D-5120

WTR-l.00

MAR 25 1994

H EMORANDUM

To: Regional Director; PN, HP. LC. UC. GP

Attention: 100

From: For Daniel P. Beard (sgct) Joseph L. MIlI~r

Commi ssi oner

Subject: Office of Inspector General Audit--Repayment of Irrigation

Investments by Water Districts: 93-1-468. Issued February 8. 1993

The three recommendations included in the subject audit report were concurred

in by Reclamation. The third one recommends that the regions more closely

monitor the collection process to verify that interest on delinquent accounts

is properly charged and that prescribed actions are taken to help ensure

delinquent accounts are collected in a timely manner. Reclamation’s

concurrence with this recommendation was implemented by Finance and Accounting

Division Directive No. COL-1-92 dated December 3. 1992. Addressing the other

two recommendations is the purpose of this memorandum.

The first pertains to the establishment of appropriate advance payment terms

required when renewing or executing water service contracts. Public Law

96-375 granted authority to Reclamation to make advance payment terms for

different time periods (i.e.. monthly or bimonthly along with semiannual or

annual). The length of the time period for advance payment is discretionary.

Considering the intent of the legislation and the objectives of the

Administration. Reclamation~s policy, effective immediately, will be to

establish the advance terms as semiannual or annual payments. A shorter

advance payment period may be approved by me only if you document that there

would be undue hardship upon a water service contractor.

The second recommendation calls for periodic adjustments to water service and

repayment rates based on changes in irrigators’ ability to pay. This

recommendation pertains both to new repayment contracts and to modifications

of existing contracts when additional Federal benefits accrue.

In response to this recommendation it will be Reclamation’s policy, effective

immediately, to include a provision for periodic reexamination of ability to

pay and for resulting adjustments in water service and repayment rates in all

new contracts and in all existing contracts when they are amended. The period

for this reexamination shall be every five years.
This contract term should provide that rates will be adjusted upward based on

increases in irrigators’ ability to pay. It should also provide that the

rates wilhbe adjusted downward if the ability to pay declines; provided.

however, that the downward adjustment cannot result in the lengthening of the

repayment period beyond that allowed by Reclamation law. The basis of

negotiation should include the mechanism for setting the floor or lowest rate

which may be established by the adjustment provision in the contract. This

policy shall apply unless otherwise directed by project-specific legislation

or by a determination that Reclamation’s action conflicts with the State law

governing a contract.

The first priority for use of any funds received from increased payments shall

be to reduce the assistance provided from power revenues. The second priority

shall be to reduce the repayment period. Since this is utilization of payment

capacity as required by the Reclamation Project Act of 1939, this policy shall

not be construed as “authorizing or permitting lump sum or accelerated

repayment of construction costs” as described in the Reclamation Reform Act of

1982.

If there are any questions regarding this policy, please contact Larry

Schluntz. D-5120. at (303) 236-9336. extension 260.

bc: W-1000. W-1010. W-6400. W-6500. W-6600

D-1000. D-5000, D-5010. D-5020. D-5100. D-5120. D-5120 (Schluntz). D-7000

WBR: LSchl untz : jkn:12/16/93:303-236-9336/260

Revised: LSchl untz : jw: 12/28/93:303-236-9336/260

Revised:TLynott:jw: 1/6/94:303-236-3286

Revised:TL~nott:jw: 1/11/94:303-236-3286

Revised:LSchluntz:jkn:2/18/94:303-236-9336/260

(WP:schluntz\i raudit2.mem)