[Audit Report on Followup of Recommendations Concerning Utility Rates Imposed by the National Park Service]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 98-I-406

Title: Audit Report on Followup of Recommendations Concerning Utility
       Rates Imposed by the National Park Service



  
     Date:  April 15, 1998
  
  
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     U.S. Department of the Interior
     Office of Inspector General

     AUDIT REPORT FOLLOWUP OF RECOMMENDATIONS
     CONCERNING UTILITY RATES IMPOSED BY THE NATIONAL PARK SERVICE


     REPORT NO. 98-I -406
     APRIL 1998
  
  


     MEMORANDUM
  
     TO:  The Secretary
  
     FROM:  Robert J. Williams
            Acting Inspector General
  
     SUBJECT SUMMARY:  Final Audit Report for Your Information -
                       "Followup of Recommendations
                       Concerning Utility Rates Imposed
                       by the National Park Service" (No. 98-I-406)
  

     Attached for your information is a copy of the subject audit
     report. The objective of the audit was to determine whether the
     National Park Service had satisfactorily implemented the
     recommendations in our January 1991 report "Utility Rates
     Imposed by the National Park Service" (No. 91-I-333) and whether
     any new recommendations were warranted.
  
     We found that none of the five recommendations made in our
     January 1991 report had been fully implemented. Specifically,
     the Park Service had not (1) established procedures or issued
     specific guidance which ensured that the parks fully recovered
     from concessioners and other non-Governmental users the Park
     Service's utility system operating and investment costs, (2)
     provided adequate oversight of the parks' cost recovery
     activity, (3) ensured that training in developing utility rates
     was provided, and (4) ensured that parks complied with standards
     pertaining to the separation of billing and collection duties
     and to the timely deposit of utility reimbursements. Because the
     prior report's recommendations had not been fully implemented,
     the Park Service, from January 1991 through August 1997, did not
     seek recovery of utility system capital and operational costs of
     $6.3 million, and we estimated that additional capital
     investment costs of as much as $31.3 million may not be
     recovered unless the Park Service corrects existing deficiencies
     in its guidance, training, and oversight.
  
     We recommended that the Park Service provide additional guidance,
     training, and oversight of utility system capital and
     operational cost recoveries and issue guidance on the retention
     and use of utility system cost reimbursements. Based on the Park
     Service's response, we considered five recommendations resolved
     but not implemented and requested that the Park Service
     reconsider its response to one recommendation, which was
     unresolved.
  
     If you have any questions concerning this matter, please contact
     me at (202) 208-5745.
  
     Attachment                                          C-IN-NPS-001-97

     


     AUDIT REPORT
  
     Memorandum
  
     To:  Assistant Secretary for Fish and Wildlife and Parks
  
     From:  Robert J. Williams
            Acting Inspector General
  
     Subject:  Audit Report on Followup of Recommendations
               Concerning Utility Rates Imposed by the
               National Park Service (No. 98-I-406)
  
     INTRODUCTION
  
     This report presents the results of our followup review of
     recommendations contained in our January 1991 audit report
     "Utility Rates Imposed by the National Park Service" (No. 91-I
     -333). The objective of the followup review was to determine
     whether the National Park Service had satisfactorily implemented
     the recommendations in the prior report and whether any new
     recommendations were warranted.
  
     BACKGROUND
  
     The Park Service often provides utility services, including
     water, electricity, and waste removal, to non-Governmental
     users, such as concessioners, inholders, and state agencies. In
     some park units, the Park Service constructs and operates its
     own utility systems, while in other park units, the Park Service
     purchases utility services from public utility companies.
     Federal law and regulations require the Park Service to obtain
     reimbursement for the cost of providing these services.
     Specifically, Title V of the Independent Offices Appropriations
     Act of 1952 (the User Fee Statute) authorizes Federal agencies
     to charge fees for services or benefits provided to
     beneficiaries. Office of Management and Budget Circular A
     -25,"User Charges," provides guidance to Federal agencies on
     implementing the User Fee Statute and requires agencies to
     establish internal controls over cash collections in accordance
     with Office of Management and Budget Circular A-123,"Internal
     Control Systems." Furthermore, the Department of the Interior
     Manual, Part 346, "Cost Recovery," requires (unless directed
     otherwise by statute or other authority) that a fee be
     established to recover an agency's costs for services such as
     utilities which provide special benefits or privileges to an
     identifiable non-Governmental recipient.
  
     Park Service guidance and policies on utility cost recovery from
     non-Governmental users are contained in its June 20, 1985,
     Special Directive 83-2, "Rates for NPS-Produced Utilities." The
     Directive provides for the Park Service to recover from non
     -Governmental users its capital investment costs for constructing
     or expanding utility systems and for performing major
     rehabilitation or replacement of existing systems through cost
     sharing or other means. The Directive also provides for the
     recovery of utility system operational costs through the
     implementation of utility rates that are based on the higher of
     actual operational costs or comparable rates (rates for similar
     services in the same geographic location).
  
     SCOPE OF AUDIT
  
     To accomplish our audit objective, we reviewed construction data
     on capital investment costs at the Park Service's Denver Service
     Center, operational cost work sheets at specific parks, and
     reports from the Park Service's maintenance and financial
     management systems. We did not review source documents, such as
     individual time sheets and invoices, to verify the accuracy or
     completeness of the reported costs. We also reviewed the
     operating cost records and cash management procedures at the 4
     parks we visited and sent questionnaires to 15 parks (including
     the 4 parks visited) at which, according to Service Center
     records, utility system construction had taken place since our
     prior audit. (Sites visited or contacted are in Appendix 2.) The
     responses to the questionnaires indicated that 11 of the 15
     parks had each spent at least $1 million of appropriated funds
     on utility systems which would serve non-Governmental users and
     which were completed or almost completed at the time of our
     current review. In addition, we contacted officials at public
     utility companies to determine comparable rates and the
     companies' methodologies for recovering capital investment
     costs.
  
     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. We also reviewed
     the Department's Fiscal Year 1996 Annual Report on
     Accountability, which includes information required by the
     Federal Managers' Financial Integrity Act of 1982, and the Park
     Service's annual assurance statement to determine whether any
     reported weaknesses were within the objective and scope of our
     review. Neither the Accountability Report nor the Park Service's
     assurance statement reported control weaknesses in the Park
     Service's recovery of utility system costs. Because of the
     limited scope of our review, we did not evaluate the Park
     Service's system of management controls related to cost recovery
     for utility services.
  
     PRIOR AUDIT COVERAGE
  
     The General Accounting Office has not issued any audit reports
     during the past 7 years that addressed the Park Service's
     recovery of utility system costs. However, the Office of
     Inspector General issued the report "Utility Rates Imposed by
     the National Park Service" in January 1991, which is the subject
     of this followup report. The January 1991 report stated that the
     Park Service was not recovering the cost of capital investments
     for utility systems that benefited non-Governmental users and
     was not fully recovering operational costs. We also found that
     procedures for the separation of duties for the billing and
     collection functions and for the timely deposit of receipts were
     not enforced in accordance with the Park Service Operations and
     Evaluation Manual. The report recommended that the Park Service
     (1) revise Special Directive 83-2 to include specific guidelines
     for recovering capital investments in utility systems from non
     -Governmental users, (2) ensure compliance with the guidelines,
     (3) ensure that the park units were fully recovering operational
     costs, (4) provide training to park personnel who are
     responsible for establishing utility rates, and (5) ensure that
     internal controls over the collection and deposit of receipts
     for utility services were in compliance with prescribed
     procedures. The Park Service, in its December 5, 1990, response
     to the draft report, concurred with all of the report's
     recommendations. However, in an October 6, 1995, memorandum to
     the Director, Office of Financial Management, regarding
     implementation of those recommendations, the Park Service stated
     that recommendations regarding the recovery of capital
     investments were "rendered obsolete" because the Park Service
     had eliminated possessory interest from concession contracts.
     Based on that memorandum, the Office of Financial Management
     considered all of the recommendations implemented. We disagree
     that the recommendations are obsolete based on the action taken,
     as discussed in the Results of Audit section of this report.
  
     RESULTS OF AUDIT
  
     We found that none of the five recommendations made in our
     January 1991 report were fully implemented. Specifically, the
     National Park Service (1) did not establish procedures or issue
     specific guidance which ensured that the parks fully recovered
     their operating and investment costs in utility systems from
     concessioners and other non-Governmental users, (2) did not
     provide adequate oversight of the parks' cost recovery efforts,
     (3) did not ensure that park personnel were provided training in
     developing utility rates, and (4) did not ensure that all the
     parks were complying with prescribed standards pertaining to the
     separation of duties for the billing and collection functions
     and to the timeliness of deposits. As a result, from January
     1991 through August 1997, the Park Service did not seek recovery
     of costs totaling about $6.3 million from non-Governmental users
     and may not recover additional capital investment costs of as
     much as $31.3 million unless it revises its procedures.
  
     Prior Audit Report Recommendations
  
     Recommendation A.1. Revise Special Directive 83-2 to include
     specific guidelines for recovering capital investments in
     utility systems that are identifiable to non-Government users.
     Any exceptions to full recovery of such capital investments
     should be properly authorized and documented.
  
     Our prior audit report stated that, although Special Directive
     83-2 authorized the parks to pursue cost sharing or other means
     of capital cost recovery, the Directive did not provide specific
     guidance on how cost recovery should be implemented. The report
     also stated that even when guidance was requested by park
     officials, it was not provided by Park Service headquarters
     officials. For example, according to the report, in December
     1989, the Regional Director, Western Region, requested that Park
     Service headquarters provide specific guidance on whether cost
     recovery was mandatory, what approach should be used to recover
     costs, and what types of costs were considered capital costs.
     However, the Region did not receive a response to its request.
     The report further stated that officials at the Denver Service
     Center, which is responsible for planning and financing new or
     expanded utility systems, were not aware of the requirement to
     pursue recovery of capital investment costs. In its response to
     the report, the Park Service agreed that non-Governmental users
     should pay a share of capital investment costs "to the extent
     that it is economically feasible" and said that it would
     document and justify the basis for any instances of less than
     full cost recovery.
  
     In an October 6, 1995, memorandum to the Director, Office of
     Financial Management, regarding the status of implementation of
     the recommendations, the Park Service's Chief of the
     Accountability and Audit Team stated that the Park Service had
     taken all necessary actions to implement the outstanding
     recommendations. The memorandum further stated that
     Recommendations A.1 and A.2 had been "rendered obsolete" because
     the Park Service "had eliminated possessory interest from
     concession contracts so that capital investment is restricted to
     Government assets."
  
     We do not consider the elimination of possessory interest from
     concession contracts to be relevant to the Park Service's
     recovery of its utility system investment costs from benefiting
     non-Governmental users. Accordingly, during our followup review,
     we asked the Park Service to explain how the elimination of
     possessory interest affected the Park Service's ability to
     recover utility system investment costs from benefiting non
     -Governmental users. Park Service officials did not provide a
     response to our inquiry. In our opinion, the elimination of
     concessioners' possessory interest has no bearing on the Park
     Service's recovery of utility system investment costs that were
     financed by the Government. In addition, at the parks visited,
     we did not identify any provisions in the two concessions
     contracts reviewed that would restrict the recovery of utility
     system capital investment costs. Consequently, we do not agree
     that Recommendations A.1 and A.2 are obsolete.
  
     Despite the October 1995 memorandum, Park Service officials,
     during our followup review, stated that Park Service policy is
     to recover investments in utility systems when feasible.
     However, we found that the Park Service had not pursued the
     recovery of these costs, and no documentation was provided to
     show that the Park Service had analyzed the non-Governmental
     users' ability to pay these costs and/or had authorized an
     exemption to full cost recovery. Specifically, since January
     1991, the Park Service has spent appropriated funds totaling
     $20,051,248 to construct utility systems at three of the four
     parks visited, of which $12,321,425 was subject to recovery from
     non-Governmental users. At the fourth park, a $1,526,462
     construction project, which was not completed at the time of our
     review, had reimbursable costs of $870,083. However, the Park
     Service has not pursued recovery of these costs, which totaled
     $13,191,508 ($12,321,425 and $870,083) at the four parks
     visited, including $2,490,414 that was subject to recovery in
     fiscal years 1991 through 1997. The $10,701,094 balance could be
     recovered in future periods based on a 30-year project life
     calculated from the date of completion. Specifically:
  
     - Grand Canyon National Park had not pursued the recovery of
     costs for constructing a water treatment facility and an
     electrical distribution system. The total cost of the systems
     was $10,746,849. Based on our review of consumption data, we
     determined that 86 percent ($9,242,290) was attributable to use
     by 26 non-Governmental users. We also determined that investment
     costs of $2,053,823 were subject to recovery but were not billed
     and collected from concessioners for fiscal years 1991 through
     1997.
  
     - Mesa Verde National Park had not pursued the recovery of costs
     for constructing a water treatment plant and pipelines. The
     total cost of the systems was $6,901,574. Based on our review of
     consumption data, we determined that the concessioner's use was
     38 percent ($2,622,598). We also determined that investment
     costs of $360,502 were subject to recovery but were not billed
     and collected from the concessioner for fiscal years 1991
     through 1997.
  
     - Lake Mead National Recreation Area had not pursued the
     recovery of costs for constructing a sewage lagoon. The cost of
     the lagoon was $2,402,825, of which the concessioner's use was
     19 percent ($456,537) based on consumption data. We determined
     that investment costs of $76,089 were subject to recovery but
     were not billed and collected from the concessioner for fiscal
     years 1993 through 1997. In addition, we found that the
     Recreation Area plans to spend $11.5 million for water treatment
     and wastewater facilities in fiscal years 1998 and 1999 and that
     it has not formalized any commitment for repayment of these
     costs from the concessioner.
  
     - Glacier National Park had obligated $1,526,462 for
     rehabilitation of the Sperry Chalet utility system. We estimated
     that the concessioner's use would be 57 percent ($870,083). The
     Park Service plans to complete this project in 1998.
  
     In addition to the results of our reviews at the four parks
     visited (having recoverable capital investment costs of about
     $13.2 million, of which $2.5 million was subject to recovery in
     fiscal years 1991 through 1997), we identified additional
     capital investment costs of $22,879,158 at 7 of the 11 parks
     contacted. Based on responses to our questionnaire, we
     determined that $2,294,710 was subject to recovery in fiscal
     years 1991 through 1997. However, none of these seven parks had
     pursued recovery of these costs. In total, we estimated that
     capital investment costs of $36 million were recoverable, of
     which $4.8 million was subject to recovery in fiscal years 1991
     through 1997.
  
     Based on discussions with Park officials, we concluded that costs
     were not recovered because Park personnel did not understand how
     to implement the provisions of Special Directive 83-2 regarding
     recovery through "cost sharing or other means." Consequently, we
     consider Recommendation A.1 not implemented.
  
     Recommendation A.2. Provide sufficient oversight of all Park
     Service areas to ensure that capital investments in utility
     systems that are identifiable to non-Government users are fully
     recovered or that any exceptions to full recovery are properly
     authorized and documented.
  
     Our prior audit found that the Park Service did not ensure that
     the parks pursued cost sharing or other means of recovering
     capital investment costs. As a result, we estimated that unless
     the Park Service revised its guidelines and provided sufficient
     oversight of individual parks, the Park Service would not
     recover utility system investment costs of $32.5 million for
     fiscal year 1990 and beyond.
  
     Our followup review found that the Park Service did not provide
     sufficient oversight of the parks' cost recovery efforts. For
     example, the Park Service, in its response to the prior audit
     report, stated that it will "delegate an individual in the
     Washington Office the responsibility for the Utility Fee
     Program." However, the various individuals whom the Park Service
     identified as having responsibility for oversight told us that
     they were not aware that they had been delegated such
     responsibility and that they had not performed any oversight
     reviews. As such, we consider Recommendation A.2 not
     implemented.
  
     Recommendation B.1. Ensure that all Park Service areas comply
     with Special Directive 83-2. At a minimum, this action should
     include assigning specific individuals within the regional
     offices the responsibility of ensuring that the areas comply
     with the Directive.
  
     Our prior audit found that the Park Service did not ensure that
     its field sites were complying with Special Directive 83-2 in
     formulating utility rates. As a result, we estimated that the
     Park Service did not recover operational costs of at least $2.6
     million for utility services provided to non-Governmental users
     during fiscal years 1986 through 1989.
  
     Our followup review found that the Park Service issued a November
     27, 1995, memorandum designating 10 regional officials as Cost
     Recovery Liaison Officers. However, we found that 4 of the 10
     officials were unaware of their designations or
     responsibilities, 4 had retired before the memorandum was issued
     (2 of these individuals had retired 31 and 16 months,
     respectively, before the memorandum was issued), and 2 officials
     had retired after the memorandum was issued. The regions did not
     reassign the responsibilities to other employees.  As such, we
     concluded that the Park Service did not ensure that the field
     offices were ensuring compliance with Special Directive 83-2,
     which resulted in estimated unrecovered operational costs of
     $1,537,018 in fiscal years 1995 through 1997 at the four parks
     visited. For example:
  
     - Grand Canyon National Park had not recovered operational costs
     of $551,927 for fiscal year 1995 because the Park official
     responsible for establishing the utility rates at the time
     mistakenly believed that rate increases were limited to 15
     percent annually. The fiscal year 1995 water rate was
     established at $6.85 per thousand gallons despite information
     which indicated that the rate should have been $8.46 per
     thousand gallons. This official no longer works at the Park, and
     the rates for fiscal years 1996 and 1997 have been reestablished
     without this limitation. However, the 1996 rate ($9.09 per
     thousand gallons) did not include salary costs of $80,000 for
     maintenance support personnel, such as the Chief of Maintenance,
     the Maintenance Management Assistant, the Auto Shop supervisor,
     and maintenance clerks, that should have been reimbursed
     annually for fiscal years 1995 through 1997.
  
     - Lake Mead National Recreation Area had not recovered
     operational costs of $384,000 for fiscal year 1997 because
     Recreation Area personnel excluded cyclic maintenance costs from
     the rate calculations. Since Special Directive 83-2 does not
     specify the costs that should be included as operational costs,
     Recreation Area personnel indicated that there was "some
     confusion" as to what costs they should include in the rate
     computation. In addition, we identified maintenance supervisory
     personnel costs of $55,000 that were not included in the rates
     for fiscal years 1995 and 1997. The Recreation Area was not able
     to provide support for fiscal year 1996 costs because no rate
     work sheets were prepared. As such, we were unable to determine
     whether these personnel costs were excluded for that fiscal
     year.
  
     - Mesa Verde National Park had not recovered operational costs
     totaling $60,981 for fiscal years 1995 through 1997 because the
     Park used the 1995 rate (based on 1994 actual costs) for 1996
     and 1997. Therefore, the Park was not recovering cost increases
     attributable to inflation, such as cost of living increases for
     personnel, that had occurred since May 1994. In addition, the
     Park was recovering only 1 percent of its maintenance
     supervisory costs, even though Park officials said that a larger
     percentage should be recovered. Mesa Verde was the only park
     visited that included any maintenance supervisory costs in its
     rate calculation.
  
     - Glacier National Park had not recovered estimated operational
     costs of $190,110 for fiscal year 1997 because utility charges
     were based on comparable rates that did not fully compensate the
     Park for actual maintenance costs incurred. Park maintenance
     personnel stated that they were unable to fully identify actual
     utility system costs in the accounting records or to estimate
     actual costs accurately. As a result, according to Park
     personnel, the Park established comparable rates based on local
     public utility company rates. We estimated the Park's
     reimbursable maintenance costs by determining the amount of
     maintenance costs attributable to utility systems, using data
     from the Park Service's Federal Financial System, and
     multiplying this amount by the percentage of non-Governmental
     use. The resultant amount was $190,110 higher than the amounts
     recovered, which were based on the comparable rates.
  
     Based on these examples, we concluded that the Park Service had
     not properly delegated oversight responsibilities to specific
     individuals or provided sufficient oversight to ensure
     compliance with the Special Directive, which resulted in the
     parks not fully recovering their operational costs. Accordingly,
     we consider Recommendation B.1 not implemented.
  
     Recommendation B.2. Ensure that all pertinent personnel at Park
     Service areas which provide utility services to non-Governmental
     users are trained and/or provided adequate guidance to formulate
     utility rates in accordance with the Park Service Special
     Directive 83-2.
  
     Our prior audit report stated that the Park Service had not
     adequately trained and/or provided sufficient guidance to
     individuals who were responsible for formulating the utility
     rates. In its response to the prior report, the Park Service
     stated that training needs would be reviewed and a specific plan
     would be developed. The Park Service further stated that it
     would suggest joint training among regions to establish uniform
     application of Park Service policies and procedures and to
     promote the cost effectiveness of training.
  
     Our followup review found that the actions outlined in the
     response had not been taken to provide training or guidance in
     the development of utility rates. Specifically, the employees
     responsible for developing utility rates at the 11 parks that
     had new utility systems which served non-Governmental users
     stated that they had not been provided training in the
     development of the rates or on the Special Directive and that,
     as discussed under Recommendations A.1 and B.1, sufficient
     guidance had not been provided by Park Service headquarters.
     Therefore, we consider Recommendation B.2 not implemented.
  
     Recommendation C.1. Ensure that all Park Service areas providing
     utility services to non-Governmental users review their internal
     controls applicable to receipts and deposits and ensure that
     such controls are in compliance with prescribed standards. The
     areas should be required to provide written verification of
     compliance with prescribed standards to an organizational
     appointee designated by the Director.
  
     Our prior audit found that the Park Service was not ensuring that
     all park units were complying with prescribed standards
     pertaining to the separation of duties for the billing and
     collection functions and to the timeliness of deposits, as
     required by Office of Management and Budget Circular A-123,
     "Internal Controls." Specifically, although the Park Service's
     Operations Evaluation Manual provided adequate guidelines for
     the separation of duties for the billing and collection
     functions, park personnel were not complying with the
     guidelines. As a result, the Park Service could not provide
     reasonable assurance that Government resources were protected
     from fraud, mismanagement, or misappropriation. In its response
     to the prior report, the Park Service stated that it would
     require park managers to evaluate the adequacy of their
     collection processes and that Servicewide compliance would be
     determined by the individual delegated responsibility for the
     utility program (see Recommendation B.1).
  
     Our followup review found that there was not sufficient
     separation of duties at two of the four parks visited and that
     deposits were not made timely at three of the four parks visited
     as follows:
  
     - At Mesa Verde National Park, we reviewed seven utility
     payments that exceeded $5,000 during fiscal years 1994 through
     1996 to determine whether the Park was complying with Section
     IIB of guidance entitled "National Park Service Collection
     Procedures," which requires that deposits be made when the
     accumulated amount reaches $5,000. We found that six of the
     seven receipts were deposited from 1 to 17 days late. For
     example, one receipt for $20,760 on August 13, 1996, was not
     deposited until August 30, 1996, or 17 days after it was
     received. In addition, we found that the same individual who
     prepared the bills for collection also received payments and
     made deposits.
  
     - At Glacier National Park, the same individual who prepared the
     bills also received the payments and deposited the receipts.
  
     - At Grand Canyon National Park, there were undeposited receipts
     totaling $130,470 at the time of our visit on May 29, 1997. The
     receipts totaled more than $5,000 as of May 8, 1997; therefore,
     the deposit was overdue by 21 days.
  
     - At Lake Mead National Recreation Area, we reviewed three
     deposits made on July 14, 1997, and found that one deposit for
     $28,449 contained a $22,849 receipt from July 2, 1997, which was
     deposited 12 days late.
  
     Based on the cited examples, we consider Recommendation C.1 not
     implemented.
  
     Other Issues
  
     During our review, we obtained additional information that we
     believe the Park Service should consider in revising its cost
     recovery procedures. Specifically, we contacted five public
     utility companies and found that they recovered their capital
     investments through the rate process, which Special Directive
     83-2 does not allow. In our opinion, the recovery of capital
     investment costs through the rate process rather than through
     the cost-sharing process, for which no guidance has been issued,
     would be easier for the parks to implement and would be
     consistent with utility company practices. Accordingly, we
     believe that the Park Service should revise the Special
     Directive to allow the parks to recover capital investment costs
     through the monthly billing process.
  
     We also found that the Park Service had not provided sufficient
     guidance regarding the retention and use of utility cost
     reimbursements. As a result, officials at the four parks we
     visited stated that they were unsure of how the funds could be
     used and that they were returning all unspent funds in their
     utility reimbursement account to the U.S. Treasury at the end of
     each fiscal year. Park Service budget officials, who cited no
     regulations to support their position, said that the parks may
     retain and use such funds, provided that an adequate
     justification is prepared to support the need to carry over the
     funds to a subsequent year. To resolve any ambiguity regarding
     the proper retention and use of utility reimbursements, we
     believe that the Park Service should issue guidance, in
     coordination with the Solicitor's Office, to the parks regarding
     the retention of accumulated reimbursements of both operational
     and capital investment costs and ensure that such guidance is in
     accordance with applicable laws and regulations.
  
     Recommendations
  
     We recommend that the Director, National Park Service:
  
     1. Revise Special Directive 83-2 to include specific guidelines
     for recovering capital investments in utility systems that are
     identifiable to non-Governmental users and to allow for the
     recovery of these investments through the utility rate process.
     Any exceptions to full recovery of such capital investments
     should be properly authorized and documented.
  
     2. Establish an oversight process to ensure that capital
     investments in utility systems and operational costs which are
     identifiable to non-Governmental users are fully recovered and
     that any exceptions to full recovery are properly authorized and
     documented.
  
     3. Issue guidance for the recovery of operational costs of
     utility systems. The guidance should include but not be limited
     to the various types of direct and indirect park maintenance
     costs that are to be included in rate computations and
     procedures for developing the rates.
  
     4. Ensure that adequate training and/or guidance is provided to
     personnel who are responsible for formulating utility rates.
  
     5. Ensure that park units which provide utility services to non
     -Governmental users have adequate internal controls relating to
     the separation of duties for the billing and collection
     functions and for the timely deposit of receipts.
  
     6. Issue guidance to all park units on the procedures for
     retaining and spending utility system cost reimbursements and
     ensure that such guidance is in accordance with applicable laws
     and regulations.
  
     National Park Service Response and Office of Inspector General
     Reply
  
     In the March 26, 1998, response (Appendix 3) to our draft report
     from the Director, National Park Service, the Park Service
     generally concurred with the report's conclusions. Based on the
     response, we consider Recommendations 1 through 5 resolved but
     not implemented and Recommendation 6 unresolved. Accordingly,
     the unimplemented recommendations will be referred to the
     Assistant Secretary for Policy, Management and Budget for
     tracking of implementation, and the Park Service is requested to
     reconsider its response to Recommendation 6 (see Appendix 4).
  
     The Park Service said that it did not concur with Recommendation
     6 because the recommendation "implie[d] that the National Park
     Service has the authority to retain the capital costs
     recovered." The Park Service said that it would obtain a
     Solicitor's opinion regarding the retention and use of utility
     system capital cost reimbursements to settle the "question of
     authority." Although not incorporated into the recommendation,
     the discussion of this issue (page 9) states that Park Service
     budget officials did not provide any regulations to support
     their position that these funds could be retained. The report
     further notes that "to resolve any ambiguity regarding the
     proper retention and use of utility reimbursements, we believe
     that the Park Service should issue guidance, in coordination
     with the Solicitor's Office, to the parks regarding the
     retention of accumulated reimbursements of both operational and
     capital investment costs and ensure that such guidance is in
     accordance with applicable laws and regulations." (Emphasis
     added.) We believe that the Park Service's proposed action, when
     completed, should partially satisfy the intent of the
     recommendation. To fully implement the recommendation, the
     Service should request that the Solicitor's opinion also address
     the retention and use of utility system operational cost
     reimbursements. In addition, the Service needs to issue guidance
     on the appropriate accounting treatment for these
     reimbursements, particularly operational cost recoveries that
     are carried over from one fiscal year to the next. Furthermore,
     if the Solicitor finds that the Park Service can retain and use
     capital cost reimbursements, the Park Service will need to
     develop guidance on the recording and use of these cost
     recoveries. Accordingly, the Park Service is requested to
     reconsider its response to this recommendation.
  
     In accordance with the Departmental Manual (360 DM 5.3), please
     provide us with your written comments to this report by May 15,
     1998. The response should provide the information requested in
     Appendix 4.
  
     The legislation, as amended, creating the Office of Inspector
     General requires semiannual reporting to the Congress on all
     audit reports issued, the monetary impact of audit findings
     (Appendix 1), actions taken to implement recommendations, and
     identification of each significant recommendation on which
     corrective action has not been taken.
  
     We appreciate the assistance of National Park Service personnel
     in the conduct of our audit.                   
     APPENDIX 1
  
         CLASSIFICATION OF MONETARY AMOUNTS
  
                          Potential Additional       Finding Area
     Lost Revenues       Revenues
  
     Recovery of Capital Investment        $4,785,124    $31,285,542
     Recovery of Operational Costs         1,537,018   
  
     Total                $6,322,142       $31,285,542      
     RECOVERY OF CAPITAL INVESTMENT
  
                                                  RECOVERABLE AMOUNT                               
     PARK OR RECREATION       CAPITAL             POTENTIAL                                                         
     AREA                INVESTMENT            LOST     ADDITIONAL
     REVENUES    TOTAL
  
     Visited
  
     Grand Canyon National Park     $10,746,849   $2,053,823
     $7,188,467  $9,242,290 Mesa Verde National Park       6,901,574
     360,502      2,262,096   2,622,598 Lake Mead National Recreation
     Area           2,402,825     76,089       380,448    456,537
     Glacier National Park        1,526,462       0       870,083
     870,083
  
     Total              $21,577,710   $2,490,414     $10,701,094
     $13,191,508
  
     Contacted
  
     Bryce Canyon National Park     $1,777,000       0          0
     0 13Cuyahoga Valley National Recreation Area        3,499,900
     0       0       0 Gateway National Recreation Area 
     2,892,000     $4,820    $428,980      $433,800 Golden Gate
     National Recreation Area        6,513,973       202,563
     2,169,346   2,371,909 Hawaii Volcanoes National Park  1,991,162
     65,708    591,375    657,083 Independence National Park
     17,089,100          0       0       0 Kalaupapa National
     Historic Park           2,786,097       0       0          0
     Petrified Forest National Park  1,337,294       43,834
     223,625    267,459 Sequoia & Kings Canyon National Park
     16,248,543       495,299   5,029,206   5,524,505 Yellowstone
     National Park    5,633,228          0   2,985,611   2,985,611
     Yosemite National Park     14,779,792      1,482,486   9,156,305
     10,638,791 APPENDIX 2 Total          $74,548,089     $2,294,710
     $20,584,448       $22,879,158
  
     TOTAL ALL AREAS        $96,125,799     $4,785,124
     $31,285,542       $36,070,666                         APPENDIX 4                    
     STATUS OF AUDIT REPORT RECOMMENDATIONS   
     Finding/Recommendation     Reference
  
            1, 2, 3, 4, and 5                                                                                                                                                                                                                       
     6                                                                                                                                                                                                                                                             
  
                .           Status                  Resolved; not
     implemented
  
  
  
     Unresolved.
  
  
  
  
     Action Required
  
     No further response to the Office of Inspector General is
     required.  The recommendations will be referred to the Assistant
     Secretary for Policy, Management and Budget for tracking of
     implementation. However, in accordance with the Departmental
     Manual (361 DM 1.4), a detailed action plan, which includes
     quarterly milestones for completing implementation of all of
     these recommendations, should be provided to Policy, Management
     and Budget.
  
     Reconsider the recommendation, and provide a plan identifying
     actions to be taken, including target dates and titles of
     officials responsible for implementation.
     



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