[Final Audit Report on Indian Irrigation Projects, Bureau of Indian Affairs ]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 96-I-641

Title: Final Audit Report on Indian Irrigation Projects, Bureau
       of Indian Affairs 

Date: March 29, 1996

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United States Department of the Interior
OFFICE OF THE INSPECTOR GENERAL
Washington, D.C. 20240

MEMORANDUM

TO:                 The Secretary

FROM:               Inspector General

SUBJECT SUMMARY:    Final Audit Report for Your Information - "Indian
Irrigation Projects, Bureau of Indian Affairs" (No. 96-I-641)

Attached for your information is a copy of the subject final audit report.
For the Bureau of Indian Affairs irrigation projects that we reviewed, we found that
the Bureau had not taken corrective actions to recover operation and maintenance
charges of $3 million owed to eight projects for fiscal years 1993 and 1994; collect
reimbursable construction costs totaling $7.7 million from the non-Indian landowners
at five projects; and include reimbursable construction costs of about $3.3 million in
the repayment contracts for two irrigation projects. Specifically, our review noted
that:
  - Operation and maintenance rates for the projects were not based on the full
cost of delivering water, including the cost of systematically rehabilitating and
replacing project facilities and equipment. As such, project revenues have been
insufficient to adequately maintain the projects, some of which have deteriorated to
the point that the continued delivery of water is doubtful. In addition to not seeking
regular rate increases to cover the full costs of delivering water, the Bureau did not
adequately bill and collect currently owed operation. and maintenance charges.
  - Bureau offices have not negotiated repayment contracts, adjusted repayment
rates, or followed other procedures necessary to collect the reimbursable construction
debt from non-Indian landowners. As a result, an undetermined amount of the
$7.7 million construction debt at the projects reviewed may not be legally collectible
because the Bureau has not complied with appropriate administrative procedures to
legally apprise landowners of what they owe. We also confirmed that the Bureau
was successfully collecting reimbursable construction costs for two additional projects
and only a small portion of the reimbursable debt remained to be paid for these two
projects.
We made 13 recommendations relating to the assessing, billing, and collecting of
adequate operation and maintenance charges and reimbursable construction costs.

Based on a review of the Bureau's proposed actions and subsequent discussions with
Bureau officials, we considered all of the 13 recommendations resolved but not
implemented.

If you have any questions concerning this matter, please contact me or Ms. Judy
Harrison, Assistant Inspector General for Audits, at (202) 208-5745.

Attachment


W-IN-BIA-O02-94
United States Department of the Interior
OFFICE OF THE INSPECTOR GENERAL
 Washington, D.C. 20240

Memorandum

To:  Assistant Secretary for Indian Affairs

From:     Assistant Inspector General for Audits

Subject:   Final Audit Report on Indian Irrigation Projects, Bureau of Indian Affairs 
(No. 96-I-641)

We have completed a review of selected Bureau of Indian Affairs irrigation projects
to determine whether the Bureau adequately assessed, billed, and collected operation
and maintenance charges and identified and collected, in a timely manner, the
reimbursable construction costs owed by non-Indians.

We found that the Bureau's area, agency, and project offices had not obtained all the
operation and maintenance charges owed eight irrigation projects (Blackfeet, Crow,
Fort Belknap, Fort Peck, Wind River, Colorado River, San Carlos, and Wapato).
As of September 1994, delinquent operation and maintenance charges owed these
projects totaled $10.3 million, of which $3 million had not been properly billed and
collected for fiscal years 1993 and 1994, the period of our review. We also reviewed
the collection of reimbursable construction costs for these eight projects and for the
Fort Hall and Uintah Projects and found that, with the exception of the Fort Hall,
Wapato, and Colorado River Projects, the Bureau had not collected about
$7.7 million of reimbursable construction costs from the non-Indian landowners and
had not included an additional $3.3 million in the repayment contracts for two
projects. We had noted similar issues concerning the operation and maintenance
and construction of Indian irrigation projects in two audit reports issued since 1988.
In addition, in September 1995, we issued a separate audit report (No. 95-1-1402) on
the Wapato Irrigation Project because of the severity of the Project's financial
problems and the deteriorated state of Project facilities and equipment. Specifically,
our current review disclosed that:

  - Operation and maintenance revenues were insufficient to maintain the
projects, and some projects had deteriorated to the extent that their continued
capability to deliver water was in doubt. This occurred because operation and
maintenance rates were not based on the full cost of delivering irrigation water,
including the costs of systematically rehabilitating and replacing project facilities and
equipment, and because project personnel did not seek regular rate increases to
cover the full cost of project operation. Although the Code of Federal Regulations
and the Bureau Manual required the assessment of full cost rates, these regulations

were general, and specific guidance had not been developed to indicate what costs
should be included in the rates and how the costs should be developed. In addition
to the insufficient rates, the oversight of the area offices was not adequate to ensure
that agency and project offices properly prepared and mailed operation and
maintenance bills to all landowners and water users, implemented required debt
collection procedures, terminated water deliveries as required, and enforced the
requirement for surety bonds or other security from lessees of Indian lands.

  - Area, agency, and project offices had not collected reimbursable construction
costs owed by non-Indian landowners in a timely manner at the Blackfeet, Crow,
Fort Belknap, Fort Peck, Wind River, San Carlos, and Uintah Projects. Bureau
regulations require that, unless otherwise determined by the Bureau, non-Indian
landowners repay their per-acre share of reimbursable construction costs over a
40-year period. However, area, agency, and project offices had not negotiated
repayment contracts, adjusted repayment rates, established ability-to-pay rates, or
followed other administrative procedures necessary to apprise the landowners of their
debt to ensure that the debt remained legally collectible. As a result, an
undetermined amount of the construction debt may not be legally collectible,
including over $1.5 million of reimbursable construction costs owed on the Uintah
Project that the Bureau was reviewing for possible cancellation.

  - Reimbursable construction costs were collected for the Fort Hall and
Wapato Irrigation Projects and were deferred for the Colorado River Irrigation
Project because the land was still in trust status. Of the total reimbursable costs of
$4.3 million for the Wapato Project and $2.1 million for the Fort Hall Project, only
$72,000 and $2,000, respectively, remained to be paid. At the Wapato Project,
personnel attributed the timely repayment to a provision in the water rights
application that required landowners to repay a proportionate share of the
reimbursable costs. At the Fort Hall Project, timely repayment was attributed to
adherence to required collection procedures,

To correct the deficiencies noted, we made 13 recommendations relating to the
computation of operation and maintenance rates to ensure the adequate
maintenance of project facilities and equipment, compliance with Departmental
billing and collection requirements, enforcement of bonding requirements, and
collection of reimbursable construction debt.

The March 27, 1996, response (Appendix 5) to our draft report from the Assistant
Secretary for Indian Affairs concurred with 11 of the report's 13 recommendations,
partially concurred with 2 recommendations, and outlined actions needed to address
the recommendations. The response also stated that the Bureau had recently
initiated actions to address the problems identified. For example, in August 1995,
the Bureau established the Power and Irrigation Reconciliation Team to review and
reconcile construction and operation and maintenance account balances; review the
adequacy of construction and operation and maintenance assessments; and ensure
that all such costs were properly billed and collected for 3 Bureau power and
18 Bureau irrigation projects. In addition, the Bureau reported that construction
cost balances have been reconciled for the Fort Hall, Pine River, and Uintah
Irrigation Projects, and similar reviews of construction and operation and
maintenance account balances are either ongoing or scheduled at the remaining
projects.

Based on the Bureau's response and subsequent discussions with Bureau officials, we
consider the proposed actions sufficient to meet the intent of the recommendations.
Accordingly, the 13 recommendations are classified as resolved but not implemented
and will be referred to the Assistant Secretary for Policy, Management and Budget
for tracking of implementation. Therefore, no further response to the Office of
Inspector General is required (Appendix 6).

The legislation, as amended, creating the Office of Inspector General requires
semiannual reporting to the Congress on all audit reports issued, the monetary
impact of audit findings (Appendix 1), actions taken to implement audit
recommendations, and identification of each significant recommendation on which
corrective action has not been taken.

We appreciate the cooperation of Bureau officials in the conduct of our audit.

CONTENTS

Page

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
OBJECTIVE AND SCOPE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PRIOR AUDIT COVERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

FINDINGS AND RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 4

A. PROJECT OPERATION AND MAINTENANCE CHARGES . . . 4
B. REIMBURSEMENT OF CONSTRUCTION COSTS . . . . . . . . . . 12

APPENDICES

1. CLASSIFICATION OF MONETARY AMOUNTS . . . . . . . . . . . 19
2. ORGANIZATIONS VISITED OR CONTACTED . . . . . . . . . . . . 20
3. SUMMARY OF RECOMMENDATIONS AND
  CORRECTIVE ACTIONS FROM PRIOR REPORTS . . . . . . . . 21
4. REPORTS ON PHYSICAL CONDITION AND ESTIMATED
  REHABILITATION COSTS FOR PROJECTS REVIEWED . . . 25
5. BUREAU OF INDIAN AFFAIRS RESPONSE . . . . . . . . . . . . . . . 26
6. STATUS OF AUDIT REPORT RECOMMENDATIONS . . . . . . . 35

INTRODUCTION

BACKGROUND

The Bureau of Indian Affairs irrigation program began in about 1884, when the
Congress authorized funds for the general development of Indian irrigation projects.
Primary justifications for constructing irrigation projects were to provide for
economic development on many reservations and to meet Federal trust
responsibilities or other legal obligations. The projects vary considerably in acreage
and in the amount of land that is Indian owned; for example, about 99 percent of the
land served by the Colorado River Irrigation Project is Indian owned, while only
about 16 percent of land served by the Flathead Irrigation Project is Indian owned.

The Indian irrigation program is composed of two parts: (1) construction of projects
and (2) operation and maintenance of the projects. The objective of the construction
portion of the program is to develop water supplies for irrigable Indian lands, while
the objective of the operation and maintenance portion of the program is to operate
and maintain irrigation water delivery systems in a safe, economical, beneficial, and
equitable manner. The Bureau has determined that for projects with lands capable
of producing crops under sustained irrigation, landowners and water users, in
accordance with Bureau policy, are to pay the full annual costs of operating and
maintaining the projects. The Congress has, through legislation, prescribed whether
the Federal construction investment in the projects is to be repaid by project
beneficiaries. Owners of project lands in fee status,l primarily non-Indians, are
required to repay their proportionate, per-acre share of reimbursable construction
costs. However, the repayment of irrigation construction costs on trust lands is
deferred as long as title to the land remains in trust status.

OBJECTIVE AND SCOPE

The objective of our audit was to determine whether the Bureau adequately:
(1) assessed, billed, and collected operation and maintenance charges; and
(2) identified and collected reimbursable construction costs owed by non-Indians.
To accomplish our objective, we interviewed officials from various Bureau offices,
the Department of the Interior's Office of the Solicitor, tribal council members of
the Colorado River Indian Tribes, water user organizations, and the Southwest
Indian Agricultural Association2concerning the financial and physical conditions of
the projects. The locations we visited are listed in Appendix 2. We also reviewed

lUnlike trust lands, for which title is held in trust for the Indians by the Federal Government, lands
in fee status have unrestricted rights of disposition. These rights apply whether the fee status land
is owned by tribal entities, individual Indians, groups of Indians, or non-Indians. In terms of the
repayment obligation, fee status lands are considered to not be owned by Indians.

2The Southwest Indian Agricultural Association independently monitors about 37 large and small
irrigation projects under the jurisdiction of the Phoenix Area Office.

1

laws and legislative histories; Congressional correspondence and hearings; Bureau
policy and procedure manuals; Bureau correspondence; and available technical
reports on the projects' physical conditions, some of which we verified by on-site
visits. In addition, we reviewed Bureau and project budgeting and accounting
records related to developing, assessing, billing, and collecting operation and
maintenance and construction charges and land records related to leased and idle
lands.

Our audit focused on Bureau and project activities for fiscal years 1993 and 1994 and
for other periods as appropriate for 10 large projects.3 The audit was conducted
from October 1994 through March 1995 in accordance with the "Government
Auditing Standards, " issued by the Comptroller General of the United States.
Accordingly, we included such tests of records and other auditing procedures that
were considered necessary under the circumstances. As part of our audit, we
reviewed the Bureau's system of internal controls and found weaknesses in the
processes for developing, assessing, billing, and collecting operation and maintenance
and construction charges for the projects and for enforcing surety bonds or other
security requirements. We also reviewed the Department's Annual Statement and
Report, required by the Federal Managers' Financial Integrity Act, for fiscal
years 1992 through 1994 to determine whether any of the reported weaknesses were
directly related to the scope of our audit. The reports cited long-standing material
weaknesses in the Bureau's irrigation program and in debt collection practices,
including the need to update regulations, policies, and procedures because the
current guidance was insufficient to properly administer the Bureau's irrigation
projects and debt collection functions.

PRIOR AUDIT COVERAGE

Since 1988, the Office of Inspector General has issued two audit reports that address
issues involving the operation and maintenance and construction of Indian irrigation
projects, many of which were applicable to the projects we reviewed for our current
audit. The reports "Repayment of Investment in Indian Irrigation Projects, Bureau
of Indian Affairs" (No. 89-38), issued in January 1989, and "Operation and
Maintenance of Assessments of Indian Irrigation Projects, Bureau of Indian Affairs"
(No. 88-42), issued in February 1988, concluded that the Bureau had not adequately
and accurately assessed, billed, and collected project operation and maintenance
charges or taken sufficient action to collect reimbursable, noninterest-bearing
construction costs owed the Government. The reports made 26 recommendations.
During our current audit, we found that while the Bureau had taken some corrective
actions, 18 recommendations had not been fully implemented (see Appendix 3).

31n our evaluation of the Bureau's assessment, billing, and collection of operation and maintenance
charges, we reviewed eight irrigation projects: Blackfeet, Crow, Fort Belknap, Fort Peck, Wind
River,
Colorado River, San Carlos, and Wapato. In our evaluation of the Bureau's identification and
collection of the reimbursable construction costs owed by non-Indians, we reviewed these eight
projects plus the Uintah and Fort Hall Irrigation Projects.

2

As part of this review, we also issued a separate report on the operation of the
Wapato Irrigation Project (No. 95-I-1402), which questioned the Project's continued
ability to deliver water because of deficiencies in assessing, billing, and collecting
operation and maintenance charges. Further, at the Bureau's request, we attended
a November 1994 meeting in Washington, D.C. and an April 1995 meeting in
Albuquerque, New Mexico, to assist Bureau irrigation program and accounting
personnel in revising Bureau irrigation policies and procedures. At the first meeting,
we discussed the development of total estimated project operation and maintenance
costs and the resultant operation and maintenance rates. At the second meeting, we
discussed the proposed reconciliation of reimbursable construction debt, including
the factors to consider in prioritizing the determination and collectibility of
reimbursable construction costs and the need for reforms to prevent the recurrence
of similar assessment, billing, and collection problems.

 
FINDINGS AND RECOMMENDATIONS

A. PROJECT OPERATION AND MAINTENANCE CHARGES

Bureau of Indian Affairs area, agency, and project offices did not adequately assess,
bill, or collect operation and maintenance charges for eight irrigation projects. The
Code of Federal Regulations and Departmental and Bureau Manuals provide
guidelines for assessing, billing, and collecting operation and maintenance charges
and for enforcing bonding or other security requirements. However, area and agency
offices did not: (1) develop supplemental guidance to ensure that the assessment
rates accurately reflected all costs necessary to properly operate and maintain project
facilities and equipment; and (2) ensure compliance with existing policies and
procedures for billing and collecting operation and maintenance charges and for
enforcing security requirements. Although we could not determine the extent of the
underassessments because the rates did not include all costs, we did find that total
delinquent operation and maintenance charges for the eight projects were
$10.3 million, of which $3 million had not been properly billed and collected for
fiscal years 1993 and 1994. As a result, available revenues were not sufficient to
properly maintain the projects, and several projects had deteriorated to the extent
that reports have concluded that their continued ability to deliver water is in doubt.
The deterioration on five projects was such that the tribes sought and received
special construction appropriations totaling about $6.2 million for repairs that should
have been funded through operation and maintenance rates.

Rate Development Guidance

Title 25, Part 171, of the Code of Federal Regulations and the Bureau of Indian
Affairs Manual (55 BIAM, Supplement 4) require that the Bureau establish
operation and maintenance rates based on the full cost4 of delivering irrigation
water and maintaining completed project facilities. However, these regulations are
general, and neither the Bureau nor the area offices had developed guidance as to
what types of costs should be included in the operation and maintenance rates and
how cost estimates should be developed. As such, none of the eight projects that we
reviewed had developed the data necessary to prepare accurate budget estimates of
the full costs of current and future maintenance and equipment needs upon which
to base an operation and maintenance rate. For example, Bureau personnel had not
developed: (1) a comprehensive, current, and accurate inventory of project facilities

4Based on a 1985 field solicitor's opinion, and as used in this report, the full cost of operation and
maintenance consists of "all operation, maintenance, and replacement type costs" brought about by
the day-to-day operation . . . of an irrigation project" (June 26, 1985, memorandum from Phoenix
Field Solicitor to the Bureau of Reclamation titled "Payment of CAP [Central Arizona Project]
Operation, Maintenance, and Replacement Costs by Indian Entities"). Accordingly, full costs would
include the orderly replacement of project facilities and equipment resulting from the normal use and
deterioration of the project.

4

 
and equipment; (2) estimates of the current and future costs of maintaining and
replacing facilities and equipment, including cost estimates for equipment ownership
and contingencies, such as storm damage; and (3) plans and prioritized schedules for
maintenance and rehabilitation work to ensure that facilities and equipment were
properly maintained and replaced on a regular and systematic basis.

Instead, the projects' budgeted operation and maintenance costs included routine
operating costs, such as wages, utilities, gasoline, and office equipment, but generally
excluded the costs of needed maintenance and the orderly replacement of facilities
and equipment resulting from the normal day-to-day use and deterioration of the
project. In addition, we believe that project personnel did not seek regular increases
to the existing operation and maintenance rates to account for inflation and other
factors because of the perception that some irrigators would be reluctant to pay
increased rates. Accordingly, maintenance was deferred or performed only on an
exception basis whenever funds were available to the projects. The long-term effect
of the maintenance deferral has been the continued deterioration of project facilities
and equipment to the extent that the capability of the projects to provide water is in
doubt.  Reports available on the physical condition of the eight projects (see
Appendix 4) concluded that the lack of operation and maintenance funds had
contributed to the physical deterioration of the projects. Our site reviews of some
projects confirmed the deterioration of the facilities and equipment noted in the
reports, such as crumbling concrete structures, inoperative generators and pumping
plants, and inadequate drainage systems. However, the Bureau had not required
personnel at area, agency, and project offices to actively pursue the development of
full-cost operation and maintenance rates and to seek periodic rate increases, as
shown in the following examples:

- At the Wapato Irrigation Project, facilities had deteriorated to the point that
a rate increase of 35 percent was implemented over 1991 and 1992 to allow the
continued delivery of water. However, this increase did not include, in the rate
computation, the cost for the orderly replacement of project facilities and equipment
resulting from normal day-to-day use and deterioration. Further, the rates were not
increased in fiscal years 1993 and 1994, even though the Portland Area Office and
the Wapato Project Office were aware that costs were increasing and that Project
facilities were deteriorating.

- Facilities of the Blackfeet and Crow Irrigation Projects were deteriorating,
some to the extent that the continued delivery of water was questionable. In 1995,
the Blackfeet Irrigation Project Office increased its rate by 38 percent (from $8 to
$11), which was its first increase in 4 years. The Crow Irrigation Project Office has
not increased its rate since 1991, when it increased rates by about 9 percent (from
$10.6O to $11.60). However, these increases did not include the costs for the orderly
replacement of project facilities and equipment resulting from normal use and
deterioration.

- In 1993, the Colorado River Irrigation Project Office increased its operation
and maintenance rate by 23 percent (from $22 to $27 per acre), the Project's first

5

 
increase in 11 years. The rate increase was implemented only after the Project was
virtually without funds and after many items of equipment had exceeded their
estimated lives and were in poor operating condition. However, this increase did not
include the cost for the systematic replacement of the worn-out equipment.

Based on the available reports and on estimates from area office engineering staff,
we concluded that rehabilitating the eight projects would cost at least an estimated
$163 million, as indexed through September 1994 (see Appendix 4). Five tribes have
already independently sought and obtained irrigation construction appropriations
from the Congress to rehabilitate their projects, which were severely deteriorated.
Tribes serviced by the Fort Belknap, Crow, Fort Peck, and Wind River Irrigation
Projects received and used $3.7 million in Congressional construction appropriations
to pay operation and maintenance costs that should have been funded by the
beneficiaries. Also, in 1993, the Colorado River Indian Tribes used $2.5 million of
previously obtained construction appropriations to finance the development of an
operations manual and a complete inventory of the facilities and equipment for the
Colorado River Irrigation Project instead of using these funds for repairs. However,
the Project Office did not use this inventory data in developing the 1993 rate
increase. Without the development of full-cost rates, sufficient funds will not be
available to properly maintain the projects and prevent the further deterioration of
project infrastructures. We believe that the Bureau should develop and implement
guidance that directs area, agency, and project office personnel to determine the full
costs of delivering water, including developing cost estimates for the orderly
replacement of project facilities and equipment.

Project Oversight

The Departmental Manual, Part 344, requires that debts due the Government be
billed properly and promptly, which includes promptly notifying debtors in writing
of the basis for their debt, the amount due, and the specified due date. Part 344
further requires that delinquent accounts be assessed interest, penalties, and
administrative fees. The Debt Collection Act of 1982 (Public Law 97-365), the Code
of Federal Regulations (Titles 4 and 25), and the Departmental Manual (Part 344,
Chapters 2 and 3) provide guidance on debt collection, on termination of water
deliveries, and on surety bonds. However, the Billings, Phoenix, and Portland Area
Offices did not provide oversight sufficient to ensure that: (1) operation and
maintenance bills were properly prepared and mailed; (2) debt collection procedures
were implemented; (3) water deliveries were terminated as required; and (4) surety
bonds or other security requirements were enforced.

Billing Practices. The project offices we reviewed did not: (1) maintain
accurate and current land ownership and lease records; (2) bill idle Indian trust lands
in compliance with Departmental regulations; and (3) consistently and accurately
assess interest, penalties, and administrative fees on delinquent operation and
maintenance amounts, as required by Departmental regulations, for the bills that
were mailed. We found that agency and tribal realty personnel at the Wapato and

6

 
Colorado River Irrigation Projects did not routinely inform project personnel of
changes in Indian land ownership and in lease information. We identified 680 cases
in which Wapato Irrigation Project trust land records did not have the names and
addresses of the current Indian owners and had not been updated, some for as many
as 30 years. In 36 other cases, Wapato Irrigation Project personnel had not been
informed of leases executed by agency and tribal realty personnel. As such, these
leased lands were not billed operation and maintenance charges at the start of the
irrigation season as required. This made the collection of these amounts difficult
because crops were already planted and some water had already been provided.

During our review of billings for fiscal years 1993 and 1994 at the Colorado River
and Wapato Irrigation Projects, we found bills representing operation and
maintenance charges totaling $61,682 and $1,024,806, respectively, or about
$1.1 million, that had not been mailed to landowners of idle lands. The practice of
not billing idle Indian trust lands was based on guidance contained in the Bureau
Manual (55 BIAM, Supplement 4), which stated that when assessable Indian trust
lands were idle and the collection of the assessments was "impossible" during the
current irrigation season, bills "shall be prepared and kept on file." No further action
was required in those cases unless the land involved was eventually sold and the
delinquent debt was paid from the proceeds of the sale. We noted, however, that
this guidance did not conform to Departmental debt collection procedures, which
require that due process be followed and that all debtors be promptly notified in
writing of the basis for and the amount of their debt.

At six of the eight projects reviewed, interest, penalties, and administrative fees were
not assessed consistently. For example, although the Billings Area Office had issued
specific guidance instructing the projects to assess interest and penalties on
delinquent accounts, the Blackfeet, Fort Peck, and Fort Belknap Irrigation Project
Offices did not comply with these instructions. In addition, the Crow and Wind
River Project Offices selectively assessed interest and penalties. Further, the Billings
Area Office did not require assessments of administrative fees to recover the added
expense to the Government of administering delinquent accounts. Similarly, the
Colorado River Irrigation Project Office, under the Phoenix Area Office, only
assessed interest charges selectively and did not assess penalty and administrative
fees. Accordingly, the cost of collection actions for these six projects was borne
primarily by the general taxpayers. Project personnel told us that imposing these
administrative fees would hinder their collection of annual operation and
maintenance charges, but they did not provide support for this statement.

We believe that the area offices should establish procedures which ensure that:
(1) agency and tribal personnel provide project office personnel with up-to-date
names and addresses of all landowners and lessees of project lands prior to the start
of each irrigation season; (2) all bills are mailed in accordance with Departmental
regulations; and (3) the bills include the appropriate charges for interest, penalties,
and administrative fees. In our opinion, the offices, by not billing all appropriate
charges and fees, provide an incentive to delay or withhold payment and place the
financial burden on other project water users and the Federal taxpayers.

7

 
Debt Collection Procedures. We found that project and agency office personnel
did not follow the debt collection procedures prescribed by Title 4, Parts 101
through 105, of the Code of Federal Regulations and Part 344 of the Departmental
Manual to collect the approximately $10.3 million of delinquent operation and
maintenance charges for the eight projects reviewed. These procedures include:
(1) reporting debts to consumer reporting agencies; (2) referring debts to commercial
collection agencies; (3) liquidating available collateral; (4) collecting in installments;
(5) requesting debtors' mailing addresses from records of the Internal Revenue
Service; and (6) using an administrative offset against other monies owed by the
Government to non-Indians, Indians, and tribes. In addition, the Phoenix and
Portland Area Offices did not place holds on funds or withdraw funds from
individual Indian money accounts to recover delinquent debts due the Government,
as allowed by Title 25, Part 115.9, of the Code of Federal Regulations.

Overall, we found that area, agency, and project offices did not have formalized
plans with target dates for collecting delinquent operation and maintenance charges
owed the projects. Instead, collection efforts were generally limited to sending out
three separate demand requests for payment, with no additional actions taken if
payment was not received. As a result, we identified operation and maintenance
billings totaling $1.9 million for fiscal years 1993 and 1994 that were not collected.
For example, at the Colorado River and Wapato Irrigation Projects, extended
collection efforts were deferred, despite increasing operation and maintenance debt,
until the projects were virtually without funds. For fiscal years 1993 and 1994, we
identified $1.1 million5 and $80,000 in delinquent debt at the Wapato and the
Colorado River Irrigation Projects, respectively. As of September 30, 1994, the total
delinquent debt for both projects was about $8 million. We did note, however, that
although the cumulative operation and maintenance debt for the projects under the
Billings Area Office increased by $700,000, from $1.8 million in 1992 to $2.5 million
by the end of fiscal year 1994, the Billings Area Office placed holds on individual
Indian money accounts to collect delinquent operation charges from individual
Indians. We believe that the use of the holds helped prevent further escalation of
the debt because it restricted access to funds in the accounts until the charges were
resolved.

We also noted that under Title 25 of the Code of Federal Regulations, projects can
terminate water deliveries to lands for which there are delinquent operation and
maintenance charges. For example, a Colorado River Irrigation Project employee
stated that water deliveries were terminated to lands for which the appropriate
operation and maintenance charges had not been paid. At the other projects, such
as the Wapato and the Blackfeet Projects, we found that personnel were precluded
from terminating water deliveries because of the physical layout and deteriorated

5This amount is exclusive of $540,000 of delinquent debt that the Wapato Irrigation Project collected
in 1993.

 
condition of the projects. However, we believe that as conditions allow, termination
of water deliveries should be used as a mechanism for facilitating collection efforts.

In conclusion, we believe that the area offices should provide agency and project
offices with the oversight, technical assistance, and support necessary to ensure that:
(1) the collection of all delinquent operation and maintenance charges is aggressively
pursued in a timely and consistent manner in accordance with Departmental debt
collection requirements; and (2) the projects can continue to deliver water.

Requirements for Surety Bonds. Agency office realty personnel did not enforce
the requirement for surety bonds or other securities when they leased Indian trust
lands. Title 25, Part 162, of the Code of Federal Regulations states, in part, that
unless otherwise provided by the Secretary, a satisfactory surety bond or other
security is required in an amount that will reasonably ensure performance of
contractual obligations under the lease. We found, however, that at six of the eight
projects we reviewed, the appropriate agency realty personnel did not enforce the
requirement for surety bonds or other securities, as shown in the following examples:

- The Blackfeet Agency had not enforced surety bonds or other security
requirements, even though some lessees had not paid the required operation and
maintenance charges on the Blackfeet Irrigation Project. Overall, we found that
cumulative delinquent operation and maintenance charges from lessees totaled
$28,000, or 18 percent, of the Project's cumulative delinquent operation and
maintenance debt of $160,000 through 1994.

- The Colorado River Indian Tribes Realty Office also did not have a policy
requiring surety bonds or other securities when leasing Colorado River Irrigation
Project land, even though approximately 70 percent of the Project's 107,000 acres are
leased. Project personnel told us that they require lessees to pay the proper
operation and maintenance bill prior to receiving water. However, we found that of
the $1.4 million in total reported operation and maintenance debt through 1993,
about $221,000 was applicable to lessees.

- Realty personnel at the Yakima Agency had discontinued the use of surety
bonds for the Wapato Irrigation Project in 1970 at the request of the Yakima Indian
Nation. As a result, the Agency negotiated and renegotiated agricultural leases with
lessees whose delinquent Project operation and maintenance charges were steadily
increasing. Our review of a 1994 Bureau delinquency report on the Project disclosed
that 313 lessees had accumulated delinquent operation and maintenance charges
totaling $875,000 for the 7-year period 1988 through 1994.

We understand that tribal and Bureau realty offices have been reluctant to enforce
surety bonds or other security requirements, such as certificates of deposit, because
of the costs associated with obtaining the surety bonds and the possible resultant
financial impact on farmers and ranchers. These offices, however, do have the
authority to modify leasing requirements to accept other collateral or security, such
as letters of credit or certificates of deposit, which can minimize or eliminate the

9

 
costs to the lessees of Indian trust lands. The nonpayment of charges because of the
lack of surety bonds or other collateral results in the following: a reduced ability of
the projects to enforce contractual obligations, such as the payment of annual
operation and maintenance charges; unintended subsidies to the lessees; deferred
maintenance work on the projects; and increased debt on tribal and individual Indian
trust lands.

For those projects having difficulty collecting from lessees, we believe that the agency
and area offices should enforce the requirement for surety bonds or other securities
and take immediate action against the bond in the event of nonpayment. In our
opinion, these actions are necessary  for the continued operation of the projects; the
equitable treatment and protection of all project landowners, water users, and the
Government and the prevention of additional debt accruing on Indian trust lands.

Recommendations

We recommend that the Assistant Secretary for Indian Affairs require appropriate
officials to:

1. Develop comprehensive and accurate inventories of project facilities and
equipment for all projects with operation and maintenance rates. The inventories
should include the location, age, physical condition, and estimated remaining useful
life for each facility and piece of equipment.

2. Develop project budgets and assessment rates based on accurate estimates
of the full costs of properly operating, maintaining, rehabilitating, and replacing the
projects' facilities and equipment. Such estimates should include the costs for
contingencies and the orderly replacement of project facilities and equipment. The
area offices should provide the oversight and technical assistance necessary to ensure
that the estimates are prepared properly and timely.

3. Prepare the guidance and provide the technical assistance necessary for the
irrigation projects to establish and fund reserve accounts for financing the orderly
replacement of project facilities and equipment.

4. Ensure that project offices comply with Departmental billing requirements.
This will require that agency and project office personnel work together to update
records to reflect the current names and addresses of all landowners and lessees and
bill annual operation and maintenance charges to all landowners and water users.

5. Comply with Departmental debt collection procedures and develop
formalized plans, with target dates, for collecting delinquent operation and
maintenance charges owed the projects.

10

 
6. Coordinate with the tribes and agency officials to enforce the requirement
for surety bonds or other securities and deny leases or renewal of leases to lessees
who owe delinquent operation and maintenance charges.

7. Enforce, where possible, regulations on the termination of water deliveries
to lands on which the landowners or lessees have not paid operation and
maintenance charges.

Bureau of Indian Affairs Response and Office of Inspector General
Reply

The March 27, 1996, response (Appendix 5) from the Assistant Secretary for Indian
Affairs concurred with Recommendations 1, 4, 5, 6, and 7 and partially concurred
with Recommendations 2 and 3. However, we consider the seven recommendations
resolved but not implemented based on a review of the Bureau's proposed actions
and subsequent discussions with Bureau officials from the Office of Trust
Responsibilities, Division of Water and Land Resources the Office of Audit and
Evaluation; and the Power and Irrigation Reconciliation Team (see Appendix 6).

Recommendations 2 and 3. Partial concurrence.

Bureau Response.  While the Bureau partially concurred with both
recommendations, it stated that it "cannot include capital improvements in its O&M
[operation and maintenance] assessment" because "capital improvements to existing
plant and equipment require Congressional authorization for construction
rehabilitation and betterment, "

Office of Inspector General Reply. We used the term "capital improvements"
in our discussion of operation and maintenance and in these two recommendations
in the draft report to indicate those types of repairs that would have a useful life of
more than 1 year and would be capitalized and depreciated rather than expensed in
a commercial setting. We did not intend to recommend that the Bureau finance
capital improvements through its operation and maintenance assessments.
Accordingly, we have revised both recommendations and applicable sections of the
report to eliminate the reference to capital improvements.

11

 
B. REIMBURSEMENT OF CONSTRUCTION COSTS

Of the 10 irrigation projects reviewed, we found that the Bureau of Indian Affairs
was collecting reimbursable construction costs from non-Indian landowners on
2 projects but had not taken adequate action to recover reimbursable construction
costs from non-Indian landowners in a timely manner for 7 projects. Repayment of
reimbursable construction costs for the remaining Colorado River Irrigation Project
was deferred because the land was still in trust status.  Federal statutes and
regulations and Bureau policies require that non-Indian landowners repay their share
of the Federal investment in Indian irrigation projects within a reasonable time
period, generally 40 years. However, for seven of the projects reviewed, the Bureau's
area, agency, and project offices had not: (1) negotiated repayment contracts;
(2) adjusted repayment rates; (3) established ability-to-pay rates; or (4) followed the
procedures necessary to ensure that reimbursable construction costs remained legally
collectible. As a result, we estimated that reimbursable construction costs of about
$8 million were not collected, of which an undetermined amount may not be legally
collectible. In addition, about $3 million had not been included in the repayment
contracts for two projects.

Wapato and Fort Hall Irrigation Projects

The Wapato and Fort Hall Irrigation Project Offices continued to collect the
reimbursable construction costs owed the Federal Government by the Project's
non-Indian landowners. In our January 1989 report "Repayment of Investment in
Indian Irrigation Projects, Bureau of Indian Affairs" (No. 89-38), we reported that
these two projects were the only projects, out of the seven reviewed, that had
collected reimbursable construction costs in a timely manner. We performed a
limited review of the Wapato-Satus and Athtanum Units6 (the two major units of
the Wapato Project) and reviewed the Bureau's 1995 report on the Fort Hall Unit7
(the largest unit of the Fort Hall Project) to ensure that project personnel were still
billing, collecting, and accounting for reimbursable construction costs at the two
projects in accordance with repayment requirements. Based on our limited review,
we concluded that the costs were appropriately billed, collected, and accounted for.
Further, we noted that the unpaid balance of reimbursable construction costs and the
amount of delinquent construction receivables were insignificant in relation to
construction cost repayment as follows:

6Final construction costs for the "Additional Works" Unit of the Wapato Project have not been
determined by the Bureau, and reimbursable construction costs are not applicable to the Toppenish
Simcoe Unit, since water is provided on a request and/or demand basis only and is billed at that time.

7The Project's Michaud Unit and Minor Units have not been formally designated as complete and
assessed construction costs. However, almost all the lands served by these units are still in Indian
ownership; thus, under the Leavitt Act of July 1, 1932, repayment of the Indian share of construction
costs would be deferred as long as title to the land remains in Indian ownership.

12

 
      Reimbursable
      Construction  Amount   Unpaid   Amount
Project/U nit    costs    Repaid   Balance  Delinquent
Wapato     $4,311,055  $4,239,009  $72,046   $10,279
Fort Hall     2,111.961   2,109,837   2,124     50
Total

The Wapato Project Office has been able to obtain timely repayment because the
water rights applications of Project landowners included a provision requiring that
landowners repay a proportionate share of the Project's reimbursable construction
costs.  Fort Hall Project Office personnel said that their success in collecting
reimbursable construction costs was the result of following required collection
procedures.

Remaining Projects

Bureau regulations and the Code of Federal Regulations (25 CFR 134.4) require
non-Indian landowners to repay their per-acre share of reimbursable construction
costs over 40 years unless the Bureau determines that the costs cannot be repaid and
then adjusts, defers, or cancels these costs. In the absence of a repayment contract
or other specific authority, the Bureau is required to determine the appropriate
per-acre construction charge and to assess and collect the charge annually. However,
the Blackfeet, Fort Belknap, Crow, Wind River, Uintah, San Carlos, and Fort Peck
Irrigation Projects had not taken the appropriate action to collect reimbursable
construction costs from non-Indian landowners in a timely manner. We addressed
the issue of the inadequate recovery of the Federal investment in Indian irrigation
projects in our December 1979 audit report "Review of the Repayment of the
Federal Investment in Irrigation and Power Projects, Bureau of Indian Affairs"
(No. W-BIA-9-78) and in our January 1989 Audit Report No. 89-38 (see Prior Audit
Coverage section). In these reports, we recommended that the Bureau determine
the reimbursable costs for each irrigation project from non-Indian landowners and
take appropriate action to recover these costs in a timely manner. Although some
of these deficiencies were reported up to 15 years ago, our recommended actions had
not been fully implemented at the time of our current review. During our review of
the Billings and Phoenix Area Offices, we found that problems continued to exist in
the areas of repayment contracts, repayment rates, establishment of ability-to-pay
rates, and compliance with required administrative procedures to ensure that
reimbursable construction costs remained legally collectible.

Billings Area Office. The Billings Area Office had not negotiated repayment
contracts or assessed and collected construction charges from non-Indian landowners
on the Blackfeet, Fort Belknap, and Crow Irrigation Projects. In addition, the Area
Office continued to assess non-Indian landowners on the Fort Peck Irrigation Project
the same repayment rate of $0.50 per acre established by the Secretary of the

13

 
Interior in 1920, pending completion of the project. Further, the Area Office had
not adjusted repayment rates, as required, for the Wind River Irrigation Project for
the additional $423,000 of costs incurred by the Project since 1976. Our review of
the reimbursable construction costs for the Blackfeet, Crow, and Fort Peck Irrigation
Projects disclosed that following our 1979 audit report, the Area Office contracted
for a study of the non-Indian landowners' ability to pay. The study, completed in
1985 and reported in our 1989 audit, recommended a nominal repayment rate of
$1 per acre for an interim period of 5 years for each project. However, the Area
Office has not assessed this nominal rate, updated the repayment studies, or
collected reimbursable construction costs.  As a result, since the non-Indian
landowners have not been legally apprised of their debt in accordance with
appropriate administrative procedures, an undetermined portion of the debt maybe
uncollectible.

Phoenix Area Office. The Phoenix Area Office had not ensured that the
reimbursable construction costs applicable to non-Indian landowners in the Uintah
Irrigation Project remained legally collectible, in part because the Project did not:
(1) ensure that liens were recorded in the land patents when land was transferred
from trust to fee status or in subsequent transfer documents; and (2) bill landowners
for construction charges accruing since 1983. The filing of liens is necessary to
extend the Government's rights to collect money damages, which are otherwise
limited under the statute of limitations provided in Public Law 89-505. Based on
these conditions and other administrative deficiencies, the Regional Solicitor,
Intermountain Region, recommended, in a September 28, 1983, memorandum, that
this debt be canceled. However, the recommended cancellation was never submitted
to the Secretary or the Congress for approval. Bureau irrigation personnel informed
us that the data were recently updated but were awaiting further review and analysis
by the Bureau's Power and Irrigation Reconciliation Team before finalization and
submittal to the Secretary. The current data propose that construction costs of about
$1.5 million accruing on non-Indian lands since 19568 be canceled.

The Phoenix Area Office also had not adjusted the repayment obligation of the San
Carlos Irrigation and Drainage District, as provided for in the 1988 amendment to
the District's repayment contract. Under the amendment, the repayment amount can
be adjusted every 5 years to reflect additional expenditures on the San Carlos
Irrigation Project since September 30, 1984. However, the Area Office has not
negotiated an adjustment to the District's repayment contract to include the District's
approximately $2.8 million share of the $5.7 million investment in the Project since
1984. Accordingly, the $2.8 million is not included in the amount the District has
agreed to repay. Based on the District's average annual repayment of about $59,400



8Reimbursable Federal funds expended on the Uintah Irrigation Project applicable to non-Indians
prior to 1956 were either collected or canceled by various acts of the Congress.

14

 
a year and its maximum annual repayment of $125,0009 per year, we estimate that
the amount not included in the District's repayment base will increase the District's
current repayment period by a range of 23 years to 48  years.10 These estimates are
exclusive of any power revenues, which are used to assist in the repayment of the
non-Indian irrigation debt after the power investment has been repaid. On the San
Carlos Project, it is not expected that power revenues will be applied to the
non-Indian irrigation debt until at least the year 2010.
In summary, we estimated that reimbursable construction costs totaling
approximately $7.7 million were not collected within a reasonable period of time for
five projects and that costs totaling approximately $3.3 million were not included in
the repayment contracts for two projects. However, even if the repayment contracts
for these two projects were adjusted to include these amounts, the repayment periods
would be extended by up to an additional 48 years. The reimbursable construction
costs are as follows:

      CONSTRUCTION DEBT OF NON-INDIAN LANDOWNERS

Area Office/Project

Billings
Blackfeet
Fort Belknap
Fort Peck
Crow
Wind River
Phoenix
Uintah
San Carlos
  Total

Projects With No or
Minimal Repayment
(Estimated Project
Debt as of 9/30/94)

$1,460,598
505,092
3,342,824
852,529

1,529,996

Projects With Debt Not   Estimated
in Repayment   Repayment Period
   Base*      (In years)

            **
            **
      612 to 679***
          ****
$422,995       43

2,848,464     23 to 48
$3,271,459

9The District's repayment rates as established in a 1947 amendment to the District's repayment
contract range from $12,500 to $125,000 annually, depending on the amount of water in the San
Carlos Reservoir as of March 1 of each year.

10The repayment period, based on the remaining reimbursable costs of approximately $7.1 million
incurred through September 30, 1984, is estimated to range from 57 to 120 years.

15

 
An undetermined amount of the $7.7 million debt maybe uncollectible because the
area offices did not follow the administrative procedures necessary to apprise the
non-Indian landowners of their debt and thus ensure that the debt remained legally
collectible.  In addition, in cases where the statute of limitations applies, the
likelihood of collection has been further reduced because the statute requires that
action for money damages be brought within 6 years after the right to action accrues.

Recent Bureau Actions

As of April 1995, Bureau staff had completed the determination and reconciliation
of construction cost balances for the Fort Hall, Pine River, and Uintah Irrigation
Projects and the preliminary verification of operation and maintenance receivables
for several other irrigation projects, and the Bureau was scheduling similar financial
activities at other projects. In addition, the Bureau's Office of Trust Responsibilities
was developing a plan for the reconciliation of irrigation and power project needs to
resolve the material weakness identified in prior Office of Inspector General reports
(see Appendix 3). We discussed the proposed scope of work on the projects with
Bureau personnel at an April 1995 meeting in Albuquerque, New Mexico.

At the meeting, we suggested that the Bureau reprioritize the projects to be reviewed
to minimize the costs and maximize the benefits to the Government. This could be
accomplished by concentrating on the three power projects and other projects with
repayment contracts in place, as these projects represented a large portion of the
Government's investment and offered a better likelihood of collection rather than
the projects proposed by the Bureau. We also suggested that, as appropriate, the
proposed scope of work be modified to address several issues before fieldwork was
undertaken, including the need for: (1) the preparation and proper approval of land
classification reports that accurately represent current project land ownership; (2) the
reclassification of lands classified as "temporarily nonassessable" to either presently
assessable or permanently nonassessable, in accordance with regulations; (3) reviews
of land records (such as fee patents and warranty deeds) at county recorders' offices
for projects where repayment contracts do not exist to determine whether
construction liens were properly recorded; and (4) consideration of the applicability
of the statute of limitations on the collectibility of debt. We believe that accurate
land classifications and related designation reports are essential to the proper
allocation and assessment of construction costs. In this regard, area office officials
informed us during our audit that possible deficiencies existed in the land
classification report for at least one project and that a project completion report had
not been prepared for at least one other project. We informed the Bureau at the
Albuquerque meeting that these deficiencies must be addressed before construction
costs can be properly allocated.  Bureau officials generally agreed with our
suggestions and concerns and modified their proposed plan to consider these areas.

16

 
Recommendations

We recommend that the Assistant Secretary for Indian Affairs instruct appropriate
officials to:

1. Assess and collect adequate repayment charges from non-Indian landowners
on the Blackfeet, Fort Belknap, Fort Peck, and Crow Irrigation Projects either
through negotiated repayment contracts or under the Bureau's authority to
determine, assess, and collect construction costs if repayment contracts cannot be
negotiated.

2. Adjust the existing repayment contract with Wind River Irrigation Project
water users to ensure the timely recovery of their proportional share of the
additional Federal investment in the Project since 1976.

3. Amend the repayment contract with the San Carlos Irrigation and Drainage
District for its proportionate share of the additional Federal investment in the San
Carlos Irrigation Project since September 30, 1984, and amend the repayment
contract every 5 years thereafter, as provided for in the Bureau's 1988 agreement
with the District.

4. Propose, to the San Carlos Irrigation and Drainage District, a change in the
District's repayment rate to ensure that any additional investment in the Project after
September 30, 1984, is recovered over a period not to exceed 40 years. If agreement
cannot be reached, changes in project legislation should be proposed to require that
additional investment in the Project be recovered over this period.

5. Prioritize the proposed determination of reimbursable construction costs for
those projects with non-Indian landowners based on where it would be the most cost
beneficial to the Government. Among the factors the Bureau should consider in
evaluating projects are the amount of reimbursable construction costs involved; the
existence of valid repayment contracts; and the existence of power components,
revenues from which could help retire the projects' irrigation construction debt after
the power component is repaid.

6. Ensure that project completion reports are prepared as necessary and that
land designation reports for projects with non-Indian landowners are current and
accurate before the Bureau attempts to determine the amount of reimbursable costs
applicable to those projects.

Bureau of Indian Affairs Response and Office of Inspector General
Reply

The March 27, 1996, response (Appendix 5) from the Assistant Secretary for Indian
Affairs concurred with all six recommendations.  We consider the six
recommendations resolved but not implemented based on the Bureau's response and

17

 
subsequent  discussions with Bureau officials from the Office of Trust
Responsibilities, Division of Water and Land Resources; the Office of Audit and
Evaluation; and the Power and Irrigation Reconciliation Team (see Appendix 6).

18

 
APPENDIX 1

CLASSIFICATION OF MONETARY AMOUNTS

               Potential
              Additional     Underpaid
    Finding        Revenues     Revenues
                (Amounts in Millions)
Operation and Maintenance
Billings             $1.1
Collections            $1.9
Construction
Reimbursable Costs
Total

19

 
                    APPENDIX 2


ORGANIZATIONS VISITED OR CONTACTED

        Organization
U.S. Department of the Interior
Bureau of Indian Affairs
Headquarters Office
Billings Area Office
Blackfeet Agency Office
   Blackfeet Irrigation Project Office
  Crow Agency Office
   Crow Irrigation Project
  Fort Belknap Agency Office
   Fort Belknap Irrigation Project Office
  Fort Peck Agency Office
   Fort Peck Irrigation Project Office
  Wind River Agency*
  Wind River Irrigation Project*
Phoenix Area Office
  Colorado River Agency Office
   Colorado River Irrigation Project Office
   San Carlos Irrigation Project Office
   Pima Agency
Portland Area Office
  Yakima Agency Office
   Wapato Irrigation Project Office
  Fort Hall Irrigation Project Office*
Irrigation and Power Liaison and Compliance Section*

Water User Organizations
Fort Peck Water Users Association
Tribal Council Colorado River Indian Tribes
Southwest Indian Agricultural Association
Irrigation Committee of the Yakima Indian Nation
Yakima Reservation Irrigation District (non-Indian)

Office of the Solicitor
Regional Solicitor's Office

Location

Washington, D.C.
Billings, Montana
Browning, Montana
Browning, Montana
Hardin, Montana
Hardin, Montana
Harlem, Montana
Harlem, Montana
Popular, Montana
Wolf Point, Montana
Fort Washakie, Wyoming
Fort Washakie, Wyoming
Phoenix, Arizona
Parker, Arizona
Posten, Arizona
Coolidge, Arizona
Sacaton, Arizona
Portland, Oregon
Toppenish, Washington
Wapato, Washington
Fort Hall, Idaho
Albuquerque, New Mexico

Wolf Point, Montana
Parker, Arizona
Parker, Arizona
Toppenish, Washington
Yakima, Washington

Portland, Oregon

*Contacted only.

20

 
                           APPENDIX 3
                            Page 1 of 4

   SUMMARY OF RECOMMENDATIONS AND CORRECTIVE
        ACTIONS FROM PRIOR REPORTS

The status of the recommendations and corrective actions from Audit Reports 89-38 and
88-42 is as follows:
- The report "Repayment of Investment in Indian Irrigation Projects, Bureau of Indian
Affairs" (No. 89-38), issued in January 1989, concluded that the Bureau had not taken
sufficient action to enforce statutes and regulations requiring the collection of reimbursable
construction costs from non-Indian landowners. In our current review, we found that none
of the report's five recommendations had been fully implemented.

Recommendations

1. Determine the appropriate reimbursable
costs for each Bureau irrigation project with
non-Indian landowners and either (a) establish
annual assessment charges sufficient to recover
reimbursable costs within 40 years or
(b) establish, in accordance with existing
statutes, repayment rates based on the
landowners' ability to pay whenever it is
demonstrated that the full assessment cannot be
paid.
2. Amend the existing repayment contract with
the San Carlos Irrigation and Drainage District
to ensure timely recovery of its proportional
share of the additional Federal investment in
the San Carlos Irrigation Project since 1931.
This amendment may require a change in
legislation.
3. Establish action plans, by individual project,
to ensure that the foregoing recommendations
are implemented within prescribed and
reasonable periods of time.
4. Determine the reimbursable or
nonreimbursable status of each irrigation
project based on prior legislation and
subsequent legal decisions. This action could
result in one project having both reimbursable
and nonreimbursable costs, depending upon the
legal requirements in effect at the time the
funds were appropriated.
5. Reconcile and, if appropriate, adjust the
Bureau's general ledger balances and/or the
ledger accounts maintained by the projects.

Status of Recommendations and
    Corrective Actions
Partially implemented. Efforts are under way to
determine the reimbursable costs for Bureau
projects with non-Indian landowners. The Bureau
has completed its analysis for three projects and
estimated that its analysis for all projects will be
completed by July 1999.

Partially implemented.
with the San Carlos

The repayment contract
Irrigation and Drainage

District has been amended to include additional
construction  expenditures  through
September 30, 1994.  However, the repayment
rates, which were established in 1947, were not
changed.
Partially implemented.  Plans have been
established for 18 projects, and reviews have been
completed at 3 projects. Estimated completion
date is 1999.
Partially implemented. Efforts are under way to
determine the reimbursable status of the Bureau's
irrigation projects. Estimated completion date is
1999.

Partially implemented.  The Bureau has
completed its analysis of reimbursable costs for
three projects.  The Bureau estimates that
repayment balances for other projects with
non-Indian landowners will be reconciled and
ledger accounts adjusted by July 1999.

21

 
APPENDIX 3
Page 2 of 4

- The report "Operation and Maintenance Assessments of Indian Irrigation Projects,
Bureau of Indian Affairs" (No. 88-42), issued in February 1988, concluded that the Bureau
was not assessing, billing, and collecting operation and maintenance charges as required.
The report contained 21 recommendations. Based on the Bureau's response, we considered
all the recommendations resolved. However, in our current review, we found that 13 of the
recommendations had not been fully implemented.

Recommendations

1. Compute the assessment rate for the Wind
River Irrigation Project in accordance with
Title 25, Part 171, of the Code of Federal
Regulations and the Bureau Manual (55 BIAM
Supplement 4) and determine whether it is
necessary to provide refunds to water users who
overpaid their 1985 and 1986 assessments.

2. Reconcile the current Master File List
Report of Acreage for the Wind River
Irrigation Project with the 1964 redesignation
report and assess any additional acreage
determined to be assessable.

3. Forward the operation and maintenance
billings for recently deceased Indians to the
appropriate probate officials for possible
inclusion in the probate.

4. Bill multiple owners of all irrigated tracts of
land or establish a point beyond which it is not
cost effective to do so.

5. Develop procedures to ensure that project
personnel are promptly notified of all leases,
especially those approved after the start of the
irrigation season.

6. Establish procedures to ensure that leased
acreage data are verified and are reconciled
with the assessed acreage shown on the
operation and maintenance billings.

Status of Recommendations and
  Corrective Actions

Partially implemented. The Project's operation
and maintenance assessment rate determination
procedures were modified to exclude estimated
delinquencies as a cost factor.  However, a
decision has not been made concerning possible
refunds to water users who overpaid their 1985
and 1986 assessments.

Not implemented.  The Bureau expects to
reevaluate the designation of Project lands in
1996.

Partially implemented. At least six projects still
do not forward operation and maintenance bills
to the appropriate probate officials.

Partially implemented. The Bureau has not
developed a national policy to establish an
amount below which it is not cost effective to bill
irrigators.  However, the Bureau is presently
developing the capability to bill multiple owners
of Indian trust land and anticipates that this
capability will be operational for the 1996
irrigation season at 10 of its irrigation projects.

Partially implemented. Standard procedures have
not been developed to require and ensure that
agencies report all leases to the projects in a
timely manner, but at least one agency does notify
the Project of all leases.

Not implemented. Procedures have not been
developed to require that the agencies and
related projects annually reconcile their records
to ensure that all leased acreage is billed for
operation and maintenance charges.

22

 
APPENDIX 3
Page 3 of 4

Recommendations (Cont.)

7. Establish billing and monitoring procedures
to  ensure  that  interest,  penalty, and
administrative charges are assessed on all
delinquent accounts at the rates prescribed by
regulations.

8. Ensure that all future irrigation operation
and maintenance billings show delinquent
amounts, plus applicable interest, penalty, and
administrative charges, in addition to the
amount of the current assessment.

9. Determine the authority for the Bureau's
general policy of not assessing penalty charges
to Indian landowners who have delinquent
operation and maintenance accounts. If no
authority exists, assess penalty charges on
delinquent accounts except for those projects
specifically exempted by legislation, court
decree, or specific regulations.

10. Enforce the requirement for a surety bond,
or other  security, to ensure payment/
performance under the terms of the lease.

11. Take prompt and decisive collection action
against the lessor's bond for the nonpayment of
irrigation operation and maintenance charges.

12. Correct the program problems affecting the
general ledger accounts receivable balances.

Status of Recommendations and
Corrective Actions (Cont.)

Partially implemented. The Bureau now notifies
all projects in writing of what interest, penalties,
and administrative charges to assess on
delinquent operation and maintenance amounts
for the upcoming irrigation season. In addition,
the Bureau, through its National Irrigation
Information and Management System, which
generates irrigation operation and maintenance
bills, has established procedures to ensure that
interest, penalties, and administrative charges are
assessed on delinquent accounts. The System will
be operational at 10 projects for the 1996
irrigation season.

Partially implemented.  Under the Bureau's
National Irrigation Information and Management
System, delinquent amounts, plus applicable
interest, penalties, and administrative charges, are
shown separately from the amount of the current
assessment. The System will be operational at
10 Bureau projects for the 1996 irrigation season.

Partially implemented.  The Solicitor has
determined that the Bureau and its projects
should be assessing penalty charges to Indian
landowners. All projects have been notified to
assess interest, penalty, and administrative charges
on delinquent amounts owed by Indian
landowners. The assessment of these charges is
being automated at 10 projects.

Partially implemented. Not all agencies have
enforced the use of surety bonds or other security
requirements.

Partially implemented. Since surety bonds were
not required at some projects, there was no
security against which actions could be taken.

Partially implemented.  The Bureau's former
accounting system was replaced by the Federal
Financial System, which corrected the
programming problem. Corrective action is under
way or has been completed at 10 projects to
ensure that all accounts receivable amounts are
included in the general ledger accounts.

23

 
APPENDIX 3
Page 4 of 4

Recommendations (Cont.)       Status of Recommendations and
                   Corrective Actions (Cont.)

13. Reconcile the general ledger and project    Partially implemented.  Work is under way at
subsidiary records for irrigation operation and    10 projects to reconcile differences between the
maintenance receivables and properly maintain    irrigation operation and maintenance receivables
the records thereafter.               in the Bureau's general ledger accounts and the
                        projects'  subsidiary  records.    Estimated
                      completion date for the Bureau's remaining
                       projects is December 1996.

24

 
REPORTS ON PHYSICAL CONDITION AND
REHABILITATION COSTS FOR PROJECTS

Area Office/Project
Billings
Blackfeet

Crow

Fort Belknap

Fort Peck

Wind River

Phoenix
Colorado River

San Carlos

Portland
Wapato

    APPENDIX 4


ESTIMATED
REVIEWED

Title and Source of Estimate

"Rehabilitation Needs, Blackfeet Irrigation Project, Blackfeet Indian
Reservation, Montana," prepared by the Billings Area Office and Blackfeet
Agency, January 1993.
Rehabilitation estimates supplied by engineering staff, Billings Area Office,
1994.
"Status Report With Cost Update and Funding Requirements for the
Rehabilitation of the Fort Belknap Irrigation Project," prepared by
Morrison-Mairlie/CSSA, July 1990.
"Fort Peck Irrigation Project Condition Report, Fort Peck Indian
Reservation, Montana," prepared by the Billings Area Office and Fort Peck
Agency, February 1994.
"Wind River Irrigation Project Assessment and Plan," prepared for the
Eastern Shoshone and Northern Arapaho Tribes and the Wind River
Agency by the Office of the Tribal Water Engineer and the Natural
Resources Consulting Engineers, Inc., June 1994.

"Rehabilitation and Betterment of the Colorado River Indian Reservation
Irrigation Project, Arizona and California," prepared by the Phoenix Area
Office, July 1991.
"Rehabilitation and Betterment Report for the San Carlos Irrigation Project
(SCIP) - Joint Works, Arizona," prepared by the Phoenix Area Office,
July 1993.

Six reports as follows: (1) "Facilities and Operations Appraisal, Wapato
Irrigation Project, Washington," prepared by the Bureau of Reclamation,
1976; (2) "Trip Report on Technical Assistance to the Wapato Irrigation
Project," prepared by the Bureau of Indian Affairs, 1990; (3) "Assessment of
Hydroelectric Generation and Transmission Facilities," prepared by the
Bureau of Reclamation, 1990; (4) "Safety and Health Inspection of Wapato
Irrigation Project," prepared by the Bureau of Indian Affairs, 1991;
(5) "Water Conservation and Resource Enhancement Plan on the Yakima
Indian Reservation Within the Wapato Irrigation Project," prepared by the
Yakima Indian Nation, 1992; and (6) "Review of Operation and
Maintenance Program, Examination Report, Wapato Irrigation Project,"
prepared by the Bureau of Indian Affairs, 1993.
Total

Estimated
costs*

$4,369,935

9,000,000

21,122,905

3,969,795

29,247,923

25,756,440

$163,106,205

*These costs represent report amounts indexed through September 1994 using the Bureau of
Reclamation's Construction Cost Trends Index.
**The San Carlos Irrigation Project-Joint Works consists of facilities necessary to deliver water to
the approximately 100,000 acres of land served
by the Project. The $52,774,800 includes both rehabilitation and betterment, as no separate
breakdown of the costs was provided.
***cost of replacing electrical transmission facilities only.

25

 
APPENDIX 5

Memorandum

To:    Assistant Inspector General for Audits

Subject:   OIG Draft Audit Report W-IN-BIA-O02-94 - Indian Irrigation Projects

The subject audit evaluated whether the Bureau of Indian Affairs (Bureau) identified and
collected reimbursable irrigation project construction costs owed by non-lndians and
whether the Bureau assessed, billed, and collected annual operation and maintenance
charges from landowners and water users. The report found that ten of the Bureau's
irrigation projects had either not collected all the reimbursable construction costs due or
had not collected adequate operation and maintenance (O & M) revenues.

Recommendations from the draft audit report reiterate recommendations from previous
audits issued by the Office of Inspector General (OIG):

o   Audit 88-42, "Operation and Maintenance Assessments of Indian Irrigation Projects,
  Bureau of Indian Affairs"

o   Audit 89-38, "Repayment of Investment in Indian Irrigation Projects, Bureau of
  Indian Affairs"

o   Audit 94-1-427, "Repayment of the Federal Investment in the Flathead Indian
  Irrigation Project, Bureau of Indian Affairs"

o   Audit 95-1-1402, "Wapato Irrigation Project, Bureau of Indian Affairs"

The Bureau acknowledges that the repeated OIG audits of the irrigation program have
provided the impetus for a comprehensive reevaluation of irrigation project management
in the Bureau. As a direct result of these audits, the Power and Irrigation Reconciliation
Team (PIRT) was established on August 12, 1995, by the Deputy Commissioner of Indian
Affairs to verify and reconcile irrigation account balances, to update irrigation repayment
contracts and rate schedules, and to ensure incorporation of geographic considerations
and engineering requirements in rate setting algorithms for the irrigation projects subject
to repayment requirements. While this is obviously a long term project, PIRT is committed
to completing the following seven actions for all 18 irrigation projects.

26

 
APPENDIX 5
Page 2 of 9

Construction Repayment:

o   Reconcile construction repayment balances for each of the 18 irrigation projects.

o   Ensure irrigation assessments are adequate to recover reimbursable construction
  costs.

Operation and Maintenance:

o   Reconcile O & M receivable balances for each of the 18 irrigation projects.

o   Ensure O & M assessments are adequate to fund plant and equipment
  maintenance and replacement to original design standards.

Billing and Collections:

o   Bill for all construction repayment and O & M debt.

o   Enforce all debt collection and debt management procedures authorized for
  irrigation projects.

o   Ensure bill formats separately identify construction assessments, O & M
  assessments, delinquencies, and interest, penalties and administrative charges

While each of the 13 recommendations contained in the subject audit is addressed, we
believe it is possible to consolidate these recommendations and those from the prior
irrigation audits into 7 recommendations. Attachment A displays the relationships between
the recommendations from the previous audits and the subject draft report.

We recommend the following modifications or corrections to statements in the draft audit
report:

o   Page 1, paragraph 2: "The Bureau has determined that for projects with lands
  capable of producing crops under sustained irrigation, landowners and water users
  are to pay the full annual costs of operating and maintaining the projects."

Comment: The Bureau does not arbitrarily determine whether water users pay O
& M costs. Authority to assess maintenance costs for existing irrigation systems is
codified under 25 U.S.C. 385 which authorizes the Secretary of the Interior to
charge and collect for irrigation system maintenance. The Bureau, with public
participation, has promulgated implementing regulations under 25 CFR Part 171 to
define those lands subject to maintenance assessments and complies with those
regulations for each rate setting event. Additional legislation (34 Stat. 1024; 39 Stat.
142; and 68 Stat. 1027) relate to the collection of charges on specific projects.

We recommend the sentence be reworded as follows: "On projects with lands
capable of producing crops under sustained irrigation, landowners and water users
are to pay. . ."

27

 
APPENDIX 5
Page 3 of 9

o   Page 7, paragraph 2: "Instead, the projects' budgeted operation and maintenance
  costs . . . generally excluded the costs of needed maintenance and capital
  improvements..."

Page 8, paragraph 2: "However, this increase did not include the cost for capital
improvements to facilities.. ."

Page 9, paragraph 1: "However, these increases did not include the costs for
capital improvements to facilities and equipment."

Page 18, Recommendation A.2: "Such costs should include the costs for capital
improvements. .."

Page 18, Recommendation A.3: "Prepare the guidance and provide the technical
assistance necessary for the irrigation projects to establish and fund reserve
accounts for financing capital improvements..."

Comment: The term "capital improvements" should be changed to "maintenance
and replacement to design standards." Capital improvements to existing plant and
equipment require Congressional authorization for construction rehabilitation and
betterment. O & M assessments are used to maintain and replace plant and
equipment to the original design standards.

The Bureau's responses to the 13 recommendations in the draft audit report are included
below:

O & M Recommendations

Recommendation A.1: Develop comprehensive and accurate inventories of project
facilities and equipment for all projects with operation and maintenance rates. The
inventories should include the location, age, physical condition, and estimated remaining
useful life for each facility and piece of equipment.

Response: The Bureau concurs. The PIRT Team will help each project manager
inventory plant and capitalized equipment. Work tasks will include annotation of the
location of plant features and capitalized equipment; definition of depreciation and service
life factors; computation of remaining useful life, maintenance and replacement schedules,
and budgeting methods to fund maintenance; and development of rate setting algorithms
which will include provisions for plant and equipment maintenance and replacement.
Project managers will ensure completion of inventories and continued maintenance of
inventory records.

Responsible Official:     Raymond L. Davis
            PIRT Team Leader
               and
            Project Managers (see Attachment B)

Due Date:

See Attachment C

28

 
APPENDIX 5
Page 4 of 9

Recommendation A.2: Develop project budgets and assessment rates based inaccurate
estimates of the full costs of properly operating, maintaining, rehabilitating, and replacing
the projects' facilities and equipment. Such estimates should include the costs for capital
improvements, contingencies, and equipment replacement. The area offices should
provide the oversight and technical assistance necessary to ensure that the estimates are
prepared properly and timely.

Response: The Bureau partially concurs. To record the plant and equipment inventory
and to support budgeting and rate setting for irrigation services, the Bureau will develop
a real property and equipment accountability module in its National Irrigation Information
and Management System (NIIMS). The real proper&y module will:

o   Identify and record plant and equipment assets.

o   Record service life factors to:

a)  plan plant and equipment maintenance and replacement,

b)  set rates adequate to accumulate funds to finance the servicing, and

c)  schedule staff and resources adequate to execute maintenance tasks.

o   Recognize collections and allocate funds to capital reserves to finance maintenance
  and replacement efforts.

Responsible Official:     John Williamson, Chief
            Irrigation and Power Liaison
            and Compliance Section

Due Date:         December 1997

The Bureau's Office of Trust Responsibilities will work with the irrigation projects to
establish a policy for defining the amount of contingency funds needed for each project.

Responsible Official:      Ross Mooney, Acting Chief
            Water and Land Resources Division

Due Date:         December 1998

The Bureau cannot include capital improvements in its O & M assessments. As previously
noted, capital improvements to existing plant and equipment require Congressional
authorization for construction rehabilitation and betterment. O & M assessments are to
maintain and replace plant and equipment to the original design standards.

Recommendation A.3: Prepare the guidance and provide the technical assistance
necessary for the irrigation projects to establish and fund reserve accounts for financing
capital improvements to project facilities and equipment.

29

 
APPENDIX 5
Page 5 of 9

Response: The Bureau partially concurs. ln June 1996, the Bureau will publish a draft
revised 25 CFR 171: Irrigation Operation and Maintenance, to promulgate the Bureau's
authority to levy rates for irrigation services which are adequate to recover the total cost
for system operations, including funding for contingencies.

To implement the rule, the Bureau will revise the BIA Manual to replace portions of the
current 55 BIAM: Land Operations, which defines irrigation procedures, with 48 BIAM:
Irrigation. The new 48 BIAM will define procedures for assessing and levying charges for
irrigation services and for billing and collecting irrigation fees.

Responsible Official:      Ross Mooney, Acting Chief
            Division of Water and Land Resources

Due Date:         June 1996

As the PIRT Team reconciles project balances and evaluates the assessment rates, they
will recommend rates adequate to fund the reserve accounts.

Responsible Official:      Raymond L. Davis
            PIRT Team Leader

Due Date:         See Attachment C

The Bureau cannot include capital improvements in its O & M assessments. As previously
noted, capital improvements to existing plant and equipment require Congressional
authorization for construction rehabilitation and betterment. O & M assessments are to
maintain and replace plant and equipment to their original design standards.

Recommendation A.4: Ensure that project offices comply with Departmental billing
requirements. This will require that agency and project office personnel work together to
update records to reflect the current names and addresses of all landowners and lessees
and bill annual operation and maintenance charges to all landowners and water users.

Response: The Bureau concurs. NIIMS is implemented and provides billing support to 10
of the Bureau's 18 irrigation projects and is scheduled for implementation at the remaining
projects by December 1996. Every tract of land in a project is identified and assessed from
the NIIMS billing module.  In order to verify the names and addresses of Project
landowners and lessees prior to generating bills, NIIMS generates a proof report which lists
the tracts of land, identified by unit serial number, and the land owner, lessee or otherwise
designated agent responsible for making payment for O & M assessments for that tract of
land. NIIMS can support multiple heirship records to identify multiple owners who share
interest in each tract of land. The report will be provided to project managers for
verification prior to bill generation and mailing. The Bureau will develop an interface to
automate verification of ownership records for the NIIMS database to each Area Off ice's
land records database, where justified. If an interface is not possible, NIIMS will provide
a proof data set of land ownership and lessees to support reconciliation of the datasets.

30

 
APPENDIX 5
Page 6 of 9

Responsible Official:

John Williamson, Chief
Irrigation and Power Liaison
and Compliance Section

Due Date:         December 1997

Recommendation A.5: Comply with Departmental debt collection procedures and develop
formalized plans, with target dates, for collecting delinquent operation and maintenance
charges owed the projects.

Response: The Bureau concurs. The Bureau will continue its efforts to collect delinquent
assessments, surety bonds and promissory notes. The Office of Trust Responsibilities is
currently negotiating an interagency agreement under which the Department of Treasury
(Treasury) will provide debt collection services for delinquent irrigation assessments. The
Bureau will submit a list of vendors responsible for payment of delinquent irrigation
assessments to the Treasury to initiate delinquent debt collection actions.

In cases where individual Indian owners have not made payment, the Bureau will review
the availability of funds in the owner's Individual Indian Money (IIM) account(s) and collect
the delinquent fees from the owner's IIM account(s) in compliance with the Debt Collection
Act of 1982 and using the procedures defined in 25 CFR 115.09 and 115.10.

Responsible Official:     Project Managers (see Attachment B)

Due Date:         See Attachment C

Recommendation A.6: Coordinate with the tribes and agency officials to enforce the
requirement for surety bonds or other securities and deny leases or renewal of leases to
lessees who owe delinquent operation and maintenance charges.

Response: The Bureau concurs. NIIMS will provide reports of leased lands with
delinquent O & M assessments to lease managers. The Office of Trust Responsibilities
will work closely with each Area's realty office to monitor leases to ensure no lease will be

renewed with delinquent lessees.
  Responsible Official:

  Due Date:
Recommendation A.7: Enforce, where

Project Managers and Area Realty
Officers (see Attachment B)
See Attachment C
possible, regulations on the termination of water

deliveries to lands on which the landowners or lessees have not paid operation and
maintenance charges.
Response: The Bureau concurs. NIIMS provides project managers reports of delinquent
accounts along with an identifier for the delinquent tracts of land to support ready

31

 
APPENDIX 5
Page 7 of 9

identification of land which should be denied water. Project managers will ensure field
crews execute orders to stop water deliveries where appropriate.

Responsible Official:     Project Managers (see Attachment B)

Due Date:         See Attachment C

Construction RePayment Recommendations

Recommendation B.1: Assess and collect adequate repayment charges from non-lndian
landowners on the Blackfeet, Fort Belknap, Fort Peck, and Crow Irrigation Projects either
through negotiated repayment contracts or under the Bureau's authority to determine,
assess, and collect construction costs if repayment contracts cannot be negotiated.

Response: The Bureau concurs. PIRT's reconciliation schedule for the projects cited is:

Irrigation Project       Start Date Completion Date

Blackfeet          06-01-96     02-28-97
Crow           07-01-96     03-20-97
Fort Belknap        06-01-96     02-28-97
Fort Peck          07-01-96     03-20-97

Responsible Official:     Raymond L. Davis
            PIRT Team Leader

The PIRT Team will verify each project's repayment balances and compute an amortization
schedule sufficient to retire the construction debt during the time period designated in each
project's authorizing legislation.  The PIRT team will recommend the construction
repayment schedules to the project managers for inclusion in their computation of irrigation
rates. After each project is reconciled, the Bureau will evaluate whether recovery of
construction debt is sufficient to justify the cost of reconciling the accounts.

Recommendation B.2: Adjust the existing repayment contract with Wind River Irrigation
Project water users to ensure the timely recovery of their proportional share of the
additional Federal investment in the Project since 1976.

Response: The Bureau concurs. PIRT's reconciliation of the Wind River Irrigation Project
is scheduled for completion on January 30, 1997. The PIRT Team will verify Wind River's
repayment balance and compute an amortization schedule sufficient to retire the
construction debt during the time period designated in the Project's authorizing legislation.
The PIRT team will recommend the construction repayment schedules to Wind River
management for inclusion in their computation of irrigation rates.

Responsible Official:      Raymond L. Davis
            PIRT Team Leader

32

 
APPENDIX 5
Page 8 of 9

Recommendation B.3: Amend the repayment contract with the San Carlos lrrigation and
Drainage District for its proportionate share of the additional Federal investment in the San
Carlos Irrigation Project since September 30, 1984, and amend the repayment contract
every 5 years thereafter, as provided for in the Bureau's 1988 agreement with the District.

Response: The Bureau concurs. PIRT's reconciliation of the San Carlos Irrigation and
Drainage District is scheduled for completion on April 30, 1997. The PIRT Team will verify
San Carlos's repayment balance serve as a basis for renegotiation of the Project's
repayment contract.

Responsible Official:      Raymond L. Davis
            PIRT Team Leader

Recommendation B.4: Propose, to the San Carlos Irrigation and Drainage District, a
change in the District's repayment rate to ensure that any additional investment in the
Project after September 30, 1984, is recovered over a period not to exceed 40 years. If
agreement cannot be reached, changes in project legislation should be proposed to require
that additional investment in the Project be recovered over this period.

Response:  The Bureau concurs.  The PIRT Team will compute an appropriate
amortization schedule to liquidate the Project's construction debt balances within the time
periods provided for in the Project's authorizing legislation. Should the Project's current
repayment assessments be inadequate, project managers will either levy repayment
assessments adequate to liquidate the construction debt under existing authority or present
to the Department of the Interior proposed legislation on authorizing the Bureau to levy
adequate assessments.

Responsible Official:     Project Managers (see Attachment B)

Due Date:         December 1997

Recommendation B.5: Prioritize the proposed determination of reimbursable construction
costs for those projects with non-lndian landowners based on where it would be the most
cost beneficial to the Government. Among the factors the Bureau should consider in
evaluating projects are the amount of reimbursable construction costs involved; the
existence of valid repayment contracts; and the existence of power components, revenues
from which could help retire the projects' irrigation construction debt after the power
component is repaid.

Response: The Bureau concurs. Project reconciliation priorities were originally defined
in the PIRT authorization and were rescheduled in the Project Leader's February 1996
report to the Office of Trust Responsibilities (see Attachment C), due to changes in
management requirements. We request this recommendation be considered resolved.

Recommendation B.6: Ensure that project completion reports are prepared as necessary
and that land designation reports for projects with non-lndian landowners are current and

33

 
APPENDIX 5
Page 9 of 9

accurate before the Bureau attempts to determine the amount of reimbursable costs
applicable to those projects.

Response: The Bureau concurs. The PIRT Team will inventory the record of Project
design specifications, land classifications, tract designations, assessability designations,
and other geographic descriptors for inclusion in their reconciliation report for each Project.
To the extent that geographic designations bear on whether costs are reimbursable, or,
more importantly, whether costs are assessable, the PIRT Team will incorporate those
designations in their verification of Project repayment balances.

Responsible Official:      Raymond L. Davis
            PIRT Team Leader

Schedule:         See Attachment C

Since your office has already conducted extensive research to support the
recommendations from this and previous irrigation audits, we request that you make copies
of your work papers available to the PIRT Team to support their review of each project's
accounts and operations. A member of the PIRT Team will contact your office as the PIRT
Team initiates their review at each project site.

Attachments

[NOTE:  ATTACHMENTS NOT INCLUDED BY OFFICE OF INSPECTOR GENERAL. ]



34

 


APPENDIX 6

STATUS OF AUDIT REPORT RECOMMENDATIONS

Finding/Recommendation
   Reference      Status      Action Required
  1 through 13    Resolved; not No further response to the Office
          implemented  of Inspector General is required.
                The recommendations will be
                referred to the Assistant Secretary
                for Policy,  Management and
                Budget for tracking of
                implementation.

35

 
ILLEGAL OR WASTEFUL ACTIVITIES
   SHOULD BE REPORTED TO
THE OFFICE OF INSPECTOR GENERAL BY:

Sending written documents to:            calling:

Within the Continental United States

U.S. Department of the Interior        Our 24-hour
Office of Inspector General           Telephone HOTLINE
1550 Wilson Boulevard            1-800-424-5081 or
Suite 402                (703) 235-9399
Arlington, Virginia 22210

TDD for hearing impaired
(703) 235-9403 or
1-800-354-0996

Outside the Continental United States

Caribbean Region

U.S. Department of the Interior         (703) 235-9221
Office of Inspector General
Eastern Division - Investigations
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Suite 410
Arlington, Virginia 22209

U.S. Department of the Interior
Office of Inspector General
North Pacific Region
238 Archbishop F.C. FIores Street
Suite 807, PDN Building
Agana Guam 96910

(700) 550-7279 or
COMM 9-011-671-472-7279

 


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