing the timeliness of
deposits.

As awarded, the reservation services contract required the contractor to obtain a performance
bond of $500,000. In September 1995, the Park Service's contracting officer released
Destinet from this requirement. According to Park Service officials, this action was taken
to compensate Destinet for the "loss" of reservation revenues associated with the removal of
the Bridge Bay campground at Yellowstone National Park from the Servicewide Reservation
System. The October 1, 1996, contract reinstated the bonding requirement but did not
specify the amount of coverage. Even though the bonding requirement was reinstated,
Destinet did not obtain a performance bond, and the Park Service did not enforce the
contractual bonding requirement. Without a performance bond in an amount suficient to
protect the Government against the loss of the $608,596 of unremitted revenues, the
Government is at risk of nonpayment.

We believe that immediate action is needed to ensure that Destinet promptly remits all
outstanding revenues due the Government, pays all future revenues in accordance with
Federal law, and obtains a performance bond to protect the Government against the risk of
nonpayment.  To expedite corrective action, we informed Park Service officials, on
February 14,1997, of our concerns about the delinquent remittance of reservation revenues.
The officials said that they would issue a letter to Destinet which would demand immediate
payment of past-due amounts.

Recommendations

We recommend that the Director, National Park Service:

    1. Require Park Service officials to initiate collection actions immediately to
recover reservation revenues being retained by Destinet and to monitor future Destinet
revenue collections and remittances to ensure that Government monies are deposited into a
U.S. Treasury account promptly.

     2. Require the contracting officer to enforce Title 3 1, Section 3302(c)(l), of the
United States Code with respect to the timeliness of Destinet remittances of Government
revenues and direct Destinet to report the date of revenue receipt as a means of enforcing this
law.

    3. Direct the contracting officer to include a provision in future reservation
services contracts that:

    - Requires the contractor to comply with Title 3 1, Section 3302(c)(l), of the United
States Code and to report the date revenues are received.

 
    - Requires the contractor to pay interest
remitted timely.

    - Specifies an amount for the performance
risk to the Government of contractor nonpayment.

and penalties on revenues that are not

bond requirement based on the potential

    4. Direct the contracting officer to establish an amount for the performance bond
requirement based on the potential risk to the Government of contractor nonpayment and
direct Destinet to obtain such a bond.

National Park Service Response and Office of Inspector General Reply

In the April 29, 1997, response (Appendix 2) to our draft report from the National Fee
Program Manager, National Park Service, the Park Service concurred with all four
recommendations and identified the actions taken to implement each recommendation.
Based on the response and additional information provided by the Park Service, we consider
the four recommendations resolved and implemented. Therefore, no further response to this
report is required (see Appendix 3).

The legislation, as amended, creating the Office of Inspector General requires semiannual
reporting to the Congress on all audit reports issued, actions taken to implement audit
recommendations, and identification of each significant recommendation on which corrective
action has not been taken.

We appreciate the assistance of Park Service personnel in the conduct of our audit.

 
APPENDIX 1

       PARK UNITS UNDER
THE SERVICEWIDE RESERVATION SYSTEM

Park Unit

Acadia National Park

Assateague Island National Seashore
Cape Hatteras National Seashore
Death Valley National Park*
Everglades National Park*
Frederick Douglass National Historic Site
Grand Canyon National Park*
Great Smoky Mountains National Park

Greenbelt Park*

Gulf Islands National Seashore

Joshua Tree National Park*

Mammoth Cave National Park

Rocky Mountain National Park*
Sequoia and Kings Canyon National Park*

Shenandoah National Park*

Whiskeytown National Recreation Area

Yosemite National Park*

Location

Maine

Maryland

North Carolina

California

Florida

Washington, D.C.

Arizona

Tennessee

Maryland

Florida

California

Kentucky

Colorado

California

Virginia

California

California

* Destinet p er s onnel are located at these parks.

 
APPENDIX 2
Page 1 of 2

United States Department of the Interior

IN REPLY REFER TO:

5419(2460)

Memorandum .

To .
  .

Through:

From:

NATIONAL PARK SERVICE
     PO. Box 37127

Washington, D. C. 20013-7 127

AR? 2 9 i237

Assistant Inspector General for Adits

Subject:

Response to Draft Audit Report, Reservation Revenue Remittance Activities
Associated with the Servicewide Reservation System Contract

In response to the audit recommendations:

1. Require National Park Service (NPS) officials to initiate collection actions immediately to
recover reservation revenues being retained by Destinet and to monitor future Destinet revenue
collections and remittances to ensure that Government monies are deposited into a U.S. Treasury
account promptly.

ACTION:   The National Fee Program Manager (COTR), officials from the Accounting
Operations Center (AOC), the WAS0 Contracting Program (Contracting Officer), NPS
management control officials and the DOI Solicitors met and crafted a response strategy to
request timely deposits of outstanding revenue due the NPS related to the Destinet contract and
to deal with a potential tax liability associated with the reservation contract.

On March 3,1997, the WAS0 Contracting office issued a demand letter to Destinet requesting
remittance of $628,5 14.17 (due to the NPS as of February 20,1997). In response to the demand
letter and subsequent conversations with the Contracting Officer and the Solicitor, $260,272.80
was deposited by Destinet on March 7,1997, and $412,612.56 was deposited on March 2 1,1997,
totaling $672,885.36.

The National Fee Program Manager (COTR) will receive a monthly report from AOC that will
verify that timely remittances of funds due the NPS relative to the Destinet Contract are being
made. It was determined that deposit requirements stipulated in United States Code (U.S.C.)
3 1, Section 3302 (c)( 1), timeliness for checks to clear deposit, mail lag time, and banking
industry averages for check clearance, were used as establishing a time tiame of 5 days and no
more than 10 working days from time of reservation sale for depositing monies due the NPS. If
Destinet fails to deposit monies within this time frame, AOC will notify the COTR who will

 
APPENDIX 2
Page 2 of 2

instruct the Contracting Officer to contact Destinet and demand payment. If fbrther delays occur,
the Contracting Officer will issue a demand letter.

2. Require the Contracting Officer to enforce Title 31, Section 3302(c)(l), of the U.S.C. with
respect to the timeliness of Destinet remittances of Government revenues and direct Destinet to
report the date of revenue receipt as a means of enforcing this law.

ACTION:  Timeframe for remitting funds due the NPS per the Destinet contract will be
established as stated in #l and transmitted to Destinet per a contract modification no later than
April 30, 1997, by the Contracting Officer. The modification will also include a report
requirement that will identify when the revenue for a sale was received by Destinet.

3. Direct the Contracting Officer to include a provision in future reservation services contract
that: (a) requires the contract to comply with Title 3 1, Section 3302(c)(l), of the U.S.C. and to
report the date revenues are received; (b) requires the contractor to pay interest and penalties on
revenues that are not remitted timely; and (c) specifies an amount for the performance bond
requirement based on the potential risk to the Government of contractor nonpayment.

ACTION:  These requirements are noted and have been added to the draft RFP for the next
NPS National Reservation Service contract, tentatively scheduled to be let for bid in May 1997.

4. Direct the Contracting Officer to establish an amount for the performance bond requirement
based on the potential risk to the Government of contractor nonpayment and direct Destinet to
obtain such a bond.

ACTION:  Per the contract amendment identified in #2, the Contracting Officer will require
Destinet to obtain a performance bond in the amount of $400,000 for the remainder of the current
contract (through September 30, 1997).

cc:

Associate Director, Park Operations and Education
Program Manager, Ranger Activities Division

8

 
APPENDIX 3

STATUS OF AUDIT REPORT RECOMMENDATIONS

Finding/
Recommendation
  Reference

Status          Action Required

1-4

Implemented

No further action is required.

 
ILLEGAL OR WASTEFUL ACTIVITIES
   SHOULD BE REPORTED TO
THE OFFICE OF INSPECTOR GENERAL BY:

Sending written documents to:            Calling:

Within the Continental United States

U.S. Department of the Interior
Office of Inspector General
1849 C Street, N.W.
Mail Stop 5341
Washington, D.C. 20240

Our 24-hour
Telephone HOTLINE
l-800-424-5081 or
(202) 208-5300

TDD for hearing impaired
(202) 208-2420 or
l-800-354-0996

Outside the Continental United States

Caribbean Region

U.S. Department of the Interior
Office of Inspector General
Eastern Division - Investigations
1550 Wilson Boulevard
Suite 410
Arlington, Virginia 22209

North Pacific Region

(703) 235-9221

U.S. Department of the Interior
Office of Inspector General
North Pacific Region
238 Archbishop F.C. Flares Street
Suite 807, PDN Building
Agana, Guam 96910

(700) 550-7428 or
COMM 9-O1l-67l-472-7279

 
Toll Free Numbers:
l-800-424-5081
TDD l-800-354-0996

FIX/Commercial Numbers:
(202) 208-5300
TDD (202) 208-2420

HOTLINE

1849 C Street, N.W.
Mail Stop 5341
Washington, D.C. 20240