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Water Resources: Costs of the Fountain Valley Authority Pipeline

RCED-88-125 Published: Jul 13, 1988. Publicly Released: Jul 13, 1988.
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Highlights

In response to a congressional request, GAO examined the Bureau of Reclamation's construction of the Fountain Valley pipeline in Colorado to determine: (1) why there was an increase in the pipeline project's total cost; (2) whether the Bureau had the legal authority to charge overhead costs to the pipeline operator; and (3) the equity of the Bureau's overhead charges.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of the Interior To ensure that all Bureau regions are using an appropriate and uniform cost allocation method, recording and reporting reliable project cost data, and complying with accounting principles for federal agencies, the Secretary of the Interior should direct the Commissioner, Bureau of Reclamation, to select and approve an indirect overhead cost allocation method that is equitable to all projects and direct all regional office administrators to use the approved method consistently.
Closed – Implemented
A Bureau of Reclamation task force was established to make recommendations on overhead and general administrative expenses. According to the Bureau, the task force report was issued and recommendations implemented by September 1990. If GAO undertakes any future work involving cost allocation, it will consider how effective the changes were in establishing an uniform cost allocation method.
Department of the Interior To ensure that all Bureau regions are using an appropriate and uniform cost allocation method, recording and reporting reliable project cost data, and complying with accounting principles for federal agencies, the Secretary of the Interior should direct the Commissioner, Bureau of Reclamation, to require Missouri Basin regional administrators to stop the practice of shifting indirect overhead costs among projects to avoid exceeding project budgetary limits, and thereby bring the Region's accounting practices into conformance with prescribed accounting principles.
Closed – Implemented
The Bureau's task force studied the allocation of indirect overhead costs and made recommendations to the Commissioner of Reclamation on September 4, 1990. If GAO undertakes any future work involving cost allocation, it will consider how effective the changes were in establishing an uniform cost allocation method.

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Topics

Auditing and Financial Management
Accounting errorsAccounting proceduresAllocation (Government accounting)Billing proceduresConstruction costsCost accountingNoncomplianceOverhead costsPipeline operationsWater resources developmentWater supply