Allocation for CVP the Process

¶ … Allocation for CVP

The process of allocation of costs proceeds from two distinct procedural approaches. First, a three-step process is adhered to. Subsequently, this three step process points to the subdivision of six categories of cost allocation, each accounted for according to its own specific characterizations of shared burden and the division of repayment responsibilities.

The case study indicates that the standard procedure for representing cost allocation is based on a combination of legislative authorization and the efforts of CVP to reflect its financial input in as accurate a detail as possible. Thus, the case study reports that "a three-step process is followed in the allocation of CVP costs: Identify costs to be allocated; Allocate costs to project purposes; Calculate repayment responsibilities for each project purpose" (Chapter III, 1) The first step is the most important of these, and enters cost figures into a set of categories that help to indicate both how funds will be used and how their repayment will be shaped between parties such as CVP, existing partners, states of operation or government agencies.

It is thus that the case study divides these cost categories according to the degree of shared burden and repayment responsibility generated amongst government agencies, existing partners, state bodies and taxpayers in addition to CVP itself. The categories are identified as Single-Purpose Facilities, Multi-Purpose Facilities, COE-Transferred Facilities, Non-Reimbursable Costs, Authorized Deferred Use and State Share of San Luis Unit. There is also a seventh and separate category for consideration of those allocations for which repayment responsibilities are attributed to Western, a firm which has taken over responsibility of some of CVP's assets.

These categories produce a complex and splintered cost allocation picture, but they also provide the best opportunity for presentation of the divided repayment responsibilities that define the general financial outlook for CVP.

This is indicated by such cost allocation categories as Authorized Deferred Use and State Share of San Luis Unit, in which costs for certain facilities and operational demands are shared with the State of California. This is because these categories of cost are dictated by legislative authorization denoting shared use and shared responsibility through government contract or public usage. Accordingly, the example of Authorized Deferred Use would demand greater expenditure on the part of CVP to accommodate a contingency construction at the behest of the local government. The case study reports that this legislation "authorized the Auburn-Folsom South unit and allowed the Secretary to include additional capacity in the Folsom South Canal to deliver water to potential future additions to the CVP along the east side of the Central Valley. Public Law 90-65, dated August 19, 1967, authorized the Secretary to include extra capacity in the Tehama-Colusa Canal to enable it to provide future water service to areas that could be authorized as an extension of the CVP." (Chapter III, 1) The expectation accorded here would be the share of construction costs amongst those who would ultimately use the water source, meaning that this would become a publicly shared cost repaid through traditional avenues of taxation.

Such common costs allow for a greater flexibility of internal decision making, with an expansion into wider arenas. The shared responsibility of repayment allows for some expenditure in other areas of development as well as the expansion of investment into nature reclamation projects. In a similar regard though, decision-making is actually removed in some capacities from the jurisdiction of CVP's accounting department, with the legislative demands of State and local authorities imposing certain use of resources upon the utility firm.

In either regard though, decision-making is largely accommodated by the accuracy of cost-allocating and the computational analysis there applied. The case study indicates that this is initiated with a review of the financial statement and with correspondence to existing legislation and contractual obligations. The case study denotes that "costs reported in the financial statement are disaggregated, as necessary. The total costs of many features reported in the financial statement include cost components that are to be directly assigned to a non-reimbursable expense category or are subject to allocation and repayment criteria that differ from those of the main feature." (Chapter III, 1)