FY 2006 Audit and Inspection Reports

TVA Nuclear’s (TVAN) Concerns Resolution Program (CRP) - TVA Nuclear 2006

Inspection 2006-518I

September 29, 2006

• TVAN’s workforce (i.e., TVA employees and contractor employees with unescorted access to TVA’s nuclear facilities) generally felt free to raise nuclear safety and quality issues.  However, many of the responses were not as affirmative as the prior survey.
   
• Issues associated with the closed CRP files were generally addressed.
   
• The number of allegations made directly to the Nuclear Regulatory Commission by TVAN’s workforce has increased in the last three years.  Despite this increase, the number of allegations remains lower than the high years 1996 – 1997.

Based on these findings, we believe the fundamental mission of the CRP is being met.
(Full Report)
 

TVA Nuclear’s (TVAN) Concerns Resolution Program (CRP) - Browns Ferry Nuclear Plant (BFN) 2006

Inspection 2006-519I

September 29, 2006

TVAN CRP was designed to help ensure all TVA and contractor employees supporting TVAN “are free to express safety issues, concerns, or differing views to TVAN management without fear of reprisal and all such concerns and issues are investigated and resolved in a timely manner.”  We performed an inspection which assessed the willingness of TVA employees and contractors to report nuclear safety and quality issues through various avenues, including TVAN’s CRP.  The scope of the review corresponded to BFN contractors and TVA employees with unescorted access to BFN’s nuclear facilities.

Overall, we determined BFN contractors and TVA employees generally felt free to raise nuclear safety and quality issues through some avenue.  The responses we received generally compared favorably to the responses we received from the TVAN workforce (i.e., TVA employees and contractors with unescorted access to TVA’s nuclear facilities).
(Full Report)
 

Succession Planning

Inspection 2006-513I

September 14, 2006

We conducted a review to determine what TVA has done to address challenges arising from TVA’s aging workforce, retirements, and the resulting knowledge loss.  Challenges facing power utilities as a result of the aging workforce include the loss of critical knowledge, the inability to find replacements with utility-specific skills, and the lack of bench strength within the organization.  We determined TVA has adopted an Integrated Staffing Plan Principle, as well as several initiatives to support this principle which address the challenges arising from TVA’s aging workforce.  These initiatives include (1) Strategic Talent Management, (2) Work Force Planning, (3) Knowledge Retention, (4) Training Pipeline, and (5) Recruiting.  We also determined that TVA’s succession planning initiatives include many recognized best practices, and TVA is a recognized best practice organization related to knowledge retention.

While TVA has taken actions to address the issues arising from an aging workforce, the implementation of TVA Corporate HR initiatives by the business units can be improved.  We recommended the Executive Vice President, Administrative Services:

• Consider educating employees on the importance of self-reported retirement dates and how that information is used, along with providing on-going education on retirement benefits and planning from early in a TVA employee’s career;
   
• Ensure complete implementation of the Knowledge Retention Initiative, which supports compliance with and the success of the Integrated Staffing Plan Principle; and
   
• Emphasize the importance of pipeline hiring to move TVA more towards being a developmentally oriented business.

TVA management agreed with our findings and has initiated or plans to initiate corrective action.  (Full Report)
 

OPM’s Guidance for Addressing the Potential H5N1 Virus Pandemic

Inspection 2006-531I

September 11, 2006

We reviewed the Office of Personnel Management (OPM) guidance/requirements regarding a potential influenza pandemic to determine if TVA is in compliance with OPM requirements and/or has taken other proactive solutions.  We found that OPM has issued some guidance for Federal agencies to follow in the event of a pandemic; however none are mandatory for agencies to implement.  TVA is currently reviewing OPM guidance and has taken other proactive actions by adopting and adapting the Nuclear Energy Institute guidelines.

Based on our presentation to management, subsequent to the issuance of the pandemic plan, we may be requested to verify implementation of key pandemic plan initiatives.  
(Full Report)
 

Retroactive Rate Adjustments

Audit 2006-028C

August 22, 2006

We audited the costs invoiced by a contractor for retroactive rate adjustments and determined the adjustments were overstated by about $12,000 due to miscellaneous billing errors.  The contractor agreed with our findings.  (Summary Only)
 

TVA's Contracting Process

Audit 2006-002C

August 21, 2006

We reviewed TVA’s contracting process and noted several areas where improvements could result in better contract management and greater contractor compliance with commercial terms and conditions.  Although we noted many instances of good practices being performed by various individuals in Procurement and TVA’s Strategic Business Units, these practices were not universal.  Overall, we noted (1) deficiencies in 40 percent of the 64 contracts reviewed; (2) technical contract managers were approving payments without adequately reviewing pricing on 25 percent of the invoices reviewed; and (3) internal controls were not always followed.  Additionally, we surveyed Procurement’s contract managers and purchasing agents and a representative sample of TVA’s technical contract managers to ask for their input regarding weaknesses and areas of improvement in the contracting process.  The survey results were most negative in areas concerning (1) training, (2) workload, and (3) communications.  TVA management instituted several initiatives to address most of the issues identified in the report.  (Summary Only)
 

Welding Services

Audit 2006-012C

August 10, 2006

We audited $3.2 million of costs billed to TVA by a contractor for welding services performed at Browns Ferry and Sequoyah Nuclear Plants by one of its subcontractors and determined TVA had been billed $450,165 for unsupported and ineligible costs.  The overbilling included (1) per diem payments that exceeded limitations or were ineligible under the contract, (2) ineligible mobilization/demobilization and travel expenses, (3) unsupported small tools and consumable costs, (4) labor costs that were either unsupported or billed at incorrect rates, and (5) unsupported subcontractor costs.   TVA management is reviewing our findings and recommendations.  (Summary Only)
 

Fuel Fabrication Services

Audit 2006-001C-03

August 10, 2006

We audited $32.7 million of costs billed to TVA by a contractor providing reload fuel fabrication services for Browns Ferry Nuclear Plant and determined TVA had been overbilled $5,545 due to the contractor’s use of overstated hours and incorrect labor rates.  Additionally, the contract did not have a formal authorization process for certain services to be performed by the contractor and the contractor could not provide documentation of TVA’s authorization for some of the services it had billed TVA.  The contractor agreed to credit TVA for the overbilled amount.  TVA management agreed with our findings and is (1) reconciling the deliverables it received with the compensation paid for the services in question and (2) issuing a contract supplement to confirm how work will be released under the contract.  (Summary Only)
 

Nuclear Security Overtime

Audit 2006-005C-02

August 9, 2006

We determined a TVA contractor providing nuclear security services was incurring a high level of overtime due to work schedules and headcount limitations.  The headcount limitations had resulted in TVA paying $1.84 million in extra labor costs during 2004 and 2005.  We estimated if the trend continued TVA would pay an extra $3.5 million over the planned three-year remaining term of the contract.  TVA management stated they had reviewed the contractor’s staffing levels and determined additional full-time positions were needed to man the security posts.  Also management stated they had taken action regarding the contractor’s security manning requirements and shift scheduling that will reduce overtime to acceptable levels.  (Summary Only)
 

TVA’s Prescription Safety Eyewear Program

Inspection 2006-511I

August 8, 2006

At the request of TVA Occupational Health and Workers’ Compensation, we performed a limited scope review to assess whether policies, procedures, and key control activities ensure compliance with TVA’s Prescription Safety Eyewear Program requirements.  In summary, we determined TVA’s policies and procedures adequately address the eligibility requirements and process to be followed in order to obtain prescription safety eyewear.  However:

• Policies and procedures regarding prescription safety eyewear (1) do not address the retention of supporting documentation for purchases of prescription safety eyewear and (2) are not being complied with by all the Safety Eyewear Coordinators.
   
• Policies and procedures could be strengthened to clearly identify the time frame constraints for obtaining replacement eyewear.
   
• Current identifiers used for employees are not unique to a single employee.

TVA management agreed with our findings and recommendations and has taken or plans to take corrective action.  (Full Report)
 

Gallatin Fossil Plant Coal Deliveries

Inspection 2006-524I

July 18, 2006

We compared Gallatin Fossil Plant (GAF) coal receipts using TVA and terminal shipment weights to identify whether any significant variances exist. Our review covered December 1, 2005, to May 3, 2006.  We determined (1) coal receipt information input into FuelWorx (FWX) and the Daily Coal Report (DCR) were generally accurate and (2) significant variances exist between vendor/terminal invoiced weights and TVA delivered weights.  Specifically:

• All but 1 of the 64 tested coal shipments were input into FWX and the DCR accurately.
   
• The net effect of all terminal versus TVA weight variances shows that TVA received approximately 31,000 tons more coal than reported on the terminal shipping notices.

We also noted that when TVA weights are unavailable, terminal weights are input as TVA weights.  Two additional issues cited by GAF personnel were that (1) the responsible individual is not always informed when TVA weights are unavailable and (2) not all scale personnel receive formalized training.

TVA management agreed with our findings and recommendations and has taken or plans to take corrective action.  (Full Report)
 

Craft Labor Time Reporting (Browns Ferry Nuclear Plant Unit 1 Restart)

Inspection 2006-514I

July 17, 2006

At the request of TVA Nuclear (TVAN), we reviewed Stone and Webster Engineering Corporations’ (SWEC) craft labor time reporting associated with the October 2005 Unit 1 Restart craft labor switch to five eight-hour straight-time work schedules.

In 2005, TVA and the Tennessee Valley Trades and Labor Council modified their memorandum of understanding, including Attachment A, Mandatory – Eight/Ten Straight-Time Attendance Agreement (LRS-54).  The change was made to increase productivity (e.g., to curtail absenteeism and tardiness).  To comply, SWEC switched to five eight-hour days straight-time work schedules in October of 2005.  SWEC developed the following key control activities to ensure compliance with LRS-54.

• The AnalyzeTime application evaluates payroll data to identify inconsistencies and potential errors in time calculations.
   
• Timesheets, which support payroll payments, are prepared and signed by a foreman and then approved by an applicable supervisor.
   
• Gate-log reports are available to identify time reporting variances for employees working inside the secured area.

We determined (1) the AnalyzeTime application is working as intended, (2) over 99 percent of timesheets reviewed contained all required signatures, and (3) gate-log reviews are being conducted; however, these reviews provide only limited information for monitoring.  We also noted that:

• Absences are not tracked when an employee is temporarily assigned to another unit.
   
• No process exists to ensure that excused absences are monitored to identify potential abuse.  (Full Report)
   
  

TVA's Role as a Regulator

Inspection 2005-522I

June 13, 2006

We conducted a review to assess the TVA role as rate regulator over municipal utilities and cooperatives (collectively “distributors”) which purchase TVA power.  The TVA Act imposes only one regulatory requirement, prohibiting discrimination between consumers of the same class.  The TVA Act, however, also gives the Board authority to include terms and conditions in power contracts as needed to carry out the purposes of the Act, which include keeping rates as low as feasible.  Pursuant to this authority, most power contracts include, in addition to the required nondiscriminatory provision, terms and conditions related to resale rates, use of revenues, and financial and accounting requirements.

In summary, we determined the following:

• TVA is in a unique position as both a seller of electric power and a regulator over the rates charged by many of its customers.  We believe there is an increasing inherent conflict in TVA serving as a regulator while working to ensure good customer relations.
   
• TVA routinely reviews and approves resale rates and use of funds for nonelectric system purposes.  We determined TVA should develop additional guidelines to assist in their reviews.
   
• Thirteen distributors used electric system funds for nonelectric purposes, while the joint use agreements may not have been modified to permit such use.

TVA management agreed with our recommendations, and we concur with their planned actions.  (Report)
 

Dental Claim Adjudication

Inspection 2006-516I

June 13, 2006

We performed a limited scope review to determine if claims are being adjudicated in accordance with the provisions of the TVA Dental Benefit Plan.  While the majority of claims reviewed were adjudicated properly, we did identify an adjudication error associated with charges for preventive services.  TVA Employee Benefits had also discovered the error and subsequently addressed the issue.  The dental claim administrator had reimbursed TVA in the amount of $5,353.22 and reimbursement for 16 additional charges identified by our review was pending.  (Summary Only)
 

Review of Employee Recognition Costs Billed by a Contractor

Audit 2006-010C

June 13, 2006

We audited the employee recognition costs billed to TVA by a contractor under two contracts for engineering services provided in support of BFN Unit 1.  In summary, we found the contractor had (1) not refunded TVA for $71,406 of unspent funds under one contract and (2) billed TVA $49,093 for employee recognition costs under the second contract.  Although the second contract did not provide for TVA to receive a refund, the amounts paid by TVA had been agreed to based on the contractor’s representations that it would be incurring employee recognition costs.  TVA management plans to pursue recovery of the unspent funds under the two contracts.  (Summary Only)
 

Welding Services for Fossil & Hydro Projects

Audit 2005-004C-03

June 1, 2006

We audited $12.4 million of costs billed to TVA by a contractor for performing welding services for fossil and hydro projects.  In summary, we found TVA had been overbilled $539,194 for (1) labor costs due to unsupported records and the contractor’s use of incorrect labor rates; (2) mobilization, travel, and per diem costs that were ineligible or billed at incorrect rates; (3) duplicate costs and invoice calculation errors; (4) equipment costs due to the contractor’s use of incorrect billing rates; and (5) unsupported costs.  TVA management (1) has instructed the contractor to provide any additional or clarifying documentation to support its billings and (2) is planning to recover any overbilled and unsupported costs.  (Summary Only)
 

Review of TVA’s Fiscal Year 2006 Second Quarter Financial Information

Audit 2006-020F

May 17, 2006

We identified no instance where PricewaterhouseCoopers LLP did not comply in all material respects with Government Auditing Standards in its review of TVA’s interim financial information for the second quarter of FY 2006.  (Summary Only)
 

Nuclear Security Services

Audit 2006-005C-01

April 27, 2006

We reviewed $59.2 million of costs paid by TVA to a contractor for providing managed security services for TVA Nuclear and security support for other TVA organizations.  We found the contractor had overbilled TVA $104,599, including (1) $84,799 for leased vehicle costs that included billings past lease expiration dates and reductions in the lease costs that had not been passed through to TVA, (2) $16,221 for labor costs and associated fees because certain straight time hours were billed to TVA at overtime rates, and (3) $3,599 of estimated travel costs that were either unsupported or ineligible.  TVA concurred with our findings and is planning to recover the overbillings.  (Summary Only)
 

Tritium Production Services

Audit 2006-001C-01

April 20, 2006

We reviewed $5.7 million of payments TVA made to a contractor for providing analysis and licensing support for tritium production at Sequoyah Nuclear Plant and determined the contractor had overbilled TVA $78,653.  The overbilling included (1) an estimated $76,075 in unsupported labor costs and (2) $2,578 for travel and material costs that were either unsupported or ineligible.  TVA management is planning to recover the overbilled costs.  (Summary Only)
 

TVA Land Disposals

Inspection 2005-525I

April 7, 2006

We assessed TVA’s compliance with applicable policies, procedures, and laws/regulations when conducting land disposal transactions.  TVA’s land disposal actions include easements, sales, abandonments, deed modifications, transfers, and leases.  The TVA Act grants TVA authority to transfer land to government agencies, corporations, partnerships, or individuals.  TVA’s overall policy on the use, acquisition, and disposal of land is contained in TVA Code V, which was last updated in 1982.  With regard to reservoir property:

• TVA maintains 293,000 acres of reservoir property.
   
• River Systems Operations and Environment (RSO&E) manages reservoir property and maintains Board-approved Land Management Plans for the major reservoir properties.

In summary, we determined:

• TVA’s policy on land disposals does not clearly articulate (1) criteria for considering which property is subject to disposal, (2) criteria for accepting or rejecting proposals, and (3) provisions for land swaps.
   
• RSO&E generally complied with their land disposal processes including (1) obtaining appropriate reviews and approvals, (2) ensuring independent appraisals of land value, and (3) receipt of payment for appraised values.  However, we found documentation could be improved related to the non-requirement of public notice.
   
• Documentation is not required or being maintained for withdrawn or rejected Land Use Applications.
   
• RSO&E has scheduled reassessment of TVA’s Land Management Plans beyond their planned ten-year horizon.
   
• No non-compliance with applicable laws and regulations.

TVA management generally agreed with our findings and recommendations and has taken or plans to take corrective action.  (Report)
 

Boiler Pressure Parts and Burner Parts

Audit 2005-049C

April 6, 2006

We reviewed TVA’s contracts with a contractor that provided boiler pressure parts and burner parts and determined the contracts’ compensation clauses were not adequate for determining and evaluating prices to be billed for the parts.  We recommended TVA management (1) incorporate specific pricing criteria in the contracts for use in determining and evaluating prices and (2) revise/supplement the cost reimbursable payment terms under one of the contracts to specifically address costs/rates to be paid by TVA.  TVA management agreed the contracts’ pricing criteria should be revised and took appropriate action.  (Summary Only)
 

TVA’s Accounting for Insurable Losses

Inspection 2006-515I

April 3, 2006

We assessed the adequacy of controls applicable to the accounting for costs associated with non-nuclear insurable losses.  TVA has negotiated and obtained insurance to cover two areas of non-nuclear operations:  (1) non-nuclear property and (2) unplanned outages.  The unplanned outage insurance covers Fossil’s nine baseload units.  In summary, we found that the Corporate Insurance Risk & Analysis Group (CIR&A) is in the process of developing policies and procedures to ensure identification of non-nuclear insurable losses and the accounting for associated costs.  According to CIR&A, interim actions have been undertaken to capture the costs of non-nuclear insurable losses, including:

• The Risk Management Information System was implemented in 2002 for the purpose of capturing insurable loss information as it relates to TVA’s non-nuclear operations.
   
• Insurable loss incidents are identified by maintaining contact with designated site personnel. CIR&A also reviews various reports and data generated within TVA to identify potential insurable loss incidents.
   
• CIR&A has trained TVA business managers and designated site personnel to identify the costs that need to be captured in the event an insurable loss occurs.

Since this process is currently in a development stage, we plan to defer any further audit work until the process is fully implemented.  (Report)
 

Sequoyah Nuclear Plant (SQN) Tool Control Program

Inspection 2006--502I

March 31, 2006

As a result of our review of the procedures and key control activities used to track and account for tools at Browns Ferry Nuclear Plant (Inspection No. 2005-526I), we performed an inspection to assess the processes and key control activities used to track and account for tools at SQN.  TVA Nuclear (TVAN) Business Practice 226 (BP-226), Tool and Equipment Accountability, dated August 27, 2000:

• Established and implemented a plant accountability system for tools and equipment.
• Strengthened and standardized existing tool and equipment accountability practices.
• Provided for periodic reporting to control and minimize equipment losses.

Our inspection identified a significant lack of tool accountability/tracking resulting from (1) noncompliance with processes and key control activities prescribed by TVAN BP-226 and (2) other process/control weaknesses.  However, two control mechanisms were implemented to enhance tool room security -- access to the tool room was restricted using hand geometry and closed circuit cameras were installed in the tool room.  Management agreed with our findings and has initiated corrective actions.  (Report)

TVA Dental Program

Inspection 2006-512I

March 31, 2006

TVA’s previous contract for administration of dental benefits went into effect on January 1, 1999.  In April 2005, TVA’s Employee Benefits and Procurement sent out a Request for Proposal for quotes from seven companies interested in providing administrative services for dental benefits to TVA’s employees.  Beginning January 1, 2006, a new dental administrator began administering TVA’s dental benefit program.

We assessed whether Employee Benefits/Procurement adequately considered the costs/benefits of switching to the new dental administrator for administration of the dental benefits program.  In summary, we determined that it appears Employee Benefits/Procurement adequately considered the costs/benefits of switching.  However, documentation could be improved.  Specifically, no documentation was maintained supporting (1) the rationale behind the technical evaluation scoring methodology and (2) key assumptions used in the cost analysis (i.e., network penetration and average discount rates).  Our review of the proposals also noted nothing to question the recommendation of the new dental administrator as the dental plan administration provider, assuming the unsupported network penetration and average discount rates used in Employee Benefits/Procurement’s cost analysis were accurate. Management agreed with our findings and has taken or plans to take appropriate corrective actions. (Summary Only)
 

TVA’s Usage of E-Bay to Dispose of Surplus Assets

Inspection 2006-509I

March 17, 2006

We performed a limited scope review to assess the processes and controls over the sale of TVA assets on eBay, including how eBay is chosen for the sales mechanism, reserves are determined, and payments are received and accounted for.  Our review of the TVA Investment Recovery (IR) procedures for eBay sales (eBay Sales), dated December 6, 2005, identified several opportunities for improvement.  Specifically, the procedures did not adequately address the minimum acceptable price and payment processes/controls and provided TVA organizations, which may not have IR’s expertise, the ability to sell TVA assets on eBay.  Management agreed with our findings and has taken or plans to take appropriate corrective actions.  (Report)

Clean Air Emissions Monitoring

Inspection 2006-508I

March 13, 2006

We reviewed the process and controls for emissions data reporting.  Our objective was to ensure that controls are prescribed and functioning to ensure accurate emissions data reporting.  The Continuous Emissions Monitoring System (CEMS) is in place at TVA fossil plants and combustion turbine facilities to report data on opacity, SO2, NOx, CO2, and flow.  Fossil Power Group has a process that “is intended to satisfy the regulatory requirements for a quality assurance program (QA Plan) for the Continuous Emission Monitoring Systems (CEMS) by providing a uniform process for the assurance of Acid Rain compliance at Fossil Power Group (FPG) facilities.”  The process authorizes quality control procedures which characterize specific CEMS activities required to maintain compliance with current CEMS regulations.

In summary, we determined controls are prescribed and functioning which ensure the accuracy of emissions data reporting.  Specifically, we determined that the CEMS data is being approved and certified at the plant and the TVA Designated Representative (DR) level prior to submission to the Environmental Protection Agency.  In addition to controls prescribed by the process, Environmental Compliance and Technology Applications performed environmental program reviews which also evaluated compliance with controls and quality procedures related to CEMS reporting.  (Summary Only)

TVA Helicopter Usage

Inspection 2005-529I

March 9, 2006

TVA’s helicopter fleet consists of seven helicopters that TVA owns and self-insures.  Based on our review of FlightWatch1 data and discussions with the Manager of Helicopter Services, TVA’s helicopters are used for a variety of missions, including:

• Inspecting TVA’s 17,000 circuit miles of transmission lines in a seven-state region.
• Aerial photography, laser mapping, and river and environmental surveys.
• Construction support.
• Clean air testing.
• Right-of-way inspections.
• Transportation of TVA executives.
• Economic development activities, such as aerial tours of industrial megasites.

The aircraft can also be deployed for certain emergency contingencies such as floods, tornadoes, and ice storms.

The objective of our review was to assess (1) the procedures and control activities used to ensure the TVA helicopter fleet is used for valid business purposes and (2) the operational use of the fleet.  Our review included policies, procedures, and laws/regulations applicable to TVA helicopters and covered the period of October 1, 2004, through September 30, 2005.

We determined that it appears that the TVA Helicopter Fleet was used for valid business purposes.  However, there were no documented guidelines identifying proper uses of the helicopter fleet and approval levels needed to obtain flight services.  Additionally, there has been no cost benefit study of helicopter fleet usage to ensure it is being used effectively. Management agreed with our findings and has taken or plans to take appropriate corrective actions.  (Report)

TVA’s Purchasing Card Usage

Inspection 2005-524I

February 28, 2006

We determined Procurement has made Purchasing Card Program changes to address control weaknesses identified in our previous report on the program; however, travel and travel-related expenses are still being charged to the purchasing cards.  We also noted (1) weaknesses in supervisory review and approval of purchasing card statements, (2) disallowed and questionable purchasing card transactions, (3) purchasing cards issued without required documentation, and (4) TVA policies and on-line training modules that do not clearly and consistently define acceptable purchasing card use for hospitality expenses.  Procurement has stated that subsequent to our review period, actions were taken to address weaknesses in supervisory review and approval of purchasing card statements.  Procurement agreed with all but three recommendations and we concur with TVA management’s planned actions.  However, we noted increased risk associated with not addressing the three recommendations.  (Report)

Follow-up Review of TVA Hospitality Expenses

Audit 2005-052F

February 23, 2006

We determined (1) not all purchasers of hospitality had completed the hospitality training module, (2) some purchases were not charged to the correct cost classification, (3) TVA’s Hospitality Policy did not require use of TVA Form 17901, Pre-approval of TVA Hospitality Expenditure, (4) TVA’s Hospitality Policy did not address use of a TVA purchasing card for purchasing hospitality, and (5) TVA’s pre-approval form did not require assessment of reputation risk.  In addition, we found TVA’s hospitality spending had decreased by 70% since our 2004 review.  Management generally agreed with our findings and is taking appropriate corrective action.  (Report)

Heavy Equipment Division (HED) Tools Control Analysis

Inspection 2006-505I

February 23, 2006

We determined that HED appears to be following the policies and procedures set forth in their tool management policy for the distribution and reclamation of tools at the fossil plant sites.  HED procedures and key control activities ensure that HED leased tools are adequately tracked and accounted for.  However, the computer inventory tracking system does not accurately reflect HED tools available for lease, and documentation related to the disposal of tools and inventory adjustments could be improved.  Management agreed with our findings and has taken or plans to take appropriate corrective actions.  (Report)

Low Level Radioactive Waste Liability (LLRW) Estimates

Inspection 2006-506I

February 23, 2006

Determined the (1) Fiscal Year (FY) 2005 LLRW estimate appeared reasonable when unforeseen incurred LLRW disposal costs were taken into account and (2)  the processes, methodology, and assumptions used to develop the FY 2006 disposal estimates were consistent with those used in developing the FY 2005 estimates.  In addition, we verified that the LLRW expense and liability accounts were adjusted quarterly in accordance with TVA Nuclear Business Practice 263.  However, we noted (1) the process and methodology for developing LLRW estimates is not documented and there is a potential lack of cross-training and (2) no physical inventory is currently done at the plants to ensure proper accounting for all LLRW.  Management agreed with our findings and has taken or plans to take appropriate corrective actions.  (Report)

TVA’s Continuity of Operations Plan

Inspection 2006-507I

February 21, 2006

We determined that while TVA’s June 2002 proposed COOP appears to address major COOP requirements as stated in Federal Preparedness Circular 65 and provides guidance for the preparation of site-, activity-, or business-unit specific plans, TVA’s COOP lacks proper implementation and support.  Management agreed with our findings and has taken or plans to take appropriate corrective actions.  (Report)

Bellefonte Nuclear Plant (BLN) Construction Inventory

Inspection 2006-510I

February 14, 2006

We determined that approximately 95 percent of the items selected for review from items in BLN’s construction inventory records pertaining to 213 commodities were actually warehoused at BLN.  We also noted that the sales price of the inventory will likely be less than the original purchase cost due to the condition of the materials.  This report was issued to management for informational purposes only.  (Report)

Review of TVA’s Fiscal Year 2006 First Quarter Financial Information

Audit 2006-013F

February 13, 2006

We identified no instance where PricewaterhouseCoopers LLP did not comply in all material respects with Government Auditing Standards in its review of TVA’s interim financial information for the first quarter of FY 2006.  (Report)

Watts Bar Nuclear Plant (WBN) Tools Control Analysis

Inspection 2006-503I

February 8, 2006

As a result of our review of the procedures and key control activities used to track and account for tools at Browns Ferry Nuclear Plant (Inspection No. 2005-526I), we performed an inspection to asses the processes and key control activities used to track and account for tools at WBN.  TVA Nuclear (TVAN) Business Practice 226 (BP-226), Tool and Equipment Accountability, dated August 27, 2000:

• Established and implemented a plant accountability system for tools and equipment.
• Strengthened and standardized existing tool and equipment accountability practices.
• Provided for periodic reporting to control and minimize equipment losses.

Our inspection found a significant lack of tool accountability/tracking resulting from (1) noncompliance with processes and key control activities prescribed by TVAN BP-226, and (2) other process/control weaknesses.  Management agreed with our findings and has initiated corrective actions.  (Report)

Internal Controls Over Time Reporting

Audit 2005-034F

January 30, 2006

We reviewed and evaluated the control design and documentation for the time reporting process to determine whether key financial reporting risks were addressed in the control framework.  In summary, we determined process control documentation was inadequate in the areas of establishing responsibility for accurate time reporting, and monitoring of time reported, which resulted in inconsistencies in time reporting processes used at TVA sites.  TVA management agreed with our findings and initiated corrective actions to improve guidance.  (Summary Only)
 

Subcontracted Engineering Services

Audit 2005-045C

January 18, 2006

We reviewed $64.5 million of costs billed to TVA by a contractor for subcontracted engineering services performed at Browns Ferry Nuclear Plant Unit 1.  We determined TVA had been over billed $34,958.  The overbilling included (1) $20,243 of temporary living allowance (TLA) payments that had not been approved by TVA, (2) $8,019 of relocation payments made to an employee who had already been paid to relocate to BFN by another contractor, (3) $3,623 of travel expenses that were either ineligible, over contractual limits, or should have been included in overhead, and (4) $3,073 of fees that should have been credited back to TVA.  The contractor subsequently credited TVA for the $3,073 of fees.  TVA management is planning to review the TLA certifications to determine if retroactive approval is justified and to recover any payments associated with unapproved certifications. Management is reviewing the remaining findings to determine the action it plans to take.  (Summary Only)
 

Summary of Sarbanes-Oxley 404 Process and Controls Documentation Reviews

Audit 2005-059F

December 6, 2005

To assist TVA in preparing for compliance in fiscal year 2007 with Section 404 of the Sarbanes Oxley Act of 2002 (SOX 404), we reviewed the documentation and design of certain financial reporting controls determined by the Controller’s organization to be in scope for SOX 404 compliance and reporting.  In summary, we reviewed 15 processes and made recommendations to management for improvements and obtained information about management’s remedial actions planned or taken.  (Summary Only)
 

Subcontracted Welding Services

Audit 2005-043C

December 5, 2005

We reviewed $5.1 million of cost billed to TVA by a contractor for subcontracted welding services performed at Browns Ferry Nuclear Plant Unit 1.  We determined TVA had been billed $295,067 for (1) per diem payments that exceeded contract per diem limits; (2) ineligible and unsupported per diem, relocation, and equipment costs; and (3) ineligible fees.  TVA management informed us they agreed with our audit findings and plan to take action to recover the overbilled amounts from the contractor.  (Summary Only)
 

TVA IG Agreed-upon Procedures for Intragovernmental Activity and Balances

Audit 2006-006F

December 1, 2005

We completed agreed-upon procedures and issued a report to the U.S. Treasury Financial Management Service and Government Accountability Office to assist in the preparation and audit of the fiscal year 2006 U.S. government-wide consolidated financial report.  (Summary Only)
 

Intragovernmental FY 2005 3rd Quarter Activity and Balances

Audit 2005-061F

November 30, 2005

Each quarter federal agencies, including TVA, submit intragovernmental balances by federal trading partner (TP) to the U.S. Treasury (UST) to assist in preparing the annual governmentwide consolidated financial report.  To facilitate TVA’s reconciliation with its TPs at yearend, we reviewed the FY 2005 3rd quarter intragovernmental information reported to UST.  In summary, we found (1) Intragovernmental balance information as reported generally agreed with the third-quarter financial statements, (2) some inaccuracies in the data submitted in the U.S. Treasury Intragovernmental Reporting and Analysis System, indicated the need for better controls to ensure data reported is accurate and representative of balances in TVA's financial statements, and (3) the Controller organization made reasonable efforts to explain and resolve any material differences in the balances reported by TVA and those reported by its federal trading partners.  ( Report)

Calvert City Coal Terminal

Inspection 2005-530I

November 22, 2005

We performed an inspection to determine why Tennessee Valley Authority (TVA) has incurred significant coal adjustments stemming from TVA’s receipt of coal through Calvert City Terminal (CC).  TVA has contracted with CC through 2008 for transloading, stockpiling, and blending coal.  We determined that the inventory adjustments on coal received through CC may be a result of several issues, including (1) differences in CC and TVA Fuel Management System recorded weights, (2) CC’s rail unloader scale and barge unloader scale not being certified, (3) missing rail cars included in inventory as received because they were still listed on the manifest, and (4) stockpiles continuing to have coal removed and added after lines are drawn for inventory flyovers.

However, we also noted CC is now requiring scale certification, and the results of the coal inventory flyovers were within the acceptable margin of error.  Accordingly, the report was issued to management for informational purposes, and management has requested a follow-up review one year after scale certification has occurred.  (Summary Only)
 

Audit of PricewaterhouseCoopers Audit of TVA’s FY 2005 Financial Statements

Audit 2005-041F

November 18, 2005

TVA contracted with the independent certified public accounting firm of PricewaterhouseCoopers LLP to audit the balance sheets as of September 30, 2005 and 2004, and the related statements of income, changes in proprietary capital, and cash flows for each of the three years in the period ended September 30, 2005.  The contract required the audit be done in accordance with generally accepted government auditing standards.   Our review disclosed no instances where PricewaterhouseCoopers did not comply, in all material respects, with generally accepted government auditing standards.  (Report)
 

Chemicals and Water Treatment Services

Audit 2005-017C

November 9, 2005

We audited $18.4 million of payments TVA made to a contractor for chemicals and water treatment services during Fiscal Year 2004 and found 23 percent of the payments were authorized by technical contract managers who did not have adequate controls in place to ensure the products or services had been received.  Additionally, we found the prices billed by the contractor were in compliance with the contract except for (1) $6,266 of overbillings, and (2) an estimated $322,579 of payments for products with unsupported prices.  TVA management plans to (1) implement more effective controls over receipt, (2) recover the $6,266 overbilling, and (3) obtain appropriate documentation for the unsupported prices or recover billings that lack supporting documentation.  (Summary Only)
 

Nuclear Security Services

Audit 2005-050C

November 4, 2005

We reviewed adjustments to provisional billings of indirect costs submitted by a contractor.  We determined the contractor’s adjustments for calendar years 2002 through 2004 were overstated $80,615 due to errors in the contractor’s reconciliation of previously billed costs.  Also, we found the contractor owed TVA additional credits totaling $28,829.  The contractor agreed with our findings and submitted adjusted invoices that included credit for the questioned amounts.  (Summary Only)
 

Asset Retirement Obligation

Audit 2005-057F

November 1, 2005

As part of our annual audit plan, we audited the asset retirement obligation (ARO) controls relied on by management to ensure the ARO balances in the TVA's financial statements are accurate and complete.  Controls over the balance in this and other related ARO accounts included quarterly reconciliations of the general ledger balances and underlying support for the cost estimates maintained in a worksheet format for each plant.  We tested the reconciliations and determined the controls over the ARO process were operating effectively to ensure balances were accurately stated, in all material respects, in TVA's June 30, 2005, financial statements.  (Report)
 

Agreed-Upon Procedures: TVA Fiscal Year 2005 Performance Measures

Audit No. 2005-063F

October 31, 2005

Winning Performance is the process TVA uses to manage its performance.  It is a single, integrated process that includes strategic planning, operational planning and budgeting, performance monitoring and reporting, and employee development and compensation.  We performed procedures agreed-upon by management to assist in determining the validity of the fiscal year 2005 payout.  In summary we found (1) changes to the FY 2005 goals were properly approved with one exception which will not impact the payouts, (2) actual year-to-date inputs for each indicator agreed with the respective reason for improvement sheet with one exception which will not impact the payouts, (3) actual inputs for the eight TVA-wide metrics agreed with the underlying support provided by the Strategic Business Units, and (4) the payout percentages were mathematically accurate after noted exceptions were corrected.  (Summary Only)
 

Browns Ferry Nuclear Plant (BFN) Tools Control Analysis

Inspection 2005-526I

October 25, 2005

The Office of the Inspector General was requested by the Vice President, BFN Unit 1 Restart, to review tool management associated with the restart project.  TVA is providing all necessary tools for the BFN Unit 1 Restart.  Work is primarily being completed by engineering and modification contractors, 1,500 of which are craft laborers who have tool needs/requirements.

We assessed the processes and key control activities used to track and account for tools purchased for the BFN Unit 1 Restart and on-going BFN operations.  We found a significant lack of tool accountability/tracking resulting from (1) noncompliance with TVA Nuclear Business Practice 226, Tool and Equipment Accountability, prescribed processes and key control activities and (2) other process/control weaknesses.  Management agreed with our findings and plans to initiate corrective actions.  (Report)
 

Selective Catalytic Reduction Catalyst

Audit 2005-044C

October 3, 2005

We reviewed a contractor’s material cost adjustments and profit sharing calculations and determined the contractor (1) had understated the material cost adjustment due TVA by $5,933 and (2) could not provide verifiable documentation of the material weights used in its catalyst production.  TVA management agreed with our findings and is taking action to recover the amount owed to TVA.  Additionally, since the contractor could not provide verifiable documentation of its material weights, TVA is negotiating a contract change to limit future cost adjustments to the contractor’s preferred customer price.  (Summary Only)