Rural Utilities Service

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Rural Utilities Service

• Ken Ackerman
• Assistant Administrator
• Program Accounting and Regulatory Analysis
• NARUC Staff Subcommittee
• on Accounting and Finance
• Columbus, Ohio
• September 15 - 18, 2003

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Topics

• Accounting Issues
• Program Highlights
• Electric
• Telecommunications
• Water and Environmental Programs
• Other Issues

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Statement of Financial Accounting Standard No. 150

• FAS No. 150, Accounting for Certain Financial
  Instruments with Characteristics of both
  Liabilities and Equity
• Issued in May 2003
• Effective for financial instruments entered into
  or modified after May 31, 2003

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SFAS No. 150

• May affect patronage capital allocated
• Applicable to financial instruments which are
  mandatorily redeemable at a specified or
  determinable date or upon an event certain to
  occur
• By-laws which call for mandatory retirement of
  patronage capital allocated to an estate

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SFAS No. 150

• Effective date for non-public companies has been
  extended to fiscal years beginning after December
  15, 2004. This is a change from the original
  pronouncement. Change will be in effect for
  interim statements issued for periods beginning
  after December 15, 2004.

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Asset Retirement Obligations

• Statement of Financial Accounting Standard No.
  143, Accounting for Asset Retirement Obligations
• Issued in June 2001
• Effective for fiscal years beginning after June
  15, 2002

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Asset Retirement Obligations

• FERC final rule issued April 9, 2003
• Order No. 631
• Effective for fiscal years beginning on or after
  January 1, 2003
• Creates new accounts and revises existing
  definitions, descriptions and instructions

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Asset Retirement Obligations

• New Accounts created by FERC
• 230, Asset retirement obligations
• New plant account in each functional category
• 403.1 Depreciation expense for asset retirement
  obligations
• 411.10 Accretion expense

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Asset Retirement Obligations

• Adoption is retroactive and shall be recognized
  as a cumulative effect of a change in accounting
  principle
• At adoption, the liability and related asset will
  be recognized as if FAS No. 143 had been in
  effect for all periods.

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Asset Retirement Obligations

• RUS issued a letter June 25, 2003, providing
  guidance for adopting FERC Order No. 631
• RUS will create Account 403.8 for depreciation
  expense associated with asset retirement
  obligations
• RUS will not require separate subsidiary records
  for the cost of removal included in depreciation
  rates on assets not covered by FAS No. 143

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AcSEC ED on Plant, Property and Equipment
(Revised)

• SOP keeps 4-Stage framework
• Preliminary
• Preacquisition
• Construction/Acquisition
• In-service

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AcSEC ED on Plant, Property and Equipment
(Revised)

• RUS concerned with Stage 1 Preliminary
• Calls for expensing costs
• Long Range Plans etc.
• Normally deferred and capitalized
• Would be expensed
• RUS expenses when a determination is made not
  to construct
• Concern with expensing major maintenance costs

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AcSEC ED on Plant, Property and Equipment
(Revised)

• RUS agrees with Stages 2, 3, 4
• Requirements similar to USOA in each
• Capitalize identifiable costs on construction
• Expense items which are not components

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AcSEC ED on Plant, Property and Equipment
(Revised)

• GA Expenses
• Allows capitalization of identifiable costs
• Payroll and Benefits
• Time sheet justifications
• No capitalization of
• Executive Management
• Corporate Accounting
• Human Resources
• Corporate Legal
• Marketing

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AcSEC ED on Plant, Property and Equipment
(Revised)

• Removal Costs
• Removal Costs other than those covered by FASB
  No. 143
• Removal costs to be expensed
• SOP will not provide guidance on how to expense
• At time of removal
• Over the life of asset through Depreciation
  expense
• RUS and Utilities overall record removal in
  depreciation expense

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AcSEC ED on Plant, Property and Equipment
(Revised)

• Component Accounting
• Has always been required by RUS and Utility
  Accounting
• Continuing Property Records
• Record units are component accounting
• Retire old record unit
• Capitalize new record unit constructed
• Old and new units should not be on balance sheet
  at the same time

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AcSEC ED on Plant, Property and Equipment
(Revised)

• Disclosures
• Present in basic financial statements or
  footnotes
• Gross carrying amounts of property, plant and
  equipment
• Construction Work in progress
• Accumulated Depreciation
• Significant subcategories
• E.g. Distribution, Transmission, etc
• RUS requirements already have such disclosure
  requirements

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AcSEC ED on Plant, Property and Equipment
(Revised)

• Mass-Asset Accounting
• SOP will allow mass-asset (group-life) method of
  accounting
• Final SOP will include criteria for utilizing
  mass-asset accounting

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AcSEC ED on Plant, Property and Equipment
(Revised)

• Accepted by the committee at their September
  meeting with a 10 5 vote
• SOP is effective for fiscal years beginning on or
  after December 15, 2004

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Change of Auditor

• 7 CFR 1773.4, Borrower Responsibilities, requires
  that the board select a qualified CPA to perform
  the annual financial audit of the companys books
  and records.
• In the event of a change of auditor, RUS must be
  notified, in writing, of the change at least 90
  days prior to the as of audit date.

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• Electric

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RUS Electric General Field Representatives
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Record Retention

• RUS Bulletin 180-2, revised June 26, 2003
• Generally endorses FERC guidelines found in 18
  CFR Part 125
• Provides new rules on storage media
• Provides guidance on financial requirement and
  expenditure statements and patronage capital
  records

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Depreciation Issues

• RUS Bulletin 183-1, Depreciation Rates and
  Procedures
• Most current issue dated October 28, 1977
• Requires depreciation rates be within specified
  ranges rates

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Depreciation Issues

• RUS will be reviewing the depreciation bulletin
  in the next year
• Extent of changes have not been determined
• Review is part of an overall review of rules and
  regulations by RUS Staff

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Renewable Energy

• 205 RUS borrowers offer green pricing to their
  members
• 18 power supply
• 187 distribution
• 31 RUS borrowers report ownership of renewable
  energy generation resources
• 8 power supply
• 23 distribution
• Total ownership is 70.5 MW

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Renewable Energy

• 23 RUS borrowers use some form of biobased
  product mainly biodiesel and ethanol
• 3 power supply
• 20 distribution

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RUS National Commitments

• Promote renewable energy sources
• RUS will finance
• Commercially available technology
• Viable projects
• Entities with cooperative structure and goals

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RUS Renewables Webpage
Renewables Page added to RUS Website http//www.u
sda.rus.gov/electric/renewables Conferences Speci
al Interest Meetings News You Can Use
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Electric Accounting Course

• RUS Electric Accounting Course offered by the
  USDA Graduate School
• Currently in the process of being revised and
  updated
• Anticipated completion early in 2004

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• Telecommunications

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Telecommunications Program GFR Territories
Henderson
McKenzie
Lannen
Ahlgren
Jacobs
Coyner
Couzens
Nieland
Jorewicz
Anderson
Honis
Aplin
Schweighofer
Boening
DeForest
Hutson
Baird
Carey
Fritts
Tindall
Jenkins
Nall
Brummitt
Vogt
Vacant
Welch
Hayes
Vogt
Jenkins Hawaii Micronesia
De Leon
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Broadband Program

• Pilot program
• Awarded 100M in FY 2001
• Awarded 80M in FY 2002
• 28 loans in 20 states

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Broadband Program

• Program Status
• 91 applications totaling approximately 1B
• Awarded 55M in loans as of August
• 1.4 B in loan authority
• Currently developing audit requirements and a
  uniform system of accounts for broadband borrowers

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Local TV

• The LOCAL TV Act
• Signed On December 21, 2000 -
• Intended to facilitate access, on a
  technologically neutral basis, to local
  television station signals in unserved areas and
  underserved rural areas.

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Local TV

• Program Status
• Proposed rule has been issued, comments are due
  by September 15, 2003
• Plan to finalize not later than 1st QTR 2004

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Community Connect

• Program Status
• Awarded grants totaling 20M in May 2003
• Plan to award another 10M by Sep 2003

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• Water and Environmental Programs

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• Status of NARUC Resolution on RUS Water and
  Environmental Program loan authority
• RUS has met with the National Association of
  Water Companies (NAWC)
• RUS asked NAWC to survey its members to determine
  if there is a widespread interest in an expanded
  program
• RUS has also been investigating the legislation
  language required to achieve the goals of the
  resolution

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RUS Field Accountants
E. Kaufmann (Idaho)
E. Kaufmann
Gustin
Mueller
Schafer
Vacant NY Headquarters
Dellavedova
K.Johnson
Henry
Vacant
Elam
Husby
Dotson
Benson
Clark
G. Kaufman
E. Johnston
Haas
Yager
Talley
Kirby
Bunch
Vacant NM Headquarters
Partrich
Martin
Rich
Garrett
Haas (Kansas)
Stevens
Lacomb
Baker
Vacant
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Job Opportunities

• Field Accountants
• Texas
• Pennsylvania / New York / New England
• New Mexico / Arizona
• South Dakota
• Nebraska
• Kentucky
• Staff Accountants - Washington, DC
• Systems Accountants - Washington, DC

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http//www.usda.gov/rus/
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