Bureau of Reclamation:

Central Valley Project Cost Allocation Overdue and New Method Needed

RCED-92-74: Published: Mar 31, 1992. Publicly Released: Apr 30, 1992.

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Pursuant to a congressional request, GAO reviewed how the Bureau of Reclamation allocates construction costs for the Central Valley Project (CVP), the Bureau's largest water resource project.

GAO found that: (1) the Bureau gave limited attention to the congressional mandate to implement an updated cost allocation study by January 1988, mainly because of funding and staffing constraints; (2) the Bureau included inappropriate costs and made questionable estimates of project benefits and alternative costs in its 1988 draft study, and public comments on the study cited similar concerns; (3) the Bureau charges rates to its CVP water users that are based on the cost allocation percentages it developed in 1970 and updated in 1975; (4) delays in properly allocating CVP costs could result in the government recouping less of its capital investment, because the value of the dollar received years later will be less than if those dollars were timely received; and (5) although the Bureau has agreed to explore alternate allocation approaches it continues to rely on its methodologies, which could cause additional delay in developing an acceptable cost allocation.

Recommendation for Executive Action

  1. Status: Closed - Not Implemented

    Comments: Interior concurs with the recommendation. The Bureau of Reclamation contracted for an evaluation of the methodologies to update Central Valley Project's (CVP) cost allocations. This involved review and potential revision for each cell of a large spreadsheet of cost allocations with documentation of authority, allocation procedure, and result. The draft product is now undergoing public review and comment, after which a final report will be prepared recommending the use of the most appropriate methodology. Depending on the methodologies recommended, legislation may or may not be recommended. This process is expected to culminate in promulgation of an allocation or a recommendation for legislative action by June of 2000.

    Recommendation: To complete the CVP cost allocation expeditiously, the Secretary of the Interior should direct the Commissioner of the Bureau of Reclamation to use less costly and more timely methodologies to update the CVP cost allocation study. GAO has suggested two approaches: (1) allocating joint costs in direct proportion to specific costs; or (2) allocating joint costs on the basis of use.

    Agency Affected: Department of the Interior

 

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