TALL TIMBERS, MD. -- The U.S. Army Corps of Engineers, and not residents of this tiny Potomac River community, should pay the $300,000 cost overrun for an erosion abatement project completed here last year, according to a preliminary audit by the Defense Department inspector general's office.

The Defense Department audit, which is expected to be completed next month, also has tentatively concluded that the Corps should reimburse the St. Mary's County government, which already has paid the Corps more than $215,000 of the project's cost overrun.

A few days before learning of the preliminary findings, the county's board of commissioners was considering ways to levy a special tax on about 50 Tall Timbers property owners to pay for the overrun.

Residents of this close-knit town 75 miles southeast of Washington said last fall that they were notified by St. Mary's officials that the county would not absorb the cost of the overrun.

Instead, county leaders said, the $300,000 overrun would cost some residents living along a half-mile stretch of the Potomac between $170 and $600 a year for 10 years.

Auditors this week said the Corps "misinterpreted" a federal law when it tried to charge the county $304,327 for the erosion abatement project, according to James McHale, program director at the inspector general's office.

McHale also said that because the Corps admitted to auditors that it was "100 percent responsible" for the high rate of erosion along the Tall Timbers shoreline in recent years as a result of past Corps failures to control erosion, "there wasn't much doubt" that the Corps should pay for the cost overrun.

"It wasn't a bad mistake, but a matter of interpretation," said McHale.

Corps officials declined to comment on the inspector general's preliminary findings. Although it is unclear whether the agency might dispute the audit's findings, the Corps can appeal the conclusions in the final report when it is issued next month.

In the past, Corps officials have contended that the overrun associated with the Tall Timbers project was not their doing. They blamed the additional cost on two major storms, including Hurricane Gloria, that increased the shoreline's erosion between the time of the original cost estimate for the project and completion of the work.

In addition, the Corps said a private contracting firm, which built the stone structure to control erosion along the waterfront, packed the stones in the rock wall more compactly than is normal, thus increasing the cost.

County officials and Tall Timbers residents said the audit's findings help to justify their anger with the Corps.

"The county is obviously very pleased," said John Norris, St. Mary's public works director. "This is not a group of people that always have their hands out. They have been bearing responsibility for the costs of {the town's} seawall for a lot of years."

Since the 1950s, residents here have been taxed hundreds of thousands of dollars for several Corps projects designed to hold back the sometimes stormy waters of the lower Potomac.

Rep. Roy P. Dyson (D-Md.), whose district includes Tall Timbers, said the inspector general's audit "lays the blame squarely where it should be. I think it's all going to work out now."

Tall Timbers' trouble with beach erosion started long before the Corps came to town 30 years ago, but the federal agency has received the brunt of the anger for not solving the erosion problem that has taken away the town's once-popular beaches.

The Corps' strongest detractors here charge that the agency has not only been ineffective in stopping erosion, but has actually intensified the disappearance of the community's shoreline.

In 1953, the Corps constructed a sea wall along a half-mile stretch of Tall Timbers' shoreline as a means to control erosion, an ever-increasing concern for dozens of communities along the Chesapeake Bay and its tributaries.

In the early 1960s, the Corps constructed two long jetties -- large piles of rocks -- in an attempt to protect a channel that leads into a bay on the northern edge of town.

The 800-foot jetties preserved the channel but robbed the flow of sand to the town's shoreline. Consequently, the 15- to 20-foot-wide beach that stretched into the Potomac vanished within about 15 years.

In early 1986, the county's board of commissioners approved a Corps project to construct a 2,700-foot stone revetment, a long, horizontal pile of compacted rocks intended to protect the shoreline from further erosion.

The county said it would pay any amount over $1 million, although the Corps estimated the project would cost between $850,000 and $950,000.

When completed last January, the bill amounted to $1,304,327, an amount county officials and Tall Timbers residents called extreme.

They took their case to Dyson and Maryland Sens. Paul Sarbanes and Barbara Mikulski, who began pressing the Corps to reconsider.

"We are elated," said Robert Wagner, a Tall Timbers property owner who was one of the leaders in the town's fight with the Corps. "It is time that the Corps' feet are to the fire and they are caught up in their own ineptitude."

Wagner said Tall Timbers residents will now push to have their shoreline restored to the shape it was in before the Corps built the jetties in the 1960s.

As in other communities facing similar erosion problems, experts have found that shortening jetties or placing a break in the middle of the stone structures can help increase the natural flow of sand along shoreline areas located downstream from the jetties.

Wagner said he hopes the state -- and not the Corps -- will consider such a project.

"We have urged the Corps since mid-1983 to restore the shoreline's sand flow. Instead they just piled rocks in front of our sea wall," Wagner said. "We now hope to have those jetties shortened, or the erosion will just continue."