Audit of Eastern Power System and Related Activities of the Corps of Engineers (Civil Functions), Department of the Army, and the Southeastern Power Administration, Department of the Interior, for the Fiscal Years 1959 and 1960

B-125032: Published: Oct 31, 1961. Publicly Released: Oct 31, 1961.

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This document presents our report on the audit of the power generating and related activities of the Corps of Engineers (Civil Functions), Department of the Army, in the southeastern area of the United States and the power marketing activities of the Southeastern Power Administration, Department of the Interior, for the fiscal years 1959 and 1960. In the report we repeat our recommendation that the Department of the Interior design statements specifically for the purpose of showing clearly the status of repayment of the Government's investment in the power program. In the absence of agency statements showing this type of information, we prepared a statement which shows that in fiscal year 1960 net power revenues were greater than estimated scheduled repayment requirements by $1 million; however, there was a cumulative estimated repayment deficiency of $l4.3 million at June 30, 1960. Our prior reports to the Congress on Federal water resources development programs in the southeastern area contained matters for consideration by the Congress on allocations of construction costs to power and other purposes and recommendations to the Secretary of the Interior and the Chief of Engineers on accounting and financial practices. At June 30, 1960, the Department of the Interior and the Corps of Engineers had reached general agreement on the cost allocations for 8 of the 11 multiple-purpose projects including power that were then in operation. The basic difference between the two agencies on the cost allocation method and interest factor for the Wolf Creek, Center Hill, and Dale Hollow Projects has not been resolved. Because of the continuing lack of agreement on the cost allocations for these projects and because of certain accounting and financial policy deficiencies, we cannot express an opinion as to whether the financial statements present fairly the financial position of the Southeastern Power System and Related Activities at June 30, 1960, and the financial results of operations for the fiscal year then ended.

The rates and charges in the Department of the Interior agreement with the Tennessee Valley Authority (TVA) for sale of power generated at Wolf Creek, Center Hill, and Dale Hollow Projects were disapproved by the Federal Power Commission (FPC) on May 20, 1958, as not being sufficient to return the costs of these projects pursuant to the requirements of section 5 of the Flood Control Act of 1944. However, the Department of the Interior has continued to sell power to TVA at the rates provided in the agreement. As a result, the legal requirement that schedules of rates and charges become effective upon confirmation and approval by FPC has not been met. The Department of the Interior believes that the legislative history and executive pronouncements support the basis used in determining costs of the projects to be returned under the rates and charges in the agreement with TVA. The Department also points out that the appropriate committees of the Congress, having been given the position of the Department and its expressed intentions to abide by the terms of the agreement with TVA, have not indicated any objection. We believe that the Flood Control Act of 1944 clearly imposes a responsibility on the Secretary of the Interior to obtain FPC confirmation and approval of rate schedules for power generated at Corps of Engineers projects.