Office of Inspector General 

DEPARTMENT OF HOMELAND SECURITY 

Review of Compliance with 

the Currituck Beach Lighthouse 

Operating License 

OIG-05-08 December 2004 

Office of Audits 

Offi ce of Inspector General 

U.S. Department of Homeland Security

Washington, DC 20528 

Preface 

The Department of Homeland Security (DHS) Office of Inspector General (OIG) was established 

by the Homeland Security Act of 2002 (Public Law 107-296) by amendment to the Inspector 

General Act of 1978. This is one of a series of audit, inspection, investigative, and special reports 

prepared by the OIG as part of its DHS oversight responsibility to identify and prevent fraud, 

waste, abuse, and mismanagement. 

This report assesses the strengths and weaknesses of the program or operation under review. It 

is based on interviews with employees and officials of relevant agencies and institutions, direct 

observations, and a review of applicable documents. 

The recommendations herein have been developed to the best knowledge available to the OIG, 

and have been discussed in draft with those responsible for implementation. It is my hope that 

this report will result in more effective, efficient, and economical operations. I express my 

appreciation to all of those who contributed to the preparation of this report. 

Richard L. Skinner 

Acting Inspector General 

Contents

Introduction.................................................................................................................................... 3

Results in Brief .............................................................................................................................. 4

Background ................................................................................................................................... 5

Detailed Results of Review.......................................................................................................... 10

Conclusion ................................................................................................................................... 16

Appendices 

Appendix A: Committee on Government Reform Request .................................................... 18

Appendix B: Government Letter on Instructions on Final Accounting .................................. 20

Appendix C: Purpose, Scope, and Methodology ..................................................................... 22

Appendix D: Management Comments..................................................................................... 24

Appendix E: Major Contributors To This Report .................................................................... 25

Appendix F: Report Distribution............................................................................................. 26

Abbreviations 

DHS Department of Homeland Security

GSA General Services Administration

OBC Outer Banks Conservationists, Incorporated 

OIG Office of Inspector General

U.S. United States 

Currituck Beach Lighthouse Page 1 
Tourists atop the Currituck Beach Lighthouse 

Source: United States Coast Guard files 

Page 2 Currituck Beach Lighthouse 
OIG

Department of Homeland Security 

Office of Inspector General 

Introduction 

In June 1990, the Coast Guard issued a license to Outer Banks Conservationists, 

Incorporated (OBC) for the non-federal use of the Currituck Beach Lighthouse 

(Lighthouse)1

 located on the outer banks of North Carolina. The license required 

OBC to maintain the Lighthouse tower; acknowledged that the Coast Guard is 

responsible for maintaining and operating the automated lantern as an aid to 

navigation; allowed OBC to charge an admission fee to the Lighthouse to help 

with maintenance, repair, and operating costs; and required OBC to remit excess 

revenue to the Coast Guard. 

OBC expressly sought permission to use the Lighthouse tower to draw tourists 

and tourist dollars to its leased property, which surrounds the Lighthouse. OBC 

has leased the adjoining Currituck Beach Lighthouse Reservation (Keepers 

Reservation) from the State of North Carolina since 1980. The Keepers 

Reservation is comprised of 5.2 acres and contains two houses, which OBC 

restored, that were used by keepers of the Lighthouse. The Lighthouse property is 

less than an acre and contains the tower. 

OBC accumulated revenue from admission fees. Because the admission fees 

are program revenue generated from the granted use of federal property, such 

fees are public money. OBC reported to the Coast Guard that, starting in 1990, 

it charged climbers a $1.50 fee for admission to the Lighthouse, and a $1.50 fee 

for admission to the Lightkeepers’ Reservation; subsequently, OBC increased 

each fee to $3. The license required OBC to annually submit to the Coast Guard 

a certified statement showing an accounting of operating expenses and revenue. 

The license also required a final accounting of the revenues and expenses 

generated from OBC’s use of the property under the license, and remittance to the 

government of any excess revenues not used for allowed purposes. 

The General Services Administration (GSA) conveyed the deed to the Lighthouse 

to OBC on October 17, 2003, thereby terminating the license. 

1

 License for Non Federal Use of Real Property, number DTCGZ75130-90-RP-037L 

Currituck Beach Lighthouse Page 3 
On September 11, 2003, the Chairman of the U.S. House of Representatives, 

Government Reform Committee (Committee) presented evidence that suggested 

that money owed to the Coast Guard had never been remitted and requested OIG 

to determine how much money OBC owes the Coast Guard under the license. 

(See Appendix A.) The areas of concern raised by the Committee are summarized 

in the following three key questions: 

1. Was OBC’s practice of accumulating and carrying-over revenues proper? 

2. What is the amount of excess revenue owed the government to settle the 

license? 

3. Did the Coast Guard provide appropriate oversight of the Lighthouse 

license? 

Results in Brief 

During the course of the license, OBC properly accumulated and carried over 

revenues from period to period, allowing it to pursue not only maintenance, but 

also more capital-intensive restoration and preservation of the Lighthouse. With 

termination of the license, these accumulated revenues, generated from OBC’s use 

of the Lighthouse property, became excess revenue inuring to the government. 

OBC submitted, and the Coast Guard accepted, with adjustments, a final 

accounting of the license revenues and expenses. The Coast Guard determined 

that the amount of excess revenue owed the government to settle the license was 

$328,392, of which the Coast Guard allowed OBC to use $220,000 for planned 

maintenance and restoration of the Lighthouse in lieu of remittance and demanded 

the balance of $108,392 from OBC2

. The OIG agreed with the Coast Guard’s 

calculation; and while the OIG found no definitive legal authority permitting OBC 

to use the $220,000 for the restoration and maintenance contracts it had cancelled, 

the OIG deemed allowing this proposed expenditure to be equitable considering 

the facts and circumstances in this matter. 

The Coast Guard concluded that the primary purpose of the license, i.e., the 

restoration and preservation of the Lighthouse structure, was accomplished. 

The license required OBC to assume responsibility for repairs, maintenance, 

renovations, restoration, and preservation of the Lighthouse and the grounds. The 

Coast Guard’s inspections of the Lighthouse determined that it was adequately 

2

 On November 10, 2004, OBC agreed that the $108,392 held in escrow should be distributed to the U.S. Treasury, and that OBC would 

proceed with its planned restoration work. 

Page 4 Currituck Beach Lighthouse 
maintained overall, although conditions found during some inspections raised 

concerns about the effects of tourists’ foot traffic and triggered closer Coast Guard 

oversight at times. 

The Coast Guard’s primary concern was the accomplishment of its aids-tonavigation mission. Therefore, the Coast Guard generally limited its oversight 

of OBC and Currituck to monitoring the physical condition of the tower and 

working order of the light. The Coast Guard relied on OBC to comply with the 

financial provisions of the license, with minimal financial management oversight. 

However, prompted by congressional inquiries, the Coast Guard conducted a 

financial management review in July 2003. The Coast Guard’s review of OBC’s 

final accounting report in March 2004 resolved all material discrepancies noted 

during these reviews and resulted in its approval of OBC’s final accounting with 

exceptions. 

The Coast Guard reviewed our report and concurred with our findings. The Coast 

Guard’s comments to the report are Appendix D. 

Background 

In June 1989 OBC requested permission from the Coast Guard to allow tourists to 

climb to the top of the Lighthouse. OBC sought this permission to draw tourists 

to its surrounding property leased from the State of North Carolina. According 

to OBC’s request, with the draw of climbing the Lighthouse, OBC would then 

charge tourists an admission fee to the surrounding property, allowing OBC to 

obtain funding needed to complete restoration of its surrounding property. In 

subsequent discussions, the Coast Guard indicated that it could only license OBC 

to use the Lighthouse and collect admission fees for the benefit of the Lighthouse. 

In June 1990, the U.S. Department of Transportation, through the Coast 

Guard, issued a license3 to OBC for the non-federal use of the Currituck Beach 

Lighthouse. The license allowed for an admission fee to generate revenue for 

maintenance, repair, operation, restoration, and preservation and required the 

licensee to submit certified financial statements annually. Specifically, the license 

required that OBC: 

• protect, maintain, and keep the facilities in working order; 

3

 License for Non Federal Use of Real Property, number DTCGZ75130-90-RP-037L 

Currituck Beach Lighthouse Page 5 
• obtain prior approval for any additions or alterations to the structures; 

and 

• annually submit a certified statement showing a breakdown of operating 

expenses and revenue. 

The license authorized OBC to open a museum gift shop at the base of the tower 

and to charge an admission fee to the Lighthouse. The license limited OBC’s 

use of the property to the restoration and preservation of the property and its 

structures. 

Since 1980, OBC has leased the Currituck Beach Lighthouse Reservation 

(Keepers Reservation) from the State of North Carolina. The Keepers 

Reservation is comprised of 5.2 acres surrounding the Lighthouse and contains 

two houses that were used by keepers of the Currituck Beach Light. Both 

keepers’ houses were restored by OBC. One keepers’ house is not open to the 

public. The other is used as a museum gift shop. The keepers’ houses are shown 

in the photo on the next page taken from atop the Lighthouse. 

OBC and the County of Currituck, North Carolina, in which the Lighthouse is 

located, both applied in February 2003 for ownership of the historic structure 

under the National Historic Lighthouse Preservation Act.4 On April 4, 2003, 

the Department of the Interior selected OBC’s proposal for ownership of the 

Lighthouse. OBC’s stewardship of the Lighthouse and the surrounding Keepers 

Reservation was the primary reason cited for the Department of Interior’s decision 

to award the deed to OBC.5 The County of Currituck appealed the decision. 

However, the Department of the Interior upheld its decision on July 30, 2003, 

awarding the Lighthouse to OBC. 

The GSA conveyed the deed for the Currituck Lighthouse property to OBC on 

October 17, 2003, thereby terminating the license. OBC assumed responsibility 

for maintaining the tower as an historic landmark according to historical 

preservation standards, while the Coast Guard retained responsibility for 

maintaining the automated lantern as an aid to navigation. The Coast Guard 

4

 On October 24, 2000, the National Historic Lighthouse Preservation Act of 2000, Public Law 106-355, amended the National Historic 

Preservation Act for the purposes of establishing a national historic lighthouse preservation program. The National Historic Lighthouse 

Preservation 

the Coast Guard identifies for disposal as excess property. Eligible entities are: any federal agency, the state or local government of the 

community in which the historic light station is located, and any nonprofit corporation, educational agency, or community development 

organization that has agreed to comply with certain historic preservation and public access conditions and is financially able to maintain the 

historic light station. 

5 Assistant Secretary for Fish and Wildlife and Parks, United States Department of the Interior, decision memorandum on disposition of the 

Currituck Beach Lighthouse of July 30, 2003. 

Page 6 Currituck Beach Lighthouse 
The surrounding Keepers Reservation as seen from atop the Lighthouse 

Source: United States Coast Guard files 

continues to operate the lantern providing a reference point for mariners 

navigating Currituck Sound or the Atlantic Ocean. 

Coast Guard’s July 2003 Compliance Review 

The Coast Guard, in response to congressional inquiries, planned and conducted 

a limited scope review of OBC’s compliance with the license. In July 2003, the 

Coast Guard issued a report on its review of OBC’s Lighthouse operations, basic 

business processes, revenues, and expenses. 

Currituck Beach Lighthouse Page 7 
While generally finding that OBC complied with the Coast Guard license 

agreement, the review disclosed a number of discrepancies, including: 

• OBC used the property for fund-raising for the Corolla Wild Horse Fund, 

as well as other OBC operations. 

• OBC held the Lighthouse admissions receipts in interest-bearing 

accounts and accrued interest revenue, but did not report the interest in 

its annual financial statements. 

The Coast Guard’s report noted that only half the admission revenues OBC 

collected were considered as Lighthouse revenues and attributed this to the 

collection of admission fees for the adjoining Lightkeepers Reservation that 

OBC leases from the State of North Carolina. The report recommended that the 

Coast Guard send a letter to OBC approving OBC’s practice of collecting fees 

for both the Lightkeepers Reservation and the Lighthouse at the entrance to the 

Lighthouse. Also, the report recommended that the letter direct OBC to change 

entrance signs, shown in the photo below, to specify that two admission fees are 

collected, and either remove or request approval for an unauthorized wishing 

well being used by OBC to collect donations to OBC’s Corolla Wild Horse fund. 

Finally, the report recommended that future licenses be written with more specific 

and defined terms. Although the Coast Guard provided OBC with a copy of its 

report, it did not send the recommended letter. 

The Coast Guard recommended in its July 2003 compliance review report that 

OBC change this sign to specify two admission fees were being collected 

Source: United States Coast Guard files 

Page 8 Currituck Beach Lighthouse 
Government Instructions for Final Accounting 

In response to a request for guidance from OBC’s accounting firm,6

 the GSA, 

the Coast Guard, the OIG, and the National Park Service sent a letter to OBC on 

January 9, 2004. (See Appendix B.) The letter advised OBC that: 

• The intent of the federal government is for OBC to conduct a final 

accounting and submit a financial statement reporting all Lighthouse 

revenues and expenses. 

• The final accounting should include the financial transactions related 

to the Lighthouse operations conducted during the period of the license 

from July 1, 1990, through October 17, 2003. At a minimum, the 

financial statement should report: 

1) All revenues OBC generated from its use of the Lighthouse, including 

but not limited to one-half of the admission fees; and the federal 

government’s share of wishing well revenues, Lighthouse donations, 

and interest income, over the course of the license. The final 

accounting should describe the methodology used to determine the 

amount of wishing well revenues, Lighthouse donations, and interest 

income due the federal government. 

2) All restoration expenses OBC incurred during the period of the 

license, to include expenditures incurred for preserving, restoring, 

maintaining, repairing, and renovating the Lighthouse. 

3) All operating expenses OBC incurred during the period of the license 

for the purposes of the license, to include expenses for managing the 

preservation, restoration, maintenance, repair, and renovation of the 

Lighthouse and expenses for managing and operating the Lighthouse 

as a public museum and archive. 

4) The amount of revenue in excess of expenses, as determined by 

subtracting restoration and operating expenses from the revenues. 

• A principal officer of OBC, or a public accounting firm should OBC 

so desire, must certify that the financial statement fairly presents in 

all material respects the results of operations of the Lighthouse for the 

period of the license. 

6

 Letter of November 12, 2003, from Maddison, Caison, & Ogburn, LLP to the National Park Service, the United States Coast Guard, the 

Department of Homeland Security’s Office of Inspector General, and the General Services Administration regarding the conduct of a final 

accounting for the Currituck Beach Lighthouse. 

Currituck Beach Lighthouse Page 9 
Detailed Results of Review 

Was OBC’s Practice of Accumulating and Carrying-Over 

Revenues Proper? 

OBC’s accumulating and carrying-over revenues from one annual period to 

the next was proper and compliant with applicable Coast Guard policies and 

procedures.7 OBC accumulated more revenues every year than were required for 

routine repair and maintenance of the Lighthouse, and held accumulated revenues 

for capital-intensive restoration needs. OBC accumulated excess revenues 

over more than one year, which allowed funding of more expensive restoration 

and preservation work to be pursued. For example, in the fiscal year ending 

June 2000 OBC spent about $454,000 on restoration and rehabilitation of the 

Lighthouse, while collecting only about $403,000 in total admissions and relying 

on cash reserves from prior years’ operations. 

The Coast Guard approved this practice, which we deem not only reasonable, but 

also consistent with the license, federal regulations, and established Coast Guard 

policies and procedures in effect at the time. The license required the payment to 

the Coast Guard of revenue in excess of expenditures but did not mandate annual 

remittance. Under the Coast Guard’s policies and procedures for the outgranting 

of historical lighthouse properties, the Coast Guard either issued a long-term 

license or a short-term lease: 

• Long-term licenses were to be issued for non-profits willing to assume 

responsibility for care of the lighthouse. Such was the case with the 

Currituck license to OBC. 

• Alternatively, short-term leases could be issued competitively to anyone 

willing to pay market rent. However, Coast Guard policy, citing 

appropriation law, precluded care of the lighthouse being accepted in 

lieu of rents. Therefore, responsibility and expenses for care of a leased 

lighthouse remained with the Coast Guard. 

Under the Currituck license, OBC assumed responsibility for the care of the 

Lighthouse. Therefore, the Coast Guard’s use of provisions authorizing admission 

fees to fund care of the lighthouse in the license was appropriately made and 

OBC’s practice of carrying-over revenues was proper. Further, carrying-over 

program income across fiscal periods may be prudent, if not necessary, to 

7 Real Property Asset Management Manual, Commandant Instruction M11011.9B, dated 18 October 1988. 

Page 10 Currituck Beach Lighthouse 
accomplish program goals requiring capital investment. Such was the case with 

the Currituck license to OBC. 

What is the Amount of Excess Revenues Owed the Government to 

Settle the License? 

On March 4, 2004, OBC provided a final accounting for the license reporting 

excess revenue of $187,908 as calculated based on the government’s instructions. 

On September 22, 2004, the Coast Guard determined that the amount of excess 

revenue owed the government to settle the license was $328,392. The OIG 

agreed with the Coast Guard’s calculation. The Coast Guard allowed OBC to use 

$220,000 of this amount for planned restoration and maintenance work on the 

Lighthouse in lieu of remittance and has demanded the balance of $108,392 from 

OBC. While the OIG found no definitive legal authority permitting OBC to use 

the $220,000 for the restoration and maintenance contracts it had cancelled, the 

OIG deemed allowing this proposed expenditure to be equitable considering the 

facts and circumstances in this matter. 

The Coast Guard Accepted OBC’s Final Accounting Report With 

Exceptions 

The Coast Guard’s excess revenue calculation is based on its decision to accept 

OBC’s final accounting for the license, with exceptions. The Coast Guard’s 

analysis identified, and adjusted for, $162,493 of unallowable professional fees 

and expenses that OBC reported, raising the calculated amount of excesses 

revenue to $350,401. The Coast Guard also identified, and adjusted for, $22,009 

of closeout costs that OBC incurred preparing the final accounting after the period 

of the license, lowering the calculated amount of excesses revenue to $328,392. 

The Coast Guard’s determination also allowed OBC to use $220,000 for planned 

maintenance and restoration of the Lighthouse in lieu of remittance. The 

Coast Guard made this allowance as an equitable adjustment pertaining to two 

restoration and maintenance contracts that OBC had cancelled at the end of the 

license. In its final accounting report OBC requested the government recognize 

the continuing bona fide need for the work to have been performed under the 

contracts and circumstances of the cancellations and consider these allowances. 

We reviewed the Coast Guard’s proposed allowance and we found no definitive 

legal authority permitting OBC to use the $220,000 for the restoration and 

maintenance contracts that it had cancelled. Nevertheless, allowing this proposed 

Currituck Beach Lighthouse Page 11 
expenditure appears equitable considering the facts and circumstances in this 

matter. 

Further, the Coast Guard’s acceptance of OBC’s final accounting reasonably 

resolved issues addressed in its July 2003 compliance review report that were 

raised as concerns in the Committee’s request.8 These issues center on revenue 

reporting, including admission charges, interest earnings, and revenues resulting 

from other uses of the Lighthouse, as discussed below. 

Reporting of Revenues From Admissions Charges 

The Coast Guard accepted OBC’s reporting of admission charges. OBC told the 

Coast Guard in 1990 that it charged both a fee for admission to the Lighthouse of 

$1.50 and a fee for admission to the Lightkeepers Reservation of $1.50. The fees 

were raised through the years to $3 and $3. The two fees were described in OBC 

correspondence to the Coast Guard. While the charges initially consisted of both 

a Lighthouse admission fee and a Lightkeepers Reservation fee, OBC began to 

collect a conservation program donation in later years in lieu of the Lightkeepers 

Reservation fee after the keepers’ house had been rehabilitated. Coast Guard 

officials said they did not object to this change because it did not affect the 

lighthouse fee. The Coast Guard had approved the collection, at the lighthouse, of 

a second admission charge by OBC as part of a cost savings initiative. The Coast 

Guard does not consider the resulting funds from the second admission fee as 

miscellaneous receipts or government property. 

In its annual financial statements OBC reported the amount of the Lighthouse 

admission fees collected, but did not report the total amount of admission charges 

collected or the Lightkeepers’ Reservation admission fees or the conservation 

program donation. OBC’s reporting only the Lighthouse admission fee reflected 

an oral agreement reached with the Coast Guard in 1990. This agreement allowed 

OBC to consolidate three functions at the base of the lighthouse: collecting 

admission fees for the Lighthouse; collecting admission fees for the surrounding 

OBC property, i.e. the Lightkeepers Reservation; and gate keeping. The Coast 

Guard approved the arrangement since consolidating these activities would reduce 

salary costs allowing more revenue for restoration. The Coast Guard’s July 2003 

compliance review of the license acknowledged this agreement. Nevertheless, the 

8

 See Appendix A for the Committee on Government Reform’s request letter. 

Page 12 Currituck Beach Lighthouse 
more than $1.4 million OBC collected through the conservation donation has been 

a source of controversy, as reflected in the Committee’s request. 

Reporting of Interest Earnings and Revenues Resulting From Other Uses 

of the Lighthouse 

The Coast Guard accepted OBC’s final accounting for other revenues. The final 

accounting resolved issues raised in the Coast Guard’s July 2003 compliance 

review, which noted omissions in reporting of other revenues generated by 

OBC from its use of the Lighthouse. In its annual statements, OBC understated 

revenues by omitting interest earned on accumulated revenues and not disclosing 

the other revenues OBC collected by unauthorized uses of the lighthouse, such 

as wishing well donations and sponsorship solicitations. However, in its final 

accounting OBC reported $48,355 in interest earnings and $10,054 in wishing 

well donations. 

The Coast Guard’s July 2003 compliance review also noted that onsite solicitation 

of sponsorship donations, which offered donors multiple free Lighthouse 

admissions, appeared to function as a volume discount for admission fees. 

Therefore, when a donor climbed the Lighthouse as a sponsor without paying an 

admission fee, the Coast Guard suggested OBC should account for the price of 

an admission as Lighthouse revenue. The Coast Guard’s July 2003 compliance 

review recommended changes in recordkeeping to capture these transactions. 

However, lacking sufficient data, OBC was unable to determine the amount of 

Lighthouse revenue from sponsorship solicitations. As the Coast Guard estimated 

the amount, over the 13 years of the license, was under $12,000, it concluded the 

omission was not a material discrepancy. 

Reporting of Expenses 

The Coast Guard accepted OBC’s final accounting for expenses, with exceptions. 

The Coast Guard accepted and approved OBC’s final accounting for restoration 

expenses, which were consistent with the results of the Coast Guard’s July 2003 

compliance review. During the compliance review, the Coast Guard examined the 

accounting for restoration expenses and found no material discrepancies. 

However, the Coast Guard challenged the substantial increase in operating 

expenses in recent periods during the July 2003 compliance review, upon receipt 

of the last annual financial statements, and in its review of OBC’s final accounting 

Currituck Beach Lighthouse Page 13 
report. The Coast Guard found that OBC had included $162,493 in certain 

operating expenses, such as professional fees and expenses, which OBC incurred 

pursuant to its efforts to acquire the lighthouse, but which were unrelated to the 

license requirements. Therefore, the Coast Guard adjusted its excess revenue 

calculation, disallowing $162,493 of $1,247,133 in operating expenses. 

During its compliance review, the Coast Guard conducted limited testing of 

OBC’s accounting for other expenses and found only minor discrepancies. For 

a judgmentally selected sample, the Coast Guard found OBC generally valued, 

classified, recorded, and documented the expense transactions correctly. Further, 

during its review of OBC’s final accounting report, the Coast Guard found that 

the disallowed professional fees and expenses were valued, classified, recorded, 

and documented correctly. We note that OBC readily disclosed and accounted for 

professional fees and expenses transactions, including those that were disallowed 

as license expenses. OIG concluded that the Coast Guard’s acceptance of OBC’s 

reporting of expenses, with the noted adjustments for disallowed operating 

expenses, was reasonable. 

Did the Coast Guard Provide Appropriate Oversight of the 

Lighthouse License? 

The Coast Guard appropriately focused its oversight of the Lighthouse and the 

license on inspecting the physical condition of the tower and working order of the 

light and performed periodic inspections. However, the Coast Guard was lax in 

enforcing license provisions requiring annual financial statements to be certified, 

forgoing the assurance that certification could have provided. 

Coast Guard Inspections 

The Coast Guard’s primary concern in its inspections and oversight of the 

Lighthouse was to ensure that its aids-to-navigation mission was accomplished. 

For example, during the license period, the Coast Guard upgraded the electrical 

system for the Lighthouse. However, when the Coast Guard did not timely 

repair windows on the lantern level, OBC made the needed repairs and ensured 

the results met historical preservation standards. The Coast Guard continues 

to maintain and operate the lantern providing a reference point for mariners 

navigating Currituck Sound or the Atlantic Ocean. 

Page 14 Currituck Beach Lighthouse 
The Coast Guard’s inspections of the Lighthouse determined that it was 

adequately maintained. Structural engineers’ assessments conducted in 1989, just 

prior to the license, and in 2002 show the light tower was sound, and may have 

improved under OBC’s care, as a result of capital investments. 

Inspection records also show that the material condition of the Lighthouse varied 

over the course of the license. For example, when the Coast Guard found that 

OBC’s opening of the Lighthouse to tourists resulted in heavier foot traffic than 

designed and had unintended adverse consequences placing the integrity of the 

structure at risk, the Coast Guard and OBC took measures to ensure the safety of 

the tower and the climbers. In 1992, the Coast Guard’s inspections found that: 

• OBC was allowing more tourists in the tower than the stairs could safely 

handle; 

• The stress of the shifting foot traffic was adversely affecting the wrought 

iron stairs and the tower; and 

• The tourist climbing operation was a safety risk to the public. 

With similar findings in 1993, the Coast Guard instructed OBC to limit the 

number of tourists in the tower at one time and pressed OBC on conducting 

structural engineering assessments, which led to OBC’s measures to strengthen 

the staircase supports. Additionally, the Coast Guard directed OBC to more 

clearly warn the public of the risks, including clear statements on every page of 

the registry and requiring all persons, regardless of pay status, to sign the registry 

before climbing. 

Financial Oversight 

The Coast Guard deemed financial oversight of the out-granted Lighthouses to 

be a lower priority than oversight of aids-to-navigation mission performance. 

Inspectors were civil engineers or Aids-to-Navigation Teams, not accountants. 

Instead, the Coast Guard required annual financial reporting that allowed for 

monitoring of the Lighthouses’ financial management. Additionally, the Coast 

Guard had included a license provision requiring those annual reports to be 

certified, which should have provided greater assurance of full and accurate 

reporting. 

However, while the license specifically required the annual statements to be 

certified, the Coast Guard was lax in enforcing this provision. During the 

Currituck Beach Lighthouse Page 15 
license period, OBC did not comply with and the Coast Guard did not enforce 

this provision. None of the 13 annual statements submitted by OBC’s public 

accounting firm were certified by either the accountant or OBC management. 

All of the 13 annual submissions from OBC’s public accounting firm contained 

a disclaiming statement that the information in the financial report was given to 

the accounting firm by OBC and was unaudited. Two of the 13 annual financial 

reports were unsigned. The Coast Guard accepted the 13 financial statements 

without challenge and did not question the lack of certification. 

However, in July 2003, in response to congressional inquiries, the Coast Guard 

conducted a review of OBC’s financial reporting as part of a limited compliance 

review. The Coast Guard found that OBC was properly accounting for repair, 

maintenance, and restoration expenses and admissions revenue, but not other 

revenues. The Coast Guard’s compliance review identified unauthorized and 

unreported uses of the Lighthouse and resulting revenues, such as wishing well 

collections and onsite sponsorship donations that appeared to function as a 

volume discount on lighthouse admissions. The Coast Guard considered revenue 

generated from these unauthorized operations as inuring to the Coast Guard. 

OBC management certified the final accounting report of March 4, 2004, 

which included interest and revenue from the wishing well. The Coast Guard’s 

determination on OBC’s final accounting report accepted OBC’s calculation of 

excess revenues. 

Conclusion 

The OIG and the Coast Guard found areas of non-compliance by OBC with the 

terms of the license. Although the Coast Guard did not enforce compliance with 

the license relative to the certification of annual reports or amend the license to 

incorporate the oral agreement to consolidate the collection of fees, it concluded 

that OBC was substantially compliant with the license. The Coast Guard did not 

find the points of non-compliance material and asserted that the deviations from 

the letter of the license, while not formally agreed to in advance, were reasonable. 

Further, after the January 9, 2004, letter to OBC resolved the requirements for the 

final accounting for the Lighthouse, the Coast Guard accepted much of OBC’s 

ensuing report, made adjustments and allowances for expenses, and determined 

the amount of excess revenue to be $328,392. OIG agreed with the Coast Guard’s 

determination. 

Page 16 Currituck Beach Lighthouse 
We limited our review to the now-terminated Currituck Beach Lighthouse 

license. Accordingly, we are not making recommendations to the Coast Guard for 

improving the management and oversight of other lighthouses licensed under this 

program. 

Management Comments. The Coast Guard concurred with our findings. The 

Coast Guard’s written response to the report is contained in Appendix D. 

Currituck Beach Lighthouse Page 17 
Appendix A 

Committee On Government Reform Letter 

Page 18 Currituck Beach Lighthouse 
Appendix A 

Committee On Government Reform Letter 

Currituck Beach Lighthouse Page 19
Appendix B 

Government Letter on Instructions on Final Accounting 

Page 20 Currituck Beach Lighthouse 
Appendix B 

Government Letter on Instructions on Final Accounting 

Currituck Beach Lighthouse Page 21
Appendix C 

Purpose, Scope, and Methodology 

Purpose, Scope, and Methodology 

On September 11, 2003, the Chairman of the U.S. House of Representatives, 

Government Reform Committee9

 (Committee) presented evidence that suggested 

that money owed to the Coast Guard has never been remitted and requested 

OIG to determine how much money OBC owes the Coast Guard under the 

license. To accomplish this objective, we determined whether OBC’s practice of 

accumulating and carrying-over revenues was proper and what was the amount 

of excess revenue owed the government to settle the license. To address the 

Committee’s concerns we also determined whether the Coast Guard provided 

appropriate oversight of the Lighthouse license. We limited this review to the 

Currituck Beach Lighthouse license. 

We assessed OBC’s compliance with the terms of the license. We interviewed 

OBC and Coast Guard officials. We reviewed license files, compliance review 

team working papers, and inspection reports obtained from the Coast Guard. We 

interviewed, held discussions with, and reviewed documents from officials of the 

General Services Administration, the National Park Service, and the County of 

Currituck. 

We evaluated OBC’s practices regarding accumulating and carrying-over 

revenues. We ascertained OBC’s practices, including historical practices on 

remitting excess revenues, by reviewing Coast Guard’s files and interviewing 

OBC and Coast Guard officials. In evaluating these practices, we applied criteria 

we developed through research of Coast Guard policies and procedures and 

federal regulations. 

We evaluated OBC’s reporting of Lighthouse revenues and expenses, by 

identifying instructions provided to OBC as shown in the Coast Guard’s files 

and disclosed from discussions with Coast Guard officials and applying criteria 

we developed through research of license provisions, federal regulations, and 

Generally Accepted Accounting Principles. 

We reviewed and monitored the Coast Guard’s determination of the amount 

of excess revenue owed the government to settle the license. We assessed 

the reasonableness of the assumptions, risks, and results of the Coast Guard’s 

analysis. We reviewed reports and information provided by OBC. We reviewed 

the Coast Guard’s files and discussed the process and preliminary results of the 

9 A copy of the letter from the Government Reform Committee is Appendix A of this report. 

Page 22 Currituck Beach Lighthouse 
Appendix C 

Purpose, Scope, and Methodology 

Coast Guard’s review with Coast Guard officials. We identified from Coast Guard 

documents the amount of excess revenue demanded from OBC. 

We evaluated the Coast Guard’s oversight of the Lighthouse license by identifying 

the Coast Guard’s practices from reviewing the Coast Guard’s files and 

discussions with Coast Guard officials and applying criteria we developed through 

research of Coast Guard policies and procedures and federal regulations. We 

discussed the application of federal regulations with the Office of Management 

and Budget. We identified circumstances related to administration of historical 

lighthouse outgrants from discussions with Coast Guard, Department of Interior, 

and General Services Administration officials and review of Coast Guard, 

Department of Transportation, Department of Interior, and General Services 

Administration documents. 

Throughout the review, the OIG team worked closely with Coast Guard officials. 

We greatly appreciate the cooperation and courtesy extended by the Coast Guard, 

General Services Administration, Department of Interior, OBC, and OBC’s 

accountants during the course of our review. Appendix 5 lists the major OIG 

contributors. For additional information about the review the principal OIG 

points of contact are Mr. J. Richard Berman, Assistant Inspector General for 

Audits, at (202) 254-4100 and Ms. Tamara Faulkner, Congressional Liaison at 

(202) 254-4100. 

Currituck Beach Lighthouse Page 23 
Appendix D 

Management Comments 

Page 24 Currituck Beach Lighthouse 
Appendix E 

Major Contributors to this Report 

Major Contributors to This Report 

J. Richard Berman, Assistant Inspector General for Audits 

Richard Reback, Counsel to the Inspector General 

Edward M. Stulginsky, Deputy Assistant Inspector General for Audits 

Phillip J. Maulden, Project Manager 

Richard Doery, Attorney 

Currituck Beach Lighthouse Page 25 
Appendix F 

Report Distribution 

Outer Banks Conservationists, Inc. 

Department of Homeland Security 

Secretary 

Deputy Secretary 

Chief of Staff 

General Counsel 

Chief Security Officer 

DHS OIG Liaison 

United States Coast Guard 

Other Executive Agencies 

U.S. Department of the Interior

General Services Administration 

Office of Management and Budget 

Chief, Homeland Security Branch 

DHS OIG Budget Examiner 

Congress 

Committee on Government Reform, U.S. House of Representatives 

Page 26 Currituck Beach Lighthouse 

Additional Information and Copies 

To obtain additional copies of this report, call the Office of Inspector General (OIG) 

at (202) 254-4100, fax your request to (202) 254-4285, or visit the OIG web site at 

www.dhs.gov/oig. 

OIG Hotline 

To report alleged fraud, waste, abuse or mismanagement, or any other kind of criminal 

or noncriminal misconduct relative to department programs or operations, call the OIG 

Hotline at 1-800-323-8603; write to Department of Homeland Security, Washington, DC 

20528, Attn: Office of Inspector General, Investigations Division – Hotline. The OIG 

seeks to protect the identity of each writer and caller.