FIN 06-30

Reclamation Manual
Directives and Standards
SUPPLEMENT TO THE
DEPARTMENT OF THE INTERIOR
DEPARTMENTAL ACCOUNTING MANUAL

FILE: 06 COST ACCOUNTING
30 Cost Recovery

Subject(B): Interest Rate Formula

Purpose: To clarify administrative policy for establish annual interest rates for calculation of interest during construction (IDC) and interest on investment (IOI)

Authority: Secretarial Order #2929 issued by the Secretary of the Interior, January 29, 1970.

R.A.6120.2, Power Marketing Administration Financial Reporting (10-1-83).

Planning Instruction No. 9x-03, Subject: Interest Rates for Fiscal Year 199x.

Law authorizing a particular project or administrative policy established pursuant to law.

GAO's Manual for Guidance of Federal Agencies, Title 2 - Accounting, Appendix I - Accounting Principles and Standards, I10 - Imputed Interest

Contact: General Accounting and Technical Analysis Group (GATAG), Finance and Accounting Services (FAS), (303) 445-3423.


1. Responsibilities.

The Director, Program Analysis Office, Denver, CO will advise the regional offices at the beginning of each fiscal year of the interest rate applicable for the current year.

The Regional Finance Offices are responsible for calculating and recording interest during construction (IDC) and interest on the (unpaid) investment (IOI) on an annual basis. (See 3. Related References listed below.). The interest rates applied to each project shall be in accordance with this Supplement.

2. Interest Rates.

The interest rates to be used in computing IDC and IOI will be the rates established by the authorizing legislation, or, if the rates are not established by the authorizing legislation, the rates established by Bureau of Reclamation (Reclamation) laws or administrative policy.

Generally, the costs (original construction costs and costs of additions and replacements regardless of source of funds) allocated to reimbursable functions, except irrigation, are subject to IDC and IOI unless otherwise provided by law.

A. Power.

(1). For projects started on or before January 29, 1970, unless otherwise provided by law, the interest rate will be that determined in accordance with administrative policy.

(2). For projects which began construction after January 29, 1970, unless otherwise provided by law, the interest rate will be the average yield rate during the preceding fiscal year on interest bearing marketable United States securities which have terms of 15 or more years remaining to maturity, rounded to the nearest multiple of one-eighth of 1 percent. Through September 30, 1983, the yearly rate adjustment was limited to 0.5 percent. This limitation was eliminated after that date.

(a). The applicable rate for construction, additions, and replacements is the rate determined for the fiscal year in which the funds are first disbursed to initiate construction or begin the replacement or addition.

(b). The applicable rate for deficits is the rate for the fiscal year in which the deficit occurs.

B. Municipal and Industrial (M&I) Water. Interest rates for the M&I allocation will apply to the original construction costs (for IDC and IOI purposes), additions and replacements (including any IDC), and deficits as follows:

(1). Original Construction

(a). The rate set forth in repayment contracts.

(b). If (a) is not applicable, the interest rates or formulas in project authorizing acts or other applicable legislation (e.g., Reclamation Project Act of 1939, section 9(c)(1) in which case the interest rate will be 3-1/2 percent per annum).

(c) If (a) and (b) are not applicable, the rate established administratively for construction begun before fiscal year 1984.

(d). If (a), (b), and (c) are not applicable, the interest rate will be determined as outlined in interest rates for power.

(2). Additions, Replacements, and Deficits

(a). The rate set forth in repayment contracts if the repayment contracts clearly provide for its use.

(b). If (a) is not applicable, the rate or formula prescribed in the authorizing legislation if the law clearly provides for its use for additions, replacements, and/or deficits. If the law is not clear, the rate or formula prescribed in the authorizing legislation should be used only with the concurrence of the Field Solicitor.

(c). If (a) and (b) are not applicable, the rate established administratively for additions, replacements, and deficits begun or incurred before fiscal year 1984.

(d). If (a), (b), and (c) are not applicable, the interest rate will be determined as outlined in interest rates for power.

C. Other Interest-bearing Investments. The interest rate will be the rate prescribed by law or repayment contract or, if neither apply, the rate approved by the Commissioner.

3. Related References.



(012) 9/30/95
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