	Background

The Corps’ Civil Works program is responsible for investigating,  developing, and maintaining the nation’s water and related environmental  resources. Each year, the Corps’ Civil Works program receives funding through the  Energy and Water Development Appropriations Act. The Corps’ Cost and Benefit Analyses Were Inadequate to Support Decision-Making

Our review of four Civil Works projects or actions found that the cost and  benefit analyses the Corps used to support these actions were fraught with  errors, mistakes, and miscalculations, and used invalid assumptions and  outdated data. The Corps’ analyses often understated costs and overstated  benefits. As such, we concluded that they did not provide a reasonable  basis for decision-making. In two instances, we also found that the Corps’  three-tiered review process, consisting of district, division, and  headquarter reviews, did not detect the problems we uncovered. These  instances raised concerns about the adequacy of the Corps’ internal  reviews. We found that project benefits for which there was credible support were  about $13.3 million a year compared with the $40.1 million a year claimed  by the Corps’ 1998 report. Oregon Inlet Jetty Project

Our review of the Oregon Inlet Jetty project found that the Corps’ most  recent cost benefit analysis of the project, issued in 2001, had several  limitations, and as a result did not provide a reliable basis for deciding  whether to proceed with the project. We determined that if the Corps had incorporated more current data on  the actual number of trawlers that used the inlet in its analysis, benefits  would have been reduced by about 90 percent, from over $2 million  annually to less than $300,000. The Corps also incorrectly calculated project benefits  because it overstated the number of properties protected by about 20  percent and used an inappropriate methodology to calculate the value of  protected properties. The Corps’ Reprogramming Activities Resulted in Inefficient Management of Civil Works Program Funds

The Corps’ reprogramming guidance states that only funds surplus to  current year requirements should be a source for reprogramming and that  temporary borrowing or loaning is inconsistent with sound project  management practices and increases the Corps’ administrative burden. However, we recently reported that, over a two year period (fiscal years  2003 through 2004), the Corps moved over $2.1 billion through over 7,000  reprogramming actions. This movement of funds occurred because during  these two years the Corps managed its civil works project funds using a  “just-in-time” reprogramming strategy. The Corps’ reprogramming practices place a large demand on the  administrative resources of the agency. In response to the findings in our report, the Congress directed the Corps  to revise its procedures for reprogramming of funds starting in fiscal year  2006 to reduce the amount of reprogramming actions that occur and  would institute a more rationale financial discipline for the Corps Civil  Works appropriations accounts. Specifically, according to the  Corps’ revised policy, external peer review of such documents will take  place where the “risk and magnitude of the proposed project are such that  a critical examination by a qualified person or team outside of the Corps  and not involved in the day-to-day production of a technical product is  necessary.” In addition, the Corps has reported that it has undertaken a  number of other improvements, including (1) updating and clarifying its  project study planning guidance, (2) establishing communities of practice  to foster technical competence and share knowledge among individuals  who have a common functional skill, and (3) reorganizing to foster  integrated teamwork and streamline the project review and approval  process. In closing, Mr. Chairman, we have found that the Corps’ track record for  providing reliable information that can be used by decision makers to  assess the merits of specific Civil Works projects and for managing its  appropriations for approved projects is spotty, at best. While we are encouraged that the Corps  and/or the Congress have addressed or are in the process of addressing  many of the issues we have identified relating to these individual projects,  we remain concerned about the extent to which these problems are  systemic in nature and therefore prevalent throughout the Corps’ Civil  Works portfolio.
Why GAO Did This Study

Through the Civil Works Program, the Corps of Engineers (Corps) constructs, operates, and maintains thousands of civil works projects across the United States. The Corps uses a two-phase study process to help inform congressional decision makers about civil works projects and determine if they warrant federal investment. As part of the process for deciding to proceed with a project, the Corps analyzes and documents that the costs of constructing a project are outweighed by the benefits. To conduct activities within its civil works portfolio, the Corps received over $5 billion annually for fiscal years 2005 and 2006. During the last 4 years, GAO has issued five reports relating to the Corps' Civil Works Program. Four of these reports focused on the planning studies for specific Corps' projects or actions, which included a review of the cost and benefit analyses used to support the project decisions. The fifth report focused on the Corps management of its civil works appropriation accounts. For this statement, GAO was asked to summarize the key themes from these five studies. GAO made recommendations in the five reports cited in this testimony. The Corps generally agreed with and has taken or is taking corrective action to respond to these recommendations. GAO is not making new recommendations in this testimony.

What GAO Found

GAO's recent reviews of four Corps civil works projects and actions found that the planning studies conducted by the Corps to support these activities were fraught with errors, mistakes, and miscalculations, and used invalid assumptions and outdated data. Generally, GAO found that the Corps' studies understated costs and overstated benefits, and therefore did not provide a reasonable basis for decision-making. For example: (1) for the Delaware Deepening Project, GAO found credible support for only about $13.3 million a year in project benefits compared with the $40.1 million a year claimed in the Corps' analysis; (2) for the Oregon Inlet Jetty Project, GAO's analysis determined that if the Corps had incorporated more current data into its analysis, benefits would have been reduced by about 90 percent; and (3) similarly, for the Sacramento Flood Control Project, GAO determined that the Corps overstated the number of properties protected by about 20 percent and used an inappropriate methodology to calculate the value of these protected properties. In addition, the Corps' three-tiered internal review process did not detect the problems GAO uncovered during its reviews of these analyses, raising concerns about the adequacy of the Corps' internal reviews. The agency agreed with GAO's findings in each of the four reviews. For three projects the Corps has completed a reanalysis to correct errors or is in the process of doing so; it decided not to proceed with the fourth project. GAO's review of how the Corps manages its appropriations for the civil works program found that instead of an effective and fiscally prudent financial planning, management, and priority-setting system, the Corps relies on reprogramming funds as needed. While this just-in-time reprogramming approach can provide funds rapidly to projects that have unexpected needs, it has also resulted in many unnecessary and uncoordinated movements of funds, sometimes for reasons that were inconsistent with the Corps' own guidance. Because reprogramming has become the normal way of doing business at the Corps, it has increased the Corps' administrative burden for processing and tracking such a large number of fund movements. For example, in fiscal years 2003 through 2004 the Corps moved over $2.1 billion through over 7,000 reprogramming actions. In response to GAO's findings, the Congress directed the Corps to revise its procedures for managing its civil works appropriations, starting in fiscal year 2006, to reduce the number of reprogramming actions and institute more rational financial discipline for the program.