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This report addresses only the results of our review of the Colorado River Storage proj ect. The resul ts of our Bureauwide review will be reported separately, PRIOR AUDIT COVERAGE The Office of Inspector General issued the report "Review of the Timely Recovery of Irrigation Investment Costs - Central Arizona Project, Bureau of Reclamation" (Report No, 89-03) on October 4, 1988, We reported that the Bureau' 5 proposed renegotiated contract with the Central Arizona Water Conservation District provided for repayment of the interest-bearing investment before the interest. free investment. If both debts were repaid concurrently, the U,S, Treasury would recover an additional $279 million in interest payments, which equates to a present value of about $21,4 million, We recommended that prior to approving the proposed amendatory contract, the Commissioner, Bureau of Reclamation, (1) obtain legal advice from the Department's Solicitor to determine the best approach for negotiating with the District for removal of the inequities contained in the present repayment methodology and (2) consistent with this advice, propose to the District changes in the appropriate contract provisions to provide for concurrent amortized repayment of both the interest-bearing and interest-free debts starting in the first year of repayment, Both the Assistant Secretary - Water and Science and the Bureau disagreed with our recommendation, As such, we referred the audit report to the Assistant Secretary - Policy, Budget and Administration for resolution, On February 21, 1989, after the Assistant Secretary - Water and Science, signed the amendatory contract, which did not provide for concurrent repayment of the two debts, the Assistant Secretary - Policy, Budget and Administration decided in favor of the Bureau, The U, S. General Accounting Office issued the following reports which provided irrigation assistance information on the legal requirements for recovery from power sales revenues , individual pro j ec t amounts to be recovered, and alternative recovery methods: "Recovering a Portion of Federal Irrigation Project Construction Costs Through Revenues From Department of Energy Electric Power Sales" (GAO/RCED-85-128), dated July 26, 1985, "Additional Information Concerning Irrigation Project Costs and Pricing Federal Power" (GAO/RCED-86-18FS), dated October la, 1985, "Pricing Alternatives for Power Marketed by the Department of Energy" (GAOjRCED-86-186BR), dated September 30, 1986, The General Accounting Office reported-the benefits of amortizing as an alternative approach; however, in performing its evaluation, the General Accounting Office did not measure the impact on the repayment of the power investment. 3