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APPENDIX J Page J of 5 ATTACHMENT A Detailed Comments on Draft OIG Audit Report Review of the Timely Recovery of Irrigation Investment Costs - CRSP Dated January 10, 1989 1. Page I, Paragraph 1: Report: "A sound business approach requiring amortized repayment of the Storage Project's noninterest-bearing irrigation assistance costs concurrent with repayment of the interest-bearing debt would allow the Government to collect $660 million of additional revenues....," Discussion: This conclusion fails to address the impact of hydrologic variability, The comparison between the present method and the proposed change to irrigation assistance in equal annual installments was based solely from projections made in fiscal year 1987. However, the present method makes adjustments each fiscal year in the assistance payment projections to compensate for the influences of several variables, one of which is weather. For example, periods of drought can result in a decrease of power output and ultimately projected irrigation assistance revenue. The present method compensates for this reduction in the amount of projected revenues by shifting back the estimated completion of assistance to some of the participating projects a~ much as 10 to 20 years within the 50 year repayment period. Conversely, under an extremely wet cycle the increases in power output will result in an acceleration of payments from power revenues and a decrease in the amount of time needed to complete the assistance to irrigation, These annual changes in the projected timing for assistance payments allow for a great degree of flexibility in coping with the unpredictable nature of weather and contribute to a more stable power market by minimizing the necessity of constant adjustments in the power rate. The proposal to fix assistance payments in equal annual installments without employing some other means of compensation for external variables will likely force irregular fluctuations in the power rate, Without an examination of this effect on the power market the report presents an incomplete conclusion. 2, Page 1. Paragraph 1: Report: "The present value of these additional revenues is $80 mlI110n.- Discussion: Without supporting detail, it is difficult to determine now tne values in AppendiX 2 were derived, Items which require more clarity in Appendix 2 are as follows: (a) As stated in the report, figures were used from fiscal year 1987. However our annual exhibit to Congress for fiscal year 1987, titled "Historical and Projected Repayment of Authorized Reimbursable Investment," shows accumulated apportioned revenue 13