TITLE:  Reclamation Fund and Western Area Power Administration, B-303180, July 26, 2004
BNUMBER:  B-303180
DATE:  July 26, 2004
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   Decision

   Matter of:   Reclamation Fund and Western Area Power Administration

   File:            B-303180

   Date:           July 26, 2004

   DIGEST

   While the relationship between the Bureau of Reclamation (BOR) and the
Western Area Power Administration (WAPA) is not a creditor-debtor
relationship, WAPA is required to set rates to recover from its power
customers amounts appropriated over the years from BOR's Reclamation Fund
to finance construction, operation, and maintenance of federal power
facilities, and to deposit power revenues into the Reclamation Fund.  The
statutory power marketing scheme was designed to ensure that power
customers reimburse the federal government for the benefit they receive
from the federal government.  The statutory scheme requires WAPA to
enforce reimbursement by WAPA's customers and to repay to the Reclamation
Fund the amount it collects.

   DECISION

   The Department of the Interior (Interior) has requested an advance
decision under 31 U.S.C. S 3529 regarding the nature of the relationship
between the Reclamation Fund and the Western Area Power Administration
(WAPA).  The annual appropriation acts for the Department of Energy
(Energy) finance WAPA, one of Energy's power marketing administrations
(PMA), by providing that most of WAPA's appropriations "shall be derived
from the Department of the Interior Reclamation Fund."  See, e.g., Energy
and Water Development Appropriation  Act for Fiscal Year 2004, Pub. L. No.
108-137, 117 Stat. 1827, 1858 (Dec. 1, 2003).  Other laws address the
reverse flow of money from WAPA to the Reclamation Fund.  See, e.g., 43
U.S.C. SSA 392a, 485h(c).  In the request, Interior asked us whether the
annual appropriation to WAPA is a "a transfer from one appropriation to
another" or "a loan from the Reclamation Fund." Letter from Nina Rose
Hatfield, Deputy Assistant Secretary for Budget and Finance of the
Department of the Interior, to the Comptroller General, May 15, 2004.  If
a loan, Interior further asked "what recourse is available for Interior to
enforce repayment of this liability between Federal agencies" and what is
"the authority from which that recourse arises."  Id. Interior submitted
this request in the context of an ongoing dispute with Energy regarding
the appropriate accounting treatment for the appropriation to WAPA from
the Reclamation Fund, an account held in the Treasury for the Bureau of
Reclamation (BOR), and the amounts that WAPA, by law, must deposit into
the Fund.  43 U.S.C. S 392a.  Interior and Energy first sought guidance on
this issue from the Office of Management and Budget (OMB), which in turn
requested guidance from the Federal Accounting Standards Advisory Board
(FASAB) and FASAB's Accounting and Auditing Policy Committee (AAPC). 
Office of Management and Budget, Memorandum from Linda M. Springer,
Controller, to the Chief Financial Officers of the Departments of Energy
and Interior, Re: Accounting for Certain "Appropriated Debt" Transactions,
Sept. 15, 2003.  While AAPC had this matter under review, Interior
requested this decision. 

   In this decision, we do not address the applicable accounting standards or
the pertinent accounting treatment for the transactions at issue.  We will
defer to FASAB in that regard.  In order to inform the discussion among
the parties and AAPC and FASAB as they consider the proper accounting
treatment for the intragovernmental activities at issue, we explain here
the movement of funds between the Reclamation Fund and WAPA and the laws
that govern the relationship between BOR and WAPA.

   BACKGROUND

   WAPA is one of four power marketing administrations in the United States
today,[2] which were established between 1937 and 1977 in order to sell
and transmit the power generated at various federal hydroelectric plants. 
See U.S. General Accounting Office, Power Marketing Administrations: Their
Ratesetting Practices Compared With Those of Nonfederal Utilities, at 6,
GAO/AIMD-00-114 (Washington, D.C.:A  Mar. 30, 2000).  The PMAs sell the
wholesale power to public customers, such as municipally owned utilities
and irrigation districts, which then resell the power to end-use consumers
in the retail market.  Id.  The hydroelectric plants, which generate the
power, were built as part of large multi-purpose water projects that
provide benefits in addition to power generation, such as navigation,
flood control, irrigation, water supply, and recreation.  Id.  These
projects were constructed, and continue to be owned and operated, by the
U.S. Army Corps of Engineers and Interior's BOR.  Id.  Although WAPA sells
a small amount of power generated at hydroelectric plants of the Army
Corps of Engineers, most of its power is BOR-generated.  See U.S. General
Accounting Office, Power Marketing Administrations: Cost Recovery,
Financing, and Comparison to Nonfederal Utilities, at 21-22,
GAO/AIMD-96-145 (Washington, D.C.: Sept. 19, 1996).

   The dispute between Interior and Energy arose in the context of the
Consolidated Financial Statements of the United States.[3]  We understand
that WAPA, because of its responsibility to credit its power revenues to
the Reclamation Fund, records its appropriation from the Reclamation Fund
as an "account payable"[4] in its financial statements.  See AAPC, Minutes
of Jan. 29, 2004, and Minutes of Mar. 10, 2004, available at
http://www.fasab.gov/aapc/meeting.html (last visited July 14, 2004).  BOR,
in its financial statements, however, does not record the appropriation
from the Reclamation Fund to WAPA as a corresponding "account
receivable."[5]  Id.  Without an offsetting entry to WAPA's account
payable, Treasury has had difficulty reconciling assets and liabilities in
the Consolidated Financial Statements.  Id.

   DISCUSSION

   There are four laws that define the relationship between the Reclamation
Fund and WAPA: (1) the annual appropriation to WAPA derived from the
Reclamation Fund (see, e.g., Pub. L. No. 108-137);[6] (2) WAPA's authority
to market the power generated by BOR projects (42 U.S.C. S 7152); (3) the
statutory direction that WAPA credit revenues from the sale of
BOR-generated power into the Reclamation Fund  (43 U.S.C. S 392a); and (4)
WAPA's responsibility to set rates for the sale of power to recover
certain costs from customers (43 U.S.C. S 485h(c)). 

   The operations of most agencies are financed by appropriations from the
General Fund of the Treasury.  In more limited instances, some agencies
have authority to use excise taxes, user fees, or other collections that,
by law, are credited to a special deposit account of which the collecting
agency has custody.  For example, the Census Bureau, an agency of the
Department of Commerce, collects fees for providing certain documents and
services and is statutorily authorized to deposit revenue from such
activities into a special account whose funds the Census Bureau can then
use to pay for future activities.  See 13 U.S.C. S 8.  WAPA's operations,
however, are financed by appropriations from a special deposit account of
another agency in a different department of the federal government.

   WAPA's financing arrangement has its origins in the passage more than a
century ago of the Reclamation Act of 1902. Pub. L. No. 57-161, 57 Stat.
388 (June 17, 1902), codified in relevant part at 43 U.S.C. S 391.  With
that legislation, Congress created the Reclamation Fund as a "special
fund" in the newly established BOR to help finance an expensive enterprise
of reclaiming arid lands in the western United States for agricultural and
other productive uses that would promote the economic development of the
West.  Id.  The 1902 Act authorized the Secretary of the Interior to use
the Reclamation Fund to finance the construction, maintenance, and
operation of large-scale irrigation projects.  Id.  Until 1914, the
Secretary of the Interior used Reclamation Fund money without further
authorization or an appropriation from Congress; since 1914, a specific
appropriation from the Fund has been required.  See Pub. L. No. 63-170, S
16, 38 Stat. 686, 690 (Aug. 13, 1914); Flood-Control Plans and New
Projects: Hearings Before the House Committee on Flood Control, 78th Cong.
627 (Feb. 1 - 23, 1944) (statement by J. Kennard Cheadle, Chief Counsel,
Legal Division, Bureau of Reclamation).

   In the annual Interior appropriations acts, Congress provided that BOR's
appropriations "shall be derived from the reclamation fund," which it
defined as "the special fund[] in the Treasury created by the Act of June
17, 1902 (43 U.S.C. 391)."  See, e.g., Appropriation Act for the
Department of the Interior for Fiscal Year 1978, Pub. L. No. 95-96, Title
III, 91 Stat. 797, 801-03 (Aug. 7, 1977).  For fiscal year 1978, for
example, Congress appropriated money out of the Reclamation Fund for
"carrying out the functions of the Bureau of Reclamation as provided in
the reclamation laws," including for the "construction and rehabilitation
of authorized reclamation projects or parts thereof (including power
transmission facilities) and for other related activities, as authorized
by law" and for the "operation and maintenance of reclamation projects or
parts thereof and other facilities, as authorized by law."  Id.

   To fund the Reclamation Fund prior to fiscal year 1939, Congress passed
numerous laws, some directing that the proceeds of various activities be
deposited in the Fund and others authorizing the Treasury to loan money to
the Reclamation Fund up to a designated ceiling.  See, e.g., 43 U.S.C. SS
392, 393, 394, 401, 397, 391a.  In 1938 and 1939, Congress enacted two
provisions that improved the long-term financial viability of the
Reclamation Fund: the Hayden-O'Mahoney Amendment to the Appropriation Act
for the Department of the Interior for Fiscal Year 1939, codified at 43
U.S.C. S 392a, and section 9(c) of the Reclamation Project Act of 1939,
codified at 43 U.S.C. S 485h(c).

   In the Hayden-O'Mahoney Amendment, Congress provided a continuous source
of funding for the Reclamation Fund by requiring that any revenue
generated by Reclamation Fund-financed projects, including revenue from
the sale of power, be deposited into the Reclamation Fund: "All moneys
received by the United States in connection with any irrigation projects,
including the incidental power features thereof, constructed by the
Secretary of the Interior through the Bureau of Reclamation, and financed
in whole or in part with moneys heretofore or hereafter appropriated or
allocated therefor by the Federal Government, shall be covered into the
reclamation fund . . ."  43 U.S.C. S 392a.  The Hayden-O'Mahoney Amendment
provides further that "after the net revenues derived from the sale of
power developed in connection with any of said projects shall have repaid
those construction costs of such project allocated to power to be repaid
by power revenues therefrom and shall no longer be required to meet the
contractual obligations of the United States, then said net revenues
derived from the sale of power developed in connection with such project
shall, after the close of each fiscal year, be transferred to and covered
into the General Treasury as 'miscellaneous receipts.'"  Id. (Emphasis
added.)

   Section 9(c) of the Reclamation Project Act required that rates charged to
power customers be set at a level that is high enough to recover the full
costs of producing, transmitting, and selling BOR-generated power.  43
U.S.C. S 485h(c).  To recover the full costs, the power rates must reflect
the annual operation and maintenance costs of power-related activities and
the annual amortization of the construction cost of the large-scale
irrigation projects allocated to power: "Any sale of electric power or
lease of power privileges, made by the Secretary in connection with the
operation of any project or division of a project, shall be for such
periods, not to exceed forty years and at such rates as in his judgment
will produce power revenues at least sufficient to cover an appropriate
share of the annual operation and maintenance cost, interest on an
appropriate share of the construction investment at not less than 3 per
centum per annum, and such other fixed charges as the Secretary deems
proper."  Id.  Through this cost-based rate setting process, Congress
arranged for power customers to pay for this publicly provided benefit
over time.

   For the next four decades, BOR was responsible for both generating power
and selling and transmitting this power.  Then, in 1977, Congress created
the Department of Energy, and assigned to it certain responsibilities and
resources from Interior and other entities in the federal government. 
Department of Energy Organization Act of 1977 (1977 Act), Pub. L. No.
95-91, Title III, 91 Stat. 578 (Aug. 4, 1977), codified at 42A U.S.C. S
7152.  In the 1977 Act, Congress transferred to Energy the then existing
PMAs and "the power marketing functions of the Bureau of Reclamation,
including the construction, operation, and maintenance of transmission
lines and attendant facilities." Id. at S 7152(a)(1)(D).   The 1977 Act
also authorized Energy to establish additional PMAs if necessary to
perform these power marketing duties.  Id. at

   S 7152(a)(3).  Pursuant to this authority, Energy established WAPA in
December 1977.  See Western Area Power Administration, Annual Report
Fiscal Year 2002, at  7, available at
http://www.wapa.gov/media/pdf/annrep02.pdf (last visited July 19, 2004).

   Congress, however, left the Reclamation Fund and the power generating
functions of BOR in Interior, and continued to finance the marketing of
BOR-generated power from the Reclamation Fund, that is, by appropriation
from the Fund to WAPA.

   In language typical of prior years, WAPA's fiscal year 2004 appropriation
states in relevant part:

   For carrying out the functions authorized by title III, section
302(a)(1)(E) of the Act of August 4, 1977           (42 U.S.C. S 7152),
and other related activities . . . $177,950,0000, to remain available
until expended, of which $167,236,000 shall be derived from the Department
of the Interior Reclamation Fund . . . .

   See Energy and Water Development Appropriation Act for Fiscal Year 2004,
Pub. L. No. 108-137, 117 Stat. 1827, 1858 (Dec. 1, 2003) (emphasis
added).  This financing method parallels the way Congress financed power
marketing of BOR-generated power when that function was housed in Interior
prior to the enactment of the Energy Organization Act of 1977.

   In addition to retaining the historical practice of financing the power
marketing function from the Reclamation Fund, Congress retained, without
amendment, the two laws governing revenues from the sale of power, namely
the Hayden-O'Mahoney Amendment, 43 U.S.C. S 392a, and section 9(c) of the
Reclamation Project Act, 43 U.S.C. S 485h(c).  The Hayden-O'Mahoney
Amendment requires WAPA, like BOR before, to "cover into the Reclamation
Fund" revenues generated by the sale of power.  43 U.S.C. S 392a.  Section
9(c) of the Reclamation Project Act requires WAPA, like BOR before, to
charge its customers at rates set to recover costs specified in section
9(c) -- that is, annual operation and maintenance costs and an
amortization of the federal investment in the power facilities constructed
to the benefit of the customers.  43 U.S.C. S 485h(c).

   Energy set out the process it would use to project costs and establish
rates for WAPA in DOE Order No. RA 6120.2.  Department of Energy, Order
No. RA 6120.2 (Sept. 20, 1979).[7]  Pursuant to this order, WAPA uses
financial forecasting techniques to assess whether its current rates are
adequate to generate expected revenues at least sufficient to annually
recover costs specified in the order, including its annual operation and
maintenance costs and the annual amortized amount of the federal
investment in the power generation and transmission facilities.  Id. at 
PP 1, 6b, 12.  Whenever this annual assessment shows that revenues are not
adequate to recover the annual amortization or other costs, then WAPA must
suggest a correction plan for the next year that increases rates,
decreases costs, changes contracts, or provides "other viable means for
meeting cost recovery criteria."  Id. at  P 10b.

   The Secretary of Energy has delegated to WAPA's Administrator the
responsibility to set power rates, and requires that the Federal Energy
Regulatory Commission (FERC), an independent agency within Energy, approve
WAPA's rates.  58 Fed. Reg. 59,716, 59,717 (Nov. 10, 1993).  Before
approving the proposed rates, FERC reviews them to determine "whether the
revenue levels generated by the rates are sufficient to recover the costs
of producing and transmitting electric energy including the repayment,
within the period of cost recovery permitted by law, of the capital
investment allocated to power and costs assigned by Acts of Congress to
power for repayment."  Id.  Notably, notwithstanding the fact that the
Reclamation Fund is a BOR account, neither BOR nor Interior has a
statutory role in setting, reviewing, or approving rates, nor does either
have a role in the collection of revenues from WAPA's customers.

   The statutory framework governing WAPA and the Reclamation Fund defines an
intragovernmental relationship whereby one federal agency (WAPA) receives
funds appropriated from the account of another federal agency (BOR's
Reclamation Fund) and later deposits certain revenues that it collects
into that account.  This arrangement is certainly not a "loan" between BOR
and WAPA as one traditionally views a loan.  Congress has not directed BOR
to make money temporarily available, nor does BOR make money temporarily
available, to WAPA subject to a specified repayment schedule enforceable
by BOR.  The language of WAPA's fiscal year 2004 appropriation, Public Law
108-137, and the Hayden-O'Mahoney Amendment, 43 U.S.C. S 392a, speak in
terms of appropriations, or fiscal, law -- WAPA's appropriations shall be
"derived" from the Reclamation Fund; WAPA's revenues shall be "covered"
into the Reclamation Fund.  Moreover, the fact that the Hayden-O'Mahoney
Amendment directs that WAPA "cover" its power revenues into the
miscellaneous receipts of the Treasury after power revenues have "repaid"
the power-related construction costs of a project does not compel a
conclusion that there was a "loan" of funds from the Reclamation Fund to
WAPA.[8]  Compare Pub. L. No. 108-137, 117 Stat. at 1858 (WAPA's
appropriations "shall be derived from the Department of the Interior
Reclamation Fund") with 16 U.S.C. S 838k(a) (the Bonneville Power
Administration "is authorized to issue and sell to the Secretary of the
Treasury . . . bonds, notes, and other evidences of indebtedness . . . to
assist in financing the construction, acquisition, and replacement of the
transmission system").

   Nor is this arrangement a "transfer" as that term is commonly used by
Congress in the financing of government activities.  Congress typically
uses the term "transfer" (1) to reflect a movement of funds from one
agency to another to reimburse for goods or services received; (2) to
permit one appropriation to move funds to another to supplement the
receiving appropriation; or (3) to direct a payment from one appropriation
to another.  The arrangement here most resembles the third usage of the
term, but even that usage does not precisely describe the arrangement. 
Here, Congress appropriates money to WAPA from the Reclamation Fund.  The
appropriation is at the prerogative of the Congress, not BOR or Interior. 
BOR moves funds from the Reclamation Fund to WAPA but does so in order to
effectuate Congress's appropriation of amounts from the Reclamation Fund
to WAPA.  WAPA sells power; WAPA sets rates to recover from its customers
its annual operation and maintenance costs as well as an amortization of
the federal investment in the power facilities that benefit these
customers; and WAPA credits revenue it collected to the Reclamation Fund. 
Neither BOR nor Interior has a role in approving rates to ensure that WAPA
recovers specified costs from its customers, nor does either have a role
in ensuring that WAPA credits power revenues to the Reclamation Fund.[9]

   The statutory scheme here was designed to ensure that power customers
reimburse the federal government for the benefit they have received from
the federal government.  WAPA is the federal agency responsible for
enforcing that reimbursement.  The Reclamation Fund is the depository for
WAPA's collections of the reimbursements.

   CONCLUSION

   While we find that the relationship between BOR and WAPA is not a
creditor-debtor relationship, it is clear that WAPA is required to set its
rates to recover the federal investment as well as its annual operation
and maintenance costs.  Certainly, WAPA must track its costs carefully to
ensure that it covers into the Reclamation Fund the federal investment and
its costs.  We defer to FASAB to determine the accounting treatment that
should be used.  FASAB is the vehicle that GAO, jointly with Treasury and
OMB, established to develop accounting standards for federal government
entities in furtherance of its duties under 31 U.S.C. S 3511.

   /SIGNED/

   Anthony H. Gamboa

   General Counsel

   ------------------------

   [1] GAO, Treasury, and OMB jointly established FASAB in October 1990 as a
federal advisory committee to develop accounting standards and principles
for federal agencies under 31 U.S.C. S 3511, and to provide guidance to
agencies on federal financial reporting requirements.

   [2] The other three PMAs are the Bonneville Power Administration, the
Southwestern Power Administration, and the Southeastern Power
Administration.

   [3] The CFO Act of 1990 imposes a duty on Interior and Energy to prepare
audited financial statements to "reflect the overall financial position of
the offices, bureaus, and activities covered by the statement, including
assets and liabilities thereof; and results of operations of those
offices, bureaus, and activities."  Pub. L. No. 101-576, Title III, S
303(a)(1), 104 Stat. 2838, 2849-50 (Nov. 15, 1990), codified as amended at
31 U.S.C. S 3515.  The Government Management Reform Act of 1994 requires
the Department of Treasury (Treasury), in coordination with OMB, to
prepare a consolidated financial statement of the executive branch of the
U.S. government. Pub. L. No. 103-356, Title IV, S 405(c), 108 Stat. 3410,
3416 (Oct. 13, 1994), codified as amended at 31 U.S.C. S 331(e)(1).

   [4] The accounting term, "account payable," reflects an entity's liability
for a good or service that it has received but not yet paid for.  See U.S.
General Accounting Office, A Glossary of Terms Used in the Federal Budget
Process  8, GAO/AFMD-2.1.1 (Washington, D.C.: Jan. 1993) [hereinafter
Budget Glossary].

   [5] The accounting term, "account receivable," reflects an entity's asset
for a good or service that it has delivered but for which it has not yet
received payment.  See Budget Glossary at 9.

   [6] The authorizing legislation for individual Reclamation projects may
identify, for purposes of cost recovery, the allocation of that project's
costs to be recovered from power customers.  See, e.g., Fryingpan-Arkansas
Project Act of 1962, Pub. L. No. 87-590, 76 Stat. 389 (Aug. 16, 1962).

   [7] DOE Order No. RA 6120.2 also provides for the rate-setting process for
the other PMAs under other authorities, such as 16 U.S.C. S 825s.

   [8] The notion that the private sector use of these or similar terms
compels particular actions and accounting treatment is beyond the scope of
this decision.

   [9] In the past, we have described the appropriations that fund the
federal government's power-related capital investments as "appropriated
debt."  See, e.g., U.S. General Accounting Office, Power Marketing
Administrations: Cost Recovery, Financing, and Comparison to Nonfederal
Utilities, at 18 n. 5, GAO/AIMD-96-145 (Washington, D.C.: Sept. 19,
1996).  Even this term does not precisely describe the financing
arrangement.  We coined the term in our 1996 report in an effort to
quantify the failure of PMAs to timely recover the federal capital
investment in power facilities.  We pointed out that use of the term was
not to suggest that the appropriations for capital investment were to be
considered "lending."  Id.