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092735 1 (1970-07-06)

handle is hein.gao/gaobacwpz0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, D C 20548 CIVIL DIVISION Dear Mr. Armstrong. The General Accounting Office has reviewed certain aspects of the policies followed by the Bureau of Reclamation (Bureau) in computing interest expense on the Federal investment in water resources projects. We limited our review to the effect that these policies have on the financial statements and the repayment plans for the Federal Columbia River Power System (FCRPS). Our opinion letters to the audited FCRPS financial statements for fiscal year 1969 and earlier years have commented on the variations in the methods used by the entities of FCRPS in recording interest on the Federal investment and the need to resolve this matter for improved dis- closure of the financial posicion and results of operations of the in- tegrated power system. The Bureau currently computes annual interest expense only on the beginning fiscal year balance in the Federal investment. This balance consists of the commercial electric Plant-in-Service plus retirement work in progress less any repayments of investment. This method of computing interest on investment excludes from consideration funds used for addi- tional investments between the beginning and end of the year--net additions to Plant-in-Service and related accounts, and current operation and maintenance expenses. The Bonneville Power Administration (BPA) and the Corps of Engineers (Corps) consider such items in computing interest expense. Computation of interest cost on changes during the year in the Federal investment is required by the Accounting Principles and Stand- ards for Federal Agencies prescribed by the Comptroller General. Subsection 16.8(e) states that the interest cost for each year should be determined on the net Federal investment in the program or activity at the beginning of the year and on the net additions to such investment during the year. Also, the computation of interest cost by the Bureau on its net additions to the Federal investment during the year would provide consistency with the policy followed by the other entities of the FCRPS whose financial results are consolidated for financial statement purposes. crlaf 0OCUMENW AVAILABI8 O7 3

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