Uranium Enrichment Deferral Charges and the Customer Payment Period

RCED-84-13: Published: Oct 21, 1983. Publicly Released: Oct 25, 1983.

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In response to a congressional request, GAO evaluated two recommendations in a Department of Energy (DOE) Office of Inspector General (IG) report on the financial management of the uranium enrichment program.

In its report, the IG stated that using the current-value-of-funds rate rather than the average-marketable-securities rate to compute the schedule adjustment charges for enrichment costs would more accurately account for the cost of customers' deferring deliveries of enriched uranium and equitably allocate those costs among customers. Further, reducing the 30-day period during which customers are allowed to make payment would improve the program's cash management practices. The Assistant Secretary of DOE disagreed with these recommendations, stating that the present interest rate is used throughout the uranium enrichment program and that reducing the 30-day customer payment period may weaken the program's competitive position in world markets. GAO agreed with the Assistant Secretary's position that the program is operated on a full-cost recovery basis and that the government would gain no long-term benefit from implementing either of the IG recommendations. However, GAO believes that using the current-market-yield interest rate on Treasury borrowings would be appropriate because it more closely approximates the cost of Treasury borrowings and more equitably allocates the cost of deferrals among DOE customers. GAO also believes that the IG recommendation to reduce the customer payment period has merit. However, the effect on the DOE position in the competitive uranium enrichment market needs to be considered before any adjustment is made.

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