Below are summaries of OIG issued reports (audits, evaluations, special projects and investigations), except for those with particularly sensitive information such as pre-award audits. In addition, the summaries include a link to the report itself where we determined public release of the report was appropriate. Information which generally would be withheld under the Freedom of Information Act has been redacted from those reports before making them available. Reports are listed in the fiscal year issued, in order of issuance, most recent first.
TVA OIG reports published on this website may, from time to time, include references specifically identifying non-governmental organizations or other business entities. Pursuant to the James M. Inhofe National Defense Authorization Act for Fiscal Year 2023, Pub. L. No. 117-263, § 5274, any such organization may submit a written response to the report within 30 days, clarifying or providing additional context for each instance within the report in which the organization is specifically identified. Any response provided for that purpose will be appended to the final, published report. If you have any questions about this process, please contact Jeffrey McKenzie at 865-633-7374 or [email protected] within 30 days of publication.
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(3) communication with business partners. PSS is taking actions to address some of these concerns. We also identified risks to the independence of PSS's Quality Control inspectors performing work on nuclear related components.
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The FISMA methodology considers metrics at a level 4 (managed and measurable) or higher to be at an effective level of security. Based on our analysis of the 40 IG metrics and associated maturity models, we found 21 of 40 IG metrics were at a level 1 (ad-hoc), level 2 (defined), or level 3 (consistently implemented); therefore, TVA's information security program was not operating in an effective manner.
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We included an audit of TVA's Load Not Served (LNS) WP measure in our annual audit plan because LNS was the second highest weighted measure in the fiscal year (FY) 2022 WP scorecard. LNS, which is an estimate of the megawatt hours not delivered when an interruption to a customer connection point is greater than or equal to 1 minute, was weighted at 30 percent at the target level on the WP scorecard for FY 2022. TVA's total payout for WP for FY 2022 was $147.8 million, based on a total payout percentage of 119 percent of target. The LNS goal was paid at the threshold level for FY 2022 (50 percent of target) and accounted for about $18.6 million of the total $147.8 million payout.
Our audit objective was to determine if adequate internal controls were in place to ensure accurate calculation and reporting of the LNS WP measure. Our audit scope included the LNS totals reported for WP in FY 2022 and the calculations' compliance with Transmission Standard Programs and Processes (TRANS-SPP) 10.001, Rev. 5, Service Interruption Database Guidelines. Our scope did not include an assessment of the reasonableness of any exclusions allowed by TRANS-SPP-10.001.
We determined the significant internal controls we identified for accurate LNS calculations were operating effectively. However, there were not adequate controls in place to ensure proper management approval of LNS exclusions. Additionally, we found some user access permissions were not appropriate.
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All costs billed to TVA by AFS during our audit scope were for fixed price projects. We determined the fixed price POs were billed in accordance with the milestone payment schedules that had been authorized in the POs. However, we determined TVA did not have a process in place to determine the reasonableness of the fixed prices it paid to AFS. Specifically, TVA Supply Chain did not:
- Compete the fixed price tasks among similar vendors although it had informed TVA senior management it intended to do so; or
- Obtain detailed breakouts of AFS's fixed price proposals to determine the reasonableness of the prices. A contract technical steward in TVA's Technology and Innovation business unit informed us TVA relied on AFS's assertions that the fixed prices had been built up and calculated using the contract's pricing schedule. However, no validation of AFS's assertions were performed.
In summary, we determined Lamb billed TVA:
- $873,147 in costs not provided for in the contract, including (1) $449,311 in equipment costs, (2) $345,503 in insurance costs, and (3) $78,333 in other direct costs.
- $67,691 in other ineligible costs and incorrect billing rates, including (1) $47,674 in ineligible markups on subcontract costs, (2) $15,784 in ineligible travel costs, and (3) a net $4,233 in labor billing rate errors.
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We found most gas plant critical components have not been evaluated to identify critical spare parts. In January 2023, TVA's dashboard for tracking progress towards identifying critical spare parts indicated only 291 of 45,934 critical components in the gas fleet had been reviewed. We identified the following contributing factors: (1) limited resources dedicated to reviewing existing components to identify critical spare parts, (2) Power Operations not having governing procedures defining the process for identifying critical spare parts, and (3) incomplete inventory data in TVA's system of record for inventory, asset, and location information. We also found not all identified critical spare parts were in stock or set to reorder once used. Additionally, we found (1) some improvements were needed to properly store and maintain critical spare parts, and (2) improvements are needed to maintain the useful life of certain items such as those with electronic components or requiring preventive maintenance while in storage.
This report, specifically identifies the Electric Power Research Institute (EPRI) a non-governmental organization/business entity. Pursuant to the James M. Inhofe National Defense Authorization Act for Fiscal Year 2023, Pub. L. No. 117-263, § 5274, any such organization may submit a written response to the report within 30 days, clarifying or providing additional context for each instance within the report in which the organization is specifically identified. Any response provided for that purpose will be appended to the final, published report. If you have any questions about this process, please contact Jeffrey McKenzie at 865-633-7374 or [email protected] within 30 days of publication.
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In summary, we determined MacBooks® managed by TOPS followed TVA's configuration management policy. However, we determined 3 of 15 MacBooks® did not follow TVA policy for patch management. Specifically, one MacBook® was obsolete, and two had inconsistent patching history. In addition, we identified a gap between TVA policy and a TOPS patch management work instruction. TVA management agreed with our findings and took action to (1) surplus one MacBook® we identified as obsolete and (2) update the TOPS work instruction to align with TVA policy.
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May 16, 2023 - Independent Examination of the BWRX-300 Technology Collaboration Agreement - 2023-17424
In our opinion, the company's proposed rates for the recovery of its fringe benefits, overhead, and general and administrative costs were fairly stated. However, we determined the total cumulative indirect rate listed in the TCA did not accurately represent the total rate that would be applied to the company's salary costs. Specifically, we found the TCA's total cumulative indirect rate and accompanied calculation represent a salary rate multiplier, instead of the indirect cost recovery rate, as it is labeled in the TCA. We suggest TVA management negotiate appropriate changes to the TCA to more accurately reflect the total indirect cost recovery rate.
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In summary, we determined SGT overbilled TVA $1,903,315 including:
- $1,163,835 in ineligible overhead and fee markups applied to services, equipment, and other costs provided by TVA under the contract.
- $689,748 in labor costs, including:
- $685,880 for labor billing rates that exceeded adjusted rates that had been approved through the contract's change order process. In addition, we found the adjusted rates were never incorporated into the contract's pricing schedules.
- $1,304 for unsupported labor costs.
- $2,564 for ineligible labor costs.
- $38,579 in travel costs, including (1) $37,316 in duplicate costs and (2) $1,263 in ineligible costs.
- $11,153 in miscellaneous costs for ineligible subscription renewals.
April 5, 2023 - Independent Examination of Cost Proposal for Non-Nuclear Modification and Supplemental Maintenance - 2022-17394
In our opinion, the company's cost proposal was overstated. Specifically, we found (1) the application base for the company's proposed markup rate for the recovery of general and administrative (G&A) costs did not reflect TVA's intent, (2) the company's proposed markup rate for the recovery of workers' compensation and general liability costs exceeded the markup rate provided for in TVA's request for proposal (RFP), and (3) the company's proposed markup rate for the recovery of noncraft payroll tax costs was overstated compared to recent actual costs.
We estimated TVA could avoid about $54.29 million over the planned $386 million contract by (1) requiring the company's G&A markup rate to be applied to unburdened noncraft wages to more accurately reflect TVA's intent for reimbursing G&A costs, (2) negotiating revised workers' compensation and general liability insurance markup rates to comply with the RFP requirements, and (3) revising the contract to provide for reimbursement of actual noncraft payroll tax costs.
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March 30, 2023 - Independent Examination of Cost Proposal for Nonnuclear Modification and Supplemental Maintenance - 2022-17393
In our opinion, the company's cost proposal was overstated. Specifically, we found the proposed markup rate for recovery of the company's workers' compensation and general liability costs exceeded the markup rate and application base provided for in TVA's request for proposal (RFP). We estimated TVA could avoid about $4.39 million over the planned $579 million contract by negotiating revised workers' compensation and general liability insurance markup rates and application base to comply with the RFP requirements.
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Due to the importance of training and development programs in contributing to improved organizational performance and enhanced employee skills and competencies, we conducted an evaluation of TVA's training and development processes. We found the process for identifying training needs was generally effective; however, we found some of TVA's training processes were not effective and needed improvement. Specifically, we found (1) not all individuals were assigned the appropriate training, and (2) the effectiveness of training was not always being measured.
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We found substations had overall appropriate physical access controls. However, we identified control weaknesses in TVA's annual access review process and management of one of the physical access controls. Additionally, we determined TVA's Standard Programs and Processes should be revised to define requirements for physical access reviews.
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In summary, we determined BCS billed TVA:
- From $116,763 to $421,683 in unapproved temporary living allowance (TLA) costs. In addition, we identified other areas where the administration of TLA and TLA certifications could be improved.
- $44,941 in other ineligible and unsupported costs, including (1) $21,582 for ineligible and unapproved subcontractor costs, (2) $11,269 for ineligible equipment costs,
(3) $8,845 for duplicate and ineligible material costs, and (4) $3,245 for unsupported noncraft labor costs.
(2) several invoice and payment errors resulted in incorrect payments by TVA, which could have been identified with a proper invoice review.
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- Fisher overbilled TVA $80,324, including (1) $48,183 for overbilled labor costs, (2) $23,383 for duplicate material costs, (3) $7,758 for ineligible equipment costs, and (4) $1,000 for ineligible insurance costs.
- The use of fixed price payment terms on projects caused TVA to pay at least $4.35 million more than it would have if cost-reimbursable payment terms had been used for those projects. Additionally, if TVA utilized cost-reimbursable pricing for the remaining contract spend, it could potentially avoid $28.7 million in future costs.
We found employee relocations were generally paid in accordance with TVA SPP 11.208 and the management review control for payment of these transactions was operating effectively. However, we identified an opportunity to improve the relocation process and instances where program guidance could be clarified. Specifically, we found (1) SIRVA's review of miscellaneous expense allowance claims was not documented consistently, (2) program guidance for some employee relocations could be improved, (3) program guidance for manager and specialist new hires is unclear, and (4) program guidance for temporary living allowances incorrectly references the Federal Travel Regulation.
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We found TVA's controls for identifying consulting contracts and limiting the risks of conflicts of interest were not operating effectively. In addition, we found the organizational conflict of interest (OCI) and Business Ethics and Compliance Requirements clauses that should be included in all TVA contracts are not consistently incorporated into consulting contracts. We also found no guidance for TVA Supply Chain personnel and suppliers that addressed (1) how to identify actual or potential OCIs or (2) how these OCIs are to be mitigated, resolved, or avoided during contract performance.
1 Our audit identified 129 consultants that were paid approximately $193.4 million for their services between October 1, 2017, and February 28, 2022.
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- Geosyntec overbilled TVA $317,583, including (1) $304,690 for an ineligible fee applied to T&M labor rates, (2) $10,576 for labor billing rate errors, and (3) a net $2,317 for overbilled other direct costs. We also found the contract's compensation terms did not reference the contract's rate attachment for equipment and specialized computer applications or specify when the rate attachment was to be used.
- The use of T&M pricing terms on projects caused TVA to pay about $822,869 more than it would have if cost-reimbursable payment terms had been used for those projects. Additionally, if TVA utilized cost-reimbursable pricing for the remaining contract spend, they could potentially avoid $192,362 in future costs.
November 17, 2022 - Monitoring of Ernst & Young LLP's Audit of the Tennessee Valley Authority Fiscal Year 2022 Financial Statements - 2022-17395
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In summary, we determined Slick Rollers overbilled TVA $139,132, including (1) $104,012 in ineligible and unsupported material and equipment costs, (2) $32,564 in ineligible and unsupported labor costs, and (3) $2,556 in unsupported per diem costs. We also noted several opportunities to improve contract administration by TVA. Specifically, we found
(1) the contract contained language requiring subcontractor approval that does not match TVA's intent, (2) Slick Rollers began work on two POs prior to approval by TVA, and (3) Slick Rollers did not provide a proper invoice to TVA as required by the contract.
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We found TVA ED has a monthly process in place to review job number forecasts prior to reporting the numbers externally and that the number of jobs reported generally agreed with supporting documentation. However, we found the information presented to the public by TVA related to job creation and retention is not always clear, complete, or presented in the proper context as required by the TVA Information Quality Guidelines.
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November 15, 2022 - Agreed-Upon Procedures for TVA Fiscal Year 2022 Performance Measures - 2022-17397
- The FY 2022 WP goals for the Enterprise measures were properly approved. There was one change form that affected one measure.
- The FY 2022 goals (target) for the corporate multiplier measures were properly approved.
- The actual FY to-date results for the Enterprise measures agreed with the underlying support, without exception.
- The actual FY to-date results for the corporate multiplier measures agreed with the underlying support, without exception.
- The FY 2022 WP payout percentage provided by the Benchmarking and Enterprise Performance organization on November 9, 2022, was mathematically accurate and agreed with the OIG's recalculation.
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We tested seven inputs to the Power Supply Plan, including two key inputs, and determined six were inaccurate. Specifically, we found errors in the (1) fuel costs, (2) load forecast, (3) Southeastern Power Administration hydro generation forecast, (4) solar purchased power agreement contract terms, (5) coal ancillary services, and (6) demand response capacities and costs. We also noted an opportunity for improvement related to the level of detail contained in the documentation available to guide the load forecasting process.
Due to the complex nature of TVA's power supply planning models and forecasting methodologies, we were unable to determine the overall impact of the errors identified on the Power Supply Plan. While the impacts we were able to quantify were low, having errors in six of seven inputs we reviewed indicates there could be risk to the integrity of information being provided to and by TVA's Power Supply Plan. Additionally, various personnel raised concerns regarding the reliability of information being provided by TVA's Power Supply Plan, specifically in the burn forecast.
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(1) adopted a formal method for evaluating technology readiness or (2) managed technology readiness throughout projects. We also determined TVA has taken limited steps to address previously identified programmatic weaknesses related to Standard Programs and Processes and records management.
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The FISMA methodology considers metrics at a level 4 (managed and measurable) or higher to be at an effective level of security. Based on our analysis of the core IG metrics and associated maturity models, we found 12 of the 20 core IG metrics were at a level 1 (ad-hoc), level 2 (defined), or level 3 (consistently implemented); therefore, TVA's ISP was not operating in an effective manner as defined by the FY 2022 Core IG Metrics Implementation Analysis and Guidelines.
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We found controls were adequate to ensure the Program credits were accurately calculated in accordance with Program guidance. However, we found some credits were not passed from the local power company to the customer. We also determined the Program did not have controls needed to more appropriately achieve the stated objective. Specifically, the Program did not include controls needed to (1) verify the reduced on-peak demand was due to a reduced level of operations as a result of COVID-19 and (2) specify how/when customers were considered back to prepandemic operating conditions.
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September 8, 2022 - Independent Examination of Cost Proposal for Coal Combustion Residual Program Management Services - 2022-17368
In our opinion, the company's cost proposal was unsupported and overstated. The company informed us that it did not have financial statements or other actual historical cost documentation to support its proposed costs. Therefore, we could not completely verify (1) certain aspects of the company's proposal for a Gallatin Fossil Plant (GAF) ash pond closure and restoration project or (2) if the labor and labor markup rates included in the company's proposed rate attachments were fairly stated. However, based on our review of the company's estimation methodology and the limited supporting documentation provided by the company, we found:
- The company's proposal for an $892.8 million GAF project was overstated because the company's proposal included (1) inflated subcontract costs, (2) overstated noncraft labor cost, (3) overstated markup rates for the recovery of the company's indirect costs, and (4) a fee rate that exceeded the maximum allowable fee rate in TVA's request for proposal. We estimated TVA could avoid $117.6 million on the proposed $892.8 million GAF project by negotiating appropriate reductions to the proposal.
- The company's proposed contract rate attachments included (1) craft labor rates that were overstated and did not conform to TVA's project labor agreement, (2) noncraft cost-reimbursable labor rates that included excessive burden, and (3) noncraft time and material rates that included excessive burden. We suggested TVA negotiate to revise the company's rate attachments to (1) comply with the project labor agreement and (2) eliminate excessive burden on noncraft cost-reimbursable and time and material labor rates.
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The OIG determined some respiratory protection procedures were not being performed as required. Specifically, we determined some (1) requirements were not being met for training, fit tests, facepiece seal protection, and respirator storage and (2) employees were delinquent on medical evaluation requirements.
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(Summary Only)
August 12, 2022 - Independent Examination of Cost Proposal for Coal Combustion Residual Program Management Services - 2022-17367
In our opinion, the company's cost proposal was overstated. Specifically, we found the company's proposed:
- Gallatin Fossil Plant (GAF) project for $364.1 million included (1) craft labor rates not compliant with TVA's Project Labor Agreement (PLA), (2) overstated markup rates, and
(3) excessive fee. - Alternate GAF proposal for $361.5 million included overstated escalation on TVA's heavy equipment, in addition to the same overstated costs in the company's $364.1 million GAF proposal.
- Contract rate attachments included (1) overstated and incorrect labor and labor markup rates, (2) overstated equipment rates, and (3) overstated time and material (T&M) rates.
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In summary, we determined the costs billed by Delta Dental generally complied with the contract, except for $14,618 in overbilled costs due to a duplicate billing. Delta Dental agreed with the overbilling and issued TVA a credit for the full amount on April 18, 2022.
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We determined TVA Nuclear has taken actions, or no further actions were needed, to address the majority of issues and/or recommendations made. However, two recommendations from 2015 have not been addressed and likely affected TVA's corporate insurance premiums.
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In summary, we determined Williams overbilled TVA $549,911, including (1) $359,753 in unapproved subcontractor costs, (2) $30,802 in excessive and ineligible fee applied to subcontractor costs, (3) $107,080 in ineligible temporary living allowance and travel costs, (4) $29,840 in unsupported and ineligible labor costs, (5) $14,209 in ineligible material costs, and (6) $8,227 in credits not received by TVA (which have since been recovered by TVA).
In addition, we noted several opportunities to improve contract administration by TVA. Specifically, (1) TVA approved and implemented a contract rate attachment that contained incorrect craft labor rates, (2) TVA paid invoices under an incorrect contract, and (3) the contract contained inconsistent compensation terms for nonmanual labor.
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In summary, we found (1) no clear ownership of the non-power dam control system, (2) vulnerable versions of operating systems and control system software, (3) inappropriate logical and physical access, and (4) internal information technology controls were not operating effectively or had not been designed and implemented. Prior to completion of our audit, TVA clarified the ownership of the control system and took actions to address the inappropriate logical and physical access. We recommend the Senior Vice President, Resource Management and Operations Services, update the non power dam control system to address the identified vulnerabilities and information technology control weaknesses. TVA management agreed with our recommendation and provided information on planned actions.
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May 25, 2022 - Organizational Effectiveness - Browns Ferry Nuclear Plant Radiation Protection - 2021-17252
- Concerns regarding interactions between BFN RP groups.
- Concerns regarding management interactions.
- Perceptions of (1) unethical and (2) noninclusive behaviors by certain managers.
- Perceptions that BFN RP personnel cannot stop work and plant operations are placed before radiation safety.
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May 4, 2022 - Independent Examination of Cost Proposal for Transmission Construction Services - 2021-17308
In our opinion, the company's cost proposal was overstated. Specifically, we found the proposed general liability insurance markup rate was overstated compared to recent actual costs. We estimated TVA could avoid about $118,000 over the planned $50 million contract by negotiating a reduction to the general liability insurance markup rates to more accurately reflect the company's recent actual costs.
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We found TVA's policies and procedures are not effective in assuring outside employment of TVA employees is properly approved. Specifically, we found TVA employees are not consistently submitting their outside employment or business ownership on TVA Form 15570 prior to accepting outside employment or opening a business. In addition, we found TVA's (1) review for potential conflicts of interest and (2) application of 5 CFR § 7901 requirements could be improved. We also found (1) the TVA Forms 15570 on file were not updated as required and (2) roles and responsibilities in the outside employment approval process could be clarified.
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In summary, we determined Voith billed TVA (1) at least $2,435,353 for labor classifications that did not have a corresponding labor rate in the contract and (2) $12,606 in excessive labor rates due to ineligible rate adjustments. In addition, based on the limited fixed price information we reviewed, it did not appear TVA was paying excessive prices by compensating Voith on primarily a fixed price basis.
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April 11, 2022 - Independent Examination of Cost Proposal for Coal Combustion Residual Program Management Services - 2021-17243
In our opinion, the company's proposed markup rates for recovery of indirect costs were fairly stated. However, the company's proposed costs for a $248.2 million CCR project were overstated by a net $1.6 million due to inaccuracies in craft pay and benefits. Subsequently, the company submitted a revised estimate of $246.6 million to correct the inaccuracies.
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We determined appropriate actions were taken in response to human performance events in Gas and Hydro. Specifically, we determined (1) actions were taken or planned to be taken in response to human performance events and (2) initiatives were created to improve human performance in the organizations.
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In summary, we determined Jacobs overbilled TVA $504,063, including (1) $322,596 in unsupported and ineligible temporary living allowances and travel costs, (2) $73,188 in labor costs, and (3) $108,279 in payroll tax and insurance costs for 2018 and 2019 because costs were not adjusted to actual costs at year end as required by the contract. In addition, Jacobs also informed us that it had not performed a payroll tax and insurance adjustment for calendar years 2017 and 2020. We also identified opportunities for TVA to improve contract administration by ensuring the contract does not include conflicting contract language.
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February 9, 2022 - Independent Examination of Cost Proposal for Transmission Construction Services - 2021-17309
In our opinion, the company's cost proposal was overstated. Specifically, the proposed labor markup rates, for recovery of the company's indirect costs, were overstated compared to recent actual costs. We estimated TVA could avoid about $3.5 million over the planned $25 million contract by negotiating reduced markup rates to more accurately reflect the company's recent actual costs. In addition, we found the company's proposed (1) costs for the RFP's fixed price example projects were overstated by $417,189 and (2) equipment rates were not reflective of its actual equipment costs.
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February 9, 2022 - Independent Examination of Cost Proposal for Transmission Construction Services - 2021-17307
In our opinion, the company's cost proposal was overstated. Specifically, the proposed markup rates on craft wages for recovery of the company's indirect costs were overstated compared to recent actual costs. We estimated TVA could avoid about $2.2 million over the planned $100 million contract by negotiating reduced markups to more accurately reflect the company's recent actual costs.
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February 8, 2022 - Independent Examination of Cost Proposal for Transmission Construction Services - 2021-17310
In our opinion, the company's cost proposal was overstated. We found the proposed labor markup rates, for recovery of indirect costs, were overstated compared to recent actual costs. We estimated TVA could avoid about $783,000 over the planned $25 million contract by negotiating revised labor markup rates to more accurately reflect the company's recent actual costs.
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We found TVA did not provide sufficient oversight of the two Contract Operations Providers and the Contract Engineering Provider. We found the lack of oversight resulted in inadequate maintenance in some areas and inconsistencies in reporting that hindered TVA's ability to track and correct the identified deficiencies. In addition, we found TVA's Gas Transmission Pipelines Policy (TVA Power Operations Standard Programs and Processes 09.120, Natural Gas Transmission Pipeline Operations) in place between July 2016 and October 2020 was limited and outdated on contractor oversight.
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In summary, we determined WWT:
- Overbilled TVA $38,302 in labor service costs, including (1) $31,341 for unsupported labor hours, and (2) $6,961 in excessive hourly pay rates.
- Could not provide adequate support for the Cisco list prices used to apply contractual discounts for products and maintenance. Therefore, we could not determine if the majority of costs billed for products and maintenance agreements were in accordance with the contract terms.
- Overbilled TVA $4,051 because the contractual discounts were not applied correctly on the limited product costs we were able to review.
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December 16, 2021 - Organizational Effectiveness - Browns Ferry Nuclear Plant Chemistry - 2021-17254
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In summary, we determined (1) Vega overbilled TVA $4,070 in ineligible fee, and (2) TVA paid an additional $187,786 in labor costs because Vega used statutory payroll tax rates instead of effective payroll tax rates in the buildup of its craft labor billing rates. We also noted opportunities to improve contract administration by TVA. Specifically, we found the contract contained (1) language requiring subcontractor approval that does not match TVA's intent and (2) inconsistent language regarding markups on subcontractor costs.
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November 16, 2021 - Agreed-Upon Procedures for TVA Fiscal Year 2021 Performance Measures - 2021-17331
- The FY 2021 WP goals for the Enterprise measures were properly approved. There was one change form that affected one measure.
- The FY 2021 goals (target) for the corporate multiplier measures were properly approved.
- The actual FY to-date results for the Enterprise measures agreed with the underlying support, without exception.
- The actual FY to-date results for the corporate multiplier measures agreed with the underlying support, without exception.
- The FY 2021 WP payout percentage provided by the Benchmarking and Enterprise Performance organization on November 5, 2021, was mathematically accurate and agreed with the Office of the Inspector General's recalculation.
November 16, 2021 - Monitoring of Ernst & Young LLP's Audit of the Tennessee Valley Authority Fiscal Year 2021 Financial Statements - 2021-17306
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The FY 2021 IG FISMA metrics recommend a majority of the functions be at a maturity level 4 (managed and measurable) or higher to be considered effective. Based on our analysis of the metrics and associated maturity levels defined within the IG FISMA metrics, we found TVA's ISP was operating in an effective manner.
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We recommended TVA ensure (1) documents related to TVA's disposal of coal ash for public release are properly reviewed and TVA information classification markings removed,
(2) Web sites follow TVA policy for authentication, and (3) removal of TVA's password complexity rules from TVA's publicly accessible Web sites. TVA management provided actions they plan to take or have taken to address each of our recommendations.
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We found 41 contributions totaling $296,582 made using miscellaneous vouchers rather than submitted through TVA's online request and approval system in violation of TVA's Contributions Policy. We also noted the Contributions Policy and TVA‑SPP‑13.092, Miscellaneous Vouchers, contradict one another. TVA‑SPP‑13.092, Miscellaneous Vouchers, states miscellaneous vouchers may be used for payment of contributions while the Contributions Policy states all contributions made by TVA must be processed through the Community Relations office to confirm consistent adherence to the approval requirements and minimize overlapping of contributions, including sponsorships.
We also found control weaknesses including inadequate segregation of duties, inadequate controls for contribution approvals, and a lack of ongoing technical support for the contributions request and approval system. Additionally, in-kind donations are not managed and tracked as outlined in the Contributions Policy.
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October 18, 2021 - Airgas USA, LLC - Claim For Missing Gas Cylinders - Contract Nos. 5436 and 5456 - 2021-16906
In summary, we determined Airgas' February 2, 2021, claim for $891,340 related to missing gas cylinders was not valid. Specifically, we found Airgas (1) did not comply with the contracts' criteria related to the frequency of inventory audits and loss of use allowances and (2) did not provide documentation supporting that the claimed missing gas cylinders were billed and delivered to TVA.
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We found no evidence TVA was out of compliance with the TVA Memberships in External Organizations Board Practice. We did not identify any evidence of direct lobbying or litigation on behalf of TVA; however, the external organizations do not administratively segregate TVA's funds, so we were unable to determine if the funds were used for lobbying or litigation. We also found all contracts or membership agreements contained required language limiting the use of TVA funds for prohibited activities such as litigation or lobbying; however, TVA does not have a contract or membership agreement with one external organization.
We also identified opportunities for improvement related to TVA's management of memberships in external organizations. Specifically, we determined TVA could (1) provide training of employees participating in committee or leadership roles in external organizations and (2) benefit from the coordination of all memberships in external organizations with the Office of the General Counsel to confirm all legal and ethical requirements are met.
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In summary, we found several controls of TVA's privileged account management to be generally effective, including (1) an accurate inventory of privileged network device accounts, (2) appropriate segregation of duties, (3) appropriate account lifecycle management for most privileged users, and (4) monitoring of privileged accounts. However, we also found
(1) improper usage of primary user accounts with privileged access, (2) one account with inappropriate privileged access, and (3) several gaps in TVA's Standard Programs and Processes when compared to best practices.
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September 21, 2021 - Organizational Effectiveness - Transmission Field Operations, North Maintenance - 2021-15801
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(7) desktop and laptop sanitization. However, we identified seven issues that should be addressed by TVA management to further increase the effectiveness of the privacy program. Specifically, we found:
- Unsecured electronic restricted personally identifiable information on SharePoint and shared network drives.
- Unsecured hard copy restricted personally identifiable information.
- No end user notifications for e-mail security violations.
- No technical controls for removable media.
- We could not confirm that all desktops and laptops utilize encryption.
- Privacy Act notices on TVA forms did not include all required elements.
- Not all external Web sites included privacy policies. (Note: Prior to completion of our audit, TVA Technology and Innovation took action to address the external Web sites that were missing required privacy policies.)
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- We determined B&V overbilled TVA an estimated $5,771,839, including (1) an estimated $5,657,998 for unapproved OT costs for exempt labor categories, (2) $69,383 in travel and temporary living allowance costs, and (3) a net $44,458 for incorrect hourly billing rates.
- We noted several opportunities to improve contract administration by TVA. Specifically, we determined TVA paid an estimated $3.3 million more in labor costs by using fixed hourly labor rates instead of negotiating cost reimbursable compensation terms in its contract with B&V. We also found (1) invoices were not submitted timely, (2) B&V did not submit an electronic billing file to the TVA Office of the Inspector General in the format provided for in the contract, (3) site expenses were not provided for in the contract, and (4) the labor categories included in the contract's pricing schedule did not correspond to B&V's internal job titles.
(2) tasks were issued using the most cost efficient pricing methodology. Our audit scope included about $57.5 million in costs billed to TVA from March 12, 2018, through August 31, 2020. This included $25.8 million for cost-reimbursable projects and $31.7 million for fixed price projects.
In summary, we determined:
- Mesa overbilled TVA $213,545 on cost-reimbursable projects, including (1) $147,045 in temporary living allowances and travel costs, (2) $34,298 in subcontractor costs,
(3) $18,576 in labor costs, (4) a net $7,195 in performance fee payments, and (5) $6,431 in volume discounts not provided to TVA. - The use of fixed price payment terms on projects caused TVA to pay at least $1.52 million more than it would have if cost-reimbursable payment terms had been used for those projects. Additionally, if TVA utilized cost-reimbursable pricing for the remaining spend on its current contract with Mesa (i.e., Contract No. 15396), we estimated TVA could potentially avoid up to $8.69 million in future costs.
We found TVA had (1) taken a measured approach to solar PPAs to better understand the industry and market trends and (2) generally developed solar PPAs to recognize positive financial value or breakeven.
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(2) there was no formal evaluation of the risks posed by identified hazards; (3) IH plans did not prioritize hazards; and, (4) an incomplete monitoring process allowed for misalignment between plans and exposure assessments.
We also determined TVA is taking appropriate actions to address adverse conditions which were identified during assessments at gas plants; however, hazard exposures were not documented and employees were not notified as required. In addition, we identified opportunities for improvement related to handling of IH issues in the contractor population.
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We found controls were generally adequate to ensure purchases made by TVA contractors using a TVA purchasing card were for TVA business purposes and not the use of another entity. However we also determined (1) TVA does not have controls in place to ensure purchases made by contractor employees assigned a TVA purchasing card are not being billed back to TVA on invoices from the contractor, (2) required language to govern contractor's usage and liability for purchasing cards issued to TVA contractors is not included in contracts, and (3) over 50 percent of the transactions we tested were not reconciled by the cardholder in a timely manner, resulting in untimely approval by the approving official.
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(2) there was no formal evaluation of the risks posed by identified hazards; (3) IH plans did not prioritize hazards; and (4) incomplete monitoring efforts allowed misalignment between procedures, plans, and exposure assessments.
We also determined TVA took appropriate actions to address adverse conditions, which were identified during assessments at hydro plants; however, TVA did not maintain employee notification records as required by internal procedures. In addition, we identified opportunities for improvement related to clarifying responsibilities for notification and monitoring of contractor actions taken to address IH recommendations.
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We found TVA did not perform procedures to validate data used to calculate nine of the ten metrics reported in the FY 2020 SRIP. TVA validated data for the greenhouse gas emissions information included in the report, but at most, performed reviews for reasonableness for the remaining nine metrics reported and calculated by TVA's Environment and Energy Policy group or subject matter experts.
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$35.5 million in cost-reimbursable expenses billed to TVA from September 1, 2018, through December 31, 2019.
In summary, we determined LE Myers overbilled TVA $120,152, including (1) a net $93,695 in unsupported and incorrect craft labor charges, (2) $13,955 in unsupported travel costs, and (3) $12,502 in unsupported equipment costs. In addition, we found that (1) LE Myers did not submit an electronic billing file to the TVA Office of Inspector General in the format and frequency provided for in the contract's terms, and (2) TVA did not revise the contract's equipment rate schedule to include a piece of equipment approved for use by TVA's Contract Manager.
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(2) there was no formal evaluation of the risks posed by hazards identified; (3) industrial hygiene plans did not prioritize hazards for control; and (4) incomplete monitoring efforts, which allowed for misalignment between plans and exposure assessments as well as limited coverage for retiring plants.
We also found TVA did not take appropriate actions to address some adverse conditions identified during assessments. We determined actions were not taken to address four occurrences of elevated silica. We also determined some employees were not notified of hazard exposures or actions taken to address their exposures, as required by the Occupational Safety and Health Administration. In addition, we identified opportunities for improvement related to handling of industrial hygiene issues in the contractor population.
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We determined SREG has met, or was in the process of meeting, their stated goals and objectives. For example, SREG has (1) improved the condition, safety, and utilization of TVA's real estate assets and (2) been working to eliminate noncore and underutilized buildings through regional consolidations. However, we identified several areas for improvement that could enable SREG to more effectively accomplish their mission of helping TVA manage real estate assets and align the portfolio with business need. Specifically, (1) SREG does not have an accurate and comprehensive list of all real property, (2) SREG is not always included in, or knowledgeable of, key business decisions that impact real estate, and (3) TVA does not have a centralized real estate function.
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July 8, 2021 - Organizational Effectiveness-Sequoyah Nuclear Plant Chemistry/Environmental - 2020-15752
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June 15, 2021 - Organizational Effectiveness - Commercial Energy Solutions Fuels and Hedging - 2020-15762-04
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(2) tasks were issued using the most cost efficient pricing methodology. Our audit scope included about $55.3 million in costs billed to TVA from January 5, 2018, through February 29, 2020, of which over 99.9 percent was billed using T&M compensation terms. In summary, we determined:
- Stantec overbilled TVA $93,916, including (1) $73,099 for mileage rates not specified in the contract and (2) $20,817 for ineligible travel costs.
- The use of T&M terms on projects caused TVA to pay at least $1.65 million more than it would have if cost reimbursable payment terms had been used for those projects. Additionally, if TVA utilized cost reimbursable pricing for the remaining contract spend, they could potentially avoid $1.01 million in future costs.
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In summary, we determined Siemens overbilled TVA $201,829 due to ineligible and unsupported time and material costs. Specifically, we found Siemens billed TVA, (1) $124,501 for ineligible per diem costs, (2) $30,523 in unsupported tool costs, (3) $18,342 for ineligible noncraft labor costs, (4) an estimated $17,425 for ineligible craft labor costs, and (5) $11,038 in other ineligible costs.
In addition, we identified $500,580 in costs billed to and paid by TVA under Contract No. 10092 that should have been billed under another contract TVA has with Siemens. We also identified opportunities to improve contract administration by TVA. Specifically, we found (1) the contract limits TVA's ability to control cost, and (2) TVA did not maintain adequate documentation to support credits taken by TVA.
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January 25, 2021 - Organizational Effectiveness - Commercial Energy Solutions Pricing, Structuring, Analysis/Contracts - 2020-15762-01
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January 22, 2021 - Organizational Effectiveness - Commercial Energy Solutions Energy Services and Programs - 2020-15762-03
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The FY 2020 IG FISMA metrics recommend a majority of the functions be at a maturity level 4 (managed and measurable) or higher to be considered effective. Based on our analysis of the metrics and associated maturity levels defined with the IG FISMA metrics, we found TVA's ISP was operating in an effective manner.
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We determined most actions taken by TVA in response to COVID-19 related to staffing, employee safety, and telework were reasonable. Specifically, (1) TVA's policies align with the Centers for Disease Control and Prevention and federal guidelines, (2) TVA took actions to document and communicate lessons learned, (3) feedback from employees and management was positive regarding changes made in response to COVID-19 on employees and their work. However, we identified potentially misleading marketing language used to promote unproven technology to combat COVID-19. In addition, we identified some opportunities for improvement related to extended telework, mask usage at TVA facilities, and information management practices. Additionally, we identified some required elements were not present in the continuity of operations plan for TVA's River Forecast Center.
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December 16, 2020 - Organizational Effectiveness - Commercial Energy Solutions Origination and Renewables - 2020-15762-02
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December 10, 2020 - Organizational Effectiveness - Sequoyah Nuclear Radiation Protection - 2020-15743
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Due to the importance of effective project management to TVA's mission and potential issues identified during Organizational Effectiveness evaluations, we performed an evaluation of project turnover to PO. The objective of our evaluation was to determine if TVA is effectively managing the turnover of projects to PO. The scope of our evaluation included capital projects for PO's generation assets managed by the Generation Projects group. We limited our evaluation to the implementation and closure activities related to the turnover of those projects to PO.
We determined TVA is not effectively managing the turnover of projects to PO because the project turnover processes were not aligned and the inconsistencies led to project issues related to (1) turnover and customer acceptance, (2) completion of the design change notice, and (3) project closure. In addition, we identified opportunities for improvement related to (1) time frames for completion of the design change notice process and (2) project ownership.
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In our opinion, the company's cost proposal was overstated. Specifically, we found:
- The company's proposed labor markup rates, for recovery of its indirect costs, were overstated compared to recent actual costs. We estimated TVA could save about $167,000 over the planned $10 million contract spend by negotiating reduced labor markup rates to more accurately reflect the company's recent actual costs. In addition, we suggest TVA negotiate the removal of the company's proposed rate for work performed at TVA facilities since the company (1) does not normally calculate a rate for field employees and (2) does not anticipate using any field employees.
- The company's proposed performance fee was overstated based on the request for proposal's (RFP) fee limits. During our examination, TVA successfully negotiated the fee percentage to comply with the RFP's fee limits. We estimated TVA's actions could save about $371,000 over the planned $10 million contract.
- The company's proposed labor rate ranges were not reflective of the actual salary costs for the company's employees.
Our audit found multiple instances where TVA personnel did not comply with requirements in TVA's P-Card policies and procedures. Specifically, we found (1) some approving officials were not performing their review duties properly, (2) split transactions occurred, (3) disallowed and questionable (nonbusiness expense) transactions occurred, (4) only
25 percent of TVA's cardholders and approving officials completed the required annual P-Card training at least once, (5) periodic audits of P-Card transactions by Supply Chain were not performed, and (6) certain potentially fraudulent transactions by one cardholder had not been identified due to inadequate reviews of the cardholder statements. OIG Investigations subsequently found evidence the cardholder had used the P-Card to make several monthly rental payments to the apartment complex where the cardholder lived. In addition to those areas of noncompliance listed above, we found P-Cards were being used without determining if sources the Supply Chain and Financial Services Standard Programs and Processes rank ahead of the P Card in its hierarchy were available.
We made 12 recommendations to TVA management to strengthen controls and help improve compliance with the P-Card policies by (1) implementing additional procedures and monitoring activities and (2) clarifying and updating the policies and related training. TVA management provided actions they plan to take to address each of our recommendations.
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November 18, 2019 - Monitoring of Ernst & Young LLP's Audit of the Tennessee Valley Authority Fiscal Year 2020 Financial Statements - 2020-15767
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In our opinion, the company's cost proposal was overstated. Specifically, we found the (1) proposed total labor markup rate, for recovery of the company's indirect costs, was overstated based on its most recent actual costs, (2) labor markup rates included profit, and (3) proposed performance fee was overstated based on the request for proposal's (RFP) fee limits. We estimated TVA could avoid about $2.9 million over the planned $35 million contract by negotiating (1) reduced total labor markup rates to more accurately reflect the company's recent actual costs, (2) removal of the profit included in the labor markup rates, and (3) a reduced performance fee to comply with the RFP's fee limits. In addition, we found the company did not comply with the RFP's requirement related to labor rate ranges.
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Due to past issues identified related to maintenance of coal combustion residual (CCR) storage facilities, we performed an evaluation of required maintenance at TVA's CCR storage facilities. The objective of the evaluation was to determine if TVA performed required maintenance of CCR storage facilities. The scope of the evaluation was maintenance needs identified during required inspections in fiscal years 2018 and 2019 at Bull Run, John Sevier, and Paradise Fossil Plants.
We determined, in general, TVA performed required inspections and completed maintenance to address issues identified during the inspections. However, we determined some inspection reports had incorrect or missing information. We also identified opportunities for improvement related to policies for maintenance and inspection of coal CCR storage facilities, inspection plan requirements, and training requirements.
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November 16, 2020 - Agreed-Upon Procedures For TVA Fiscal Year 2020 Performance Measures - 2020-15753
- The FY 2020 WP goals for the Enterprise measures were properly approved. There was one change form, approved on February 28, 2020, that affected one measure.
- The FY 2020 goals (target) for the corporate multiplier measures were properly approved.
- The actual FY to-date results for the Enterprise measures agreed with the underlying support, without exception.
- The actual FY to-date results for the corporate multiplier measures agreed with the underlying support, without exception.
- The FY 2020 WP payout percentage provided by the Benchmarking and Enterprise Performance organization on November 3, 2020, was mathematically accurate and agreed with the OIG's recalculation.
The employee did not comply with several legal and regulatory requirements such as filing a statement notifying the Designated Agency Ethics Official (DAEO) of his negotiation for outside employment. Additionally, the employee did not file a recusal statement, obtain a written waiver for outside employment or qualify for a regulatory exemption from these requirements. The evidence shows the employee worked solely with TVA Human Resources (HR) during the termination process and did not receive advice from the DAEO regarding these requirements.
The OIG recommends that TVA HR consult with TVA's DAEO to ensure TVA employees receive detailed guidance regarding outside employment and post-employment issues.
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We found that (1) TVA's approval process did not ensure expenses for travel within 50 miles of an official station complied with TVA's travel policy, (2) TVA does not have documented procedures to ensure flat-rate-travel reimbursements are being verified appropriately or reimbursed properly, (3) TVA's human resources system had incorrect official stations shown for 25 of 74 employees included in our samples, and (4) TVA's travel policy provides limited guidance addressing the assignment and review of official stations.
We made four recommendations to TVA management to strengthen controls around travel expenses reimbursed within 50 miles of an official station. TVA management provided actions they plan to take to address each of our recommendations.
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We compared TVA's procedures around preventing, preparing for, and managing active shooter incidents to best practices recommended by the Department of Homeland Security (DHS). DHS best practices include four steps (Connect, Plan, Train, and Report) to apply in advance of an incident or attack. We found TVA has plans in place to prevent, prepare for, and manage active shooter incidents that include steps to address the connecting and planning phases of DHS recommendations to prepare for active shooter incidents. However, we found the training and reporting steps need improvement. Specifically, we found TVA's Active Threat Awareness program training is not mandatory and less than 10 percent of TVA's employees have taken the training. In addition, portions of best practices related to active threat awareness are included in at least ten TVA Standard Programs and Processes rather than a single document and are not easily accessible by employees. TVA management agreed with our findings and recommendations.
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Our audit found TVA's approval process did not ensure expenses complied with the Business Meetings and Hospitality Policy. Specifically, we found expenses were approved for
(1) reimbursement and/or payment without the required information and supporting documentation included with the expense voucher, (2) questionable team-building expenditures, and (3) prohibited alcohol expenditures. We also found a lack of guidance for compliance with TVA's Food Services Policy. Additionally, we found the process for approving large meeting expenses and guidance for the classification of meeting-related expenses could be improved.
We made five recommendations to TVA management to strengthen controls around business meetings and hospitality by (1) developing additional guidance to ensure compliance with the Business Meetings and Hospitality Policy and Food Services Policy, and (2) reinforcing the existing Food Services Policy. TVA management provided actions they plan to take to address each of our recommendations.
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September 24, 2020 - Organizational Effectiveness - Watts Bar Nuclear Plant Radiation Protection - 2020-15718
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165 full-time employees. In addition, we determined some individual employees worked significant amounts of overtime. For example, we found 37 instances during fiscals years 2018 and 2019 where employees worked over 1,000 hours of overtime and 1 employee who worked over 2,300 hours of overtime in a single year. We also determined TVA may not be accurately capturing the effects of fatigue because (1) fatigue assessments are no longer required when significant overtime is worked and (2) fatigue data is not trended with health and safety data in TVA's medical case management system. Additionally, employees expressed concerns regarding the adverse impact of understaffing on safe operation of coal plants.
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We found that TVA ED loans were generally executed and administered in accordance with TVA policies and procedures. However, we found instances where loans were originated subsequent to the expiration date of (1) credit analyses, and/or (2) loan commitment periods. We also found that loan program guidance could be improved by incorporating the ED loan program guidelines into TVA Standard Programs and Processes 24.015, Economic Development Loan Programs.
We made two recommendations to TVA management to (1) ensure credit analyses and/or loan commitments are current when new loans are issued and (2) update TVA Standard Programs and Processes 24.015, Economic Development Loan Programs to include ED loan program guidelines.
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September 17, 2020 - Contractors' Use of Equipment Provided by TVA's Equipment Support Services - 2020-15724
- ESS provides equipment to contractors on TVA projects that have cost reimbursable payment terms. Although ESS does not bill the contractors for the equipment (i.e., ESS charges a TVA project, not the contractor), certain contractors bill TVA for the ESS equipment even though their contract with TVA provides that TVA can only be billed for actual equipment costs. Even though the contractors subsequently provide credits or refunds to TVA for the equipment, it is administratively difficult for TVA to ensure it receives reimbursement for all the costs billed by the contractor.
- ESS provides equipment to certain contractors on TVA projects that have fixed price or fixed unit rate payment terms. However, TVA's Standard Programs and Processes (SPP) do not provide guidelines or processes for TVA to determine the cost effectiveness of providing ESS equipment on fixed price/fixed unit rate projects or to ensure TVA receives the appropriate reductions on the fixed price/fixed unit rates.
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The OIG recommended TVA do the following: (1) Take action to recover from the employee the outstanding balance of the unauthorized transactions, (2) consider disciplinary action against the employee, (3) ensure that all cardholders and approvers in Transmission and Power Supply are current on annual Purchase Card training, and (4) take measures to ensure approving officials are notified when Purchasing Card statements are not reconciled monthly and to suspend cards when there is repeated noncompliance with this requirement.
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September 3, 2020 - Organizational Effectiveness - Watts Bar Nuclear Plant Chemistry/Environmental - 2020-15719
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In our opinion, the cost proposal was overstated. Specifically, we found the proposed labor markup rates, for recovery of indirect costs, were overstated compared to recent actual costs. We estimated TVA could save about $4 million over the planned $300 million contract spend by negotiating reduced labor markup rates to more accurately reflect recent actual costs.
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In our opinion, the company's cost proposal was overstated. Specifically, we found the proposed total labor markup rate, for recovery of the company's indirect costs, was overstated compared to recent actual costs. In addition, we found the company's proposed costs for the request for proposal's (RFP) example projects contained a cost markup not provided for by the RFP's draft contract. We estimated TVA could avoid about $2.24 million over the planned $20.5 million contract by negotiating a reduced total labor markup rate to more accurately reflect the company's recent actual costs.
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We determined Section 106 reviews were not consistently tracked resulting in a lack of data to determine the time and costs of the reviews. However, we were able to identify inefficiencies in the Section 106 process. Specifically, we determined the process had inefficiencies regarding (1) prioritization of projects, (2) incorporation of Cultural Compliance in planning, (3) communication between organizations, (4) workload of Cultural Compliance personnel, (5) reliance on contractors, and (6) tracking of cultural resources. We made recommendations to the Vice President, Environment, to address inefficiencies in Section 106 reviews.
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- Thalle overbilled TVA $78,414 on a TCE project, including (1) $24,716 for ineligible costs billed and (2) $53,698 in overstated TCE cost savings.
- Thalle overbilled TVA $70,751 in equipment costs on cost reimbursable projects, including (1) $54,755 in overbilled TVA Equipment Support Services equipment rental costs and (2) $15,996 in overbilled costs for Thalle owned equipment.
- The use of fixed price or unit rate payment terms on projects caused TVA to pay at least $2.1 million more than it would have if cost reimbursable payment terms had been used for those projects. Additionally, we determined the unit rate payment terms used by TVA to compensate Thalle were not provided for in the contract's terms and conditions.
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In our opinion, the company's cost proposal was fairly stated. However, we found the company's proposed labor rate ranges were not reflective of the actual salary costs for company employees. Specifically, we found the company had actual salary rates (1) lower than the minimum labor rates proposed for some categories and (2) higher than the maximum labor rates proposed for some labor categories.
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In our opinion, the company's cost proposal included labor markup rates for the recovery of indirect costs that were misstated. We estimated TVA could save $7.44 million over the planned $200 million contract by negotiating revisions to the labor markup rates to more accurately reflect the company's recent actual costs. In addition, we found the proposed labor rate ranges were not reflective of the actual salary costs of the company.
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In our opinion, the company's cost proposal was overstated. Specifically, we found the methodology the company used to calculate its proposed labor markup rates was not reflective of the divisions that would be performing the anticipated scopes of work. We estimated TVA could avoid about $5.17 million over the planned $90 million contract by negotiating reductions to the labor markup rates to more accurately reflect the costs from the company divisions who would be performing work under the potential contract.
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In our opinion, the company's cost proposal was overstated. Specifically, we found the (1) proposed costs for the request for proposal's (RFP) example projects contained math errors, were not priced in accordance with the RFP requirements, and overstated travel expenses; (2) proposed total labor markup rate, for recovery of the company's indirect costs, was overstated compared to recent actual costs; (3) proposal did not include reduced labor markup rates for employees working in the field and nonbenefited workers; and
(4) proposed maximum wage rates were overstated.
We estimated TVA could avoid about $3.08 million over the planned $45 million contract by (1) ensuring the company's project estimates and invoices are reviewed for accuracy and comply with contract pricing criteria, (2) negotiating a reduced total labor markup rate based on the company's recent actual costs, (3) including labor markup rates for employees performing work in the field and nonbenefited workers, and (4) requiring the company to revise its wage range maximums.
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We determined some requirements of TVA's arc flash procedure were not being performed. Specifically, we determined (1) some arc flash hazard analyses were not complete, reviewed timely, updated, or verified and submitted for record; (2) some identified arc flash hazards were not communicated accurately to workers; and (3) arc flash hazards were not consistently documented.
In addition, we determined arc flash training needs improvement. Specifically, we determined (1) not all personnel assigned arc flash training had completed the training curriculum, (2) TVA's identified population of individuals required to have arc flash training was incomplete and not a reliable indicator as to who is required by the Occupational Safety and Health Administration to receive the training, and (3) TVA does not require retraining at the frequency suggested by industry guidance. Also, while PPE was generally available and in good condition, PPE management practices could be improved.
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We found some requirements of TVA's arc flash procedures were not being performed. Specifically, (1) arc flash hazard analyses were incomplete, not reflective of current plant operating conditions, and not reviewed timely; (2) identified hazards were not communicated accurately to workers; (3) plants had not adequately evaluated and implemented controls to reduce exposure to high hazard incident energies; and (4) hazards and mitigations were not routinely documented.
In addition, we determined arc flash training needs improvement. TVA's identified population of individuals required to have arc flash training had completed initial training; however, the trainee population was incomplete and not a reliable indicator as to who is required by the Occupational Safety and Health Administration to receive the training. TVA has also not implemented retraining at the frequency required by its procedures. Also, while personal protective equipment was generally available and in good condition, its management could be improved with an inventory listing and preventive maintenance.
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In summary, we determined:
- Trans Ash overbilled TVA $1,592,128 on cost reimbursable projects, including (1) $1,312,051 in unapproved subcontractor costs, (2) $32,895 in ineligible fees associated with subcontractor costs, (3) $156,403 in labor and related costs, (4) $42,929 resulting from the use of lump sum pricing when the purchase order provided for a cost reimbursable compensation methodology, (5) $42,000 in temporary living costs, and (6) $5,850 in equipment costs.
- Trans Ash billed TVA for construction equipment rented from TVA's Equipment Support Services (ESS) group using the Trans Ash equipment rental rates included in the contract's rate schedule instead of billing TVA for the equipment rentals as a direct pass through cost, as required by the contract's terms and conditions. However, due to the process used by TVA to bill Trans Ash for ESS equipment rented, we could not determine the cost impact, if any, of Trans Ash billing ESS equipment using the contract's equipment rental rate schedule.
- The use of fixed price or unit rate payment terms on projects caused TVA to pay at least $1.6 million more than it would have if cost reimbursable payment terms had been used for those projects. Additionally, we determined the unit rate payment terms used by TVA to compensate Trans Ash were not provided for in the contract's terms and conditions.
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In summary, we determined Morsey overbilled TVA up to $3,819,541, including (1) from $1,543,520 to $3,698,483 in subcontractor costs that had not been preapproved by TVA,
(2) $100,354 in overbilled equipment costs, (3) $36,945 in unsupported and ineligible travel costs, and (4) a net underbilling of $16,241 because Morsey billed incorrect craft and noncraft time and materials billing rates. In addition, we determined TVA paid an additional $134,810 in labor costs because Morsey used statutory payroll tax rates instead of effective payroll tax rates in the build up of its craft and noncraft labor billing rates.
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The OIG recommends that (1) TVA re-educate the contractor on when mileage reimbursement is permitted under the contract, and (2) resolve the misinterpretation of the contract terminology pertaining to mileage reimbursement between the Nuclear Projects and Supply Chain groups.
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The OIG recommends that (1) TVA re-educate the contractor on when mileage reimbursement is permitted under the contract, and (2) resolve the misinterpretation of the contract terminology pertaining to mileage reimbursement between TVA's Nuclear Projects and Supply Chain groups.
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The OIG recommended TVA do the following: (1) review the duties and responsibilities of the contract employee and ensure compliance with the Organizational Conflict of Interest terms of the contract; (2) require contractors acting in contract manager roles and/or involved with contracting decisions be required to disclose any actual or potential conflict of interest, similar to OGE Form 450, "Confidential Financial Disclosure Report;" and (3) ensure contract employees do not review or have access to information that could provide the contractor with an unfair competitive advantage.
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(4) positive ethical culture. However, we also identified risks that could impact Hydro's ability to meet its responsibilities in support of PO's vision. These were comprised of risks related to (1) lack of effective accountability by management, (2) inadequate staffing, (3) training needs, and (4) other resources, including adequacy of equipment, infrastructure, supplies, and/or workspace conditions. In addition, we requested feedback from personnel in other TVA organizations that have regular interactions with Hydro personnel. Based on feedback that was received, we identified concerns related to reliability, collaboration/coordination of work, and staffing that could have a negative impact on Hydro's ability to execute PO's vision.
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No. 11992. NEA provided assistance to state and local governments under the authority of the Disaster Relief and Emergency Assistance Act. Our audit included approximately
$27.5 million in costs paid by TVA from October 25, 2016, to September 24, 2019. Our audit objective was to determine if the costs were billed in accordance with the terms and conditions of the contract.
In summary, we determined NEA overbilled TVA $417,327, including (1) $224,420 in labor costs not provided in the contract and (2) $197,907 for ineligible travel expenses. In addition, we noted the contract language needs clarification regarding how TVA intends to reimburse NEA for holiday pay.
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We were unable to determine if financial transactions for labor charged to Operations and Maintenance and Capital general ledger accounts under the IT organization during fiscal year 2018 received the proper accounting treatment. TVA's IT had informal processes in place to compare forecast to actual project costs on a monthly and quarterly basis to ensure labor charges received the proper accounting treatment. While the description of these variance review processes appeared adequate, we found (1) they were not documented, and (2) limited evidence was provided to show the described processes were followed. TVA management agreed with our recommendations.
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No. 11022 for medical administrative services. Our objective was to determine if the costs billed to TVA under Contract No. 11022 for medical administrative services were in accordance with the contract's terms. The audit covered claim costs and associated fees totaling $262,707,081 billed to TVA during calendar years (CY) 2017 and 2018.
In summary, we determined BCBST overbilled TVA an estimated $88,163, including (1) a net $36,991 related to shared savings for which BCBST has reimbursed TVA a net $18,166, (2) $21,259 for claims that exceeded chiropractic plan limits, (3) an estimated $17,503 in excess costs due to established patients being billed as new patients, and (4) $12,410 in credits not received by TVA.
In addition, we found TVA paid from $369,116 to $836,232 more for administrative fees and various services, such as provider audits and other shared saving services, than it would have under TVA's prior contract with BCBST. The additional payments could have occurred because TVA was not aware of a BCBST underwriting guideline regarding the effect of shared savings on administrative fees.
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In summary, we found no significant instances of noncompliance with TVA's Standard Programs and Processes, but did note that best practices were not consistently followed for maintenance of the vendor master file. Specifically, we found (1) Maximo does not log changes to the vendor master file, (2) instances where vendor addresses match employee addresses, (3) duplicate vendors, (4) vendors are not deactivated in a timely manner, (5) no minimum requirements for vendor record data, and (6) vendors with no physical address.
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March 25, 2020 - Thalle Construction Company, Inc. - Project Change Request No. 017 to Purchase Order No. 3260693 - Contract No. 10061 - 2020-15704
TCE pricing provides that compensation would be cost based with the maximum amount of total compensation, including fee, not to exceed the TCE established for the work. Additionally, if the project's actual cost exceeded the TCE by more than 3 percent, the amount of overrun would be shared 50 percent by TVA and 50 percent by the contractor. Conversely, if the project's actual cost is more than 3 percent below the TCE, the savings would be shared 75 percent for TVA and 25 percent for the contractor.
During March 2019, TVA reduced Thalle's statement of work (SOW) on the PO and required Thalle to complete all services by April 26, 2019. Thalle submitted PCR-017 on November 6, 2019, which provided a revised TCE totaling $5,077,957 based on the reduced SOW. Our audit objective was to determine the validity of Thalle's PCR-017.
In summary, we determined Thalle's revised TCE in PCR-017 was overstated:
- $975,988 due to (1) incorrect deductions for the reduced SOW, (2) ineligible and unsupported additions to the TCE, and (3) overstated general and administrative (G&A) markup and fee used in the original TCE.
- $39,061 for unallowable performance fee paid on the costs that exceeded the TCE.
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We determined the clearance procedure was being performed for work requiring clearances to safely control hazardous energy and training was completed as required. However, we determined (1) some clearances were not issued in accordance with all procedural requirements, and (2) audits performed were not in compliance with the clearance procedure. We also identified an opportunity for improvement related to the alignment of clearance procedures.
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We determined storm restoration material could be managed more effectively. Specifically, we found (1) discrepancies between storeroom inventory counts and data in TVA's work management system, (2) storm restoration materials were not properly identified, and (3) storm restoration material reorder points were incorrect. Additionally, Transmission's Web site contained out-of-date and incomplete data.
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The FY 2019 IG FISMA metrics recommend a majority of the functions be at a maturity level 4 (managed and measurable) or higher to be considered effective. Based on our analysis of the metrics and associated maturity levels defined with the IG FISMA metrics, we found three of the five functions fell below the targeted level 4; therefore, TVA's ISP was not operating in an effective manner. We made eight specific recommendations to TVA management to make improvements in the ISP.
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(1) employee behaviors inconsistent with TVA values in two plant groups, (2) safety concerns due to asset and equipment conditions, and (3) workforce training and staffing.
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January 21, 2020 - Organizational Effectiveness - Hydro Generation, Raccoon Mountain - 2019-15627-04
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$48.1 million in costs paid by TVA from September 9, 2013, to June 30, 2018.
In summary, we determined:
- Enercon did not provide $94,936 in volume rebates due TVA. In addition, Enercon overbilled TVA $31,792 on cost reimbursable projects, including (1) $24,594 in unsupported travel costs and (2) $7,198 in excessive performance fee payments.
- The use of fixed price payment terms on a sample of 18 projects totaling $1.34 million caused TVA to pay at least $122,996 (10.11 percent) more than it would have if cost reimbursable payment terms had been used for those projects.
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(3) effective leadership, and (4) positive ethical culture. However, we also identified risks that could impact HDCC's ability to meet its responsibilities in support of Power Operations' mission. These were comprised of risks including (1) perceptions of lack of effective accountability and (2) execution-related concerns related to inadequate night shift staffing and workspace issues in the System Operations Center.
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In summary, we determined the company billed TVA in accordance with the contract terms. In addition, we determined the analysis and assumptions used by TVA in entering into an agreement with the company to purchase 75,000 dekatherms per day of natural gas from April 1, 2017, through March 31, 2021, were reasonable and resulted in significant discounts and savings to TVA. Furthermore, we determined the contract's current pricing methodology is reasonable for a planned 3-year extension, and, if TVA is able to negotiate similar contract pricing, we estimated it could save about $849,000 compared to estimated future market prices.
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In summary, we determined DZ billed TVA in accordance with the contract terms. However, we found craft employees are allowed up to 15 minutes of walkout time before the end of their assigned shift and are paid for the time as if they had worked until the end of the shift. Although this appears to be a standard and accepted practice by TVA and DZ, the practice of allowing walkout time is not documented in the contract, TVA's Project Maintenance and Modification Agreement, or any other TVA Project Labor Agreement. Additionally, it is not clear if DZ's practice (1) meets the intent of TVA's (unwritten) policy on craft end of shift walkout time or (2) is managed effectively.
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November 18, 2019 - Monitoring of Ernst & Young LLP's Audit of the Tennessee Valley Authority Fiscal Year 2019 Financial Statements - 2019-15683
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November 14, 2019 - Agreed-Upon Procedures for TVA Fiscal Year 2019 Performance Measures - 2019-15679
- The FY 2019 WP goals for the enterprise measures were properly approved. One change form was approved on November 9, 2018, and clarified the definition sheet methodology for calculating the goals for one of the measures. However, this change form did not impact the overall measure, weight, and goals of that measure. Another change form was approved on January 22, 2019, and affected one measure.
- The FY 2019 goals (target) for the corporate multiplier measures were properly approved.
- The actual FY to-date results for the enterprise measures agreed with the underlying support, without exception.
- The actual FY to-date results for the corporate multiplier measures agreed with the underlying support, without exception.
- The FY 2019 WP payout percentage provided by the Benchmarking and Enterprise Performance organization on November 6, 2019, was mathematically accurate and agreed with the OIG's recalculation.
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November 6, 2019 - Organizational Effectiveness Follow-Up - Sequoyah Nuclear Plant Site Security - 2019-15682
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October 24, 2019 - Organizational Effectiveness Follow-up - Human Resources' Employee Health - 2019-15688
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In summary, we determined AECOM overbilled TVA $287,346, including (1) $235,437 in labor costs, (2) $27,010 in subcontractor costs, (3) $11,742 in fee, (4) $9,682 in travel costs,
(5) $2,050 in materials costs, and (6) $1,425 in fixed price costs. Additionally, we noted issues with TVA's contract administration including (1) inadequate oversight of the fee evaluation process, (2) markup rates not included in the contract, and (3) activity on closed purchase orders.
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We reviewed 5,235 adjustable payouts made in fiscal years 2017 and 2018, and found most of the IPM adjustments were in alignment with overall performance ratings. However,
59 adjustments made in fiscal years 2017 and 2018 fell outside the recommended ranges established in the IPM guideline. We determined some of these happened because the IPM process uses rounded overall performance ratings instead of actual calculated performance ratings.
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(1) met regulatory requirements and established criteria and (2) provided financial or operational benefits over other potential locations considered.
We determined the site selected for the System Operations Center met established criteria and regulatory requirements. However, we could not determine if the site selected provided financial or operational benefits over other potential locations considered. We identified several issues in the site-selection process, including (1) inaccurate analysis,
(2) cost considerations that were high level and not documented, and (3) duplicate parcels. As a result, we determined 4 of the final 6 sites were incorrectly considered for selection by TVA because they did not meet one or more of TVA's established criteria. Additionally, we identified 1 site that was prematurely eliminated from consideration that should have been included in TVA's final site selection evaluation.
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We determined TVA generally managed designated outage materials to maximize use and minimize cost. Specifically, we found (1) no instances where TVA missed material redeployment opportunities for designated outage materials and (2) all outage items designated for surplus and subsequently repurchased were warranted. However, we identified opportunities for improvement related to documentation for material returns and a TVA inventory database control.
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Our audit found that employee recognition expenditures generally were not made in compliance with TVA policies and procedures. Specifically, we found (1) a lack of appropriate preapprovals, (2) strategic business unit-sponsored employee recognition expenditures not associated with an approved program, (3) transactions for items not allowable as employee recognition, and (4) split transactions. We also found employee recognition transactions that could pose reputational risks to TVA. Further, we found that oversight of employee recognition programs needs improvement, including monitoring of all employee recognition expenditures. Finally, we found that gift card award programs were not properly administered.
We made fifteen recommendations to TVA management to (1) update the governing TVA Standard Programs and Processes and (2) enhance oversight of employee recognition transactions. TVA management agreed with our recommendations and provided actions they plan to take to address each of them.
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Our audit found several instances where TVA executives did not comply with the FTR and/or TVA policies for travel, business meetings, and hospitality including (1) overpaid meal and incidental expenses per diem, (2) excessive meal costs incurred while in travel status, (3) the use of "car services" instead of less expensive modes of transportation in certain locations, (4) foreign travel expenses that did not comply with the FTR and TVA policies, (5) lodging that was not always in compliance with the FTR and TVA policies, and (6) some travel costs that were not reported to the TVA Board of Directors. Additionally, we found domestic airfare was generally in compliance with the FTR, but an area for improvement was identified.
In summary, the actions by some TVA executives indicate a "Tone at the Top" that could send a message to TVA employees that management is not committed to the TVA Code of Conduct and compliance with the FTR and TVA policies and procedures. We made 14 recommendations to TVA management to strengthen controls around executive travel by reinforcing the existing TVA travel policy and developing additional guidance to ensure compliance with the FTR. TVA management provided actions they plan to take to address each of our recommendations.
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(2) found a gap in how TVA's cybersecurity monitoring system detects cyberattacks against the transmission system, and (3) found TVA had not configured network devices in a consistent manner. TVA management remediated or mitigated all identified vulnerabilities and agreed with our remaining findings and recommendations.
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August 23, 2019 - Organizational Effectiveness - Hydro Generation, North Eastern Region - 2019-15627-02
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- S&L overbilled TVA $46,828 on cost reimbursable projects including (1) $43,080 in labor burden and other direct costs and (2) $3,748 in volume rebates (of which a credit of $2,236 was subsequently provided to TVA).
- The use of fixed price payment terms on projects caused TVA to pay at least $11.5 million more than it would have if cost reimbursable payment terms had been used for those projects.
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August 5, 2019 - Organizational Effectiveness - Hydro Generation, South Western Region - 2019-15627-01
(2) perceptions of upper management support including spending and lack of hydro experience.
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We determined that when the DCN process was utilized, DCNs were generally in compliance with procedural requirements and drawings appeared to have been updated accordingly. However, we determined the DCN process was not always followed for modifications made to coal plant drawings. Specifically, we found (1) modified drawings onsite that had not been updated through DCNs; (2) hand-illustrated drawings utilized in lieu of approved, computer-generated drawings; (3) outdated drawings potentially referenced in the course of work; and (4) reluctance at the sites to initiate the DCN process. Additionally, we identified opportunities for improvement related to (1) training, (2) drawing descriptions, (3) communication of DCN status and drawing availability, and (4) outdated standard programs and processes and intergroup agreements.
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May 22, 2019 - Organizational Effectiveness - Transmission Operations, Reliability, and Supervisory Control and Data Acquisition - 2018-15609
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We were unable to determine if Coal Operations fully implemented work management process improvements recommended by RMG because there were no formal recommendations made for coal plants. While RMG did not provide recommendations to TVA for coal plants, we reviewed work management metrics and determined that one metric improved while RMG was onsite while others had mixed results. However, performance declined in the 6 months after RMG left at several sites.
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We found most key inventory fields were utilized; however, some of the key fields contained invalid data. Specifically, we determined there was invalid data in fields related to
(1) quality assurance levels, (2) inventory status, (3) item descriptions, (4) units of measure, and (5) sites.
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May 15, 2019 - Organizational Effectiveness Follow-Up - Materials and Transportation Management - 2019-15638
(2) instances where goals were not SMART, and
(3) cross functional risks related to business units. The objective of this follow-up evaluation was to assess management's actions to address the remaining risks from our initial organizational effectiveness evaluation. In summary, we determined TVA management has taken actions to address the three remaining risks outlined in our initial organizational effectiveness evaluation.
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We reviewed minimum job requirements for 56 of 141 employees who were hired, rehired, or promoted to safety-sensitive positions in Power Operations during fiscal years 2017 and 2018. We determined some employees did not meet minimum job requirements for safety-sensitive positions upon hire or promotion. Specifically, we determined 4 employees did not meet one or more of the job requirements related to certifications or experience. In addition, we determined 11 employees in safety-sensitive positions did not meet minimum training requirements listed on the job descriptions to be completed after they were promoted. We also identified an opportunity for improvement regarding documentation of required training.
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We found 10 of 17 emergency response plans for gas plants were not reviewed on a timely basis based on TVA's requirement for an annual review, and all contained inaccurate contact information. We also found some systems required in emergency response plans were not available or functional. Specifically, we observed availability or functionality issues with at least two of four emergency alerting and notification systems tested at all six gas plants visited.
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We found the majority of emergency plans for active and retired coal plants were not reviewed on a timely basis or were not up to date. Specifically, we found (1) three of six emergency plans for active coal plants were not reviewed timely based on TVA's requirement for an annual review, and all six contained inaccurate contact information; (2) two of four emergency plans for retired coal plants were not reviewed timely and plans were not executable because of changed plant conditions; and (3) 14 of 15 emergency action plans required for coal combustion residuals storage facilities were not reviewed on a timely basis. We also found some systems required in emergency response plans were not functional. Specifically, we observed functional issues with emergency alerting and notification systems at two of the three plants we visited.
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March 26, 2019 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2019-15623
$10 million contract.
In our opinion, the company's cost proposal was overstated. Specifically, we found the company's proposal included overstated noncraft labor markup rates as compared to its most recent actual costs. In addition, the company's proposed contract rate attachments included (1) labor classifications that were not consistent with the company's actual job titles and (2) unnecessary attachments for craft labor and equipment costs.
We estimated TVA could avoid about $381,000 by negotiating reductions to the noncraft labor markup rates to more accurately reflect the company's recent actual costs. In addition, we suggest TVA negotiate revisions to the company's contract rate attachments to (1) more accurately reflect the company's actual labor classifications and (2) remove the unnecessary attachments for craft labor and equipment.
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(3) leadership of first-line supervisors. However, we also identified risks that could impact the effectiveness of PAF to achieve its responsibilities in support of Power Operation's mission. These risks related to (1) diminished trust in leadership at PAF and TVA senior management levels; (2) a weak safety climate; and (3) lack of adequate training.
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In summary, we determined SQN is not in compliance with BP-226. Specifically, we found (1) issues and returns of tools and equipment are not made in TVA's Tool Management System, and periodic random inventories are not performed; (2) tool room access is not adequately controlled; and (3) a new tool tracking system TVA is planning to use cannot accommodate rigging requirements. TVA management agreed with our findings and recommendations.
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February 20, 2019 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2018-15606
$10 million contract.
In our opinion, the company's cost proposal was understated. Specifically, we found the company's proposed costs for a Bull Run Fossil Plant (BRF) project included (1) markup rates that were misstated and (2) overstated materials, travel, and equipment costs. We also found the company's proposed rate attachments included (1) a contractor owned equipment attachment containing equipment that the company anticipates will be leased or rented from third parties, (2) fee on cost reimbursable work that exceeded the maximum allowable fee rate in TVA's request for proposal (RFP), and (3) excessive time and material (T&M) billing rates for most labor classifications because the rates were based on the company's maximum pay rates.
We suggest TVA negotiate appropriate adjustments to the BRF unit rates to more accurately reflect the company's actual costs. In addition, we suggest TVA negotiate (1) revisions to the company's contract rate attachments to correct errors and more accurately reflect the company's actual equipment usage, (2) a reduction to the company's proposed fee for cost reimbursable work to the maximum allowable fee rate in TVA's RFP, and (3) T&M billing rates based on the wage ranges' midpoint pay rates.
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January 29, 2019 - Human Resource System Personally Identifiable Information Access Control - 2018-15531
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April 30, 2018. Our audit objective was to determine if GE billed TVA in accordance with the contract terms.
In summary, we determined GE generally billed TVA in accordance with the contract terms. However, we found (1) GE did not maintain adequate documentation of the index it used to calculate the fees billed to TVA and (2) the contract terms regarding document retention could be strengthened.
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In our opinion, the contract's labor markup rates were overstated. We estimated TVA could save $1.4 million by negotiating reductions to the labor markup rates to more accurately reflect the contractor's recent historical costs. In addition, we found the contract's labor rate ranges are not reflective of the actual salary costs of the contractor's employees.
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November 15, 2018 - Monitoring Of Ernst & Young LLP's Audit Of The Tennessee Valley Authority Fiscal Year 2018 Financial Statements - 2018-15597
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November 14, 2018 - Agreed-Upon Procedures For TVA Fiscal Year 2018 Performance Measures - 2018-15602
- The FY2018 WP goals for the enterprise measures were properly approved. There were four change forms that clarified the definition sheet formulas for three separate measures. However, these change forms did not impact the measures, weights, and goals of the Enterprise measures.
- The FY2018 goals (target) for the corporate multiplier measures were properly approved.
- The actual FY to-date results for the enterprise measures agreed with the underlying support.
- The actual FY to-date results for the corporate multiplier measures agreed with the underlying support, without exception.
- The FY2018 WP payout percentage provided by the Benchmarking and Enterprise Performance organization on November 5, 2018, was mathematically accurate and agreed with the OIG's recalculation.
November 9, 2018 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2018-15562
$25 million contract.
In our opinion, the company's cost proposal was overstated. Specifically, we found the company's proposed costs for a Cumberland Fossil Plant (CUF) project and proposed unit rates for a Bull Run Fossil Plant (BRF) project included overstated (1) material costs, (2) general and administrative (G&A) rates, (3) labor costs, (4) equipment costs, and (5) temporary living allowance (TLA) costs. In addition, the company included a fee rate for the CUF project that exceeded the maximum allowable fee rate in TVA's request for proposal. We also found the company's proposed rate attachments included (1) incorrect craft labor rates, (2) incorrect application of the markup rates, and (3) noncraft wage ranges that did not reflect the company's current wage ranges. In addition, the company's proposal did not include (1) separate labor rate attachments for nonmanual employees who receive union benefits and (2) three noncraft labor categories that were included in the CUF and BRF proposals.
We estimated TVA could avoid about $1.66 million on the planned $25 million contract by (1) negotiating appropriate reductions to material costs, G&A rates, labor costs, equipment costs, and TLA costs; (2) limiting the company's fee rate on the CUF project to the RFP's maximum allowable rate; and (3) negotiating appropriate reductions to unit rates in the BRF proposal. In addition, we suggest TVA negotiate revisions to the company's contract rate attachments to correct errors and more accurately reflect the company's actual wage ranges and costs.
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We found TVA did not comply with the Federal Travel Regulation (FTR) and TVA policies and procedures regarding use of TVA helicopters for passenger transportation flights. Specifically, we found (1) cost comparison analyses prior to use of the helicopters were not documented, (2) business justifications prior to use of the helicopters were not documented, and (3) authorizations prior to use of the helicopters were not documented. Failure to follow the FTR and TVA policy (1) prevents TVA from ensuring travel costs are managed effectively and (2) may cause reputational risks for TVA with regard to wasteful use (or perceived wasteful use) of the TVA helicopters.
Additionally, TVA's Standard Programs and Processes for Use of TVA Helicopters, does not address (1) documentation requirements for the various types of helicopter flights,
(2) procedures necessary to evidence compliance with the FTR, and (3) the organization responsible for documenting the flights for audit purposes. We also noted passenger names are typically listed on flight sheets for passenger transportation flights but are not listed on flight sheets for transmission line or right-of-way work, aerial photography, and other similar jobs. Finally, all flight sheets listed the times of arrival and departure for multiple landings but it was unclear which passengers, if any, boarded and exited the helicopter at each location.
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(3) GAF specific training, (4) GAF's dual unit operator strategy, and (5) equipment. During our evaluation, actions were taken by TVA management to address the identified safety risks.
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Our audit objectives were to (1) determine whether loans were issued in accordance with TVA policies and procedures, (2) confirm loan balances to verify the receivables, and
(3) determine the extent to which loans were charged-off as bad debt and evaluate compliance with TVA's policies and procedures. We found loans were generally issued in compliance with TVA's policies and procedures. However, we were unable to confirm individual loan balances to verify the TVA receivable amount because neither TVA nor Regions (the bank servicing the loans) track individual loan balances. In addition, we found (1) loan write-offs were generally not made in accordance with the program guidelines,
(2) summary-level, loan-program balances reported to TVA by local power companies did not agree to those provided by Regions, (3) local power company loan documentation retention needs improvement, and (4) installation inspections are not required.
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September 28, 2018 - Organizational Effectiveness Follow-Up - Materials and Transportation Management - 2018-15578
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September 28, 2018 - Organizational Effectiveness Follow-Up - Human Resources' Employee Health - 2018-15583
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September 28, 2018 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2018-15536
$50 million contract.
In our opinion, the company's cost proposal was overstated. Specifically, we found the company proposed:
- Unit rates for a Bull Run Fossil Plant (BRF) project included overstated (1) equipment costs, (2) material costs, (3) indirect costs, and (4) labor costs. In addition, the BRF proposal contained various calculation errors that understated some of the company's costs.
- Costs for a Cumberland Fossil Plant (CUF) project included (1) overstated subcontractor costs, (2) a fee rate that exceeded the maximum allowable fee rate in TVA's request for proposal, and (3) understated labor costs.
- Costs for a Paradise Fossil Plant (PAF) project included (1) overstated noncraft labor costs; (2) overstated labor burden markup rates (payroll taxes, insurance, and fringe benefits); and (3) excessive fee.
- Rate attachments (1) included incorrect craft labor rates, (2) did not include some of the craft labor classifications the company used in the BRF proposal, (3) included noncraft wage ranges that did not reflect the company's current wage ranges, and (4) did not include an information technology markup rate that the company included in its proposals for the PAF and CUF projects.
(2) subcontractor, fee, and labor costs in the CUF proposal; and (3) labor costs, labor burden markup rates, and fee in the PAF proposal. In addition, we suggest TVA negotiate revisions to the company's contract rate attachments to correct errors and more accurately reflect the company's actual wage ranges.
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(2) teamwork, and (3) management support. However, we also identified issues that could pose risks to PCC's effectiveness and its continued ability to meet its responsibilities, including achievement of Gas Operations' initiatives in training and management communication.
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We found that CRs were originated for all environmental incidents; however, some safety and operational incidents did not result in CRs being originated as required by the procedure. We also found that not all actions taken to address CRs were timely, and some CR originators perceived that actions taken were not effective. In addition, we found opportunities for improvement related to (1) classification of CRs by significance level, (2) documentation of actions taken to address CRs, and (3) discrepancies in the Standard Programs and Processes that govern this process.
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September 24, 2018 - Organizational Effectiveness - Sequoyah Nuclear Plant Site Security - 2018-15550
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In summary, we determined CR overbilled TVA $191,867, including (1) $158,812 in subcontractor costs, (2) $2,766 in unsupported labor costs, (3) $27,750 for ineligible sales tax costs, and (4) $2,539 in travel costs. In addition, we noted CR billed TVA approximately $1.15 million for holiday and paid time off (PTO) hours under Contract No. 5586 in which TVA did not (1) obtain any assurance CR's PTO costs were not also included in the hourly billing rates or (2) limit the amount of PTO CR could bill under the contract.
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August 27, 2018 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2018-15547
$25 million contract.
In our opinion, the company's cost proposal was overstated. Specifically, we found:
- The company's proposed costs for a Cumberland Fossil Plant (CUF) project included overstated (1) material costs, (2) bond costs, (3) equipment costs, and (4) labor burden rates. In addition, the company included a fee rate that exceeded the maximum allowable fee rate in TVA's request for proposal (RFP).
- The company's proposed rate attachments included (1) incorrect labor billing rates, (2) noncraft wage ranges that did not reflect the company's current wage ranges, and
(3) fee on cost reimbursable work that exceeded the maximum allowable fee in TVA's RFP. In addition, the company's proposed methodology for recovering overhead and general and administrative (G&A) costs differed from the RFP's draft contract terms.
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In our opinion, the contract's labor and labor markup rates were fairly stated. However, we found the contract's current labor rate ranges are not reflective of the actual costs of the contractor's employees. We suggest that TVA request the contractor submit revised labor rate ranges that are more reflective of the actual minimum and maximum salary cost for each labor classification and incorporate these labor rate ranges into the contract.
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In our opinion, the contract's labor and labor markup rates were fairly stated. Specifically, the contract's labor markup rates were supported by the contractor's actual historical costs, and the contractor's proposal to update the contract's wage ranges was reasonable.
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(2) weighted averages used for moisture, ash, and sulfur calculations. We estimated the incorrect calculations resulted in net underpayments to coal vendors totaling $103,576.
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July 31, 2018 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2018-15548
$50 million contract.
In our opinion, the company's cost proposal was overstated. Specifically, we found:
- The company's proposed costs for a Cumberland Fossil Plant project included overstated (1) overhead/general and administrative rates, (2) equipment costs, (3) labor burden rates, and (4) temporary living allowance costs. In addition, the company's Cumberland Fossil Plant proposal included (1) a fee rate that exceeded the maximum allowable fee rate in TVA's request for proposal and (2) understated bond costs.
- The company's proposed rate attachments included (1) noncraft wage ranges that did not reflect the company's current wage ranges, (2) incorrect and missing labor billing rates, (3) excessive time and material rates, and (4) excessive equipment rental rates.
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We determined some of the inputs used for the July 2017 heat rate curves were not calculated correctly. Specifically, we determined the hourly heat rates were incorrect for four of the five CC plants. We did not determine the impact of any inaccurate calculations. We were unable to verify the accuracy of the data used to calculate coal hourly reference heat rates due to inconsistencies in system settings or data not being available. However, we did determine the hourly reference heat rates were not calculated for 6 hours at one of the eight coal plants.
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$1.706 billion, respectively, in FYs 2018, 2019, and 2020.
Our audit objective was to determine if TVA adequately monitors the actual return on investment of capital projects compared to those submitted during the budgeting and project review processes. We found TVA is not adequately monitoring actual return on investment of capital projects. Specifically, TVA Standard Programs and Processes requiring the assessments do not provide adequate guidance. We also found the required post-project benefits assessments were generally not being performed as only 1 assessment was performed in FYs 2015 through 2017 out of 22 projects completed. In addition, we found the estimated benefits in the project justification for the 1 assessment performed were not valid. Accordingly, the post-project assessment's basis for comparison was not valid.
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We found (1) TVA has adequate processes in place for awarding ED grants but does not have a Standard Program and Process for InvestPrep grants, (2) ED has not included InvestPrep grants in any compliance review program, and (3) the ED organization has not established specific performance metrics to determine if grant program objectives are met.
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We performed a limited scope review of flights to and from Oxford, Mississippi, for the period January 9, 2013, through February 9, 2018, and determined none of the flights were for non-TVA business purposes. We did not look at the cost effectiveness of these flights because our previous audit determined one of the weaknesses of TVA's FWA program was that cost comparison analyses prior to use of FWA were not performed.
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(3) management support of employees. We did not identify any significant risks.
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June 13, 2018 - Organizational Effectiveness Follow-Up - Environmental Permitting and Compliance - 2018-15559
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June 5, 2018 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2017-15515
$200 million contract.
In our opinion, the company's cost proposal was overstated. Specifically, we found:
- The company's proposed costs for a Cumberland Fossil Plant (CUF) project included overstated (1) equipment costs, (2) subcontract costs, (3) material costs, and (4) general and administrative (G&A) rate. In addition, we found the company's CUF proposal included (1) a fee rate that exceeded the maximum allowable fee rate in TVA's request for proposal (RFP), (2) unallowable contingency costs, and (3) understated noncraft labor costs.
- The company's proposed rate attachments included (1) incorrect craft labor rates, (2) noncraft wages that were not in compliance with the RFP's requirements, (3) fee on cost reimbursable work that exceeded the maximum allowable fee in TVA's RFP, and (4) hourly overhead markup rates for project direct costs for which the company could not provide support.
(1) revise the company's contract rate attachments to correct errors and more accurately reflect the company's actual wage ranges, (2) negotiate a reduction to the company's proposed fee for cost reimbursable work to the maximum allowable fee rate in TVA's RFP, and (3) remove the overhead markup rates from the rate attachments and require the company to bill actual direct project costs as incurred.
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$1 million in spending in any one fiscal year from October 1, 2014, through July 31, 2017.
We found TVA's management of early payment discounts needs improvement. TVA missed early payment discount opportunities of $932,340 out of $4,879,957 in early payment discounts available during our audit period. We also found early payment discount terms were generally entered accurately into TVA's Maximo system utilized to process and approve invoices. However, we noted a few exceptions where Maximo's payment terms did not accurately reflect the contractual payment terms.
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- $3,458,285 in labor costs were overbilled due to the use of labor classifications not provided for in the contract.
- $430,322 in labor costs were overbilled, including (1) $42,921 in excessive nonmanual labor wage rates, (2) $17,417 in overbilled nonmanual labor markups, (3) $353,804 in ineligible craft labor overtime costs, and (4) $16,180 in unsupported labor costs and excessive craft labor costs due to misclassifications.
- $435,624 for ineligible and unsupported temporary living allowances and travel costs.
- $52,705 for ineligible material and fitness for duty costs.
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May 15, 2018 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2018-15546
$50 million contract.
In our opinion, the company's cost proposal was overstated. Specifically, we found the company's proposed costs for a Cumberland Fossil Plant project included (1) misapplication of overhead/general and administrative (G&A) markup rates, (2) a fee rate that exceeded the maximum allowable fee rate in TVA's request for proposal (RFP), and (3) overstated material, equipment, travel, labor and labor burden costs. We also found the company's proposed rate attachments included (1) incorrect craft labor rates, (2) noncraft wage ranges that did not reflect the company's current wage ranges, (3) incorrect noncraft billing rates, (4) a contractor owned equipment rate schedule containing equipment that the company anticipates will be leased or rented from third parties, and (5) fee on cost reimbursable work that exceeded the maximum allowable fee rate in TVA's RFP.
We estimated TVA could avoid about $4.7 million on the planned $50 million contract by (1) limiting the company's application of overhead/G&A to total direct costs, (2) limiting the company's fee rate to the RFP's maximum allowable rate, and (3) negotiating appropriate cost reductions to the company's proposed material, equipment, travel, labor, and labor burden costs. In addition, we suggest TVA negotiate (1) revisions to the company's contract rate attachments to correct errors and more accurately reflect the company's actual wage ranges and equipment usage, and (2) a reduction to the company's proposed fee for cost reimbursable work to the maximum allowable fee rate in TVA's RFP.
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In summary, we determined TKE overbilled TVA $439,620 in elevator service costs, including (1) $184,477 in ineligible modernization costs; (2) $170,900 in unsupported and overbilled repair costs; (3) $68,515 in overbilled preventative maintenance costs, in which a credit of $1,036 has been provided to TVA; and (4) $15,728 in overbilled callback service costs. Additionally, we noted several opportunities to improve contract administration by TVA. Specifically, we found (1) stand-alone purchase orders that should have been referenced to Contract No. 8527, (2) missing Maintenance Control Program documentation, (3) costs administratively paid under another contract that should have been administratively paid under Contract No. 8527, and (4) missed early payment discount opportunities.
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April 25, 2018 - Browns Ferry Nuclear Plant Site Security's Organizational Effectiveness - 2017-15503
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In summary, we determined RSI overbilled TVA $109,504, including (1) $85,565 for ineligible and unsupported temporary living allowance costs and (2) $23,939 for unapproved and ineligible travel costs. In addition, RSI billed TVA $104,308 in fringe benefit costs it had not incurred because the contract did not provide a reduced fringe benefit markup rate for RSI employees who did not receive medical benefits.
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We determined the number of FWA in TVA's fleet is generally comparable to the number of FWA maintained by eight of its peers. However, we determined (1) TVA's stated justifications for sole sourcing the purchase of the aircraft were not supported and did not include any analyses of historical usage to determine TVA's FWA needs, and (2) the purchase of a jet instead of a second turboprop has not been cost effective. Additionally, (1) TVA may not have complied with Title 31, United States Code, Section 1344(a)(1), Passenger Carrier Use, and (2) TVA did not comply with various federal regulations and TVA policies and procedures regarding use of the aircraft.
Failure to follow the federal laws and regulations (1) prevents TVA from being able to accurately determine the need for owning aircraft, (2) prevents TVA from ensuring travel costs are managed effectively, and (3) may cause reputational risks for TVA with regard to misuse (or perceived misuse) of the aircraft. We made ten recommendations to TVA management to improve (1) controls around the purchase of any future aircraft, (2) use of the FWA, and (3) compliance with all applicable laws and regulations.
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March 21, 2018 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2017-15491
$200 million contract.
In our opinion, the company's cost proposal was overstated. Specifically, we found the company's proposed costs for a Cumberland Fossil Plant project, proposed unit rates for a Bull Run Fossil Plant (BRF) project, and proposed costs for a Paradise Fossil Plant (PAF) project included overstated (1) labor markup and overhead/general and administrative rates, (2) material costs, (3) equipment costs, (4) labor costs, and (5) subcontractor costs. In addition, the company included (1) unsupported costs in the BRF project and (2) excessive project oversight costs in the PAF project. We also found the company's proposed rate attachments included (1) incorrect craft labor rates and (2) noncraft wage ranges that were not reflective of the company's actual wage ranges.
We estimated TVA could avoid $19.07 million on the planned $200 million contract by negotiating appropriate reductions to (1) labor markup and overhead/general and administrative rates, material costs, equipment costs, labor costs, and subcontractor costs; (2) unit rates in the BRF proposal; and (3) project oversight costs in the PAF proposal. In addition, we suggest TVA negotiate revisions to the company's contract rate attachments to correct errors and more accurately reflect the company's actual wage ranges.
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February 27, 2018 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2017-15501
$50 million contract.
In our opinion, the company's cost proposal was overstated. Specifically, we found the company's proposed costs for a Cumberland Fossil Plant project and proposed unit rates for a Bull Run Fossil Plant project included overstated (1) labor markup rates, (2) labor costs, (3) material costs, (4) equipment costs, (5) subcontract costs, and (6) other direct costs. In addition, the company's proposed contract rate attachment for employees who receive no benefits was not representative of the company's actual benefit structure
We estimated TVA could avoid about $5.2 million on the planned $50 million contract by negotiating appropriate reductions to (1) labor markup rates, labor costs, material costs, equipment costs, subcontract costs, and other direct costs in the Cumberland Fossil Plant proposal and (2) unit rates in the Bull Run Fossil Plant proposal. In addition, we suggest TVA require the company (1) eliminate the rate attachment for field temporary or local hires with no benefits and (2) submit a rate attachment for employees with limited benefits to more accurately reflect the company's benefit structure.
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We also identified areas for improvement related to (1) the classification of CRs, (2) CAP education and training, and (3) the routing of anonymous CRs to appropriate personnel.
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January 10, 2018 - TVA Nuclear's Process for Addressing Nuclear Regulatory Commission's 2009 Confirmatory Order - 2017-15448
We concluded there was a weakness in the approach that TVA followed for addressing the 2009 CO. TVA did not have a formal process or procedure directly related to how a CO issued by the NRC should be addressed. TVA's approach did not assign accountability or provide oversight to govern the implementation and continued execution for on-going actions. A potential contributing cause was TVA's intent to address the underlying issue only and not to prevent recurrence.
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December 22, 2017 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2017-15493
$50 million contract.
In our opinion, the company's cost proposal was overstated. Specifically, we found the company's proposed costs for a Cumberland Fossil Plant (CUF) project and proposed unit rates for a Bull Run Fossil Plant (BRF) project included overstated equipment costs, labor costs, temporary living allowance costs, and material costs. In addition, the company included (1) unallowable contingency costs for the CUF project, (2) a fee rate for the CUF project that exceeded the maximum allowable fee rate in TVA's request for proposal (RFP), and (3) unsupported costs in the BRF project. We also found the company's proposed rate attachments for (1) noncraft labor, craft labor, and contractor-owned equipment contained errors, and (2) fee on cost reimbursable work exceeded the maximum allowable fee rate in TVA's RFP.
We estimated TVA could avoid $1.97 million on the planned $50 million contract by (1) negotiating appropriate reductions to equipment, labor, temporary living allowance, and material costs; (2) eliminating contingency costs from the company's CUF project and future cost reimbursable projects; (3) limiting the company's fee rate on the CUF project to the RFP's maximum allowable rate; (4) eliminating unsupported costs from the BRF proposal; and (5) negotiating appropriate reductions to the unit rates in the BRF proposal. In addition, we suggest TVA require revisions to the company's contract rate attachments.
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(3) management support within the business units. However, we also identified risks related to (1) collaboration across the CHRO, (2) relationship and inclusion issues, (3) potential for noncompliance with the Tennessee Valley Authority's code of conduct, and (4) the potential for ineffective CHRO measurements.
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December 18, 2017 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2017-15504
In our opinion, the company's cost proposal was overstated. Specifically, we found the company's proposed costs for a Cumberland Fossil Plant project and proposed unit rates for a Bull Run Fossil Plant project included overstated (1) equipment costs, (2) material costs, (3) workers' compensation insurance costs, and (4) travel costs.
We estimated TVA could avoid about $3.75 million on the planned $100 million contract by negotiating appropriate reductions to (1) equipment, materials, workers' compensation, and travel costs in the Cumberland Fossil Plant proposal and (2) unit rates in the Bull Run Fossil Plant proposal.
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In summary, we found the monetary value obtained by TVA during fiscal years 2016 and 2017 was more than the cost of providing the interruptible pricing products introduced in October 2015 to participating commercial and industrial customers. However, we also found documentation related to the interruptible valuation is not maintained in a central location. We recommended TVA's Vice President, Pricing and Contracts, maintain all supporting documentation related to the annual interruptible valuation in a central location. TVA management agreed with the audit findings and recommendation in this report and plans to take corrective action.
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$502 million in craft labor costs billed to TVA from January 1, 2010, to June 30, 2015. Our audit objective was to determine if Bechtel billed TVA in accordance with the contract terms and conditions.
In summary, we determined Bechtel overbilled TVA $6,828,935. Specifically, Bechtel overbilled:
- $3,826,970 in ineligible craft labor and related costs, which included (1) $3,584,707 for ineligible overtime and double time costs billed, (2) $195,850 for ineligible personnel history questionnaire incentive payments, and (3) $46,413 for ineligible and/or unsupported meal allowances.
- $2,932,151 for ineligible and excessive craft labor costs for material handling.
- $60,808 in overbilled craft labor due to using an incorrect rate for the craft labor Helmets to Hardhats contribution.
- $9,006 in other unsupported and ineligible craft labor costs.
November 14, 2017 - Monitoring of Ernst & Young LLP's Audits of the Tennessee Valley Authority Fiscal Year 2017 Financial Statements - 2017-15507
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May 2018. However, we identified an opportunity for improvement related to (1) routing of handwritten, anonymous CRs and (2) documenting that CRs are routed to the appropriate personnel.
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November 8, 2017 - Agreed-Upon Procedures For TVA Fiscal Year 2017 Performance Measures - 2018-15522
- The FY 2017 WP goals for the enterprise measures were properly approved. There were no change forms for FY 2017 measures.
- The FY 2017 goals (i.e., target) for the corporate multiplier measures were properly approved.
- The actual year-to-date results for the enterprise scorecard measures agreed with the underlying support.
- The actual year-to-date results for the corporate multiplier measures agreed with the underlying support, without exception.
- The FY 2017 WP payout percentage provided by the Benchmarking and Enterprise Performance organization on November 6, 2017, was mathematically accurate and agreed with the OIG's recalculation.
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October 27, 2017 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2017-15499
$300 million contract.
In our opinion, the company's cost proposal was overstated. Specifically, we found the company's proposed costs for a Cumberland Fossil Plant (CUF) project and proposed unit rates for a Bull Run Fossil Plant (BRF) project included overstated temporary living assignment (TLA) costs, equipment costs, performance and payment bond costs, labor costs, and insurance costs. In addition, the company (1) understated its small tools rate for the CUF project due to errors in the company's estimate and (2) proposed a fee rate for the CUF project that exceeded the maximum allowable fee rate in TVA's request for proposal (RFP). We also found the company's proposed markup rate for employees who receive no benefits was overstated.
We estimated TVA could avoid about $9.62 million on the planned $300 million contract by (1) negotiating appropriate reductions to TLA, equipment, performance and payment bond, labor, and insurance costs; (2) limiting the company's fee rate on the CUF project to the RFP's maximum allowable rate; and (3) negotiating appropriate reductions to unit rates in the BRF proposal. In addition, we suggest TVA negotiate revised markup rates for employees who receive no benefits.
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September 29, 2017 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2017-15494
$150 million contract.
In our opinion, the company's cost proposal was overstated. Specifically, we found:
- The company's proposals for a Cumberland Fossil Plant (CUF) project and a Bull Run Fossil Plant (BRF) project included overstated (1) equipment costs, (2) material costs,
(3) general and administrative (G&A) and small tool rates, and (4) labor costs. In addition, we found the company's proposed unit rate for BRF monthly maintenance was understated due to omissions in the company's unit rate cost buildup. - The company's proposed labor rate attachments included (1) incorrect craft labor rates and (2) noncraft wage ranges that were not reflective of the company's actual wage ranges. In addition, the company's proposal omitted labor rate attachments for employees who receive limited or no benefits.
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September 28, 2017 - Organizational Effectiveness Follow-Up - Environmental Permitting and Compliance - 2017-15497
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TVA's decision to enter into long-term wind power contracts has not proven to be in TVA's economic interest. The decision to enter into the wind power contracts was primarily due to TVA management's assumptions that (1) TVA and other utilities could be required to provide a greater portion of the electricity they sell by using renewable resources, (2) early approval of the wind power contracts would allow TVA to proactively obtain cost effective renewable and clean generation agreements prior to enactment of renewable energy standard legislation, and (3) the wind power contracts were competitive with forecasted market electricity prices. However, the assumptions TVA used in its decision-making process proved to be inaccurate.
TVA accepted a significant amount of risk by locking into level fixed prices over the contract terms. TVA relied on net present value (NPV) analyses based in part on long-term forecasts of electricity prices over a 20-year time horizon. TVA's NPV analyses showed most of the contracts to have only a small positive NPV and a significant probability that the NPV would be negative. In addition, TVA's own analyses showed it would only begin to receive value, if any, in the last 10 years of the contracts' 20-year terms.
As of TVA's most recent NPV calculation performed in March 2016, the total NPV of these contracts was a negative $1.4 billion. If TVA had issued one initial contract for 200 MW instead of contracting with nine wind farms for approximately 1,700 MW all at once, TVA management could have learned valuable insights into wind power contracting and the related risks.
With regard to the $37.7 million in energy curtailment payments TVA made between November 1, 2012, and January 3, 2017, we determined these payments were in TVA's economic interest at the time the decisions were made.
We recommended TVA's Senior Vice President, Distributed Energy Resources:
- Take a measured approach for large projects in areas TVA does not have familiarity or that are new to TVA. For instance, rather than entering into several large contracts in a short period of time, consideration should be given to entering into one small contract to gain a better understanding of the industry and market.
- Provide positive financial value earlier in future power purchase contract terms by negotiating terms that do not set a level fixed price over the contract term. Instead, use periodic price adjustments (quarterly or annually) based on a specific economic index or escalating the price at a predetermined rate over the contract term.
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(4) inclusion that could negatively affect the ability of HR to contribute to the Chief Human Resources Office's mission and to the success of the Tennessee Valley Authority.
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We found that materials designated as surplus at active and transitional plants were generally appropriate. Of the $49.7 million of surplused materials from October 1, 2013, to March 31, 2017, less than 1 percent was repurchased by coal plants. However, retired plant materials may have been surplused unnecessarily resulting in missed opportunities to redeploy materials, including inventory and noninventory, within the fleet. Based on our review of TVA SPPs and best practices, we identified opportunities for TVA to improve its redeployment of both inventory and noninventory materials in future plant retirements. In addition, we identified conflicting criteria related to the time frame used in designating materials as surplus.
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September 11, 2017 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2017-15492
$100 million contract.
In our opinion, the company's cost proposal was overstated as follows:
- The company's proposal for a Cumberland Fossil Plant project included overstated (1) equipment costs, (2) overhead markup rates, and (3) material costs. In addition, the company's proposed fee rate exceeded the maximum allowable fee rate in TVA's request for proposal (RFP).
- Proposed time and material (T&M) rates were not supported by the company's actual costs.
- The company did not comply with the RFP requirements regarding cost reimbursable work.
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August 31, 2017 - Actions to Address Issues Identified in Assessments of Nuclear Quality Assurance - 2017-15466
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- $1,560,515 in labor costs were overbilled due to the use of labor classifications and billing rates not provided for in the contract.
- $654,852 in labor and related costs were overbilled, including (1) $454,838 for ineligible general liability insurance markups applied to craft labor, (2) $177,443 in unapproved craft labor costs, (3) $14,136 in excessive nonmanual fringe benefits, (4) $6,302 in ineligible overtime costs, and (5) $2,133 in excessive payroll tax costs. WPS also acknowledged the 2015 payroll tax adjustment required by the contract had not been completed.
- $246,304 in unapproved subcontractor costs were billed.
- $133,551 in overbillings occurred due to ineligible and unsupported temporary living allowances and travel costs, excessive fees, discounts that were not provided to TVA, and ineligible materials, supplies, and fitness for duty costs.
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We could not determine if transmission PM had been performed in accordance with established schedules because (1) work completion dates in Maximo, TVA's work management system, did not consistently match the date the PM was completed, and (2) TVA did not require supporting documentation evidencing work completion dates to be maintained. Additionally, we reviewed documentation related to equipment failures and did not identify any failures or Load Not Served, a measure of the magnitude and duration of transmission system outages, attributed to Transmission and Power Supply PM practices.
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We determined PM regulated by the North American Electric Reliability Corporation (NERC) was performed in accordance with TVA's established schedules. However, we were unable to determine if non-NERC PM had been performed in accordance with established schedules due to unreliable dates and a lack of documentation in Maximo - the work management system used by TVA to manage PM. We also determined that inadequate PM contributed to 11 equipment failures; 9 of these failures resulted in forced outages. Through interviews with plant personnel, we identified potential areas for improvement including: (1) predictive maintenance, (2) implementation support for new PM programs,
(3) Maximo training and access, and (4) transition of coordinator responsibilities.
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(5) customer service. However, we also identified an employee engagement risk related to a relationship issue with one manager.
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Based on our independent recalculation of the January 2017 FCA rates, we determined all but one calculation within the FCA was performed in accordance with the Board-approved formula, with the exception being the resource cost allocation (RCA). The RCA assigns variable costs based on usage and power supply cost to one of two customer categories. These categories, Non-Standard Service and Standard Service, are defined by the Board-approved formula and are generally based on a customer's demand. We noted TVA's method of calculating the RCA used in the FCA calculation was not in agreement with the approved methodology. Specifically, while calculating the RCA, TVA did not appropriately categorize some direct-served, federal, and interdivisional customers, based on their contract demand.
TVA subsequently determined that over a 16-month period (October 2015 through January 2017), the miscalculation of the RCA led to errors of about (1) $449,000 too much deferred cost in the Non-Standard Service Customer deferred account and (2) $462,000 too little deferred cost in the Standard Service Customer deferred account.
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In summary, we determined ScottMadden billed TVA (1) $2,077,043 for work that was performed prior to authorization and (2) $273,890 for labor categories that were not included in the pricing schedules of Contract Nos. 3526 and 8579. In addition, although ScottMadden had a higher percentage of sole-source awarded tasks than its competitors, we determined Supply Chain was following its intended competitive model for the blanket contracts to obtain the best value for TVA.
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We determined non-competed contracts are executed in accordance with TVA policies and procedures. However, identification and classification of non-competed contracts in TVA's Maximo system could be improved. We also noted improvements could be made in the maintenance and retention of contract file documents.
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May 18, 2017 - Human Resources Business Office and Ombudsman's Organizational Effectiveness - 2016-15445-01
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April 19, 2017 - NTD Consulting Group, LLC's Assessment of TVA's Evaluation of the Chilled Work Environment at Watts Bar Nuclear Plant - 2016-16702
Due to the technical nature of the issues, the OIG engaged a consulting firm with expertise in the nuclear power industry, NTD Consulting Group, LLC (NTD) to (1) assess whether TVA's analyses of its April 22, 2016, response to the NRC CWEL were thorough and adequate; and (2) review the history of nuclear safety culture issues at TVA for the past several years. In summary NTD found:
- TVA's two analyses were incomplete and inadequate, as was TVA's April 22, 2016 response to the NRC CWEL.
- TVA's planned corrective actions to address the chilled work environment are unlikely to have long-term effectiveness or sustainability and the probability of success will remain low until an independent and critical evaluation is conducted, and the associated changes are embraced throughout the organization.
- The precursors of the chilled work environment went unrecognized by management, internal and external oversight groups, and TVA barrier programs and processes such as the corrective action program, the Employee Concerns Program, Quality Assurance, Nuclear Safety Culture Monitoring Panel, and the Nuclear Safety Review Board which are the programmatic barriers put in place to detect such precursors.
- Documentation, data, and interview results indicate TVA management has inappropriately influenced the outcome of causal analyses and independent investigations pertaining to nuclear safety culture/safety conscious work environment issues at WBN.
In response to NTD's report, TVA management generally agreed with the recommendations and noted that a number of corrective actions were taken or are underway since the first draft of the report was issued. Additionally, TVA management reiterated that they "previously stated to the OIG and, more importantly, to the NRC, its belief that there is a chilled work environment at WBN 1. Moreover, TVA has expressly acknowledged management's role in creating the condition and its responsibility for correcting it."
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$100 million contract. In our opinion, the company's cost proposal contained overstated time and material (T&M) and fixed unit rates as follows:
- The proposed T&M rates included: (1) markups on third-party equipment rentals not provided for in the draft contract; (2) overstated hourly, daily, and weekly equipment rental rates; (3) overstated hourly craft and noncraft labor rates and noncraft labor classifications for labor costs that are typically recovered through the company's overhead markup rate; and (4) markups on subcontract costs not provided for in the draft contract.
- The proposed fixed unit rates included overstated equipment, overstated labor, and markups not provided for in the draft contract.
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The objective of this follow-up evaluation was to determine if the sale of the Bellefonte site was conducted according to TVA's policies and procedures. We determined the sale complied with most of the steps in TVA's land disposal policies and procedures. However, the sale was a unique transaction that resulted in some deviations from TVA's policies and procedures. Also, we noted some land disposal guidance was outdated.
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Based on our review of the training required by the Occupational Safety and Health Administration and the Environmental Protection Agency regulations, we determined the ammonia training provided by TVA addressed most of the federal training requirements; however, some elements may not be addressed. We also found (1) some personnel had not completed all of the required training, and (2) training could be improved by adding hands-on and more frequent training. Additionally, based on interviews with plant personnel, we determined the staffing of maintenance personnel for ammonia systems was adequate at the four coal plants we reviewed. However, staffing for assistant unit operators was inadequate or needed improvement at two of the four plants.
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TVA contracted with Brandenburg Industrial Service Company (Brandenburg) to perform the demolition at JSF. We initiated this evaluation due to inherent safety risks associated with the demolition phase of deconstruction and TVA's lack of recent experience in fossil plant demolition. Our objective was to determine whether demolition activities at JSF were adhering to safety principles found in the TVA D4 Program Guide and were in compliance with selected safety criteria established in Brandenburg's Health and Safety Plan (HASP) for JSF.
Our evaluation found TVA and Brandenburg met most of the safety requirements included in TVA's D4 Program Guide and Brandenburg's HASP for JSF and selected for review by the OIG. However, we determined Brandenburg was not in compliance with hazard identification requirements outlined in its HASP and the D4 Overview training records were not maintained at JSF by Brandenburg for 6 of the 25 sampled Brandenburg employees. We also noted potential safety hazards that were corrected subsequent to our site visit.
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December 13, 2016 - Proposal for Construction Services for TVA Bottom Ash Dewatering Facilities - 2016-15429
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November 15, 2016 - Monitoring of TVA's Financial Statement Audit by Ernst and Young LLP - 2016-15446
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November 8, 2016 - Proposal for Construction Services for TVA Bottom Ash Dewatering Facilities - 2016-15430
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November 4, 2016 - Agreed-Upon Procedures for TVA Fiscal Year 2016 Performance Measures - 2017-15456
- The FY 2016 WP goals for the enterprise-wide and strategic business unit measures were properly approved.
- One scorecard adjustment change form for FY2016 was approved on July 26, 2016. The change form affected one measure that was on five scorecards.
- The FY2016 goals (i.e., target) for the corporate multiplier measures were properly approved.
- The actual year-to-date results for the strategic business unit scorecard measures agreed with the respective supporting documentation.
- The actual year-to-date results for the enterprise-wide scorecard measures agreed with the underlying support.
- The actual year-to-date results for the corporate multiplier measures agreed with the underlying support.
- The FY2016 WP payout percentages provided by the Benchmarking and Performance Analysis organization on October 31, 2016, were mathematically accurate and agreed with the OIG's recalculations.
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(3) management support of employees, and (4) employee engagement. However, we also identified inherent project management risks that, coupled with relationship issues between GC personnel and customer and support organizations, could increase the risk that GC will not be able to effectively meet its mission in the future. Specifically, both GC personnel and customer and support organizations mentioned lack of recognition of how each organization affects the other, lack of knowledge of TVA Standard Programs and Processes, lack of collaboration and communication, and conflicting priorities as issues that affect their relationships.
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September 28, 2016 - Cumberland Fossil Plant Organizational Effectiveness Follow-up Review - 2016-15420
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September 28, 2016 - Environmental Permitting and Compliance Organizational Effectiveness - 2016-15366
Our review identified strengths within EP&C related to (1) compliance with regulations, (2) providing support to Operations, (3) relationships with regulators, (4) teamwork, (5) safety, and (6) direct management support of employees. However, we also identified internal and external factors that, if left unresolved, could increase the risk that EP&C will not be able to effectively meet its long-term vision and could impact TVA's ability to meet the environmental portion of its mission. These factors are related to (1) organizational alignment and role clarity within TVA's environmental functions, (2) resource availability to cover the current and emerging TVA risk landscape, and (3) employee engagement risks.
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Our review identified strengths in EO related to (1) organizational alignment, (2) positive work relationships with other organizations, (3) management support of employees, and (4) employee teamwork. However, we also identified issues that, if left unresolved, could increase the risk EO will be unable to effectively meet its responsibilities in the future. Specifically, our interviews of EO personnel and review of operational information disclosed issues related to (1) role clarity and relationship issues with Nuclear, (2) staffing concerns and environmental audit coverage, and (3) concerns with one manager's behavior.
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September 22, 2016 - Proposal for Holistic Industrial Wastewater Treatment Program Services - 2016-15419
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Employees interviewed by the OIG in the Operations Department at the Browns Ferry Nuclear Plant (BFN) generally felt free to raise concerns without fear of retaliation. All but one employee reported feeling free to report nuclear safety, quality, or technical concerns without fear of retaliation. Also, most employees were comfortable reporting nuclear safety or quality concerns through multiple avenues. A few employees were aware of retaliation, mostly citing events dating back several years. However, several employees relayed a perception there could be retaliation for raising concerns. Interviews of Operations Department employees at BFN identified issues that could impact an employee's willingness to report concerns in the future, including (1) inadequate resolution of concerns, (2) employee distrust of management, (3) the Outage Control Center and management pressuring employees, and (4) limited awareness and understanding of the Employee Concerns Program.
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Employees interviewed by the OIG in the Operations Department at the Sequoyah Nuclear Plant generally felt free to raise concerns without fear of retaliation. All but one employee reported feeling free to report nuclear safety, quality, or technical concerns without fear of retaliation. Also, most employees were comfortable reporting nuclear safety or quality concerns through multiple avenues. However, 11 percent indicated there could be retaliation when expressing concerns. Even though the potential for retaliation may not currently impact an employee's decision to report concerns, it could in the long term. Our interviews with the operators identified other issues that could impact an employee's willingness to report concerns in the future, including (1) the Outage Control Center and management overriding and pressuring employees, (2) employee distrust of management, and (3) a lack of confidence in the effectiveness of the Corrective Action Program and Employee Concerns Program.
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September 20, 2016 - Enterprise Project Management Office Organizational Effectiveness - 2016-15384-01
Our review found the EPMO to be effective in achieving its current goals and objectives. To meet its responsibilities, the EPMO has deployed project management guidance, risk assessment tools, and a project lessons learned database and is currently developing an integrated suite of project management tools. Our review identified strengths related to (1) organizational alignment, (2) trust and accountability, (3) management support of employees and (4) employee engagement. We also identified an inherent risk pertaining to organizational resistance to change that if not well mitigated, could threaten the mission of the EPMO, as well as the potential for sustainable project management culture change across TVA. EPMO is in the process of mitigating this risk. As a result of actions recently taken by the EPMO to mitigate risks to alignment, execution, and engagement, no recommendations were made.
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The OIG found the work environment for Nuclear Oversight is not always conducive to raising concerns without fear of retaliation. Most QA employees felt free to raise concerns or problems without fear of retaliation; however, one QA employee informed us that although they would report a nuclear quality problem or concern, they would not report these problems or concerns to their management. While most QA employees felt free to raise concerns or problems, most ECP employees did not without fear of retaliation. Our interviews with QA and ECP personnel identified issues that could be impacting employees' willingness to report concerns, including (1) distrust of management, (2) past concerns being overridden or ignored, (3) work being influenced, and (4) QA rotational positions.
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August 4, 2016 - Proposal for Holistic Industrial Wastewater Treatment Program Services - 2016-15405
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We recommended TVA management consider (1) developing policies and practices that directly communicate the senior-level commitment to combating fraud; (2) implementing practices, such as training and other fraud-awareness activities, that involve all levels of TVA in setting an antifraud tone that permeates the organizational culture; and (3) designating an entity within TVA to lead fraud risk management activities in accordance with the guidelines provided by the GAO framework. TVA management agreed with our recommendations, stating they were consistent with Public Law 114-186 signed by President Obama on June 30, 2016.
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TVA management requested approval by the Board of Directors to surplus the Bellefonte site during its May 5, 2016, public board meeting so TVA could begin the process for selling it. After considering future needs for the site, as well as the risks associated with a potential sale, the Board voted to surplus Bellefonte. TVA can now go forward with the sale. We plan to complete a follow-up review after the sale of the property to determine whether the sales process was conducted in accordance with TVA policies and procedures.
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TVA management (1) changed the contract payment terms in the Maximo system on March 21, 2014, from Net 45 days to 2 percent-16 days/Net 45 days, which corrected the problem of missed payment discount opportunities when TVA had opted to make progress payments, and (2) issued Contract Amendment No. 4, effective July 28, 2015, which partially addressed the contract scope of work and fully addressed the price adjustment formulas. However, the contract scope of work needs to be further amended to include materials and services.
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In December 2013, IT informed the OIG that management action plans to address recommendations from the 2011 audit were complete. Soon thereafter, IT informed us it had also completed implementation of the IT1K program. To assess the results of the management action plans, the IT1K program, and to determine the current state of IT's organizational effectiveness, a follow-up IT organizational effectiveness audit was scheduled. The objective of this audit was to evaluate the effectiveness of organizations within IT in meeting TVA's mission and values. To accomplish this, we evaluated (1) current effectiveness of operational groups within IT, (2) IT's alignment with TVA values, (3) the outcomes of IT1K initiatives, and (4) the outcomes of management action.
We found operational maturity levels were generally trending upward; however, actions are needed to improve alignment with TVA values in two IT groups, and some IT1K initiatives and management action plans have not been completed or sustained. In addition, we found IT could make improvements in three areas that were not previously covered in our audits of the individual groups under IT-(1) progression planning, (2) support for critical applications, and (3) job descriptions.
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In summary, in conjunction with Synapse, we determined TVA was making dispatch decisions using inaccurate cost information. The dispatch costs were inaccurate because TVA's delivered costs of fuel, which is the major component of dispatch costs, did not include all appropriate costs, were not calculated consistently across commodities, and were not calculated correctly. The errors we identified skewed coal dispatch costs up to 8.4 percent and gas dispatch costs up to 2.8 percent. In addition, other opportunities for improvement were identified related to inflation and escalation rates used in the delivered cost of coal calculations and the usage percentages assigned to each gas hub used by TVA in calculating the delivered cost of gas.
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May 31, 2016 - Verification of TVA's Compliance with the Green Pricing Accreditation Program Requirements for Calendar Year 2015 - 2016-15395
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May 5, 2016 - Aggregated Demand Response Proof of Concept Agreement with Seven States Power Corporation - Contract No. 544179 - 2015-15341
Our audit objectives were to (1) determine if the amounts invoiced by Seven States were in compliance with the contract terms and (2) assess the effectiveness and management of the ADR POC program. Our audit included $2.34 million in payments made to Seven States from August 1, 2013, through February 5, 2016. In summary, we found Seven States invoiced amounts to TVA in accordance with the contract terms and conditions. However, we also found (1) Seven States has not met capacity nominations, and (2) TVA's management of the ADR POC program needs improvement. Specifically, TVA management did not establish capacity nomination limits that reflected Seven States' actual load curtailment capability and penalties for underperformance until September 30, 2015, which resulted in TVA incurring approximately $1,028,000 in additional costs; has not performed a cost/benefit analysis of the six load curtailment events; and has not established criteria to measure the program's effectiveness.
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The OIG determined URS may have overbilled TVA $6,885,835 in shared cost savings and $317,852 for a completion bonus, due to potential misrepresentations in estimated material costs included in the Target Cost Estimate for the John Sevier Combined Cycle project. In addition, we determined URS overbilled TVA $1,205,758, including: (1) $378,212 in overbilled temporary assignment costs, (2) $325,876 in other direct costs, (3) $439,189 in labor costs, (4) $55,390 in markup costs, and (5) $7,091 in travel costs. URS issued credits and refunds to TVA during the course of our audit, which reduced the amount to be recovered by $76,745.
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This audit was initiated to determine whether (1) the design provides reasonable assurance of meeting its intended purpose and (2) the Protocol was implemented as required. We determined the Protocol provides false assurance TVA is mitigating the risk of undue influence due to several factors: (1) the design not meeting its intended purpose, (2) the Protocol not being implemented as required, due to inconsistent incorporation into policies and procedures and noncompliance with some Protocol requirements, (3) a lack of consequences for the applicant's noncompliance with self-disclosure, and (4) an absence of instructions on how an employee should disclose knowledge of actual or apparent undue influence limits the likelihood it will be identified and prevented. Ultimately, this poses a risk of reputational harm to TVA and the applicant, person, corporation, or entity seen as receiving the benefit.
We recommended TVA (1) perform a risk assessment to determine what types of "things of value" and "covered persons" should be defined in the Protocol; (2) enhance the Protocol by evaluating the benefit of whether to define applicant violation consequences, incorporating reporting guidelines for employees, and revising immediately, and requiring review cadence; (3) require implementation of the Protocol for benefits identified as "things of value," into all TVA related policies and processes; (4) develop a repository for all types of defined "covered person" requests other than those related to Section 26a permit and interest in real property requests; (5) identify who is responsible to brief the TVA Board's Audit, Risk, and Regulation Committee; (6) provide annual training; and (7) disseminate the Protocol annually, at a minimum, to TVA personnel who could be affected by its requirements.
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We determined there was no assurance the process was operating as intended, and some risks were not being adequately mitigated. Specifically, we determined (1) the process was primarily designed to acquire and process staff augmentation contractors, but the process could only provide limited assurance of assembling the least-cost contractor workforce; (2) controls around contractor employment tenure could be improved; (3) numerous exceptions to a control capping noncraft staff augmentation contractor salaries were being granted; (4) hiring managers could choose job positions in the contractor selection system with higher pay rates than intended for the position being filled; (5) CWM performance metrics were not being calculated; and (6) contractor data inaccuracies existed within TVA systems. We also identified three CWM process risks that may not be adequately mitigated, including compliance with TVA's Citizenship Requirements policy, conflicting employer-employee relationships, and compliance with United States Citizenship and Immigration Services guidance. TVA management agreed with our recommendations to address the findings and risks noted above.
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In our opinion, aligning long-term incentives with all strategic imperatives would (1) benefit TVA by promoting accountability in all areas identified as crucial to the achievement of TVA's mission in TVA's Strategic Plan, and (2) continue to emphasize these areas as members cycle off of the TVA Board of Directors and executives leave TVA.
We also reviewed the process for establishing long-term performance measures for the ELTIP and found the process was followed by TVA and the TVA Board. However, one potential area for improvement was noted regarding the inclusion of additional information in the plan documents that clearly describe the ELTIP performance measures development process. The People and Performance Committee and TVA management acknowledged our recommendations and provided planned actions.
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We recommended TVA's Executive Vice President and Chief Operating Officer, Operations: (1) implement a common procedure for preapproval of overtime; (2) develop guidance for all of TVA for managing fatigue and controlling work hours; and (3) review positions within the organization where employees are working excessive amounts of overtime on a regular basis, to determine whether safety and/or productivity are a concern. TVA management agreed with our findings and recommendations and provided planned actions to address them.
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We found while EAP's operational maturity has improved, actual IT project delivery has been inconsistent. A review of a judgmentally selected sample of recently completed and ongoing projects identified various possible causes for this inconsistency, including:
- IT resource engagement, including level of involvement and resource availability.
- Level of IT senior leadership team's project engagement.
- Project Manager (PM) effectiveness, including the level of authority to acquire resources and the impact of PM turnover on projects.
- Inconsistent business engagement in IT projects.
- Inconsistent project processes, including the identification, documentation, testing, and tracking of business and functional requirements.
During our review, TVA indicated fire protection systems and equipment were generally maintained and in good condition, with some exceptions. Additionally, Hydro Generation was making improvements to condition assessments of fire protection equipment. However, we found the following: (1) risk assessment reports indicated hydro plants could use more fire protection equipment, and additional documentation of inspection, testing, and maintenance were still needed; (2) TVA indicated fire drills were being conducted on a routine basis, but were not being documented as required, fire incidents were not being tracked, and lessons learned were not consistently shared; (3) TVA had not fully implemented the Emergency Response Liaison (ERL) role; and (4) the increased risk from replacing the ERL role had not been considered in TVA's enterprise risk process. We made recommendations to management to address the findings.
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Except for suggested actions to assess the risk of having armed guards without psychological evaluations and use a single application to reduce redundancy in the application process, TVA management generally agreed with our recommendations.
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During the period of our review, September 26, 2009, through September 26, 2014, we identified no instances where TVA overlooked an ERI related to NRC-proposed rulemaking; however, we did identify areas where the BP 247 was not being followed. Specifically, (1) the ERI Monitoring Table was not being filled out completely and consistently, (2) formal executive briefings were not consistently occurring, and (3) executive sponsors were not being assigned to ERIs with significant impacts on NPG resources. As a result of our audit, TVA began taking corrective action by issuing a revision to BP 247, with an effective date of December 12, 2014.
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We found policies and procedures were not followed to ensure effective review and approval of supplier invoices. Specifically, our review of 143 invoices totaling $184,339,674 found inadequate reviews were performed on 104 invoices or 73 percent. Based on our review, we identified several possible underlying causes why effective invoice reviews were not performed: (1) contracts contained unclear and/or conflicting compensation provisions; (2) some contracts do not provide specific requirements regarding invoice detail and for those contracts that do, the requirements are not being followed or enforced; (3) not all relevant contract and purchase orders are attached to the invoice or available in TVA's Enterprise Asset Management (EAM) system; (4) required field invoice approver (FIA) training does not include details on how to access and approve invoices in TVA's EAM system; (5) clear and frequent communication does not always exist between the FIA and contracting officer (CO); (6) an approval stamp used at a nuclear plant implied the OIG reviews the invoices; and (7) the current invoice review process is a manual process within an automated system.
We recommended TVA management: (1) develop a contract quality assurance program to ensure clear, concise, and easy to follow compensation terms, (2) ensure the FIAs and contract technical stewards have the most up-to-date terms and conditions of a contract by developing an approach to provide access (dependent upon business need) to contract documents, (3) require training for those accessing and approving invoices in TVA's EAM system, (4) revise policies to require the CO to confirm FIAs understand their responsibilities in approving invoices for payment, and (5) revise policies to clarify CO responsibility for monitoring the invoice approval process and verifying the contractor's invoices contain adequate detail in a format that facilitates the review. In addition, we recommended TVA management utilize the technology available to expedite and improve the invoice review process by implementing automated steps in the invoice review process where possible, including: (1) requiring electronic data from vendors that allows for 100 percent review, (2) setting parameters to identify exceptions, (3) following up on items identified as exceptions before making payment on those items, (4) establishing automatic notifications be sent to FIAs, contract managers, and others regarding exceptions to ensure the exceptions are reviewed, and (5) establishing automated analytical reviews, as necessary.
TVA management generally agreed with our findings and stated they would take action to address our recommendations.
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This is our fourth audit since the requirement was enacted. Since the OIG's previous audit, TVA hired a Senior Program Manager for Privacy to manage the agency's privacy program. We generally found the privacy program improved since our prior audit; however, we found that controls could be strengthened in the areas of: (1) written policies, (2) storage of hard copy and electronic PII, (3) monitoring of systems containing PII, and (4) system inventory. TVA management agreed with our findings and recommendations.
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- $246,353 in ineligible other direct costs.
- An estimated $47,978 in temporary living costs.
- $64,103 in ineligible labor costs.
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- $269,009 in subcontractor costs.
- An estimated $144,570 in labor costs.
- An estimated $18,267 in travel costs.
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- $923,231 in labor and related costs, which included (1) $696,841 in ineligible labor hours and rates billed, (2) $228,490 in ineligible home office labor costs,(3) $24,044 in excessive payroll additive costs, and (4) a net credit of $26,144 in other labor costs.
- $938,928 in ineligible or unsupported relocation, permanent and temporary assignment, and travel costs, which included (1) $520,370 in relocation costs,(2) $372,048 in permanent and temporary assignment monthly allowances,(3) $23,932 in other temporary assignment costs, and (4) $22,578 in travel costs.
- $204,336 in ineligible or unsupported affiliate company and subcontractor costs.
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- The fiscal year (FY) 2014 Winning Performance goals for the enterprise-wide and Strategic Business Unit measures were properly approved. One change form for FY 2014 was approved by the Chief Executive Officer on September 22, 2014. The change form affected three scorecards and resulted in no change to payout.
- The FY 2014 goals (i.e., target) for the corporate multiplier measures were properly approved.
- The actual year-to-date results for the Strategic Business Unit scorecard measures agreed with the respective supporting documentation, without exception.
- The actual year-to-date results for the enterprise-wide scorecard measures agreed with the underlying support, without exception.
- The actual year-to-date results for the corporate multiplier measures agreed with the underlying support, without exception.
- The FY 2014 Winning Performance payout percentages provided by the Benchmarking and Performance Analysis organization on October 20, 2014, were mathematically accurate and agreed with the Office of Inspector General's recalculations.
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To perform our audit, we reviewed TVA's documentation of personnel who were classified as executives for the period March 2005 through May 2014. Also, we reviewed TVA's recruiting, hiring, and severance expense information for executives who were hired and departed during the period. In summary, we found:
- As of March 1, 2005, TVA had 46 executives compared to 54 executives as of May 31, 2014. During the period, TVA hired 47 executives and promoted 55 employees to executive level positions. TVA also demoted and/or reclassified 15 executives to nonexecutive level positions and 79 executives departed TVA.
- Executives who were promoted from within appeared to remain a TVA executive longer than those who were hired from outside TVA.
- TVA incurred approximately $7.4 million in recruiting, hiring, and severance expenses for 20 executives who were hired and also departed TVA during the period. We estimate it costs TVA an average of almost $400,000 when an executive leaves TVA and another executive is recruited and hired to fill the vacancy.
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We found TVA was meeting its commitments for CCP management. Specifically, we found TVA has implemented programmatic improvements, stabilized its coal ash storage facilities, and improved oversight of CCP management. Additionally, we found TVA was taking steps to become an industry leader in CCP management. The report did not include any recommendations.
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We found TVA's maintenance of fire protection systems was improving; however, there was heightened risk of damaging fires at TVA sites due to (1) restoration times for certain priority systems exceeding TVA targets; (2) delays in addressing fire protection work orders; (3) instances of noncompliance with TVA's inspection, testing, and maintenance procedure; and (4) difficulties in maintaining aging equipment. We noted improvements were made to minimize the impact of fire, such as equipping fire trucks for each plant, replacing the fire brigade room at Kingston, and updating a portion of personal protective equipment for brigade members. However, many issues noted in the original inspection remained. For example, fire brigade members continued to have concerns about fire response preparedness and lessons learned were not shared consistently across the fleet. We also found Fire Protection Self-Assessments presented the condition of TVA's fire protection systems in a more positive manner than other sources might suggest was warranted.
We recommended the Senior Vice President, Power Operations, (1) take steps, as appropriate, to restore impaired fire protection systems to service and determine if additional personnel or resources are needed to expedite repairs of fire protection systems in the future; (2) determine the equipment needs of fire brigade members and take steps to provide that equipment; (3) identify additional training needs for fire brigade members and take steps to provide that training; (4) determine whether increased staffing is warranted for fire brigades; (5) create and implement a formal process for capturing and sharing lessons learned from fire events across the fleet; (6) amend the Fire Protection Self-Assessments to include ratings of fire protection system equipment, provide a more objective means for determining whether preventive maintenance was performed, reflect prioritization of impairments and work orders outstanding, and provide a synopsis of additional drivers of fire risk at each site. TVA Management agreed with the findings and recommendations.
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We found compliance with PM schedules varies by plant, and the PM compliance metric captured may not fully represent all PM activities not completed. The monthly PM compliance percentage varied from 10.5 to 100 percent. The most common reasons cited for not completing PM or adjusting the PM schedule was resource driven and/or due to emergent/sponsored work. We also found if a work order did not have the correct reconciliation code, a canceled PM task would be counted as completed, which skewed the data. Reconciliation codes are essential for accurate reporting, but they are not a required field in Maximo.
We found that both uncompleted and unestablished PM contributed to equipment failures. In a review of 65 Problem Evaluation Reports (PERs), we identified six PERs linking failures to PM issues. Four of those PERs related to equipment for which no PM schedule or requirement had been established, and two PERs related to uncompleted PM tasks. We also found plants were making progress implementing the new Maintenance Basis Optimization (MBO) but had seen some delays in achieving target dates. Support of outages had impacted some sites' abilities to complete its MBO phases. Additionally, we found the absence of PM requirements could make it harder to manage equipment reliability risk.
We recommended the Senior Vice President, Power Operations, (1) increase PM completion/reduce deviations from PM schedules and reinforce the importance of PM activities, (2) develop a way to more accurately capture and report PM compliance and other appropriate PM tracking metrics, (3) expedite MBO efforts, and (4) consider the potential impact of having PM governed only by guidelines and not requirements. TVA management generally agreed with the recommendations in the report.
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While NPG's GWPP performed required reporting, we could not verify the monitoring requirements in TVA's NPG standard programs and processes were followed. Our review also found corrective actions were taken to address the leaks and spills at TVA's nuclear plants reported to the NRC for the time frame of our review. However, we found opportunities for programmatic improvements. There were instances where programmatic weaknesses were identified several times over the last five years and were not remediated. External assessments also noted deficiencies in the program that were downgraded or excluded when NPG performed its fleet self-assessment. In addition, there was not a formal process in place to ensure recommendations made by external consultants were addressed. We made recommendations to management, accordingly, to address the findings in the report.
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Our audit of the invoice preparation process for LPCs during the period, found: (1) wholesale invoices were calculated correctly, (2) controls to prevent/detect invoice errors were adequate, and (3) Oracle Utilities had appropriate/adequate IT general and application level controls. However, we identified minor issues where changes could strengthen and/or improve the revenue billing process and decrease the likelihood of errors or adjustments.
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In summary, we determined TVA was overbilled $1,547,434 for costs and fees billed under the contract associated with the Bechtel-Bartlett subcontract. The overbilling included (1) $1,484,582 in excessive payroll tax and insurance costs and related fee, (2) $60,287 in ineligible temporary living allowance costs, and (3) $2,565 in excessive labor costs and related fee. We recommended TVA management take action to recover $1,547,434 in overbilled costs from Bechtel and ensure payroll tax and insurance reconciliations are performed on an annual basis.
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Our review found TVA has met or is meeting its commitments for the Kingston Recovery Project. Community leaders and regulatory personnel interviewed were satisfied with TVA's actions to meet its commitments.
In order to address these commitments, TVA has taken a number of steps. Specifically, TVA has cleaned up the ash spill and restored the area, protected public health and safety, kept the public and stakeholders informed and involved in the process, and helped with the economic development of Roane County. Some community leaders believe TVA has worked to make the area better than it was before the spill.
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Generally, TVA had effective processes for identifying and managing actual and potential environmental issues and risks. However, we noted areas where environmental risk management processes can be strengthened as of the end of FY2013. Specifically, we found environmental risks identified for business planning could be more comprehensive, more clearly identified, and integrated agency wide in order to help ensure their recognition and resource availability. In addition, weaknesses in environmental review processes increase TVA risks and can be strengthened to demonstrate regulatory compliance and due diligence in assessing the potential environmental impacts of proposed agency decisions.
Many positive aspects of the EMS program were evident and demonstrated effectiveness of functions related to environmental risk management. However, we determined opportunities for enhancing TVA's EMS exist in communicating with regulators, coordinating planning processes, emergency response preparedness, environmental training, and sharing lessons learned.
We recommended process improvements related to identifying risks and integrating environmental information sources, system enhancements to strengthen environmental reviews, and enhancements to EMS functions. By implementing our recommended actions, TVA can improve process efficiencies that will help sustain EMS effectiveness in the face of current challenges and impacts from budget constraints.
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We found actions were taken to address some programs and systems with poor health. We identified that 785 out of 1,617 programs and systems within FPG had been rated red or yellow and randomly selected 35 programs and systems for detailed review. Actions taken by FPG to address the poor health resulted in an improvement in color rating or overall health of 17 programs and systems. However, there was no upgraded rating or improvement in system health for 18 systems. Of these 18 systems, 7 had no actions completed, while 11 had some actions completed without improvement in system health. The major reason cited for not completing actions was lack of funding.
We also found system health reports were not completed or documented and required program health reports could not be provided. Additionally, FPG-SPP-09.045, Performance of Engineering Programs, and FPG-SPP-09.030.03, System Health Reports, were superseded by engineering guidance documents which have no requirements, only recommendations. This may increase the number of health reports not completed or not completed in a timely manner. The absence of accurate and timely equipment health reports could make it more difficult for TVA to effectively manage equipment reliability risk.
We recommended the Senior Vice President, Power Operations, (1) document justification when actions are not taken to address systems and programs with red and yellow ratings, (2) reinforce the importance of consistent documentation of system health reports, and (3) consider the potential impact of eliminating the requirement to do asset health assessments on TVA's non-nuclear asset condition risk and determine a schedule for completing health assessments that will mitigate the risk of equipment failure TVA management responded they will incorporate our feedback into their review effort to have a consistent approach to system health with appropriate documentation.
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CGLP constructed the Red Hills Generation Facility (RH) to burn lignite coal in two fluidized-bed combustion boilers generating a combined 440 megawatts of power. The facility's fuel is supplied by Mississippi Lignite Mining Company's lignite mine located adjacent to RH. TVA's 30-year obligation to buy power from CGLP started when RH began commercial operation April 1, 2002. Our audit included $400.3 million in costs billed by CGLP associated with the period October 1, 2010, through September 30, 2013. Our objective was to determine if the costs billed were in accordance with the contract's terms and conditions.
In summary, we found:
- TVA's electronic workbook used to calculate the invoice amount does not contain a formula needed to account for unexcused hours when TVA directs RH to provide less energy than at full capacity (derated) and RH cannot produce any power.
- TVA needs to improve documentation and communication of adjustments to the RH meter data.
- CGLP billed TVA $12,674 in costs for meter readings not supported by actual meter data on the October 2011 invoice.
- CGLP overbilled TVA a net $5,135 due to data entry errors made by TVA in the electronic workbook used to calculate the invoice amount.
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In summary, we found the current contract's compensation terms should be revised to (1) clarify whether TVA will reimburse costs incurred or pay an annual lump sum to AEMA and ADPH and (2) require AEMA, ADPH, and the five counties, Lauderdale, Lawrence, Limestone, Madison, and Morgan, to provide details to TVA on actual funds spent during a fiscal year in support of the REP program. We also noted the salaries paid to emergency management personnel varied significantly between the five counties.
We recommended TVA management take action to revise the contract language to address the two issues noted above. TVA management agreed the contract language needs to be revised in these areas and plans to revise the language accordingly in a new contract with the State of Alabama to be effective October 1, 2014.
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In RO, 1,438 systems and components had been rated red or yellow. We randomly selected 50 systems and components for review, eight with a red rating and 42 with a yellow rating. We found actions had been taken to address some systems and components with poor or marginal health. Of the eight systems and components with a red rating, all had either a project or work order developed to address the condition as required by the guidance. For five, actions to improve the asset condition were currently in progress, and for three, no actions were underway or planned within the next three years. Of the 42 systems and components with yellow ratings, for 32, no action had been taken, and for 10, projects were being developed to address the identified deficiency. Of the 10 that had projects under development, two had projects that were funded or being worked, seven had projects that were not currently funded, and one had a project that was completed.
Additionally, we found TVA had identified asset condition of non-nuclear generation as a top Enterprise Risk Management risk in FY2014. ROR-SPP-09.21, System and Component Health Program, was superseded by an engineering guidance document, which had no requirements, only recommendations. This could result in health report assessments not being completed. Without accurate and timely equipment health report assessments, TVA cannot effectively manage equipment reliability risk.
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We found TVA has made improvements in its ERM program since a 2008 OIG inspection was completed. However, we made the following observations in our recent review: (1) risks were not aligned to strategic objectives that support TVA's mission, (2) TVA had not established and communicated a risk appetite or risk appetite statement, (3) the risk management culture was not fully embedded throughout the organization, (4) risk tolerances reported by SBUs/BUs could be improved, and (5) multi-point risk assessments were not used as part of the risk assessment process. Also, the current application used to collect and analyze risks limits the effectiveness and efficiency of the ERM program, and information in and the process for reviewing TVA's risk management program guidelines and policy could be improved.
We made six recommendations for improving the effectiveness of the ERM program. Prior to our issuing the final report, TVA addressed the deficiencies in its risk management policy and guidelines. Management generally agreed with the remaining findings and recommendations.
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- $846,022 for duplicate invoices submitted by the contractor.
- $83,271 in duplicate costs charged on merchant transactions.
- A net $106,174 in state taxes paid on fuel purchases which included (1) $157,065 in state fuel taxes from which TVA was exempt, (2) $59,229 in state fuel excise taxes that had been stripped from invoices by the contractor and for which TVA was liable, and (3) $8,338 in state excise taxes from states outside TVA's service region and from which TVA may be exempt.
- $8,835 in unauthorized transactions.
In response to our draft report, the contractor stated TVA should reimburse it a net $192,042 for state taxes stripped from invoices for which either TVA is liable ($65,907) or the contractor cannot file for a refund from the states ($126,135). Based on additional documentation provided, the OIG determined TVA may owe the contractor up to $164,663 of the $192,042 it claimed it was owed for state taxes that had been stripped from invoices, including:
- $59,229 in state taxes applicable to TVA (discussed above).
- $93,227 in Alabama state taxes that the contractor had stripped from invoices and for which the contractor cannot file for a refund. (TVA will need to recover the taxes from Alabama and provide a credit to the contractor for the stripped amount.)
- $9,411 in Tennessee state taxes that the contractor had stripped from invoices that should not have been.
- $3,045 in Georgia state taxes that had been stripped from invoices and for which the contractor cannot file a refund. (TVA will need to recover the taxes from Georgia and provide a credit to the contractor for the stripped amount.)
- Less the $249 overbilled to TVA for North Carolina taxes.
- $846,022 from the contractor for payments made on duplicate invoices plus $11,459 in interest.
- $83,271 overbilled by merchants due to duplicate costs charged on merchant transactions.
- $253,337 from the appropriate party for state fuel taxes billed by the contractor for tax exempt fuel purchases, pay the contractor $164,663 for state fuel taxes stripped from invoices for which either TVA is liable or the contractor cannot file for a refund from the respective state, and determine if TVA can recover $8,338 in state excise taxes billed by the contractor for other states outside TVA's service region.
- $8,835 from the contractor for unauthorized charges billed.
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As a follow-up to audit 2011-14477, we contracted with Mercatus Energy Advisors (Mercatus) to provide a third-party review of the final actions taken by TVA management with regard to the recommendations from our audit and determine if TVA's Financial Gas Hedging program was designed and functioning in a manner to achieve program objectives in the most efficient and effective manner.
In summary, Mercatus agreed the overall design of TVA's FTP control structure was appropriate. However, Mercatus identified several additional areas regarding the design and function of the program that required attention. To address these areas, Mercatus recommended TVA
- Determine risk tolerance and proper size of the FTP.
- Analyze volumetric risk on a regular consistent basis and communicate with stakeholders having a vested interest in this aspect of the FTP.
- Redesign hedging strategies to better match the characteristics of the exposures being hedged.
- Improve and consolidate performance reports.
- Cease using "Value at Risk" as a primary risk metric and replace it with at risk type of metric(s) that includes financial natural gas hedges and the physical exposures being hedged.
- Conduct stress testing on a routine basis.
- Ensure actions required by governance documents are adhered to or if language in the documents is inaccurate, revise the documents to reflect actual practices.
- Conduct a proper cost/benefit analysis of the FTP and compare all-in hedged cost of fuel to the cost of fuel without hedging (market price).
- Properly analyze and manage all of TVA's energy commodity exposure.
Full Report
We found 333 systems, programs, and components within NPG had been designated red or yellow. We randomly sampled 25 for detailed review. Our analysis showed at least two actions were taken to address 24 of the 25 samples. For 1 component, only one action was completed and other actions were awaiting approval. These actions resulted in an improvement in condition and a change in 14 cases to a white or green rating, while 11 had ratings that remained red or yellow. It is important to note that of the remaining 11 with red and yellow ratings, 2 changed from red to yellow, and 9 remained the same. In addition, 5 of the 9 that remained red or yellow had some asset condition improvement but not sufficient improvement to change the rating.
Full Report
We found improvements in the Non-Nuclear ECP have been made in addressing concerns in a timely manner, but the effectiveness of the program could be improved. We found (1) instances where the Non-Nuclear ECP was not adequately addressing employee concerns, and (2) some employees felt concerns were not being adequately addressed and reported experiencing pressure and repercussions from management and team members.
We recommended TVA management (1) identify an individual to perform audits and assessments of closed concerns, (2) coach individuals addressing concerns on what constitutes a sufficient investigation, and (3) develop an instrument to send to complainants to indicate instances of retaliation and investigate as necessary. TVA management agreed with our findings and recommendations.
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In summary, we determined AMEC overbilled TVA an estimated $100,441. The overbilling included an estimated (1) $63,196 in labor costs, (2) $14,693 in transportation and subsistence costs, (3) $13,243 in unit rate costs, (4) $8,709 in miscellaneous costs, and (5) $600 in unclassified costs.
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In summary, we determined URS (1) did not obtain TVA approval for some subcontracts and circumvented requirements for TVA approval, and (2) overbilled TVA $168,623 in the markup costs applied to costs for services and equipment provided by TVA under subcontracting agreements.
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Although the probability of occurrence for coal dust explosions was rated by TVA in the Enterprise Risk Management risk map as unlikely, the potential consequences of an explosion could be severe and result in disruption of generating capacity, costly clean up and repairs, and even loss of life.
We found coal plant and coal handling conditions exceeded acceptable dust level limits specified in TVA Safety Procedure (TSP) 816. Specifically, we observed coal dust accumulations that exceeded the 1/32 inch standard in many of the coal handling areas during walkdowns at the Bull Run, Cumberland, and Paradise fossil plants. Additionally, TVA self-identified coal dust accumulations that were above the allowable standard in many areas throughout the coal fleet. We also found monitoring tools required by the program were not being used consistently to improve plant conditions.
Site assessment reports performed by yard systems engineers indicated some conditions improved between 2010 and 2012. Some equipment deficiencies were being addressed, and there were several programmatic practices in progress that were expected to improve conditions over time. However, equipment has deteriorated faster than funding has been available for repairs or replacements. Deficiencies resulting from inadequate equipment maintenance contribute to the increased presence of combustible coal dust and coal accumulations within the coal handling system. With deteriorating equipment and recent staff reductions for housekeeping, TVA faces significant challenges in keeping coal dust accumulations within the limits specified in TSP 816. More focus is needed on the program in order to better contain coal dust and reduce the necessity for extensive and repeated housekeeping activities to achieve dust accumulations below the 1/32 inch standard.
TVA management generally agreed with our recommendations and has taken or is taking actions to address the findings.
Full Report
- The FY 2013 Winning Performance goals were properly approved. One change form for FY 2013 was approved on March 3, 2013; two change forms were approved on June 7, 2013; one change form was approved September 16, 2013: and one was signed but not dated. The change forms affected five scorecards and resulted in no change to the payout.
- The comparison of actual year to date figures for September 2013 for all the measures on the strategic business unit and business unit scorecards noted one exception related to the Nuclear Power Group's Equipment Reliability measure and did not result in a change to the payout. The measures on the strategic business unit and business unit scorecards agreed with the respective supporting documentation provided.
- A comparison of the actual year to date figures for the incentivized TVA Corporate balanced scorecard measures to the definition sheets noted one exception related to the Total Corporate Spend measure and did not result in a change to the payout. The incentivized TVA Corporate balanced scorecard measures agreed with the underlying support. Subsequent changes to the Total Financing Obligations over Productive Assets actual year to date measure were received on November 4, and 7, 2013, and were compared to the supporting documentation. We determined there would be no impact to the payout percentage.
- The FY 2013 Winning Performance payout percentages were provided by the Metrics and Performance Analysis organization on October 21, 2013. Subsequent changes to the actual year to date figure for the Total Financing Obligations over Productive Assets measure were received November 4, and 7, 2013. These changes did not impact any payout percentages.
In summary, we determined P&J overbilled TVA $366,401 which included (1) $225,832 in overbilled tonnage costs, (2) $122,921 in overbilled leachate costs, (3) an estimated $11,206 in overbilled standby costs, and (4) $6,442 in overbilled structural adequacy costs
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We found critical spare parts could be managed more effectively. We found there were inconsistencies in TVA's management of its critical spare parts. Specifically, we found (1) C&GO does not have written policies to govern its critical spare parts program; (2) preventive maintenance is not being performed on critical spare parts at certain plants; and (3) information maintained in TVA's system for asset and location information, Maximo, regarding critical spare parts, is unreliable. We also found the lack of critical spare parts has negatively affected system and component health. We noted TVA has taken steps to improve identification and procuring of critical spare parts but has not followed through with implementing steps recommended by a management consulting firm. Additionally, our physical inventory counts at the plants were consistent with the information contained in Maximo.
We recommended the Executive Vice President and Chief Generation Officer, Generation, (1) develop C&GO procedures to govern the identification and procurement of critical spare parts; (2) ensure proper maintenance is performed on spare parts; (3) take steps to follow-up on actions recommended by a management consulting firm, (4) work with Engineering Environmental & Support Services to implement controls over the information maintained in Maximo, including who can identify what are critical spare parts; and (5) work with Supply Chain to accurately update Maximo to reflect what items should be listed as critical spare parts. TVA management agreed with our recommendations.
Full Report
We found the capital projects approval process was generally performed timely, as well as in accordance with TVA policies. We also found TVA had incorporated best practices in the approval process. However, we found areas for improvement related to the timeliness of Nuclear Power Group (NPG) project approvals and the forecasting of project schedules.
We found that although the overall TVA project approval process was completed in a reasonable time frame, the NPG approval process took 25 days longer than the TVA average. This indicated there were opportunities for improvement in the timeliness of NPG approvals.
We found 31 percent of NPG projects reviewed came in more than 25 percent behind the forecasted schedule. While there were also projects that came in ahead of schedule, the degree to which the schedules were being missed indicated there was potential for more accurate planning related to forecasted schedules.
We recommended management (1) evaluate the approval process for NPG capital projects to identify opportunities to improve the timeliness of project approvals, and (2) evaluate the planning and forecasting process to identify other areas for improvement.
Full Report
We found that reported PM metrics may not be accurate. During our review, we identified several concerns that raised questions about the validity of reported PM metrics. For calendar year 2012, auditors were provided two sets of PM metrics for each site. There were differences in the data sets and some of the differences were significant. Additionally, the three plants were not consistently using the "Counts as Deferral" flag in Maximo, thus preventing certain deferrals from being identified and considered for the deferral count. Also, we found there was inconsistency in how the late PM metric was reported. These issues will impact the value of the NPG Equipment Reliability Index (ERI), which is part of NPG's winning performance scorecard for fiscal year (FY) 2013. We also found that deviations from the PM schedules were negatively affecting system and component health. While PM program health has historically been rated poorly, there has been recent improvement. TVA started a PM optimization (PMO) program to bring its PM program in line with industry standards. Due to slow progress at all three plants, escalations were filed to raise this concern to a higher level.
We recommended the Executive Vice President and Chief Generation Officer, Generation, take steps to (1) define methods for consistent and accurate reporting of PM metrics across the nuclear fleet, including a step for verification and retention of documentation for items manually excluded; (2) address the issue with the "Counts as Deferral" flag used in PM tracking; (3) perform an analysis to determine what impact inaccurate PM data could have on the Equipment Reliability Index calculation for fiscal year 2013 winning performance measures; (4) reduce deviations from the PM schedules; (5) take necessary actions to prevent recurring PMO implementation problems resulting from lack of site support; and (6) expedite PMO efforts. TVA management agreed our recommendations.
Full Report
This review found TVA has made improvements to succession planning; however, areas for improvement still exist. Improvements include the use of a talent grid, implementation of succession planning metrics, and a more accurate attrition prediction model. In addition, we found TVA could strengthen some best practices.
While TVA has made progress in its succession planning process, we found, through interviews and review of documentation, areas for improvement still exist. Specifically, areas of improvement include: (1) follow-up on action items identified in talent reviews including the development of organizational action plans; (2) cross-pollination of talent; (3) reduction in talent review preparation time; and (4) frequent revisions of the talent review and succession planning process, which have caused frustration among TVA management. Additionally, TVA is working to address areas of concern regarding populating succession plans with realistic candidates.
As part of this review, we identified succession planning best practices and compared them to processes TVA had in place. Of the ten best practices identified, we found TVA could strengthen executive ownership, onboarding of succession candidates, and transparency of the succession planning process. In addition to these findings, all TVA managers who were interviewed expressed concern with the use of forced distribution for the talent grid.
We made recommendations to management to address the findings in the report.
Full Report
We made four recommendations that pertain to improving TVA's oversight of the VII program. TVA management generally agreed with our recommendations and plans to take action to address them.
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We found several positive attributes in Distributor Compliance's planning and performance of the assessments; however, we noted areas where changes were needed to improve (1) assessment planning and performance and (2) compliance with the Distributor Compliance charter and applicable professional standards and policies regarding the assessment reports. Specifically, we noted:
- Scope statements in the reports did not always reflect the actual information that was reviewed.
- Documentation of sampling methodologies was inadequate and the methodologies could be modified to provide more assurance that assessment objectives are met.
- Recommendations did not always help detect issues and/or prevent identified issues from recurring.
- Testing for misclassified residential accounts was not being performed.
- Distributors were not made aware of all issues identified during the assessments and the unreported issues.
We made the following recommendations: (1) include testing for the number of days provisions in the contract, (2) include testing to identify penalty exempt accounts in all assessments, (3) when possible, select a sample containing items from across the population instead of from a subset of the population, (4) fully document sampling methodology in working papers and the report, including details for replacing and/or expanding the sample, (5) review and update processes for ensuring all applicable issues are included in report, (6) include recommendations that help improve distributors' compliance with the wholesale power contract by detecting issues and/or preventing identified issues or errors from recurring, (7) include in assessments the testing for potentially misclassified residential customers, and (8) inform distributors of all issues identified during the assessments.
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(Summary Only)
We found Nol-Tec overbilled TVA $292,678, including (1) $150,147 of ineligible sales commissions, (2) $89,155 of ineligible labor costs, (3) $39,878 for a duplicate payment made by TVA, and (4) $13,498 of ineligible subcontractor markup costs.
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In summary, we determined MPW overbilled TVA $397,519 as follows:
- $323,654 was overbilled for equipment and labor costs, including (1) $212,443 for ineligible equipment and labor costs; (2) $96,975 for excessive crew costs; and (3) $14,236 in fuel surcharges, per diem, and labor escalation associated with the ineligible equipment and labor costs that were billed.
- $73,865 of ineligible mobilization/demobilization costs were overbilled, including (1) $64,307 in setup and breakdown costs not provided for by the contract and (2) $9,558 in mobilization/demobilization costs billed for ineligible equipment.
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The objective of this review was to determine if Coal Operations and Gas Operations have made progress in their emergency preparedness and response program since the ash spill at Kingston Fossil Plant. This review looked at the current status of emergency preparedness with respect to both Coal Operations and Gas Operations.
Our review found that although progress had been made in emergency preparedness and response, improvements could have been implemented more effectively. In addition, opportunities to improve the program still exist in the areas of site consistency and training. Through interviews and review of documentation, we found a lack of consistency in how emergency preparedness is handled between the sites. Also, training more personnel in National Incident Management System and adding training opportunities could build a more in-depth emergency preparedness program. An additional concern was raised during interviews concerning the responsibilities of the shift operations supervisors. The roles specified for incident commanders are generally in addition to their jobs as shift operations supervisors, and there were concerns that the training was a significant commitment in addition to the daily work load. We made recommendations to management to address the findings in the report.
Full Report
We identified minor vulnerabilities in the commodity tracking process for the WBN2 construction project related to potential duplication of data entry and review. We made recommendations to eliminate the duplication. TVA agreed with our findings and the OIG concurs with WBN2 management's planned action.
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The Office of the Inspector General audited TVA's vehicle allowance and assigned vehicle programs to determine the cost effectiveness of the programs and if proper controls were in place to ensure program eligibility guidelines were being met. Our specific audit objectives were to determine if (1) TVA employees receiving vehicle allowances met established eligibility requirements and if proper controls were in place to determine eligibility criteria were met, (2) TVA employees with assigned vehicles met established criteria for having an assigned vehicle and if proper controls were in place to determine eligibility criteria were met, and (3) the cost effectiveness of both the vehicle allowance and assigned vehicle programs.
Our audit found TVA does not document how officers and key managers who are paid vehicle allowances meet the "business need" eligibility criteria specified in TVA's Vehicle Allowance Program Guidelines. Based on the available data, it appears a large percentage of the personnel who receive vehicle allowances may not meet TVA's stated criteria of significant business related travel. We also noted several administrative matters within the guidance that were not followed.
TVA's Fleet Service management did not maintain adequate documentation to validate the adequacy of TVA's controls over vehicle assignments. Additionally, we were unable to determine which program is more cost effective because data obtained during the audit indicated the cost differential between the two programs was small. However, overall cost savings may be available, because there are individuals who either receive a vehicle allowance or have an assigned vehicle who do not appear to have a business need for the allowance or vehicle.
We made five recommendations that pertained to (1) documentation of vehicle allowances, (2) periodic review of those receiving an allowance, (3) maintenance of the Vehicle Allowance Guidelines, (4) coordination between those with vehicle allowances and those with assigned vehicles, and (5) review of all employees currently receiving an allowance. We made three additional recommendations that pertained to (1) maintenance of TVA Form 9314A, (2) documentation of vehicle replacements, and (3) review of all employees currently assigned a vehicle.
Full Report
Our investigation found the following:
- The Sunshine Act requires public meetings by an executive agency be open to the public. However, as a legal matter, the prevailing view as indicated by the District of Columbia, U.S. Appellate Court, is that notational voting does not constitute a meeting, and it does not constitute a violation of the Sunshine Act. Furthermore, because notational voting does not constitute a meeting as described in the Sunshine Act, notice is not required.
- In selecting a CEO, the Board decided to use the notational process to protect the privacy of applicants and to address the difficulties of obtaining a quorum at that time.
- The evidence developed by our investigation shows the Board followed notational procedure by not discussing the candidates' qualifications or otherwise deliberating with one another about the selection. Board members voted separately.
- Because the Sunshine Act does not prohibit the notational procedure and the evidence demonstrates that the Board properly used that procedure, the Board did not violate the Sunshine Act.
In summary, we determined TVA meter testing complied with TVA policies and procedures regarding timeliness and met identified industry standards. However, we noted areas for improvement in TVA's meter testing processes, including (1) verification of meter constants, (2) reconciliation of meter information in TVA systems, and (3) consistency among testing documentation.
We recommended TVA (1) formalize its policy for testing and/or documenting meter constants as part of preventative maintenance; (2) develop a procedure for reconciling meter information included in the Maximo, Itron Enterprise Edition, and Lodestar systems; and (3) develop guidelines for acceptable documentation of meter tests, including information, review, and maintenance requirements. TVA management concurred with our recommendations and is taking or has taken action to address these issues.
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TVA has included the BFN NFPA 805 transition project as part of fire protection risk in its Enterprise Risk Management process. We reviewed the BFN transition to the NFPA 805 program. Our audit objective was to evaluate BFN's performance in transitioning to the NFPA 805 program requirements by the license amendment date.
TVA did not meet the NFPA 805 transition date for the License Amendment Request submittal of March 2012 and has revised its commitment date to March 2013. We determined the Nuclear Power Group's delays in transitioning to NFPA 805 adversely impacted BFN's ability to meet the 2012 commitment date. Specifically, historical indecisiveness coupled with a lack of due diligence and inadequate attention to emerging industry fire protection regulations contributed to revising the commitment date. In addition, the Nuclear Power Group's mitigation strategy as provided in Enterprise Risk Management documentation did not include consideration of the consequences of not meeting the revised March 2013 deadline, which would include NRC-assessed penalties.
Full Report
In summary, we determined AREVA's net credit adjustment of $134,544 due to TVA was understated. Based on the methodology included in the contract, we determined the adjustment should be a credit to TVA of $564,765. AREVA officials agreed with our findings. AREVA issued TVA a credit of $375,875 and plans to issue TVA a credit for the remaining $188,890.
(Summary Only)
TVA's facilities asset portfolio includes over 34 million square feet of gross space in about 3,446 structures, and a small number of these properties are not in use. From 2009 to 2011, FM identified 19 underutilized properties. Two of these properties, former coal plants, were decommissioned in 2011. A third property, part of TVA's Muscle Shoals reservation, is being mitigated under an extensive redevelopment project, which includes the November 2012 TVA Board of Directors approval of the possible sale of 1,000 acres of the Muscle Shoals property. In addition, TVA established the Challenged Properties Program (CPP) in March 2012 to develop strategies for proper handling of underutilized or vacant properties.
Because of the importance of proper maintenance to the safe, efficient, and effective operation of assets, we initiated this audit to evaluate TVA's efforts to identify and mitigate risks associated with its buildings and infrastructure. As of July 2011, TVA's Enterprise Risk Management identified the risk of building and infrastructure failures among other safety risks and the FAP Program as the primary strategy to mitigate these risks.
In summary, our audit disclosed FM's FAP Program was adequately designed to identify and mitigate the risks of building and infrastructure failures, and FM's processes for remediating identified risks are reasonably effective. However, we found TVA's risk exposure from building failures is elevated because the identified risks exclude underutilized properties, and FAP funding has not been adequate to address the risks in the long term. We also identified opportunities to improve some FAP Program and related FM processes.
Full Report
While mitigation strategy for addressing TVA's outage scheduling risk is designed appropriately and has reduced risk, opportunities exist to improve the outage scheduling process. We found (1) the control overseeing the Outage Concurrence Process is manual and time consuming; (2) the control in place over quality checks is not being completed; and (3) the Outage Concurrence Process does not align with SPP-30.004, TVA Chief Operating Officer Approved Method to Optimize TVA Asset Availability (Asset Availability Optimization Process), in regard to the use of Asset Availability in entering outages.
We recommended the Vice President, System Planning, (1) work in conjunction with the Asset Availability owners to determine if a control can be added to Asset Availability to prevent outages from being entered without first completing the Outage Concurrence Process; (2) take steps to make sure that quality checks are performed as prescribed in the Outage Concurrence Process; and (3) work in collaboration with the owner for the Asset Availability Optimization Process to address conflict between the Outage Concurrence Process and the Asset Availability Optimization Process to align the process for entering outages into Asset Availability. TVA management agreed with the recommendations.
Full Report
- $153,619 due to the use of ineligible firm price billings.
- $60,991 for hydro-blasting work which was not included in the contract's scope.
- $20,229 of ineligible billings for materials and miscellaneous costs.
- $19,221 of labor billings that were overstated because G&A did not use the billing rates in the contract.
In summary, we determined DZNPS overbilled TVA an estimated $215,042, which included $186,798 in nonmanual labor costs and $28,244 in craft labor costs. In addition, DZNPS did not use the Hourly Craft Superintendent (HCS) classification in TVA's labor agreements and instead, classified all superintendents as nonmanual employees, including six employees promoted from craft general foreman. Because a 15-percent general and administrative cost markup is applied to nonmanual labor, TVA paid an additional $35,867 for these six employees, which would not have been incurred if they had been classified as HCS.
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In summary, we determined DZNPS overbilled TVA an estimated $215,042, which included $186,798 in nonmanual labor costs and $28,244 in craft labor costs. In addition, DZNPS did not use the Hourly Craft Superintendent (HCS) classification in TVA's labor agreements and instead, classified all superintendents as nonmanual employees, including six employees promoted from craft general foreman. Because a 15-percent general and administrative cost markup is applied to nonmanual labor, TVA paid an additional $35,867 for these six employees, which would not have been incurred if they had been classified as HCS.
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While EL&RF is taking actions to mitigate risk associated with load forecasting, we found opportunities exist to improve the mitigation strategy documentation. The documented mitigation strategy does not reflect planned actions to improve data integrity or the regular updates to the forecast models and economic drivers. Additionally, we found mitigations are generally designed appropriately. However, we noted EL&RF does not have any compensating controls to prevent inadvertent modifications to data until the Demand & Data Consolidation Process is completed.
We recommended the Senior Vice President, Strategy, Financial Planning & Business Development, (1) enhance the load forecast documented mitigation strategy to include the mitigations planned, or already occurring but not listed, as part of the strategy and (2) implement measures to reduce the likelihood of inadvertent modifications to data until the Demand & Data Consolidation Process is completed. TVA management agreed with our findings and recommendations and has taken actions to address them.
Full Report
We determined Jacobs overbilled TVA an estimated $15,667 including $9,285 in ineligible overtime labor costs and $6,382 in excessive and ineligible travel and miscellaneous costs. In addition, at the start of our audit, TVA was performing an assessment of temporary living allowance (TLA) costs billed and identified $84,628 in overbilled TLA costs. Jacobs disputed TVA's assessment and stated the overbilled costs were $64,785. We determined TVA's calculation of overbilled TLA costs was correct, and Jacobs subsequently agreed to refund $84,628 and issued a credit to TVA in its September 2012 invoice.
We also found several instances of inadequate contract administration including (1) $266,788 paid by TVA for a labor classification, which was not included in the contract's "Schedule of Prices;" (2) $21,717 in additional travel costs paid by TVA because TLA compensation terms were not made part of the contract until January 1, 2010; and (3) failure by the contractor to obtain advance written approval from TVA prior to billing subcontractor TLA and relocation costs.
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Our review found TVA has implemented or was implementing actions to reduce the risk of physical assaults on TVA employees, contractors, and visitors. The mitigations were generally designed appropriately to address the risk. However, TVA identified that workplace-violence incidents were not always reported to TVA Security and Emergency Management. This prevented TVA from recognizing emerging patterns and identifying possible training that could lower the risk of similar future incidents.
We recommended a procedure be created for individuals who receive workplace-violence incident reports detailing which workplace-violence incidents should be reported to TVA Security and Emergency Management along with a uniform way of submitting that information. TVA management generally agreed with our findings and recommendations and plans to take measures to address them.
Full Report
Our review found TVA has implemented or was implementing actions to reduce the risk of physical assaults on TVA employees, contractors, and visitors. The mitigations were generally designed appropriately to address the risk. However, TVA identified that workplace-violence incidents were not always reported to TVA Security and Emergency Management. This prevented TVA from recognizing emerging patterns and identifying possible training that could lower the risk of similar future incidents.
We recommended a procedure be created for individuals who receive workplace-violence incident reports detailing which workplace-violence incidents should be reported to TVA Security and Emergency Management along with a uniform way of submitting that information. TVA management generally agreed with our findings and recommendations and plans to take measures to address them.
Full Report
- The fiscal year (FY) 2012 Winning Performance goals were properly approved.
- The actual year to date measures for the September 2012 Strategic Business Unit and Business Unit scorecards agreed with the respective supporting documentation provided.
- The three actual year to date incentivized measures on the TVA Corporate balanced scorecard were compared to the respective measures on the definition sheets and one exception was found; however, this did not impact the payout. The measures agreed with the respective supporting documentation provided.
- The FY 2012 Winning Performance payout percentages were provided to the OIG by the Metrics and Performance Analysis organization on October 21, 2012. The OIG was notified on October 30, 2012 of a subsequent change to the actual year to date net cash flow; however, the change did not impact the payout.
TVA's hedge strategy requires a minimum of 50 percent to a maximum of 75 percent of the forecasted natural gas volume for the fiscal year be hedged. From FY 2006 through the first quarter of FY 2012, TVA's natural gas-related costs have been $3.14 billion; the FTP hedging program contributed another $840 million for total costs of $3.98 billion. This contribution reflects the difference between the locked-in price of natural gas and the market price of natural gas at the time of delivery. TVA management stated the $840 million is a result of the dramatic drop in the price of natural gas over the period. In addition, TVA, as of December 31, 2011, expects the hedging program to add $421 million to natural gas costs of $3.7 billion for the period January 2012 to December 2017 for total natural gas costs of $4.1 billion. Although this situation could reverse in an environment with rising gas prices, it illustrates the significant potential impact, positive and negative, the FTP can have on TVA's FCA. As a result of the growth in FTP financial positions and the inherent risk with the program, we audited the program to evaluate (1) management oversight and the design of controls in place to mitigate operational risk exposure, (2) the program objectives and related performance measures, (3) whether TVA was meeting defined performance objectives, and (4) how the FTP impacts TVA's overall risk tolerance.
In summary, we determined the design of TVA's FTP control structure was appropriate. However, we identified several areas where improvement is needed to validate the usefulness and effectiveness of the program as well as to ensure TVA's stakeholders' understanding of the program. Specifically,
- TVA has not conducted a comprehensive cost benefit analysis to determine whether the benefits derived from the FTP are greater than the inherent risks of the program.
- TVA does not currently measure the performance of the FTP against defined program objectives.
- aR back-testing was not performed on a routine basis.
- TVA's communications with its customers did not sufficiently convey the FTP's impact on rates.
Full Report
PowerPlant replaced TVA's Project Justification System on March 7, 2011, at a cost of about $7 million. PowerPlant was implemented to replace the assets module within the Enterprise Financial Management System, while also providing the functionality to centralize project and portfolio management. TVA achieved some project and portfolio management capability with the new system, but considerable opportunity for improvement exists. Specifically, as a result of our review, we identified (1) the PowerPlant PPM tools do not currently meet all needs identified by the SBUs, (2) users feel they have not been adequately trained on some functions of the system, and (3) communication of defects that have been resolved would benefit users.
We recommended management consider (1) implementing additional project management functionality available in the PowerPlant system or purchasing another system to provide a PPM tool to more efficiently and effectively manage TVA's capital projects, (2) completing additional PowerPlant training as planned, and (3) developing a strategy for communicating system changes, upgrades, and modifications.
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- The program was not operating effectively because much of the DLC program equipment was outdated and in disrepair, and the program cost was substantially higher than the savings TVA achieved.
- TVA was not using two key contractual oversight mechanisms for verifying the program was operating as intended and distributor reports to TVA were accurate.
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- $524,623 of ineligible labor costs, including $517,358 in excessive labor costs because Hartford did not bill actual employee wages, associated labor burden, and fees as specified by the contracts and $7,265 of ineligible labor costs billed for corporate personnel.
- $147,358 in temporary living allowance costs for which Hartford could not provide the contracts' required eligibility certifications and other related documentation.
- An estimated $7,389 in unsupported or ineligible travel and miscellaneous costs.
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We found the condition of assets is identified through system, program, and component health assessments; however, the process varies among the organizations. According to process descriptions and interviews, all organizations we reviewed use asset condition information to identify corrective actions when necessary. RO personnel stated they take actions to address any system with poor ratings even though the RO process does not specifically require this as the other organizations' do.
We also found the condition of assets information is used by TVA for planning purposes, and by the organizations to develop and prioritize projects for business planning purposes and system planning for future costs. In addition, TVA has instituted a capital productivity initiative to improve management of capital and operations and maintenance (O&M) projects to capture savings. As part of the new initiative, projects will be reviewed by a project review board, and the condition of assets information could be a factor for consideration in its project reviews.
We made two recommendations that pertained to requiring defined actions where assessments resulted in poor ratings in the RO organization, and including the condition of assets information as an evaluation factor for proposed capital or O&M projects where the condition is relevant. TVA management generally agreed with our findings and recommendations.
Full Report
Based on our review of TVA's plans and actions to mitigate the risk and potential effects of craft labor shortages, we determined plans and actions were inadequate to aid in the achievement of future goals as identified in TVA's Integrated Resource Plan (IRP). Specifically, we determined risk mitigation actions related to competition needs improvement, and deficiencies existed in risk planning and mitigation related to the shrinking labor pool. In addition, we noted improvements could be made to the process for assessing and monitoring risk related to craft labor.
TVA has passed the management of craft labor risk to contractors, unions, and other organizations. In our opinion, TVA, as part of its economic development mission, has an obligation to participate in efforts to replenish shrinking craft labor pools. In addition, to achieve long-term future goals as identified in TVA's IRP, it is necessary to develop actions for attracting and retaining craft labor and/or look for alternative solutions to achieve these goals.
Based on the above, we recommended nine actions related to the process for monitoring craft labor staffing risk, as well as plans and actions for reducing craft labor staffing risk. TVA management agreed with the findings and recommendations.
Full Report
- $903,698 in labor and related costs, which included (1) $778,617 in ineligible home office labor costs, (2) $75,309 in excess payroll additive costs, (3) $34,098 in excessive labor costs, and (4) $15,674 in fees for manual personnel seconded services. In addition, we found Bechtel did not invoice costs for seconded services separately as required by the contract, and seconded service costs were improperly included in Bechtel's annual performance fee base.
- $546,054 in other ineligible or unsupported direct costs, which included (1) $534,835 for relocation, temporary assignment, and travel costs; (2) $5,795 for other nonlabor direct costs; and (3) $5,424 for fees on subcontractor costs.
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August 3, 2012 - Trans Ash, Inc. - Ash Management Services at Johnsonville Fossil Plant - 2011-13899
(a) assistance in the off-site fly ash utilization project at Johnsonville Fossil Plant,
(b) ash pond management services at Johnsonville Fossil Plant, and (c) additional work described in separate Task Agreements (TAO) executed by TVA and Trans-Ash. In summary, we determined Trans-Ash billed TVA (1) $1,479,630 for work that was not authorized under the contracts, and (2) $186,955 in excessive and unsupported costs. Specifically,
(1) $1,479,630 was billed for work not included in the contracts' scopes and not authorized by separate TAOs. Additionally, the cost was billed using rates that were (a) not provided for by the contracts and (b) higher than rates included in another contract TVA had with Trans-Ash. As a result, the unauthorized cost was inflated by $81,434.
(2) $186,955 was overbilled due to:
- $170,993 in excessive costs that were billed on three TAOs;
- $13,866 in unsupported costs; and
- $2,096 in excessive costs billed due to an inflated tonnage rate.
We recommended TVA management:
1. Determine if $1,479,630 of unauthorized work should be recovered from Trans-Ash. If TVA management decides to pay for the unauthorized work, it should take action to recover $81,434 of inflated billings from Trans-Ash. Additionally, management needs to implement controls to ensure future work with Trans-Ash is properly authorized and billed using established contractual provisions.
2. Take action to recover $186,955 in overbilled costs from Trans-Ash.
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The OIG concluded, based on the review of project documentation and discussions with project management, adequate analysis was not performed to support the decision to implement the expense management application. Specifically, we found management circumvented controls and the decision was made without adherence to TVA project management policies. This resulted in time delays within the project, inadequate budget planning, duplication of efforts including possible waste of resources, and project management inefficiencies. Even though steps were taken to (1) define a business need, (2) derive estimates for cost and time implementation and identify ownership, (3) evaluate alternative system solutions, (4) obtain approvals and define a budget, and (5) assess the current and future business conditions, these efforts were made after the application was chosen as the system solution. Without understanding the reasons and parameters for implementing a new expense management system, the project team's efforts to follow the process as outlined in the project management policies were ineffective and resulted in schedule delays as well as project management team frustrations. We recommended the Vice President and Controller ensure project management policies are followed with TVA's mission in mind by communicating those policies to individuals within the organization and stressing the importance of (1) adequately defining the business need for a project prior to selecting the solution, (2) validating assumptions used in decision-making, evaluating business conditions and alternative solutions, and (3) determining project budget limits and obtaining project approval. TVA management agreed with the recommendations.
Full Report
The OIG's audit of Memphis found (1) an erroneous adjustment made to a customer account resulted in a $3.6 million underpayment to TVA in January 2010, and (2) other isolated instances of noncompliance related to the proper reporting of electric sales, including customer misclassifications and a metering issue. Additionally, Memphis could improve compliance with other contract provisions and/or Memphis' policy by (1) obtaining and maintaining required documentation and (2) increasing accuracy of contract demand in the billing system.
The OIG also identified two areas where TVA's oversight of distributors should be enhanced. The two issues, (1) the lack of guidance related to permitted expenditures and (2) the lack of a joint cost study, were included in previous OIG distributor audit reports, and TVA has agreed to take corrective action to address these issues.
The OIG made 10 specific recommendations that require action by Memphis, and recommended TVA's Senior Vice President, Policy and Oversight, work with Memphis to resolve the findings. These recommendations generally related to (1) complying with power contract provisions and (2) remediating classification and metering issues. Memphis and TVA management generally agreed with our recommendations and are taking action to address the findings.
Full Report
- $2,482,444 in unsupported costs related to (1) missing cost details, (2) unclassified costs, (3) subcontractor costs, (4) labor costs, and (5) equipment and materials.
- $1,113,702 in costs for hydro blasting services because POI billed (1) excessive hours for equipment operating time and (2) hourly rates for equipment and employees not provided for in the contract.
- $393,848 of ineligible costs for (1) equipment and materials, (2) labor costs, (3) mobilization / demobilization, (4) travel, meals, and per diem, and (5) fuel surcharges.
- $135,941 due to the use of incorrect billing rates.
- $41,837 in duplicate billings.
- Credit for $21,863 in discounts that had been provided by POI.
We recommended TVA management recover the $4,145,909 in net overbilled costs from POI and ensure POI complies with the PMMA requirements.
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Our audit found KUB generally complied with key contract provisions for (1) proper reporting of electric sales and (2) nondiscrimination in providing power, but we noted noncompliance related to (3) approved use of electric revenues. Additionally, we noted a few other minor issues regarding required documentation and information in the billing system.
We also identified two areas where TVA's oversight of distributors should be enhanced. The two issues, addressing (1) distributors using electric funds for economic development and (2) the lack of a joint-cost study, have been reported in previous OIG distributor audit reports, and TVA has agreed to take corrective action on these issues.
We make six specific recommendations in this report that require KUB action and recommend TVA's Senior Vice President, Policy and Oversight, work with KUB to resolve them. These recommendations generally relate to (1) complying with Power Contract provisions and (2) remediating classification issues.
KUB and TVA management disagreed with our finding regarding the noncompliant use of electric system funds for economic development purposes. KUB stated it intends to continue the practice of using modest amounts of electric system funds for economic development purposes. TVA stated it does not plan to take any action prior to completion of its currently ongoing review of TVA regulatory policy and the TVA Board's action on that review.
KUB and TVA management generally agreed with our other recommendations, and KUB stated it has taken action on the majority of the recommendations prior to issuance of this report.
Full Report
Since TVA began construction on Watts Bar Nuclear Plant (WBN) Unit 2 in October 2007, the OIG has had staff assigned to attend meetings at the project site in order to keep abreast of management challenges as the OIG conducts its various reviews. During meetings attended by the OIG at the WBN Unit 2 project site, construction issues discussed were characterized by management as recoverable or normal construction problems. Each project schedule, based on its associated assumptions, showed how everything was on track for meeting the early target finish date. Additionally, pertinent information critical of the project's performance was not provided to the OIG by former TVA management when requested by our office. These actions made it harder to identify the extent and potential consequences of the problems on the project. However, in 2010, it became evident many of the issues raised in meetings were symptomatic of much broader problems that increased the risk of exceeding the project's schedule and budget. As a result, we began this review. In mid-2011, we met with TVA executives to brief them on our concerns surrounding the project. In August 2011, we briefed the Audit, Risk, and Regulation Committee on our concerns and the preliminary findings of this report.
We conducted this review to (1) assess TVA's schedule and cost performance on this project and (2) identify any weaknesses in the project's set-up and management and recommend actions to improve schedule and cost performance on this and future projects. We found two primary reasons for the schedule and cost overruns. Based on our assessment of the individual issues raised in various meetings, discussions with WBN Unit 2 and TVA personnel, and reviews of project documentation, we determined that the poor performance experienced at WBN Unit 2 was attributable primarily to (1) deficiencies in project set-up and (2) ineffective management oversight as discussed below.
- Problems with the original project set-up included the following: (1) the detailed scoping, estimating, and planning study was not as in-depth as it should have been; (2) inability to implement prime subcontractors' agreements contributed to project delays; (3) Bechtel was the American Society of Mechanical Engineers (ASME) certification holder, limiting TVA's ability to remove them from the project if problems occurred; and (4) construction began before adequate engineering had been completed.
- Project management in key areas was also ineffective. Specifically, TVA management did not: (1) perform effective oversight of the engineering, procurement, and construction contractor; (2) address certain warning signs that the project was in trouble; and (3) adequately mitigate known problems related to staffing, work order packages, timeliness and quality of information provided to the Nuclear Regulatory Commission, and the procurement of materials that require a long lead time to obtain.
TVA management agreed with our recommendations to: (1) develop a consistent and thorough approach for planning and estimating nuclear construction projects including, but not limited to, a range of estimates with probabilities, key risk assumptions, and contingency amounts; (2) develop contingencies for supplementing contractors' expertise in case they are unable to provide qualified resources; (3) develop contingencies for obtaining the American Society of Mechanical Engineers certifications for future projects as applicable; (4) require design engineering to be substantially complete before starting construction on nuclear projects; (5) establish controls over the development and reporting of project performance data and provide for independent verification of the data; (6) assess the cultural climate to determine if the actions of certain former key management have affected the organizational culture and provide a venue for WBN unit 2 personnel to voice their concerns; (7) evaluate project incentives to ensure they will deliver the desired results; (8) address aging nuclear workforce issues by developing a program for transferring knowledge; and (9) work collaboratively with TVA's Board of Directors to evaluate the benefits of retaining the services of nuclear construction experts to monitor large nuclear construction projects' progress and report results directly to the Board.
Full Report
As part of TVA's Risk Management program, the organization has identified asset performance vulnerability. Asset performance vulnerability impacts TVA's ability to provide power when there is a demand. The risk for asset performance vulnerability is driven by equipment-failure-related incidents that cause forced-outage events and planned-outage extensions of significant duration. According to TVA's Risk Management program, the severity for asset performance vulnerability is moderate. TVA has mitigated these risks. In addition, TVA has completed the draft of a Natural Gas Piping System Management manual. This manual provides the primary standards and methodology required for the commissioning, maintenance, and integrity management of natural gas piping systems found at TVA fossil power group properties.
Full Report
The objectives of this review were to determine (1) the overall status of the non-time-critical phase of the Kingston Ash Recovery Project and (2) if TVA is meeting the schedule for non-time-critical activities. During our review, we found that TVA has made significant progress in the non-time-critical phase of the Kingston Ash Recovery Project. Specifically, TVA has recently completed the following activities: (1) removing ash from the North Embayment, (2) buttressing of Dike C, (3) transferring a portion of a nearby ball field to the Kingston Fossil Plant, and (4) replacing the skimmer wall in the intake channel. In addition, TVA has ongoing non-time-critical activities that include: excavating ash from the Middle Embayment, constructing the Perimeter Wall Stabilization around the on-site disposal areas, disposing of ash on-site, studying the effects of residual ash on the river system, and creating a master plan for park and recreation areas. While TVA is making progress in the completion of non-time-critical activities, we found that five of nine activities reviewed did not meet the scheduled completion date. If the project continues late completion of activities, there is an increased risk that the overall project completion date of 2015, disclosed in the company's financial statements, could be delayed.
We recommend TVA's Senior Vice President, Generation Construction, evaluate the current schedule to determine if the identified delays have caused overall schedule slippage. If it is determined that the overall schedule will be delayed beyond the date disclosed in the footnotes to TVA's financial statements, then the disclosure should be updated. TVA management agreed with our recommendation and has taken actions to address it.
Full Report
Westinghouse agreed with our findings that escalation costs were overbilled and overestimated. Accordingly, TVA management should ensure (1) TVA recovers $26,917 in overbilled escalation, and (2) the remaining escalation costs are billed in accordance with the contract. TVA and Westinghouse agreed the compensation terms need to be clarified, and the contract is being revised.
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Full Report
While we found TVA was in compliance with IPIA requirements that were applicable to TVA, we noted areas where TVA can improve its process for IPIA reporting and better ensure that it meets IPIA requirements with a more formal process. Specifically, we recommended TVA (1) document all processes related to complying with IPIA (these processes may include, but are not limited to, the identification, calculation, and recapture of improper payments), (2) maintain documentation of all reports used to identify potential improper payments as well as documentation related to actual improper payments, (3) consider posting TVA's Improper Payments Information Report - FY 2011 on the agency Website to increase transparency and better align its policy with that of other agencies, and (4) document a formal review process to help ensure TVA accurately reports improper payments. TVA management generally agreed with our recommendations and has taken or is taking corrective actions.
Full Report
Our audit found MLEC generally complied with the contract provisions for proper reporting of electric sales and nondiscrimination in providing power, but we noted noncompliance related to approved use of electric revenues. We also noted a few other less significant issues regarding MLEC's customer contract documentation and internal controls. Additionally, we identified two areas where TVA's oversight of distributors could be enhanced. These areas were (1) discontinuing the practice of allowing distributors to pledge electric system funds as guarantees for customer economic development loans with Rural Development and communicating this to all affected distributors and (2) the lack of guidance related to permitted expenditures. These findings were reported in previous OIG distributor audit reports, and TVA agreed to take corrective action.
MLEC did not provide comments to address the six findings and recommendations in the report. Except for the recommendation regarding the proper accounting for economic development expenditures, TVA management generally agreed with our recommendations. Also, in response to a recommendation made regarding the formal documentation of decisions and approvals by the MLEC Board related to resale rate components and amounts, TVA management stated except with respect to enforcing the nondiscrimination requirement, it currently has no contract mechanism to mandate the recommended requirements related to MLEC's resale rates.
Full Report
- First, as a government corporation, TVA is required to issue an Annual Management Report rather than a Performance Accountability Report (PAR) or Annual Financial Report (AFR), and most IPIA requirements apply to the PAR and AFR.
- Second, TVA's improper payments fell below the IPIA threshold in FY 2011, defined as $10 million of all program activity payments and 2.5 percent of program outlays (TVA's improper payments totaled $7,446,226 million and comprised 0.074 percent of program outlays).
Full Report
During fiscal years 2008 through May 2010, Tennessee Valley Authority (TVA) processed 642 CQARs with net adjustments totaling about $110 million. We assessed the accuracy and compliance with contract terms of 18 CQARs, representing about $24.6 million, or all adjustments over $1 million. In addition, we tested the accuracy and compliance with contract terms of 35 CQARs where adjustments were less than $1 million, totaling $16,285,302. In summary, we found the CQARs were calculated accurately and in accordance with contract terms.
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- $714,288 was overbilled for subcontractor costs for Williams' sister company, Williams Specialty Services. The overbilling included (a) $631,131 in unallowable craft labor costs and associated fees, (b) $99,448 in costs not provided for in Williams' subcontract with Williams Specialty Services, (c) $7,489 in unsupported costs, and (d) a credit of $23,780 for an invoice that was underpaid by TVA.
- $279,288 was overbilled for payroll tax costs on non-manual employees.
- $225,463 was overbilled for labor costs, including (a) $190,804 in fringe benefit costs for non-manual employees who did not receive fringe benefits, (b) $26,349 in unsupported and duplicate labor billings, and (c) $8,310 for non-manual labor costs billed at incorrect markup rates.
- $10,362 was billed for ineligible fees applied to fitness for duty/badging costs.
We identified improvements needed in the effectiveness and efficiency of the PER process. Specifically, we determined the process could be improved to assure Corrective Action Plans (CAP) were closed out timely by tracking Corrective Action Plans (CAP) that were not approved within 30 calendar days of Project Review Committee (PRC) review. Prior to the issuance of our report, WBN U2 issued a PER to address all CAP timeliness issues from a project-wide standpoint. We also identified an opportunity to improve the trending of PERs and recommended the WBN U2 Quality Assurance Manager expand the trending analysis guidelines to include categorizing of PERs by level of importance and analyzing PER trends according to importance as well as quantity.
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We determined (1) $1,036,100 in origin demurrage costs had not been billed back to a contractor as provided for in the contract; (2) TVA had not fulfilled its contractual obligation to provide a contractor with applicable portions of barging agreements, resulting in $537,440 in unrecoverable demurrage costs; (3) $376, 667 in demurrage costs were incurred and billed back to the contractor but had not been paid; (4) TVA's agreement with a contractor lacked the necessary language to hold the contractor accountable for origin demurrage costs until January 1, 2011, when a new contract was put in place, resulting in unrecoverable demurrage costs of $784,000; (5) due to inconsistencies in demurrage contract terms for coal delivered to Cumberland Fossil Plant (CUF), TVA incurred approximately $764,400 in unrecoverable costs; changes to the unload time under this same contract could save TVA about $327,600 annually; (6) a clause in TVA's contract for delivery to Allen Fossil Plant (ALF) was not aligned with the operating conditions at the plant which prevented TVA from using a provision to mitigate demurrage costs; (7) origin and destination demurrage costs were not tracked separately, which prevented TVA from transferring origin demurrage costs to the supplier; (8) eliminating barge damage charges at ALF could reduce costs by at least $145,000 per year; and (9) addressing operational challenges at ALF and CUF could reduce demurrage costs at these plants. As a result of the operational challenge at ALF, we also noted that when the focus of a business unit is on their individual goals rather than TVA goals, the overall strategic business unit's budget and ultimately TVA's expenses can be impacted. This was previously identified in OIG audit, 2002-911E, Review of the Coal Procurement Process.
In addition, we determined that more effective knowledge of the contract demurrage terms, monitoring of the contracts, and communication among terminal, barge, and rail contract administrators, the Coal and Gas Services specialist responsible for demurrage payments, and Yard Operations personnel are needed.
We made recommendations accordingly to the Senior Vice President, Fossil Power Group.
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Full Report
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Our audit found Volunteer generally complied with the contract provisions for (1) proper reporting of electric sales and (2) nondiscrimination in providing power. However, we noted instances of noncompliance with other provisions of the power contract. The most important instances were related to the use of electric system revenues and customer classification. We also identified three areas where TVA oversight of distributors could be enhanced. Two areas identified were new oversight issues addressing the lack of (1) guidance related to the due diligence process for cooperatives providing loans to customers from funds provided by Rural Development and (2) review of cooperative distributors' capital credit allocations in the retail rate setting process. The remaining issue, regarding the lack of a current joint cost study, was reported in previous OIG distributor audit reports, and TVA agreed to take corrective action on this issue.
With regard to the 18 recommendations related to Volunteer, Volunteer disagreed with three recommendations, but TVA management agreed with all of the recommendations, stating it planned to investigate one finding further. In regards to the recommendations which were specific to TVA, TVA management stated (1) it planned to recommend formal approval by the TVA Board of Directors of a use of revenues policy which expressly approved distributor participation in the United States Department of Agriculture Rural Economic Development and Grant Program, and (2) consideration of Volunteer's capital credit allocations was inherent in TVA's revised retail ratemaking and approval process.
Full Report
- A formal written procedure directing the budget process did not exist.
- Operating and maintenance (O&M) targets were set using historical data rather than tied to fundamental business drivers.
- A control to ensure each submitted business plan aligns resources with strategic goals was not operating as intended.
- The budget process addressed risk management initiatives at the organization level; however, entity-wide risk management was not directly addressed.
- The process for prioritizing capital and O&M projects among organizations could be improved.
- The budget process relied heavily on compiling data from multiple spreadsheets which was manually intensive, time consuming, and error-proned.
Results of the procedures applied follow. In summary,
- The fiscal year (FY) 2011 WP goals were properly approved, including two changes approved on August 15, 2011 and August 24, 2011. These two changes affected 16 scorecards and resulted in increases to the payout.
- The actual year to date FY 2011 measures for the Strategic Business Unit and Business Unit scorecards agreed with the respective supporting documentation provided.
- The two actual year to date incentivized TVA Corporate balanced scorecard measures agreed with the underlying support provided.
- The mathematical accuracy of the payout percentages and subsequent changes were verified by the OIG through recalculation.
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The Inspector General agrees with TVA management in their efforts to maintain maximum financial flexibility, including (1) the adoption of sound financial principles, (2) ensuring multiple options and strategies are pursued to achieve the most economical approach, and (3) seeking to ensure that debt remains a viable option in future financing decisions.
TVA should be able to support additional debt to help meet energy demands as long as the TVA Board maintains its ratemaking authority, TVA maintains its service territory and customer base, and TVA uses the debt proceeds to successfully build gen