The Bureau of Reclamation’s Cooperative Agreement No. R16AC00087 With the Panoche Drainage District

At the request of the Bureau of Reclamation (USBR), we audited Cooperative Agreement No. R16AC00087 between the USBR and the Panoche Drainage District. This agreement was awarded under the statutory authority of the San Luis Act of 1960 (Pub. L. No. 86-488 § 5) to fund operation and maintenance of the San Luis Demonstration Treatment Plant (Demo-Plant) located in the San Luis Unit of California’s Central Valley Project. The purpose of the Demo-Plant is to remove salts and selenium from agricultural drain water in the San Joaquin River Water Quality Improvement Project area. The period of performance for this agreement is June 14, 2016, through December 31, 2018. As of October 10, 2017, the original agreement had been modified three times and amounted to $4.38 million. Of this amount, the USBR had paid $1.23 million to the District. We audited $772,974 in costs claimed by the District for the period June 14, 2016, through May 4, 2017. We identified $20,077 as unsupported and $193,814 as unallowable for a total of $213,891 in questioned costs. In addition to the questioned costs, we identified other issues with the District’s management of the cooperative agreement. Specifically, we found missing and unacceptable single audits, unreliable financial records, an absence of clearly written accounting policies and procedures, personal use of District-owned vehicles, questionable employee qualifications, and questionable wage rates. We made 22 recommendations to the USBR to resolve questioned costs and to communicate the other issues we identified to the District. The Acting USBR Commissioner and Assistant Secretary for Water and Science responded to our draft report on May 9, 2018, and concurred with our recommendations. Based on the USBR’s response, however, we consider Recommendations 1 through 17 to be unresolved and not implemented and Recommendations 18 through 22 to be resolved and not implemented. We will refer the recommendations to the Assistant Secretary for Policy, Management and Budget for resolution and implementation tracking.