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Rural Development Utilities Programs. KENNETH M. ACKERMAN Assistant Administrator Program Accounting and Regulatory Analysis NARUC Staff Subcommittee on Accounting and Finance Phoenix, Arizona May 5, 2009. Topics. Leadership Changes Electric Program Telecommunications Program

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rural development utilities programs
Rural Development Utilities Programs

KENNETH M. ACKERMAN

Assistant Administrator

Program Accounting and Regulatory Analysis

NARUC Staff Subcommittee on

Accounting and Finance

Phoenix, Arizona

May 5, 2009

topics
Topics
  • Leadership Changes
  • Electric Program
  • Telecommunications Program
  • Broadband Stimulus Funding
  • Water & Environmental Programs (WEP)
  • WEP Stimulus Funding
  • Accounting Issues
  • Renewable Energy Credits
  • Audit Policy Changes
new leadership
New Leadership
  • Tom Vilsack was sworn in as the 30th Secretary of the U.S. Department of Agriculture (USDA) on January 21, 2009
  • March 13, 2009 President announced his intention to nominate Dallas P. Tonsager to be Under Secretary of Agriculture for Rural Development
  • Cheryl Cook – Deputy Undersecretary for Rural Development
  • March 25, 2009 President announced that he has nominated FCC commissioner Jonathan S. Adelstein to become the new Rural Utilities Service Administrator
slide4

Electric Programs Overview

  • 667 borrowers
    • 615 distribution
    • 52 generation & transmission
  • RUS Loans $13,356,794,000
  • FFB Loans $23,322,172,000
  • Total $36,678,966,000
summary of loan program electric programs budget dollars in million

Summary of Loan ProgramElectric Programs Budget(Dollars in Million)

Loan 2008 2009 2010

Program: Actual Actual Proposed

Direct 5% 99.3 100.0 100.0

Municipal Rate 0.0 0.0 0.0

Direct Treasury Rate 0.0 0.0 0.0

FFB Guaranteed 6,500.0 6,500.0 6,500.0

Non-FFB Guaranteed 0.0 0.0 0.0

Total Loan Program 6,599.3 6,600.0 6,600.0

slide7

RENEWABLE ENERGY

Rural Development, Electric Programs has

typically setaside $200 million of

FFB loan funds to finance renewable energy

projects, with priorityprocessing.

renewable energy
Renewable Energy
  • RUS finances the following energy types:
    • Anaerobic Digester
    • Biodiesel Production
    • Ethanol Production
    • Solid Fuel Production
    • Thermal Conversion
    • Wind
    • Geothermal
    • Biodiesel
many challenges ahead for the electric program
Many Challenges Ahead For The Electric Program
  • Effects related to the control of greenhouse gas emissions
  • Legal Challenges
  • Trajectory of construction costs
  • Forecast of wholesale fuel prices
  • Demand effects of increased energy efficiency, conservation, and prices
  • Renewable Energy
telecommunications loan program budget
TelecommunicationsLoan Program Budget

Infrastructure 2008 2009 2010 Proposed

  • Hardship 5% $ 143,985,000 $ 145,000,000 $ 145,000,000
  • Direct, Treasury $ 248,250,000 $ 250,000,000 $ 250,000,000

Rate

  • Direct, FFB $ 292,935,000 $ 295,000,000 $ 295,000,000
  • Total Telecom $ 685,170,000 $ 690,000,000 $ 690,000,000
loan program budget
Loan Program Budget

Broadband: 2008 2009 2010(Proposed)

  • Treasury Rate $ 792,000,000 $ 406,231,179 $ 531,698,895
  • Grants $ 13,405,000 $ 13,813,145 $ 13,406,000
  • Total Broadband $ 805,405,000 $ 420,044,324 $ 545,104,895
loan program budget13
Loan Program Budget

DLT and Public TV: 2008 2009 2010 (Proposed)

  • Treasury Rate $ 28,265,000 $ 0 $ 0

Loans

  • DLT Grants $ 29,790,000 $ 29,790,000 $ 29,790,000
  • Public TV Grants $ 4,965,000 $ 4,965,000 $ 0
  • Total DLT $ 63,020,000 $ 34,755,000 $ 29,790,000
distance learning and telemedicine program modification
Distance Learning and Telemedicine Program (modification)
  • Re-authorized through 2012
  • Places emphasis on ensuring that “libraries” are included as eligible purposes/entities
  • $32.827 Million available in DLT Grants for FY09 (including carryover)
telecom loan investment
Telecom Loan Investment

Infrastructure: Broadband:

  • 96 loans have been made, for $1.8 billion, in more than 1,900 communities
  • More than 885 thousand households will receive broadband access under loans made
  • $675 million in loans made in FY 2008
  • $3.7 billion in principal outstanding; 503 borrowers
  • 92% of borrowers are providing Broadband service
infrastructure program
Infrastructure Program

Trends:

  • Lending Levels
    • Higher demand in FY 2008, obligations increased 79% over FY 2007
    • A backlog of applications was carried over into FY 2009
infrastructure program17
Infrastructure Program

Trends:

  • Competition
    • From multiple fronts (Cable, ISPs, other LECs, Satellite)
    • Decrease in subscriber lines
  • Continued reliance on Universal Service Funds
  • Offering of Non-regulated Services
broadband status
Broadband Status
  • U.S. is No. 20 in the world among countries in per-capital broadband penetration
  • Only 26.49 % of people in U.S. have regular broadband access
  • U.S. ranks only No. 15 in broadband speed. The medium download speed in
      • U.S. is 2.3 megabytes per second
      • 63 megabytes per second in Japan
      • 49 megabytes per second in South Korea
      • 17 megabytes per second in France
      • 7.6 megabytes per second in Canada
broadband program
Broadband Program

Proposed Changes(Proposed Rule/Statutory):

  • Promote deployment to rural areas with little or no service
  • Limit funding in urban areas and areas where a significant share of the market is served by incumbent providers
  • Clarify equity and marketing survey requirements
broadband program20
Broadband Program

Proposed Changes(continued):

  • Increase the transparency of the application process
  • Promote a better understanding of application requirements
  • Ensure that projects funded are keeping pace with increasing demand for bandwidth
american recovery and reinvestment act of 2009
American Recovery and Reinvestment Act of 2009

Rural Development – Rural Utilities Service

$2,500,000,000

slide22

On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (“ARRA”).

Vision

  • Rural Development will support the expansion of broadband service in rural areas through financing and grants to projects that provide access to high speed service and facilitate economic development in locations without sufficient access to such service.
broadband stimulus
Broadband Stimulus
  • $7.2 billion Stimulus Package for rural and underserved broadband services
    • NTIA $4.7 Billion
    • RUS $2.5 Billion
    • FCC Charged with devising a plan to extend broadband services to every American
    • Define what is meant by “high speed” access and “underserved area”
slide24
Strategy
  • In order to provide economic stimulus during the current recession, ARRA requires that funds be obligated by September 30, 2010.
  • Rural Development will provide a combination of direct loans and grants to applicants that offer the most viable, economically advantageous proposals available within that time period.
  • These funds will be awarded on a competitive basis with unprecedented transparency and accountability.
slide25
Objectives
  • Fund projects that will support economic development and job creation beyond the immediate construction and operations of the broadband facilities.
  • Ensure that at least 75% of the investment serves rural areas.
  • Implement in concert with National Telecommunications Information Administration (NTIA) and Federal Communications Commission (FCC).
  • Establish appropriate monitoring and servicing of the investments to ensure the objectives are achieved.
slide26
Project Requirements
  • 75 percent of the areas to be served by a project receiving funds from such grants or loans shall be in a rural area without sufficient access to high speed broadband service to facilitate rural economic development;
  • Priority shall be given to:
    • Projects that will deliver end users a choice of more than one service provider;
    • Projects that provide service to the highest proportion of rural residents that do not have access to broadband service;
    • Projects that commence immediately upon approval.
slide27
Timeline
  • Within 60-days of the end of the public comment period on April 13, 2009, we intend to publish a series of Notice of Funding Availability (NOFAs) in the Federal Register seeking applications for USDA assistance. The NOFA will include:
    • The amount of funding available
    • Applicant, Area and Project eligibility requirements
    • The application process
    • The application window
    • Evaluation (scoring) criteria
    • The reporting requirements for borrowers/grantees
water and environmental programs millions
Water and Environmental Programs($ Millions)

FY 2008 FY 2009 FY 2010 Proposed Actual Available Proposed

  • Direct Loans $ 1,261.52 $ 857 $ 1,022
  • Guaranteed Loans $ 18.4 $ 75 $ 75
  • Grants $ 426 $ 286 $ 366
  • 2005 Hurricanes $ 0 $ 16 $ 0
  • Solid Waste Mgmt Grants $ 3.50 $ 3.5 $ 3.4
  • Individually-owned water well $ .05 $ .99 $ .99
  • Grants for Water and $ .50 $ .50 $ .50

Wastewater Revolving

Total $1,709.97 $ 1,238.99 $1,467.89

water and environmental programs millions30
Water and Environmental Programs($ Millions)

Supplemental FY 2009

Available

ARRA Direct Loans $ 2,733.51

ARRA Grants $ 924.68

2008 Disaster Direct Loans $ 49.58

2008 Disaster Grants $ 17.00

Total Supplemental $ 3,724.77

household water well system grant program
Household Water Well System Grant Program
  • The loan limit is $ 11,000 at 1 percent for 20 years
  • A NOFA for FY 2009 was published on November 20, 2008.
  • A notice announcing the availability of $993,000 for FY 2009 will be published soon.
american recovery and reinvestment act arra
American Recovery and Reinvestment Act (ARRA)

Authorizes funding of $ 1.38 Billion for the cost of direct loans and grants for the rural water, waster water, and waste disposal programs.

Water & Waster Disposal Grants $ 924,680,000

Direct Water & Waste Disposal Loans $ 2,733,515,731

initial use of arra funds
Initial Use of ARRA Funds
  • On April 28, 2009 Secretary Vilsack announced the selection of more than $ 615.8 million in water and environmental projects that are being funded immediately with federal funds provided through the American Recovery and Reinvestment Act (ARRA)
  • 193 Projects in 34 states provide safe drinking water and improved wastewater treatment systems for rural towns and communities
  • The projects are estimated to create 12,385 jobs
accounting issues
Accounting Issues
  • Novinium Letter
  • SEC International Financial Standards Roadmap
  • Renewable Energy Credits
novinium
Novinium
  • Novinium Inc., requested it’s Perficio and Ultrinium products be treated as an addition to electric utility plant
    • Perficio extends useful life for 20 years
    • Ultrinium extends useful life for 40 years
  • Advancement to the silicone dielectric enhancement fluid used in CableCURE
novinium letter
Novinium Letter

Letter Issued: April 3, 2009

RUS authorizes the capitalization of the cost of Novinium’s Perficio and Ultrinum injected into underground cable.

RUS borrowers should consider the guaranteed life extension of the injected cable when setting its depreciation rates.

sec international financial standards roadmap
SEC International Financial Standards Roadmap
  • SEC Release No. 33-8982 – “Roadmap for the Potential Use of Financial Statements prepared in accordance with International Financial Standards by U.S. Issuers.”
  • RUS agrees with comments filed by FERC and NARUC
  • Support equivalent of SFAS No. 71 standard as part of International Financial Reporting Standards (IFRS)
renewable energy credits
Renewable Energy Credits
  • Original proposal treated RECs as intangible assets.
  • Defer accounting guidance until further information is available
  • Creation of working group to recommend appropriate accounting treatment
renewable energy credits39
Renewable Energy Credits
  • REC Working Group (RECWG) participants:
  • Technical Accounting and Auditing Staff
  • Staff from several G&Ts
  • NRECA
  • CFC

Goal was to recommend accounting treatment and record keeping requirements related to RECs (began its work June 2008)

renewable energy credits40
Renewable Energy Credits
  • April 16, 2009 RUS released accounting guidance on Renewable Energy Credits
  • Memo available online at
    • http://www.usda.gov/rus/pasd/Renewable%20Energy%20Credits.pdf
renewable energy credits41
Renewable Energy Credits

RUS is establishing Account 159, Renewable Energy Credits, for recording the purchase and sale of RECs. The REC inventory should be valued either by using weighted average, first in first out (FIFO), or specific identification.

renewable energy credits42
Renewable Energy Credits
  • Amounts received for the sale of RECs should be recorded as revenue. RECs sold should be removed from inventory at carrying value, if any, and charged against an expense account at the time of sale
  • RUS is establishing Account 459, Revenue from the Sale of RECs, under the functional category Other Operating Revenues, and Account 559, Renewable Energy Credit Expenses
renewable energy credits43
Renewable Energy Credits

RECs that are used to satisfy state or regional Renewable Portfolio Standards should be removed from inventory at cost and offsetting expense recorded if the RECs are being carried with an associated dollar value. RECs accounted for as units with no associated costs shall reduce the number available for sale but will result in no recordable income statement transaction.

part 1773 audit policy
Part 1773-Audit Policy
  • Revisions being planned
  • Update Independence Standards
  • Implement electronic filing of audits
  • Redefine users to include both for-profit and not-for-profit grant recipients
  • Update sample letters to reflect an adoption of SAS 115, Communicating Internal Control Related Matters Identified in an Audit
slide45

http://www.usda.gov/rus/

kenneth.ackerman@wdc.usda.gov