CIVIL DlViSiON llMMllllllllllilllllllliljill& LMO89790 ; -. . Czar Ger;efal Clarke: The General Accowting Office has reviewed certain activities of the revolving fund of the Corps of Engineers, Department of the ' Army. Our review included an examination of accounting axd billing procedures; calculation of replacement charges; equipment and facil,- ity utilization' , cznd the overall management control of revolving fund activities. Our work was performed at Corps district offices in Seattle, Kashington; Portland, Oregon; Omaha, Nebraska; Kansas C=ity, Eissouri; St. Louis, Kssouri; and Memphis, Tennessee; and at the Office of the Chi.ef of Engineers (OCE) in Washington, D. C. The Corps' revolving fund centralizes the operation and financing of cowon services and facilities used in the civil works program, Obl-&ations incurred by the fund are about $603 mil.lion annually and cover expenses incurred in providing scrviccss to authorized projects, for which the fund is reimbursed through bill- ings to appropriated funds., Our review of accounting and management activities of the revolving fund.showed weaknesses in the operation of repair facili- ties, application of replacement charges, reporting of eq,uipment Utilization ) and enforcement of accdunt-ing procedures. These specific weaknesses are discussed in subsequent sections of this report. The Corps owns and operates two maintenance and repair facilities on the Missouri River--Omaha, Nebraska, and Gasconade, Missouri--which were. needed, over the years, to ‘service the various types of floating . pl.ant and support equipment necessary to meet construc.tion and mainte- nance requ%rements on the Missouri River. To day , new work on the Ri.vcr is at a minimum, and the ~~orkload at the repair facilities has ' declined to the point where continued operation of the repair and maintenance facf.l.ities is no Longer economical and, in fact, is con- trary to the COXPS’ policy of requiring maximum economic utilization of all revolving ftlnd-owned equipment 2nd faci.litics. --_ Our review of ectj.vities at the Gasconadc: Boatyarcl which has been in operation since November 1, 189.2, illustrates the need to evaluate the operation of thesc facilities. It has about 74,000 square feet of floor space located on about 30 acres of land adja- cent to the confluence of the Missouri and Gasconade Rivers. No boats have been built at the facility since 1349 and the maintenance F;orkload has been declining since that time. The cost of operating the boatyard during fiscal year 1370,including repair and maintenance . of operating plant and cquipmsnt, manufacture and fabrication of parts, flood control and rescue services , and services furnished to other Corps offices, FJ~S about .$506,OdO. At the time of our review, most of the shops t:'ere vacant and the ec;uipment was idle. The machine shop .houses a tool room and about 20 pieces of equipment such as metal lathes, drill presses, * milling machines, and power saws. The equipment appeared to be in working condition, but records showed that the 20 pieces of equipment were used only a total of 482 hours during fiscal year 1970. We discussed the situation at Gasconadc with the Chief of the Kansas City District's Operation Division who advised us that he was initiating a study to determine a more economic:al way of repairing the District's equipment. With the gradual phase down of construction work on *the Missouri Riveir and the improved condition of the. river itself, the present workload et the maintenance and repair facilities indicates a ques- tionable need to retain these facilities in their present capacity. . We balieve the necessary repair work could be accomplished in a more economical manner by consolidating facilities or by closing certain . of the facilities and contracting for the required services. -- Recommendation --- We recommend that the need for the Gasconade Boatyard and similar . repair facilities at other locations be evaluated and a determination made as to whether it would bs more economical to consolidate or close some of the facilities and have the work performed by contract. IiQ'ROVEFlERS NEEDED IN DEVELOPIKG P---P REE'LACEI\IEP~T - CHARGES The Corps revised its accounting methods in fiscal year 1964 to provide funds for the replacement of existing plant and equipment without requesting direct appropriations. A charge to provide reve- ._ nues for the increasing cost of replacing plant and equipment was added to the rental rates being billed to projects on which the equipment w& used. We noted the following inconsistencies in the manner in which certain districts wore developing and applying the '. .rcplacement charges: 1. Because OCE establishes the r+lacement charge for dredges and aircraft, the charges do not refl.ect any additions and betterments made to the plant after the charge is established. For example, in September 1969, a replacement charge of $64,000 was established for the dredge BUl?.GESS owned by the . Memphis District. Although ad:!i.tions and betterments costing about $205,000 were added to the dredge during fiscal year 1970, 0% made no adjusti...-. "Ont to the replacement charge until 1971 b;hen all replacement charges for dredges and aircraft were revised. In contrast, however, annual repl.acenent charges computed by the FIemphis District for its towboqt NISSISSJ.PPE increased from $17,989 to $20,677 after additzions and betterments costing $278,000 were made. 2. Annual replacement charges of about $29,000 were established for a group of excess barges converted to a floating dock in the Nemphis District. The charges were- computed and billed on the basis that the barges were still being used as barges -and were to be replaced although the District had no plans to repl.ace them. 3. Numerous mathematical errors were made in the calculation of replacement charges by the Seattle District during fiscal years 1.970 and 1971: .I.n addition, replacement charges of $20,285 for snag boats EVWLA and PRESTON had not been col- lected from projects on which they were used during fiscal year 1970. 0 4. From January 1, 1964, to September 22, 1969, OCE did not : revise the indicessused dy the districts to compute the 1_ replacement charges, even though price. levels were rising each year. Although other districts unofficially updated the indices,. the Portland and Seattle Districts continued to use the original indices.during that period and, as a result, (11 charges for plant and equipment acquired prior to January 1, 1964, were not increased annually as the price level climbed, and (2) no replacement charges were estab- lished for plant and equipment acquired during the period. These deficiencies resulted in projects in the Portland District being undercharged by about $205,750. We believe that improvements in developing and applying replace- ment charges would result not only in billing appropriated funds on a more- equitlable basis, but would also provide a uniform~basis for eval-- uating the effectiveness of similar types of plant and equipment owned , by the revolving fund in various districts. - 3 -. Recommendation -- _____-- We recommend that the policies and practices for establishding and applying replacement charges be evaulated and appropriate revi- s-ions made to ensure that such charges *are properly calculated and equitably applied on a consistent basis. The utilization of fl.oating plant , as we!.]. as methods of account- ing for and reporting such utilizationj variec? among the district offices examined. Corps regulations require each district to report annually to OCE al.1 equipment with less than 30 days utilization and to either justify retention of that equipment or dispose. of it. Engineering Regulation 1125-2-300, effective June 22, 1971, revised the time period to‘45 days. These utilization retention reports used by the districts appear to be of questionable value as a management tool because El) even 10 minutes usage counts as a utilization day and (2) the reports are not always suhmitte<, We found that the Kansas City District Office &as maintaining several pieces of floating plant with little or no utilization which were justified on the utilizatron report on the basis of emergency operations, possible use on unpredictable river conditions, or as spare pieces. We questioned the need $0 r the retention of some of the equipment and the District subsequently declared 32 items of equipment excess , resulting in a savings to the Corps of about'$170,000. , The Seattle District Office did cot prepare the required repor!x justifying retention of equipment used less than 30 days in fiscal years 1.968, 1969, and 1970. Eecause the Seattle District Office did not prepare these-reports, we, as well as OCE, could not determine how long five items exccssed durini fiscal year 1970 wrere underutilized. The District, however, was incurring charges of about $G,850 annually . to operate and maintain the equipment itAcventually excessed. Although the Memphis District prepared reports on equipment used less than 30 days, we were unabl.e to evaluate the effectiveness of the equipment because the utilization reports were based on the days the equipment was rented rather than on the days the equ-ipment was used. ..- Rental charges on a piece oE equipment begin one day prior to the day it leaves its home station and cont-inues for the period it is away from the home station regardless of whether it is actuam.-beir:g used. We believe that this method of reporting does not provide OCE with a rea- sonable basis to accurately determine whether the equipment is being effectively utilized. The utilization reports required by 0.X to justify retention of %. - equipment is dzsigncd as a manigement tool to moiGtor and plan for the - 4 - equipment needs of the districts and obtain maximum utilization of equipment owned by thn~revolving fund. However, we believe that the problems noted during our review detract from the value of such reports and indicate the need fcr revised procedures to ensure timely . reporting on a uniform basis that reflects actual use rather than time billed to the using project or agency. Recon~mcndatj.on _.-- We recommend that the submission of utilization reports be more closely monitored to ensurcuniformreporting on the basis of actual usage. MEED FOR INIXOVED l-_----_----~_--l__ E@ORCEPIE~T OF -- ACCOUNTIEG PROCEDUKES -I_--- Our review disclosed numerous weal:nesses in accounting for revolving fund activities which we believe continued undetected and uncorrected because neither tlte districts' internal review staffs nor the Army Audit Agency reviewed the financial'managcmont of the fund. Some of the weaknesses noted, mostly in the Seattle District, are indicated below. --Kcvolvtng fund plant and equipment F!ere used on projects but the projects were not always hilled for their usage. --Transportation expenses on ner:ly purchased equipmdnt received from other Government agencies were not always capitalized. --In so&me instances income was not recorded in the month in which it was earned. --The costs of operating a snagboat and a survey boat as part of a community relations program were charged to an appro- priation for clearing debris from nav-igabl.e waters instead of to an overhead account. -.T-, 2 subsidiary and general ledger accounts wdre not recon- &led and the necessary year-end adjustments had c-ither not bi2n made or were incorrect. --Many depreciation charge s for new equipment were incorrect OS inconsistently computed. --Dcprcciation expense was not always charged from the first clay of the month ncarcst the acquisition date of equipment. ---Sdvag~ VCI~UCS varied considcrabLy iit relation to total book L. I Cost for similar equj pment items. -. 5- While many of these errors are not material, we believe they are indicative of a 1tcec1 for a greater emphasis on improving accounting practices. The overall audit of revolving fund activities is the responsibility of the Army Audit Agency; the Corps' internal review staffs are used.to ensure that management is effective, operations are efficient and economical , and internal. controls are adequate and consistently appljed. The financial aspects of the revolving fund.in some of the districts we reviewd have not been audited by the Corps' internal review staff or the Army Audit Agency since 1968; financial aspects of other districts have not been audited since 1966. We recommend that internal controls be strengthened to ensure improved accounting on a continuing basis. I--- We appreciate the cooperation and assistance given to our staff by your representatives during the review. We shzll appreciate -receiving your co-mwnts regarding any actions taken on the matters discussed i1: this report. Sincerely yours, Assistant Director Lieutenant General. F. J. C.Larlce Chief of Engineers Department of the Army Room 4D-013 1000 Independence Avenue, S. TJ. Washington, D. C. 20314 UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, D.C. 20548 CIVIL DIWSION Dear Mr. Hollingsworth: The General Accounting Office has reviewed the actions taken by the Atomic Energy Commission (AEC) to provide for the development and implementation of adequate quality assurance programs in conducting its various activities. Our review was performed at AEC Hea'dquarters, Germantown, Maryland; AEGIS Chicago, 'Idaho, and Richland Operations Offices; and at contractor locations under the jurisdiction of these offices--Argonne National Laboratory, Argonne, Illinois; Atlantic Richfield Hanford Company, Richland, Washington; Douglas United Nuclear, Inc., Richland, Washington; Idaho Nuclear Corporation, Idaho Falls, Idaho; National Accelerator Laboratory, Batavia, Illinois; and WADCO Corporation, Richland, Washington. With respect to the licensing of production and utilization facilities, AEG has defined quality assurance as comprising: " ** all those planned and systematic actions nsessary to prGY.i& adrqu ate C.!d. CoiLL dice th%C 6 Stru;t'Ufi, s-yakai, or component will perform Satisfactorily in service. Quality assurance includes quality control, which comprises those quality assurance actions related to the physical charac- teristics of a material, structure, component, or system which provide a means to control the quality of the material, structure; component, or system to predetermined requirements." The programs of the Divisions of Space Nuclear Systems, Naval Reactors, and Military Application have had formal quality assurance procedures for many years. For the past several years, AEC officials have emphasized the need for increased attention to and more effective application of quality assurance practices in reactor development programs to (1) help prevent costly expenditures due to deficiencies, (2) conserve materials and manpower, and (3) provide greater assurance of the successful achievement of program objectives. In our report to the Congress, dated August 17, 1971, on the "Cost, Schedule; and Design Aspects of Selected Atomic Energy Commission Construction Projects" (B-164105), we pointed out that a quality assurance program was instituted and emphasized by the Division of Reactor Develop- ment and Technology (RDT) for the Loss of Fluid Test Facility project because of problems being encountered in the construction of certain other I
Revolving Fund Activities of the Corps of Engineers (Civil Functions)
Published by the Government Accountability Office on 1971-12-21.
Below is a raw (and likely hideous) rendition of the original report. (PDF)