The department acts as consortium, coordinating the activities and interests of the state government of California and the U.S. federal government to focus on interrelated water problems in the state’s Sacramento–San Joaquin River Delta.

The coordination program was created in 1994 by Governor Pete Wilson and federal Interior Secretary Bruce Babbitt following a decade of chaotic disputes between the state of California, the federal government, environmental groups, agricultural interests, and municipal water services.

In February 2006, the California Legislative Analyst's Office, or LAO, published criticisms of the CALFED Program during its annual budget review, citing sources from the California State Legislature and various independent review panels.

"[1] Due to its various coordination agencies and priorities, the LAO declared that "the program had strayed from its original focus of resolving conflicts among water-related interests in the Delta, by expanding into what looked like a statewide water management program, resulting in substantial overlap with the mission and responsibilities of [the] California Department of Water Resources."

The LAO recommended to the Legislature and for Governor Arnold Schwarzenegger to reform CALFED by establishing realistic budget reviews and create more confined responsibilities that would not overlap into other departments.