SALEM, Ore. — A watchdog arm of the U.S. Department of the Interior says the Bureau of Reclamation lacked the authority to enter into an agreement with the Klamath Water and Power Agency on water use, and that consequently $32.2 million spent by the agency over seven years “was a waste of funds.”

The department insisted that it did have the authority.

The dispute between the inspector general’s office and its own department has been referred to the Assistant Secretary for Policy, Management and Budget for resolution.

In its report released this week, the inspector general’s office recommended that the Bureau of Reclamation discontinue funding water-supplementation activities in the Klamath Basin unless it has specific legal authority. The Interior Department noted that the cooperative agreement with the Klamath Water and Power Agency already ended, on May 2. The Klamath Project is a federal dam project in southern Oregon and northern California to manage the flows of the Klamath River.

The inspector general’s office said parts of the program paid irrigators for idling land and for deepening and drilling wells, and that it largely benefited the irrigators instead of fish and wildlife, the intended benefactors.

In its response, the Interior Department said water savings realized through the cooperative agreement “essentially provided the same fish and wildlife benefits as the acquisition of third party water rights.”

The reduction in surface water demand through land idling and wells, the department argued, increased “the water available in Upper Klamath Lake and Clear Lake Reservoir to meet requirements for the endangered short-nose and Lost River suckers and in the Klamath River for the endangered coho salmon.”