Corps’ Role in M&I Water Storage

The Corps enters into agreements with M&I water users, such as states  or local water utilities, for water storage within Corps-managed projects,  such as reservoirs or dams. Under the Water Supply Act of 1958, the Corps also may reallocate or  reassign water storage at an existing project (e.g., reservoir) from one  use to another, such as reallocating storage for hydropower generation to  M&I water supply. Specific costs. Variability of M&I Water Storage Agreement Prices Cannot Be Reliably Determined, but Some Officials Cited Multiple Factors That May Affect Prices Set by the Corps

Based on our review of M&I water storage agreement data stored in the  Corps’ OMBIL database and discussions with agency officials, we could  not determine the extent to which storage prices varied because Corps’  data were not sufficiently reliable for such an analysis. However, some  Corps officials and a few M&I water users and stakeholders stated that  water storage prices vary, and agency officials identified several factors  that may contribute to the variation, including the original construction  costs for a project and the authorized purposes of the project. Some data contained errors. For  example, we compared information from a randomly selected sample  of nine agreements from the Corps’ Kansas City, Savannah, and  Tulsa districts to the corresponding data in OMBIL. Some data were missing. Some inconsistencies existed in how data were recorded in the  database. Corps officials said that they do not systematically review the M&I water  storage data, such as regularly tracing OMBIL data back to the originating  agreement to ensure the data in OMBIL are accurate. Instead, Corps  officials said they conducted a limited quality control review of the M&I  water storage agreement data in OMBIL, as of fiscal year 2016. Corps headquarters officials said they do not currently have plans to  systematically review the M&I water storage agreement data in OMBIL in  the future because the agency does not have a policy and implementing  guidance requiring a review of the data. In addition, under federal  internal control standards, agency management should design control  activities, such as controls over information processing, to achieve  objectives and respond to risks. Without developing policy and implementing guidance on how staff  should conduct systematic reviews of the M&I water storage agreement  data in OMBIL, the Corps will continue to have issues related to the  reliability of the data. M&I Water Users We Interviewed Were Generally Satisfied with the Corps’ Water Storage Pricing Process, but Water Users and Stakeholders Also Cited Some Concerns

Many M&I water users we interviewed said they were generally satisfied  with the Corps’ process for setting water storage prices, but many water  users and stakeholders also cited some concerns. For example, one M&I water user said that in the 16 years  it took the Corps to finalize its reallocation study, the community faced a  drought that put its ability to meet the water storage needs of a local  nuclear power plant at risk and could have affected the plant’s ability to  supply energy to its customers. Corps officials  also said they were unable to provide estimated time frames because the  agency does not systematically track the time it takes to complete the  reallocation agreement process. Such activities include promptly recording all  transactions to maintain their relevance and value to management in  controlling operations and making decisions. Without systematically reviewing  and correcting, as appropriate, data on M&I water storage agreements in  the OMBIL database, the Corps cannot ensure it is providing users of the  information with accurate and reliable information on M&I water storage  agreements. Without  collecting and analyzing data on the length of time it takes to complete  the reallocation process, including data on its initiation and authorization  through its final decision, the Corps does not have the information  necessary to measure progress in implementing initiatives designed to  streamline its planning process as well as identifying areas that may  hinder the Corps’ ability to complete projects in a timely manner. Recommendations for Executive Action

We recommend that the Secretary of the Army direct the Chief of  Engineers and the Commanding General of the U.S. Army Corps of  Engineers to take the following three actions:  systematically review data on municipal and industrial water storage  agreements stored within the OMBIL system and correct errors, as  appropriate, to ensure that the data are accurate and complete; develop policy and implementing guidance directing staff to conduct  systematic reviews of M&I water storage agreement data in OMBIL;  and  collect and analyze data on the length of time it takes to complete the  reallocation process. Appendix I: Objectives, Scope, and Methodology

Our objectives for this report were to examine (1) how the U.S. Army  Corps of Engineers (Corps) sets municipal and industrial (M&I) water  storage prices, (2) what is known about the variability, if any, of those  prices, and (3) M&I water users’ and stakeholders’ views on water  storage prices and how the Corps sets M&I water storage prices. These data  were obtained from the Corps’ primary water storage database—the  Operations and Maintenance Business Information Link (OMBIL)—which  maintains storage data on Corps’ projects.
Why GAO Did This Study

The Corps is to implement the water storage provisions of the Water Supply Act of 1958 at Corps' projects, such as reservoirs, across the United States. Under the act, the Corps enters into agreements with M&I water users, such as local water utilities, for storage space in the projects. As part of these agreements, the Corps includes the terms of repayment to cover the cost to construct, operate, and maintain the project.
GAO was asked to review the Corps' process for setting M&I water storage agreement prices. Among other objectives, this report examines (1) what is known about the variability of these prices and (2) M&I water users' and stakeholders' views on water storage prices and how the Corps sets M&I water storage prices. GAO reviewed the M&I water storage agreement data stored in OMBIL and assessed the reliability of the data, in part, by comparing information in agreements with data in OMBIL and interviewed Corps officials in headquarters and the Kansas City, Savannah, and Tulsa districts and a nongeneralizable sample of 26 M&I water users and 14 stakeholders such as industry groups, all selected for such factors as number of storage agreements.

What GAO Found

Based on GAO's review of the U.S. Army Corps of Engineers' (Corps) municipal and industrial (M&I) water storage agreement data stored in the Operations and Maintenance Business Information Link (OMBIL) database and discussions with agency officials, GAO could not determine the extent to which storage prices varied because Corps' data were not sufficiently reliable for such an analysis. Specifically, some data contained errors or were missing, and inconsistencies existed in how some data were recorded in OMBIL. Corps officials said that they do not systematically review the data, such as regularly tracing data in OMBIL back to the originating agreement to ensure the data are accurate. Instead, Corps officials said they conducted a limited quality control review of the M&I water storage agreement data in OMBIL but have not resolved all the errors they identified to help ensure complete and accurate information, as called for by federal standards for internal control. Without systematically reviewing and correcting the data in OMBIL, the Corps and users of the information may not have access to reliable M&I water storage agreement data. Corps officials also said they do not currently have plans to systematically review the M&I water storage agreement data in OMBIL because the agency does not have a policy and implementing guidance requiring review of the data, which is inconsistent with federal internal control standards. Without developing a policy and implementing guidance on how staff should systematically review and correct M&I water storage agreement data, the Corps will continue to have issues with the reliability of the data. While GAO could not determine the extent of variability in prices, Corps officials and M&I water users and stakeholders said that M&I water storage agreement prices vary. Agency officials identified factors that may contribute to the variation, including a project's original construction costs and the year the M&I water storage agreement was signed, given that inflation may increase prices charged for storage.
Many M&I water users GAO interviewed were generally satisfied with the Corps' M&I water storage pricing process. However, many M&I water users and stakeholders also highlighted concerns with their water storage agreements, primarily the length of time it took to complete the process for establishing agreements that reassign storage at existing projects from one use, such as hydropower generation, to use for M&I water supply. For example, one M&I water user GAO interviewed said it took the Corps 16 years to finalize its study for the water user's storage request and in that time the community faced a drought that jeopardized the ability to meet water storage needs of a local power plant. Corps officials could not provide estimates of the time it takes to complete the process because the agency does not systematically track this information. Under federal standards for internal controls, management should design control activities to achieve objectives and respond to risks. Such activities include promptly recording all transactions to maintain their relevance and value to management in controlling operations and making decisions. Without collecting and analyzing data on the length of time it takes to complete the process, the Corps does not have the information to identify areas that may hinder its ability to complete the water storage pricing process in a timely manner.

What GAO Recommends

GAO recommends that the Corps systematically review and correct its data on M&I water storage agreements and develop policy and guidance for conducting such reviews; and collect and analyze data on the time it takes to complete reallocation agreements. The agency concurred with the recommendations.