Examination of the Panama Canal Commission's Financial Statements for the Years Ended September 30, 1982 and 1981

GAO examined the balance sheets of the Panama Canal Commission as of September 30, 1982 and 1981, and the related statements of operations and non-interest-bearing investment; changes in the investment of the United States; changes in financial position; status of appropriations; and property, plant, and equipment for the years then ended. The examination was made in accordance with generally accepted government auditing standards. In connection with its examination, GAO also made a limited study and evaluation of the Commission's system of internal accounting control and tested its compliance with applicable laws and regulations.

GAO found that the statements presented fairly the Commission's financial position, the results of its operations, and the changes in its financial position for the years then ended. In addition, GAO approved the Commission's accounting policies on capitalization. These policies provide that major units of property, plant, and equipment be capitalized. However, the Commission expensed rather than capitalized the cost of some projects for the years ending September 30, 1982 and 1981. GAO viewed this as not in keeping with approved capitalization policy. GAO also took exception to the Commission's method of computing interest on U.S. investment in the Panama Canal. This method involved computing interest on only a decreasing portion of what the United States had invested in the Canal. Although the Commission disagreed with the GAO position on capitalization policies and investment computation methods, GAO concluded that the combined effect of these two issues could be to understate fiscal year 1982 operating expenses by about $28 million and overstate amounts payable to the Republic of Panama by $378,635.