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Who Should Read This Report and Why? U.S Army Corps of Engineers officials and personnel responsible for financial reporting should read this report. It discusses issues related to the financial reporting of Construction-in-Progress on the financial statements.
Background. Construction-in-Progress was part of the $30.9 billion of General Property, Plant, and Equipment assets that the U.S. Army Corps of Engineers reported on its FY 2003 financial statements. We previously reported that the $10 billion beginning Construction-in-Progress balance on the FY 2003 U.S. Army Corps of Engineers Financial Statements was materially overstated.
Results. The U.S. Army Corps of Engineers significantly improved its financial reporting of Construction-in-Progress by removing invalid items and correcting errors. As a result, the U.S. Army Corps of Engineers reduced its Construction-in-Progress balance to $3.8 billion at the end of FY 2003. However, the reduced balance was still not reliable and was misstated by $640 million. In addition, $188 million of valid Construction-in-Progress could not be supported by originating source data. Continued material misstatement and lack of support for Construction-in-Progress will preclude the U.S. Army Corps of Engineers from gaining a favorable audit opinion on its financial statements.
The U.S. Army Corps of Engineers needed to ensure proper implementation of its FY 2004 Construction-in-Progress Information Paper, which addresses deficiencies involving invalid and unsupported Construction-in-Progress assets. The U.S. Army Corps of Engineers also needed to perform a comprehensive review of the Construction-in-Progress account and remove all costs involving the purchase or development of wildlife mitigation land. Additionally, the U.S. Army Corps of Engineers needed to disclose in the financial statements the portion of the Construction-in-Progress balance that will be turned over to other Federal agencies upon completion (finding A).
The U.S. Army Corps of Engineers did not properly account for costs involving the Columbia River Fish Mitigation Program. As a result, the U.S. Army Corps of Engineers overstated its FY 2004 Construction-in-Progress beginning balance by approximately $536 million. In addition, completed Columbia River Fish Mitigation Program work is accruing excessive capital interest charges. The U.S. Army Corps of Engineers needed to address deficiencies involving Columbia River Fish Mitigation Program costs and discontinue accruing capital interest for completed Columbia River Fish Mitigation Program work (finding B). See the Findings section of the report for the detailed recommendations.
Management Comments and Audit Response. The Commander of the U.S. Army Corps of Engineers concurred with all of the findings and recommendations. The comments were responsive, however, we request implementation dates for all corrective actions and a plan for reporting hydropower-related costs by December 28, 2004. See the finding sections of the report for a discussion of management comments and the Management Comments section of the report for a complete text of the comments.
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