One Employee Calculates California's $1.3B Water Debt

Every year, the Bureau of Reclamation sorts the cost of one of the largest water systems in the country -- 20 dams and reservoirs, 11 power plants, 500 miles of canals, water for a third of California's farmland and a million households⧉ -- into the rate that more than 200 irrigation and municipal contractors pay.▸ One person does the sorting⧉: a single Economist, working alone, with no manager or peer checking the arithmetic behind the roughly $1.3 billion in water-supply construction debt contractors are repaying -- just $7.8 million of it still owed, due in full by 2030⧉. A DOI Inspector General audit, Report No. 2022-WR-048⧉, found that arithmetic has never been reviewed.

Each year the Central Valley Project's $4.4 billion in accumulated construction cost is re-sorted across the project's eight authorized purposes⧉ -- power, flood control, recreation, fish and wildlife, and the rest -- to determine what water-supply contractors owe, alongside roughly $135 million the CVP costs to operate and maintain each year, of which about $54 million is billed annually to those same contractors⧉.▸ That sorting happens inside a construction spreadsheet with about 87 separate worksheets, some holding hundreds of line items, feeding a companion operations-and-maintenance spreadsheet with 17 more⧉. One employee builds both, alone.

The Inspector General found no manager or peer reviewed the Economist's work for accuracy in either spreadsheet, and no written procedure existed for how the cost allocation should be performed at all⧉ -- BOR relied entirely on one person's institutional memory.

The Economist inherited that memory imperfectly.▸ In a single O&M worksheet, auditors found 65 of 300 line items flagged with the Economist's own open questions about a predecessor's allocation rationale⧉ -- for instance, a "Folsom Public Safety, Protection of Land" line the predecessor had marked nonreimbursable for reasons the current Economist could not reconstruct. No process existed to resolve those questions; the spreadsheets' internal formulas confirm that numbers add up, not that the decisions behind them are correct⧉. Asked why no one reviewed the work, the Economist's manager cited a vacant junior-economist position and said he would start reviewing the calculations himself in the meantime.

Once costs are allocated, a separate ratesetting team turns them into the actual per-acre-foot water rate contractors pay, using 55 schedules guided by 27 standard operating procedures⧉.▸ BOR's own rules require a peer, then a supervisor, to review every schedule. When the OIG asked for the review records, BOR could produce complete documentation only for 2021 and part of 2019 -- and of the 55 schedules listed on the 2021 tracking spreadsheet, 41 of them, 75 percent, had no record that anyone had reviewed them⧉.

The procedures meant to guide the schedules have aged out with the staff who wrote them: only 1 of the 27 ratesetting SOPs had been updated since 2010, and two of the 55 schedules had no SOP at all⧉; auditors found stale formulas referenced in four of six SOPs they tested.▸ A newer accountant on the team told auditors the group runs on the knowledge of just two or three people, one of whom is retiring.

The costs that feed both spreadsheets come, in part, from purchase cards and contract awards at BOR's three CVP area offices -- and those channels had their own gaps.▸ Of 2,392 micropurchase transactions BOR made in fiscal year 2022, totaling about $2.4 million, auditors sampled 34 worth roughly $165,000 and found documentation deficiencies -- missing packing lists, missing proof of receipt, missing supervisor sign-off -- in 16 of them⧉, 47 percent. Auditors also questioned $1,685 as a duplicate payment, after BOR paid two identical travel invoices for what had become a single combined training trip⧉, and found the South-Central California Area Office let a local store keep multiple employees' purchase-card numbers on file, so any BOR staffer buying protective footwear could have the charge put on a card that wasn't theirs⧉.

On the contract side, of 126 CVP contracts awarded in FY2022, worth about $25 million, auditors sampled 14 worth roughly $15 million and found 6 -- 43 percent -- had no evidence a field supervisor or budget analyst had approved the award before it was made⧉.

BOR and the Department's acquisition office concurred or conditionally concurred with 19 of the OIG's 20 recommendations⧉ -- independent review of the cost allocations, written SOPs, updated ratesetting procedures, packing-slip documentation, an end to storing card numbers at stores, and requisition forms at every area office.▸ The one holdout was Recommendation 14 itself: BOR did not concur that its South-Central store was keeping card numbers on file, but the OIG kept the recommendation resolved anyway, citing store managers' and BOR's own purchase-card coordinator's independent confirmation that it was happening⧉. Per the report's own status table, 16 recommendations were later marked Resolved and 3 more Implemented⧉ -- most on 2024 target dates, with only the cost-allocation and SOP fixes (Recommendations 1-7) carrying a March 2025 deadline.

One was not: Recommendation 18, requiring BOR to routinely sample micropurchase transactions at all three area offices to catch documentation problems before an outside audit finds them, remained marked Unresolved⧉, with the OIG noting only that it would meet with BOR to discuss it further -- the routine check that would have caught this audit's own findings sooner is the one fix still pending.