IN REPLY

REFER TO:

United States Department of the Interior

BUREAU OF RECLAMATION

Mid-Pacific Regional Office

2800 Cottage Way

Sacramento, California 95825-1898

2&7

MP-360 

To: Project Superintendent, Folsom, Fresno, Redding, Tracy, Willows

From: $FWLQJ Regional Director /s/ Lawrence F. Hancock

Subject: Procedures for Voluntary Payment of O&M Deficits by CVP Water

Contractors

The PL 99—546 requirement that operation and maintenance (O&M) deficits

incurred after fiscal year (FY) 1985 be repaid with interest has triggered

irrigation districts interest in the financial impacts of such interest

bearing deficits on their operations. Several districts have indicated a

desire to voluntarily pay their FY 1986 deficits including accrued interest

and have informally requested information as to the manner and method such

payment can be accomplished.

On July 30, 1987 a Regional policy was adopted on the acceptance and

handling of voluntary deficit payments. This memorandum establishes the

procedures to be used in the making and processing of such voluntary

payments.

Beginning with October 1, 1987 (FY 1988), contractors desiring to avoid O&M

deficit interest charges shall be responsible for paying by September 30 of

each fiscal year, the difference between the full O&M and lesser contract

rate(s) for all water purchased for delivery for that fiscal year at the

lesser contract rate. If this voluntary payment is made, interest will not

be charged on such repaid portion of the deficit. Any additional and/or

remaining deficit attributable to factors other than differences between

O&M rates and contract rates will be due and payable within 30 days after a

final accounting of the annual deficit has been completed and the

contractors have been notified of such deficit amounts. For this portion

of deficit, interest will not be charged on deficit payments received

within the 30—day grace period, but will be charged on any remaining

deficit balance not repaid within the grace period.

For FY 1987, the procedures indicated in the preceding paragraph will also

apply, except that contractors will have until October 31, 1987 rather than

September 30, 1987 to make payment for the difference between the full O&M

and lesser contract rate(s) for all water delivered for FY 1987 at the

lesser contract rate(s). This extended period for payment without being

charged interest is in recognition that these procedures were not in place

until the end of the fiscal year, which did not allow ample time to make

payment by September 30, 1987.
2

O&M deficits arising in FY 1986 must be repaid with interest accruing

through the date of payment as such deficits were incurred prior to the

time this voluntary repayment policy was adopted and in force.

Additionally, there have been no voluntary remittances to date of FY 1986

deficits by water contractors.

For payment of FY 1986 interest bearing deficits, and any subsequent

deficits and interest not repaid under this voluntary payment policy,

contractors desiring to repay such deficits should submit a request for an

accounting from the Bureau of the exact payment required as of a specific

date to pay off their respective annual deficit(s), with accrued interest,

if applicable. The Financial Analysis and Service Branch (FASB) of the

Regional Project Investment and Repayment Division will provide the payment

amounts and will perform the necessary accounting for interest

calculations, recording payments and maintaining the individual contractor

records.

To ensure proper accounting, it will be important that CVP water

contractors making voluntary payment of O&M deficit(s) transmit such

payment along with an explanatory letter specifically identifying the

particular annual deficit(s) for which payment is being tendered. It is

also important that any such receipts and transmittals be forwarded

directly to the FASB in the Sacramento Regional Office for recording of the

payment(s) and updating and maintaining individual contractor records.

Transmittal of such receipts to the Denver Centralized Finance Office will

be done by the FASB.

These procedures are effective upon receipt and water contractors should be

advised of the availability of these procedures for their use in making

decisions relative to the payment of O&M deficits, including accrued

interest. Questions or comments concerning the foregoing should be

addressed to Mr. C. L. Winn or Mr. Jim Bjornsen at FTS 460-5258.
 IN REPLY

REFER TO:

United States Department of the Interior

BUREAU OF RECLAMATION

Mid-Pacific Regional Office

2800 Cottage Way

Sacramento, California 95825-1898

-8/

MP-350

To: Regional Director

From: Regional Project Investment and Repayment Officer

Subject: Voluntary Payment of O&M Deficits by CVP Water Contractors

In recent months a number of irrigation districts have made inquiries

relative to the financial impacts on them of interest on annual operation

and maintenance (0&M)deficits required by PL 99-546. It is apparent that

the interest consideration on O&M deficits has caused various districts to

analyze their respective financial concerns and to make decisions regarding

payment of these deficits. Several districts have in fact indicated a

desire to voluntarily pay the FY86 deficit including accrued interest and

have informally requested information as to the manner and method such

payment should be accomplished.

At this time no formal procedure is in place to accept and properly account

for these voluntary payments. We believe, however, that it is in the best

interests of the Bureau, irrigation districts and the general public that

these deficits are paid as promptly as possible. We further believe that

early payment also meets the intent of PL 99-546, specifically full

recovery of O&M deficits from the individual contractor (with accrued

interest, if applicable).

Therefore, it is recommended that CVP water contractors who desire to make

voluntary payment of O&M deficits are furnished with the exact payment

amount as of a specific date and advised to forward such payment with an

explanatory letter stating the particular annual deficit(s) for which

payment is tendered. In those instances where final accounting of the

annual deficit has not yet been determined, the contractors will be advised

of the estimated O&M deficit (including accrued interest). The contractors

will also be informed that a final billing adjustment or refund will be

made when the accounting is finished. The Financial Analysis and Services

Branch will perform the necessary accounting for interest calculations,

recording payments, and maintaining the individual contractor records.

We are not aware of any reason that adoption of this procedure should

trigger RRA considerations or conflicts with provisions of existing water

contracts.
As several districts are awaiting the Bureau’s position on this matter,

your early consideration and approval will be appreciated.

/s/ C. L. Winn

Approved:

 /s/ David Houston 8/31/87 

Regional Director Date