Bureau of Reclamation
Opportunities Exist to Improve Managerial Cost Information and Cost Recovery Gao ID: GAO-02-973 September 20, 2002In a previous report (GAO/AIMD-00-127, May 2000), GAO identified reimbursable project costs that were not being recovered by the Department of the Interior's Bureau of Reclamation. In this report, GAO reviewed the Bureau of Reclamation's managerial cost accounting and cost recovery practices. The Bureau does not currently identify and distribute all of the costs it incurs to its specific projects and activities. These costs are not distributed because the Bureau considers them nonreimbursable and because its cost accounting system is used to capture costs related to reimbursable purposes such as irrigation, municipal and industrial (M&I) water supply, and power generation. While GAO recognizes that the Bureau does not have the authority to recover certain costs, such as those funded through the Policy and Administration appropriation, all of the costs should nevertheless be distributed to the relevant activities to provide information useful in managerial decision making. Because not all costs are distributed, information on the full cost of projects and activities is not readily available to the Congress, program managers, and others to facilitate decision making and the allocation of the federal government's resources.
RecommendationsOur 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: Team: Phone:GAO-02-973, Bureau of Reclamation: Opportunities Exist to Improve Managerial Cost Information and Cost Recovery
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United States General Accounting Office:
GAO:
Report to the Secretary of the Interior:
September 2002:
Bureau Of Reclamation:
Opportunities Exist to Improve Managerial Cost Information and Cost
Recovery:
GAO-02-973:
Contents:
Letter:
Results in Brief:
Scope and Methodology:
Background:
The Bureau Lacks Full Cost Information to Support Managerial Decisions:
The Bureau Does Not Recover All Reimbursable Costs:
Conclusions:
Recommendations:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
Determining Whether the Bureau Allocates All Costs to Projects and
Programs:
Determining Whether the Bureau Identifies All Reimbursable Costs and
Recovers Those Costs From Customers:
Appendix II: Comments From the Department of the Interior:
Appendix III: Total Policy and Administration and Bureauwide Program
Costs In Comparison to the Bureau‘s Total Budget, 1997-2002:
Appendix IV: GAO Contact and Staff Acknowledgments:
Table:
Table 1: Bureauwide Program Activities Funded by the ’Water and Related
Resources“ Appropriation:
[End of section]
United States General Accounting Office:
Washington, D.C. 20548:
September 20, 2002:
The Honorable Gale A. Norton:
Secretary of the Interior:
In previous work at the Department of the Interior‘s (Interior) Bureau
of Reclamation (Bureau), we identified reimbursable project costs that
were not being recovered by the Bureau. [Footnote 1] Based on this and
other work we have performed at the Bureau, we reviewed the Bureau‘s
managerial cost accounting and cost recovery practices. Our objectives
were to determine whether the Bureau (1) identifies and distributes for
management purposes all the costs it incurs in operating its projects
and administering its programs, and (2) ensures that recoverable costs
are identified and recovered from customers.
Results in Brief:
Federal accounting standards seek to ensure that relevant and reliable
information on the full costs of a government entity‘s activities is
readily available to aid program managers and congressional officials
in making decisions regarding the allocation of limited federal
resources. In addition, the President‘s governmentwide management
initiatives require the availability of quality cost information.
However, the Bureau does not currently identify and distribute all the
costs it incurs to its specific projects and activities. For example,
the combined costs of Policy and Administration and Bureauwide
programs, which were budgeted to be about $200 million (21 percent of
the Bureau‘s budget) in fiscal year 2002, are not distributed to
specific projects and activities. These costs are not distributed
because the Bureau considers them nonreimbursable and the Bureau‘s cost
accounting system is used primarily to capture costs related to
reimbursable purposes such as irrigation, municipal and industrial
(M&I) water supply, and power generation. While we recognize that the
Bureau does not have the authority to recover certain costs, such as
those funded through the Policy and Administration appropriation, all
the costs should nevertheless be distributed to the relevant activities
to provide information useful in managerial decision making. Because
not all costs are distributed, information on the full cost of projects
and activities is not readily available to the Congress, program
managers, and others to facilitate decision making and the allocation
of the federal government‘s resources. We recommend that the Bureau
enhance its managerial cost accounting so as to provide information
that facilitates managerial decision making and fulfills each of the
five purposes of the Managerial Cost Accounting Standards. This would
include distributing Policy and Administration and Bureauwide program
costs to the appropriate projects and activities.
Even though its cost accounting system is designed primarily to
facilitate cost recovery, the Bureau does not recover all costs that
benefit specific Bureau projects. Reclamation law provides that the
Bureau recover the costs of certain reimbursable activities, including
irrigation, M&I water supply, and power generation. Federal policy
requires that the full costs incurred by the federal government in
providing services be recovered from the beneficiaries of those
services, unless the recovery of such costs is legislatively precluded.
However, the Bureau treats many costs as being precluded from recovery
under the Fact Finders Act, even though these costs directly or
indirectly provide benefits to the Bureau‘s projects. We disagree with
the Bureau‘s treatment and do not believe the act precludes the Bureau
from recovering the costs (direct and indirect) benefiting specific
projects through water delivery contracts and rates charged to
customers. We recommend that the Bureau review the Bureauwide programs
and recover the costs of those that either directly or indirectly
benefit projects, unless cost recovery is prohibited under current law.
Interior concurred with our recommendation regarding reviewing the
Bureauwide programs and recovering the costs of those that benefit
projects. Interior did not concur with our recommendation regarding
distributing the Policy and Administration and Bureauwide program costs
to projects and activities. Interior stated that the current cost
accounting system provides the necessary information for program
management and external reporting. Interior also stated that
distributing costs to the projects and activities would not be cost
effective. We disagree. Without distributing the Policy and
Administration and Bureauwide program costs, which represented 21
percent of the Bureau‘s budget for fiscal year 2002, the Bureau has no
basis to determine the full costs of its projects or activities or, in
the case of Bureauwide program costs, for recovering the portion that
benefit projects. System changes needed to accomplish this could be
made in concert with the planned departmentwide implementation of a new
cost accounting system. Interior‘s written comments are reproduced in
appendix II and are summarized and addressed in detail later in the
body of this report.
Scope and Methodology:
We conducted our audit work at the Bureau‘s Denver, Colorado office and
at its Mid-Pacific region. We reviewed and analyzed relevant
legislation, written policies and directives, accounting standards, and
other documents pertaining to managerial cost accounting. We also
interviewed knowledgeable personnel at each audit site to obtain
information relevant to the objectives of this assignment.
The scope of our review included the Bureau‘s managerial cost accounting
practices and the Bureau‘s treatment of different types of costs
related to its administration and operation of its projects and the
delivery of its programs. We conducted our review from November 2001 to
July 2002 in accordance with generally accepted government auditing
standards. Appendix I describes our objectives, scope, and methodology
in detail. We provided the Department of the Interior and the Bureau of
Reclamation with copies of a draft of this report for review and
received written comments on the report.
Background:
The Bureau constructs and operates multiple-purpose water resource
projects in 17 western states. These projects provide water for
irrigation, M&I use, power generation, recreation, and fish and
wildlife protection, and also provide for flood control, water
conservation, and land resource management. The Bureau‘s facilities
include 348 reservoirs with a storage capacity of 245 million acre-feet
of water, 58 hydroelectric power plants, and more than 300 recreation
sites. These facilities:
* generate more than 40 billion kilowatt hours of energy each year,
making the Bureau the nation‘s second largest producer of hydroelectric
power;
* deliver water to one out of every five western farmers for about 10
million acres of irrigated land that produces 60 percent of the nation‘s
vegetables and 25 percent of its fruit and nuts;
* deliver 10 trillion gallons of municipal, rural, and industrial water
to over 31 million people in the West;
* provide water to support habitat for wildlife refuges, migratory
waterfowl, fish, and threatened and endangered species;
* deliver water to Native American tribes through irrigation projects
and potable water supplies;
* provide water-based recreation activities for about 90 million
visitors a year; and;
* provide flood control benefits and drought contingency planning and
assistance to western states and tribes.
Construction, operation, and maintenance of these projects and Bureau
programs are financed primarily with federal funds. The Bureau assigns a
percentage of capital and operation and maintenance (O&M) costs to each
project purpose based on the project‘s expected uses and benefits. Costs
associated with irrigation, M&I use, and power generation are generally
required to be recovered through water delivery contracts and rates
charged for water and power. In contrast, costs associated with flood
control, fish and wildlife enhancement, and recreation are generally not
recoverable under current law. To facilitate cost recovery and manage
the projects and programs, the Bureau collects budget and cost
information through its program and budget and financial accounting
systems.
The need for cost information is not unique to the Bureau. Cost
information is needed throughout government for management, resource
allocation, and oversight purposes. The cost of government is a concern
to the public as well as to the federal government itself. One of the
ways to capture cost information is by applying managerial cost
accounting techniques. By using managerial cost accounting information,
agency executives and managers, the Congress, citizens, news media, and
interest groups can better assess the costs of governmental activities.
The need for useful managerial cost information has been recognized for
some time. The Congress and others have taken a number of actions to
require cost accounting information and to encourage its use in
administering federal projects and programs. Some of the specific
requirements for managerial cost accounting are as follows.
* The Chief Financial Officers Act of 1990 includes among the functions
of chief financial officers ’the development and reporting of cost
information“ and ’the systematic measurement of performance.“
* Statement of Federal Financial Accounting Concepts (SFFAC) No. 1,
Objectives of Federal Financial Reporting, issued in 1993, states that
the objectives of federal financial reporting are to provide useful
information to assist internal and external users in assessing the
budget integrity, operating performance, stewardship, and systems and
control of the federal government. It also states that federal
financial reporting should provide information that helps users to
determine the (1) costs of specific programs and activities and the
composition of, and changes in, those costs, (2) efforts and
accomplishments associated with federal programs and their changes over
time and in relation to costs, and (3) efficiency and effectiveness of
the government‘s management of its assets and liabilities.
* Statement of Federal Financial Accounting Standards (SFFAS) No. 4,
Managerial Cost Accounting Standards states that the objective of the
standard is to (1) provide program managers with relevant and reliable
information relating costs to outputs and activities, (2) provide
relevant and reliable cost information to assist the Congress and
executives in making decisions about allocating federal resources,
authorizing and modifying programs, and evaluating program performance,
and (3) ensure consistency between costs reported in general purpose
financial reports and costs reported to program managers. The stated
purposes in the standard for managerial cost accounting are:
- budgeting and cost control;
- performance measurement;
- cost reimbursement (and setting fees and prices);
- program evaluations, and;
- making economic choice decisions.
* The Federal Financial Management Improvement Act of 1996 (FFMIA)
requires agencies to implement and maintain financial management
systems that comply with federal accounting standards, including
SFFAS No. 4.
* The Joint Financial Management Improvement Program (JFMIP) issued
a statement on January 31, 2002, stating that ’A key element of
financial planning and evaluation is clear measurement of the full
costs of agencies‘ activities during each fiscal year.“
The Bureau has taken steps in recent years to improve its cost
accounting practices. It better defined the treatment of costs by
issuing in 1999 the Standard Processes of Costing (SPOC) report that
clarified and standardized direct and indirect cost treatment. In
addition, it changed the basis it uses to distribute some indirect
costs to better reflect actual usage. Also, at the direction of the
Department of the Interior, the Bureau will be implementing Activity
Based Costing (ABC), a cost accounting method that measures the cost of
work efforts leading to a specific result. On January 16, 2002,
Interior‘s Deputy Secretary sent a memo to all Bureau and office heads
directing them to implement an ABC cost model by fiscal year 2004
(October 1, 2003). The Bureau‘s ABC initiative is discussed in more
detail later in this report.
The Bureau Lacks Full Cost Information to Support Managerial Decisions:
The Bureau does not distribute all the costs it incurs to its specific
projects and activities. Thus, full cost information is not available
for managerial decision making as envisioned in federal accounting
standards and the President‘s management improvement initiatives.
The Bureau‘s distribution of costs is driven largely by the need to
recover certain costs. Its cost accounting system focuses primarily on
recovering costs in accordance with specific project provisions. It
does not identify the full costs of the Bureau‘s activities such as
irrigation, M&I water supply, power generation, recreation, fish and
wildlife protection, flood control, water conservation, and land
resource management. Therefore, complete information on the cost of the
Bureau‘s activities is not readily available to support managerial
decisions pertaining to each of the purposes of managerial cost
information described in SFFAS No. 4, Managerial Cost Accounting
Standards. [Footnote 2] The standard notes that when full cost
information is made available, analysts and decision makers will have a
comprehensive data source to develop the cost concepts that they need
in their analyses. However, it recognizes that full cost is not
necessary for all analyses and decisions.
Two large categories of costs”Policy and Administration costs and
Bureauwide program costs”are not distributed to project purposes.
Policy and Administration costs are not distributed to project purposes
because the Bureau‘s focus is on cost recovery and legislation
specifically designates these costs to be nonreimbursable as provided
by 43 U.S.C. sec. 377. [Footnote 3] Bureauwide program costs are
generally not distributed to project purposes for one of two reasons:
either because legislation specifically designates these costs to be
unrecoverable [Footnote 4] or the Bureau has otherwise decided not to
seek reimbursement for them. [Footnote 5] These two undistributed cost
categories totaled nearly $200 million or 21 percent of the Bureau‘s
total budget authority for fiscal year 2002. See appendix III for
additional information pertaining to budgeted amounts for Policy and
Administration and Bureauwide program costs for fiscal years 1997
through 2002. As discussed in the next section, we believe that certain
of these undistributed costs may be recoverable.
Because such a large portion (21 percent) of the Bureau‘s budget is not
distributed, complete information regarding the total cost of each of
the Bureau‘s activities is not readily available. Bureau managers and
external parties, such as congressional appropriators, do not have
information on the total costs of the Bureau‘s main activities at their
disposal for decision making purposes. For example, it is not possible
to analyze what the Bureau spends on irrigation, M&I water supply,
power generation, recreation, fish and wildlife protection, flood
control, water conservation, and land resource management either
currently or over time.
The Bureau‘s managerial cost accounting system contrasts sharply with
that of another Department of the Interior organization”the Bureau of
Land Management (BLM). BLM has already implemented an ABC model, which
contributed to Interior‘s previously mentioned decision to implement
ABC departmentwide. BLM‘s model fully distributes costs and can readily
identify, among other things, (1) the full costs of each of its
activities, and (2) what it costs to pursue each of its strategic
goals. BLM‘s system provides detailed information that facilitates
external reporting and can be used for internal purposes such as
developing budgets and analyzing the unit costs of activities and
outputs.
Interior plans to implement the ABC method departmentwide as part of its
implementation of the President‘s Management Agenda and the
department‘s vision for effective program management. As stated in the
Deputy Secretary‘s memo directing all Interior bureaus to adopt an ABC
model, each of the President‘s governmentwide management initiatives–
competitive sourcing, improving financial performance, integrating
budget and performance, increasing electronic government, and managing
human capital–requires quality cost information. According to the Deputy
Secretary‘s memo, implementing ABC successfully across the Department
of the Interior will:
’... provide the linkage of strategic planning, budgeting, costing and
performance reporting. It will increase the value we provide to our
customers through more efficient operations and enhance accountability
to the Congress and the public (by tying costs to performance
measures). This approach can provide the Department with an important
tool for managers to monitor and evaluate program performance/results
and more effectively allocate resources.“
The department‘s directive to implement an ABC model presents an
opportunity for the Bureau to provide more relevant and reliable cost
information to better meet the needs of decision makers and fulfill
each of the five purposes of the Managerial Cost Accounting Standard.
The Bureau Does Not Recover All Reimbursable Costs:
While cost information is important for a variety of managerial
purposes, as discussed above, it is particularly important to the
Bureau in executing water delivery contracts and in setting rates to
accomplish its cost recovery requirement. However, even though its cost
accounting system has focused primarily on cost recovery, the Bureau is
not recovering all reimbursable costs associated with operating its
projects.
The Bureau‘s authority to determine which costs to charge customers is
governed by general provisions of reclamation law, project and program
specific legislation, and specific provisions of contracts the Bureau
enters into with water users. The costs of activities related to power
and water supply are generally recoverable; however, the Bureau does
not recover certain of these costs.
OMB Circular A-25, [Footnote 6] which provides guidance for federal
agencies to use in setting fees to recover the full costs of providing
goods or services, [Footnote 7] defines full costs as all direct and
indirect costs of providing the goods or service. This definition is
consistent with that contained in federal accounting standards. The
federal accounting standards define the full cost of an entity‘s output
as ’the sum of (1) the costs of resources consumed by the segment that
directly or indirectly contribute to the output, and (2) the costs of
identifiable supporting services provided by other responsibility
segments within the reporting entity, and by other reporting entities.“
Applying the definitions of ’full cost“ used in OMB Circular A-25 and
federal accounting standards indicates that the full cost of the power
and water supplied by Bureau projects includes all direct and indirect
costs incurred in providing these services. All costs directly or
indirectly benefiting the Bureau‘s projects should be recovered, except
where specifically precluded by law.
Some Bureauwide program costs are not being recovered, even though the
programs either directly or indirectly benefit the Bureau‘s projects
and are not expressly precluded from recovery by specific legislation.
Bureauwide programs are comprised of about 30 programs (the number can
vary from year to year) that undertake a variety of activities that
support the Bureau‘s projects, involve coordinating with others, or
provide technical and financial assistance to others. Programs include
dam safety, land resource management, technical assistance to states,
and O&M program administration. The programs are administered by the
Commissioner's Office and/or the regional offices and are intended to
be "bureauwide" in scope and benefit the overall Bureau mission.
Bureauwide programs are funded with two appropriations: ’Policy and
Administration“ and ’Water and Related Resources.“ The language of the
’Policy and Administration“ appropriation provides that it is made
nonreimbursable as provided by the Fact Finders Act. [Footnote 8] The
’Water and Related Resources“ appropriation contains no express
prohibition on reimbursement. [Footnote 9] Because the ’Policy and
Administration“ appropriation is legislatively precluded from recovery,
we limited our analysis in table 1 to Bureauwide programs funded
through the ’Water and Related Resources“ appropriation. Table 1 shows,
for each Bureauwide program, (1) the amount appropriated for fiscal
year 2002 from the ’Water and Related Resources“ appropriation, (2)
whether the Bureau recovers the costs, (3) which programs have specific
legislation exempting them from recovery, and (4) whether the program
provides direct or indirect project benefits, or both.
Table 1: Bureauwide Program Activities Funded by the ’Water and Related
Resources“ Appropriation (dollars in thousands):
Bureauwide programs: Dam Safety Programs:Department of the Interior Dam
Safety; [Shaded]
Current cost recovery treatment, FY 2002 appropriation[A]: $1,700;
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
[Empty];
Benefits[C]: Direct project benefits: [Empty];
Benefits[C]: Indirect project benefits: [Check].
Bureauwide programs: Dam Safety Programs: Initiate Safety of Dams
Corrective Action;
Current cost recovery treatment, FY 2002 appropriation[A]: $16,400;
Current cost recovery treatment, Recovered: Partially;
Current cost recovery treatment, Specific legislation exempting[B]:
Yes;
Benefits[C]: Direct project benefits: [Check];
Benefits[C]: Indirect project benefits: [Empty].
Bureauwide programs: Dam Safety Programs: Safety Evaluation of Existing
Dams; [Shaded]
Current cost recovery treatment, FY 2002 appropriation[A]: $17,900;
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
[Empty];
Benefits[C]: Direct project benefits: [Empty];
Benefits[C]: Indirect project benefits: [Check].
Bureauwide programs: Dam Safety Programs: Safety of Dams Corrective
Action Studies;
Current cost recovery treatment, FY 2002 appropriation[A]: $624;
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
Yes;
Benefits[C]: Direct project benefits: [Check];
Benefits[C]: Indirect project benefits: [Check].
Bureauwide programs: Departmental Irrigation Drainage;
Current cost recovery treatment, FY 2002 appropriation[A]: $2,000
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
Yes;
Benefits[C]: Direct project benefits: [Check];
Benefits[C]: Indirect project benefits: [Check].
Bureauwide programs: Drought Emergency Assistance;
Current cost recovery treatment, FY 2002 appropriation[A]: $2,582;
Current cost recovery treatment, Recovered: Partially;
Current cost recovery treatment, Specific legislation exempting[B]:
[Empty];
Benefits[C]: Direct project benefits: [Empty];
Benefits[C]: Indirect project benefits: [Empty].
Bureauwide programs: Efficiency Incentives; [Shaded]
Current cost recovery treatment, FY 2002 appropriation[A]: $3,000;
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
[Empty];
Benefits[C]: Direct project benefits: [Check];
Benefits[C]: Indirect project benefits: [Check].
Bureauwide programs: Emergency Planning and Disaster Response; [Shaded]
Current cost recovery treatment, FY 2002 appropriation[A]: $330;
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
[Empty];
Benefits[C]: Direct project benefits: [Empty];
Benefits[C]: Indirect project benefits: [Check].
Bureauwide programs: Environmental & Interagency Coordination; [Shaded]
Current cost recovery treatment, FY 2002 appropriation[A]: $1,200;
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
[Empty];
Benefits[C]: Direct project benefits: [Empty];
Benefits[C]: Indirect project benefits: [Check].
Bureauwide programs: Environmental Program Administration; [Shaded]
Current cost recovery treatment, FY 2002 appropriation[A]: $1,500;
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
[Empty];
Benefits[C]: Direct project benefits: [Check];
Benefits[C]: Indirect project benefits: [Check].
Bureauwide programs: Examination of Existing Structures; [Shaded]
Current cost recovery treatment, FY 2002 appropriation[A]: $5,142;
Current cost recovery treatment, Recovered: Partially;
Current cost recovery treatment, Specific legislation exempting[B]:
[Empty];
Benefits[C]: Direct project benefits: [Check];
Benefits[C]: Indirect project benefits: [Check].
Bureauwide programs: Federal Building Seismic Safety; [Shaded]
Current cost recovery treatment, FY 2002 appropriation[A]: $950;
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
[Empty];
Benefits[C]: Direct project benefits: [Empty];
Benefits[C]: Indirect project benefits: [Check].
Bureauwide programs: General Planning Activities; [Shaded]
Current cost recovery treatment, FY 2002 appropriation[A]: $1,700;
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
[Empty];
Benefits[C]: Direct project benefits: [Check];
Benefits[C]: Indirect project benefits: [Check].
Bureauwide programs: Land Resources Management; [Shaded]
Current cost recovery treatment, FY 2002 appropriation[A]: $6,500;
Current cost recovery treatment, Recovered: Partially;
Current cost recovery treatment, Specific legislation exempting[B]:
[Empty];
Benefits[C]: Direct project benefits: [Check];
Benefits[C]: Indirect project benefits: [Check].
Bureauwide programs: Miscellaneous Flood Control Operations; 509 No Yes
X X
Current cost recovery treatment, FY 2002 appropriation[A]: $509;
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
Yes;
Benefits[C]: Direct project benefits: [Check];
Benefits[C]: Indirect project benefits: [Check].
Bureauwide programs: National Fish and Wildlife Foundation;
Current cost recovery treatment, FY 2002 appropriation[A]: $1,000;
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
Yes;
Benefits[C]: Direct project benefits: [Check];
Benefits[C]: Indirect project benefits: [Check].
Bureauwide programs: Native American Affairs;
Current cost recovery treatment, FY 2002 appropriation[A]: $8,400;
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
[Empty];
Benefits[C]: Direct project benefits: [Empty];
Benefits[C]: Indirect project benefits: [Empty].
Bureauwide programs: Negotiation & Administration of Water Marketing;
[Shaded]
Current cost recovery treatment, FY 2002 appropriation[A]: $1,300;
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
[Empty];
Benefits[C]: Direct project benefits: [Check];
Benefits[C]: Indirect project benefits: [Empty].
Bureauwide programs: Operations & Maintenance Program Administration;
[Shaded]
Current cost recovery treatment, FY 2002 appropriation[A]: $1,130;
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
[Empty];
Benefits[C]: Direct project benefits: [Empty];
Benefits[C]: Indirect project benefits: [Check].
Bureauwide programs: Power Program Services;
Current cost recovery treatment, FY 2002 appropriation[A]: $935;
Current cost recovery treatment, Recovered: Yes;
Current cost recovery treatment, Specific legislation exempting[B]:
[Empty];
Benefits[C]: Direct project benefits: [Empty];
Benefits[C]: Indirect project benefits: [Check].
Bureauwide programs: Public Access & Safety; [Shaded]
Current cost recovery treatment, FY 2002 appropriation[A]: $463;
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
[Empty];
Benefits[C]: Direct project benefits: [Check];
Benefits[C]: Indirect project benefits: [Check].
Bureauwide programs: Reclamation Law Administration; [Shaded]
Current cost recovery treatment, FY 2002 appropriation[A]: $4,800;
Current cost recovery treatment, Recovered: Partially;
Current cost recovery treatment, Specific legislation exempting[B]:
[Empty];
Benefits[C]: Direct project benefits: [Check];
Benefits[C]: Indirect project benefits: [Check].
Bureauwide programs: Reclamation Recreation Management Act Title XXVII;
Current cost recovery treatment, FY 2002 appropriation[A]: $1,922;
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
Yes;
Benefits[C]: Direct project benefits: [Check];
Benefits[C]: Indirect project benefits: [Empty].
Bureauwide programs: Recreation and Fish & Wildlife Administration;
[Shaded]
Current cost recovery treatment, FY 2002 appropriation[A]: $2,300;
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
[Empty];
Benefits[C]: Direct project benefits: [Check];
Benefits[C]: Indirect project benefits: [Empty].
Bureauwide programs: Science and Technology Programs: Advanced Water
Treatment Desalination;
Current cost recovery treatment, FY 2002 appropriation[A]: $1,150;
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
Yes;
Benefits[C]: Direct project benefits: [Empty];
Benefits[C]: Indirect project benefits: [Check].
Bureauwide programs: Science and Technology Programs: Applied Science &
Technology Development;
Current cost recovery treatment, FY 2002 appropriation[A]: $3,290;
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
Yes;
Benefits[C]: Direct project benefits: [Empty];
Benefits[C]: Indirect project benefits: [Check].
Bureauwide programs: Science and Technology Programs: Desalination
Research & Development;
Current cost recovery treatment, FY 2002 appropriation[A]: $4,000;
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
Yes;
Benefits[C]: Direct project benefits: [Empty];
Benefits[C]: Indirect project benefits: [Check].
Bureauwide programs: Science and Technology Programs: Hydroelectric
Infrastructure Protection/Enhancement;
Current cost recovery treatment, FY 2002 appropriation[A]: $660;
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
Yes;
Benefits[C]: Direct project benefits: [Empty];
Benefits[C]: Indirect project benefits: [Check].
Bureauwide programs: Science and Technology Programs: Technology
Advancement;
Current cost recovery treatment, FY 2002 appropriation[A]: $300;
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
Yes;
Benefits[C]: Direct project benefits: [Empty];
Benefits[C]: Indirect project benefits: [Check].
Bureauwide programs: Science and Technology Programs: Watershed/River
System Management;
Current cost recovery treatment, FY 2002 appropriation[A]: $940;
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
Yes;
Benefits[C]: Direct project benefits: [Empty];
Benefits[C]: Indirect project benefits: [Check].
Bureauwide programs: Site Security; [Shaded]
Current cost recovery treatment, FY 2002 appropriation[A]: $32,014;
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
[Empty];
Benefits[C]: Direct project benefits: [Check];
Benefits[C]: Indirect project benefits: [Check].
Bureauwide programs: Soil & Moisture Conservation;
Current cost recovery treatment, FY 2002 appropriation[A]: $314;
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
Yes;
Benefits[C]: Direct project benefits: [Check];
Benefits[C]: Indirect project benefits: [Empty].
Bureauwide programs: Technical Assistance to States;
Current cost recovery treatment, FY 2002 appropriation[A]: $1,500;
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
[Empty];
Benefits[C]: Direct project benefits: [Empty];
Benefits[C]: Indirect project benefits: [Empty].
Bureauwide programs: Title XVI – Water Reclamation & Reuse;
Current cost recovery treatment, FY 2002 appropriation[A]: $1,650;
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
Yes;
Benefits[C]: Direct project benefits: [Check];
Benefits[C]: Indirect project benefits: [Empty].
Bureauwide programs: Water Management & Conservation; [Shaded]
Current cost recovery treatment, FY 2002 appropriation[A]: $7,507;
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
[Empty];
Benefits[C]: Direct project benefits: [Check];
Benefits[C]: Indirect project benefits: [Check].
Bureauwide programs: Wetlands Development; [Shaded]
Current cost recovery treatment, FY 2002 appropriation[A]: $3,836;
Current cost recovery treatment, Recovered: No;
Current cost recovery treatment, Specific legislation exempting[B]:
[Empty];
Benefits[C]: Direct project benefits: [Check];
Benefits[C]: Indirect project benefits: [Check].
Notes:
[A] ’Water & Related Resources“ funds only, many of these programs also
have administration and policy-setting activities funded by the Policy
& Administration appropriation.
[B] Specific Legislation Exempting: Specific legislation, other than
the Fact Finders Act, that exempts the program from cost recovery.
[C] Direct Project Benefits: Benefits can be identified to a specific
project.
Indirect Project Benefits: Benefits multiple projects.
Shaded Programs: Programs with project benefits and no specific
legislation exempting cost recovery.
Source: Developed by GAO based on Bureau written program descriptions
and interviews with program managers. Bureau officials provided input
to the table. We did not independently verify the Bureau‘s legal
citations for specific legislation exempting some programs from cost
recovery and did not independently determine whether there were other
legislative exemptions.
[End of table]
The shaded items in table 1 represent costs that (1) are not currently
recovered (or are only partially recovered) and (2) directly or
indirectly benefit specific projects. In our opinion, these costs
should be reviewed to determine whether they may be recovered in
accordance with current law. Examples of these costs include the
following.
* Environmental and Interagency Coordination program, which involves
participating in activities with other agencies and public groups on
water-related issues. Work proposed for fiscal year 2002 included
working with other agencies to develop methods to evaluate
environmental, social, and economic impacts associated with existing
and future water resource programs; providing information to public
groups; and reviewing other agency environmental compliance documents
to determine the possible impact on current and future Bureau
activities (indirect benefits).
* Environmental Program Administration program, which involves
activities the Bureau undertakes to ensure compliance with
environmental law, policy, and initiatives. Work proposed in fiscal year
2002 was related to assuring compliance with the Endangered Species
Act, the National Historical Preservation Act, and the National
Environmental Policy Act (indirect benefits).
* Examination of Existing Structures Program, which provides for the
review of Bureau facilities with respect to public safety, emergency
management, and efficient energy and water management practices. Our
review of the program found that these inspections are related directly
to Bureau projects and facilities, some of which provide water for
irrigation and M&I purposes (direct benefits).
* General Planning Activities program, which involves funds used to
accomplish various water resource management initiatives and other
activities. Work proposed for fiscal year 2002 included maintaining and
developing hydrologic models; coordinating with other federal, state,
and local agencies; coordinating on wastewater reuse activities; and
responding to congressional and public inquiries regarding planning
activities (indirect benefits).
* Negotiation and Administration of Water Marketing Program, which
involves the administration of repayment contracts that the Bureau
holds with entities to which water is delivered. A representative of the
Bureau‘s Commissioner‘s Office told us that only two regions fund these
activities through this program and the long-term goal is to have these
regions use other reimbursable funds for these activities which would
result in charging these costs to water customers (direct benefits).
* Reclamation Law Administration Program, which involves Bureau
inspections to ensure that entities contracting for water delivery are
in compliance with the Reclamation Reform Act of 1982. Bureau activities
are focused upon ensuring that water districts, individual contractors,
and individual water users are in compliance with the act. The Bureau
conducts inspections and audits to ensure this compliance. Program
costs are consequently directly related to the provision of water to
districts, contractors, and users (direct benefits).
The Bureau treats many Bureauwide program costs lacking specific
legislative exemption as nonrecoverable under the Fact Finders Act.
[Footnote 10] The Fact Finders Act provides:
’The cost and expense after June 30, 1945, of the Office of the
Commissioner [Footnote 11] in the District of Columbia and, except for
such cost and expense as are incurred on behalf of specific projects,
of general investigations and of nonproject offices outside the
District of Columbia, shall be charged to the reclamation fund and
shall not be charged as a part of the reimbursable construction or
operation and maintenance costs.“
The Fact Finders Act exempts from recovery the cost of ’general
investigations“ [Footnote 12] and ’nonproject offices“ that are not
incurred on behalf of a specific project. The Bureau treats many
Bureauwide program costs as precluded from recovery under the Fact
Finders Act even though some directly or indirectly benefit a specific
project or projects. In our opinion, the Fact Finders Act does not
preclude recovery of costs when they are incurred directly or
indirectly on behalf of a specific project or projects. [Footnote 13]
These include the shaded programs identified in table 1. In our opinion
such costs should be distributed to projects and the appropriate amount
recovered through water delivery contracts and rates charged to project
beneficiaries, unless specifically exempted by legislation.
Conclusions:
Program managers, the Congress, and others need relevant and reliable
cost information to facilitate budgeting and cost control, performance
measurement, cost reimbursement, program evaluation, and economic
choice decisions. However, the Bureau‘s emphasis on reimbursable costs
and cost recovery has left a large portion of its budget”about 21
percent in fiscal year 2002---undistributed to the Bureau‘s projects
and activities.
Therefore, complete information on the costs of the Bureau‘s activities
is not available to aid managerial decision making. The current
departmental cost accounting initiative presents an opportunity for the
Bureau to reevaluate its decisions regarding cost distributions and to
make readily available information to support not only cost recovery
but also the full range of managerial needs.
In addition to providing more complete cost information for decision-
making purposes, the Bureau also has the opportunity to improve its cost
recovery efforts by beginning to recover the costs of all programs that
directly or indirectly benefit projects, including those related to
nonproject offices and investigations. Reclamation law provides that
the Bureau recover the costs of certain reimbursable activities,
including irrigation, M&I water supply, and power generation. Federal
policy requires that the full costs incurred by the federal government
in providing services be recovered from the beneficiaries of those
services, unless the recovery of such costs is legislatively precluded.
However, the Bureau does not recover all costs that benefit specific
Bureau projects, even though its cost accounting is focused primarily
on cost recovery.
Recommendations:
We recommend that the Secretary of the Interior direct the Commissioner,
Bureau of Reclamation, to:
* Enhance the Bureau‘s managerial cost accounting so as to provide more
complete cost information that facilitates managerial decision making
and fulfills each of the five purposes of the Managerial Cost Accounting
Standards. This would include distributing Policy and Administration
and Bureauwide program costs to the appropriate projects and activities
and could be accomplished in conjunction with the Department of the
Interior‘s current cost accounting initiative.
* Review the Bureauwide programs and recover the costs of those that
either directly or indirectly benefit projects, unless cost recovery is
prohibited under current law. Where it is determined that cost recovery
is prohibited, this would include documenting the specific legal basis
and rationale for the determination.
Agency Comments and Our Evaluation:
The Department of the Interior provided written comments on a draft of
this report. The comments are reproduced in appendix II and summarized
and addressed below. Interior concurred with our recommendation to
recover the costs of Bureauwide programs that either directly or
indirectly benefit projects, unless cost recovery is prohibited under
current law. Interior stated that, as part of ongoing action on a
previous report, [Footnote 14] it will review Bureauwide programs and
issue, by March 31, 2004, directives for those programs that will
address, among other things, whether the associated costs are
recoverable.
We are encouraged by Interior‘s comment and look forward to seeing the
results of its review. However, we note that the referenced action on
the previous findings has been slow. For example, in comments on a
draft of the May 31, 2000, report, Interior stated that it would work
with the Solicitor‘s office to determine whether it could recover costs
identified in the report. In July 2002, in the course of our work on
the current review, we inquired about the status of the Solicitor‘s
review and were told that the Solicitor‘s input had not yet been
requested. We believe it is important to note that while the previous
report related only to unrecovered indirect costs, our work during this
review identified unrecovered costs related to activities that benefit
projects both directly and indirectly, as shown in table 1. Since the
Bureau devotes significant resources to the Bureauwide programs and we
have now identified costs that directly benefit projects but are not
recovered from project beneficiaries, we believe that taking timely
action to implement this recommendation is important.
Interior did not concur with our recommendation to distribute Policy and
Administration and Bureauwide program costs to projects and activities;
however, its comments in doing so were contradictory. Interior did not
concur with the recommendation, but stated that it would explore doing
as we recommend as part of its implementation of a departmentwide ABC
system in fiscal year 2004. We believe that implementing this
recommendation is critical if, as stated in its comment letter,
Interior plans to implement the recommendation to recover the costs of
Bureauwide programs because these programs consist of activities that
directly or indirectly benefit projects. In our opinion, distributing
these costs would facilitate appropriate cost recovery. Interior‘s
major comments in nonconcurring with this recommendation are synopsized
below, along with our responses.
Interior‘s first major comment was that the current cost accounting
system already meets all of the cost accounting standards‘ objectives
and purposes and, due to the latitude allowed under the standards, is
in compliance with the standards. Interior further states that our
finding that the Bureau lacks full cost information to support
managerial decisions is misleading. The primary focus of our review was
not to narrowly assess compliance with the standards but, rather, to
determine whether the Bureau identifies and distributes for management
purposes all the costs it incurs in operating its projects and
administering its programs. This included determining the Bureau‘s
primary focus with respect to the purposes of managerial cost
information as delineated in the standards--budgeting and cost control,
performance measurement, cost reimbursement, program evaluations, and
economic choice decisions. We found that the Bureau, because of its
focus on cost reimbursement, does not distribute a large portion of its
budget (21 percent for fiscal year 2002) and, thus, complete
information on the costs of the Bureau‘s activities is not available to
aid decision making. It is not misleading for us to note that
distributing these costs would provide more complete cost information
that would be useful for resource allocation decisions, cost analysis
and management, and program and performance measurement.
In addition, although stating that its system meets the cost accounting
standards‘ objectives and purposes, Interior also stated that it plans
to continue enhancing the system to ’more fully satisfy each of the five
purposes“ of the standards. Such enhancements were precisely what we
had in mind in recommending that the Bureau distribute Policy and
Administration and Bureauwide program costs so that more complete
information on the costs of the Bureau‘s activities would be available
to decision makers both within and outside the Bureau. We believe that
implementing our recommendation would aid the Bureau as it seeks to
’more fully satisfy“ the standards‘ purposes by providing the Congress,
executives, and managers with better and more complete information and
analysis on resource utilization and the costs of activities and
outputs. Moreover, we believe that the nonconcurrence with our
recommendation to distribute Policy and Administration and Bureauwide
program costs contradicts the intent of Interior‘s departmentwide
effort to implement the President‘s Management Agenda. The Deputy
Secretary‘s January 16, 2002, memo cited in our report emphasizes the
importance of cost information in implementing the President‘s
Management Agenda and specifically identifies ABC as Interior‘s vehicle
for understanding and managing costs. The Deputy Secretary‘s memo
states that ’ABC is a cost accounting method that measures the cost of
work efforts leading to a specific result.“
To implement its cost accounting initiative, Interior has created an
interagency work group. In discussing how to integrate budgeting and
performance and improve cost reporting, the work group wrote that ABC is
a management tool that attempts to ensure that an organization‘s
expenditures, including direct and overhead costs, are allocated to
products or services in order to identify the cost to the organization
of delivering those products or services. The work group further wrote
’ABC will facilitate understanding the full cost (direct and indirect)
of performance by understanding what drives the cost of work processes—
This approach helps assess the efficiency of performance, in dollar
terms. It requires detailed accounting for all expenditures and permits
aggregating the information at different levels to suit various
decision making purposes.“ The Bureau will not be able to assess the
efficiency of its performance in delivering products and services in
such a manner without distributing the costs of its Policy and
Administration and Bureauwide program activities.
The second major comment by Interior was that the Bureau‘s cost
accounting system provides the necessary information for program
management and full cost information for external reporting. We
disagree. The full costs of the Bureau‘s projects, programs, and
activities are not reported. As we state in the report, the cost
accounting system focuses primarily on cost recovery. It does not
identify the full costs of the major activities undertaken by the
Bureau in accomplishing the primary purposes of its water projects,
such as irrigation, M&I water supply, power generation, recreation,
fish and wildlife protection, flood control, water conservation, and
land resource management.
As a result, the full costs of, for example, operating the Central
Valley Project, the Examination of Existing Structures Program, or the
various activities associated with operating and maintaining a facility
are not known. In addition, the Bureau does not report the full costs of
Bureauwide programs in either its annual report or budget documents. To
report the full cost of Bureauwide programs, the Bureau would need to
include the costs funded through the Policy and Administration
appropriation because many of these programs use Policy and
Administration funds to pay the employees who administer the Bureauwide
programs.
The Bureau does report total costs, in aggregate, by Government
Performance and Results Acts (GPRA) responsibility segment. However, it
does not distribute all of the Policy and Administration costs to its
responsibility segments. For example, for fiscal year 2000, the Bureau
made Policy and Administration one of its GPRA responsibility segments
instead of distributing those costs to the other responsibility
segments that Policy and Administration supports. The other
responsibility segments were: (1) Water and Energy Management and
Development, (2) Land Management and Development, (3) Fish and Wildlife
Management and Development, (4) Facilities Operations, and (5)
Facilities Maintenance and Rehabilitation. Since the Bureau did not
distribute the Policy and Administration costs, it did not report the
full costs of the other responsibility segments because the Policy and
Administration appropriation funds activities that support the
administration of the other segments.
For fiscal year 2001, the Bureau changed the GPRA responsibility
segments to the Commissioner‘s Office and its five regional offices.
The Policy and Administration costs were distributed to each of these
six offices, with the Commissioner‘s Office accounting for over 60
percent of the Policy and Administration costs. However, since it made
the Commissioner‘s Office a responsibility segment and did not
distribute its costs to the five regional offices, the Bureau did not
report the full cost of the regional offices because the Commissioner‘s
Office supports the regional offices.
The third major comment by Interior was that distributing Policy and
Administration and Bureauwide program costs would not improve decision
making because these costs are not recoverable, are not controllable by
project and program managers, and should not be aggregated with program
and activity costs because these costs are not appropriated and budgeted
to project-level activities. We disagree. The purposes for which
managerial cost accounting information is used are different than those
for financial and budgetary accounting information and public policy
decisions regarding cost recovery that are made through the legislative
process. While managerial cost accounting should be integrated with
financial and budgetary accounting, it is different in that cost
accounting information is developed and tailored to facilitate decision
making by program managers, executives, and external stakeholders such
as Members of Congress. These decisions often relate to one or more of
the purposes delineated in the cost accounting standards, one of which
addresses cost recovery. To meet these needs, managerial cost
accounting may employ data produced by the financial and budgetary
accounting process as well as nonfinancial or programmatic data, such
as units of output.
We understand Interior‘s point that Policy and Administration and some
Bureauwide programs have been legislatively excluded from cost recovery.
However this does not mean that these costs should be excluded from
distribution and analysis for the purpose of managerial decision making.
The Congress, executives, managers, and others need cost information in
determining how effectively and efficiently resources are being used,
irrespective of whether the costs are recovered. Both the Bureau‘s
customers and the public have an interest in assuring that resources are
used effectively and efficiently and that the costs can be linked to
results and outcomes.
We disagree that because costs are not controllable by a manager that
costs should not be distributed to the activities managed by that
manager. The cost accounting standard addresses this concern and states
that:
’For performance measurement or other purposes, some entities may want
to make a distinction between controllable and uncontrollable costs
with respect to an individual responsibility segment or a cost center.
The full cost information need not interfere with this distinction.“
The standard further addresses this issue by stating that:
’Ultimately, most costs are controllable at a certain level of activity
by the entity. If some of them are not controllable at a lower level of
the organization, they may very well be controllable at a higher level.
Each segment should concern itself with the costs that are assigned to
it on a cause-and-effect basis. These costs are often incurred because
of a segment‘s demand and use of services from other segments or
entities. Although the service-receiving segment has no control over
the efficiency in producing the service, it can influence the costs by
changing the demand for the service. For an entity‘s top management,
full cost reporting provides it with an overview of how the entity‘s
various costs, including the general and administrative costs, are
incurred and assigned to the entity‘s segments. The full cost reporting
also makes the entity‘s top management aware of the costs of services
that it receives from other entities. The management can closely review
those costs and determine whether actions are needed to control them.“
We also disagree that aggregating Policy and Administration and
Bureauwide program costs with program and activity costs would make it
difficult to evaluate the costs relevant to decision making. As costs
are distributed to projects and programs, different types of costs need
not lose their identity. For example, the Policy and Administration
costs distributed to projects or programs would retain their identity
so managers would know which costs are controllable and recoverable.
Understanding the makeup of project and program costs would aid in cost
analysis. Again, the cost standard addresses this by stating:
’...as a principle, full cost should include the costs of all resources
applied to a program, activity, and its outputs, regardless of funding
sources.“
Interior‘s fourth major comment was that implementing our
recommendation would require changes to the Bureau‘s accounting system
that would not be cost effective. We are not aware of any formal Bureau
analysis that has determined what system changes would be required nor
the cost effectiveness of any changes. However, any changes would be to
a detailed cost accounting system the Bureau already has in place and
that already accounts for most of its direct and indirect costs. In
addition, we are recommending that any changes be done in conjunction
with the implementation of the department‘s cost accounting initiative.
The department‘s interagency work group has recognized that some system
modifications will be necessary for each of Interior‘s bureaus. It
formed a subgroup to identify contractors that the department‘s bureaus
may already be working with or are considering working with in
implementing ABC with the intent of maintaining consistency and trying
to pool resources across the department.
Moreover, system costs did not stop the BLM from distributing all of its
costs and making changes to its cost accounting system as it implemented
ABC. BLM‘s implementation of ABC is in part what prompted Interior to
implement ABC department wide. Although BLM and the Bureau have
different missions and outputs, ABC is not a mission-dependent cost
accounting system and it is being used in both the private and public
sector by a wide range of businesses and federal agencies. BLM‘s
implementation of ABC resulted in its identifying activities and
producing unit cost information for 131 outputs and tying these amounts
back to its Statement of Net Costs (full costs).
We will send copies of this report to appropriate House and Senate
Committees; interested members of the Congress; The Honorable Mitchell
E. Daniels, Jr., Director, Office of Management and Budget; and other
interested parties. This report will also be available free of charge on
GAO‘s home page at [hyperlink, http://www.gao.gov]. We will also make
copies available to others upon request.
Please call me at (202) 512-9508, or Rob Martin, Assistant Director, at
(202) 512-6131 if you or your staff have any questions. Major
contributors to this report are listed in appendix IV.
Sincerely yours,
Signed by:
Linda M. Calbom:
Director:
Financial Management and Assurance:
[End of section]
Appendix I: Appendixes Objectives, Scope, and Methodology:
In previous work at the Department of the Interior‘s Bureau of
Reclamation, we identified certain reimbursable project costs that were
not being recovered by the Bureau. Based on this and other work we have
performed at the Bureau, we decided to examine the managerial cost
accounting practices it uses in carrying out its financial management
and cost recovery responsibilities. Our objectives were to determine
whether the Bureau (1) identifies and distributes for management
purposes all the costs it incurs in operating its projects and
administering its programs, and (2) ensures that recoverable costs are
identified and recovered from customers.
The scope of our review included the Bureau‘s managerial cost accounting
practices and the Bureau‘s treatment of different types of costs
related to its administration and operation of its projects and the
delivery of its programs. We conducted our audit work at the Bureau‘s
Denver, Colorado office and at its Mid-Pacific region. For comparative
purposes, we also obtained and analyzed information on the managerial
cost accounting practices, and use of Activity Based Cost accounting
information, of the Department of the Interior‘s Bureau of Land
Management.
The following sections provide details of our methodologies and any
additional restrictions on the scope of our work.
Determining Whether the Bureau Allocates All Costs to Projects and
Programs:
We reviewed relevant legislation, accounting standards, and documents,
including financial management laws such as the Chief Financial Officers
Act of 1990 and the Federal Financial Management Improvement Act of
1996; reclamation law; Federal Financial Accounting Standards; a 1998
Bureau report to the Congress on operations and maintenance activities
and overhead; [Footnote 15] a 1999 Bureau cost accounting report;
[Footnote 16] and Department of the Interior and Bureau of Reclamation
policies, accounting manuals, and other cost accounting guidance. We
also reviewed the Bureau‘s Strategic Plan and annual reports to
determine how managerial cost information is used or could be used. We
requested and examined the types of cost accounting reports produced by
the Bureau‘s financial accounting system.
To determine how the Bureau distributes both direct and indirect costs,
we reviewed Interior and Bureau policy and procedures for distributing
costs and discussed these policies and procedures with Bureau
officials. In addition, we interviewed knowledgeable personnel to
enhance our understanding and consulted with Bureau Denver office
officials to develop flowcharts that documented how the Bureau‘s costs
are distributed to project purposes.
Determining Whether the Bureau Identifies All Reimbursable Costs and
Recovers Those Costs From Customers:
To define the full cost of the services provided by the Bureau, we
reviewed (1) Office of Management and Budget (OMB) Circular A-25, which
provides guidance for use in setting fees to recover the full costs of
providing goods and services and (2) Statement of Federal Financial
Accounting Standards (SFFAS) No. 4, Managerial Cost Accounting Concepts
and Standards for the Federal Government. OMB Circular A-25 defines
full cost as all direct and indirect costs of providing goods and
services and is consistent with guidance for full cost reporting
contained in SFFAS No. 4. We also reviewed prior GAO reports pertaining
to the Bureau‘s cost recovery practices.
We determined the Bureau‘s basis for including or excluding costs from
recovery. We did not independently verify the Bureau‘s legal citations
for specific legislation exempting some programs from cost recovery. We
also reviewed the Fact Finders Act to determine the limitations it
places on the Bureau‘s ability to recover costs.
We identified the budget amounts associated with Policy and
Administration and with each of the Bureauwide programs. We reviewed
and analyzed Bureauwide programs for funding levels, cost recovery
policies and practices, and the legislative basis for these policies and
practices. We interviewed Bureau officials responsible for many of these
programs, obtained information on the activities performed in these
programs, and reviewed and analyzed the written descriptions of these
programs. We provided a summary of our analysis to Bureau officials for
their review and comment.
We conducted our review from November 2001 through July 2002 in
accordance with generally accepted government auditing standards. We
provided the Department of the Interior and the Bureau of Reclamation
with copies of a draft of this report for review and comment. Written
comments were received and have been reproduced in appendix II.
[End of section]
Appendix II: Comments From the Department of the Interior:
United States Department of the Interior:
Office Of The Secretary:
Washington, D.C. 20240:
Ms. Linda M. Calbom:
Director, Financial Management and Assurance:
General Accounting Office:
441 G Street NW:
Washington, D.C. 20548:
Dear Ms. Calbom:
Enclosed is the Department of the Interior's response to the General
Accounting Office (GAO) draft report "Bureau of Reclamation:
Opportunities Exist to Improve Managerial Cost Information and Cost
Recovery" (GAO-02-973). We appreciate the opportunity to provide
comments.
In response to Recommendation 1, the Bureau of Reclamation does not
concur with the recommendation to distribute Policy and Administration
(P&A) and Reclamation-wide program costs to the projects and
activities. However, as the Department moves forward with the
implementation of the Activity-Based Costing initiative in fiscal year
2004 Reclamation will explore reporting of P&A and Reclamation-wide
program costs.
Reclamation will continue to enhance and improve its cost accounting to
provide relevant and reliable information for decision-making and to
more fully satisfy each of the five purposes of the Managerial Cost
Accounting Standards. The Managerial Cost Accounting Standards provide,
"Managerial costing should use a basis of accounting, recognition, and
measurement appropriate for the intended purpose." (emphasis added)
Reclamation believes its current cost accounting meets its intended
purpose as well as the objectives and purposes of the Managerial Cost
Accounting Standards. Reclamation's cost accounting system provides the
information necessary for program management as well as provide the
full cost of its programs and activities to external constituents.
Distributing P&A and Reclamation-wide program costs would not improve
the decision-making usefulness of the information since these costs are
not appropriated or budgeted to project-level activities.
In response to Recommendation 2, Reclamation will continue to implement
its planned actions to resolve a recommendation issued in a previous
GAO audit report "Bureau of Reclamation, Information on Operations and
Maintenance Activities and Costs at Multipurpose Water Projects"
(GAO/AIMD-00-127), issued May 31, 2000. More specifically, Reclamation
plans to review those Reclamation-wide programs that directly or
indirectly benefit projects and issue Reclamation Manual Directives and
Standards for those programs. The updated directives and standards will
address the basis for funding these programs, including cost recovery,
if applicable.
Again, thank you for the opportunity to review the draft report.
Reclamation's response to the report's recommendations, general
comments on the draft report, and technical/editorial comments are
enclosed for your review and consideration.
Sincerely,
Signed by:
Bennett Raley:
Assistant Secretary for Water and Science:
Enclosures:
Bureau of Reclamation:
Draft General Accounting Office (GAO) Report:
Response to Audit Recommendations:
Bureau of Reclamation: Opportunities Exist to Improve Managerial Cost
Information and Cost Recovery GAO-02-973:
Recommendation 1:
Enhance the Bureau's managerial cost accounting so as to provide
information that facilitates managerial decision-making and fulfills
each of the five purposes of the Managerial Cost Accounting Standard.
This would include distributing Policy and Administration and
Bureauwide Program costs to the appropriate projects and activities and
could be accomplished in conjunction with the Department of the
Interior's current cost accounting initiative.
Response: Nonconcur. The Bureau of Reclamation does not concur with the
recommendation to distribute Policy and Administration (P&A) and
Reclamation-wide program costs to the projects and activities.
Reclamation will continue its efforts to enhance and improve cost
accounting to provide relevant and reliable information that
facilitates managerial decision-making, to more fully fulfill each of
the five purposes of the Managerial Cost Accounting Standards, and to
report these costs in accordance with the Department of the Interior's
cost accounting initiative.
Reclamation will explore the reporting of P&A and Reclamation-wide
program costs in accordance with the Department's Activity-Based
Costing initiative, to be implemented in fiscal year 2004. The
Managerial Cost Accounting Standards provide, "Managerial costing
should use a basis of accounting, recognition, and measurement
appropriate for the intended purpose." (emphasis added) Reclamation
believes its current cost accounting meets its intended purpose as well
as the objectives and purposes of the Managerial Cost Accounting
Standards. Reclamation's cost accounting system provides its managers
with relevant and reliable information necessary to manage their
programs in an efficient and effective manner as well as provide cost
information to external users such as the Congress, customers, and
other Federal agencies. Reclamation reports the full costs of its
programs and segments in its annual financial statements and annual
budget reports. In Reclamation's opinion, reporting full costs in this
manner is in accordance with the Chief Financial Officers Act of 1990,
Government Performance Results Act of 1993, and the Managerial Cost
Accounting Standards. Moreover, the Managerial Cost Accounting
Standards provide management with latitude and flexibility in the
application of the standard as follows, "These standards are based on
sound cost accounting concepts and allow sufficient flexibility for
agencies to develop managerial cost accounting practices that are
suited to their specific operating environments." In Reclamation's
opinion, GAO's recommendation does not take this flexibility into
consideration.
Given Reclamation's operating environment and various legislative
requirements, we do not agree that this recommendation would result in
information that was more decision useful. The allocation of P&A and
Reclamation-wide program costs to specific programs and activities in
the accounting system would not improve program management or decision-
making since these costs are not appropriated or budgeted to project-
level activities. On the contrary, if P&A and Reclamation-wide program
costs were aggregated with the costs of programs and activities, it
would make it more difficult to evaluate the costs relevant for
decision-making, e.g., costs which are controllable by program
managers. Also, since a considerable amount of Reclamation's operations
involve multipurpose water projects, e.g., irrigation, power, flood
control, etc., the allocation of P&A and Reclamation-wide program costs
would require a significant change to our accounting processes. This
would require significant resources to modify the accounting system and
would not be cost effective.
Recommendation 2:
Review the Bureauwide Programs and recover the costs of those that
either directly or indirectly benefit projects, unless cost recovery is
prohibited under current law. Where it is determined that cost recovery
is prohibited, this would include documenting the specific legal basis
and rationale for the determination.
Response: Concur. As part of continued action on Recommendation 1 of a
previous GAO audit report "Bureau of Reclamation, Information on
Operations and Maintenance Activities and Costs at Multipurpose Water
Projects" (GAO/AIMD-00-127), issued May 31, 2000, Reclamation has
developed a plan to review those Reclamation-wide programs that either
directly or indirectly benefit projects and develop applicable,
individualized Reclamation Manual Directives and Standards for those
programs. The development of the revised or new directives and
standards will address the basis for funding of these programs, as well
as applicable rationale for the determination of appropriate cost
recovery or the determination that costs are nonreimbursable. Issuance
of the revised or new directives and standards are currently scheduled
for completion by March 31, 2004.
[End of enclosure]
Bureau of Reclamation:
Draft General Accounting Office (GAO) Report:
General Comments on Draft GAO Report:
Bureau of Reclamation: Opportunities Exist to Improve Managerial Cost
Information and Cost Recovery GAO-02-973:
Finding: The Bureau Lacks Full-Cost Information To Support Managerial
Decisions:
The title of this finding and the condition that GAO portrays is
misleading. GAO's report implies that Reclamation is not meeting the
Statement of Federal Financial Accounting Standards No. 4, Managerial
Cost Accounting Standards, and does not have cost information to
support managerial decisions because it is not distributing Policy and
Administration (P&A) and Reclamation-wide program costs. Reclamation
does not agree with this narrow perspective and interpretation of the
Managerial Cost Accounting Standards. Overall, Reclamation is in
substantial compliance with the Managerial Cost Accounting Standards
and Reclamation is making progress, in conjunction with the Department
of the Interior's costs initiative, to further enhance its cost
accounting. Currently, Reclamation's cost accounting system provides
relevant and reliable cost information necessary for (1) managing
Reclamation programs, (2) reporting cost information to external users,
(3) ensuring consistency between costs reported in the general purpose
financial statements and costs reported to program managers, and (4)
addressing the variety of complex cost accounting needs.
(1) Reclamation's cost accounting system provides its managers with
relevant and reliable information necessary for informed program
management. To fulfill its mission as a water resources management
agency, which includes the recovery of capital investment and operation
and maintenance costs associated with its multipurpose water projects,
Reclamation has developed a detailed and comprehensive accounting
system. In addition to accounting for all direct costs, the accounting
system allocates all indirect costs to programs and activities.
Indirect costs are in excess of $100 million annually. As mentioned in
the report, a Reclamation-wide team recently completed a comprehensive
evaluation of its costing processes to ensure the consistent treatment
of direct and indirect costs.
(2) Reclamation currently provides full-cost information to external
users such as the Congress, customers, and other Federal agencies.
Reclamation reports the full costs of its programs and segments in its
annual financial statements and annual budget reports. Reclamation
believes that reporting full costs at this level is in accordance with
external reporting requirements such as the Government Performance
Results Act of 1993 (GPRA) and the Chief Financial Officer's Act of
1990.
To more accurately reflect its water resources management mission,
Reclamation implemented a new programmatic budget structure in fiscal
year 1998. Reclamation's budget structure is more responsive to the
planning, cost accounting, and reporting requirements of GPRA. This
budgetary reporting structure provides decision makers, both internal
and external with information necessary to determine if Reclamation is
achieving statutory objectives and to determine the effectiveness and
efficiency of its programs. This structure is used to report the costs
of Reclamation's "program activities" consistent with the GPRA
definition which provides " ... program activity means a specific
activity or project as listed in the program and financing schedules of
the annual budget of the United States Government." GAO's
recommendation to distribute P&A would result in mixing costs from
different appropriations provided for different purposes. Reclamation
does not distribute P&A costs to projects because these costs are "non-
project" costs by definition, Policy and Administration is an entirely
different appropriation than Water and Related Resources. The Congress
purposely provides P&A as a separate and distinct appropriation with
the intent of NOT mixing those funds and costs with those of programs
funded by different appropriations.
Under Reclamation's budget structure, all funding is allocated into
several appropriation accounts. Funding in the Water and Related
Resources appropriation account is fully funded within the following
five program activities: "Water and Energy Management and Development";
"Land Management and Development" activity; "Fish and Wildlife
Management and Development"activity "Facility Operation" activity; and
the "Facility Maintenance and Rehabilitation" activity. The sixth major
appropriation account, "Policy and Administration (P&A)," involves the
development of Reclamation policy and the direction of daily operations
and is fully funded within the P&A appropriation account.
(3) Reclamation uses information from its Federal Financial System for
Federal Agencies' Centralized Trial-Balance System (FACTS) I, for
proprietary financial data, and FACTS II, for budget execution data,
reporting to ensure consistency between costs reported in the general
purpose financial statements and costs reported to program managers. In
accordance with the Office of Management and Budget requirements and
Departmental guidance, Reclamation reports the full cost of its
responsibility segments and major program activities in its annual
financial statements. Reclamation's accounting system integrates
financial, budget, and cost accounting processes for management
purposes.
(4) As stated above, Reclamation's cost accounting system addresses a
wide variety of complex and often competing cost accounting
requirements while meeting the objectives and purposes of the
Managerial Cost Accounting Standards as well as departmental and
governmental initiatives. GAO's report fails to fully recognize
Reclamation's ability to respond to a variety of cost reporting
perspectives such as organizational, customer, projects, budgetary, and
financial accounting views. Rather, GAO's report focuses on
distributing P&A and Reclamation-wide program costs which provide only
one of many cost perspectives. The Managerial Cost Accounting Standards
(Standards) provide, "Managerial costing should use a basis of
accounting, recognition, and measurement appropriate for the intended
purpose." (emphasis added) Reclamation believes its current cost
accounting meets its intended purpose as well as the objectives and
purposes of the Standards. Moreover, the Standards provide management
with latitude and flexibility in the application of the standard. In
Reclamation's opinion, GAO's recommendation does not take this
flexibility into consideration. The Standards, Section 24, provides,
"These standards are based on sound cost accounting concepts and allow
sufficient flexibility for agencies to develop managerial cost
accounting practices that are suited to their specific operating
environments."
Furthermore, Reclamation's cost accounting fulfills each of the five
purposes of the Standard. Following is a brief description of the use
of cost information for the five purposes.
Budgeting and Cost Control - To ensure accurate cost recovery and
reimbursement, costs are accounted for at a detailed level. For
example, for its multipurpose water projects, costs are accumulated at
the detailed job level, such as a project feature such as a spillway,
to enable the accurate recovery of costs allocated to reimbursable
project purposes, e.g., irrigation. Historical costs are used as the
basis for formulating future budgets. And finally, project and program
costs are monitored to ensure that they do not exceed available
funding.
Performance Measurement - Cost information is currently used for
performance measurement. For example, one of the GPRA performance
measures is the unit cost of hydroelectric power generation relative to
other power generation entities. Costs are compiled in accordance with
Federal Energy Regulatory Commission accounts to facilitate comparison
with other entities.
Determining Reimbursements and Setting Fees and Prices - Reclamation's
cost accounting system provides the cost information required for cost
recovery and reimbursement purposes. For example, as required by
legislation, capital costs allocated to certain project purposes,
principally irrigation, municipal and industrial water, and power
generation, are recovered from project beneficiaries. Moreover, these
beneficiaries are responsible for an allocated share of operation and
maintenance costs. To ensure that these cost recovery requirements arc
met, Reclamation's cost accounting system accounts for all direct and
indirect costs at a detailed level.
In addition, Reclamation's cost accounting system provides the cost
information required for the working capital and revolving funds. And
finally, accurate cost information is required for reimbursement from
foreign countries for technical assistance.
Program Evaluations - Reclamation's cost accounting system provides
cost information which is used for cost-benefit analyses and to assess
alternatives. For example, the cost of uprating a power generation
facility might be compared to the increased power generation and the
period necessary to recover the uprating costs.
Economic Choice Decisions - Cost information provided by the cost
accounting system is used to assess project alternatives. For example,
such information is used to assess various construction or facility
rehabilitation alternatives.
Reclamation agrees, in concept, that full costing of its programs and
activities might be useful in some situations. There are, however,
mitigating factors that need to be considered when determining whether
full costing should he developed, and if so, what categories of costs
should be included. For example, it must be determined whether the
inclusion of certain categories of costs will improve the decision-
usefulness of the information. A related factor in assessing whether a
category of costs should be included, is whether it will he cost
effective to include this category of costs. The increased decision-
making benefit of the additional information should exceed the
additional cost of assigning this category of costs to specific
programs and activities.
While theoretically appealing, the allocation of P&A and Reclamation-
wide program costs to specific programs and activities in the
accounting system would not improve program management or decision-
making since these costs are not appropriated or budgeted to project-
level activities. On the contrary, if P&A and Reclamation-wide program
costs were aggregated with the costs of programs and activities, it
would make it more difficult to evaluate the costs relevant for
decision-making, e.g., costs which are controllable by program
managers. Also since a considerable amount of Reclamation's operations
involve multipurpose water projects, e.g., irrigation, power, and flood
control etc., the allocation of P&A and Reclamation-wide program costs
would require a significant change to our accounting processes. This
would require significant resources to modify the accounting system and
would not be cost effective.
Based on the latitude provided in the Standards, as mentioned above,
Reclamation believes that it is not required to allocate P&A and
Reclamation-wide program costs to the project-level activities in its
accounting system.
[End of enclosure]
[End of section]
Appendix III: Total Policy and Administration and Bureauwide Program
Costs In Comparison to the Bureau‘s Total Budget, 1997-2002 (dollars in
thousands):
Budget category: Policy & Administration;
Fiscal year 1997: $46,000;
Fiscal year 1998: $47,558;
Fiscal year 1999: $47,000;
Fiscal year 2000: $47,424;
Fiscal year 2001: $50,114;
Fiscal year 2002: $52,968.
Budget category: Policy & Administration: Percent of total Bureau
budget;
Fiscal year 1997: 5.8;
Fiscal year 1998: 5.3;
Fiscal year 1999: 5.9;
Fiscal year 2000: 6.0;
Fiscal year 2001: 6.1;
Fiscal year 2002: 5.6.
Budget category: Bureauwide programs (Water & Related Resources
funding):
Fiscal year 1997: $92,932;
Fiscal year 1998: $114,087;
Fiscal year 1999: $120,579;
Fiscal year 2000: $123,491;
Fiscal year 2001: $146,161;
Fiscal year 2002: $145,148.
Budget category: Bureauwide programs (Water & Related Resources
funding): Percent of total Bureau budget:
Fiscal year 1997: 11.7;
Fiscal year 1998: 12.7;
Fiscal year 1999: 15.1;
Fiscal year 2000: 15.6;
Fiscal year 2001: 17.9;
Fiscal year 2002: 15.4.
Budget category: Total Policy & Admin. and Bureauwide programs:
Fiscal year 1997: $138,932;
Fiscal year 1998: $161,645;
Fiscal year 1999: $167,579;
Fiscal year 2000: $170,915;
Fiscal year 2001: $196,275;
Fiscal year 2002: $198,116.
Budget category: Total Policy & Admin. and Bureauwide programs:
Combined Policy and Administration and Bureauwide programs as percent
of total Bureau budget:
Fiscal year 1997: 17.4;
Fiscal year 1998: 18.0;
Fiscal year 1999: 20.9;
Fiscal year 2000: 21.6;
Fiscal year 2001: 24.1;
Fiscal year 2002: 21.0.
Budget category: Total Bureau budget authority:
Fiscal year 1997: $796,182;
Fiscal year 1998: $898,569;
Fiscal year 1999: $799,923;
Fiscal year 2000: $792,637;
Fiscal year 2001: $814,962;
Fiscal year 2002: $943,457.
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
Rob Martin, (202) 512-6131:
Acknowledgments:
In addition to the individual named above, Brian Eddington and Larry
Feltz made key contributions to this report.
[End of section]
Footnotes:
[1] U.S. General Accounting Office, Bureau of Reclamation: Information
on Operations and Maintenance Activities and Costs at Multipurpose
Water Projects, GAO/AIMD-00-127 (Washington, D.C.: May 31, 2000).
[2] As stated previously, the purposes of managerial cost information
in the standards are (1) budgeting and cost control, (2) performance
measurement, (3) cost reimbursement (and setting fees and prices), (4)
program evaluations, and (5) making economic choice decisions.
[3] Commonly referred to as the Fact Finders Act.
[4] Some Bureauwide program costs are recoverable. The Power Program
Services costs are reimbursable and a few programs, such as the Land
Resources Management Program, are partially reimbursed depending on the
activities that are being funded. See table 1 for information regarding
those programs that are partially reimbursed.
[5] The cost accounting standard discusses the need for full cost
information. It states that only with reliable full cost information
can management ensure that user charges fully recover the costs and
that in those cases where user charges are exempted or restricted by
law, agencies would nevertheless need the full cost information to
assess the extent to which costs are not recovered.
[6] OMB Circular A-25, User Charges, Revised, July 8, 1993.
[7] The purpose of OMB Circular A-25 is to implement a law commonly
known as the User Fee Statute. However, its guidance may be used by
agencies in setting fees authorized by other laws to the extent that it
does not conflict with the requirements of those laws.
[8] The Policy and Administration appropriation funds the Bureau's
centralized management functions in the Commissioner‘s Office, Denver
Office, and regional and area offices. The appropriation‘s purpose is
to fund management and the administrative activities that are not
chargeable directly to a specific project or program. Examples of
activities funded include overall policy setting and program
management, finance and accounting, information resources, and human
resources management.
[9] The Water and Related Resources appropriation is the largest
appropriation received by the Bureau. It funds, in addition to a
portion of the Bureauwide programs, construction and rehabilitation of
Bureau projects, operation and maintenance of projects and facilities,
land management and development, and fish and wildlife management and
development.
[10] Fact Finders Act of April 19, 1945 (59 Stat.54) (43 U.S.C. sec.
377).
[11] Commissioner of the Bureau of Reclamation.
[12] General investigations are studies and planning efforts designed
to ’acquire and analyze data and to formulate plans for improved
management and development of water and related land resources.“
Examples of activities undertaken as general investigations include
water conservation studies and studies related to the construction of
new facilities for water supply or delivery.
[13] We previously informed the Bureau of our opinion in this regard.
See pages 7-9 of U.S. General Accounting Office, Bureau of Reclamation:
Information on Operations and Maintenance Activities and Costs at
Multipurpose Water Projects, GAO/AIMD-00-127 (Washington, D.C.: May 21,
2000).
[14] See U.S. General Accounting Office, Bureau of Reclamation:
Information on Operations and Maintenance Activities and Costs at
Multipurpose Water Projects, GAO/AIMD-00-127 (Washington, D.C.: May 31,
2000).
[15] Bureau of Reclamation, Annual Costs of Bureau of Reclamation
Project Operation and Maintenance for Fiscal Years 1993-97 (Sept.
1998).
[16] Bureau of Reclamation, Standard Processes of Costing Business
Practices (Sept. 30, 1999)
[End of section]
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