Under its Civil Works program, the Department of Defense’s (DOD) U.S. Army Corps of Engineers plans, constructs, operates, and maintains a wide range of water resources projects. In addition to its headquarters in Washington, D.C., the Corps has eight regional divisions and 38 districts that carry out its domestic civil works responsibilities (see fig. 1). Corps headquarters primarily develops policies and plans the future direction of the organization; divisions coordinate the districts’ projects; and the districts plan and implement the projects, which are approved by the divisions and headquarters. Water resource projects are generally very large undertakings that often take more than a single fiscal year to complete. Moreover, the timing of these projects is often dictated by weather conditions or environmental concerns. For example, many dredging projects take place during the winter months because environmental concerns limit dredging operations during the spring and summer (March through September) to protect various species, such as threatened and endangered turtles. Congress appropriates about $5 billion annually to the Corps to carry out its Civil Works program. Federal agencies generally receive annual appropriations (also called fiscal year or 1-year appropriations) that are made for a specified fiscal year. These appropriations are available for obligation—legal commitment by the government for the payment of goods and services ordered or received—only for the bona fide needs of the fiscal year for which they were appropriated. If an agency fails to obligate its annual funds by the end of the fiscal year for which they were appropriated, the funds cease to be available to the agency for new obligations. They are referred to as “expired” and, after 5 years, are returned to the U.S. Treasury. In contrast, the Corps receives “no-year” appropriations through the Energy and Water Development Appropriations Act—that is, there are no time limits on when the funds may be obligated or expended, and the funds remain available for their original purposes until expended. The majority of the Corps’ Civil Works appropriations are generally directed to two types of activities: (1) operations and maintenance and (2) construction. Operations and maintenance activities include the preservation, operation, and maintenance of existing rivers and harbors. Construction activities include construction and major rehabilitation projects related to navigation, flood control, water supply, hydroelectric power, and environmental restoration. The Corps’ fiscal years 2007 and 2008 quarterly reports to Congress on continuing contracts awarded with the new clause contained inaccurate information. According to these reports, the Corps awarded 21 new continuing contracts during this time: 9 for construction and 12 for operations and maintenance, ranging in value from $2.1 million to $341.5 million, for a total of about $811 million. However, we found that some continuing contracts were double-counted, while others were omitted from the reports. For example, two contracts were first reported to Congress as new continuing contracts at the end of fiscal year 2007. The Corps then reported the same two contracts in the first quarter of fiscal year 2008, marking them as “not reported” in the prior fiscal year. In addition, we identified two continuing contracts totaling approximately $48 million that should have been included as new awards in the Corps’ quarterly reports but were omitted. Corps officials confirmed that these were indeed new continuing contracts that should have been included in the reports. Both types of errors impacted the total number and value of the continuing contracts with the new clause that were reported to Congress as having been awarded during this 2-year period. We also identified other types of errors that did not affect the overall totals of new contracts or their value but, nevertheless, raise questions about the accuracy of the information that the Corps is providing to Congress. For example, when we asked Corps officials in one district to verify information about the continuing contracts they had awarded in fiscal years 2007 and 2008, they provided us with documentation that showed that one contract that had been incorrectly included in the Corps’ quarterly report to Congress as a continuing contract was actually a fully funded contract. In addition, four new continuing contracts were not initially reported as new in the quarterly reports covering their award periods; instead, three were reported in a later quarterly report and one was reported earlier. Similarly, we found that two fully funded contracts were incorrectly included in the 2007 quarterly reports as existing continuing contracts. The Corps’ failure to accurately report to Congress the number of continuing contracts it awards is a problem that we previously identified in 2006, and at that time, we recommended that the Corps develop an appropriate tracking system for these contracts. Although the Corps concurred at the time, Corps officials told us that the agency had not developed a tracking system as we had recommended because it believed its system of asking divisions to provide information on a quarterly basis was sufficient for tracking the use of continuing contracts. These officials also told us that the agency had issued a 2007 guidance document that provided instructions to the districts for making submissions for the quarterly reports to Congress. In light of the inaccuracies we identified in the quarterly reports to Congress, we do not believe that the Corps quarterly data calls constitute a systematic tracking system for continuing contracts that we recommended in 2006; therefore, we believe that our 2006 recommendation has not yet been implemented by the agency. According to our Standards for Internal Control in the Federal Government, managers are to “complete, within established time frames, all actions that correct or otherwise resolve the matters brought to management’s attention.” We believe that the Corps’ inaction on our recommendation has led to a lack of internal controls that has contributed to persistent errors on the part of the agency in reporting to Congress on its use of continuing contracts. As a result of the limits that Congress has placed on the Corps’ use of continuing contracts in recent years, the Corps has issued guidance and made several modifications to its policies that govern the Civil Works program. While these changes, taken together, have resulted in a decrease in the number of continuing contracts that the Corps has awarded, they have not significantly affected the agency’s ability to execute its Civil Works program. Specifically, the committee report accompanying the Corps’ fiscal year 2005 appropriations expressed concern about the Corps’ use of continuing contracts and noted that the purpose of continuing contracts was to enable the Corps, in awarding contracts for the components of large construction projects, to take advantage of economies of scale and efficiently manage these large components over several years. In enacting the Energy and Water Development Appropriations Act of 2006, Congress provided specific direction to the Corps regarding its use of continuing contracts. The law states, among other things, that with certain exceptions, none of the funds made available in the act may be used to award any continuing contract, or make modifications to any existing continuing contract, that commits an amount for a project in excess of the amount provided for the project. To help ensure that it met these new congressional requirements, the Corps issued guidance in fiscal year 2006 that, among other things, directed that districts use fully funded contracts as their primary contracting option and that continuing contracts be used only as the contracting option of last resort; summarized new information that the districts are required to provide in their requests to use continuing contracts, including an explanation of why using a continuing contract is in the best interest of the government; and directed districts to take measures to ensure that contractor costs do not exceed the amount provided for projects. Also, in response to these new congressional requirements, that same year, the Corps developed a new clause for continuing contracts that specifically required contractors to stop work once they had expended the funding set aside for the fiscal year. In addition, the Corps established certain criteria for the use of continuing contracts for operations and maintenance projects. The Assistant Secretary of the Army for Civil Works preapproved certain requests for operations and maintenance continuing contracts if the contracts met five conditions. In response, the Corps issued guidance to the divisions reiterating these conditions. These conditions included that (1) the contract was financed from the Corps’ operations and maintenance account and (2) the work could not be broken down into smaller increments that could be fully funded within the current fiscal year. The following fiscal year, the Corps also established certain criteria for continuing contracts for construction projects. Specifically, using continuing contracts for construction activities was to be considered only if the contract was for more than $10 million and the work could not be completed in a single fiscal year. The Corps also required that requests for using continuing contracts, other than continuing contracts that had been preapproved, be approved at the Assistant Secretary level. While the Corps quarterly reports to Congress cannot be fully relied on for accurate information on the number and value of continuing contracts awarded with the new clause, they do provide a reasonable sense of the overall direction of the use of such contracts. In 2006, we reported that the Corps, on average, awarded about 500 continuing contracts per year for fiscal years 2003 through 2005. The 2007 and 2008 quarterly reports to Congress indicate that the number of continuing contracts with the new clause has reduced considerably and may average only about 10 per year for fiscal years 2007 and 2008. The decreased use of continuing contracts, and the use of the new clause, does not appear to have significantly affected the Corps’ Civil Works program. While the Corps has not established metrics to evaluate the impacts of this change, district officials we spoke with told us that they believe that the new continuing contracts clause has had little, if any, impact on their ability to accomplish the Civil Works mission of the agency. For example, several Corps district officials we interviewed said that while there were some temporary difficulties in executing their projects when the new clause was first implemented, their ability to conduct their work has not been adversely affected. Specifically, these officials told us that the combined effect of the requirement to fully fund contracts and the lack of sufficient funds in 2007, when the new clause was first implemented, led them to award fewer contracts at that time, and some project starts were delayed until the following fiscal year. These officials did not provide any examples, however, of where work on a project was stopped because funds were not available.