United States Government Accountability Office GAO Report to Congressional Requesters June 2012 KACHEMAK BAY FERRY Federally Funded Ferry Was Constructed with Limited Oversight and Faces Future Operating Challenges GAO-12-559 June 2012 KACHEMAK BAY FERRY Federally Funded Ferry Was Constructed with Limited Oversight and Faces Future Operating Challenges Highlights of GAO-12-559, a report to congressional requesters Why GAO Did This Study What GAO Found In 2002, the Seldovia Village Tribe In examining the history of the Kachemak Bay ferry project, GAO found that the proposed building a year-round ferry Seldovia Village Tribe’s federally funded ferry differs significantly from its original that would serve several isolated proposal. In 2002, the tribe proposed a vehicle and passenger ferry with year- communities on the south shore of round service between Homer, Alaska, on the north shore of Kachemak Bay and Alaska's Kachemak Bay. Federal multiple southern ports, including the city of Seldovia. Federal funding was funding for a ferry was subsequently appropriated in fiscal years 2004, 2005, and 2006, from which about $8.5 million included in the Department of was provided to the tribe for a ferry. The state also provided $1.5 million. The Transportation’s appropriations, tribe subsequently built a ferry and dock facilities that cost about $8.8 million, but transferred to the Department of the the project was significantly more limited in scope and service than the original Interior, and then provided to the tribe proposal. Specifically, the ferry, known as the Kachemak Voyager began through agreements under the Indian Self-Determination and Education operating in May 2010, but it only provided passenger and light-freight service Assistance Act, as amended. The between Homer and Seldovia and only during the summer months. tribe’s ferry began operating in May Federal agencies provided funding and limited oversight but had no decision- 2010, amid community concerns about making role for the ferry project. After the Department of Transportation (DOT) significant changes in the ferry’s received the funds for the ferry in its fiscal years 2004, 2005, and 2006 annual design and operation from the original appropriations, it transferred these funds to the Department of the Interior proposal and its effect on existing (Interior). As a result of these transfers, DOT provided no oversight for the ferry private tour boat businesses. project. Interior provided the funding to the tribe through agreements under the GAO was asked to examine (1) the Indian Self-Determination and Education Assistance Act, as amended, that history of the Kachemak Bay ferry generally authorize tribes to use funds to plan and administer programs with little project; (2) the roles of federal involvement by the federal government. The tribe provided Interior with quarterly agencies in funding and overseeing the project status reports, but Interior did not provide guidance to the tribe in ferry project and associated dock response to changes in the project. Following a 2009 Inspector General projects; and (3) concerns and investigation, Interior developed new procedures to preclude certain challenges, if any, regarding the transportation projects like the tribe’s ferry from being funded through these continued operation of the ferry. GAO agreements in the future. DOT’s Federal Transit Administration (FTA) also analyzed documents and interviewed awarded the tribe two grants in 2010, totaling $675,000, and also provided federal agency officials and tribal and limited oversight over the grants, according to agency officials. community representatives. A number of concerns and challenges exist regarding future operations of the What GAO Recommends ferry and its financial sustainability. First, local private tour boat operators are GAO recommends that the concerned that competition from the ferry has and will continue to negatively Departments of the Interior and affect their businesses. In particular, they noted that, because of federal grants, Transportation collaborate to the ferry has been able to offer lower fares that the private operators cannot determine the disposition of sale match. Second, it is unlikely that the ferry will become profitable as expected by proceeds in the event the ferry is ever 2013, largely because of lower passenger volume and higher operating costs sold. Interior and Transportation than projected. Using actual passenger and cost data from 2010 and 2011, GAO agreed to implement GAO’s determined that losses will most likely continue to grow, which will make the ferry recommendation. The Seldovia Village financially unsustainable without further government subsidies. Third, FTA was Tribe did not comment on GAO’s concerned that the tribe had not complied with its grant requirements. The tribe recommendation but expressed a needed prior FTA approval before using the ferry for nonpublic transportation number of concerns which are activities, such as sightseeing, but did not obtain approval. The tribe took discussed more fully in the report. corrective actions. Finally, should the tribe choose to sell the ferry, it is unclear what statutory provisions govern the sale, and it is therefore uncertain whether a portion of the proceeds must be credited to the federal-aid highway fund or if the View GAO-12-559. For more information, contact Anu K. Mittal at (202) 512-3841 or awarding agency has a right to those proceeds. email@example.com. United States Government Accountability Office Contents Letter 1 Background 4 The Seldovia Village Tribe’s Federally Funded Ferry Differs Significantly from Its Original Proposal 10 Federal Agencies Provided Funding and Limited Oversight but Had No Decision-Making Role for the Ferry Project 19 Concerns and Challenges Exist Regarding Continued Ferry Operations 30 Conclusions 38 Recommendation for Executive Action 39 Agency and Third Party Comments and Our Evaluation 39 Appendix I GAO Legal Opinion on Department of Transportation—Homer- Halibut Cove-Jakolof Bay-Seldovia Ferry 44 Appendix II Comments from the Department of the Interior 50 Appendix III Comments from the Department of Transportation 52 Appendix IV Comments from the Seldovia Village Tribe 55 GAO Comments 77 Appendix V GAO Contact and Staff Acknowledgments 80 Tables Table 1: The Seldovia Village Tribe’s Kachemak Bay Ferry Project Expenditures for Planning and Construction, by Category, for 2005 to 2010 18 Table 2: Assumed and Actual Ferry Operating Parameters 33 Page i GAO-12-559 Kachemak Bay Ferry Figures Figure 1: State of Alaska, with Selected Cities and Highway System 5 Figure 2: Kachemak Bay and Surrounding Communities 7 Figure 3: Timeline of Key Events for the Kachemak Bay Ferry Project 11 Figure 4: The Kachemak Voyager 17 Figure 5: Timeline of Ferry Project Federal Appropriations and Grants, and Transfer of Funds to the Seldovia Village Tribe, by Fiscal Year 20 Figure 6: Extended and Direct Kachemak Bay Ferry Routes from Homer to Seldovia 31 Figure 7: Projected Kachemak Voyager Financial Performance and Reanalysis, 2010-2013 Operating Season 34 Abbreviations BIA Bureau of Indian Affairs DOT Department of Transportation FTA Federal Transit Administration This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately. Page ii GAO-12-559 Kachemak Bay Ferry United States Government Accountability Office Washington, DC 20548 June 11, 2012 The Honorable Don Young Chairman Subcommittee on Indian and Alaska Native Affairs Committee on Natural Resources House of Representatives The Honorable Lisa Murkowski United States Senate Alaska’s Kachemak Bay lies on the southwestern edge of the Kenai Peninsula, roughly 220 miles south of Anchorage by road. The city of Homer, located on the bay’s north shore, is the most populated community along Kachemak Bay, with roughly 5,000 residents. Situated at the end of Alaska’s state highway system, Homer is accessible by land, air, and water. In contrast, across the bay on the south shore are several smaller communities with a combined population of about 900, including the city of Seldovia, that can only be reached by air or water. Seldovia is home to one of Alaska’s federally recognized Native entities—the Seldovia Village Tribe. A commercial fishing village of roughly 250 people, Seldovia is also a summer home and tourist destination, with its population and number of visitors decreasing significantly outside of the summer months. Private air services and tour boats, as well as water taxis and private vessels, are the primary means of daily transportation between Homer and Seldovia and the other south shore communities. The Alaska Marine Highway System’s passenger, vehicle, and freight- carrying ferries also serve Homer and Seldovia but not on a daily basis. Frequency of service for all transportation options can be affected by weather and maintenance demands, particularly in the harsh winter months. The limited transportation options for the communities on the isolated southern shore of Kachemak Bay raised concerns among residents about the communities’ long-term sustainability and economic development. To address these concerns, in 2002 the tribe proposed a project to build a year-round, high-speed car and passenger ferry serving multiple communities in Alaska’s Kachemak Bay, with associated dock and road upgrades. Funding for a ferry that would serve four Kachemak Bay communities was included in the Department of Transportation’s (DOT) fiscal years 2004, 2005, and 2006 appropriations, which DOT transferred to the Department of the Interior. Interior subsequently provided about Page 1 GAO-12-559 Kachemak Bay Ferry $8.5 million of this funding to the tribe. In addition, the tribe received some funding for the ferry from the state of Alaska and additional federal funding from DOT’s Federal Transit Administration (FTA). The tribe’s ferry—the Kachemak Voyager—began operating in May 2010, amid community concerns about significant changes in the ferry’s design and operation from the original 2002 proposal and its effect on existing private tour boat businesses. In light of questions about the ferry project, you asked us to examine (1) the history of the Kachemak Bay ferry project; (2) the roles of federal agencies in funding and overseeing the ferry project and associated dock facility projects; and (3) concerns and challenges, if any, regarding the continued operation of the ferry. In addition, you asked our Office of the General Counsel to issue a legal opinion regarding appropriations enacted for a ferry. This legal opinion is provided in appendix I. To examine the history of the Kachemak Bay ferry project, we reviewed and analyzed ferry project proposal, planning, and construction documentation from local and tribal sources as well as from private tour boat operators, and we interviewed individuals with knowledge of the project. We reviewed and analyzed budget and expenditure documentation and interviewed tribal officials to determine how and when ferry project funding was spent, including for the Homer and Seldovia docks and ferry operations. We visited Homer and Seldovia, Alaska, to observe firsthand the ferry, ferry terminal, and docks. To examine the roles that federal agencies played in funding and overseeing the ferry project and associated dock projects, we reviewed appropriations and relevant documentation from DOT’s Federal Highway Administration and interviewed officials. We reviewed and analyzed project files and relevant guidance from Interior’s Bureau of Indian Affairs (BIA) and Office of Self- Governance and interviewed officials to determine the roles the agencies took in overseeing the project. We also interviewed officials from the U.S. Army Corps of Engineers and reviewed and analyzed documentation about their role in providing permits for the ferry dock projects. We reviewed and analyzed documentation and interviewed officials from FTA to determine the agency’s role in providing grant funding to and oversight of the Homer dock upgrade and ferry operations. We reviewed and analyzed reports from Interior’s Office of Inspector General to identify past concerns raised about oversight of the ferry project and how those issues were resolved. To examine any concerns and challenges regarding the ferry’s continued operation, we reviewed and analyzed documentation from federal, state, Page 2 GAO-12-559 Kachemak Bay Ferry local, and tribal sources and from private tour boat operators and interviewed officials and tribal representatives knowledgeable about current and planned ferry operations. We analyzed documentation of operations for the Kachemak Voyager and other boats serving Kachemak Bay to determine the ferry’s current status and concerns raised over its effect on already-existing services. We evaluated the extent to which the ferry was on course to becoming self-sustaining by reestimating the ferry’s financial projections for 2010 through 2013 from the tribe’s 2009 Feasibility Summary Report, using actual operating data from 2010 and 2011 provided by the tribe. For 2010 and 2011, we replaced estimated values with actual values for (1) the number of trips, (2) passenger count per trip, (3) fuel consumption, and (4) fuel costs. For all other parameters we analyzed, such as ticket prices, crew wages, or Homer terminal costs, we used the estimated values in the 2009 report. To develop projections for 2012 to 2013, we assumed that (1) the number of passengers would grow at the same rate as from 2010 to 2011, (2) the number of one-way trips per day would remain the same as in 2011, (3) fuel consumption per hour for the ferry would remain at the 2011 level, and (4) cost per gallon of fuel would grow at the same rate as from 2010 to 2011. We also assessed the tribe’s compliance with FTA’s grant requirements by reviewing and analyzing FTA grant documentation and reports submitted by the tribe and interviewing agency officials. We also gathered documentation and interviewed DOT officials about where the proceeds from a potential sale of the ferry should be credited and what amount should be credited if the ferry were deemed to be not self-sustaining and was sold by the tribe. We conducted this performance audit from July 2011 to June 2012 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Page 3 GAO-12-559 Kachemak Bay Ferry Alaska—encompassing 586,412 square miles—is the largest state in the Background union, one-fifth the size of the lower 48 contiguous states combined. Despite its size, Alaska is one of the least populated states, with only about 700,000 people, nearly half of whom live in the three largest cities of Anchorage, Fairbanks, and the capital of Juneau. The remainder of the population lives in smaller, often isolated communities scattered throughout the state, and access to these communities can be difficult, not just because of the state’s size but also because of its rugged terrain and harsh winter weather. As shown in figure 1, Alaska’s highway system, operated by the Alaska Department of Transportation and Public Facilities, connects some of the larger population centers by road, from Prudhoe Bay in the far north through Fairbanks and Anchorage to Homer on the Kenai Peninsula, where the highway ends on the north shore of Kachemak Bay. Page 4 GAO-12-559 Kachemak Bay Ferry Figure 1: State of Alaska, with Selected Cities and Highway System Page 5 GAO-12-559 Kachemak Bay Ferry As shown in figure 2, communities located on the south side of the bay— including Seldovia, Halibut Cove, Jakolof Bay, Nanwalek, and Port Graham—are accessible only by water or air; they are served largely by private boat and airplane transportation businesses. The Alaska Department of Transportation and Public Facilities operates the Alaska Marine Highway System, a fleet of 11 ships that transports passengers, vehicles, and freight to more than 30 ports along a 3,500 mile route from Bellingham, Washington, to Unalaska in the Aleutian chain of islands. One of the system’s ferries, the Tustumena, provides regularly scheduled direct route service between Homer and Seldovia, generally visiting Seldovia twice per week in the summer and once per week in the winter, when resident and tourist demand is lower. Severe weather, rough water conditions, and scheduled maintenance for the state ferry can also affect access to Seldovia during the winter months. Page 6 GAO-12-559 Kachemak Bay Ferry Figure 2: Kachemak Bay and Surrounding Communities Page 7 GAO-12-559 Kachemak Bay Ferry The city of Seldovia is home to the federally recognized Seldovia Village Tribe. Many of the tribe’s approximately 470 members live in Seldovia, surrounding lands, and nearby south shore communities, as well as in Homer across the bay. The tribe’s leadership and headquarters are located in Seldovia, and the tribe operates businesses and provides services to its members and the surrounding communities. Among other things, the tribe owns and operates (1) medical and dental centers in Seldovia and Homer, (2) a company that makes and sells local wild berry products, (3) a museum and visitor center, (4) a conference center in Seldovia, and (5) the Kachemak Voyager ferry. Pursuant to the Alaska Native Claims Settlement Act, the Seldovia Native Association, Inc., was incorporated under state law as a village corporation in 1972. 1 Under the Indian Self-Determination and Education Assistance Act, as amended, federally recognized Indian tribes can enter into self- determination contracts and self-governance compacts with the federal government to take over administration of certain federal programs previously administered by the federal government on their behalf. 2 Self- determination contracts under the act allow tribes to contract for the administration of programs for the benefit of Indians that would otherwise be managed by Interior’s BIA on their behalf. Having contracted a program, a tribe assumes responsibility for managing the program’s day- to-day operations, such as hiring program personnel, conducting program activities and delivering program services, and establishing and maintaining administrative and accounting systems. BIA representatives provide technical oversight to ensure that the tribe meets contract terms. Self-governance compacts under the act transfer to tribes the administration of programs for tribes and Indians administered by Interior and provide the tribes with some flexibility in program administration. The terms for administering programs under self-governance compacts are largely established in negotiations between the tribe and Interior’s Office of Self-Governance, but they generally allow for reduced oversight by Interior, even though the compacts are subject to the act’s requirements and implementing regulations. The Director of Interior’s Office of Self- 1 The Alaska Native Claims Settlement Act, enacted in December 1971, authorized Alaska Native villages to establish for-profit or nonprofit corporations, which were vehicles for distributing the settlement’s land and monetary benefits to Alaska Natives, who are shareholders in the corporations. Pub. L. No. 92-203. 85 Stat. 688 (1971), codified as amended at 43 U.S.C. §§ 1601-1629h. 2 Pub. L. No. 93-638 (1975), codified as amended at 25 U.S.C. §§ 450 to 458ddd-2. Page 8 GAO-12-559 Kachemak Bay Ferry Governance enters into self-governance compacts with tribes that have requested to do so by tribal resolution and that meet specific planning and financial management criteria. For both self-determination contracts and self-governance compacts, the Secretary of the Interior negotiates and enters into written annual funding agreements with the governing body of each participating tribe, which specifies the Interior program that the tribe will administer, the tribe’s and Interior’s obligations, and the funds being transferred to the tribe. Subject to the terms of the agreement and purpose for which the funds were appropriated, the tribes are also authorized to redesign programs, as well as to reprogram or reallocate funds provided under self-governance compacts and their annual funding agreements. In this report when we refer to the tribe’s self-determination contract or self-governance compact, we are referring to the contract or compact along with its associated annual funding agreements. BIA is responsible for implementing federal Indian policy and administering the federal trust responsibility for both American Indians and Alaska Natives. BIA assists tribes in various ways, such as providing social services; law enforcement; and developing and maintaining infrastructure, including transportation. BIA either provides services directly or provides transportation funding to tribes through self- determination contracts, self-governance compacts, or other agreements. BIA’s Division of Transportation and DOT’s Federal Highway Administration’s Federal Lands Highway Office jointly administer the Indian Reservation Roads Program, in accordance with an interagency agreement, to provide funding for tribes to plan, design, construct, and maintain transportation projects. The program’s definition of transportation facilities includes public roads, ferry routes, marine terminals, and transit facilities, but the program only includes one ferry operated by a tribe in eastern Washington under a self-determination contract. Under the program, tribes submit tribal transportation improvement programs or a priority list of tribal transportation projects to BIA, which BIA uses to develop the Indian Reservation Roads transportation improvement program. After DOT’s Federal Highway Administration approves the transportation improvement program, it is implemented by the tribes or BIA. DOT’s Tribal Transit Program, administered by FTA, also provides grants to tribes to construct and operate tribal transportation projects. If a planned project, such as Page 9 GAO-12-559 Kachemak Bay Ferry building or upgrading a dock, requires excavation in navigable waters of the United States, among other things, the tribe must obtain a River and Harbors Act section 10 permit from the U.S. Army Corps of Engineers. 3 According to historical proposal, planning, and construction documents, The Seldovia Village the ferry currently operated by the tribe—the Kachemak Voyager—differs Tribe’s Federally significantly from the tribe’s original proposal for a year-round vehicle, freight, and passenger ferry to serve Homer and several of the isolated Funded Ferry Differs communities along the south shore of Kachemak Bay. The ferry project Significantly from Its underwent significant changes from 2002 to 2009, as shown in figure 3, Original Proposal which resulted in construction of a seasonal ferry capable of transporting passengers and light freight and serving regularly scheduled routes to Homer and Seldovia, at a cost of about $8.8 million. 3 33 U.S.C. § 403. Page 10 GAO-12-559 Kachemak Bay Ferry Figure 3: Timeline of Key Events for the Kachemak Bay Ferry Project Page 11 GAO-12-559 Kachemak Bay Ferry The Tribe Initially To encourage economic development on the south side of Kachemak Proposed a Vehicle and Bay and provide greater access to Alaska’s state highway system in Passenger Ferry Serving Homer for south shore communities, after conducting community meetings to determine local needs, the tribe in 2002 began distributing a Multiple Ports Year-Round project summary to federal, state, and local officials and to residents. This summary included a plan for improving existing roads, constructing new roadways, and providing year-round ferry service to the south Kachemak Bay communities. The tribe-sponsored plan was to be implemented in multiple phases and included the following features: • Twenty-six and a half miles of road reconstruction and resurfacing and 1 mile of new road construction, providing vehicle access between isolated communities and to recreational opportunities in the Kachemak Bay State Wilderness. • Daily passenger and vehicle ferry service between Homer, Seldovia (via Jakolof Bay), and Halibut Cove (via Peterson Point). • New ferry docks at Jakolof Bay and Peterson Point. The tribe’s estimated cost for the project was $44 million: $32 million for the road improvements and $12 million for the ferry and dock improvements. In 2003 the tribe reported that the plan had wide public support and was recommended for implementation by Alaska state officials. Residents and local business owners we spoke with confirmed that they supported the plan to provide daily transportation of vehicles and freight across Kachemak Bay. Nevertheless, according to a former state legislator, although state officials had initially agreed to provide significant financial support to the project, that support did not materialize because of a change in administration. Consequently, village corporation officials told us, not enough funding was available to carry out the plan as originally envisioned. Page 12 GAO-12-559 Kachemak Bay Ferry With the initial project plan deemed prohibitively expensive, the tribe scaled down the original plan and offered an alternative proposal in 2003. 4 The revised proposal included the following features: • Daily passenger and vehicle ferry service between Homer, Halibut Cove (via Peterson Point), Jakolof Bay, Nanwalek, Port Graham, and Seldovia. • New ferry docks at Jakolof Bay and Halibut Cove. • Limited road access improvements. The tribe’s estimated cost for the scaled-down project was $14 million: $12 million for the ferry and $2 million for docks and associated road construction. Federal funding for a ferry project serving multiple ports in Kachemak Bay was first appropriated in fiscal year 2004, with additional funding appropriated in the following 2 fiscal years. The state also provided funding. This scaled-down project, however, did not have the same degree of support within the community as the original proposal. For example, according to a former state legislator, he did not support the revised project because it did not include the extensive road improvements of the original proposal, which he believed were vital to encouraging regional economic development. He told us that the road improvements were necessary to sustain Seldovia and the surrounding communities by connecting them to one another, and to the state highway system in Homer, by way of a vehicle-carrying ferry. Similarly, Seldovia city officials told us they were not informed of the tribe’s 2003 proposal until a few days before Congress passed the fiscal year 2004 appropriation for a ferry. They told us they notified their congressional representative that the city had not been consulted on the project. In response to the city officials’ concerns, the tribe and the village corporation—which the tribe had hired 4 There is some disagreement among stakeholders regarding when the ferry project was scaled down from its original plan. According to the tribe it did not scale down its original plan until 2005, concurrent with the award of the self-determination contract. However, Seldovia city officials provided us with an undated brochure that contained information on the scaled down proposal, which they said they received in late 2003, and this information was also provided to a member of the Alaska congressional delegation prior to congressional consideration of funding for planning and design of a Seldovia-Homer- Jakolof Bay-Halibut Cove ferry, which occurred in December 2003. Page 13 GAO-12-559 Kachemak Bay Ferry to manage the project—told us that they immediately agreed to work with the city of Seldovia to conduct community outreach, assist with request for proposals and a design feasibility study, and form a port authority to potentially operate the new ferry. The Tribe Built and Now The village corporation managed the ferry project in two phases: planning Operates a Passenger and and construction. During the planning phase, the village corporation Light-Freight Ferry Serving conducted two studies of options for the proposed project and, on the basis of these studies, selected a vessel option that could transport Two Ports in the Summer passengers and light freight in 500-pound containers—but not vehicles— and would run between Homer and Seldovia during the peak-traffic summer season. The first study, published in 2007, analyzed ferry vessel alternatives, as well as project-scoping options, regional passenger traffic, and the project’s potential financial outcomes. This study established criteria stating that the recommended ferry service must be self-sustaining in both the short and long term. Vessels were evaluated according to the extent to which they could (1) be constructed with available funds, (2) generate sufficient revenue to cover operating costs, and (3) provide social and economic benefits. The study reviewed five different vessel types, four of which could carry passengers and vehicles and one that could carry only passengers and light freight. The study found that ferries carrying both vehicles and passengers could not operate without a substantial subsidy, would be impossible to operate in competition with the Alaska state ferry, and concluded that the only viable alternative was a fast passenger-only catamaran with optional light-freight capability. According to the tribe, the level of funding available at that time and a steep increase in steel prices contributed significantly to this conclusion. The village corporation’s second study, which focused primarily on ferry- operating alternatives, projected that the selected vessel would be profitable in its fourth year of operation (2013) if it ran only during the peak-traffic summer season. This study, published in 2009 by the village corporation, evaluated different service and route options and the financial feasibility of the selected vessel—a 150-passenger and light- freight-only 83-foot catamaran. The village corporation’s proposed project, based on the results of the 2009 study, differed significantly from earlier proposals in a number of key ways: Page 14 GAO-12-559 Kachemak Bay Ferry • The ferry would serve only two ports, Homer and Seldovia. • The ferry would run only during the peak-traffic summer season, generally May through September. • The ferry would run two routes—a direct 16.7-nautical-mile route across Kachemak Bay and an extended 22-nautical-mile route, which would include wildlife viewing and sightseeing. • The ferry would not have vehicle or heavy-freight transport capabilities. • The tribe would operate the ferry. • Docks would be constructed only in Homer and Seldovia. • No roads would be built or improved. • A visitor center would be built in Homer. The release of the 2009 study generally represented the end of the planning phase, although the construction phase had already begun. In the summer of 2008, the village corporation selected a company in Bellingham, Washington, as the contractor for boat construction. The village corporation separately contracted the construction of the docks— one on village corporation-owned land in Seldovia and the other in Homer’s small boat harbor. Because of the changes in scope and service from the original project proposal, the city of Seldovia withdrew its support for the project and contacted us, BIA, and members of Congress to ask that the project be halted. City officials told us that they had not been consulted by the tribe or the village corporation on changes to the project and that, other than a single port authority steering committee meeting in 2004, there were no opportunities to provide public comment or input during the project development period. According to the tribe, the village corporation and the tribe met with, consulted with, and involved the city and the public in the design and development of the ferry through announced public meetings, a survey, and a consulting contract with the city. Voters also ratified, after initially failing to ratify, the city council ordinance establishing a port authority, but according to the city officials, the entity has never functioned because no public transportation exists in Seldovia’s harbor for it to oversee. Some city residents we spoke with said they also withdrew Page 15 GAO-12-559 Kachemak Bay Ferry their support for the ferry project after learning that the proposed vessel (1) would run only in the summer, (2) was not capable of transporting vehicles and freight, and (3) would compete with local tour companies. The Kachemak Voyager, shown in figure 4, began operating in 2010, providing service between Homer and Seldovia for the summer season that extended from May through October. The village corporation hired a contractor to operate the ferry in 2010, and the tribe took over operations for the 2011 season. Since the ferry began operating, the tribe has promoted it to local commuters and tourists, advertising daily extended trips for wildlife viewing and charters for hire. In both years, the ferry operated only during the summer months, with an average of six daily one-way trips between the two ports, including two trips from Homer to Seldovia via the extended scenic route that passes by the village corporation-owned Gull Island. During the Kachemak Voyager’s first season of operation, the tribe completed construction of the two docks— one in Homer and one in Seldovia. The Homer harbormaster told us that the dock and accompanying ramp were welcome improvements. City of Seldovia officials, however, told us that the dock in Seldovia is unstable and, therefore, has not been used for safety reasons; instead, the Kachemak Voyager has used the main dock in the city’s harbor for mooring the ferry in Seldovia. Page 16 GAO-12-559 Kachemak Bay Ferry Figure 4: The Kachemak Voyager The Tribe Spent about To plan and construct the Kachemak Bay ferry and associated docks in $8.8 Million of Federal Homer and Seldovia, the tribe spent about $8.8 million of the close to Funding to Plan and $9 million in federal appropriations and grants it received beginning in fiscal year 2005. According to documentation provided by the tribe, it Construct the Ferry spent about $1.97 million for phase I project-planning activities, including Project expenditures for project design, administration, feasibility studies, and environmental assessments and permits, and about $6.79 million for phase II construction activities, including expenditures for ferry construction, dock construction, administration, and outreach and marketing. Expenditures for both phases are summarized by category in table 1. Additional funding, including a $1.5 million Alaska state grant and an operating grant from FTA, was used to subsidize ferry operations. According to the tribe, little funding remains after the 2011 season to subsidize ferry operating costs in the future. Page 17 GAO-12-559 Kachemak Bay Ferry Table 1: The Seldovia Village Tribe’s Kachemak Bay Ferry Project Expenditures for Planning and Construction, by Category, for 2005 to 2010 Phase I: Phase II: Total Expenditure categories planning construction expenditures Administration $287,006 $797,896 $1,084,902 Outreach, marketing, and mobilization 73,836 328,951 402,787 Feasibility studies, design, and port authority development 243,409 243,409 Development of construction budget and sources 22,874 22,874 Environmental assessments and permits 65,229 274,386 339,615 Project design 1,214,646 1,214,646 Staffing and oversight 60,000 309,136 369,136 Ferry construction 3,304,029 3,304,029 Shoreside preparation and construction 1,778,132 1,778,132 Total $1,967,000 $6,792,530 $8,759,530 Source: Seldovia Village Tribe. Note: A total of $9 million was originally appropriated for the design and construction of a ferry. The fiscal years 2005 and 2006 appropriations, however, were subject to rescissions that made available less than the full amount of the appropriation. In addition, BIA retained $33,000 and $120,000 of the fiscal years 2004 and 2005 appropriations, respectively, for oversight. Specifically, a provision in the self-determination contract notes that the $33,000 retained by BIA was “for travel to look at other Alaska independent owned ferries with the project manager, to attend any community meetings, to personally view the ferry infrastructure landings and any other administrative expenses associated directly with this project as deemed necessary by the BIA.” Page 18 GAO-12-559 Kachemak Bay Ferry Federal agencies provided funding and limited oversight, but they had no Federal Agencies decision-making role in determining the type of ferry to be constructed or Provided Funding and how it would be operated. Congress appropriated funds for a ferry in fiscal years 2004 through 2006 without any specific description of the type Limited Oversight but of ferry to be constructed or its operations and well before the tribe’s Had No Decision- design and operating studies were completed. Similarly, DOT transferred Making Role for the the ferry construction funds to Interior without any specific design or operation limitations. BIA subsequently transferred the ferry construction Ferry Project funds to the tribe in fiscal years 2005 through 2007 without any specific design or operation limitations and before the tribe had completed its ferry design and operating studies. The self-determination contract and self- governance compact that BIA used to provide the funds authorized the tribe to plan, conduct, and administer the funding for planning and constructing the ferry and provided for limited oversight. 5 The tribe also applied for and was awarded grants by FTA for dock construction and ferry operation, which it received in 2010 (see fig. 5). In total, the tribe received about $9.2 million from these sources to plan, construct, and operate the ferry. The U.S. Army Corps of Engineers issued required permits for dock construction but did not provide funding. 5 The ferry was not included in the Seldovia Village’s Tribal Transportation Improvement Program, a multi-year financially constrained list of proposed transportation projects developed by a tribe from the tribal priority list or the long-range transportation plan, because the appropriation was not for the Indian Reservation Road program. Page 19 GAO-12-559 Kachemak Bay Ferry Figure 5: Timeline of Ferry Project Federal Appropriations and Grants, and Transfer of Funds to the Seldovia Village Tribe, by Fiscal Year Note: The fiscal years 2005 and 2006 appropriations were subject to rescissions that made available less than the full amount of the appropriation. In addition, BIA retained $33,000 of the fiscal year 2004 appropriation for oversight, such as travel and other agency administrative expenses associated with the project, and $120,000 of the fiscal year 2005 appropriation, even though this funding was provided to the tribe under a self-governance compact and not a self-determination contract. Page 20 GAO-12-559 Kachemak Bay Ferry DOT Transferred DOT’s annual appropriation acts made available a total of $9 million for a Appropriations to Interior ferry serving four Kachemak Bay ports as follows: and Did Not Oversee the • Fiscal year 2004. Section 115 of Division F of the Consolidated Ferry Project Appropriations Act, 2004, appropriated funding for a Kachemak Bay ferry by incorporating a provision of the managers’ statement by reference. 6 The managers’ statement identifies $2 million for the “Seldovia-Homer-Jakolof Bay-Halibut Cove Ferry planning and design, Alaska.” 7 • Fiscal year 2005. Section 117 of Division H of the Consolidated Appropriations Act, 2005, appropriated funding for a Kachemak Bay ferry by incorporating a provision of the managers’ statement by reference. 8 The managers’ statement identifies $6 million for the “Homer-Halibut Cove-Jakolof Bay-Seldovia Ferry, Alaska.” 9 • Fiscal year 2006. Section 113 of Division A, Title I of the Transportation, Treasury, Housing and Urban Development, the Judiciary, and Independent Agencies Appropriations Act, 2006, appropriated funding for a Kachemak Bay ferry by incorporating a provision of the managers’ statement by reference. 10 The managers’ statement lists $1 million for the “Homer-Halibut Cove-Jakolof Bay- Seldovia Ferry, AK.” 11 The appropriation acts and the associated managers’ statements did not provide any specific description of the ferry to be constructed or its operations. In addition, the funds for constructing the ferry, appropriated in fiscal years 2005 and 2006, were appropriated before completion of 6 Pub. L. No. 108-199, div. F, § 115, 118 Stat. 3, 294-95 (2004). Division F is the Transportation, Treasury & Independent Agencies Appropriations Act, 2004. 7 H.R. Rep. No. 108-401, at 960 (2003). 8 Pub. L. No. 108-447, div. H, § 117, 118 Stat. 2809, 3212-13 (2004). Division H is the Transportation, Treasury, Independent Agencies, and General Government Appropriations Act, 2005. 9 H.R. Rep. No. 108-792, at 1403 (2004). 10 Pub. L. No. 109-115, div. A, tit. I, § 113, 119 Stat. 2396, 2407 (2005). Division A is the Transportation, Treasury, Housing, and Urban Development, the Judiciary, the District of Columbia, and Independent Agencies Appropriation Act, 2006. 11 H.R. Rep. No. 109-307, at 158 (2005). Page 21 GAO-12-559 Kachemak Bay Ferry ferry planning and design, funded in fiscal year 2004. The design and operating studies were not completed until May 2007 and March 2009, respectively. The fiscal years 2004 and 2005 appropriations acts provided that the appropriated funds may, at the request of the state, be transferred by the Secretary of Transportation to another federal agency to carry out the identified project. According to DOT and Alaska state officials, the state of Alaska notified DOT that it did not want to administer the funds for the tribe’s ferry project or provide them to the tribe as a subrecipient and asked that a federal agency administer the funds. 12 As a result, BIA and DOT officials agreed to use the process already established for the jointly administered Indian Reservation Roads Program as a means of providing the ferry funding to the tribe. The allocations were executed under the Indian Reservation Roads Program Stewardship Plan, a 1996 agreement between DOT’s Federal Highway Administration and BIA that, as of March 2012, was being revised and updated. In keeping with this agreement, DOT allocated a total of about $8.7 million in ferry project appropriations to the BIA Division of Transportation as follows: 13 • In March 2005: $2,000,000 of the fiscal year 2004 appropriation. • In June 2005: $3,968,000 of the fiscal year 2005 appropriation. • In March 2006: $1,935,569 of the fiscal year 2005 appropriation. • In July 2006: $787,757 of the fiscal year 2006 appropriation. 14 12 According to Alaska state officials, they did not want to provide the tribe with the funding as a subrecipient because the state would be responsible for overseeing the tribe’s use of the funds. 13 The fiscal years 2005 and 2006 appropriations were subject to rescissions that made available less than the full amount of the appropriation for transfer to BIA. 14 This allocation letter to BIA identified the route, location, and work type as the Homer- Halibut Cove-Jakolof Bay-Seldovia Ferry—“Kachemak Bay Ferry” (Kbay), Kenai Peninsula Borough—construction of ferry and ferry terminal facilities. Except for this letter, the allocation letters to BIA only repeated the language from the managers’ statements and did not include any additional information on the nature and scope of the ferry. Page 22 GAO-12-559 Kachemak Bay Ferry According to DOT officials, the fiscal years 2004 and 2005 funding was transferred to BIA pursuant to the transfer authority in the appropriations acts. We discuss these transfers in the legal opinion presented in appendix I. DOT officials also told us that the agency did not have any oversight responsibility for the project after transferring these funds to BIA. However, the Chief of BIA’s Division of Transportation told us that because the funding was not for an Indian Reservation Roads project or a transportation project on federal land, transferring the funds to BIA did not transfer oversight responsibility for the project to BIA; oversight responsibility remained with DOT. Interior Provided Ferry After receiving the funds from DOT, BIA provided the fiscal year 2004 Funding for the Tribe to appropriation to the tribe under a self-determination contract and the Administer Without Any fiscal years 2005 and 2006 appropriations under the tribe’s self- governance compact. In total, BIA provided the tribe with a little over Specific Design or $8.5 million as follows: Operation Limitations and Had No Decision-Making • From the fiscal year 2004 appropriation, $1,967,000 for ferry planning Role for the Project and design, provided by BIA’s Division of Transportation to BIA’s Alaska Region for obligation to the tribe in the annual funding agreement to a self-determination contract, awarded in July 2005. 15 • From the fiscal year 2005 appropriation, $1,935,569 provided by BIA’s Division of Transportation in the tribe’s Fiscal Year 2006 Annual Funding Agreement, Kachemak Bay Ferry Program Addendum, to the tribe’s self-governance compact in May 2006. • From the fiscal year 2005 appropriation, $3,848,000 provided by BIA’s Division of Transportation to Interior’s Office of Self-Governance in the tribe’s Fiscal Year 2007 Annual Funding Agreement, Kachemak Bay Ferry Program Addendum, to the tribe’s self-governance compact in July 2007. 16 15 BIA retained $33,000 of the fiscal year 2004 appropriation for oversight, such as travel and other agency administrative expenses associated with the project. 16 Even though this funding was provided to the tribe under a self-governance compact and not a self-determination contract, BIA retained $120,000 of the fiscal year 2005 appropriation. Page 23 GAO-12-559 Kachemak Bay Ferry • From the fiscal year 2006 appropriation, $787,757 provided by BIA’s Division of Transportation to Interior’s Office of Self-Governance in the tribe’s Fiscal Year 2007 Annual Funding Agreement, Kachemak Bay Ferry Program Addendum, to the tribe’s self-governance compact in July 2007. Officials from BIA’s Alaska Region, told us that the $1,967,000 self- determination contract for ferry planning and design was administered as part of its Indian Reservation Roads Program, but that neither the ferry project nor the funding actually fell under this program. As a result, according to BIA’s current regional transportation director, the project did not undergo the BIA and the Federal Highway Administration’s Indian Reservation Roads Program review and approval process for inclusion in the tribe’s Tribal Transportation Improvement Program—the document that specifies the allowable activities for a project—and BIA did not identify Indian Reservation Roads regulations as applicable in the tribe’s contract. Nevertheless, the Alaska Region did assign an awarding official to provide oversight, as it normally would for an Indian Reservation Roads project, with oversight responsibilities focused on ensuring that the ferry was built to specifications, that it met all safety and health requirements, and was a seaworthy vehicle. The village corporation, which administered the project, provided BIA’s Alaska Region awarding official with quarterly status reports from 2005 through early 2009 and the contract file contains documentation of some oversight, such as site visits and attendance at meetings by the awarding official. This documentation demonstrates that the village corporation kept the awarding official apprised of the status of the project and the reasons that it would likely produce a ferry that differed significantly from what was originally proposed. As reported by Interior’s Office of Inspector General in July 2009, the Alaska Region awarding official did not act to object or provide any guidance or direction to the tribe regarding changes in the project. 17 BIA’s current regional transportation director noted that this contract was for planning, not construction of the ferry, and the tribe used the money to conduct a study. In commenting on our report draft, BIA stated that because a feasible alternative existed, abandonment of the project was not considered to be consistent with the intent of Congress, and that the Alaska Region met its oversight responsibility for the ferry. 17 Department of the Interior, Office of Inspector General, Report of Investigation: Seldovia Ferry, OI-OR-09-0225-I (Portland, Ore: July 27, 2009). Page 24 GAO-12-559 Kachemak Bay Ferry The self-determination contract was finally closed at the tribe’s request in March 2011. In addition to the nearly $2 million self-determination contract, Interior provided about $6.5 million to the tribe in the fiscal years 2006 and 2007 ferry project funding agreements under its self-governance compact. BIA allocated funding to the tribe under the fiscal year 2006 funding agreement, and Interior’s Office of Self-Governance administered the fiscal year 2007 funding agreement. Interior’s authority to oversee these self-governance compacts was limited because compacts transfer control over program funding and decision making to tribes, provide the tribes with meaningful authority to plan and administer programs, and generally allow for limited oversight by Interior. According to the Chief of BIA’s Division of Transportation, BIA’s Alaska Region was responsible for providing technical oversight and assistance for transportation projects but that BIA can do little given the authority of tribes to operate their own programs and projects under self-governance compacts. Although the Alaska Region Office awarding official for the self-determination contract continued to receive quarterly status reports from the village corporation while the project was funded under the tribe’s self-governance compact because the self-determination contract had not yet been closed, he did not act to provide any oversight or direction to the tribe regarding the project. Furthermore, according to Interior’s Director of the Office of Self- Governance, the Kachemak Bay Ferry Program Addendum to the Fiscal Year 2007 Annual Funding Agreement, makes it clear that the Alaska Region was responsible for oversight of the project and that the Office of Self-Governance was responsible only for administering the transfer of funds to the tribe. Moreover, according to Office of Self-Governance officials, they do not have sufficient staff to provide oversight to the programs they fund and, specifically, do not have engineers on staff to provide oversight for transportation projects. The officials noted that participation in self-governance requires tribes to conduct a single organizationwide audit as prescribed under the Single Audit Act. Our review showed that the tribe received an unqualified opinion in each of Page 25 GAO-12-559 Kachemak Bay Ferry the years that it reported expenditures of federal ferry boat funding, from fiscal year 2005 through fiscal year 2009. 18 In 2009, following up on concerns about mismanagement in BIA’s Alaska Region, Interior’s Inspector General issued a report on the region’s Indian Reservation Roads Program. The report provided examples of projects that the Inspector General was told may have involved mismanagement and the potential loss or theft of funds, including the Kachemak Bay ferry project. 19 It was alleged that the intent of the ferry project had been arbitrarily changed, without approval from BIA, from addressing the community’s transportation needs to creating an avenue of tourism revenue. Interior’s Inspector General jointly investigated the ferry project with DOT’s Office of Inspector General and issued its findings in July 2009. The report concluded, among other things, that (1) the tribe’s use of the funds did not conflict with the language of the appropriations; (2) the project’s changes in scope were allowed under the tribe’s annual funding agreements; (3) BIA was informed of the changes but did not attempt any corrective action; and (4) because the tribe had notified BIA of changes to the project, any proposed misapplication of funds would be due to BIA’s lack of oversight. According to Interior officials, BIA has changed its procedures since the Inspector General’s report, and it no longer provides funding to tribes via self-determination contracts or self-governance compacts for projects it 18 Pub. L. No. 98-502 (1984), amended by Pub. L. No. 104-156 (1996), codified as amended at 31 U.S.C. §§ 7501-7507. The purpose of the Single Audit Act of 1984, as amended, is, among other things, to promote sound financial management, including effective internal controls, with respect to federal awards administered by nonfederal entities. Under the act, certain nonfederal entities—such as a state, local government, Indian tribe, or nonprofit organization—that expend $500,000 or more in federal awards in a year must have an audit conducted in accordance with Office of Management and Budget Circular No. A-133 and submit a report regarding the audit to the Federal Audit Clearinghouse Single Audit Database. The U.S. Census Bureau, in the Department of Commerce, maintains the database, which contains summary information on completed single audits, including information on the auditor, the recipient and its federal programs, and the audit results. The database is available for agency and public access at https://harvester.census.gov/fac/. An unqualified opinion states that the financial statements present fairly in all material respects the financial position, results of operations, and cash flows of the entity in conformity with generally accepted accounting standards. 19 Department of the Interior, Office of Inspector General, Flash Report: BIA Alaska Regional Indian Reservation Roads Program Rife with Mismanagement and Lacking Program Oversight, WR-IV-BIA-0001-2009 (Washington D.C.: Feb. 9, 2009). Page 26 GAO-12-559 Kachemak Bay Ferry would not normally undertake under its Indian Reservation Roads Program. According to the Chief of BIA’s Division of Transportation, tribes prefer that their Indian Reservation Roads funding and their funding from other sources, such as federal aid highways appropriations, be included in their self-determination contracts and self-governance compacts because these agreements allow them greater control over their transportation projects. However, the Chief told us that he now consults with Interior’s Office of the Solicitor to determine if non-Indian Reservation Roads funding is for a project that the Secretary of the Interior would normally perform for tribes—that is, as part of the Indian Reservation Roads Program—thereby making it eligible for inclusion in a self- determination contract or self-governance compact. If not, according to the Chief and a Solicitor’s Office attorney, BIA transfers the funding through an alternative agreement, which provides the funding to the tribe but disclaims Interior from having responsibility for the project and places responsibility for the project with, for example, the state and DOT’s Federal Highway Administration for federal aid-highway funding. According to the Chief, this alternative agreement has so far been used for several projects that were determined not to meet the definition of an Indian Reservation Roads Program project or were deemed otherwise inappropriate for inclusion in the program under a self-determination contract or self-governance compact. FTA Awarded the Tribe FTA awarded the tribe two Tribal Transit Program grants as follows: Grants for the Ferry and Exercised Minimal • Fiscal year 2009 American Recovery and Reinvestment Act funding: $475,000 grant for Homer dock upgrades, awarded in June 2010, 20 Oversight over Their Use • Fiscal year 2009 Tribal Transit Program funding: $200,000 grant for ferry boat operations, awarded in December 2010. According to FTA’s grant documentation, the $475,000 grant was requested by the tribe to construct and install improvements to Homer’s small-boat harbor, including new piers, a gangway, and related 20 The American Recovery and Reinvestment Act of 2009 was enacted on February 17, 2009, in response to what is generally reported to be the most serious economic crisis since the Great Depression. The purposes of the Recovery Act include promoting economic recovery, making investments, and minimizing and avoiding reductions in state and local government services. Page 27 GAO-12-559 Kachemak Bay Ferry infrastructure for the ferry terminal and moorage, to facilitate the safe loading and unloading of passengers and light freight to and from the ferry. The $200,000 grant was requested by the tribe to provide operating assistance for ferry service between Homer and Seldovia, beginning approximately May 1, 2010, with peak service estimated to occur between Memorial Day and Labor Day, running approximately 4 to 5 days per week with two trips per day. FTA Region X and other agency officials reviewed the tribe’s applications and recommended them for funding, with the final approval decision made by the Administrator of FTA and the Secretary of Transportation. 21 FTA officials told us that given the agency’s staffing structure, its oversight approach does not rely on visiting every grant site to assess compliance with grant terms. Instead the agency uses a risk-based process to identify an oversight approach. Based on the nature of the grants to the tribe, FTA chose to review quarterly reports for the $475,000 dock construction grant and annual reports for the $200,000 ferry operation grant. The Army Corps of The tribe received no funds from the U.S. Army Corps of Engineers Engineers Provided (Corps), but the Corps was responsible for reviewing and approving the No Funding but Issued tribe’s River and Harbors Act section 10 permit applications for dock construction in both Homer and Seldovia. Section 10 of the River and Required Permits for Harbors Act requires that a Corps permit be obtained for certain Dock Construction structures or work in or affecting navigable waters of the United States before work begins, although the Corps does not oversee the actual design or construction of projects for which it issues permits. Officials in the Corps’ Kenai field office approved the tribe’s permit applications on February 26, 2010, with both permits specifying that dock construction work was to occur from March through April 2010, the time frame requested by the tribe. Documentation in the Corp’s permit files show that the village corporation’s consultant informed the Corps in March and again in May 2010 that the dock construction work would not take place during this permitted work window. On both occasions, the Corps instructed the consultant to submit a modification request for the permits because the permits were not valid for work outside of March and April 2010, but, according to a Corps official, no modification request was submitted. 21 FTA Region X covers Alaska, Idaho, Oregon, and Washington. Page 28 GAO-12-559 Kachemak Bay Ferry Corps officials learned in November 2010 that both docks were actually constructed from July through September 2010, outside the permitted work window. In addition, the officials learned that the Homer dock as constructed deviated from the dock as permitted. The Corps, in December 2010, sent the tribe notices of alleged noncompliance. The tribe acknowledged that the construction did occur outside the permitted work window but considered the discrepancy a “clerical error,” since the Corps was aware of the delayed construction, and the permits’ time limit for completing the work was February 28, 2015. Corps officials told us that they did not take further action on the noncompliance with the permitted work window because there was no indication of any impact on marine mammals and fish populations. To resolve the dock construction noncompliance, the Corps approved an after-the-fact permit modification and did not require removal of the dock. Documentation from the Corps’ files shows that it received a permit modification request from the tribe in November 2010 to reorient the Seldovia dock for safety reasons because incoming storms were damaging it. The Corps informed the tribe on November 30, 2010, that the modification request would not be evaluated until the permit noncompliance issues were resolved. The permit noncompliance for the Seldovia dock was resolved on March 9, 2011, via a letter informing the tribe that no further action would be taken regarding the permit noncompliance issues on the Seldovia dock. The Corps’ March 9, 2011, letter to the tribe also requested that the tribe provide information needed to make its November 2010 permit modification request complete. The tribe contacted the Corps about the Seldovia dock in July and September 2011; as of March 27, 2012, however, the tribe had not submitted a completed permit modification application. Corps approval of the permit modification is required before the tribe can lawfully proceed with reorienting the Seldovia dock. Page 29 GAO-12-559 Kachemak Bay Ferry The operation of the Kachemak Voyager has raised a number of Concerns and concerns and challenges regarding the consequences and viability of its Challenges Exist continued operation. Specifically, private tour operators told us that they are concerned that the ferry competes directly with their long-established Regarding Continued businesses and will continue to negatively affect them, and the tribe faces Ferry Operations challenges meeting the projected milestone for the ferry to become financially self-sustaining. In addition, FTA officials raised concerns about the tribe’s compliance with grant requirements and the tribe has taken corrective actions to resolve them. Given these challenges and concerns, should the tribe choose to sell or dispose of the ferry in the future, neither DOT nor Interior officials have taken steps to prepare for a potential sale. Local Tour Boat Operators’ Local private tour boat operators have raised concerns that the Concerns About Ferry Kachemak Voyager duplicates services between Homer and Seldovia Competition and competes with their businesses. Like private tour operators, the Kachemak Voyager operates only during the peak summer tour season, and it follows an extended scenic route for wildlife viewing and sightseeing, as shown in figure 6, on two out of three daily trips from Homer to Seldovia. Like tour operators and the state ferry, on the remainder of its trips between the two ports, the Kachemak Voyager follows the direct ferry route. The Kachemak Voyager and private tour boats are similarly capable of carrying light freight and transporting more than 50 passengers per trip; the state ferry also has those capabilities, plus the additional capability to carry heavier freight and vehicles. Page 30 GAO-12-559 Kachemak Bay Ferry Figure 6: Extended and Direct Kachemak Bay Ferry Routes from Homer to Seldovia One of the concerns raised by the private tour boat operators is that the tribe can offer significantly discounted fares for the Kachemak Voyager because of the federal assistance that the tribe receives. According to documentation provided by the tribe, the Kachemak Voyager has offered a variety of discounts and promotions to attract local commuter and tourist business. For example, during the 2011 season, the regular adult fare for a round-trip on the Kachemak Voyager was $64, but many passengers paid discounted fares because of the more than 25 promotions and discounts offered during the 2011 season. Also during the 2011 season, Seldovia residents and village corporation stockholders were eligible to receive a “local” discounted fare of $22 each way. During this same time, tourists were offered “two for the price of one” ticket discounts for the Kachemak Voyager in a coupon booklet promoting Alaska tourism, which would equate to $32 round-trip per person. In Page 31 GAO-12-559 Kachemak Bay Ferry contrast, after taking into account all of their costs, the lowest advertised rate private tour operators could offer that year was $30 one-way and $45 round-trip. The two private tour operators providing service between Homer and Seldovia during peak season told us that the direct competition from the Kachemak Voyager has negatively affected their businesses. They stated that competition from the Kachemak Voyager in the last two operating seasons has caused their combined ridership to decline by roughly 30 to 40 percent. Moreover, even though fuel prices have risen significantly in recent years, they told us that they cannot raise their ticket prices to offset the additional cost and remain competitive with the Kachemak Voyager. Both of these tour boat operators told us that they plan to alter their operations for 2012 because of the competition from the tribe’s ferry. One operator told us that his company will shift tour boat departure and return times as needed to maximize his market share, and the other operator told us that he plans to eliminate one of his two round-trips from Homer to Seldovia. Both operators were concerned about their ability to continue to operate their businesses in the future. According to the tribe, declines in sales for the two tour boat operators may not be solely because of competition from the Kachemak Voyager, citing national economic conditions that have contributed to a statewide decline in tourism in 2010 and 2011. 22 Ferry Operations Are Not Given the differences between assumed ferry operations and actual ferry Financially Sustainable operations, it is highly unlikely that the ferry will become self-sustaining without Ongoing Subsidies within four seasons as projected by the village corporation. Instead, the ferry is likely to need significant and increasing subsidies into the future to continue operating. According to the corporation’s 2009 study of operational options for the project, the Kachemak Voyager was projected 22 One of the private tour operators provided us with ridership information from 2003 through 2011 to document the effect of the Kachemak Voyager on his business. The other operator told us that the effect on his business was similar but was not able to provide us with documentation because he was out of the country while we were collecting these data. The tribe provided us with ridership information from the City of Seldovia, which in its opinion shows that the ridership of the private tour operators had increased from 2009 to 2010 and 2011, while also stating that any losses reported by the private tour operators were likely, in part, due to the poor economy. We have not included total ridership numbers from either source in the report because we were unable to independently verify their accuracy and our review of the data collected by the City of Seldovia indicates that these data are neither complete nor reliable especially prior to 2010. Page 32 GAO-12-559 Kachemak Bay Ferry to turn a profit by its fourth season (in 2013), given certain expected operating parameters. Actual ferry operating parameters during the first two seasons, however, differed greatly from what was assumed in the 2009 study, and the passenger counts anticipated in the study did not materialize. As shown in table 2, during the first two seasons of operation, the Kachemak Voyager ran more than three times the number of one-way trips as the 2009 study assumed for the first 2 years of operation. At the same time, passenger counts per one-way trip during this period were much lower than anticipated. In fact, ferry records for the first season indicate that 44 one-way trips were made with no paying customers, only crew and occasional light freight. Table 2: Assumed and Actual Ferry Operating Parameters Ferry operating parameters Assumed Actual (first two seasons) Scheduled days per week 4 7 Trips per day 4 6 Days per year 60 in 2010 and 2011 132 average for 2010 and 2011 Average passengers per trip 39 in 2010; 47 in 2011 13 in 2010; 14 in 2011 Fuel cost (annual average) $5.70 per gallon $3.05 in 2010; $3.97 in 2011 Source: Seldovia Village Tribe. To examine the impact of the changed parameters on the ferry’s financial performance, we reassessed the financial projections made by the village corporation’s 2009 study on the basis of the ferry’s actual performance over the 2010 and 2011 seasons. Our analysis used the same methodology as the 2009 study, except that we used actual performance data for 2010 and 2011, where available, and we assumed for the 2012 and 2013 seasons that (1) the passenger counts per trip would increase at the same rate as from 2010 to 2011 and (2) the number of trips per day would continue at the same level as in 2011. Figure 7 shows the results of our analysis compared with the village corporation’s projections. The 2009 study projected that the ferry’s operation would turn a profit and become self-sustaining by 2013, but our analysis shows that by 2013 the ferry is likely to still be operating at a loss. The ferry’s continued operational loss results primarily from rising costs, particularly for fuel, and also in part because of fewer passengers per trip and the addition of more trips per day compared with the assumptions used in the 2009 Page 33 GAO-12-559 Kachemak Bay Ferry study. 23 Neither the village corporation’s 2009 study nor our adjusted projections included any allowance for depreciation of capital assets or recovery of the capital cost of the ferry. If such an allowance had been made, it would have substantially increased the estimated annual losses from ferry operations. Figure 7: Projected Kachemak Voyager Financial Performance and Reanalysis, 2010-2013 Operating Season Note: Graph compares the village corporation’s 2009 projections of the Kachemak Voyager’s financial performance with our analysis based on the ferry’s actual performance parameters in 2010 and 2011. 23 The 2009 study assumed growth in some cost items, but some costs, such as wages and fuel, remained unchanged over the 2010 to 2013 seasons. But, as reported by the tribe, the average price of fuel purchased over the 2010 to 2011 seasons rose from $3.05 to $3.97, or by about 30 percent. For our analysis, we assumed this same percentage increase in fuel prices over the 2012 and 2013 seasons. Page 34 GAO-12-559 Kachemak Bay Ferry Tribal officials told us they expect the ferry to need ongoing subsidies to continue operating. They noted that the ferry’s operating costs have increased because of two costly and unanticipated ferry repairs. Although these costs are not expected to recur in the future, they had a significant impact on operating costs in 2010 and 2011. According to tribal officials, they may also take cost-cutting measures during the 2012 season to reduce operating expenses. For example, according to the 2012 operating schedule on the ferry’s website as of mid-April, the ferry will operate four direct one-way trips between Seldovia and Homer starting on May 3 and is not offering extended sightseeing trips. The ferry is scheduled to operate an average of 5 days per week—with no service most Tuesdays and Wednesdays—and service will end after the first week of September 2012. Fares are decreased from the 2011 season, with full-priced tickets for passengers ages three and over costing $23 each way. Nevertheless, even with reduced operating costs, tribal officials expect that the ferry will need ongoing subsidies to continue operations. The Tribe Did Not Comply According to FTA officials, the tribe did not comply with the requirements with Its FTA Grant of the FTA Tribal Transit Program grants that it received in 2010 for the Requirements but Has Homer dock upgrades and ferry operating expenses because it did not obtain FTA approval for “incidental use” of the ferry for sightseeing. The Taken Corrective Action tribe has since taken corrective actions to resolve FTA’s concerns. Tribes can use Tribal Transit Program grants for operating costs of equipment and facilities used in public transportation, which is defined as transportation by a conveyance that provides regular and continuing general or special transportation to the public but not charter or sightseeing transportation, among other exclusions. FTA does permit “incidental use” of FTA-funded equipment and facilities for purposes other than public transportation, such as sightseeing, although FTA must provide prior approval of such incidental use. According to agency guidance, FTA will approve requests for incidental use if such use will not interfere with the grantee’s public transportation operations, the grantee fully recaptures the costs of the incidental use from the nontransit public or private entity, the grantee uses revenues received from the incidental use to pay for public transportation expenses, and private entities pay all applicable excise taxes on fuel. FTA Region X officials told us they initially became concerned about the tribe potentially using its grants for nonpublic transportation purposes because the tribe’s applications described an extended scenic route followed by the Kachemak Voyager on some trips. FTA Region X officials Page 35 GAO-12-559 Kachemak Bay Ferry told us that because of their concerns—and because the tribe was applying for the first time for Tribal Transit Program grants—they included the following language in both of the grants to ensure that the tribe was aware of the incidental use requirements: “…funds awarded under this grant shall be used solely for public transportation purposes. Any activities not considered public transportation, such as sightseeing, may not benefit from the use of these funds unless prior written approval by FTA is obtained for such incidental use.” According to the FTA officials, by accepting the grants, the tribe certified that it would comply with all of the grants’ requirements, including the requirement to obtain prior approval for incidental use. The officials told us that even if the tribe segregated the grants from other funding and used them only for operating expenses incurred on the direct route between Homer and Seldovia, it still needed prior FTA consent for incidental use to run on the indirect route. According to the officials, however, the tribe did not request approval for incidental use. In September 2011, we met with FTA Region X officials and shared our concerns about the potential noncompliance with FTA’s grant requirements by the tribe because of the Kachemak Voyager’s indirect scenic route. After gathering additional information, FTA sent a letter to the tribe in December 2011 regarding the grants, noting that the grants limited the use of the funds to public transportation services and that sightseeing may not benefit from the use of the grant unless prior written approval was obtained from FTA for such incidental use. FTA cited the Kachemak Voyager’s two daily extended trips for wildlife viewing and its advertised charter service as examples of incidental use. FTA notified the tribe that it must request written approval from FTA for future incidental use if it plans to continue the extended route, as well as for each charter it runs, and asked the tribe to document that the $200,000 operating grant was used for allowable costs, noting that failure to do so could result in a request for repayment and affect the evaluation of future grant applications. According to FTA officials, the tribe replied with a letter in January 2012 stating that it will operate only direct runs in 2012 and has neither provided charter services nor plans to offer charter services in the future. In addition, the tribe submitted documentation of enough eligible costs to justify its grant disbursements, and FTA does not plan to request that the tribe repay any grant funds. The tribe applied for another FTA grant in 2011 to subsidize its 2012 operations, but, according to FTA officials, the grant was not approved because of a large number of higher- priority applications from other entities. Page 36 GAO-12-559 Kachemak Bay Ferry The Disposition of Sale Given the potentially unsustainable operating costs of the Kachemak Proceeds Is Unclear If the Voyager without significant subsidies, should the tribe choose to sell the Tribe Sells the Ferry ferry in the future instead of continuing to operate it at a loss, it is unclear what would happen with the proceeds. Neither DOT nor Interior has definitively identified what statutory provisions would govern the sale. In addition, neither agency has taken any steps to prepare for the potential sale of the ferry. Generally, federal participation in the construction of ferry boats and ferry terminal facilities is subject to the following requirement regarding the disposition of a ferry: “No such ferry shall be sold, leased, or disposed of without the approval of the Secretary of Transportation. The Federal share of any proceeds from such a disposition shall be credited to the unprogrammed balance of Federal-aid highway funds of the same class last apportioned to such State. Any amount so credited shall be in addition to all other funds then apportioned to such State and available for expenditure in accordance with the provisions of this title.” 24 The funds that Interior provided to the tribe for the ferry may be subject to this requirement. The fiscal years 2006 and 2007 annual funding agreements providing funds to the tribe under its self-governance compact incorporate this requirement by reference, so the funds could be subject to it. Traditionally, only states have received federal funding for ferry boats and ferry terminal facilities, so determining where to credit the federal share of the proceeds has been relatively clear. In this instance, however, the funding for the ferry was not apportioned to a state, thereby complicating where the proceeds should be credited. DOT, however, does not believe that this provision applies to the funding because the funding was made pursuant to general provisions in DOT’s annual appropriations act, the appropriations acts made the funding available notwithstanding any other provision of law, and neither DOT nor a state awarded the funding to the tribe. Instead, DOT maintains that the funding provided to the tribe for the ferry is subject to governmentwide common grants requirements, including the disposition of property requirements codified in 49 C.F.R. § 18.32(e). It is unclear, however, whether these common grant requirements apply to funding the tribe 24 23 U.S.C. § 129(c)(6). Page 37 GAO-12-559 Kachemak Bay Ferry received because the funding was provided through a self-determination contract and self-governance compact. 25 If these requirements do apply, the ferry would still face legal uncertainties. For example, under the grant requirements, the federal agency awarding the grant has a right to a certain amount of the boat’s current market value or sale proceeds when equipment acquired with grant funds is no longer needed for the original project. Moreover, the grant requirements generally prohibit grant recipients from using equipment acquired with grant funds to provide services for a fee to compete unfairly with private companies that provide equivalent services. In addition, neither DOT nor Interior has taken any steps to prepare for the potential eventuality of the tribe selling the ferry, such as assessing how the requirement regarding the disposition of the ferry would be implemented in this unique situation. In fact, the agencies do not agree on which agency is responsible for ensuring that the tribe complies with applicable sale requirements. For example, Federal Highway Administration officials told us that the agency routinely takes steps to ensure that the federal share is credited to the appropriate account when a ferry boat is disposed of by the funding recipient, but in this case BIA would be responsible in accordance with the Federal Highway Administration’s transfer of the funds to BIA under the Indian Reservation Roads Program Stewardship Plan. Interior and DOT faced unusual challenges in funding and overseeing the Conclusions unique Kachemak Bay ferry project within the framework of their existing transportation program. The history of the Kachemak Voyager illustrates the need for collaboration between federal, state, local, and tribal entities to ensure that tribal transportation projects achieve their objectives and meet community needs, particularly when the project is unique and has an unusual funding source. Collaboration was limited in this case because the funding for the ferry project came from appropriations that were not effectively managed within the framework of existing agency transportation program policies and procedures. The state of Alaska, DOT, BIA, and the tribe chose to handle the appropriations in accordance with the established process for Indian Reservation Roads Program funds. Even though BIA will no longer provide funding to tribes through 25 See 25 U.S.C. § 450k(a)(1), 25 C.F.R. § 1000.220. Page 38 GAO-12-559 Kachemak Bay Ferry self-determination contracts and self-governance compacts for projects that it would not normally undertake under the Indian Reservation Roads Program, in this case, the tribe received funds through such a contract and compact, which enabled it to proceed with constructing a ferry that differed significantly from what it originally proposed. The resulting ferry did not meet local communities’ expectations or needs for year-round daily vehicle ferry service to multiple ports, and it is questionable whether the ferry will achieve the objective of encouraging economic development for the communities, since it duplicates existing transportation options and competes with existing businesses. Furthermore, if the Kachemak Voyager stops operating and is sold, it is unclear what should happen to the proceeds of the sale. In preparation for a potential sale of the Kachemak Voyager, we Recommendation for recommend that the Secretary of the Interior direct the Assistant Executive Action Secretary for Indian Affairs, and that the Secretary of Transportation direct the Federal Highway Administrator, to collaborate in determining the applicability of 23 U.S.C. § 129(c)(6)’s requirement or any other legal requirements regarding disposition of ferries. If the requirement of 23 U.S.C. § 129(c)(6) is applicable, (1) identify which agency will assume responsibility for having the federal share of proceeds credited, including notifying the tribe of what steps to take if it wants to sell or dispose of the ferry, and (2) determine what constitutes the federal share of sale proceeds. If another legal requirement is applicable, determine which agency will assume responsibility for ensuring that the tribe complies with it. We provided a copy of our report to the Departments of Defense, the Agency and Third Interior, and Transportation and to the Seldovia Village Tribe for review Party Comments and and comment. The Department of Defense did not provide comments. The Department of the Interior agreed with our recommendation and Our Evaluation provided technical comments which we incorporated as appropriate. (See app. II for Interior’s written comments.) Interior emphasized that the Alaska Region was responsible for oversight of the tribe’s ferry project under the contract and compact. The Alaska Region’s oversight was focused on ensuring that the ferry was built to specifications, that it met all safety and health requirements, and was a seaworthy vessel. The tribe did not obtain the funding needed for its initial proposal but identified a feasible alternative; therefore, Interior did not consider abandonment of the project to be consistent with the intent of Congress. Interior believes that the Alaska Region fulfilled its oversight responsibility for the ferry Page 39 GAO-12-559 Kachemak Bay Ferry project. Based on Interior’s and other comments we replaced the phrase “little oversight” with “limited oversight” in the title and throughout the report in describing Interior’s oversight role. As we recommended, the Department of Transportation agreed to assist Interior in determining the proper disposition of the ferry should the tribe default. (See app. III for Transportation’s written comments.) Transportation noted that it fulfilled its requirement under law to transfer the ferry appropriations to BIA, and because the ferry project was not part of Transportation’s ferry program, matters relating to the scope of the project and its actualization are beyond its purview. Transportation asserted that once funds are transferred to another federal agency, the responsibility for financial and programmatic oversight becomes that of the recipient agency. Transportation believes that BIA’s actions indicate that it recognized its oversight responsibilities, and noted that the joint investigation of the ferry project by the Interior and Transportation Offices of Inspector General found that the tribe’s use of the funds did not conflict with the language of the appropriations. The Seldovia Village Tribe did not comment on our recommendation or the future sustainability of the Kachemak Voyager. In its written response, reprinted in appendix IV, the tribe stated that it objected to the tone and tenor of the entire report. Specifically the tribe noted that: • The ferry which it currently operates is not significantly different from the tribe’s proposal that was approved for funding, and that we inaccurately describe the timing and reasons for changes that occurred. As we describe in detail in the report, the ferry that the tribe built and now operates based on its 2007 and 2009 studies differs significantly from the proposals provided to federal, state, and local officials and residents beginning in 2002 up to when funding was appropriated for a ferry from fiscal years 2004 to 2006. We state that the availability of funding was among the reasons for changes in the ferry design and operation and we believe that the dates presented in the report are accurate. In its comments, the tribe provided a more detailed 8-page timeline of events which is generally consistent with the key events that we highlight in figures 3 and 5. We have noted the tribe’s disagreement with one aspect of our timeline in the report (see footnote 4). • The report omitted information about oversight provided by Interior’s BIA and Office of Self-Governance and by Transportation and its Federal Highway Administration. As discussed above, we revised the Page 40 GAO-12-559 Kachemak Bay Ferry report to describe Interior’s oversight role as limited. In the report we describe the limited oversight provided by BIA, which primarily focused on the self-determination contract for planning and design, in keeping with its project funding agreements with the tribe. We also report that the Office of Self-Governance’s role was to provide funding, not oversight, to the tribe’s project, and that Transportation and its Federal Highway Administration provided no oversight after transferring ferry appropriations to BIA. We believe this information is complete and accurate. • Contrary to the report, the private tour boat operators’ ridership had not declined, citing passenger counts from the City of Seldovia from 2009 through 2011. Based on our discussions with Seldovia officials, we do not believe the city’s counts are reliable. Based on documentary and testimonial information gathered from the private tour operators, we believe our characterization of their ridership decline is accurate; however, we have included the tribe’s perspective in this section of the report. • The report’s section on the Army Corps of Engineers was irrelevant because this agency did not provide funding for the ferry project or provide any oversight over the funding for the project. Consequently, the tribe stated that this section should be removed from the final report. Our objective was to describe the roles of the federal agencies involved in funding and overseeing the ferry project and associated dock facility projects. As our report acknowledges, while the Army Corps of Engineers did not provide funding for the project, it did have a role in issuing permits for dock construction and ensuring compliance with them. As a result, we made no changes to the report in response to this comment. The tribe further stated that it fully complied with the terms of its self- determination contract and compacts and that we must affirmatively conclude that the tribe and the village corporation did not misuse any funding. The Interior and Transportation Inspector Generals’ joint 2009 investigation report concluded that BIA’s funding agreements with the tribe allowed changes in scope, and that the village corporation indicated to BIA that it intended to depart from its original specifications before doing so; it did not report any noncompliance by the tribe. As we state in our report, BIA approved the closure of the self-determination contract. Our report focuses on the roles of federal agencies in funding and overseeing the ferry project and associated dock facility projects and does not address whether the tribe complied with the terms of its self- Page 41 GAO-12-559 Kachemak Bay Ferry determination contract and self-governance compacts or misused funding. The tribe further stated that BIA reviewed every request for reimbursement and approved the expenditures they determined were appropriate prior to any federal funds being provided to the project. Therefore, the tribe stated that the ferry now operated by the tribe is exactly what was proposed as revised and authorized to be funded by the government. We disagree with that conclusion. Although the self- determination contract required the tribe to submit requests for payments, quarterly financial reports, and annual narrative reports to BIA, as we point out in the report, self-determination contracts and self-governance compacts transfer responsibility for decision-making to the tribe. 26 As long as the tribe complied with the terms of the contract and compacts, BIA had no role in approving or disapproving the decisions the tribe made regarding the type of ferry to be constructed and how it should be operated. Neither the contract nor compact contained any specific description of the type of ferry or its operations. We agree that BIA was kept informed of the tribe’s decisions, but we do not believe that the receipt of that information or disbursement of funding to the tribe can be construed as BIA’s approval of the tribe’s decisions because, according to BIA, the ferry the tribe developed was a feasible alternative and that abandonment of the project was not considered consistent with the intent of Congress in enacting the appropriations for a ferry. The tribe also provided other comments that we have incorporated in the report, as appropriate. 26 Section 3 of the Indian Self-Determination and Education Assistance Act articulates the federal government’s Indian self-determination policy by noting that the policy “will permit an orderly transition from the Federal domination of programs for, and services to, Indians to effective and meaningful participation by the Indian people in the planning, conduct, and administration of those programs and services.” 25 U.S.C.A. § 450a(b) (emphasis added). See also Lesoeur v. United States, 21 F.3d 965, 968-969 (9th Cir. 1994) (“The United States has made a clear policy decision to diminish regulation of Indian tribal activities,” citing the Indian Self–Determination and Education Assistance Act). Page 42 GAO-12-559 Kachemak Bay Ferry As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 16 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees; Secretaries of Defense, the Interior, and Transportation; and other interested parties. The report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff members have any questions about this report, please contact me at (202) 512-3841 or firstname.lastname@example.org. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix V. Anu K. Mittal Director, Natural Resources and Environment Page 43 GAO-12-559 Kachemak Bay Ferry Appendix I: GAO Legal Opinion on Appendix I: GAO Legal Opinion on Department of Transportation—Homer-Halibut Cove- Jakolof Bay-Seldovia Ferry Department of Transportation—Homer- Halibut Cove-Jakolof Bay-Seldovia Ferry Page 44 GAO-12-559 Kachemak Bay Ferry Appendix I: GAO Legal Opinion on Department of Transportation—Homer-Halibut Cove- Jakolof Bay-Seldovia Ferry Page 45 GAO-12-559 Kachemak Bay Ferry Appendix I: GAO Legal Opinion on Department of Transportation—Homer-Halibut Cove- Jakolof Bay-Seldovia Ferry Page 46 GAO-12-559 Kachemak Bay Ferry Appendix I: GAO Legal Opinion on Department of Transportation—Homer-Halibut Cove- Jakolof Bay-Seldovia Ferry Page 47 GAO-12-559 Kachemak Bay Ferry Appendix I: GAO Legal Opinion on Department of Transportation—Homer-Halibut Cove- Jakolof Bay-Seldovia Ferry Page 48 GAO-12-559 Kachemak Bay Ferry Appendix I: GAO Legal Opinion on Department of Transportation—Homer-Halibut Cove- Jakolof Bay-Seldovia Ferry Page 49 GAO-12-559 Kachemak Bay Ferry Appendix II: Comments from the Department Appendix II: Comments from the Department of the Interior of the Interior Note: We have not included the exhibits. Page 50 GAO-12-559 Kachemak Bay Ferry Appendix II: Comments from the Department of the Interior Page 51 GAO-12-559 Kachemak Bay Ferry Appendix III: Comments from the Appendix III: Comments from the Department of Transportation Department of Transportation Page 52 GAO-12-559 Kachemak Bay Ferry Appendix III: Comments from the Department of Transportation Page 53 GAO-12-559 Kachemak Bay Ferry Appendix III: Comments from the Department of Transportation Page 54 GAO-12-559 Kachemak Bay Ferry Appendix IV: Comments from the Seldovia Appendix IV: Comments from the Seldovia Village Tribe Village Tribe Note: GAO comments supplementing those in the report text appear at the end of this appendix. In addition, we have not included the exhibits. Page 55 GAO-12-559 Kachemak Bay Ferry Appendix IV: Comments from the Seldovia Village Tribe See comment 1. Page 56 GAO-12-559 Kachemak Bay Ferry Appendix IV: Comments from the Seldovia Village Tribe See comment 2. See comment 3. Page 57 GAO-12-559 Kachemak Bay Ferry Appendix IV: Comments from the Seldovia Village Tribe See comment 4. Page 58 GAO-12-559 Kachemak Bay Ferry Appendix IV: Comments from the Seldovia Village Tribe See comment 4. Page 59 GAO-12-559 Kachemak Bay Ferry Appendix IV: Comments from the Seldovia Village Tribe Page 60 GAO-12-559 Kachemak Bay Ferry Appendix IV: Comments from the Seldovia Village Tribe Page 61 GAO-12-559 Kachemak Bay Ferry Appendix IV: Comments from the Seldovia Village Tribe Page 62 GAO-12-559 Kachemak Bay Ferry Appendix IV: Comments from the Seldovia Village Tribe Page 63 GAO-12-559 Kachemak Bay Ferry Appendix IV: Comments from the Seldovia Village Tribe Page 64 GAO-12-559 Kachemak Bay Ferry Appendix IV: Comments from the Seldovia Village Tribe Page 65 GAO-12-559 Kachemak Bay Ferry Appendix IV: Comments from the Seldovia Village Tribe Page 66 GAO-12-559 Kachemak Bay Ferry Appendix IV: Comments from the Seldovia Village Tribe See comment 5. See comment 6. Now on p. 2. Now on pp. 19-29. Page 67 GAO-12-559 Kachemak Bay Ferry Appendix IV: Comments from the Seldovia Village Tribe Page 68 GAO-12-559 Kachemak Bay Ferry Appendix IV: Comments from the Seldovia Village Tribe Page 69 GAO-12-559 Kachemak Bay Ferry Appendix IV: Comments from the Seldovia Village Tribe Page 70 GAO-12-559 Kachemak Bay Ferry Appendix IV: Comments from the Seldovia Village Tribe See comment 4. See comment 7. Now on pp. 14 and 15. Page 71 GAO-12-559 Kachemak Bay Ferry Appendix IV: Comments from the Seldovia Village Tribe See comment 4. See comment 4. Now on p. 15. Now on p. 30. Page 72 GAO-12-559 Kachemak Bay Ferry Appendix IV: Comments from the Seldovia Village Tribe See comment 4. See comment 4. Now on pp. 30 and 31. Page 73 GAO-12-559 Kachemak Bay Ferry Appendix IV: Comments from the Seldovia Village Tribe See comment 8. See comment 4. Now on p. 32. See comment 4. Page 74 GAO-12-559 Kachemak Bay Ferry Appendix IV: Comments from the Seldovia Village Tribe See comment 9. See comment 10. Page 75 GAO-12-559 Kachemak Bay Ferry Appendix IV: Comments from the Seldovia Village Tribe Page 76 GAO-12-559 Kachemak Bay Ferry Appendix IV: Comments from the Seldovia Village Tribe The following are our comments on the Seldovia Village Tribe’s letter dated May 30, 2012. 1. Our legal opinion, which is reprinted in appendix I, discusses the GAO Comments Department of Transportation’s allocation of funds to the Department of the Interior for the ferry and Interior’s annual funding agreements with the tribe. Although the opinion concludes that both the allocation and annual funding agreements are consistent with the language of the appropriations, it does not discuss any actions of the Seldovia Village Tribe. Therefore, our legal opinion does not find, as the tribe maintains, that they “did nothing illegal.” 2. The tribe commented that the ferry currently operated by the tribe does not significantly differ from the tribe’s proposal that was approved for funding. We accurately reported, and the tribe agrees, that the scope of the ferry project changed significantly between 2002 and 2007. Because one of the report's objectives was to examine the entire history of the ferry project, not just the history beginning in 2007, we made no changes in response to this comment. Furthermore, as we discussed in the Agency and Third Party Comments and Our Evaluation section, BIA’s receipt of quarterly status reports and disbursement of funding under the self- determination contract did not constitute approval of the ferry project because the tribe—not BIA had decision-making authority—and BIA had a limited oversight role. As we stated in our legal opinion, both Transportation’s allocation documents and Interior’s annual funding agreements with the tribe are consistent with the language of the appropriations. The documents required that the tribe use the funds for a ferry, the purpose stated in the appropriations acts. 3. The tribe commented that the ferry project did not change after the 2007 study of ferry alternatives and that the 2009 study simply summarizes the final design alternative and recommendations of the 2007 study. We believe that we have accurately characterized the results of the two studies in the report. While we agree that the ferry alternative of a passenger-only catamaran with light-freight capability was recommended in both studies, the 2007 study only provided a recommendation on the type of ferry and did not include specific conclusions or recommendations for the operation of the ferry. Therefore, we cannot assume, as the tribe suggests, that decisions for the operation of the ferry had already been made in 2007. We found no evidence, and the tribe has provided none beyond the Page 77 GAO-12-559 Kachemak Bay Ferry Appendix IV: Comments from the Seldovia Village Tribe assertions in its May 30 letter, that the 2007 report's recommendations were in fact final determinations. 4. We made revisions to the report based on this comment. 5. Our report focuses on the roles of federal agencies in funding and overseeing the ferry project and associated dock facility projects and does not address whether the tribe complied with the terms of its self- determination contract and self-governance compacts or misused funding. In addition, a comprehensive analysis of the ferry's expenditures and budgets was beyond the scope of our review. 6. We accurately described the oversight actions taken by each of these agencies with respect to the ferry project. As we reported, for a variety of reasons many of these agencies had little or no oversight responsibility. We made some changes in the report to clarify each agency's role, but we believe the tribe's blanket statements concerning agency oversight and approval of the ferry are inaccurate. 7. We made changes to the report to ensure that we have accurately captured the views of the city and the tribe. As we report, city and tribal officials do not agree on whether the degree of city involvement was adequate. 8. Our report, including prior drafts, does not address the tax issue because it is not pertinent to our objectives. 9. Our objective was to describe the roles of the federal agencies involved in funding and overseeing the ferry project and associated dock facility projects. As our report acknowledges, while the U.S. Army Corps of Engineers did not provide funding for the project, it did have a role in issuing permits for dock construction and ensuring compliance with them. As a result, we made no changes to the report in response to this comment. 10. We reported the interaction between FTA and the tribe accurately, and made no changes in response to this comment. As we reported, in December 2011, FTA notified the tribe that the ferry’s extended trips with sightseeing activities appear not to serve any public transportation purpose by their less direct route, and that deviating a transit service for the purpose of sightseeing is not consistent with the requirement that FTA-funded facilities be used for public transportation. Moreover, FTA noted that incidental use of the ferry for sightseeing requires prior FTA written consent, which is not Page 78 GAO-12-559 Kachemak Bay Ferry Appendix IV: Comments from the Seldovia Village Tribe automatically granted. In addition, FTA asked the tribe to (1) request approval for incidental use for the extended route trips to be done in the future and (2) provide documentation to support the operating costs for public transportation charged to the grant. As we reported, the tribe did not apply for incidental use approval because it took corrective action by stating that the ferry would no longer take the extended sightseeing route and provided FTA with documentation of enough eligible costs for its direct routes to justify its grant disbursements. Page 79 GAO-12-559 Kachemak Bay Ferry Appendix V: GAO Contact and Staff Appendix V: GAO Contact and Staff Acknowledgments Acknowledgments Anu K. Mittal, (202) 512-3841 or email@example.com GAO Contact In addition to the individual named above, Jeffery D. Malcolm (Assistant Staff Director), Ellen W. Chu, Brad C. Dobbins, Karine E. McClosky, Mehrzad Acknowledgments Nadji, and Jeanette M. Soares made key contributions to this report. (361292) Page 80 GAO-12-559 Kachemak Bay Ferry GAO’s Mission The Government Accountability Office, the audit, evaluation, and investigative arm of Congress, exists to support Congress in meeting its constitutional responsibilities and to help improve the performance and accountability of the federal government for the American people. GAO examines the use of public funds; evaluates federal programs and policies; and provides analyses, recommendations, and other assistance to help Congress make informed oversight, policy, and funding decisions. GAO’s commitment to good government is reflected in its core values of accountability, integrity, and reliability. The fastest and easiest way to obtain copies of GAO documents at no Obtaining Copies of cost is through GAO’s website (www.gao.gov). Each weekday afternoon, GAO Reports and GAO posts on its website newly released reports, testimony, and correspondence. To have GAO e-mail you a list of newly posted products, Testimony go to www.gao.gov and select “E-mail Updates.” Order by Phone The price of each GAO publication reflects GAO’s actual cost of production and distribution and depends on the number of pages in the publication and whether the publication is printed in color or black and white. Pricing and ordering information is posted on GAO’s website, http://www.gao.gov/ordering.htm. Place orders by calling (202) 512-6000, toll free (866) 801-7077, or TDD (202) 512-2537. Orders may be paid for using American Express, Discover Card, MasterCard, Visa, check, or money order. Call for additional information. Connect with GAO on Facebook, Flickr, Twitter, and YouTube. Connect with GAO Subscribe to our RSS Feeds or E-mail Updates. Listen to our Podcasts. Visit GAO on the web at www.gao.gov. Contact: To Report Fraud, Waste, and Abuse in Website: www.gao.gov/fraudnet/fraudnet.htm E-mail: firstname.lastname@example.org Federal Programs Automated answering system: (800) 424-5454 or (202) 512-7470 Katherine Siggerud, Managing Director, email@example.com, (202) 512- Congressional 4400, U.S. Government Accountability Office, 441 G Street NW, Room Relations 7125, Washington, DC 20548 Chuck Young, Managing Director, firstname.lastname@example.org, (202) 512-4800 Public Affairs U.S. Government Accountability Office, 441 G Street NW, Room 7149 Washington, DC 20548 Please Print on Recycled Paper.
Kachemak Bay Ferry: Federally Funded Ferry Was Constructed with Limited Oversight and Faces Future Operating Challenges
Published by the Government Accountability Office on 2012-06-11.
Below is a raw (and likely hideous) rendition of the original report. (PDF)