[Audit Report on Concession Contracting Procedures, National Park Service]
[From the U.S. Government Printing Office, www.gpo.gov]
Report No. 99-i-626
Title: Audit Report on Concession Contracting Procedures, National
Park Service
Date: June 30, 1999
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U.S. Department of the Interior
Office of Inspector General
AUDIT REPORT
CONCESSION CONTRACTING PROCEDURES,
NATIONAL PARK SERVICE
REPORT NO. 99-I-626
JUNE 1999
MEMORANDUM
TO: The Secretary
FROM: Robert J. Williams
Acting Inspector General
SUBJECT SUMMARY: Final Audit Report - "Concession Contracting
Procedures, National Park Service" (No. 99-i-626)
Attached for your information is a copy of the subject final
audit report. The objective of the audit was to determine
whether the National Park Service conducted its concession
contracting activities in compliance with Federal law and Park
Service regulations.
The Park Service did not fully comply with the Concessions Policy
Act (Public Law 89-249) or with Park Service regulations.
Specifically, the Park Service did not always obtain the required
approval for certain concession contracting actions, reissue
expired concession contracts in a timely manner, adjust franchise
fees periodically, determine building use fees, or establish and
use special accounts properly. Park Service concessions guidance
requires the approval of the Director, Park Service, for certain
contracting actions. Also, Park Service guidance limits the
duration of concession contract extensions, requires that
building use fees be computed based on the fair value of
facilities assigned to concessioners, and requires the
establishment of special accounts on the basis of the costs of
planned projects. The Act also requires the periodic
reconsideration of franchise fees. The Park Service, however,
did not issue specific guidance to ensure that designated
officials performed or completed concession contracting actions
in a timely manner, establish clear lines of authority for
concession contracting actions, or adequately monitor and control
concession contracting activity. As a result, Park Service
concessioners operated under expired concession agreements that
contained provisions which were not advantageous to the Park
Service, the Government lost or delayed the opportunity to
receive additional revenues, and the Park Service may not have
received a fair return from concessioners' special accounts or
from their use of park facilities.
Based on the Park Service's response to the draft report, we
considered two of the report's nine recommendations resolved and
implemented, one recommendation resolved but not implemented, and
six recommendations unresolved. The Park Service was requested
to reconsider its response to the unresolved recommendations,
which pertained to controls over the concession contracting
process, fee reconsiderations, and building use fee computations.
If you have any questions concerning this matter, please contact
me at (202) 208-5745.
Attachment
cc: Assistant Secretary for Fish and Wildlife and Parks
Chief of Staff
Director, National Park Service
Office of Communications
E-IN-NPS-014-97-D
Memorandum
To: Director, National Park Service
From: Robert J. Williams
Assistant Inspector General for Audits
Subject: Audit Report on Concession Contracting Procedures,
National Park Service (No. 99-i-626)
This report presents the results of our audit of the National
Park Service's concession contracting procedures. The objective
of the audit was to determine whether the National Park Service
conducted its concession contracting activities in compliance
with Federal law and Park Service regulations.
We found that the Park Service did not conduct concession
contracting activities in full compliance with Federal law and
Park Service regulations or ensure that a fair return was
obtained from all concessioners operating in the national park
system. Specifically, the Park Service did not reissue expired
concession contracts and permits in a timely manner; periodically
adjust concessioners' fees as required by the Concessions Policy
Act; establish special accounts in accordance with Park Service
guidance; or compute fees for the use of park facilities,
including housing, that were assigned to concessioners. These
deficiencies occurred because the Park Service had not issued
sufficient guidance to ensure that designated responsibilities
for concession contracting were performed or completed in a
timely manner, had not established clear lines of authority, and
had insufficient internal controls to properly monitor compliance
with law and regulations. As a result, concessioners operated
under expired concession contracts and permits that contained
provisions which were not advantageous to the Park Service, the
Government lost or delayed opportunities to gain additional
revenues, and the Park Service may not have received an adequate
return from concessioners' special accounts or from their use of
park facilities.
In the May 27, 1999, response (Appendix 4) to the draft report
from the Director, National Park Service, the Park Service
indicated concurrence with Recommendations 1, 5, 6, 7, 8, and 9
and said that Recommendations 2, 3, and 4 were "under
consideration, and a final decision should be made within the
next few weeks." Based on the response, we consider
Recommendations 5 and 7 resolved and implemented. Also based on
the response, we request that the Park Service reconsider its
responses to Recommendations 1, 2, 3, 4, 6, and 8, which are
unresolved, and provide additional information for Recommendation
9 (see Appendix 5).
In accordance with the Departmental Manual (360 DM 5.3), we are
requesting a written response to this report by August 13, 1999.
The response should provide the information requested in
Appendix 5.
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 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.
CONTENTS
Page
INTRODUCTION..........................................1
BACKGROUND............................................1
OBJECTIVE AND SCOPE...................................3
PRIOR AUDIT COVERAGE..................................4
FINDING AND RECOMMENDATIONS...........................5
CONCESSION CONTRACTING ACTIVITIES.....................5
APPENDICES
1. CLASSIFICATION OF MONETARY AMOUNTS...............20
2. OFFICES CONTACTED................................21
3. PRIOR AUDIT COVERAGE.............................22
4. NATIONAL PARK SERVICE RESPONSE...................25
5. STATUS OF AUDIT REPORT RECOMMENDATIONS...........28
INTRODUCTION
BACKGROUND
The National Park System Concessions Policy Act of 1965 (Public
Law 89-249) authorized concessions operations in the national
parks. The Act directed the Secretary of the Interior "to
administer national park system areas in accordance with the
fundamental purposes of conserving their scenery, wildlife,
natural and historic objects, and providing for their enjoyment
in a manner that will leave them unimpaired for the enjoyment of
future generations." To provide for public use of the parks, the
Act authorized the Secretary "to encourage and enable "
concessioners to provide and operate facilities and services
deemed desirable for the accommodation of visitors to the
national parks.
To authorize concessions operations, the Park Service issues
permits or awards contracts to "private persons and
corporations." According to the Park Service's Concessions
Management Guideline, NPS-48, Chapter 24, permits are issued
usually for periods of fewer than 5 years and for concessions
operations that are not expected to gross more than $100,000 a
year. Longer term concessions operators having estimated gross
receipts of more than $100,000 generally are awarded concession
contracts.[1] Contracts and permits (referred to hereafter as
agreements) specify the terms and conditions of a concessioner's
operations, including the services, accommodations, or facilities
offered; the period of performance; concessioner responsibility
for maintenance and repair of facilities; and financial reporting
and fee payment requirements.
Section 3(d) of the Act provides for concessioners to pay a fee
to the Government for the "probable value . . . of the privileges
granted by the particular contract or permit involved."
Typically, concessioners pay a franchise fee to the Government
based on a percentage of the gross receipts from the concessions
operations. According to the Act, the fee must be reconsidered
at least every 5 years. In addition, some concessioners are
required to establish and make payments to concessioner
improvement accounts (special accounts).[2] Further,
concessioners that use Government facilities may be required to
pay a building use fee. In calendar year 1997 (the most recent
data available, according to a Park Service official),
concessioners paid franchise fees of $17.1 million and deposited
$26.2 million into special accounts. The Park Service also
reported that concessioners provided other consideration to the
Government in 1997, including about a $9.1 million liquidation of
their possessory interests (ownership) in concessions
facilities.[3]
Concessions program responsibilities are assigned to employees at
all levels of the Park Service. For example, the Concessions
Management Division in Washington, D.C., provides direction and
policy guidance for the concessions program, and the Division's
Concessions Program Center in Denver, Colorado, is responsible
for concessions planning and analysis, including technical
services such as business analyses and feasibility studies, that
support concessions management officials at field locations. At
the Park Service's support offices, which are affiliated with
the regional offices, concessions personnel are responsible for
providing or obtaining professional, technical, and
administrative services, and at the parks, employees are assigned
concessions program responsibilities, such as ensuring that
concessioners operate in compliance with contract provisions and
operating/maintenance plan requirements. According to the Park
Service, about 219 employees were assigned to the concessions
program in 1997, of which 129 employees were assigned on a
full-time basis and 90 employees were assigned on a
collateral-duty basis. In fiscal year 1996, the concessions
program received funding of $7.2 million, and in fiscal year
1997, the program received funding of $7.8 million. According
to Park Service records, as of September 30, 1997, the Park
Service had 216 contracts and 420 permits issued to concessioners
that operated at 133 park units nationwide.
Since 1990, the Park Service has made several changes to its
concession contracting procedures. For example, in December
1990, the Park Service issued Special Directive 90-7, "Revised
Delegations of Authority for Concession Contracting," which
required the approval of the Park Service Director for all
concession agreements that had terms of 5 years or more or
expected annual gross receipts of more than $100,000. In
September 1992, regulations on concession contracting were
revised (36 CFR 51) to increase competition and to improve
oversight of the sale and assignment of concession interests.[4]
In January 1993, the Park Service revised the standard concession
contract language to conform to the provisions of the new
regulations, and in July 1995, the Park Service issued Special
Directive 95-9, "Revised Delegations of Authority for Concession
Contracting," which decentralized the concession contracting
process by delegating authority for concession contracting
actions to field directors (now regional directors) and for
concession permit actions to park superintendents.
On November 13, 1998, the President signed the National Park
Service Concessions Management Improvement Act of 1998, Public
Law 105-91, which repealed the 1965 Concessions Policy Act but
did not affect the validity of any concession contract or permit
entered into under the 1965 Act. The 1998 Act retains certain
provisions of the rescinded Act, such as the role of the
concessions operator as a provider of public accommodations,
facilities, and services in the parks and payment of franchise
fees "or such other monetary consideration as determined by the
Secretary, upon consideration of the probable value to the
concessioner of the privileges granted by the particular contract
involved." However, the 1998 Act also contains some significant
changes to the former concessions legislation, including
provisions for the Park Service to retain franchise fees and
other monetary consideration paid by concessioners that
previously were retained by the Federal Government,
discontinuation of the granting of preferential rights to
concession contract renewal or to new or additional services
(with certain limited exceptions), a shift from possessory
interests to "leasehold surrender interests" in capital
improvements constructed by a concessioner, the establishment of
minimum requirements for proposed concessions operations, the
establishment of a National Park Service Concessions Management
Advisory Board, and the authorization of contractor support "to
conduct or assist in those elements of the management" of the
Park Service's concessions program.
In the December 1, 1998, issue of the "Federal Register," the
Park Service gave public notice that as a result of the
legislation, it was canceling all outstanding solicitations for
concession agreements except for permits for cruise ship
services. The Concessions Program Manager said that the Park
Service planned to issue draft concession contract regulations in
March 1999, provide training on new contract provisions to Park
Service personnel involved in the concessions program in the
spring of 1999, and resume contracting by the end of the summer
of 1999.
OBJECTIVE AND SCOPE
The objective of the audit was to determine whether the National
Park Service conducted its concession contracting activities in
compliance with Federal law and Park Service regulations. The
scope of our audit, in general, covered activities that occurred
during fiscal years 1996 and 1997, including the reissuance or
extension of expired agreements (according to Park Service
records, as of September 30, 1997, 232 of the 636 concession
agreements were in an expired status) and the periodic
reconsideration of concessions fees (we identified 56 agreements
that were due for fee reconsiderations during fiscal years 1996
and 1997).
We conducted our review at the Concessions Management Division in
Washington, D.C.; the Concessions Program Center in Denver,
Colorado; and the Park Service's Intermountain Regional Office in
Denver. We also contacted the regional and park offices listed
in Appendix 2 to obtain copies of concession agreements, fee
determinations, and special account projects and to interview
officials about concessions operations. To evaluate concession
contracting procedures, we reviewed (1) a judgmental sample of 24
of the 196 concession agreements that, according to Park Service
records, had been issued or reissued in fiscal years 1996 and
1997; (2) all 19 franchise fee determinations that had been
performed during this 2-year period; and (3) all 12 concession
contracts that had reported 1995 revenues (the most recent data
available on concessioner revenues at the time of our review) of
$500,000 or more and that had been in an expired status for 5 or
more years as of September 30, 1997.
Our audit was made 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. As part of our review, we evaluated the system of
internal controls over the concession contracting process to the
extent we considered necessary to accomplish the audit objective.
We found internal control weaknesses in the Park Service's
supervision and oversight of concession contracting activities as
discussed in the Finding and Recommendations section of this
report. Our recommendations, if implemented, should improve
internal controls in these areas.
We also reviewed the Departmental Reports on Accountability for
fiscal years 1996 and 1997, which include information required by
the Federal Managers' Financial Integrity Act, and found that the
Park Service had not reported any material weaknesses related to
the objective and scope of our audit.
PRIOR AUDIT COVERAGE
During the past 6 years, the Office of Inspector General has
issued seven reports and the General Accounting Office has issued
three reports that contained findings on concession contracting
activities. These reports are summarized in Appendix 3.
**FOOTNOTES**
1 According to the Code of Federal Regulations (36 CFR 51.3),
contracts are used for larger concession operations and permits
are used for "those of less complexity."
[2]:There are two types of special (capital improvement)
accounts: government improvement accounts and capital
improvement accounts. According to Park Service guidance,
moneys paid to these accounts are to be used "to rehabilitate or
construct facilities which directly support concessioner services
as authorized and/or required by a concession contract."
Government improvement accounts finance capital improvements made
to Government-owned facilities, and capital improvement accounts
finance capital improvements made to concessioner-constructed
facilities.
3 Public Law 89-249 provides for concessioners to have a
possessory interest in park improvements that they construct.
The law states that just compensation for a concessioner's
possessory interest, "unless otherwise provided by agreement,"
should be "an amount equal to the sound value of such structure,
fixture, or improvement . . . determined upon the basis of
reconstruction cost less depreciation evidenced by its condition
and prospective serviceability in comparison with a new unit of
like kind, but not to exceed fair market value."
4 The Regulation amended the definition of and placed some
restrictions on the concessioner's preferential right to new and
additional services, increased the amount of concessions
financial information that is available to the public, and
clarified the Park Service's authority over the sale or transfer
of concessions interests.
FINDING AND RECOMMENDATIONS
CONCESSION CONTRACTING ACTIVITIES
The National Park Service did not fully comply with Federal law
or Park Service regulations or ensure that it obtained a fair
return from all concessioners operating in the national park
system. Specifically, the Park Service did not ensure that
expired concession agreements were reissued in a timely manner,
franchise fees were periodically adjusted, and special accounts
were established and used properly. Also, the Park Service did
not comply with guidance on determining building use fees or
determine whether concessioners should pay for their employees'
use of park housing. Park Service guidance, including the
Concessions Management Guidelines, NPS-48, and guidance issued by
the Park Service's Associate Director for Operations limit the
length of time a concession contract can be extended, and the
Concessions Policy Act (Public Law 89-249) and Park Service
guidance require that franchise fees be reconsidered "at least
every five years." Also, Park Service guidance requires the
establishment of special accounts on the basis of the costs of
planned projects that are to be financed with account funds and
the determination of a use fee based on the fair value of park
facilities that are assigned to concessioners. The deficiencies
occurred because the Park Service had not issued specific
guidance to ensure that designated responsibilities for
concession contracting were performed or completed in a timely
manner, had not established clear lines of authority, and had
inadequate internal controls to monitor compliance with law and
regulations. As a result, Park Service concessioners continued
to operate under expired concession agreements that contained
provisions which were not advantageous to the Park Service, the
Government lost or delayed the opportunity to receive additional
revenues, and the Park Service may not have received a fair
return from concessioners' special accounts or from their use of
park facilities.
Director's Approval
Special Directive 95-9, "Revised Delegation of Authority for
Concession Contracting," assigned responsibility for most
concession contracting functions to field-level officials.
However, the Directive required the Director's approval for (1)
prospectuses for concession contracts that had expected annual
gross receipts of $500,000 or more, (2) proposed amendments to
existing contracts that reduced the Government's return, and (3)
all franchise fee determinations and reconsiderations. In
addition, the Directive stated that the Director or his designee
must approve all sales and transfers of concession
authorizations.
We found that the Park Service had not implemented the
Directive's requirement that certain concession contracting
actions should receive the Director's approval. Specifically,
the Director did not approve prospectuses for all 7 contracts
reviewed that had expected annual gross receipts of $500,000 or
more, the 2 sales or transfers of concession authorizations
reviewed, and all 19 franchise fee determinations and 2 other fee
adjustments reviewed. Because we identified no proposed
amendments to existing contracts that reduced the Government's
return, we could not determine whether the Director had approved
such transactions.
According to the Concessions Program Manager, the Director had
not approved the concession contracting actions in accordance
with the Directive's requirements because the approval authority
had been delegated to the Concessions Management Division and the
Concessions Program Center. After completion of our audit
fieldwork, the Director, in February 1999, issued the memorandum
"Delegation of Approval Authority, Concession Contracts and
Permits,"which delegated to the Associate Director, Park
Operations and Education, authority to approve the Directive's
listed contracting actions "except for those concession
operations where gross receipts are expected to exceed
$10,000,000 annually."
Contract Reissuance and Extension
The Park Service's Concessions Management Guideline (NPS-48,
Chapter 10) and memoranda issued by the Associate Director for
Operations provide guidance on concession contract issuance and
authorize two methods for extending the contract performance
period: issuance of interim letters of authorization or issuance
of contract amendments. NPS-48, issued in January 1986, states
that interim letters of authorization were to be used for
"emergency situations only and should not be relied upon as a
standard method of operation" and that extensions "normally" were
of a "limited duration." NPS-48 further states that "if a 1 or
2-year extension" would not allow adequate time "to fully effect
a new contract before the proposed extension expires . . . the
park and region should consider issuing a 5-year contract to
ensure that further extensions will not be necessary." In fiscal
year 1995, the Associate Director for Operations issued guidance
stating that after fiscal year 1995, interim letters of
authorization could only be "approved on a case-by-case basis by
the Washington Concessions Division." In a February1996
memorandum, the Associate Director further stated that concession
contract extensions could be issued for 1 or 2 years but that
3-year extensions should be "reserved for unusual circumstances"
and that extensions of more than 3 years "may not be issued."
However, we found that Park Service personnel did not fully
comply with this guidance. Specifically, as of September 30,
1997, 47 contracts and 98 permits (about 23 percent of all
agreements) had been in an expired status for more than the
maximum authorized 3-year period for extensions. On average,
these contracts and permits had been extended for about 6.2 years
and 5.1 years, respectively. In extending the performance
periods, the Park Service often used letters of authorization for
lengthy periods, and in some cases, it did not prepare an
authorization to extend the performance period. For example, we
identified six expired agreements for which no extensions, either
letters of authorization or amendments, had been prepared for
periods of 6 to 50 months.
According to Special Directive 95-9, "Revised Delegations of
Authority for Concession Contracting," park superintendents and
regional directors are "accountable for proper management of the
concession program under his or her authority" and "compliance
with program [concession contracting] standards and results
achieved will be taken into consideration in the course of annual
performance reviews." To determine whether this directive had
been implemented and to obtain information on the causes for
delays in the reissuance of agreements and the lengthy extensions
of performance periods, we interviewed concessions specialists in
the parks, regional and support offices, and the Concessions
Program Office; park superintendents; and regional office
directors.
Park and regional officials attributed delays in processing
concession agreements primarily to the "confusion" resulting from
a restructuring of the Park Service that occurred after a
November 1994 "Restructuring Plan for the National Park Service"
was implemented.[5] Even though the Park Service had issued
guidance on the assignment of responsibility, including Special
Directive 95-9 and a March 1997 memorandum from the Concessions
Program Manager that described the concessions support services
that were provided by personnel at the Concessions Management
Division and at the Concessions Program Center, officials at all
nine parks interviewed said that the reorganization had created
confusion. For example, one official said that he was uncertain
as to "who does what," and another official said that it was
unclear "who works for whom."
We found that the Restructuring Plan did not provide clear and
detailed guidance on concession contracting. Although the Plan
said that a "comprehensive analysis" and a "detailed concessions
management plan" would be developed to implement the Plan, we
found that such an analysis or plan had not been issued. The
Concessions Program Manager did issue a February 1995 memorandum,
"Concession Program Strategy," as a "framework from which we can
organize our Concessions Program." However, the Strategy did not
provide detailed implementing instructions but stated that the
"necessary procedures and requirements will be implemented" and
that the "standards and procedures to assure quality products
(contracts, evaluations, rate approvals, etc.) must be further
developed and communicated." The Strategy also did not establish
a clear line of authority between those who were held accountable
for concession contracting actions (park superintendents and
regional directors) and those who provided concession contracting
technical support services (the Concessions Program Center and
regional support offices).
We also found that Park Service officials did not effectively
communicate concessions policy to field personnel, which
contributed to the backlog of contracting actions. For example,
in October 1991, the then-Secretary of the Interior issued the
memorandum "Concessions Management Reforms," which imposed
"temporary measures" to "refrain from entering into new long term
concessions agreements or renewing existing agreements for
extended periods" pending review of proposed concessions
management reforms. Park and regional officials referred to
these measures as a "moratorium" and stated that they had never
received formal notification that the restrictions on contracting
had been lifted. They also attributed delays in processing
agreements to proposed legislation to reform the concessions
program and the frequent changes in concession contracting
policies and practices that had been made in response to the
anticipated legislative reforms.
We also found that the Park Service had not implemented
management controls to ensure compliance with Park Service
regulations or Federal law and timely reissuance of agreements.
For example, although Special Directive 95-9 stated that
concessions contracting would be taken "into consideration"
during park superintendents' and regional directors' annual
performance reviews, we found that the superintendents' and
regional directors' performance standards contained no critical
elements related to their concession contracting duties. Also,
park and regional management said that they had not received or
issued any guidance or directives establishing milestones or
schedules for the completion of contracting actions. We also
found no indication that park or regional officials had taken
actions to curtail excessive use of interim letters of
authorization and amendments to extend the performance periods or
to conduct internal control reviews of the parks' concession
contracting programs. Moreover, the Park Service's Annual
Performance Plan for fiscal year 1999 did not contain goals for
processing concession contracting actions.
We concluded that by not reissuing agreements in a more timely
manner, the Park Service delayed the opportunity to obtain more
favorable terms and conditions for the Government. Specifically,
based on our analysis of the 24 agreements that had been reissued
during the scope of our audit and of the 12 agreements that had
been in an expired status for 5 or more years as of September 30,
1997, we found that reissued agreements contained provisions
which were more favorable to the Government, such as a higher
financial return, the reduction of possessory interest over the
life of a contract, an extended period for the reconsideration of
fees, greater utility and maintenance cost reimbursements, and
the elimination of preferential rights, as described in the
paragraphs that follow.
Financial Compensation. For 10 of the 12 agreements that had
expired and had not been reissued, there was no record that the
franchise fees had been reconsidered or adjusted during the past
5 years. For example, one contract that expired in 1990 had no
record of a fee reconsideration since 1970, when the contract was
issued. Under the existing contract, the concessioner pays a
franchise fee of 1.5 percent of gross receipts.
Ten of the 24 reissued agreements reviewed provided better
returns to the Government, with some franchise fees increasing
significantly over prior levels (in two cases, the rates
increased by 100 percent or more). For example, in one reissued
contract, compensation to the Government increased from a
building use fee of $200 a year to a payment of 1 percent of
gross receipts and $7,620 a year into a special account, an
investment of $1,362,000 in an improvement program, and payment
of a franchise fee of $2,400 a year. The 14 other reissued
agreements either had the same return to the Government or the
fee structure had changed, and we could not determine the effect
of the rate change on the Government's return.
Fee Reconsideration Period. Eleven of the 12 expired agreements
provided a 60-day period for fee reconsideration, and the
remaining agreement provided a 90-day reconsideration period.
The reissued agreements contained provisions that provided the
Park Service a 180-day period to reconsider fees. A longer
reconsideration period, in our opinion, will provide the Park
Service with additional time to prepare more comprehensive
financial analyses and to engage in negotiations for fee
adjustments.
Utility Cost Reimbursement. Six expired contracts did not
require the concessioner to fully reimburse the Government for
the cost of utility services provided by the Park Service.
Two agreements that previously had provisions for the
reimbursement of utility services at a "reasonable" rate were
reissued with provisions for the Park Service to be fully
reimbursed for its cost of providing the service. Park Service
guidance requires concessioners to pay fully for the cost of Park
Service-provided utility services.
Maintenance. One contract that expired in 1991 (and had not
been reissued) required the Park Service to maintain the exterior
of the building used by the concessioner; install, repair, and
replace heating, plumbing, and electrical systems; provide road
surfacing; clear water and drainage lines to the building; and
install, repair, and replace pilings and bulkheads at a dock area
used by the concessioner. Another expired contract required the
Park Service to assume responsibility for maintenance work on
Government facilities assigned to the concessioner if the repair
cost was more than $300.
Three agreements that previously did not assign maintenance
responsibilities to concessioners were reissued with provisions
which required the concessioners to maintain all facilities used
in their operations. Another agreement, which previously assigned
the concessioner responsibility only for maintaining its own
facilities, was reissued with a provision that required the
concessioner to maintain both concessioner and Government
facilities.
Preferential Rights Nine expired agreements granted the
concessioners preferential rights to all additional commercial
opportunities within the general area of operation.
None of the reissued agreements granted concessioners
preferential rights to renewal or to additional commercial
opportunities within the general area of operation. The Code of
Federal Regulations (36 CFR 51, "Concession Contracts and
Permits") states that restricting preferential rights "would
enhance competition by limiting the availability of the
anti-competitive preferential right to additional services."
The potential benefits of reissuing agreements in a more timely
manner is further illustrated by one contract that was in an
expired status for 10 1/2 years as of September 30, 1997, and
that was reissued in January 1998 to the same concessioner.
Although the original 1975 contract established a franchise fee
of 3 percent of gross receipts (which remained in effect until
contract reissuance), the reissued contract established a
franchise fee payment of 11 percent. If, upon expiration, the
contract had been reissued with the higher fee, the Government
would have received additional franchise fees of $79,119 in 1996
and additional fees of $83,452 in 1997.
Fee Reconsiderations/Fee Determinations
To establish a recommended return from a concessions operator,
the Park Service performs fee determinations. These financial
analyses entail a review of a concessioner's financial
operations, typically for a 5-year period. The recommended rates
usually are based on a return that enables the concessioner to
operate at a level of profitability within the median range of
profitability of comparable businesses, as measured by the return
on equity, assets, and revenues. Fee determinations are
performed to establish the fees in new or reissued contracts and
to negotiate fee adjustments during the fee reconsideration
process.
Of the 19 fee determinations that were performed during fiscal
years 1996 and 1997, we found that the Park Service complied with
its internal procedures for performing fee determinations and
that it computed recommended fees on the basis of "the
opportunity for net profit in relation to both gross receipts and
capital invested," as required by the Concessions Policy Act. In
13 of 19 cases, recommended fees were computed at amounts that
enabled the concessioners to earn a return on equity, gross
receipts, and assets equivalent to industry averages. However,
in four cases, the recommended rates provided a higher than
industry average return, and in two cases, the recommended rates
provided a lower than industry average return.
The Park Service, however, did not periodically reconsider
franchise fees at least every 5 years, as required by the
Concessions Policy Act. We identified 56 agreements that were
due for a periodic fee reconsideration during fiscal years 1996
and 1997 and found that only 8 fee determinations were performed
for a reconsideration of the fees of the existing concessioners
and that Park Service officials negotiated fee adjustments for 2
other agreements. As such, about 82 percent (46 of 56) of the
required, periodic franchise fee reconsiderations were not
performed.
Of the 10 agreements that had reconsidered fees in fiscal years
1996 and 1997, fee adjustments were recommended in 8 cases and no
fee adjustments were recommended in 2 cases. The Park Service
implemented six of the eight recommended fee adjustments. It did
not implement one fee adjustment, which would have increased fees
by 67 percent, because a natural disaster at the park might have
an adverse effect on the concessioner's business, according to a
park official. The park, however, had not prepared an analysis
of the adverse effect to justify continued use of the existing
rate. In the other case in which a 50 percent increase in fees
was recommended, a park official said that the park, having not
received a copy of the fee determination, was unaware that the
financial analysis had been performed.
We found that the Park Service had not established a clear line
of authority to ensure that fees were periodically reconsidered.
A memorandum issued in March 1997 by the Concessions Program
Manager assigned responsibility for performing the fee
determinations to the Concessions Program Center, but the
memorandum did not state whether the parks or the regions were
responsible for requesting these analyses. Consequently, park
officials expressed different opinions as to which organization
had responsibility for making the requests. Of the nine parks
and four regions contacted, officials at three parks and two
regions stated that they did not know whether the parks or the
regions should request the analyses, officials at three parks
stated that it was the parks' responsibility to request the
analyses, and officials at the remaining three parks and two
regions stated that it was the regions' responsibility to request
the fee determinations. Based on the conditions noted, we
concluded that the recommendation in our September 1994 audit
report "Concessions Management, National Park Service " (No.
94-I-1211) to issue and implement "a policy directive that
identifies the required actions, responsible parties, and time
frames needed to ensure that franchise fee reconsiderations are
expeditiously completed and implemented" had not been fully
implemented.
To evaluate the monetary impact of fee determinations, we
reviewed the 21 fee determinations/analyses that were performed
in fiscal years 1996 and 1997 for fee reconsiderations (8
agreements) and for contract reissuances or purposes such as the
proposed sale of a concessions interest (13 agreements).[6]
These fee determinations recommended fee adjustments for 17
agreements (8 of which were implemented) and no fee adjustments
for 4 agreements. Based on our comparison of the concessioners'
established fees and those fees recommended in the fee
determinations, we found that Government revenues would have
increased on average by more than 38 percent (based on an
analysis of 11 of the 17 agreements for which rate comparisons
could be made) if the recommended fee adjustments had been
implemented.
In one of the eight cases in which fee adjustments were
implemented, the Park Service imposed lower than recommended
fees. In this case, a fee determination led to a
recommendation that the concessioner should pay fees of 6.25
percent of gross receipts, consisting of a 3.50 percent franchise
fee and a 2.75 percent payment to a special account, and make an
investment of $1.5 million in a building improvement program.
Also, the concessioner's possessory interest was to be written
off over a 30-year period. After the fee determination, the Park
Service awarded a new contract to the concessioner in which it
required a franchise fee payment of 3.50 percent of gross
receipts, a special account contribution of 1 percent, and an
improvement program investment of $1.5 million. The new contract
also reduced the period of time during which the concessioner's
possessory interest would be written off to 15 years, thereby
increasing the Government's return by accelerating the write-off
of possessory interest. We estimated that the Government will
receive $1,118,660 less over the 15-year term of the contract as
a result of the Park Service's having negotiated a compensation
package that provides the Government with a 4.5 percent (3.5
percent franchise fee and 1 percent capital account contribution)
return rather than the recommended 6.25 percent return (adjusted
for the effect of the accelerated write-off of possessory
interest). The park's concessions management chief did not
provide any reasons for implementing the lower than recommended
fees.
We believe that the Government may have lost revenues by not
reissuing agreements in a timely manner and by not reconsidering
the franchise fees of existing concessioners at least every 5
years, as required by law. An independent accounting firm noted
in its October 1996 report "National Park Service Franchise Fee
and AFR [Annual Financial Report] Review" that "if fees are never
reconsidered . . . there is a considerable potential loss" for
the Park Service. For example, the Government would have earned
additional revenues of about $116,600 in 1996 and $116,100 in
1997 had recommended rate increases been implemented on seven of
the nine contracts (we could not compare rates in two cases) that
had unimplemented recommended rate increases.
Special Accounts
The Park Service's "Concession Improvement Account Procedures,"
issued in August 1995, contains procedures for the establishment
of special accounts, stating that "when an improvement account is
prepared, the park must have a list of proposed projects, upon
which to justify the amount of the account (as a percentage of
gross receipts)." The "Procedures" also states that the
concession contract and maintenance plan should "provide
direction about the Concessioner's responsibility to maintain and
repair facilities" and that a special account "is not intended to
absorb such costs or to serve as an alternative to an active
maintenance and repair program."
Eight of the sampled 36 agreements (24 reissued and 12 expired
agreements) established special accounts after issuance of the
August 1995 guidance. For three of these agreements, we found no
record that the Park Service determined the estimated costs of
projects in establishing one or more of the concessioners'
special accounts. For example, Park Service officials did not
provide any documentation to show that a project listing with
estimated project costs had been prepared for a special account
that required the concessioner to deposit 1 percent of gross
receipts (about $15,000 a month, according to the park's
concessions chief) into the account. We also found no record
that the Park Service determined project costs in establishing
the amount to be deposited into two special accounts (one of
which was funded with 7 percent of gross receipts and the other
with a $9,792 annual payment). Another contract established
two special accounts, one of which provided funding of
about $1.4 million based on the estimated costs of specific
projects ($375,000 of which was for "yet-to-be identified
improvements"). However, the amount of payment to the other
account, 1 percent of gross receipts and $7,620 annually, was not
supported with a list of projects and estimated project costs.
We also found that the projects for one reissued contract
inappropriately included maintenance work that was listed in the
concessioner's maintenance plan such as painting and repainting
spaces in a parking lot (the concessioner operated a parking
lot); removing roots, leaves, and pine needles to provide for
proper drainage; and purchasing a tractor for "regularly
recurring maintenance of lawn, curbside and wooded areas."
According to the park's concessions specialist, maintenance work
was included as special account projects because the park was
inexperienced in preparing project listings and there was "a fine
line" between "extraordinary maintenance expenses" and expenses
that qualified for special account financing.
We believe that if the provision for special account
contributions is not based on projects and project cost estimates
which are identified at contract issuance, the Park Service is at
risk of special account funds being spent on lower priority or
unneeded projects or being used to subsidize concessioners'
operations. Also, we believe that the use of special account
funds to finance concessioners' routine operating and maintenance
costs does not represent a return to the Government and should
not be reported as such.[7] Although we identified only one
account that was established partially to pay maintenance
expenses, the "National Park Service Franchise Fee and AFR
[Annual Financial Report] Review" stated that "funds for special
accounts [were] not always used for improvements but sometimes
for general maintenance-type expenses."
Government Facilities Used by Concessioners
The Concessions Policy Act requires concessioners to pay
compensation to the Government for the "probable value to the
concessioner of the privileges granted by the particular contract
or permit involved" and that consideration of revenue to the
Government should be "subordinate to the objectives of protecting
and preserving the areas and of providing adequate and
appropriate services for visitors at reasonable rates." Also,
NPS-48, Chapter 24, requires the Park Service to determine the
fair value of buildings assigned to concessioners, and Office of
Management and Budget Circular A-45, "Rental and Construction of
Government Quarters," provides guidance on fees for the use of
Government housing.
Building Use Fees. Chapter 24 of NPS-48 states that for
facilities assigned to concessioners, the Park Service should
establish a building use fee that is based on the fair value
return to the Government as determined in accordance with
acceptable industry practices. This guidance further states that
fee adjustments can be made taking into consideration factors
regarding reasonable profit as stated in the Concessions Policy
Act but requires that documentation (including the appraisal of
the property and support for any adjustments) be maintained. In
December 1995, the Concessions Management Division issued a
memorandum providing guidance on computing building use fees.
The Park Service, however, generally did not determine the value
of Government facilities assigned to concessioners. Of the 24
agreements issued in fiscal years 1996 and 1997 that we reviewed,
10 agreements provided concessioners with Government facilities
that were subject to a building use fee.[8] However, we found
only one case in which a building use fee had been computed based
on the Park Service's 1995 procedures. According to Park Service
officials, building use fees were not computed as required for
nine agreements for the following reasons: in four cases, fees
were determined before the guidance was issued; in four other
cases, the concessions operations were marginally profitable and
the concessioners were unable to pay a fee based on the building
valuation; and in the remaining case, no explanation was
provided.
We recognize that the Park Service considers the total return to
the Government in establishing concessions fees and rates and
that the process of computing a building use fee might not result
in additional compensation to the Government. However, we
believe that the Park Service would be able to make better
decisions on the economic feasibility of a concessions operation
and on the best use of park facilities by determining the value
of Government property assigned to concessioners.
Employee Housing. Office of Management and Budget Circular A-45,
"Rental and Construction of Government Quarters," establishes
policies and administrative guidance regarding "Federally-owned
housing (exclusive of military barracks) for civilian and
military personnel, as well as for employees of Government
contractors, whether provided on a rental basis or free of
charge." The Circular contains standards for payments for the use
of Government quarters, stating that (1) the rental rates should
be based on their "reasonable value . . . to the employee. . . in
the circumstances under which the quarters are provided," (2) the
rental amount should not "serve as an inducement in the
recruitment or retention of employees," and (3) the rental rates
should be fair and consistent. According to the Park Service
official responsible for employee housing, the Park Service
charges rent to all employees, contractors, and cooperators who
obtain park housing directly from the Park Service.
In 7 of the 36 agreements reviewed, we found that Government
housing was assigned to concessioners. However, none of the
agreements contained provisions requiring concessioners to pay
the Government rent for employee housing,[9] and there was no
Park Service official responsible for determining whether
concessioners should pay rent for the use of Government housing.
For example, the Director of the Concessions Management Division
stated that Park Service housing officials should establish
housing rental rates, while the Park Service official who was
responsible for employee housing said that the Concessions
Management Division should establish rental rates for
concessioner housing. The Department of the Interior's Quarters
Officer said that the payment of rent for the use of Government
housing by concessioners' employees is a "legal issue that needs
to be resolved." According to this official, the Park Service,
although it does not have authority to charge rent to
concessioners' employees, does have the authority to charge
concessioners a fee for the use of facilities that house their
employees.
We believe that concession contracts do not protect the
Government's interest with regard to provisions for concessioner
use of Government housing. Of seven concessioners that were
assigned Government housing for their employees, we identified
four concessioners that received reimbursements from their
employees for housing or housing-related expenses. These
reimbursements were excluded from the revenue base on which
franchise fees were computed, as provided under Park Service
policy. For example:
- One concession contract provided buildings (referred to as
Buildings C-1 through C-15 in the concession contract) for
housing concessioner employees. This concessioner, in 1997,
reported reimbursements of $3,254 from employees for meals,
lodging, and transportation.
- Two other concessioners filed financial reports in 1997 that
showed employee reimbursements for meals, lodging, and
transportation totaling $6,481.
- Another concessioner received reimbursements of $40 a month
from employees for utility costs associated with the employees'
use of Government housing.
We believe that the Park Service should determine whether
concessioners are or should be subject to the same requirement as
Park Service employees, contractors, and cooperators who obtain
Government housing directly from the Park Service and are
required to pay rent at amounts that do not "serve as an
inducement to recruit or retain employees." We estimated that
the Government would have received additional revenues of about
$3.8 million in fiscal year 1998, based on an average monthly
rent of $106.84 for each of these employees, if it had charged
fees for housing that was provided to almost 4,000 concessioner
employees who used 979 Park Service housing units (based on
September 1998 data supplied by the Park Service).[10] While we
recognize that concessioners are required to maintain the housing
and, in some cases, pay for capital improvements to the property,
we believe that the Park Service should determine the rental
value of housing assigned to concessioners and, based on
comparable rents charged to other users of park housing, ensure
that the Government receives equitable compensation for the use
of the housing. However, there may be legal issues involved in
assessing a fee for Government facilities that are assigned to
concessioners and used to house concessioners and/or
concessioners' employees. As such, we believe that the Park
Service should seek a Solicitor's opinion as to whether the Park
Service is authorized to charge concessioners a rental fee for
their employees' use of Government quarters.
Recommendations
We recommend that the Director, National Park Service:
1. Ensure compliance with the February 9, 1999, revised
provisions of Special Directive 95-9 which require that the
specified concession contracting actions be approved by the
Associate Director, Park Operations and Education, or by the
Director or the Deputy Director.
2. Assign, to a senior-level management official such as the
Deputy Director, the authority to ensure that park
superintendents and regional directors successfully perform their
designated concession contracting responsibilities.
3. Include, for officials involved in the concession contracting
process, a critical element for the successful completion of
assigned concession contracting duties in their annual
performance standards.
4. Include in the National Park Service's Annual Performance
Plan specific, quantifiable, and appropriate measures for the
concession contracting program activity and develop and implement
controls to ensure that concession contracting accomplishments
included in the Performance Plan are reported accurately.
5. Issue and implement procedures to ensure that clear lines of
authority, responsibility, and accountability are established for
personnel, whether under contract or in-house, who provide
technical support for concession contracting.
6. Issue guidance and establish controls to ensure that
franchise fees are periodically reconsidered, as required by the
law in effect at the date of contract or permit issuance, and
that recommended fee adjustments are implemented unless
deviations are fully justified and documented.
7. Establish controls to ensure that the amounts to be paid into
concessioners' special accounts are supported with documentation
which lists the specific projects and project costs that are to
be funded from the accounts and that projects identified for
special account funding are capital improvements and not
maintenance work.
8. Ensure that building use fees are computed during the fee
determination process for each Government facility used by
concessioners and that controls are implemented which provide
assurance that building use fees are considered in evaluating the
feasibility of concessions operations.
9. Request a Solicitor's opinion on whether the Park Service is
authorized to charge a rental fee for Government quarters
assigned to concessioners for use by concessioners' employees and
whether the fee should be computed in accordance with Office of
Management and Budget Circular A-45. If such a fee is
authorized, policies and procedures should be established to
implement a rental charge for concessioner use of Government
quarters.
National Park Service Response and Office of Inspector General
Reply
In the May 27, 1999, response (Appendix 4) to the draft report,
from the Director, National Park Service, the Park Service
indicated concurrence with Recommendations 1, 5, 6, 7, 8, and 9
and said that Recommendations 2, 3, and 4 were "under
consideration." Based on the response, we consider
Recommendations 5 and 7 resolved and implemented. Also based
on the response, we request that the Park Service reconsider its
responses to Recommendations 1, 2, 3, 4, 6, and 8, which are
unresolved, and provide additional information for Recommendation
9 (see Appendix 5).
Recommendation 1. Concurrence indicated.
National Park Service Response. The Park Service stated that the
recommendation had "been adopted, as evidenced by issuance of the
February 9, 1999, memorandum." It also said that reviews of
contracting actions conducted by the Concession Program Center
and Washington Office were "summarized and presented to the
Associate Director, Park Operations and Education and/or the
Director, as appropriate, for final determinations."
Office of Inspector General Reply. The Park Service did not
indicate how it would ensure compliance with its February 9,
1999, memorandum, which assigned to the Associate Director, Park
Operations and Education, approval authority for certain
concession contracting actions and reserved the approval
authority for concession operations "where gross receipts are
expected to exceed $10,000,000 annually" to the Director. Park
Service personnel did not comply with the prior guidance (Special
Directive 95-9), which required the Director's approval of
certain concession contracting actions, and the Park Service, in
its response, did not state whether additional controls would be
implemented to ensure that its personnel comply with the newly
revised guidance on approval authorities. During our audit, we
found no indication that the Concession Program Center or the
Washington Office conducted Servicewide reviews of contracting
actions. The Park Service is requested to provide information on
the actions it plans to take to ensure that Park Service
personnel obtain the appropriate approval for concession
contracting actions, in accordance with its February 1999
"Delegation of Approval Authority, Concession Contracts and
Permits."
Recommendations 2, 3, and 4. Concurrence/nonconcurrence not
indicated.
National Park Service Response. The Park Service said that these
three recommendations were "under consideration, and a final
decision should be made within the next few weeks."
Office of Inspector General Reply. The Park Service is requested
to provide information on the controls (such as those described
in Recommendations 2, 3, and 4) it plans to implement to ensure
that concession contracting actions are conducted in accordance
with applicable policies and procedures.
Recommendation 6. Concurrence indicated.
National Park Service Response. The Park Service said that it had
issued the guidance and that it had provided our office a copy of
the guidance.
Office of Inspector General Reply. In our report, we stated that
guidance had been issued on franchise fee reconsiderations for
contracts that were issued under Public Law 89-249, which was
repealed in November 1998. However, we found that Park Service
personnel had not complied with the guidance. At the conclusion
of our fieldwork, the Park Service had not issued new guidance on
fee reconsiderations under the new concession legislation (Public
Law 105-91), which changed the conditions under which fees could
be reconsidered. The Park Service is requested to provide
information on the actions it plans to take to ensure that fee
reconsiderations are conducted in accordance with the concession
program legislation in effect at contract issuance.
Recommendation 8. Concurrence indicated.
National Park Service Response. The Park Service said that
"[b]uilding use fees will be computed as part of the fee
determination process." It also said that the requirement for
building use fee computation would be "incorporated in a
forthcoming staff manual that will be issued after regulations
and management policies have been adopted."
Office of Inspector General Reply. Although the Park Service
indicated concurrence with the recommendation, it did not provide
information on the actions it plans to take to ensure that
building use fees are computed and considered in determining fees
and evaluating the feasibility of concessions operations.
Recommendation 9. Concurrence indicated.
National Park Service Response. The Park Service said that it
would "request a Solicitor's Opinion on whether we [the Park
Service] are authorized to charge a rental fee for Government
quarters assigned to concessioners for use by concessioners'
employees and whether the fee must be computed in accordance with
Office of Management and Budget Circular A-45."
Office of Inspector General Reply. The Park Service is requested
to provide a date by which it will request a Solicitor's opinion
on charging concessioners a rental fee for the use of
Government-assigned quarters and the title of the official who
will be responsible for requesting the opinion.
Additional Comments on Finding
The Park Service stated that the report did not recognize its
"many significant accomplishments." The Park Service, in
providing support for this statement, said that it had reduced
its backlog of expired contracts and permits from about 95
percent in 1995 to 28 percent by November 1998. It also said
that it had developed a detailed concession contracting training
program and had offered "numerous training sessions" to
concessions personnel during 1997 and 1998.
Our audit scope generally covered concession contracting
activities that occurred in fiscal years 1996 and 1997;
therefore, we cannot comment on whether the Park Service reduced
its backlog of expired contracts and permits by 67 percent during
the 4-year period cited, fiscal year 1995 through November 1998.
Also, based on discussions with Park Service concessions
personnel, we believe that a reduction in the backlog may not
necessarily have resulted in commensurate benefits to the
Government. For example, in an interview, a Southeast Regional
official initially said that the Region had reissued 29 expired
contracts in fiscal year 1998. In a later discussion, another
Regional official said that although the Park Service had
attempted to reissue 29 contracts in fiscal year 1998, it had
issued 2-year extensions for 26 expired contracts and had not
negotiated extensions for 3 other expired contracts. The
official further stated that the extensions contained updated
contract language but did not contain changed terms and
conditions for contractor performance or changes in the amount of
compensation paid to the Government (such as a reconsideration of
the franchise fees). Although the backlog of expired contracts
was reduced, these actions were merely extensions of existing
contracts without reconsideration of the contracts' terms and
conditions. Regarding the Park Service's comments on its training
program, we did not review training during the audit because
concessions personnel did not indicate that they were not
sufficiently skilled or trained in concession contracting
procedures.
**FOOTNOTES**
[5]:The Plan reduced the Park Service's 10 regional offices to 7
field directorates with support offices. In February 1997, the
field directorates were redesignated regional offices.
[6]:In fiscal years 1996 and 1997, the Park Service reconsidered
the fees for 10 agreements. However, two of the fee
reconsiderations were based on fee determinations that had been
performed in prior years. Therefore, we excluded these fee
determinations (one recommended a fee increase from 2.5 percent
to 3.0 percent, and the other recommended a fee increase from 1.5
percent to 9.0 percent) from our analysis.
[7]:According to the Park Service, payments to special accounts
in fiscal year 1997 (the most recent data available) were about
$26.2 million and franchise fee payments were about $17.1
million. In its Annual Performance Plan for fiscal year 1999,
the Park Service stated that its average return for park
concession contracts was 6.6 percent of gross concessioners'
revenues in 1997 and that it planned to increase the return to 7
percent in fiscal year 1998 and to 8 percent by September 30,
2002.
[8]:Two other agreements assigned Government facilities to
concessioners. One agreement allowed a concessioner to use a
Government dock (for which a use fee was charged), and another
agreement assigned a Government building to a state agency
concessioner that was not required to pay building use fees.
[9]:All seven agreements that provided for concessioner use of
Government housing had provisions for the concessioners to pay
building use fees and/or to make special account payments. These
payments, however, were not based on a per employee fee for the
use of Government housing.
[10]:The average monthly housing rate was based on dormitory
rental rates established by the Bureau of Reclamation, which is
responsible for setting Park Service housing rates, in surveys
conducted at eight parks in fiscal years 1996 and 1997. The
total amount of estimated additional revenues was computed on the
basis of each employee residing in Park Service housing for a
9-month period each year.
APPENDIX 1
CLASSIFICATION OF MONETARY AMOUNTS
Potential Additional
Description Revenues Lost Revenues
Implementation of recommended
fee increases (based on calendar
year 1996 and 1997 unimplemented
increased fees for seven contracts) $232,700
Delay in reissuance of an expired
agreement (based on additional
revenues that might have been
earned in fiscal years 1996 and 1997) $162,600
Concession fees at less than recommended amount 1,118,700
Rental fees from concessioner use
of Government housing 3,800,000
Total $4,032,700 $1,281,300
APPENDIX 2
OFFICES CONTACTED
OFFICE LOCATION
Concessions Program Division Washington, D.C.
Concession Program Center Lakewood, Colorado
Alaska Regional Office Anchorage, Alaska
Denali National Park Denali Park, Alaska
Glacier Bay National Park Gustavus, Alaska
Intermountain Regional Office Denver, Colorado
Dinosaur National Monument Dinosaur, Colorado
Canyonlands National Park Moab, Utah
Glacier National Park West Glacier, Montana
Glen Canyon National Recreation Area Page, Arizona
Grand Canyon National Park Grand Canyon, Arizona
Grand Teton National Park Moose, Wyoming
Rocky Mountain National Park Estes Park, Colorado
Yellowstone National Park Yellowstone, Wyoming
Zion National Park Springdale, Utah
Midwest Regional Office Omaha, Nebraska
Buffalo National River Harrison, Arkansas
Isle Royal National Park Houghton, Michigan
Jefferson National Expansion Memorial National Historic Site
St.Louis, Missouri
Sleeping Bear Dunes National Lakeshore Empire, Michigan
Voyageurs National Park International Falls, Minnesota
National Capitol Regional Office Washington, D.C.
Northeast Regional Office Philadelphia, Pennsylvania
Fort McHenry National Monument Baltimore, Maryland
Gateway National Recreation Area Brooklyn, New York
Gettysburg National Military Park Gettysburg, Pennsylvania
Pacific West Regional Office San Francisco, California
Death Valley National Park Death Valley, California
Golden Gate National Recreation Area San Francisco, California
Lake Mead National Recreation Area Boulder City, Nevada
Mount Rainier National Park Ashford, Washington
North Cascades National Park ComplexSedro Woolley, Washington
Olympic National Park Port Angeles, Washington
Point Reyes National Seashore Point Reyes, California
Whiskeytown-Shasta-Trinity National Recreation Area
Whiskeytown, California
Yosemite National Park Yosemite, California
Southeast Regional Office Atlanta, Georgia
Big South Fork National River and Recreation Area
Oneida, Tennessee
Cape Lookout National Seashore Harkers Island, North Carolina
Everglades National Park Homestead, Florida
Gulf Islands National Seashore Gulf Breeze, Florida
Virgin Islands National Park St. Thomas, Virgin Islands
APPENDIX 3
Page 1 of 3
PRIOR AUDIT COVERAGE
During the past 6 years, the Office of Inspector General has
issued seven audit reports and the General Accounting Office has
issued three reports related to National Park Service concession
contracting and management.
Office of Inspector General Reports
The Office of Inspector General has issued the following reports:
- The April 1998 report "Followup of Recommendations Concerning
Utility Rates Imposed by the National Park Service"(No. 98-I-406)
stated that the Park Service did not implement prior audit report
recommendations to (1) revise a directive to provide employees
with guidance on the recovery of utility system capital
investment costs; (2) recover fully all utility system
operational costs provided to non-Governmental users, including
concessioners; and (3) ensure that internal controls over the
collection and deposit of receipts for utility services are in
compliance with Park Service regulations. The report contained
six recommendations, all of which were considered resolved but
not implemented.
- The March 1998 report "Concessioner Improvement Accounts"
(No. 98-I-389) stated that the Park Service had not provided
clear, sufficient, and timely guidance to ensure that account
funds were used appropriately and that the Park Service allowed
concessioners to use these funds before procedures were issued.
Also, concessioners made improper deductions from recorded gross
receipts in determining the amounts required to be deposited into
improvement accounts. As a result, improvement account funds
were used or planned for (1) projects that did not directly
support concessions operations or that benefitted both the Park
Service and concessioners and would have been appropriate for
cost sharing ($17.5 million), (2) expenditures that related to
concessions operations which would not be considered proper uses
of the funds under the new procedures ($1.2 million), and (3)
capital projects for which the concessioner inappropriately was
granted possessory interest ($823,000). We also found that
additional funds of about $124,800 should have been deposited
into these accounts. The report contained three recommendations,
of which one was considered resolved and implemented and two
were considered unresolved.
- The March 1998 report "Followup of Maintenance Activities,
National Park Service" (No. 98-I-344) stated that the Park
Service did not fully implement three of eight recommendations in
the two prior audit reports "Maintenance Work Performed for
Non-Government Recipients, National Park Service," issued in
September 1991, and "Maintenance of the National Park System,
National Park Service," issued in February 1992. We found that
the Park Service had not taken sufficient actions to recover its
costs of maintaining facilities used by concessioners and other
non-Governmental entities and had "essentially" discontinued use
of its standardized maintenance management system. Three of the
report's four recommendations were considered unresolved, and one
was considered resolved and implemented.
APPENDIX 3
Page 2 of 3
- The June 1997 report "National Park Service Financial
Statements for Fiscal Years 1995 and 1996" (No. 97-I-936) stated
that the Park Service had not established a process to allow it
to collect, in a timely manner, reliable information on the
number of "special concession accounts" and their balances,
deposits, and disbursements to ensure that information in the
notes to its financial statements was complete and accurate. The
report contained one recommendation on this issue, which was
considered resolved and partially implemented.
- The February 1997 report "Oversight of Concessions Operations
and Fee Payments, Guest Services, Inc., and Rock Creek Park Horse
Centre, Inc." (No. 97-I-515) stated that the Park Service needed
to strengthen its oversight and to implement additional controls
to ensure that concessioners complied fully with Park Service
guidance (NPS-48) and with the terms and conditions of the
concession contracts. The report contained eight
recommendations, of which seven were considered resolved and
implemented and one was considered resolved but not implemented.
- The September 1994 report "Concessions Management, National
Park Service" (No. 94-I-1211) stated that the Park Service did
not reconsider franchise fees in a timely manner, undercharged
concessioners for the use of Government-owned facilities,
overcompensated a concessioner for its possessory interest, and
unnecessarily allowed concessioners to exclude certain revenues
from gross receipts. The report also stated that the Park
Service had not adequately monitored special accounts which
financed maintenance work and capital improvements. The report
contained 13 recommendations, of which 12 were considered
resolved and implemented and 1 was considered resolved but not
implemented.
- The May 1993 report "Compliance With the Federal Managers'
Financial Integrity Act by Selected Bureaus" (No. 93-I-1011)
stated that concession fees were not reconsidered in a timely
manner, concession contracts were extended without increasing
fees, concessioners were permitted to sell their concession
rights at inflated prices, models for pricing facility use
charges had not been developed, and concessioners' possessory
interests were compensated at amounts which were not based on the
value of the concessioners' possessory interests. The report
contained one recommendation on this issue, which was considered
resolved and implemented.
General Accounting Office Reports
The General Accounting Office has issued the following reports:
- The March 1998 report "Concession Reform Issues" (No.
GAO/T-RCED-98-122) stated that for concession agreements which
were either initiated or extended during fiscal year 1994,
concessioners in land management agencies paid the Government an
average of about 3.0 percent of their gross revenues (the Park
Service's average return was about 3.5 percent). In contrast,
according to the report, concessioners in nonland management
agencies paid fees of about 9.0 percent of their gross revenues.
The report contained no recommendations.
APPENDIX 3
Page 3 of 3
- The May 1996 report "Information on Special Account Funds at
Selected Park Units" (No. GAO/RCED-96-90) stated that Park
Service officials acknowledged that they did not have a system in
place to routinely or systematically collect information on
concessioners' special accounts but that a computerized tracking
system to monitor the accounts would be implemented. The report
contained no recommendations.
- The September 1993 report "Improvements Needed in Managing
Short-Term Concessioners" (No. GAO/RCED-93-177) stated that
nationwide, about 6,000 short-term agreements (of 5 years or
less) existed under which concessioners provide goods and
services to the public on Federal land managed by the National
Park Service, the U.S. Fish and Wildlife Service, the Bureau of
Land Management, and the U.S. Forest Service. The report stated
that the policies and procedures for administering short-term
agreements varied considerably among the four agencies in the
areas of annual overall performance evaluations, health and
safety inspections, and fees paid to the Government for the use
of its lands. In the report, the General Accounting Office
recommended that the four agencies develop and present to the
Congress a policy to achieve greater consistency and that the
Park Service reevaluate each concessioner operating under a
commercial-use license to determine whether the activities should
be authorized under a permit.
APPENDIX 5
STATUS OF AUDIT REPORT RECOMMENDATIONS
Finding/Recommendation
Reference
1, 2, 3, 4, 6,and 8
5 and 7
9
Status
Unresolved
mplemented
Management concurs; additional information needed.
Actions Required
Reconsider responses to the recommendations, and provide plans
for implementing corrective actions, including target dates and
titles of officials responsible for implementation.
No further response is required.
Provide a target date and title of the official responsible for
implementation.
ILLEGAL OR WASTEFUL ACTIVITIES SHOULD BE REPORTED
TO THE OFFICE OF INSPECTOR GENERAL BY:
Sending written documents to:
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U.S. Department of the Interior
Office of Inspector General
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Mail Stop 5341
Washington, D.C. 20240
Calling:
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(202) 208-5300
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Caribbean Region
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Arlington, Virginia 22209
Calling:
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U.S. Department of the Interior
Office of Inspector General
North Pacific Region
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Suite 807, PDN Building
Agana, Guam 96910
Calling:
(700) 550-7428 or
COMM 9-011-671-472-7279