UNITEDSTATESGENERALACCOUNTINGOFFICE REGIONAL OFFICE ROOM 201 415 FIRS- AVENUE NORTH SEAmLIZ, WASHlNGTON 98 i 09 X~JOZ- General Wesley E Peel Dxvlslon Engxneer, North Pacxflc Dlvxsion U S Army Corps of Engineers 210 customs House Portland, Oregon 97209 Dear General Peel We have completed our review of the Corps of Engineers (Corps) proJect financxal statements for the fiscal year ended June, 30, 1976 The purpose of our review was to deteraune the reasonableness and propriety of the pro3ect financial statements submitted by the North Pacrfx Division (NPD) to the Bonneville Power AdmInistration for xncluslon 1n the fiscal year 1976 Federal Columbxa River Power System consolzdated flnancxal statements Our review Included such test of accounting records, financial procedures, and controls as we considered necessary In the cxcumstances Our 1976 detailed review work was performed prxnarlly at the Portland and Seattle Dzstrxts Matters requxrlng changes on the financial statements were brought to the attention of responsxble dxstrxt offlcxals and resolved during our audrt In addxtlon, we ldentifxd several areas where procedures affectlug the fxnancxal records could be xmproved TRiU?SACTIONS WHICH REQUIRED - CHANGESTO THE FINANCIAL STATEMENTS 1. Interest was incorrectly stated on the fxnanclal statements of the Libby, Ice Harbor, Little Goose, and Lower Granite ProJects Libby --Interest on the Federal Investment was understated by $3,961,434 on the Statement of Assets and Llabllities and understated by $4,093,020 on the Statement of Revenues and Expenses These understatements were caused by the following Statement of Statement of Assets and Revenues and Reason Llabllltles Expenses Operating interest was understated due to an error In calculation $5,489,592 $5,489,592 Interest on construction was overstated due to an error in calculation (1,528,l58) (1,528,158) Interest account not recorded correctly 131,586 $3,961,434 $4,093,020 Ice Harbor --Interest on the Federal Investment was understated by $3,353,404 on the Statement of Assets and Llabllltles, and - - $543,327 on the Statement of Revenues and Expenses These understatements were caused by the followmg. Statement of Statement of Assets and Revenues and Reason Lrabllltles Expenses The Statement of Assets and Llabilltles was understated due to incorrect computer data $3,364,260 Operating interest was understated due to an error In calculation 148,349 $148,349 Interest accounts not recorded correctly (159,205) 394,978 $3,353,404 $543,327 2 Little Goose --Interest charged to construction was understated by $533,557 on the Statement of Revenues and Expenses. This error had no effect on the Statement of Assets and Llabilitxes Lower Granite --Interest on the Federal Investment was understated by $64,549 due to a calculation error. We belleve that the Interest calculation should be more thoroughly reviewed and a "reasonableness" test applxed so that large errors in Interest ml1 not go undetected. The Bonneville ProJect's Accounts Payable were overstated by $162,;;6 The overstatement was caused by two mxsstatements of accrued contractors' earnings (a) an understatement of $121,120 and (b) an overstatement of $284,036 3. Unfunded contractors' earnings for the Little Goose, Lower Monumental, Lower Granxte, and Dworshak ProJects were classlfled as deferred credxts rather than as accounts payable. As a result, accounts payable were Incorrectly stated by $397,935, $353,653, $400,265, and $400,230, respectively. OTEER MATTERS During our fxnanclal audit we noted several areas where accounting and management procedures could be improved. 1 The criteria used to classify claxms as contingent liabilities or as accounts payable differed among the distracts Corps offxxals stated that at present, there 1s no dlvxxon-wade regulation on this matter The Portland and Seattle Distrxts classify claims as accounts payable after the claim has been settled, whereas, the Walla Walla Dxztrict classlfles portlons of claims as accounts payable when there 1s a proba- bilxty that a payment will have to be made on the claim We believe that NPD should take actlon to standardxe the procedures used by the districts to establish contingent llabxllties resulting from claims 2. Accruals for contractors' earnings xn the Portland Dlstrxt could not be verified because the Fxnance and Accounting Branch had not obtalned the necessary supporting documentatxon We were advised by Portland District offxials that procedures wxll be establlshed to require the contracting offxer at the constructron site to provide a written 3 report of the contractors' estimated earnings. TEus documentation vrll enable the Finance and Accountmg Branch to verify the amount of estzmated contractors' earnxngs reported by the Construction Branch. 3. In the Seattle Dlstrxt, movable eqzupment which cost more than $200 was generally not capitalized Items not capztalized totaled about $85,000 and Included such items as a $10,701 street sweeper and a $5,068 hrgh-performance recorder. The Portland and Walla Walla Dxstrxcts have interpreted Corps' regulations to requxre that such eqrupment be capitalized We suggest that NPD reevaluate the Corps' mnstructions and consider clarzfying the emstIng x&ructions relating to capitalxzation of movable equapment. We also believe that the Seattle District should t&e action to capxtalxe the eqtipment referred to above. 4. NPD Internal Audzt officials advised us that the Division's internal fxnancial operations had not been revlewed durxng the year, because alJ. xnternal audltor effort had been expended on contract reviews. The Budget and Accounting Act of 1950 requxres the head of each agency to assure that appropriate internal audits are performed. To be effective, we belreve that mnternal audits should extend to all financial activxtxes of the agency Therefore, we recommend that approprrate action be under- taken to assure that xnternal audrt coverage includes a review of internal fxtanclal operatxons A copy of this letter IS bexng sent to the Engineer Comptroller, to the Dxatrxt Engineers at the Portland, Seattle, and Walla Walla Distrxts, and to the Army Audit Agency. We wzsh to acknowledge the courtesy and cooperation extended to our representatives during thus review. Your comments and advxe as to actxons taken or planned on these matters would be appreciated. SIncerely yours, RegIonal Manager 4
Audit of the Corps of Engineers Project Financial Statements
Published by the Government Accountability Office on 1977-03-09.
Below is a raw (and likely hideous) rendition of the original report. (PDF)