FY 2007 Audit and Inspection Reports

Review of TVA Nuclear Medical Services

2007-10982

September 28, 2007

We initiated an inspection to determine whether the objectives of TVA Nuclear Medical Services (TVAN Medical) program were being met and assess compliance with applicable regulations.  Our review included only the services being performed by TVAN Medical.  In summary, we found no stated objectives, policies, or procedures relating specifically to TVAN Medical.  In addition, varying services are being performed at the TVAN Medical site offices, and supervision of nurse practitioners may not be adequately ensured.  Management generally agreed with our findings and recommendations and has taken or plans to take corrective action.   (Full Report)
 

Review of Paradise Fossil Plant Receiving

2007-11235

September 25, 2007

At the request of the Vice President, Paradise Fossil Plant (PAF), we conducted a limited review to determine if ordered goods were received and properly recorded in PassPort at PAF.  Our review included receipts at PAF from September 7, 2007, through September 12, 2007.  In summary, our review of selected receipts at PAF found the goods ordered for PAF were generally received, as ordered, and properly recorded in PassPort.   (Full Report)
 

Backup Verification

2007-039T-02

September 20, 2007

We performed a review to verify all production servers, databases, and the mainframe were being backed up.  Our review found (1) all but 20 production distributed servers, (2) all production databases, and (3) the mainframe were being backed up at the time of our testing.  Information Services provided explanations and/or actions taken for the 20 servers not being backed up.  We also determined 13 backup policies (rules within the software used to backup servers) were obsolete or inactive and 9 servers did not have their exclude lists documented.  Based on other observations noted during the audit, we believe an overall process design review could facilitate a better integrated and more efficient backup and restore process.  TVA Management agreed with our findings and is taking action to address the recommendations.   (Full Report)
 

Review of Contract for Reclearing and Maintenance Services

2007-11047

September 18, 2007

We audited $3.8 million of costs billed to TVA by a contractor for providing reclearing and maintenance for transmission line right-of-way areas.  In summary, we found the contractor could not provide support for an estimated $33,521 in labor costs.  The contractor agreed with our finding and explained that on several occasions employees had been paid in cash.  TVA management plans to recover the unsupported costs.   (Summary Only)
 

Review of Contract for Hydrated Lime Injection Systems

2007-033C

September 14, 2007

As part of our annual audit plan, we audited $11.3 million in costs billed to TVA by a contractor, to design and install hydrated lime injection systems at various TVA fossil plants.  Our audit objective was to determine if the costs the contractor billed to TVA were in compliance with the provisions of the contract.  In summary, we determined the contractor billed TVA an estimated $310,818 for costs that were unsupported or not in accordance with the contract provisions.  TVA management stated that discussions with the contractor are currently underway to reach a final resolution of all the audit issues and to address each of the recommendations.   (Summary Only)
 

Federal Information Security Management Act (FISMA) Evaluation

2007-11184

September 13, 2007

Review to Ensure New Hires Meet Physical Job Requirements

2007-11096

September 12, 2007

We conducted a review to assess the procedures in place at TVA to ensure that new hires meet physical job requirements.  In summary, we found TVA has a policy in place that requires all new hires to have a medical screening before starting work.  However, the TVA Medical Examiners Guide and Health and Safety Practice 1, Occupational Health, do not specify (1) who is responsible for providing examiners with job descriptions to be used in their examination and (2) that examiners are required to utilize the job description information in conducting their physical job requirement evaluation.  Management agreed with our findings and recommendations and has initiated or plans to initiate appropriate corrective action.   (Full Report)
 

Review of TVA and Contractor Hiring Practices

2007-10998

September 12, 2007

We conducted a review of TVA and contractor employment procedures to determine if TVA policies and procedures ensure the hiring of non-citizens complies with legal requirements.  In summary, it appears that TVA has appropriate policies and procedures in place to ensure that (1) its hiring process is in compliance with applicable legal requirements and (2) contractors are responsible for ensuring that principals/employees under contract to TVA meet Immigration and Naturalization Services (INS) requirements.  However, we selected 34 employees to verify TVA compliance with the INS requirements and found required information could not be provided for 9 employees due to the loss of electronic files.  The Personnel Records Imaging System (PRIS) backup and server failures were addressed in OIG Audit No. 2007-039T-01.  However, we recommended management determine what actions are necessary since required information was lost due to system failures.  Management agreed with our findings and has initiated or plans to initiate corrective action.   (Full Report)
 

Review of Travel Reimbursements at TVA

2006-522I

August 31, 2007

We performed an inspection to assess the reasonableness of travel reimbursements where employees were (1) in travel status for an extended period of time and/or (2) received significant reimbursements.  The scope of the inspection included all reimbursements made to employees during FYs 1999-2006.  We found many TVA employees who received significant travel reimbursements and traveled to the same location for extended periods in multiple years.  We identified the top 100 travelers for each year reviewed based on the number of days spent in travel status in a single location during FYs 1999-2006 and requested justifications from management for the extensive travel.  In summary, we found for the 8 years of travel reimbursements reviewed, there were 434 TVA employees identified as a top 100 traveler in a single year for the years reviewed.  During this period, the 434 individuals received reimbursements totaling over $9.6 million.  While the organizations provided explanations, no documentation was provided to support that consideration was given to changing any official duty stations.  The lack of specific justification for extended travel for several individuals over several years to one location raises questions about whether there may be untapped cost saving opportunities.  Management generally agreed with our findings and recommendations and is taking or plans to take corrective action.   (Full Report)
 

Review of Trust Funds Administered by River Operations and the Office of Environment and Research

2007-509I

August 28, 2007

We conducted a review to determine whether the trust funds administered by River Operations and the Office of Environment and Research were administered in accordance with terms of the agreements and applicable laws and regulations.  Our scope included all trust funds with balances or activity from October 2005-January 2007.  In summary, we found:

• No policies or procedures applicable to the creation or administration of trust funds existed; and
• The majority of the trust funds were basically inactive; trust funds were established with appropriated funds; and the trust funds received limited oversight.

Management generally agreed with our findings and recommendations and is taking or plans to take corrective action.   (Full Report)
 

Construction/Modifications Best Practices

2007-11059

August 22, 2007

TVA's successful effort to restart Unit 1 at Browns Ferry Nuclear Plant (BFN) provides an opportunity to transfer knowledge to future generation projects to (1) improve project oversight, (2) improve project efficiency and effectiveness, (3) generate cost savings opportunities, and/or (4) reduce TVA's risk of fraud, waste, and abuse.  OIG reviews of the BFN Unit 1 Restart project and TVA management's evaluations of the restart activities identified opportunities for improvement in future generation projects. Specifically:

• The OIG conducted reviews throughout the course of the project focusing on (1) payment of overheads and direct expenses, (2) craft time labor reporting, (3) equipment and tools controls, (4) inventory management and accounting, (5) the restart incentive program, and (6) contract compliance.
• TVA management identified areas they felt were "hard spots" during the project and developed key project control activities to avoid these issues in the future.  Some "hard spots" identified related to (1) staffing and training, (2) self-assessments, (3) development of a comprehensive plan, (4) turnover, and (5) material and equipment availability.   (Full Report)
   

Review of Calvert City Coal Terminal

2007-503I

August 17, 2007

We reviewed control activities and the scale certification process applicable to TVA coal shipments at Calvert City Terminal (CCT).  We found the terminal had controls and processes in place for the receiving, blending, weighing, and loading of the coal it handles for TVA.  The terminal also appeared to have adhered to the scale certification requirements prescribed by the TVA contract.  However, we:

• Identified one barge shipment where terminal documentation showed the barge being sent to the TVA Colbert Fossil Plant (COF).  According to TVA Fuel Supply (FS) personnel, the barge sank in August 2006, en route to COF.  As of August 10, 2007, FS had not recovered the loss.
• Found discrepancies with some barge and train shipments that apparently resulted from keying errors on the part of TVA and CCT personnel.  This included six train shipments recorded in FuelWorx as received at the wrong terminal.

Management generally agreed with our findings and recommendations and is taking or plans to take corrective action.   (Redacted Report)
 

Review of TVA's Economic Development Loan Program

2007-512I

August 16, 2007

We reviewed 42 loans initiated through Economic Development's (ED) four loan programs (Economic Development Loan Fund, Minority Business Development Loan Fund, Business Incubator Loan Fund, and Special Opportunity Counties Loan Fund) and found:

• Management had not fully implemented procedures governing the loan administrative process after closing, as agreed upon in response to
  Audit 2004-011F.
• Noncompliance with ED loan guidelines in 13 of 42 loan files reviewed.
• Uncollectible ED loans were not written off in a timely manner as required by generally accepted accounting principles.
• Explanations provided by ED management for 10 of the 13 loan files where noncompliance was noted indicated the Loan Approval Committee made exceptions and approved loan applications even though they were not in compliance with program guidelines.  Of these ten loans, five were identified as being in default status indicating that departure from guidelines could have potentially contributed to the loan defaults.  Our review noted no other specific trends in the loan files that appeared to contribute to loan defaults.  At ED's request, we reviewed ED's draft Loan Manual and identified improvement opportunities.

Management generally agreed with our findings and recommendations and is taking or plans to take corrective action.   (Full Report)
 

Review of Non-Compete Contracts

2007-506I

July 31, 2007

We conducted a review of 52 TVA non-compete contracts to determine whether non-competed contracts are issued and administered in compliance with TVA policies and procedures, including assessing the justification for the non-competed contract award.  We found:

• Two contracts could not initially be located for review and seven did not have Form 17388 and/or the appropriate notification/approval required by TVA policies and procedures.  Form 17388 is required with the appropriate signatures and justification for the contract.
• Three of the contracts reviewed did not appear to have an appropriate justification as outlined in Section 9(b) of the TVA Act and INSTRUCTION 1, Business Practice 9, Implementing Procedures.
• Multiple contracts not governed by BP9 are classified under a justification in PassPort that does not apply to the contract.

Management generally agreed with our findings and recommendations and is taking or plans to take corrective action.   (Full Report)
 

Privacy Protection - TVA Use of Information in Identifiable Form

2007-008T

July 31, 2007

We determined:

• TVA's Privacy Summary Report to the OIG needed improvement in three areas.
• TVA's privacy policies and procedures were generally consistent with federal requirements; however, we noted (1) five areas where we believe further guidance is needed, and (2) TVA is in the process of updating its privacy policies and procedures.
• While TVA has made progress in implementing privacy program components, a focused effort is needed to strengthen the program by: (1) completing implementation of planned privacy assessments of all systems identified with Information in Identifiable Form (IIF), and (2) ensuring privacy activities are better integrated between TVA groups who have privacy responsibilities.
• TVA needs to improve its privacy practices through (1) reviews and updates of Systems of Records notices and (2) implementation of best practices on systems with IIF.  

At the completion of our fieldwork on March 8, 2007, our review found there were no significant IIF compromises reported to the OIG for the two-year period ending December 6, 2006, and no instances of criminal or civil liability relating to loss of personal information were reported by the General Counsel's office.  However, an issue came to our attention subsequent to our review indicating IIF was available on temporary share drives to anyone with a TVA network account.  TVA management generally agreed with our recommendations and has taken or is taking corrective action.   (Full Report)
 

Review of Personnel Records Imaging System (PRIS) Backup/System Failures

2007-039T-01

July 25, 2007

We determined:

• The PRIS backup failure was due to (1) human error and (2) the lack of proper controls which would have detected PRIS was no longer on the master backup schedule which resulted in not having backups performed for PRIS.
• The PRIS server failure was due to hardware failures and the impact was magnified by human error.
• The Performance Review & Development data was not adequately secured when regenerated in recovery efforts.

TVA management agreed with the findings and has taken or is taking corrective action.   (Redacted Report)
 

Contract for Nuclear Parts and Engineering Services

2006-029C

July 12, 2007

We audited $249 million of costs for parts and services for Browns Ferry Nuclear Plant paid by TVA to a contractor from January 1, 2000, through May 31, 2006.  We found the contractor overbilled TVA about $960,000 because the contractor had not always included discounts on prices it billed TVA as required by the contract.  TVA management is working with the contractor to determine what impact, if any, a previous verbal agreement regarding the contract discount structure may have on the amount owed to TVA.   (Summary Only)
 

Contract for Staff Augmentation Services

2007-014C

July 11, 2007

We audited $58.5 million of costs billed to TVA by a contractor for staff augmentation support services during FYs 2005 and 2006.  We determined TVA was overbilled about $540,000 for labor costs due to duplicate billings, overpayments of labor hours, and use of incorrect wage rates.  We also found the contractor had not maintained documentation to support approximately $340,000 of travel expenses billed to TVA.  The contractor and TVA management agreed with our findings, and TVA management is planning to (1) recover the overbilled amount and (2) implement a requirement for the contractor to maintain documentation of travel expenses that are billed to TVA.   (Summary Only)
 

Review of Surplus Material

2007-020F

June 28, 2007

As part of our annual audit plan, we reviewed the processes related to identifying and managing surplus materials to determine if surplus material was identified and managed in accordance with TVA policies and procedures.  We identified areas of noncompliance and recommended corrective action to management.  Management provided comments on our findings, including corrective action taken.  (Full Report)
 

2006 Green Power Accreditation Certification

2007-11012

June 14, 2007

We completed agreed-upon procedures to assist the Center for Resource Solutions (CRS) in determining TVA's compliance with the annual reporting requirements of CRS' Green Pricing Accreditation Program for the year ended December 31, 2006.  The required information on TVA's renewable energy initiative, "Green Power Switch," was provided to CRS.   (Full Report)
 

Review of TVA's Ethics and Compliance Program

2007-016F

June 14, 2007

We evaluated the design, implementation, and effectiveness of TVA's Ethics and Compliance Program and found:

• TVA's current ethics program was limited to the Office of Government Ethics' standards and requirements.  The Designated Agency Ethics Officer (DAEO), currently within the General Counsel's office, is responsible for making sure the appropriate employees are trained in these standards.  Currently, about 20 percent of TVA employees are required to participate in annual ethics training.  The audit team found that leading practice provides ethics training to all employees and addresses how ethical behavior affects and supports a company's overall mission.  It has been shown that such training provides an ethical foundation for employees which, in turn, provides the basis for a company's compliance program.
• TVA's compliance program is comprised of "silos."  Each business unit, such as TVA's nuclear and fossil power organizations, has experts in nuclear and environmental regulations who assist individual nuclear and fossil plants in complying with specific regulations.  However, leading practice trends toward a more centralized corporate compliance management approach.  This centralized approach provides for coordination of each business unit's compliance program and allows for better communication of issues across the organizations.

Review of Hydro Automation Contract

2007-010C

June 22, 2007

We audited $3.9 million of costs billed by a TVA contractor who provided engineering, materials, and installation support for automating TVA's hydro system.  We found TVA was billed $380,000 for costs and associated fees that were either excessive, unsupported, or not in accordance with the contract.  The overbillings included excessive labor markups, unsupported labor costs, unallowable or unsupported travel costs, excessive facility rental costs, duplicate billings, overstated retroactive billing adjustments, and fees.  (Summary Only)
 

Vision Care Services

2007-022C

June 25, 2007

We audited $2.49 million of costs billed to TVA by a contractor from January 1, 2005, through December 31, 2006, for the administration of TVA's vision benefit program.  Our audit objective was to determine if the costs billed to TVA were in compliance with the contract terms and conditions.  In summary, we found TVA was billed (1) an estimated $69,928 for miscalculated and unsupported claim costs, (2) $4,210 for duplicate claims, and (3) $22,255 for claims that exceeded the contract frequency limitations.  Additionally, TVA was billed an estimated $56,748 in ineligible claim costs that occurred because eligibility information was not timely updated.  (Summary Only)
 

Contract for Engineering and Technical Support Work

2007-012C

June 26, 2007

We audited $4.5 million of payments TVA made to a contractor from April 2004 through November 2006 for engineering and technical support.  In summary, we found TVA was overbilled and/or had overpaid the contractor $30,645, including (1) $28,679 for payroll tax billings that exceeded the contractor's actual costs and (2) $1,966 due to miscellaneous billing and payment errors.  The contractor and TVA management agreed with our findings.   (Summary Only)
 

Contract for Engineering and Technical Support Work

2007-11081

June 28, 2007

Our audit of costs billed to TVA by a contractor who provided engineering and technical support found that most of the contract employees had been transferred from staff augmentation contracts where they had been performing the same duties at a substantially lower cost to TVA.  In total, we determined TVA's costs increased $689,000 when the staff augmentation contract employees were moved to the "managed task" contract, primarily due to a high overhead markup rate.  

By moving the contract employees to the "managed task" contract, it appeared TVA was attempting to avoid reporting this headcount as staff augmentation.  Since it appeared doubtful TVA had received $689,000 worth of management oversight from the contractor, it is our opinion that TVA wasted $689,000 when it moved staff augmentation contract employees to the "managed task" contract.   (Summary Only)
 

Review of Temporary Shares for Sensitive Information

2007-10997

June 13, 2007

We determined:

• Personally identifiable information (PII) and other sensitive information were not properly secured thus exposing the information to anyone with a TVA network ID;
• Temporary shares were being used to store non-business related information;
• TVA does not have a policy or guidance for management of temporary shares to address the proper use of the share (i.e., types of information that can be stored and the unsecured nature of the share), responsibilities of the users, and maintenance (i.e., maximum time frame for retention of files on the share);
• TVA Standard Programs and Processes (SPP) 12.9, Computer Security and Privacy Incident Response, which includes procedures for notifying TVA employees and their dependents, contractors, and retirees and their dependents when PII has potentially been compromised, has yet to be implemented; and
• Two business practice drafts (1) TVA Information Security Policy, which describes classification and protection of information, and (2) Acceptable Use of Information Resources (Rules of Behavior), which explicitly prohibits storage of non-TVA information on TVA servers, have yet to be implemented.

Review of Tool Controls at Paradise Fossil Plant

2007-10983

June 29, 2007

We were requested by the Vice President, Paradise Fossil Plant (PAF), to assess the procedures and key controls used to track and account for PAF tools.  In summary, we found:

• No policies or procedures exist for tools at PAF.
• Tools can be ordered without management approval.
• Controls at the PAF for contractor tool rooms are inadequate to properly track and account for tools.

Review of Force Majeure Policies and Procedures

2007-508I

June 29, 2007

The objective of our review was to determine (1) vendor compliance with contract force majeure provisions and (2) the adequacy of coal contract terms and conditions related to force majeure events.  In summary, we found:

• No documented instances in which (1) a vendor did not provide formal notification of a force majeure event and (2) the force majeure justification was not in accordance with the force majeure contract language.
• Standard contract language exists for the development of a contract force majeure clause; however, the force majeure clause is often modified either in initial contract negotiations or subsequent contract supplements.  This variation could result in increased cost to TVA.
• Most of the force majeure events were not verified.

Review of Construction and Modifications Contract

2007-015C

May 30, 2007

We audited $23.2 million of costs billed by a TVA contractor for providing construction and modification services for TVA's generating plant switchyards, substations, electrical transmission system, and power control communication facilities.  We found the costs billed by the contractor were fairly stated except for a minor overbilling of craft labor costs that occurred as a result of a clerical error.  (Summary Only)
 

Review of TVA Tuition Reimbursements

2007-505I

May 18, 2007

Full-time annual employees are eligible to participate in TVA's Tuition Reimbursement Program (TRP).  The use of the program has grown significantly since fiscal year (FY) 2003.  Payments to employees increased from about $339,000 in FY 2003 to over $985,000 in FY 2006.  The objective of our review was to assess compliance with TRP policies and procedures.  In summary, we identified opportunities for improvement in TRP program controls.  Specifically, we noted:

• Instances of non-compliance with Business Practice 18, "Tuition Reimbursement," related to (1) required documentation for program approvals, (2) evidence of satisfactory completion, (3) approval for cost increases, (4) reimbursements for non-allowable expenses, and (5) the requirement to drop inactive participants.
• Opportunities to improve controls over the program including (1) requiring all participants to sign service agreements, (2) follow-up on satisfactory course completion when tuition reimbursement is approved prior to completion of coursework, (3) ensuring maximum reimbursements are not exceeded, and (4) clarifying acceptable coursework and active participation.

Review of TVA VISA Gold Executive Expense Card

2006-540I

May 17, 2007

Gold Cards are issued to TVA Board members, officers, and other designated employees for travel, entertainment, hospitality, and incidental miscellaneous expenses and these charges are directly billed to TVA.  Our review included Gold Card purchases made from October 1, 2004, to August 28, 2006.  Of the 272 cardholders with charges during this period, 10 accounted for about 34 percent of all charges.  In summary, we found:

• VISA Gold Executive Expense Cards (Gold Card) are generally being used in accordance with TVA policies and procedures.
• Policies addressing Gold Card use could be improved.
• Gold Card expenditures were for various purposes, including travel, meals, hospitality/gifts, economic development, and employee meetings.  We noted instances where documented justifications (i.e., purpose, risk to TVA, and benefit to TVA) did not appear adequate to show the potential benefits warranted the expenditures.

Review of Contract for Fire Protection Systems

2006-030C

April 30, 2007

We audited $37.4 million of costs billed by a TVA contractor for providing specialty fire protection systems and determined the contractor had billed TVA an estimated $408,100 of excessive or unsupported costs.  Specifically, the contractor billed TVA (1) an estimated $257,400 of extra labor costs because it paid certain local craft employees wage and benefit rates that exceeded rates included in TVA's labor agreements, (2) $87,700 of labor adjustments that were either not in accordance with the contract or were duplicates of adjustments that had already been made, and (3) $63,000 of miscellaneous overpaid and unsupported labor and travel costs.  We recommended TVA (1) revise its contract to include specific criteria for paying wage and benefit rates that exceed rates included in TVA's labor agreements, (2) determine if any of the previously billed costs should be recovered, and (3) recover or avoid paying the remaining overbilled costs.  (Summary Only)
 

Section 26a Requirements

2006-521I

April 19, 2007

We performed a review to determine whether River Systems Operation & Environment (RSO&E) permitting policies and procedures (1) ensure reviews and approvals are conducted consistently and in accordance with applicable requirements and (2) are being followed.  Our review included Reservoir Land Records (RSLR) established in RSO&E's Automated Land Information System during the period October 1, 2004, through July 31, 2006.  In summary, we found:

• RSO&E has implemented permitting guidelines which, if followed, should ensure (1) that TVA regulations (18 C.F.R. Part 1304) pertaining to Section 26a of the TVA Act are followed and (2) consistent review and approval of Section 26a applications.  However, documentation requirements supporting permitting decisions could be improved.
• For the 101 RSLR we reviewed, 37 had varying noncompliance issues and an additional 15 had RSLR data entry issues.

Review TVA Fuel Cost Adjustment (FCA) Calculation - Second Quarter Fiscal Year 2007

2007-017F

March 15, 2007

We reviewed the first FCA that went into effect January 1, 2007.  The objective of our review was to determine whether the FCA for the second quarter fiscal year 2007 was calculated correctly and in accordance with the agreed-upon methodology.  In summary, we found the FCA was calculated correctly and in accordance with agreed-upon methodology.  (Summary Only)
 

Identification of TVA's Cash Accounts

2007-005F

March 15, 2007

We surveyed TVA and financial institutions in the Tennessee Valley to identify (1) any TVA-owned cash accounts not currently accounted for by TVA's Treasury and (2) non-TVA-owned cash accounts set up in TVA's taxpayer identification number (TIN).  In summary, we identified:

• One TVA-owned certificate of deposit set up in TVA's TIN and not accounted for by TVA Treasury;
• Three non-TVA-owned accounts incorrectly reported in TVA's TIN;
• One account set up in TVA's TIN where sufficient information was not provided to determine if TVA owned the funds; and
• Ten accounts reported by one financial institution where the name on the account included TVA or some derivation thereof; however, the institution would not confirm the TIN and these accounts were not accounted for by TVA Treasury.

Review of Hartsville Inventory

2007-504I

March 16, 2007

We conducted a review to determine whether TVA 's inventory management system, PassPort, accurately reflected the reported $14.3 million in inventory housed at the Hartsville facility as of December 20, 2006.  We compared PassPort data to physical inventory on hand for 93 catalog identification numbers (CAT IDs).  We found PassPort accurately reflected the location and quantity on hand for 89, or 95.7 percent, of the CAT IDs selected for review.  We also compared inventory on hand for 38 judgmentally selected CAT IDs to PassPort and found, (a) inventory held for use was commingled with surplus materials and (b) materials were not always accurately reflected, or were excluded, in PassPort.  According to Procurement, it was waiting on plant direction for the disposition of several materials housed at Hartsville, including some items corresponding to the CAT IDs we reviewed.  Management agreed with our findings and has taken or plans to take appropriate corrective action.  (Full Report)
 

Coal Royalty Review

2007-501I

February 28, 2007

At the request of the Coal Acquisition and Supply, Fossil Power Group, we initiated an inspection to review and obtain information related to a coal company’s cost and profitability assertions.  The company leases land from TVA and pays TVA a royalty fee per ton on all coal removed from a mine which is on the leased premises.  Due to increased costs and reduced profitability, the company has requested TVA to consider revising the contract to reduce the royalty fee payments.

Construction and Modification Services

2006-011C

January 31, 2007

Review of Federal Emergency Management Agency Mission Assignments 

2006-039C

January 26, 2007

Construction and Modification Services 

2006-022C

January 25, 2007

Fossil Fuels Daily Coal Report Verification

2006-538I

December 20, 2006

The Daily Coal Report (DCR) is used to identify variances between vendor/terminal and TVA shipment weights and to graph the identified variances.  We performed an inspection to verify that TVA and vendor/terminal shipment weights were accurately entered into the DCR for the period December 1, 2005, through May 3, 2006.

Review of PricewaterhouseCoopers' Audit of the TVA FY 2006 Financial Statements

2006-040F

December 18, 2006

The Tennessee Valley Authority (TVA) contracted with the independent certified public accounting firm of PricewaterhouseCoopers LLP (PwC) to audit the balance sheets as of September 30, 2006, 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, 2006.  The contract required the audit be done in accordance with generally accepted government auditing standards.  Our review disclosed no instances where PwC did not comply, in all material respects, with generally accepted government auditing standards.  (Full Report)
 

Review of Contract for Providing TVA Retirees to Provide Assistance to the Federal Emergency Management Agency

2006-016C

November 20, 2006

We audited $18.6 million of payments TVA made to a contractor for providing the services of TVA retirees to provide engineering and technical assistance to the Federal Emergency Management Agency for major disasters and emergencies.   We found the contractor had overbilled TVA an estimated $149,584 for labor, travel, miscellaneous costs, and administrative fees.   Additionally, we noted control deficiencies regarding the authorization and payment of costs by the contractor and TVA.   The contractor stated it (1) concurred with our conclusions and recommendations but is continuing to find documentation that should reduce the overbilled amount and (2) has instituted controls regarding payments to employees and subsequent billing of costs to TVA.  (Summary Only)
 

Agreed Upon Procedures for TVA FY 2006 Performance Measures

2007-003F

October 27, 2006

We performed four agreed-upon procedures, which were requested solely to assist management in determining the validity of the Winning Performance payout awards for the year ended September 30, 2006.

In summary, we found:

• Seven instances where adjustments to the fiscal year 2006 goals were not properly approved.  Four of the adjustments required TVA Board approval.  Two of these adjustments will result in no payout and related to the Environmental Impact indicator on the TVA scorecard.  In three of the four adjustments requiring Board approval, evidence was provided which showed a Board member informally approved the adjustment.
• Actual year-to-date inputs for each indicator agreed with the respective "reason for improvement" sheet.
• Actual inputs for the eight TVA-wide metrics agreed with the underlying support provided by the Strategic Business Units, with one exception which related to a miscalculation of the Productivity indicator. This one exception will not affect the payout. In addition, we noted actual performance for the Asset Availability indicator was not rounded consistently with that of other indicators, which will affect the payout. We were informed that the actual amount was truncated with the Chief Executive Officer’s approval, rather than rounded. We further noted no formal policy was in place to guide rounding decisions.
• The payout percentages were recalculated without exception. However, it should be noted that two indicators at Colbert and John Sevier were included in the calculations at target rather than actual.

Browns Ferry Nuclear Plant (BFN) Materials Inventory Accounting Practices

2006-530I

October 25, 2006

At the request of the TVA’s Chief Nuclear Officer and Executive Vice President, we conducted a review of inventory accounting practices at Browns Ferry Nuclear Plant.  Specifically, we were requested to determine whether (1) proper accounting practices and TVA policies were followed when returning material and components (i.e., spare parts) to inventory after being removed from installed locations and (2) existing procedures provide adequate guidance on returning spare parts to inventory.  In summary, we found:

• Noncompliance with Generally Accepted Accounting Principles (GAAP) and TVA policies and procedures.
• TVA policies and procedures do not adequately address (a) how to account for the return of material/components to inventory from installed locations (i.e., spare parts) and (b) the inventory tracking of spare parts.
• While we found no indication of intent to manipulate the entries to achieve outage performance goals, the circumstances could create an appearance to do so.

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