Changes in Federal Water Project Repayment Policies Can Reduce Federal Costs

Because prior GAO studies disclosed several large federal reservoirs with substantial amounts of unsold water or storage space, GAO reviewed the repayment policies and practices of the Army Corps of Engineers and the Bureau of Reclamation that do not ensure fair and timely recovery of water projects' reimbursable costs.

Current repayment policies, for the most part, require that water projects must be fully used to ensure cost recovery. However, much water is neither purchased nor used as originally intended and is likely to remain underutilized for years. As a result, the federal government will continue to absorb substantial costs. Agency officials have made some changes, but much more should be done. Millions of acre-feet of underutilized water are available in federal reservoirs. Agency officials stated that they had no water marketing policies and generally relied on state water boards, local chambers of commerce, and water districts to carry out water marketing activities. Agencies have not taken advantage of opportunities to increase cost recovery. Sometimes agencies use outdated prices for determining operation and maintenance (O&M) costs. In some cases, repayment was not required even though water users received benefits. Payments received from water option contractors were not always apportioned to O&M costs. Occasionally, the Bureau of Reclamation charged water users for O&M costs but credited the revenues to construction cost repayment. As a result of such practices, reimbursable O&M costs had to be paid from federal funds. O&M costs were not accumulated as reimbursables for future water price determinations, but often were reassigned to nonreimbursable categories.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Michael Gryszkowiec Team: General Accounting Office: Community and Economic Development Division Phone: (202) 275-5514