Auditors criticize Army Corps’ 'just-in-time' financial strategy

The Army Corps of Engineers relies too much on shifting funds between projects and needs better planning and financial management, government auditors concluded in a new report.

The Army Corps has been using a "just-in-time" financial strategy under which it reprograms funds between projects, often without notifying Congress and sometimes in violation of its own rules, the Government Accountability Office said in its report (GAO-05-946). The report comes as the Corps experiences a surge in projects related to reconstruction in the aftermath of hurricanes Katrina and Rita.

"Reprogramming has become the Corps' routine way of managing project funds, and the Corps has used reprogramming as a substitute for an effective and fiscally prudent financial planning, management, and priority-setting system for its civil works program," GAO said.

The Corps moved more than $2.1 billion among 7,000 projects within its investigations and construction programs during fiscal 2003 and 2004. The majority of reprogramming activities was done in compliance with its own rules. Under those rules, however, most reprogramming actions do not require congressional notification, which diminishes Congress' knowledge and oversight of how funds are spent, GAO said.

"We believe that all actions should have counted toward the congressional notification thresholds, because when the Corps moves funds that create a major deviation from the funding direction the Congress provided for these projects, the Congress should be informed of the changes and the reason for the changes no matter how the Corps chooses to categorize the movement," GAO stated. GAO added that an overreliance on reprogramming also has resulted in inefficient management of funds.

"We found that funds were moved into projects that had a reported 'need,' but were subsequently removed because they were 'excess,' revoked from projects without regard to their near-term funding requirements, reprogrammed into and out of the same project on the same day, moved into and out of the same project multiple times a year, and reprogrammed without a system to evaluate the priority level of the affected projects," GAO said. "This strategy has resulted in numerous reprogrammings that may otherwise have been unnecessary if the Corps had employed a financial planning and management process in which funding priorities had been clearly established."

GAO made five recommendations to help the Corps reduce its reliance on reprogramming actions, institute a financial planning and priority process for managing project funds, and work with congressional committees to develop meaningful reprogramming guidance.

The Defense Department, which oversees the Army Corps of Engineers, concurred with all but one recommendation, and said it is developing guidance to make the necessary changes.

Defense did not agree, however, with changing the way the Corps allocates funds from an annual basis to a more frequent basis. Department officials said it was important that the Corps continued to allocate all funds provided by Congress for each project and any deviation from that amount would not reflect Congress' intent.