Summary: GAO produced a report on the examination of the financial statements for the Southwestern Power System and Related Activities for fiscal year 1964. These statements pertain to the power-generating and related activities of the Corps of Engineers (Civil Functions), Department of the Army, in the southwestern area of the United States and the power-marketing activities of the Southwestern Power Administration, Department of the Interior. The "Related Activities" consist of nonpower programs, primarily flood control, at Corps multiple-purpose projects that have hydroelectric facilities. We are issuing this report to advise the Congress of our opinion of these financial statements and of actions taken of the recommendations in our prior reports. The financial statements were prepared by the Southwestern Power Administration, Department of the Interior, and consist of consolidated information from the accounts and records of the Administration and the Corps of Engineers (Civil Functions), Department of the Army. A statement of the costs of nonpower operations is no longer included in the financial statements; however, the cumulative net costs of nonpower operations through fiscal year 1964 are disclosed in the statement of assets and liabilities. Also, the source and application of funds statement, which was prepared on a cumulative basis for fiscal year 1964, will be prepared on an annual basis for fiscal year 1965.
Corps district offices in the southwestern area in fiscal year 1964 continued to use inconsistent bases in establishing service lines of plant-in-service assets. This deficiency was pointed out in our prior report to the Congress on the audit of the Southwestern Power System and Related Activities. The Department of the Army informed us in July 1965 that corrective action had been taken on establishing service lives for the plant-in-service assets and that as of June 30, 1965, depreciation for all projects had been entered in the accounts on the same basis. A joint study is presently being made by the Department of the Interior and the Corps of Engineers to determine the propriety of depreciation methods and rates currently in use. The nature and extent of changes in depreciation methods or rates which may result from this study, the resultant efforts on interest on the unrepaid investment in power facilities, and the effect of the financial statements, if any, are not now determinable.
