KACHEMAK BAY 

FERRY

Federally Funded 

Ferry Was 

Constructed with 

Limited Oversight and 

Faces Future 

Operating Challenges

Report to Congressional Requesters

June 2012

GAO-12-559

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-559, a report to 

congressional requesters

June 2012

KACHEMAK BAY FERRY

Federally Funded Ferry Was Constructed with 

Limited Oversight and Faces Future Operating 

Challenges 

Why GAO Did This Study

In 2002, the Seldovia Village Tribe

proposed building a year-round ferry 

that would serve several isolated 

communities on the south shore of 

Alaska's Kachemak Bay. Federal 

funding for a ferry was subsequently 

included in the Department of 

Transportation’s appropriations, 

transferred to the Department of the 

Interior, and then provided to the tribe

through agreements under the Indian 

Self-Determination and Education 

Assistance Act, as amended. The 

tribe’s ferry began operating in May 

2010, amid community concerns about 

significant changes in the ferry’s

design and operation from the original 

proposal and its effect on existing

private tour boat businesses.

GAO was asked 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 

projects; and (3) concerns and 

challenges, if any, regarding the 

continued operation of the ferry. GAO 

analyzed documents and interviewed 

federal agency officials and tribal and 

community representatives. 

What GAO Recommends

GAO recommends that the 

Departments of the Interior and 

Transportation collaborate to 

determine the disposition of sale 

proceeds in the event the ferry is ever 

sold. Interior and Transportation 

agreed to implement GAO’s 

recommendation. The Seldovia Village 

Tribe did not comment on GAO’s 

recommendation but expressed a 

number of concerns which are 

discussed more fully in the report.

What GAO Found

In examining the history of the Kachemak Bay ferry project, GAO found that the 

Seldovia Village Tribe’s federally funded ferry differs significantly from its original 

proposal. In 2002, the tribe proposed a vehicle and passenger ferry with yearround service between Homer, Alaska, on the north shore of Kachemak Bay and 

multiple southern ports, including the city of Seldovia. Federal funding was 

appropriated in fiscal years 2004, 2005, and 2006, from which about $8.5 million 

was provided to the tribe for a ferry. The state also provided $1.5 million. The 

tribe subsequently built a ferry and dock facilities that cost about $8.8 million, but 

the project was significantly more limited in scope and service than the original 

proposal. Specifically, the ferry, known as the Kachemak Voyager began 

operating in May 2010, but it only provided passenger and light-freight service 

between Homer and Seldovia and only during the summer months.

Federal agencies provided funding and limited oversight but had no decisionmaking role for the ferry project. After the Department of Transportation (DOT) 

received the funds for the ferry in its fiscal years 2004, 2005, and 2006 annual 

appropriations, it transferred these funds to the Department of the Interior

(Interior). As a result of these transfers, DOT provided no oversight for the ferry 

project. Interior provided the funding to the tribe through agreements under the

Indian Self-Determination and Education Assistance Act, as amended, that 

generally authorize tribes to use funds to plan and administer programs with little 

involvement by the federal government. The tribe provided Interior with quarterly 

project status reports, but Interior did not provide guidance to the tribe in 

response to changes in the project. Following a 2009 Inspector General 

investigation, Interior developed new procedures to preclude certain 

transportation projects like the tribe’s ferry from being funded through these 

agreements in the future. DOT’s Federal Transit Administration (FTA) also 

awarded the tribe two grants in 2010, totaling $675,000, and also provided 

limited oversight over the grants, according to agency officials. 

A number of concerns and challenges exist regarding future operations of the 

ferry and its financial sustainability. First, local private tour boat operators are 

concerned that competition from the ferry has and will continue to negatively 

affect their businesses. In particular, they noted that, because of federal grants, 

the ferry has been able to offer lower fares that the private operators cannot

match. Second, it is unlikely that the ferry will become profitable as expected by 

2013, largely because of lower passenger volume and higher operating costs 

than projected. Using actual passenger and cost data from 2010 and 2011, GAO 

determined that losses will most likely continue to grow, which will make the ferry 

financially unsustainable without further government subsidies. Third, FTA was

concerned that the tribe had not complied with its grant requirements. The tribe 

needed prior FTA approval before using the ferry for nonpublic transportation 

activities, such as sightseeing, but did not obtain approval. The tribe took

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 

awarding agency has a right to those proceeds. View GAO-12-559. For more information, 

contact Anu K. Mittal at (202) 512-3841 or 

mittala@gao.gov.
Page i GAO-12-559 Kachemak Bay Ferry

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—HomerHalibut 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

Contents
Page ii 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 

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without further permission from GAO. However, because this work may contain 

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Page 1 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 freightcarrying 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 2 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 SelfGovernance 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 3 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 4 GAO-12-559 Kachemak Bay Ferry

Alaska—encompassing 586,412 square miles—is the largest state in the 

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.

Background 
 

Page 5 GAO-12-559 Kachemak Bay Ferry

Figure 1: State of Alaska, with Selected Cities and Highway System
 

Page 6 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 7 GAO-12-559 Kachemak Bay Ferry

Figure 2: Kachemak Bay and Surrounding Communities
 

Page 8 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 selfdetermination 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

 

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.

Selfdetermination 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 dayto-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 Self2

Pub. L. No. 93-638 (1975), codified as amended at 25 U.S.C. §§ 450 to 458ddd-2.
 

Page 9 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 selfdetermination 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 10 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 ferry currently operated by the tribe—the Kachemak Voyager—differs 

significantly from the tribe’s original proposal for a year-round vehicle, 

freight, and passenger ferry to serve Homer and several of the isolated 

communities along the south shore of Kachemak Bay. The ferry project 

underwent significant changes from 2002 to 2009, as shown in figure 3, 

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.

The Seldovia Village 

Tribe’s Federally 

Funded Ferry Differs 

Significantly from Its 

Original Proposal
 

Page 11 GAO-12-559 Kachemak Bay Ferry

Figure 3: Timeline of Key Events for the Kachemak Bay Ferry Project
 

Page 12 GAO-12-559 Kachemak Bay Ferry

To encourage economic development on the south side of Kachemak 

Bay and provide greater access to Alaska’s state highway system in 

Homer for south shore communities, after conducting community 

meetings to determine local needs, the tribe in 2002 began distributing a 

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.

The Tribe Initially 

Proposed a Vehicle and 

Passenger Ferry Serving 

Multiple Ports Year-Round 
 

Page 13 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

• Daily passenger and vehicle ferry service between Homer, Halibut 

Cove (via Peterson Point), Jakolof Bay, Nanwalek, Port Graham, and 

Seldovia.

The revised proposal included the following features:

• 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-HomerJakolof Bay-Halibut Cove ferry, which occurred in December 2003.
 

Page 14 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 village corporation managed the ferry project in two phases: planning 

and construction. During the planning phase, the village corporation 

conducted two studies of options for the proposed project and, on the 

basis of these studies, selected a vessel option that could transport 

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 ferryoperating 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 lightfreight-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:

The Tribe Built and Now 

Operates a Passenger and 

Light-Freight Ferry Serving 

Two Ports in the Summer
 

Page 15 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 16 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 17 GAO-12-559 Kachemak Bay Ferry

Figure 4: The Kachemak Voyager

To plan and construct the Kachemak Bay ferry and associated docks in 

Homer and Seldovia, the tribe spent about $8.8 million of the close to 

$9 million in federal appropriations and grants it received beginning in 

fiscal year 2005. According to documentation provided by the tribe, it 

spent about $1.97 million for phase I project-planning activities, including 

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.

The Tribe Spent about 

$8.8 Million of Federal 

Funding to Plan and 

Construct the Ferry 

Project
 

Page 18 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

Expenditure categories

Phase I:

planning

Phase II:

construction

Total

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 19 GAO-12-559 Kachemak Bay Ferry

Federal agencies provided funding and limited oversight, but they had no 

decision-making role in determining the type of ferry to be constructed or 

how it would be operated. Congress appropriated funds for a ferry in 

fiscal years 2004 through 2006 without any specific description of the type 

of ferry to be constructed or its operations and well before the tribe’s 

design and operating studies were completed. Similarly, DOT transferred 

the ferry construction funds to Interior without any specific design or 

operation limitations. BIA subsequently transferred the ferry construction 

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 selfgovernance 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

 

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.

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.

Federal Agencies 

Provided Funding and 

Limited Oversight but 

Had No DecisionMaking Role for the 

Ferry Project
 

Page 20 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 21 GAO-12-559 Kachemak Bay Ferry

DOT’s annual appropriation acts made available a total of $9 million for a 

ferry serving four Kachemak Bay ports as follows:

• Fiscal year 2004. Section 115 of Division F of the Consolidated 

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 BaySeldovia 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).

10Pub. 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.

11H.R. Rep. No. 109-307, at 158 (2005).

DOT Transferred 

Appropriations to Interior 

and Did Not Oversee the 

Ferry Project
 

Page 22 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

 

12According 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.

13The 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.

14This allocation letter to BIA identified the route, location, and work type as the HomerHalibut 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 23 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.

After receiving the funds from DOT, BIA provided the fiscal year 2004 

appropriation to the tribe under a self-determination contract and the 

fiscal years 2005 and 2006 appropriations under the tribe’s selfgovernance compact. In total, BIA provided the tribe with a little over 

$8.5 million as follows:

• From the fiscal year 2004 appropriation, $1,967,000 for ferry planning 

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

 

15BIA retained $33,000 of the fiscal year 2004 appropriation for oversight, such as travel 

and other agency administrative expenses associated with the project.

16Even 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.

Interior Provided Ferry 

Funding for the Tribe to 

Administer Without Any 

Specific Design or 

Operation Limitations and 

Had No Decision-Making 

Role for the Project
 

Page 24 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 selfdetermination 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

 

17Department of the Interior, Office of Inspector General, Report of Investigation: Seldovia 

Ferry, OI-OR-09-0225-I (Portland, Ore: July 27, 2009).

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. 
 

Page 25 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 SelfGovernance, 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 26 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

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 

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.

 

18Pub. 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.

19Department 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 27 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 selfdetermination 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 two Tribal Transit Program grants as follows:

• Fiscal year 2009 American Recovery and Reinvestment Act funding: 

$475,000 grant for Homer dock upgrades, awarded in June 2010,20

• 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 

 

20The 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.

FTA Awarded the Tribe 

Grants for the Ferry and 

Exercised Minimal 

Oversight over Their Use
 

Page 28 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 tribe received no funds from the U.S. Army Corps of Engineers 

(Corps), but the Corps was responsible for reviewing and approving the 

tribe’s River and Harbors Act section 10 permit applications for dock 

construction in both Homer and Seldovia. Section 10 of the River and 

Harbors Act requires that a Corps permit be obtained for certain 

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.

 

21FTA Region X covers Alaska, Idaho, Oregon, and Washington.

The Army Corps of 

Engineers Provided 

No Funding but Issued 

Required Permits for 

Dock Construction 
 

Page 29 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 30 GAO-12-559 Kachemak Bay Ferry

The operation of the Kachemak Voyager has raised a number of 

concerns and challenges regarding the consequences and viability of its 

continued operation. Specifically, private tour operators told us that they 

are concerned that the ferry competes directly with their long-established 

businesses and will continue to negatively affect them, and the tribe faces 

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 private tour boat operators have raised concerns that the 

Kachemak Voyager duplicates services between Homer and Seldovia 

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.

Concerns and 

Challenges Exist 

Regarding Continued 

Ferry Operations

Local Tour Boat Operators’ 

Concerns About Ferry 

Competition 
 

Page 31 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 32 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

Given the differences between assumed ferry operations and actual ferry 

operations, it is highly unlikely that the ferry will become self-sustaining 

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 

 

22One 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.

Ferry Operations Are Not 

Financially Sustainable 

without Ongoing Subsidies
 

Page 33 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 34 GAO-12-559 Kachemak Bay Ferry

study.23

Figure 7: Projected Kachemak Voyager Financial Performance and Reanalysis, 

2010-2013 Operating Season

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.

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.

 

23The 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 35 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.

According to FTA officials, the tribe did not comply with the requirements 

of the FTA Tribal Transit Program grants that it received in 2010 for the 

Homer dock upgrades and ferry operating expenses because it did not 

obtain FTA approval for “incidental use” of the ferry for sightseeing. The 

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 

The Tribe Did Not Comply 

with Its FTA Grant 

Requirements but Has 

Taken Corrective Action
 

Page 36 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 higherpriority applications from other entities.
 

Page 37 GAO-12-559 Kachemak Bay Ferry

Given the potentially unsustainable operating costs of the Kachemak 

Voyager without significant subsidies, should the tribe choose to sell the 

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 

 

2423 U.S.C. § 129(c)(6).

The Disposition of Sale 

Proceeds Is Unclear If the 

Tribe Sells the Ferry
 

Page 38 GAO-12-559 Kachemak Bay Ferry

received because the funding was provided through a self-determination 

contract and self-governance compact.25

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. 

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.

Interior and DOT faced unusual challenges in funding and overseeing the 

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 

 

25See 25 U.S.C. § 450k(a)(1), 25 C.F.R. § 1000.220.

Conclusions 
 

Page 39 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 

recommend that the Secretary of the Interior direct the Assistant 

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 

Interior, and Transportation and to the Seldovia Village Tribe for review 

and comment. The Department of Defense did not provide comments. 

The Department of the Interior agreed with our recommendation and 

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 

Recommendation for 

Executive Action

Agency and Third 

Party Comments and 

Our Evaluation
 

Page 40 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 41 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 selfdetermination 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 42 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 selfdetermination 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

The tribe also provided other comments that we have incorporated in the 

report, as appropriate.

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.

 

26Section 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 43 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 mittala@gao.gov. 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
Appendix I: GAO Legal Opinion on Department 

of Transportation—Homer-Halibut CoveJakolof Bay-Seldovia Ferry

Page 44 GAO-12-559 Kachemak Bay Ferry

Appendix I: GAO Legal Opinion on 

Department of Transportation—HomerHalibut Cove-Jakolof Bay-Seldovia Ferry
Appendix I: GAO Legal Opinion on Department 

of Transportation—Homer-Halibut CoveJakolof Bay-Seldovia Ferry

Page 45 GAO-12-559 Kachemak Bay Ferry
Appendix I: GAO Legal Opinion on Department 

of Transportation—Homer-Halibut CoveJakolof Bay-Seldovia Ferry

Page 46 GAO-12-559 Kachemak Bay Ferry
Appendix I: GAO Legal Opinion on Department 

of Transportation—Homer-Halibut CoveJakolof Bay-Seldovia Ferry

Page 47 GAO-12-559 Kachemak Bay Ferry
Appendix I: GAO Legal Opinion on Department 

of Transportation—Homer-Halibut CoveJakolof Bay-Seldovia Ferry

Page 48 GAO-12-559 Kachemak Bay Ferry
Appendix I: GAO Legal Opinion on Department 

of Transportation—Homer-Halibut CoveJakolof Bay-Seldovia Ferry

Page 49 GAO-12-559 Kachemak Bay Ferry
Appendix II: Comments from the Department 

of the Interior

Page 50 GAO-12-559 Kachemak Bay Ferry

Appendix II: Comments from the Department 

of the Interior

Note: We have not 

included the exhibits.
Appendix II: Comments from the Department 

of the Interior

Page 51 GAO-12-559 Kachemak Bay Ferry
Appendix III: Comments from the Department 

of Transportation

Page 52 GAO-12-559 Kachemak Bay Ferry

Appendix III: Comments from the 

Department of Transportation
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 

Village Tribe

Page 55 GAO-12-559 Kachemak Bay Ferry

Appendix IV: Comments from the Seldovia 

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.
Appendix IV: Comments from the Seldovia 

Village Tribe

Page 56 GAO-12-559 Kachemak Bay Ferry

See comment 1.
Appendix IV: Comments from the Seldovia 

Village Tribe

Page 57 GAO-12-559 Kachemak Bay Ferry

See comment 2.

See comment 3.
Appendix IV: Comments from the Seldovia 

Village Tribe

Page 58 GAO-12-559 Kachemak Bay Ferry

See comment 4.
Appendix IV: Comments from the Seldovia 

Village Tribe

Page 59 GAO-12-559 Kachemak Bay Ferry

See comment 4.
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

Page 67 GAO-12-559 Kachemak Bay Ferry

See comment 5.

Now on pp. 19-29.

Now on p. 2.

See comment 6.
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

Page 71 GAO-12-559 Kachemak Bay Ferry

Now on pp. 14 and 15.

See comment 7.

See comment 4.
Appendix IV: Comments from the Seldovia 

Village Tribe

Page 72 GAO-12-559 Kachemak Bay Ferry

Now on p. 30.

Now on p. 15.

See comment 4.

See comment 4.
Appendix IV: Comments from the Seldovia 

Village Tribe

Page 73 GAO-12-559 Kachemak Bay Ferry

Now on pp. 30 and 31.

See comment 4.

See comment 4.
Appendix IV: Comments from the Seldovia 

Village Tribe

Page 74 GAO-12-559 Kachemak Bay Ferry

Now on p. 32. 

See comment 4. 

See comment 4.

See comment 8.
Appendix IV: Comments from the Seldovia 

Village Tribe

Page 75 GAO-12-559 Kachemak Bay Ferry

See comment 9.

See comment 10.
Appendix IV: Comments from the Seldovia 

Village Tribe

Page 76 GAO-12-559 Kachemak Bay Ferry
Appendix IV: Comments from the Seldovia 

Village Tribe

Page 77 GAO-12-559 Kachemak Bay Ferry

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 

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 selfdetermination 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 

GAO Comments
Appendix IV: Comments from the Seldovia 

Village Tribe

Page 78 GAO-12-559 Kachemak Bay Ferry

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 selfdetermination 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 
Appendix IV: Comments from the Seldovia 

Village Tribe

Page 79 GAO-12-559 Kachemak Bay Ferry

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.
Appendix V: GAO Contact and Staff 

Acknowledgments

Page 80 GAO-12-559 Kachemak Bay Ferry

Anu K. Mittal, (202) 512-3841 or mittala@gao.gov

In addition to the individual named above, Jeffery D. Malcolm (Assistant 

Director), Ellen W. Chu, Brad C. Dobbins, Karine E. McClosky, Mehrzad 

Nadji, and Jeanette M. Soares made key contributions to this report.

Appendix V: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments 

(361292)
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