Financial Management

Pursuant to a congressional request, GAO reviewed the Bureau of Reclamation's sources and uses of funds at federal water projects, focusing on: (1) the Bureau's legal authorities and policies and procedures for obtaining, using, and accounting for funds, the types and amounts of funding obtained, and how funds were spent; (2) controls that were established to ensure that funds are properly obtained, used, and accounted for; (3) operations and maintenance (O&M) activities, expenses, and policies and procedures; and (4) other issues, such as the repayment of O&M and construction costs at the Central Valley Project (CVP).

GAO noted that: (1) the Bureau's major sources of funds for federal water projects include: (a) appropriations authorizing the use of the Reclamation Fund; (b) appropriations using General Fund receipts of the Department of the Treasury; and (c) reimbursable activities; (2) the first two sources of funds are annual appropriations requiring action by Congress; the third source is permanent appropriations available without further action by Congress; (3) the Bureau's major uses of funds at federal water projects include: (a) O&M, construction, and general investigation activities under the Water and Related Resources appropriation; (b) activities pertaining to the Upper and Lower Colorado River Basins; and (c) policy and administrative expenses; (4) the total financial resources available to the Bureau increased from about $1.43 billion in fiscal year (FY) 1992 to about $1.76 billion in FY 1998, representing an average increase of about 3.5 percent annually; (5) the Bureau has established controls to address key risks associated with the funds it obtains and uses and has established specific controls intended to safeguard against those risks; (6) the overall system of controls is intended to ensure that funds are properly obtained, used, and accounted for; (7) based on GAO's assessment, nothing came to GAO's attention to indicate that there were design weaknesses related to the internal controls in key areas; (8) the O&M expenses incurred by the Bureau and allocated to customers for repayment include overhead activities undertaken by the Reclamation Service Center in Denver, Colorado, and by regional offices; (9) however, the Bureau is by law prohibited from charging customers for certain activities that are typically considered overhead; (10) GAO found that CVP water service contract rates are not recovering the full O&M costs incurred by the Bureau; (11) this raises questions about whether CVP main system construction costs that have been allocated for repayment by irrigation and municipal and industrial customers will be recovered by 2030, as required by law; and (12) additional issues include changes in the application of revenues that the Bureau receives for transporting nonproject water via Bureau facilities, the status of the repayment of the costs allocated to the Western Area Power Administration for recovery through rates charged power customers, and the funding of the Glen Canyon Dam environmental impact study.