UNITED STATESGENE~ALACCOUNTINGOFFICE REGIONAL OFFICE 3086 FEDERAL OFFICE BUILDING 909 FIRST AVENUE SEATTLE. WASHINGTON 9s 104 -. Brigadier General B, s. Kelley +iqu Division Engiaeer North Pacifdc Dzivis~on U.se &my Caqxs of Engineers 210 cust6m BQWE Portfaaat, ckegon 97209 Dear Gem?E;al Kelley: We have cmpleted our review of the accounts and account%xsg pro- cedares for the Corps of Engineers' mftiptxrpose projects that were ~cluded in fzhe Federal Columbia Mver Power: System (FCRPS) fos the fiscal yeas ended June 30, 1970 o Our review, which %ncl.uded an evalua- tion of adu&mfst~atlve procedures and controls, was directed toward determining the reasonableness and propr%ety of the ptogects' financfal statements submitted by the Corpse I3oreh Pacific Ditisi~n (NPD) to the Bg~egtsjllp BS7W~P cz for CGnsGlf;catauu and h2lus~on in the brim+--?Q-?--+--t ..--w.e c..aWla, 33 1970 F@RPSfinancz~al statements. Our fimU.ngs were dIscussed with appropriate District and DfvisnBon corps officials * We were pleased w%th the corrective actfon taken or prtised 0 Whfle we fomd that admBn%strative procedures and controls in the Corps' basic accounting system were geuerally adequate, we would like to comment on the following matters~ Walfa Walla Dfst~ict The John Day Project workpapers contaiued numerous computational errors 2n the Construction Work in Progress Account which resulted in an approximte $230,000 overstatement of power assets. The workpapers which support the fPnancia3. statement showed QO evidence of supez%Lsory review by the Corps. We brought this matter to the attention of Corps officials who made the necessary recomputations and assured us that adequate rev$ew procedures would be established. Seattle District 1. Computational errors in supportdng workpapers for the Libby Dam Project caused an understatement of power assets of about $182,000. Corps officials made the necessary corrections. 50TH ANNIVERSARY 1921- 1971 /.* i- -l Brigadier General R.S. Kelley -2- 2. The Seattle District was not completely follow%ng the Balance Sheet account allocation procedures which were agreed to by BPA, the Bureau, the Corps, and GAO on May 20, 1965. a. The Corps incorrectly allocated Libby Dam "Facility Costs" on a pro-rata basis with direct Construction Work in Progress costs. Since the "Facflitfes Costs" were specifically identified to features by the Corps engmeering division they should have been charged to the identified features. The Corps officials prepared revxsed workpapers usang the proper method. b. The Corps allocated the costs of Libby Dam Balance Sheet Accounts on a pro-rata basis with the Construction Work in Progress Account. The procedures agreed to on May 20, 1965, require that accounts should be analyzed and the identified costs charged to the appropriate features. Differences xn the two methods were not signsfxcant enough to warrant revised statements for FY 1970 but the Corps officials assured us that the proper procedures would be followed +%Ithe future. Portland District During our revLew of the financial nts for the John Day Project, we noted that the Portland and Walla Walla Districts used differem methods in allocating joint Constructaon Work in Progress (CWIP) costs to the various purposes, such as power and navigation, The Portland Distrfct accounts for the portion of the John Day ProJect that has been completed and is %n operation, Walla Walla accounts for the portion of the project which is still under construction. Portland prepares the financial statements for the John Day Project and obtains information on construction-work-in-progress from Walla Walla. During fiscal. year 1970, Portland xncluded fox finzancial statement purposes construction-work-in-progress cost figures supplied by Walla Walla but recognized that the method used by WaUa Walla in allocating construction- work-in-progress to purposes was different from the method provided in the Portland instructions. The difference between the two dastricts occurs after a purpose has gone rimto service, and the total estimated cost for that purpose has been transferred to plant-in-service, Subsequently, Walla Walla will charge all future joint costs to the remaining purposes still under construction whereas Portland will continue to allocate joint costs to all joint cost purposes, on the basis of allocation percentages computed on total costs to date, whether or not some of tha purposes have been completed and transferred to plant-in-service. (See attachment for a more detailed explanation and the significance of the two methods.) 2 c -w i Brigadier General R.S. Kelley -3- We have discussed this matter t.,-fth Corps officials at the DPvisPon level and at the Portland and Walla Walla Dfstricts. Corps officaals at \ the Division level told us they w&l1 review and evaluate this matter and prepare needed guidelines %n order to Provide for consistency in FCRPSreporting. Interest Rates During our review of interest computations at the Portland District we noted that the 2-l/2 percent interest rate used during initial con- struction, also had been used to compute znterest costs on new construction for the Dalles and Bonneville Projects. The 2-l/2 percent rate had been used although justification data for new construction at the new proJects provided for 3-l/8 end 3-l/4 percent interest rates, Our computation of interest costs using the higher rates disclosed that additional interest costs for the two projects were not significant enough to warrant exception to our financzal statements as of June 30, 1970. We belLeve!, however, that the differences in interest costs will become mire sSgn%ficant as rm~ constructl~on funds see beufg expended. Portland District officials told us that the North Pacnfic Divisron is pursuing these matters at the Chief of Engineer's level. With respect to interest rates9 the Secretary of the Interior issued Ordec Ilo. 2924 on January 29, 1970, Accordmg to the Order End subsequent guidelines, a 4-7/8 percent interest rate would apply during ffsca% year 31970 to any Corps or Bureau of Reclamation eonstsuction initiated after January 29, 1970. We understand that Carps and Department of the Interior officials have met to discuss the appP%cation of the Secretary's Order but that no agreements have been reached to date. A copy of this letter is being sent to the Engineer Comptroller, and to the District Engineer at the Portland, Seattle, and Walla Walla Distxiets. We wish to acknowledge the courtesy and cooperation extended to our representatives durzng this review. Attachment: Bxample of CMIP Costs cc: Engineer Comptroller Portland District Engineer Seattle District Engineer Walla Walla Dis&rict Engrneer ATTACRMENT Page 1 EXAMPLE - ALLOCATION OF JOINT CONSTRUCTIONWORK-IN-PROGRESS(CWIP) COSTS BACKGROUND 1. Both Portland and Walla Walla collect actual costs in their CWIP account. 2. Both Portland and Walla Walla transfer total estimated costs to Plant-In-Service as purposesr such as navigation, go into service. 3. After a purpose (navigation) goes Into service: a. Walla Walla - Stops allocatang joint CWIP costs to this purpose once it has gone into service. All joint costs henceforth will be charged to the remaining purpose (power) which 1s still under construction. b. Portland - Continues to allocate jomt costs to this purpose (navigation) in the CWIP account, Note: The method of allocating joint CWIP costs starts to differ between the two districts after one purpose has gone into service. (See next page for an illustration of these methods.) ATTACRMENT Page 2 ILLUSTRATION OF JOINT CKCP COST ALLOCATIONHETHODS FACTS: 1, Total Estkated Joint Costs at completion = $300 2. Total Actual Joint Costs at titerim balance sheet date 13 200 3. Joint Cost Allocatfon Percentages: Joint to Power m 80 percent Joint to Navigation sle 20 percent 4. Navigatxon is paaced in service during ffscal year !A 5. At end of fiscal year project is not yet completed, but unallocated cost to date 1s allocated I!? z s Balance Sheet - Per Walla Walla mthod: I=-4 Total Joint Jt. Power Plant Account CfzJIP Accoll.nt Total Balance Sheet - Per Portland Hethod: Total Joint Jt. Power Jt. Nav. Plant Account -o- $60 WE Account $lbOd -20 , Total $160 _I gg The estimated Navigation Jt. Costs are transferred to Plant: 20 percent x $300 Total Estimated Costs = $60 -b/ All remaining Joint Costs of $140 go to Jt. Power cl $200 actual Costs x 80 percent to Joint Power - $160
Fiscal Year 1970 Financial Audit of Commercial Power Operations of Corps of Engineers
Published by the Government Accountability Office on 1971-03-04.
Below is a raw (and likely hideous) rendition of the original report. (PDF)