Summary: GAO reviewed the proposed amendments to the Panama Canal Act that specify that regulations establishing the basis for Panama Canal Commission accounting should be issued pursuant to the Accounting and Auditing Act. The proposed amendments retain the provision that would allow for depreciation of the net replacement value of assets which will ultimately require replacement; this provision is contrary to both generally accepted accounting principles and the principles and standards of the Comptroller General. Therefore, GAO suggests that it be deleted. To eliminate inconsistency in accounting principles, appropriate sections of the Act should be amended to require the Commission to adhere to the principles and standards of the Comptroller General. GAO agrees with a proposed amendment that would eliminate the requirement that the GAO audit report include a statement listing all direct and indirect costs incurred by the United States in implementing the Panama Canal Treaty, including the cost of property transferred to Panama during each fiscal year. There is a lack of criteria for determining these treaty-related costs. The annual reporting requirement could be eliminated from the Act without diminishing the intent of Congress. GAO sees no advantage to its certification of the Secretary of Defense's estimate of Commission revenues for each fiscal year and suggests that this requirement be deleted. As GAO does not have a clear right of access to the records of the Government of Panama, effective auditing of the annual public service payments to Panama is impossible. Therefore, this requirement for audit should be deleted from the Act. GAO has no objection to adding costs incurred by other departments and agencies of the United States in providing educational, health, and other services to other items of costs to be covered by tolls. However, the proposed legislation is unclear as to whether those reimbursements are to be deposited in the Treasury. Therefore, Congress should clarify its intent in this portion of the amendment.
