The Corps’ Civil Works program is responsible for planning, developing, and maintaining the nation’s water and related environmental resources. The Corps’ headquarters is in Washington D.C.; eight regional divisions and 38 districts carry out its domestic civil works responsibilities. Each year the Corps’ Civil Works program receives funding through the Energy and Water Development Appropriations Act. The act normally appropriates a sum for water resources projects to several different appropriations accounts, including construction; operation and maintenance; and flood control, Mississippi River and tributaries. The construction account finances construction and major rehabilitation projects that relate to navigation, flood control, water supply, hydroelectric power, and environmental restoration. The operation and maintenance account finances the preservation, operation, maintenance, and care of existing river and harbor, flood-control, and related activities at the projects that the Corps operates and maintains. The flood control, Mississippi River and tributaries account provides flood protection for the alluvial valley of the Mississippi River from Cape Girardeau, Missouri, to the Head of Passes, Louisiana; and improvement of the Mississippi River for navigation from Cairo, Illinois, to Baton Rouge, Louisiana. Table 1 shows the appropriations received in fiscal years 2003–2005 for these accounts. The conference report accompanying the Energy and Water Development Appropriations Act generally lists individual projects and designates amounts for each project. Through this report, the appropriations committees essentially establish their priorities for the Corps’ water resources projects. In recent years, Congress has appropriated less funding than the sum of the amounts designated to individual projects in the conference report. Districts are responsible for executing projects. The Corps receives “no year” appropriations that remain available until spent. As part of the budget process, the Corps has historically requested appropriations from Congress to cover only those contract payments expected to be made in the upcoming fiscal year; it generally has not requested appropriations to fully fund its Civil Works contracts. According to the Corps, to comply with congressional direction that the agency give careful consideration to the disposition of appropriated funds to ensure that they are applied effectively, and that the agency effectively move (reprogram) funds from projects that are not moving forward, the Corps developed policies and business practices to expend all available appropriations in the fiscal year appropriated and thereby minimize carrying appropriated funds over to following years. In fiscal year 2006, again in response to changing congressional direction in the Energy and Water Development Appropriations Act and the accompanying conference report, the Corps modified its program execution process to focus on expending funds only on the projects for which they were specified, even if the appropriated funds could not be completely expended in the fiscal year, and minimizing reprogramming unless it was absolutely essential. Consequently, a higher level of carry-over balances is anticipated starting in fiscal year 2006. The Corps has also stated that it will begin requesting sufficient appropriations to fully fund most contracts beginning in fiscal year 2008. The Corps primarily uses fixed-price and indefinite-delivery contracts to complete its work. Fixed-price contracts are awarded for a specific price, regardless of the final cost to the contractor. If the contract is completed for less than the fixed price, the contractor benefits from greater profits; if the costs exceed the fixed price, then the contractor bears the loss. Indefinite-delivery contracts allow the Corps to obtain services or supplies through multiple task or delivery orders, as needed, to carry out project construction, and operation and maintenance activities. Starting with the River and Harbor Act of 1892 and continuing intermittently through the River and Harbor Act of 1916, Congress gave the Corps authorization to enter into contracts to complete a limited number of projects even though the Corps did not have appropriations to cover the full contract amounts. In 1922, the Corps sought and received from Congress permanent authority to enter into these types of “continuing contracts.” The River and Harbor Act of 1922 gave the Corps authority to use continuing contracts for specifically authorized projects on canals, rivers, and harbors. When the Corps sought its 1922 authority to use continuing contracts, it stated that this authority would enable it to enter into contracts that exceeded the amount of funding that had been appropriated. At that time, the Corps noted that the continuing contract option would be advantageous for some projects—such as a lock and dam project that required several million dollars and 3 to 4 years to complete—because it would help avoid tying up appropriations over a long period of time and carrying large sums of unexpended appropriations for several years. The Corps also noted that awarding contracts with a larger scope of work that covered several years would help encourage active competition among contractors. Since 1922, the Corps has used its continuing contracts authority to varying degrees for different types of projects and activities. In recent years, Congress has provided both guidance and specific direction to the Corps on how to use continuing contracts. These include the following: The Water Resources Development Act of 1999. Congress broadened the types of projects and work covered by the Corps’ continuing contracts authority. Specifically, it directed the Corps to award continuing contracts if sufficient funding was not available to complete a project funded from the construction; operation and maintenance; or flood control, Mississippi River and tributaries appropriations accounts. The Energy and Water Development Appropriations Act of 2004. Congress included a provision, not limited to fiscal year 2004, to also allow the use of continuing contracts for those contracts that were funded from the investigations appropriations account. The investigations account is used to collect and study basic information for, among other things, river and harbor and flood control activities; miscellaneous investigations; and surveys and detailed studies for projects before construction. The committee report accompanying the Corps’ fiscal year 2005 appropriations. The conference committee expressed concern about the Corps’ use of continuing contracts and noted that continuing contracts are to allow the Corps to award large construction elements of a project and take advantage of the economies of scale and allow these large elements to be efficiently managed over several years. The Energy and Water Development Appropriations Act of 2006. Congress included a provision that modifies the types of projects and work for which the Corps is required to use a continuing contract. The provision, not limited to fiscal year 2006, states that the requirements regarding the use of continuing contracts in the Water Resources Development Act of 1999 shall apply only to projects funded from the operation and maintenance account and the operation and maintenance subaccount of the Mississippi River and tributaries account. The 2006 act also prohibits the Corps from entering into a continuing contract or modifying an existing contract that commits an amount for a project “in excess of the amount appropriated for such project pursuant to this act.” The Corps’ continuing contracts contain either a “basic clause” or an “alternate clause.” Districts may only use the basic continuing contracts clause for those contracts awarded for congressionally authorized Civil Works water resources projects, which are typically authorized in a Water Resources Development Act. The alternate clause can be used for projects that are not specifically authorized, but are covered by the Continuing Authorities Program. The Corps’ continuing contracts authority applies to specific types of projects, which do not include water-related environmental infrastructure and resource development projects, such as wastewater treatment, water supply, storm water retention and remediation, environmental restoration, and surface water resource protection and development. Districts historically made the decision to use continuing contracts without oversight from the division or Corps headquarters. In our prior reports on governmentwide funding practices, we have observed that full funding for capital asset acquisitions is the best way to ensure that all financial decisions are fully accounted for and recognized as part of the budget process, and that full funding also helps ensure that governmentwide fiscal control is maintained. Unlike a project started with a partially funded continuing contract, an agency receives budget authority for the project’s full estimated costs before a commitment is made for a fully funded capital project. Otherwise, distortions in resource allocations can result when the full costs of the commitments are not recognized at the time budget decisions are made. The Corps does not track information on the number of contracts that it awards with a continuing contracts clause; therefore, it could not identify the number or the dollar value of such contracts awarded in fiscal years 2003–2005. Because the Corps does not track its use of continuing contracts, the quarterly reports it submitted to the appropriations committees in fiscal year 2006, on the use of such contracts, were inaccurate. We independently identified the number of continuing contracts awarded by the Corps in fiscal years 2003–2005 by reviewing the agency’s contracting data, and we determined that 1,592 (about 10 percent) of all contracts awarded during this 3-year period most likely included and used a continuing contracts clause. These 1,592 contracts accounted for more than 60 percent of the Corps’ annual obligations for new contracts awarded during these 3 years. The Corps does not systematically track the extent to which it uses a continuing contracts clause, and could not provide reliable information on the number of continuing contracts awarded in fiscal years 2003–2005 or the dollar value of these contracts. Moreover, according to Corps officials, nearly all multi-year contracts awarded by the Corps prior to fiscal year 2005 routinely included a continuing contracts clause, and the agency had no requirement for districts to track when this clause was actually used. In fiscal years 2005 and 2006, the conference committees, in the reports accompanying the Corps’ appropriation acts, directed the Corps to monitor its use of continuing contracts. The Corps was also directed to provide the appropriations committees with a quarterly report on the agency’s use of such contracts, starting in fiscal year 2006. Because the Corps does not have a tracking system for continuing contracts, it gathered the information submitted in the two quarterly reports for fiscal year 2006 by asking each division to provide information on their existing continuing contracts and expected obligations for the federal costs associated with these contracts. We reviewed these two quarterly reports and determined that they included inaccurate information. For example, we found at least 13 continuing contracts that were missing from the reports sent to the committees, and we found wrong contract values (the expected total costs for a contractor to complete the work) listed for 10 contracts.