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.

  March 12, 2024 - Early Payment Discounts on Vendor Invoices Follow-Up - 2023-17442

We included an audit of the Tennessee Valley Authority's (TVA) management of early payment discounts on vendor invoices in our annual audit plan as a follow up to audit 2017-15500, Early Payment Discounts on Vendor Invoices, dated May 30, 2018, where we reported TVA missed 19 percent of all early payment discount opportunities.

Our audit objective was to determine if early payment discounts are appropriately managed by TVA. Our audit scope included invoices from Supply Chain contracts and purchase orders with greater than $1 million in spend in any one fiscal year from October 1, 2020, through September 30, 2023.

We found TVA's management of early payment discounts could be improved as 18 percent of all available discounts, totaling $826,252, were not taken during the audit period. Based on our analysis and interviews with relevant personnel, we determined some personnel were often unaware of important aspects of how to manage (1) early payment discount terms, (2) invoices sent by vendors after the discount period expired, and (3) invoices sent by vendors before materials are received. Additionally, we noted TVA Supply Chain maintains dashboards that could be used to help management identify training needs.

  Full Report

  February 16, 2024 - Radiological Respiratory Protection Program - 2023-17439

Due to the risk of employee exposure to airborne radioactive materials and industrial/chemical airborne hazardous materials at the Tennessee Valley Authority's (TVA) nuclear plants, we performed this evaluation of the radiological respiratory program. We found the selected respiratory requirements we reviewed for TVA's Nuclear Power Group Standard Programs and Processes 05.10, Radiological Respiratory Protection Program, were being performed as required at TVA's nuclear plants. Specifically, we found (1) training and medical evaluations were completed as required, and (2) all plants were meeting requirements for appraising the effectiveness of their Radiological Respiratory Protection Programs.

  Full Report

  January 11, 2024 - USA DeBusk, LLC - Contract Nos. 12042 and 17143 - 2023-17413

As part of our annual audit plan, we performed an audit of costs billed to the Tennessee Valley Authority (TVA) by USA DeBusk, LLC (DeBusk) for industrial cleaning services provided under Contract Nos. 12042 and 17143. Our audit objective was to determine if the costs were billed in compliance with the terms of the contracts. Our audit scope included approximately $16 million in costs billed between January 1, 2021, and November 30, 2022, including $13.3 million in costs billed under Contract No. 12042 and $2.7 million billed under Contract No. 17143.

In summary, we determined DeBusk overbilled TVA $21,157 in travel costs, including (1) $14,033 for ineligible daily commuting costs and (2) $7,124 in unsupported per diem costs. In addition, we identified opportunities to improve contract administration by TVA. Specifically,
  • Pricing schedules for Contract No. 12042 were missing and could not be provided by TVA. As a result, we were unable to determine whether $12.97 million in labor, equipment, and travel costs billed to TVA were in compliance with the contract's pricing schedules or TVA's Project Maintenance and Modification Agreement.
  • TVA could have saved an estimated $12,082 in fuel surcharges by stipulating the use of a fuel adjustment index more closely aligned with TVA's service region.
  • Both contracts contained contradictory compensation terms and may not have conveyed the parties' intent regarding travel and temporary living allowance reimbursements.
  • Invoice packages submitted to TVA for approval did not contain all of the required supporting documentation or match the costs billed through TVA's Maximo system.
(Summary Only)

  January 9, 2024 - TVA's Preemployment Investigation and Onboarding Processes - 2023-17416

The Office of the Inspector General conducted an evaluation to determine if the Tennessee Valley Authority (TVA) is performing preemployment suitability and onboarding steps necessary for access in a timely manner. We found TVA was allowing access to TVA facilities while not always performing preemployment suitability and onboarding steps in a timely manner. Specifically, we determined that the Form I-9, for 381 of 1,571 personnel (24 percent) hired between October 1, 2021, and June 30, 2023, was either not completed in a timely manner or never completed in accordance with the Immigration Reform and Control Act of 1986 and 8 Code of Federal Regulations §§ 274a.1-274a.14. However, according to TVA Police and Emergency Management personnel, physical access should have been revoked but was not because Human Resources and Administration does not notify them when the I-9 threshold is exceeded. Additionally we identified opportunities to strengthen TVA Standard Programs and Processes to better align with federal requirements.

  Full Report

  January 5, 2024 - Health and Safety Committees - 2023-17410

Due to the importance of monitoring the performance of the Tennessee Valley Authority's (TVA) Safety Program, the TVA Office of Inspector General (OIG) performed an evaluation of TVA's health and safety committees (HSC). The objective of this evaluation was to determine if HSCs were effectively monitoring the remediation of identified safety concerns.

The TVA OIG determined TVA HSCs are generally effective at monitoring the remediation of identified safety concerns. However, there were limited instances when safety concerns were not monitored or remediation plans were not established. In addition, we found some HSCs were not following requirements to meet at least quarterly and maintain meeting minutes.

  Full Report

  December 20, 2023 - HJM Forest Resource Management Services, LLC - Contract No. 15243 - 2023-17418

As part of our annual audit plan, we audited costs billed to the Tennessee Valley Authority (TVA) by HJM Forest Resource Management Services, LLC (HJM) under Contract No. 15243 for vegetation management, initial clearing, and maintenance of TVA transmission line rights-of-way. Our audit objective was to determine if costs were billed in accordance with the terms of the contract. Our audit scope included about $16.5 million in costs billed to TVA from September 1, 2020, through December 31, 2022.

In summary, we determined costs billed by HJM generally complied with the contract, except for $3,853 in overbilled labor costs due to ineligible premium overtime pay.

(Summary Only)

  December 18, 2023 - America Fujikura Ltd. dba AFL Telecommunications LLC - Contract Nos. 12674 and 15270 - 2023-17402

As part of our annual audit plan, we performed an audit of costs billed to the Tennessee Valley Authority (TVA) by America Fujikura Ltd. dba AFL Telecommunications LLC (AFL) for optical ground wire cable (OPGW) and hardware under Contract Nos. 12674 & 15270. Our audit objective was to determine if costs were billed in accordance with the terms of the contracts. Our audit scope included approximately $29.5 million in costs billed to TVA from March 19, 2018, through August 31, 2022.

In summary, we determined:
  • AFL did not provide credits totaling $307,320 for returned steel reels.
  • AFL overbilled TVA $72,025, including (1) $43,903 because AFL did not always use the most cost-effective unit rate available and (2) $28,122 because AFL sometimes used unit rates that were in excess of the contracts' pricing schedules.
(Summary Only)

  December 6, 2023 - Continuity of Operations Plan - 2023-17415

Continuity of operations (COOP) is an effort within the executive office of the President of the United States and individual federal executive departments and agencies to ensure that mission essential functions continue to be performed during disruption of normal operations. Mission essential functions are a limited set of agency-level functions that are directly related to accomplishing the mission of the organization and must be continued throughout, or resumed rapidly after, a disruption of normal activities.

We included an audit of the Tennessee Valley Authority's (TVA) COOP plan on our annual audit plan due to the operational risks that could result from noncompliance with federal continuity guidance and/or inadequate COOP plan implementation. Our audit objective was to determine if TVA's COOP plan complies with applicable laws, regulations, and executive orders and has been adequately implemented. Our audit scope included the TVA COOP plans and applicable laws, regulations, and executive orders implemented as of December 31, 2022.

We determined TVA's COOP plan generally complies with applicable laws, regulations, and executive orders and has been adequately implemented. However, we identified three instances in which TVA's COOP plan is not currently in compliance with federal continuity directive guidance, including:
  • Annual COOP training for TVA employees is not currently required.
  • COOP program essential records are not adequately maintained.
  • One organization's COOP plan does not include a defined review cadence to ensure timely updates.
Additionally, we determined COOP program guidance does not address TVA's information management policy.

  Full Report

  November 29, 2023 - Express Scripts, Inc. - Contract No. 11023 - 2023-17404

As part of our annual audit plan, we performed an audit of costs billed to the Tennessee Valley Authority (TVA) by Express Scripts, Inc. (ESI) for pharmacy benefits management services under Contract No. 11023. Our audit objective was to determine if costs were billed in accordance with the terms of the contract. Our audit scope included approximately $95.8 million in costs billed to TVA from January 2, 2021, through October 18, 2022.

In summary, we determined:
  • ESI overbilled TVA $1,291,051 in maintenance medication refill claims that were in excess of the contract's three 30-day supply refill limits for maintenance medications.
  • ESI billed TVA $20,078 in duplicate claim costs.
(Summary Only)

  November 28, 2023 - The Steam Generating Team, LLC - Contract No. 11144 - Craft Labor and Project Closeout - 2023-17429

As part of our annual audit plan, we performed an audit of costs billed to the Tennessee Valley Authority (TVA) by The Steam Generating Team, LLC for steam generator replacement services under Contract No. 11144. Our audit objective was to determine if the craft labor and project closeout costs billed to TVA under Contract No. 11144 for steam generator replacement services were in accordance with the contract's terms. Our audit scope included about $29.2 million in craft labor costs billed to TVA from February 1, 2022, through March 31, 2023. In addition, we limited our review of project closeout costs to TVA's total project fee amount of $23 million.

In summary, we determined the project closeout fee was billed in accordance with the contract's terms. However, we determined The Steam Generating Team, LLC, overbilled TVA $386,227 in craft labor costs, including (1) $361,467 in ineligible workers compensation insurance costs, (2) $20,635 in ineligible craft incentive bonus costs, and (3) $4,125 in unsupported craft labor costs.

(Summary Only)

  November 16, 2023 - Monitoring of Ernst & Young LLP's Audit of the Tennessee Valley Authority Fiscal Year 2023 Financial Statements - 2023-17460

In keeping with its responsibilities under the Inspector General Act of 1978, as amended, the OIG monitored the audit of TVA's fiscal year 2023 financial statements performed by Ernst and Young LLP (EY) to assure their work complied with Government Auditing Standards. Our review of EY's work disclosed no instance in which the firm did not comply in all material respects with Government Auditing Standards.

  Full Report

  November 14, 2023 - Section 26a Permit Management - 2023-17409

Section 26a of the Tennessee Valley Authority (TVA) Act requires TVA's approval prior to construction, operation, or maintenance of any dam, appurtenant works, or other obstruction affecting navigation, flood control, or public lands or reservations across, along, or in the Tennessee River and its tributaries. Title 18, Code of Federal Regulations (CFR), Part 1304.1 1304.412, Approval of Construction in the Tennessee River System and Regulation of Structures and Other Alterations (18 CFR §§ 1304.1 1304.412) contains regulations related to the application process and information on what is allowable under a Section 26a permit. Additionally, 18 CFR §§ 1310.1-1310.3, Administrative Cost Recovery requires applicants pay TVA fees for its review of Section 26a permit applications. TVA's Natural Resources group has also established a series of stewardship guidelines to provide guidance for effective, consistent management of TVA reservoir land and natural resources that includes the Section 26a permit process.

Due to a concern identified in public comments prior to a TVA Board of Directors meeting, as well as concerns reported to the Office of the Inspector General EmPowerline®, we performed an evaluation to determine if Section 26a permits were being effectively managed.

We determined Section 26a permits were not being managed effectively by TVA. Specifically, we found:
  • TVA is not complying with requirements to recover all the associated cost of permits in accordance with 18 CFR § 1310.3. When costs associated with processing Section 26a permits are not recovered from applicants, TVA's ratepayers are effectively subsidizing the Section 26a permitting process.
  • TVA's oversight of the Section 26a permit process is inadequate. The oversight concerns are related to TVA: (1) performing minimal compliance oversight, (2) not providing oversight to ensure violations and encroachments are addressed in a timely or consistent manner, and (3) inconsistently documenting permit noncompliances as violations and encroachments.
  • Instances of noncompliance with 18 CFR §§ 1304.1-1304.412 related to permit application requirements and multiple instances of poor recordkeeping.
TVA is responsible for managing the Tennessee River system. An important part of that responsibility is to ensure obstructions affecting navigation, flood control, or public lands across, along, or in the Tennessee River and its tributaries are built and maintained to protect the safety of all river users and the environment. TVA manages these responsibilities through the Section 26a permit process. However, based on the issues identified during our review, TVA's oversight is not adequate to ensure the Section 26a permit process is effective.

  Full Report

  November 13, 2023 - Agreed-Upon Procedures for TVA Fiscal Year 2023 Performance Measures - 2023-17467

The Office of the Inspector General (OIG) performed the procedures, which were requested and agreed to by Tennessee Valley Authority management solely to assist management in determining the validity of the Winning Performance/Executive Annual Incentive Plan (WP) Measures for fiscal year (FY) ending September 30, 2023. Tennessee Valley Authority management is responsible for the WP Measures data provided. In summary, procedures applied by the OIG found the:
  • FY 2023 WP goals for the enterprise measures were properly approved.
  • FY 2023 goals (target) for the corporate multiplier measures were properly approved.
  • Actual FY to-date results for the enterprise measures agreed with the underlying support, without exception.
  • Actual FY to-date results for the corporate multiplier measures agreed with the underlying support, without exception.
  • FY 2023 WP payout percentages provided by the Business Planning and Analysis organization on November 6, 2023, were mathematically accurate and agreed with the OIG's recalculation.
  Full Report

  October 19, 2023 - Pandemic Recovery Credit - 2023-17414

On August 20, 2020, in response to the coronavirus (COVID-19) pandemic, the Tennessee Valley Authority (TVA) created the Pandemic Relief Credit (PRC) to provide a measure of relief to local power companies (LPCs), industries, businesses, and people of TVA's seven state service region. Relief was provided in the form of a 2.5 percent credit to LPC and directly served customers' demand and nonfuel energy charges. In August 2021, TVA extended the 2.5 percent credit through fiscal year (FY) 2022. TVA subsequently extended the 2.5 percent credit through FY 2023. Through July 2023, TVA had issued about $630 million in PRCs.

We included this audit in our annual audit plan due to the amount of credits issued to LPCs and issues identified in a previous audit of pandemic-era credits. Our audit objective was to determine if adequate controls were in place to ensure the PRCs were calculated and utilized in accordance with TVA Board of Directors' (TVA Board) approval. Our audit scope was the $449,227,369 of credits issued under the PRC for the period October 2020 through September 2022.

We determined some controls were adequate to ensure PRCs were calculated and utilized in accordance with TVA Board approval. Specifically, controls were adequate to ensure
(1) PRCs were calculated accurately and (2) LPCs that elected to pass the standard service portion of the credit to their customers did so in a nondiscriminatory manner. However, we determined the control in place to ensure the Time of Use (TOU) portion of the credit that was passed to LPC customers was inadequate. Specifically, the control for testing whether the LPC was passing the credit to the TOU customers was to ask LPC personnel if the credit was passed on to the customers. Due to the inadequacy of the control, TVA was not aware that one of the 25 LPCs we tested had not passed the majority of the credits to their end-use TOU customers totaling about $420,000.

In addition, since the standard service portion of the credit did not have to be passed on to LPC customers, the cash positions of LPCs could be increased by the PRC. We determined 44 LPCs had surplus cash in excess of the TVA Board's previously established 33 percent cash ratio threshold and noted 36 of these had not passed the standard service portion of the credit on to their end-use customers.

  Full Report

  October 12, 2023 - Organizational Effectiveness - Technology Portfolio Management - 2023-17430

The Office of the Inspector General conducted a review of TVA's Technology Portfolio Management (TPfM) organization to identify factors that could impact TPfM's organizational effectiveness. Interviews with TPfM personnel revealed positive interactions within TPfM. However, we identified issues that included engagement risk in one group that affected morale. We also identified opportunities to improve (1) performance of the Technology and Innovation mission pertaining to role clarity and execution and (2) communication and collaboration with business partners.

  Full Report

  September 28, 2023 - TVA Nuclear Preventive Maintenance - 2022-17384

Based on our review of Preventive Maintenance (PM) metric data provided by the Tennessee Valley Authority (TVA), we determined PMs were generally being performed within established schedules at TVA's nuclear plants; however, some metrics indicated performance could be improved. In addition, we found other areas where improvements are needed, including: (1) some discrepancies between TVA's PM metrics data in Cognos (the business analytics reporting tool used across TVA to access and analyze company data) reports and the data submitted to an industry peer organization; (2) PMs needed that were not established, causing declines of equipment condition and a regulatory finding; and (3) recurring issues that prevented or delayed PMs being performed. Additionally, we identified obsolescence-related equipment issues at TVA's nuclear plants. Specifically, obsolescence-related equipment issues were identified in many program, system, and component health reports as having a negative impact.

  Full Report

  September 27, 2023 - Organizational Effectiveness - Power Service Shop - 2022-17396

The Office of the Inspector General conducted a review of the Power Service Shop (PSS) organization to identify factors that could impact PSS's organizational effectiveness. During our evaluation, PSS personnel commented positively on interactions within and outside of PSS and the safety environment. However, we identified issues that could negatively impact PSS's effectiveness, if not addressed. These issues include (1) staffing challenges; (2) resource concerns related to tooling, tools, equipment, and trailers; and
(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.

  Full Report

  September 26, 2023 - Federal Information Security Modernization Act - 2023-17423

The Federal Information Security Modernization Act of 2014 (FISMA) requires each agency's Inspector General (IG) to conduct an annual independent evaluation to determine the effectiveness of the information security program (ISP) and practices of its respective agency. Our objective was to determine the effectiveness of the Tennessee Valley Authority's (TVA) ISP and practices as defined by the FY [Fiscal Year] 2023 - 2024 IG FISMA Reporting Metrics. Our audit scope was limited to answering the fiscal year (FY) 2023 IG metrics, which include 20 core IG metrics to be evaluated annually and remaining supplemental IG metrics will be evaluated on a two year cycle (Appendix B). The 20 core IG metrics were chosen based on alignment with Executive Order 14028, Improving the Nation's Cybersecurity, as well as recent OMB guidance to agencies in furtherance of the modernization of federal cybersecurity.

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.

  Full Report

  September 26, 2023 - Load Not Served Winning Performance Measure - 2023-17405

For most Tennessee Valley Authority (TVA) employees, annual compensation consists of two components: base pay (salary) and pay at risk (Winning Performance [WP]). WP is a performance management program designed to promote teamwork, encourage high performance behaviors, and motivate and reward TVA employees for achieving goals aligned with TVA's mission and values.

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.

  Full Report

  September 20, 2023 - Accenture Federal Services LLC - Contract No. 14910 - 2023-17412

The Office of the Inspector General audited costs billed to the Tennessee Valley Authority (TVA) by Accenture Federal Services LLC (AFS) under Contract No. 14910. AFS provides enterprise architecture and information technology infrastructure services to TVA under the contract. The contract provided that work could be performed using time and material or fixed price payment terms as agreed by the parties in purchase orders (PO). Our audit objectives were to determine (1) if AFS billed TVA in accordance with the contract's terms and (2) the reasonableness of TVA's process for evaluating proposed fixed price tasks issued under the contract. Our audit scope included approximately $64.9 million in costs billed to TVA by AFS from the inception of the contract, March 25, 2020, through October 27, 2022.

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:
  1. Compete the fixed price tasks among similar vendors although it had informed TVA senior management it intended to do so; or
  2. 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.
(Summary Only)

  September 11, 2023 - Robert E. Lamb, Inc. - Contract No. 13659 - 2023-17403

As part of our annual audit plan, we performed an audit of costs billed to the Tennessee Valley Authority (TVA) by Robert E. Lamb, Inc., (Lamb) to provide architectural engineering services to assist with site selection, final programming, and schematic design for a new control center under Contract No. 13659 (formerly Contract No. 11638). Our audit objective was to determine if costs were billed in accordance with the terms of the contract. Our audit scope included about $20.7 million in costs billed to TVA from July 15, 2018, through September 15, 2022.

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.
We also noted opportunities to improve contract administration by TVA. Specifically, we determined (1) TVA paid Lamb $3,239,091 in construction management fees, although fee was already being paid to Lamb through the contract's time and material labor billing rates; (2) Lamb started and completed work on one purchase order, totaling $484,710, prior to approval by TVA; and (3) TVA could have saved between $40,741 and $113,416 if the contract had included temporary living allowance provisions.

(Summary Only)

  September 11, 2023 - Organizational Effectiveness - Magnolia Combined Cycle Plant - 2023-17421

The Office of the Inspector General conducted a review of the Magnolia Combined Cycle Plant (MCC) to identify factors that could impact MCC's organizational effectiveness. During interviews, MCC personnel revealed positive interactions with team members and most management. However, we identified issues that could negatively impact MCC's effectiveness, if not addressed. These issues include (1) improvements needed with work packages and (2) staffing concerns.

  Full Report

  July 26, 2023 - Gas Plant Critical Spare Parts - 2022-17400

The Tennessee Valley Authority (TVA) defines critical spares as components or parts needed to (1) prevent loss of generation or transmission, (2) prevent unsafe operating conditions, and/or (3) return critical components to service. TVA identified 45,934 critical components for its 18 natural gas plants. Due to the importance of critical spare parts being available to reduce safety and generation impacts when equipment fails, we conducted an evaluation to determine if TVA adequately identified, stocked, and maintained critical spare parts for gas plants.

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.

  Full Report

  July 5, 2023 - Combustible Coal Dust - 2022-17376

We determined the Tennessee Valley Authority's (TVA) coal plants have taken steps to reduce combustible coal dust since dedicated Combustible Dust Program funding was provided by TVA in 2018. Specifically, coal plants have dedicated combustible dust housekeeping crews to help mitigate combustible dust accumulations, and projects were completed to improve conditions at the plants. However, we identified areas of noncompliance with TVA Technical Safety Procedure 18.1205, Combustible Dust (Combustible Dust TSP), related to (1) coal dust accumulation, (2) documentation of combustible dust daily inspections, and (3) training. In addition, we identified an area for improvement related to inconsistent language in the Combustible Dust TSP and site combustible dust programs.

  Full Report

  July 3, 2023 - Transmission and Power Supply's Management of Mac® Desktops and Laptops - 2022-17380

As part of our annual audit planning, we completed a threat assessment to identify high risk cybersecurity threats that could potentially impact Tennessee Valley Authority (TVA). We determined the potential impact for system intrusion through misconfigurations or unpatched systems to be high. Therefore, we included an audit of TVA Transmission Operations and Power Supply (TOPS) organization's management of Mac® desktops and laptops as part of our 2022 audit plan.

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.

  Full Report

  June 21, 2023 - Remote Application and Desktop Virtualization Client - 2022-17390

The Office of the Inspector General audited the Tennessee Valley Authority's (TVA) use of remote application and desktop virtualization client due to the risks of (1) potential system intrusion through misconfigurations and (2) continued elevated remote users during the COVID-19 pandemic. We found the configuration management control for TVA's remote application desktop virtualization client was ineffective. However, we determined compensating access controls were in place to mitigate the risk to an overall acceptable level.

  Full Report

  May 25, 2023 - Organizational Effectiveness - TVA Police & Emergency Management - 2022-17371

The Office of the Inspector General conducted a review of TVA Police and Emergency Management's (TVAP&EM) organization to identify factors that could impact TVAP&EM's organizational effectiveness. During interviews, TVAP&EM personnel revealed positive interactions within and outside TVAP&EM. However, we identified issues that have, or could, affect accomplishment of the TVAP&EM mission, if not addressed. These issues included (1) engagement risks, (2) employee concerns related to inconsistent practices within the organization, (3) risks related to TVAP&EM's mobile software tool, and (4) risks to personnel security. We also identified an opportunity to strengthen risk assessment within TVAP&EM.

  Full Report

  May 16, 2023 - Independent Examination of the BWRX-300 Technology Collaboration Agreement - 2023-17424

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined a company's standard design rates (i.e., indirect cost recovery rates) contained in the BWRX-300 Technology Collaboration Agreement (TCA). Our examination objective was to determine if the company's proposed indirect cost recovery rates were fairly stated.

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.

(Summary Only)

  May 12, 2023 - Organizational Effectiveness - Transmission Planning and Projects - 2022-17373

The Office of the Inspector General conducted a review of Transmission Planning and Projects (TPP) organization to identify factors that could impact TPP's organizational effectiveness. During interviews, TPP personnel revealed positive interactions with team members and business partners provided positive feedback on TPP. However, we identified issues that could negatively impact TPP's effectiveness, if not addressed. These issues include (1) engagement risks, (2) insufficient resources, (3) system risks related to an ineffective estimating and material processing system and the inadequacy of customer relationship management systems, and (4) needed improvements with business partner support.

  Full Report

  May 11, 2023 - Power Operations Hazardous Chemicals - 2022-17377

The Office of the Inspector General conducted an evaluation to determine if hazardous chemicals at Power Operations' sites were (1) adequately identified and communicated and (2) properly handled and stored. We determined hazardous chemicals at most Power Operations' sites we visited were not adequately identified or communicated. Specifically, most sites had incomplete hazardous chemical lists or unmarked containers. In addition, we selected items from a storage location at each site and determined hazardous chemicals selected were properly stored according to their safety data sheet instructions. We were unable to determine if hazardous chemicals were being handled properly because we did not observe any chemical use. However, we did find that 10 of 33 individuals interviewed could not retrieve a safety data sheet, which could increase the risk that hazardous chemicals may not be properly handled and stored. Additionally, our testing identified two sites with best practices.

  Full Report

  April 19, 2023 - The Steam Generating Team, LLC - Contract No. 11144 - 2022-17360

As part of our annual audit plan, we performed an audit of costs billed to the Tennessee Valley Authority (TVA) by the Steam Generating Team, LLC (SGT) for steam generator replacement services under Contract No. 11144. Our audit objective was to determine if costs were billed in accordance with the contract's terms. Our audit scope included approximately $35.9 million in costs paid by TVA from January 1, 2020, through January 31, 2022.

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.
(Summary Only)

  April 5, 2023 - Independent Examination of Cost Proposal for Non-Nuclear Modification and Supplemental Maintenance - 2022-17394

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for performance of nonnuclear modification and supplemental maintenance services. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned 5-year, $386 million contract.

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.

(Summary Only)

  March 31, 2023 - Identification of TVA's Enterprise Risks - 2022-17381

Enterprise Risk Management (ERM) provides an enterprise-wide, strategically aligned portfolio view of organizational challenges that provides improved insight about how to more effectively prioritize and manage risks. The Tennessee Valley Authority (TVA) Board of Directors established a formalized ERM program in 1999 to (1) develop a standard framework and (2) promote risk management awareness and techniques to manage risks throughout the company. Due to the importance of TVA identifying and assessing risks, we evaluated (1) the process used by TVA business units (BU) to identify risks and (2) how BU risks were used to comprise TVA's enterprise risk levels. We determined the processes used by TVA were generally effective for identifying strategic business unit (SBU)/BU risks and assessing those risks to determine enterprise level risks. However, we identified some opportunities for improvement related to documentation of the ERM process and defining and documenting TVA's risk appetite. Additionally, we could not determine if the risks in the 2022 Enterprise Level Risk Portfolio adequately addressed the rolling blackouts that occurred on December 23 and 24, 2022.

  Full Report

  March 30, 2023 - Independent Examination of Cost Proposal for Nonnuclear Modification and Supplemental Maintenance - 2022-17393

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for performance of nonnuclear modification and supplemental maintenance services. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned 5-year, $579 million contract.

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.

(Summary Only)

  March 30, 2023 - TVA Training and Development Processes - 2022-17375

The Government Accountability Office defines training as educational programs of instruction in professional, technical, or other fields that are, or will be, related to the employee's job responsibilities. TVA's Regulatory and Corporate Training and Support organization aims to (1) create and maintain safety and environmental training that ensures employees are trained to regulatory requirements, (2) support the job assessment process to ensure employees are assigned the training they need to perform their jobs, and (3) create and support the corporate and technical training that enables individual professional and technical development.

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.

  Full Report

  February 21, 2023 - Substation Physical Security - 2020-15708

As part of our annual audit plan, we performed an audit of physical access to Tennessee Valley Authority's (TVA) substations. Our audit objective was to determine if substations had appropriate physical access controls. Our scope included substations that contain devices with TVA network connectivity.

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.

  Full Report

  February 1, 2023 - Baker's Construction Services, Inc. - Contract No. 14743 - 2021-17300

As part of our annual audit plan, we performed an audit of costs billed to the Tennessee Valley Authority (TVA) by Baker's Construction Services, Inc. (BCS) for field labor support services provided for TVA's civil construction organization under Contract No. 14743. Our audit objective was to determine if costs were billed in compliance with the contract's terms. Our audit scope included about $19.26 million in costs billed to TVA from January 1, 2020, through August 31, 2021.

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.
We also noted opportunities to improve contract administration by TVA. Specifically, (1) the contract contained inconsistent language related to compensating noncraft labor, and
(2) several invoice and payment errors resulted in incorrect payments by TVA, which could have been identified with a proper invoice review.

(Summary Only)

  January 19, 2023 - Fisher Contracting Company - Contract No. 13155 - 2022-17351

As part of our annual audit plan, we audited costs billed to the Tennessee Valley Authority (TVA) by Fisher Contracting Company (Fisher) under Contract No. 13155 for coal combustion residual construction services. Our audit objectives were to determine if (1) costs were billed in accordance with the terms of the contract and (2) tasks were issued using the most cost efficient pricing methodology. Our audit scope included about $47.9 million in costs billed to TVA from February 12, 2018, through February 28, 2022. This included approximately $42.5 million for fixed price projects, $5.3 million for cost reimbursable projects, and $89,985 for time and material projects. In summary, we determined:
  • 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.
(Summary Only)

  December 13, 2022 - Employee Relocation Allowances - 2022-17348

The Office of the Inspector General included an audit of the Tennessee Valley Authority's (TVA) employee relocation allowances on our annual audit plan due to the potential reputational and financial risks associated with relocations that do not comply with TVA policies and procedures. Our audit objective was to determine if relocation allowances are paid in accordance with TVA Standard Programs and Processes (SPP) 11.208, Employee Relocation Allowances. Our audit scope included 308 completed employee relocations during calendar years 2019 through 2021, totaling approximately $8.4 million. TVA utilizes a third-party vendor, SIRVA Relocation, LLC, (SIRVA) to interface with the employee and administer the relocation in accordance with TVA's policies.

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.

  Full Report

  December 2, 2022 - Consulting Contracts - 2022-17347

The Office of the Inspector General included an audit of the Tennessee Valley Authority's (TVA) consulting contracts in our annual audit plan due to significant spend1 in this area as well as the conflict of interest risks associated with this type of contract. Our audit objective was to determine if proper controls are in place to identify consulting contracts at TVA and limit the risks of conflicts of interest.

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.

  Full Report

  December 2, 2022 - Geosyntec Consultants, Inc. - Contract No. 13125 - 2022-17379

As part of our annual audit plan, we audited costs billed to the Tennessee Valley Authority (TVA) by Geosyntec Consultants, Inc. (Geosyntec) to provide coal combustion residual and dam safety engineering services under Contract No. 13125. Our audit objectives were to determine if (1) costs were billed in accordance with the terms of the contract and (2) tasks were issued using the most cost-efficient pricing methodology. Our audit scope included about $11.3 million in costs billed to TVA from February 6, 2018, through June 27, 2022, of which over 97 percent was billed using T&M compensation terms. In summary, we determined:
  • 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.
(Summary Only)

  November 17, 2022 - Monitoring of Ernst & Young LLP's Audit of the Tennessee Valley Authority Fiscal Year 2022 Financial Statements - 2022-17395

In keeping with its responsibilities under the Inspector General Act of 1978, as amended, the OIG monitored the audit of TVA's fiscal year 2022 financial statements performed by Ernst and Young LLP (EY) to assure their work complied with Government Auditing Standards. Our review of EY's work disclosed no instance in which the firm did not comply in all material respects with Government Auditing Standards.

  Full Report

  November 16, 2022 - Slick Rollers, LLC - Contract No. 14457 - 2022-17341

As part of our annual audit plan, we performed an audit of costs billed to the Tennessee Valley Authority (TVA) by Slick Rollers, LLC (Slick Rollers) for coal and limestone handling system support materials and/or services at various TVA fossil plants under Contract No. 14457. Our audit objective was to determine if costs were billed in accordance with the terms and conditions of the contract. Our audit scope included about $10.3 million in costs billed to TVA from August 13, 2019, through December 16, 2021.

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.

(Summary Only)

  November 16, 2022 - Economic Development Jobs Reporting - 2022-17352

The Tennessee Valley Authority's (TVA) Economic Development (ED) organization is primarily responsible for helping to maintain TVA's industrial and manufacturing base, locate desirable companies to the Valley, and improve the competitiveness of Valley communities. TVA ED offers incentive programs and services to new and existing customers in the valley. TVA included information on jobs created and retained in the Tennessee Valley for which TVA has played a role in the recruitment or retention of the economic development project in their fiscal years 2019 through 2021 Securities and Exchange Commission reports and fiscal year 2020 Sustainability Report. Additionally, jobs created and/or retained are used as a metric in the corporate multiplier for the Winning Performance Team Incentive Plan and the Executive Annual Incentive Plan. Based on the reputational risk of disseminating inaccurate information to the public, we included an audit of TVA ED jobs reporting in our annual audit plan. Our audit objective was to determine if the job numbers reported externally by TVA ED are validated prior to being disseminated to the public in accordance with any best practices.

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.

  Full Report

  November 15, 2022 - Agreed-Upon Procedures for TVA Fiscal Year 2022 Performance Measures - 2022-17397

The Office of the Inspector General (OIG) performed the procedures, which were requested and agreed to by Tennessee Valley Authority (TVA) management solely to assist management in determining the validity of the Winning Performance/Executive Annual Incentive Plan (WP) Measures for fiscal year (FY) ending September 30, 2022. TVA management is responsible for the WP Measures data provided. In summary, procedures applied by the OIG found:
  • 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.
  Full Report

  October 26, 2022 - Organizational Effectiveness - Ackerman Combined Cycle Plant - 2022-17336

The Office of the Inspector General conducted a review of the Ackerman Combined Cycle Plant (AKC) to identify factors that could impact AKC's organizational effectiveness. During our evaluation, plant personnel informed us the culture at the plant was generally positive due to strong engagement between team members and with plant management. However, plant personnel informed us of operational concerns regarding (1) the plants grounding process, (2) work management, and (3) a valve that was not operating properly. Management subsequently addressed the valve concern and is in the process of addressing the concerns related to the grounding process.

  Full Report

  October 24, 2022 - Power Supply Plan - 2020-15747

The Tennessee Valley Authority's (TVA) Enterprise Planning organization engages in long-term generation and capacity planning to support TVA's mission of providing low-cost, reliable electricity. TVA's capacity plan is designed to ensure resource adequacy while working to minimize cost to customers and develop a long-term strategy for the TVA power system. Long-term generation planning allows for the optimal use of available resources to meet the future energy needs across TVA's service area, factoring in operating area and system constraints. Collectively, the capacity and generation plans are referred to as the Power Supply Plan. Due to the importance of power supply planning to TVA's fuel cost forecasting and operational decision-making, we conducted an evaluation to determine whether TVA is using accurate inputs to develop the Power Supply Plan.

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.

  Full Report

  October 6, 2022 - Organizational Effectiveness - Kingston Fossil Plant - 2022-17355

The Office of the Inspector General conducted a review of Kingston Fossil Plant (KIF) organization to identify factors that could impact KIF's organizational effectiveness. During our evaluation, plant personnel informed us that interactions with management and between coworkers were generally positive, although behavioral concerns regarding one individual were identified. In addition, plant personnel expressed concerns regarding (1) condition of assets, (2) staffing challenges, and (3) communication related to the future of KIF.

  Full Report

  September 29, 2022 - TVA's Evaluation of New Technologies - 2021-17261

Due to risks associated with adopting unproven or immature technologies, the Office of the Inspector General conducted an evaluation to assess the Tennessee Valley Authority's (TVA) methods for evaluating new technologies. We determined TVA has not established consistent methods for evaluating new technologies. Specifically, we found TVA has not
(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.

  Full Report

  September 19, 2022 - Federal Information Security Modernization Act - 2022-17370

The Federal Information Security Modernization Act of 2014 (FISMA) requires each agency's Inspector General (IG) to conduct an annual independent evaluation to determine the effectiveness of the information security program (ISP) and practices of its respective agency. Our audit objective was to determine the effectiveness of Tennessee Valley Authority's (TVA) ISP and practices as defined by the Fiscal Year (FY) 2022 Core IG Metrics Implementation Analysis and Guidelines (see Appendix B). Our audit scope was limited to answering the core IG metrics.

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.

  Full Report

  September 14, 2022 - Back to Business Credit Program - 2022-17346

The Office of the Inspector General included an audit of the Tennessee Valley Authority's (TVA) Back to Business Credit Program (Program) in our annual audit plan due to reputational and financial risks associated with the Program. Our audit objective was to determine if adequate controls were in place to ensure Back to Business credits were provided to businesses in compliance with Program guidelines. Our audit scope was all $13.1 million in credits issued during the life of the Program (April 2020 through September 2021).

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.

  Full Report

  September 8, 2022 - Independent Examination of Cost Proposal for Coal Combustion Residual Program Management Services - 2022-17368

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for coal combustion residual program management services. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned 20-year contract.

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.
(Summary Only)

  September 2, 2022 - Organizational Effectiveness - Bull Run Fossil Plant - 2022-17354

The Office of the Inspector General conducted a review of Bull Run Fossil Plant (BRF) organization to identify factors that could impact BRF's organizational effectiveness. Additionally, the scope of this evaluation included identifying lessons learned for future coal plant closures. During the course of our evaluation, we identified positive interactions between coworkers and with various levels of plant management. In addition, TVA's communication of BRF's retirement plans, the support provided through Power Operations' long term workforce strategy, and having an on-site Human Resources representative were seen as positive. However, BRF employees expressed concerns related to: the ability to operate BRF until retirement due to longstanding deteriorated conditions, inadequate staffing, and increased safety risk. We also found opportunities exist to improve site-specific plant knowledge and fire brigade staffing.

  Full Report

  September 1, 2022 - Respiratory Protection Program - 2021-17298

Due to the risk of employee exposure to toxic vapors, gases, dust, or oxygen deficiency, the Tennessee Valley Authority (TVA) Office of the Inspector General (OIG) performed an evaluation of TVA's Respiratory Protection Program at nonnuclear facilities. The objective of this evaluation was to determine if selected respiratory protection procedures were being performed at nonnuclear facilities.

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.

  Full Report

  August 26, 2022 - TVA's Capacity to Meet Energy Demand - 2021-17315

The Office of the Inspector General conducted an evaluation to determine if the Tennessee Valley Authority (TVA) was accurately calculating and reporting its capacity to meet energy demand. We made recommendations for TVA management to: (1) improve or create new processes to define how capacity should be calculated, used, and reported, internally and externally, (2) correct reporting errors identified and implement controls to prevent future recurrence, and (3) continue to evaluate the risk posed by TVA's current system position and take actions as necessary to address. TVA management agreed to implement our recommendations.

(Summary Only)

  August 12, 2022 - Independent Examination of Cost Proposal for Coal Combustion Residual Program Management Services - 2022-17367

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for coal combustion residual (CCR) program management services. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned 20-year contract.

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.
We estimated TVA could avoid either (1) $20.1 million on the proposed $364.1 million GAF project or (2) $28.6 million on the alternate proposed $361.5 million GAF project by negotiating appropriate reductions to the proposals. In addition, we suggest TVA negotiate to revise the company's rate attachments to (1) comply with the PLA and (2) appropriately reduce the labor markup rates, equipment rates, and T&M rates.

(Summary Only)

  July 27, 2022 - Endpoint Protection - 2022-17338

The Office of the Inspector General conducted an audit to determine the effectiveness of endpoint protection on Tennessee Valley Authority's (TVA) desktops and laptops. We found several areas of TVA's endpoint protection program to be generally effective; however, we identified two issues that should be addressed by TVA management to further increase the effectiveness. Specifically, we found (1) TVA does not require endpoint protection for all network connections and (2) gaps in TVA policy, procedures, and internal controls. TVA management agreed with our recommendations.

  Full Report

  July 25, 2022 - Delta Dental of Tennessee - Contract No. 12179 - 2022-17357

As part of our annual audit plan, we audited costs billed to the Tennessee Valley Authority (TVA) by Delta Dental of Tennessee (Delta Dental) for dental plan administrative services. Our audit objective was to determine if the costs billed to TVA were in compliance with the terms of Contract No. 12179. Our audit included approximately $15.6 million in claim costs and associated administrative fees billed to TVA during calendar years 2020 and 2021.

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.

(Summary Only)

  July 15, 2022 - Organizational Effectiveness - Communications and Public Relations - 2021-17275

The Office of the Inspector General conducted a review of the Communications and Public Relations (C&PR) organization to identify factors that could impact C&PR's organizational effectiveness. During the course of our evaluation, we identified behavioral and operational risks, some of which were recurring, that stemmed from alignment issues, which could negatively affect sustainable execution within C&PR. Specifically, these risks included (1) perceived lack of organizational direction, (2) perceived lack of empowerment in C&PR leadership, (3) concerns with the development of the organizational structure, (4) staffing and prioritization concerns, (5) role clarity concerns, (6) concerns with relationships within and outside of C&PR, and (7) organizational placement concerns.

  Full Report

  July 13, 2022 - Groundwater at TVA Nuclear Plants - 2021-17270

The Tennessee Valley Authority (TVA) operates three nuclear plants capable of generating 7,800 megawatts of electricity. Groundwater contamination can result from routine nuclear plant activities such as wet storage of spent fuel, leaks from liquid waste pipelines and tanks, and leaks of contaminated cooling water. TVA Nuclear Power Group, Standard Programs and Processes 05.15, Fleet Groundwater Protection Program, establishes a long-term groundwater-monitoring program with the purpose of minimizing the potential for inadvertent releases to the environment from plant activities. Due to risks associated with potential groundwater contamination, we performed an evaluation to determine if TVA Nuclear has taken actions to address issues related to groundwater at nuclear plants, identified during fiscal years 2017 through 2021, in internal assessments, external assessments, consultant reports, and condition reports.

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.

  Full Report

  July 6, 2022 - Information Technology Equipment Inventory - 2022-17343

The Office of the Inspector General audited TVA's information technology (IT) equipment inventory to determine if TVA had controls and processes in place to maintain an accurate and complete inventory of IT equipment. Due to the inventory inaccuracies and control weaknesses, we did not test for inventory completeness. Although we found access controls to IT inventory data were effective, we found TVA's controls and processes in place to maintain an accurate and complete inventory of IT equipment were ineffective. Specifically, we found IT inventory (1) records were not accurate, (2) lacked reconciliation processes, (3) lacked a deployment and tracking policy, and (4) policies and procedures were not reviewed and updated timely. TVA management agreed with our recommendations.

  Full Report

  June 15, 2022 - TVA Nuclear Maintenance Employee Time Reporting - 2021-17256

The Office of the Inspector General identified several instances where time was not accurately reported in the Personnel Qualification and Scheduling program (that is used to track employees' hours to avoid a violation of the Nuclear Fatigue Rule) and the time-reporting system. However, we were unable to determine if all Nuclear Maintenance employees' time was accurately reported because we could not account for time that employees were not badged into the protected areas (the area encompassed by physical barriers and to which access is controlled) of the plants. The inaccurate reporting resulted in a violation of the Nuclear Fatigue Rule, unnecessary paid time off for an employee, and overstated leave balances.

  Full Report

  June 10, 2022 - TVA Nuclear Radiation Dosage - 2021-17297

The Office of the Inspector General conducted an evaluation to determine (1) the effectiveness of the radiation protection program in limiting employee dosage and (2) if notifications were made when required. We determined the Tennessee Valley Authority's (TVA) radiation protection program was effective in limiting employee dosage levels during calendar years 2019 and 2020. Additionally, we determined the Nuclear Regulatory Commission and TVA personnel were notified, as required, when personnel dosage met regulatory milestones. However, we identified an opportunity for improvement related to performing dosimetry investigation reports.

  Full Report

  June 3, 2022 - Williams Plant Services, LLC - Contract No. 10728 - 2020-15770

As part of our annual audit plan, we audited costs billed to the Tennessee Valley Authority (TVA) by Williams Plant Services, LLC (Williams) under Contract No. 10728 for managed task construction and modification work at TVA's nuclear facilities. The contract provided for TVA to compensate Williams for these services on either a time and materials or fixed price basis. Our objective was to determine if costs billed to TVA were in accordance with the contract's terms. Our audit scope included approximately $34.1 million in costs billed to TVA from January 1, 2019, through September 18, 2020.

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.

(Summary Only)

  June 1, 2022 - Non-Power Dam Control System Cybersecurity - 2022-17340

As part of our annual audit plan, we performed an audit of Tennessee Valley Authority's (TVA) non-power dam control system cybersecurity. Our objective was to determine if the cybersecurity controls of TVA's non-power dam control system were operating effectively.

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.

  Full Report

  May 25, 2022 - Organizational Effectiveness - Browns Ferry Nuclear Plant Radiation Protection - 2021-17252

The Office of the Inspector General conducted a review of the Browns Ferry Nuclear Plant Radiation Protection (BFN RP) organization to identify factors that could impact BFN RP's organizational effectiveness. During the course of our evaluation, we identified behavioral and operational factors that are negatively impacting BFN RP's effectiveness and its ability to meet its responsibilities and support Nuclear's vision and core principles. Most employees expressed having positive relationships with individuals in their own groups, and many indicated they trusted their coworkers to perform their jobs well. However, multiple negative behavioral factors were also expressed, including:
  • 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.
In addition, we were informed about concerns related to outdated instrumentation and equipment, inadequate supplies, the briefing room environment, and budget and staffing constraints. We also identified a risk related to the oversight and monitoring of the nuclear safety culture within BFN RP that could impact BFN as a whole.

  Full Report

  May 4, 2022 - Independent Examination of Cost Proposal for Transmission Construction Services - 2021-17308

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for transmission construction services. Our examination objective was to determine if the cost proposal was fairly stated for a planned 5-year, $50 million contract.

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.

(Summary Only)

  May 4, 2022 - Outside Employment Related to Small Business Administration Loans - 2021-17277

Our office, through a partnership with the Pandemic Response Accountability Committee, obtained data from the United States Small Business Administration (SBA) related to their Economic Injury Disaster Loans (EIDL) and Paycheck Protection Program (PPP) loans. We scheduled this audit after identifying potential matches between the SBA data and TVA employees. Our audit objective was to determine if TVA's policies and procedures are effective in assuring outside employment of TVA employees is properly approved. Our audit scope was limited to TVA employees identified as having potential outside employment or business ownership through review of EIDL and PPP loan data received from the SBA.

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.

  Full Report

  April 27, 2022 - Sabotage and Fraud - 7D-16628

The owner of Corrosion Monitoring Services (CMS), a TVA contractor, pleaded guilty to one felony count of Misprision of a Felony, one felony count of Obstruction of Justice and one felony count of Witness Tampering. The charges were related to an allegation that CMS purposefully damaged metal tubes used in an air heating and exchange system at TVA's former Paradise Fossil Plant in order to repair those tubes under the CMS contract with TVA.

  Full Report

  April 22, 2022 - Voith Hydro, Inc. - Contract No. 9000 - 2021-15786

As part of our annual audit plan, we performed an audit of costs billed to the Tennessee Valley Authority (TVA) by Voith Hydro, Inc. (Voith) under Contract No. 9000, for hydro modernization, unit rehabilitation, and functional support services in support of TVA's hydro facilities, including Raccoon Mountain Pumped Storage Plant. The contract provided for TVA to compensate Voith for these services on either a fixed price, time and material, and/or target price estimate basis. Our audit objectives were to determine if (1) costs were billed in accordance with the terms and conditions of the contract and (2) tasks were issued using the most cost efficient pricing methodology. Our audit scope included about $119.6 million in costs TVA paid to Voith from August 20, 2014, through December 31, 2020. This included $118.2 million for fixed price projects and $1.4 million for time and material projects.

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.

(Summary Only)

  April 14, 2022 - Organizational Effectiveness - Allen Integrated Site - 2022-17335

The Office of the Inspector General conducted a review of the Allen Integrated Site (Allen) to identify factors that could impact Allen's organizational effectiveness. During the course of our evaluation, we identified positive behavioral factors, including relationships with team members and business units outside Allen; however, we also identified behavioral concerns with two managers. In addition, we identified operational factors needing improvement related to (1) perceptions of ineffective work management, (2) fire alarm system repairs, and (3) site security and access concerns. Management is addressing some of these concerns by implementing a Gas Operations' initiative to address work management, overseeing fire alarm system repairs, and submitting documentation to upgrade site security.

  Full Report

  April 11, 2022 - Independent Examination of Cost Proposal for Coal Combustion Residual Program Management Services - 2021-17243

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for coal combustion residual (CCR) program management services. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned 20-year contract.

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.

(Summary Only)

  March 24, 2022 - Acquisition and Disposal of Real Property - 2021-15789

The Office of the Inspector General conducted an evaluation to determine if the Tennessee Valley Authority (TVA) was effectively managing acquisitions and disposals of real property. We determined TVA effectively managed the real property acquisitions and disposals for the sample of transactions we reviewed. Specifically, we determined sampled acquisition and disposal decisions were generally supported by the financial, environmental, and title reviews conducted as part of TVA's real property transaction process; however, we identified noncompliance with some parts of the standard programs and processes and user guides. We also identified opportunities for improvement related to information provided to the TVA Board of Directors and clarification within the standard programs and processes and user guides. Additionally, we identified issues related to TVA's survey process.

  Full Report

  March 9, 2022 - Gas and Hydro Human Performance Events - 2022-17339

Due to an elevated number of human performance events in Gas Operations and Hydro Generation organizations in fiscal year 2020, we initiated an evaluation to determine if TVA was taking appropriate actions in response to human performance events.

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.

  Full Report

  February 23, 2022 - Jacobs Technology Inc. - Contract No. 11163 - 2021-15787

As part of our annual audit plan, we audited costs billed to the Tennessee Valley Authority (TVA) by Jacobs Technology Inc. (Jacobs) under Contract No. 11163 for construction management services, including design, construction, and project support at various TVA facilities. Our audit objective was to determine if costs were billed in accordance with the contract's terms. Our audit scope included about $21.3 million in costs billed to TVA from July 20, 2017, through April 29, 2020. All of the costs billed by Jacobs during our audit period were for cost-reimbursable projects.

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.

(Summary Only)

  February 9, 2022 - Independent Examination of Cost Proposal for Transmission Construction Services - 2021-17309

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for transmission construction services. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned 5-year, $25 million contract.

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.

(Summary Only)

  February 9, 2022 - Independent Examination of Cost Proposal for Transmission Construction Services - 2021-17307

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for transmission construction services. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned 5-year, $100 million contract.

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.

(Summary Only)

  February 8, 2022 - Independent Examination of Cost Proposal for Transmission Construction Services - 2021-17310

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for transmission construction services. Our examination objective was to determine if the cost proposal was fairly stated for a planned 5-year, $25 million contract.

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.

(Summary Only)

  February 7, 2022 - Maintenance of TVA-Owned Gas Pipelines - 2021-15796

The Office of the Inspector General included an audit of the Tennessee Valley Authority's (TVA) maintenance of its owned gas pipelines in our annual audit plan due to pipeline issues identified at other utilities and potential risks to TVA. Our audit objective was to determine if TVA's maintenance of its owned gas pipelines is adequate.

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.

  Full Report

  February 3, 2022 - World Wide Technology, LLC - Contract No. 10786 - 2021-15788

As part of our annual audit plan, we audited costs billed to the Tennessee Valley Authority (TVA) by World Wide Technology, LLC (WWT) under Contract No. 10786 for Cisco hardware, maintenance, services, and support. The contract provided for TVA to compensate WWT for products and services on either a time and materials or fixed price basis. Our audit objective was to determine if costs were billed in compliance with the contract's terms. Our audit scope included about $72.5 million in costs billed to TVA for the period of December 1, 2015, through December 31, 2020.

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.
(Summary Only)

  January 11, 2022 - Remote Application and Desktop Virtualization - 2021-15804

The Office of the Inspector General OIG audited the Tennessee Valley Authority's (TVA) use of remote application and desktop virtualization due to the risk of increased remote users during the COVID-19 pandemic and recent publicized remote access vulnerabilities. We found several areas where TVA was consistent with cybersecurity remote access best practices. However, we identified gaps in TVA's configuration settings, architectural design, and administrative procedures. We recommend the Vice President and Chief Information and Digital Officer, Technology & Information, review the identified gaps and remediate as appropriate. Specifics of the identified issues were omitted from this report due to their sensitive nature in relation to TVA's cybersecurity but were formally communicated to TVA management in a briefing on November 15, 2021.

  Full Report

  December 16, 2021 - Organizational Effectiveness - Browns Ferry Nuclear Plant Chemistry - 2021-17254

The Office of the Inspector General conducted a review of Browns Ferry Nuclear Plant (BFN) Chemistry to identify factors that could impact BFN Chemistry's organizational effectiveness. During the course of our evaluation, we identified behaviors that had a positive impact on BFN Chemistry, including positive relationships between team members and most management. However, we also identified a minimal behavioral risk related to communication with first-line management. In addition, we identified minimal risks to operations that, if unaddressed, could hinder BFN Chemistry's effectiveness. These risks related to nonfunctioning equipment and perceptions of inadequate staffing.

  Full Report

  December 1, 2021 - Vega Corporation of Tennessee - Contract No. 14626 - 2021-17249

As part of our annual audit plan, we audited costs billed to the Tennessee Valley Authority (TVA) by Vega Corporation of Tennessee for general construction and modification services performed under Contract No. 14626. Our audit included approximately $8.76 million in costs billed to TVA from contract inception, November 11, 2019, through April 30, 2021. Our objective was to determine if Vega billed TVA in accordance with the contract's terms.

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.

(Summary Only)

  November 23, 2021 - Organizational Effectiveness - Southaven Combined Cycle Plant - 2021-17251

The Office of the Inspector General conducted a review of the Southaven Combined Cycle (SCC) Plant to identify factors that could impact SCC's organizational effectiveness. During the course of our evaluation, we identified behaviors that had a positive impact on SCC. These were related to teamwork and interactions with others; however, we also identified risks related to employee and managerial behaviors that had a negative impact on SCC morale. In addition, we identified risks to operations that could hinder SCC's effectiveness. These were related to (1) ineffective work management, (2) inaccurate plant drawings, (3) inadequate staffing, and (4) perceived negative interactions with an internal TVA business partner.

  Full Report

  November 16, 2021 - Agreed-Upon Procedures for TVA Fiscal Year 2021 Performance Measures - 2021-17331

The Office of the Inspector General (OIG) performed the procedures, which were requested and agreed to by Tennessee Valley Authority (TVA) management solely to assist management in determining the validity of the Winning Performance/Executive Annual Incentive Plan (WP) Measures for fiscal year (FY) ending September 30, 2021. TVA management is responsible for the WP Measures data provided. In summary, procedures applied by the OIG found:
  • 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.
  Full Report

  November 16, 2021 - Monitoring of Ernst & Young LLP's Audit of the Tennessee Valley Authority Fiscal Year 2021 Financial Statements - 2021-17306

In keeping with its responsibilities under the Inspector General Act of 1978, as amended, the OIG monitored the audit of TVA's fiscal year 2021 financial statements performed by Ernst and Young LLP (EY) to assure their work complied with Government Auditing Standards. Our review of EY's work disclosed no instance in which the firm did not comply in all material respects with Government Auditing Standards.

  Full Report

  November 15, 2021 - Federal Information Security Modernization Act - 2021-17247

The Office of the Inspector General is required by the Federal Information Security Modernization Act of 2014 (FISMA) to conduct an annual independent evaluation that determines the effectiveness of the information security program (ISP) and practices of its respective agency. Our objective was to evaluate the Tennessee Valley Authority's ISP and practices as defined by the FY 2021 IG FISMA Reporting Metrics Version 1.1. Our audit scope was limited to answering the FY 2021 IG FISMA metrics developed as a collaborative effort by the Office of Management and Budget, Department of Homeland Security, and Council of Inspector Generals on Integrity and Efficiency in consultation with the Federal Chief Information Officer Council.

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.

  Full Report

  November 10, 2021 - TVA's Internet Perimeter - 2020-15723

We performed an audit of the Tennessee Valley Authority's (TVA) Internet perimeter. Our objective was to identify cybersecurity weaknesses in TVA's Internet perimeter through penetration testing. In summary, we identified some vulnerabilities in TVA's internet perimeter. Specifically, we (1) downloaded files related to TVA's disposal of coal ash that were marked as confidential, (2) accessed a Web site related to river operations that used weak authentication, and (3) found TVA's password complexity requirements on a TVA publicly available Web site.

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.

  Full Report

  November 2, 2021 - Corporate Contributions - 2021-15794

The Office of the Inspector General included an audit of Tennessee Valley Authority's (TVA) corporate contributions in our annual audit plan due to the potential reputational risk associated with contributions that do not comply with TVA policies and procedures. Our audit objective was to determine if corporate contributions were made in compliance with TVA's Standard Programs and Processes (SPP) 36.001, Corporate Contributions (Contributions Policy).

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.

  Full Report

  October 18, 2021 - Airgas USA, LLC - Claim For Missing Gas Cylinders - Contract Nos. 5436 and 5456 - 2021-16906

In response to a referral from the Office of the Inspector General (OIG), Investigations, we audited a claim for missing gas cylinders submitted to the Tennessee Valley Authority (TVA) by Airgas USA, LLC (Airgas) under Contract Nos. 5436 and 5456. Under the contracts, Airgas was to manage inventory of industrial gases for TVA, including furnishing, selling, and delivering all bulk gases and related products and services to TVA. On February 2, 2021, Airgas submitted an $891,340 claim to TVA for missing gas cylinders resulting from inventory counts Airgas performed at TVA delivery locations in 2018. Our audit objective was to determine if Airgas' claim for missing gas cylinders complied with the contracts' terms and was accurate.

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.

(Summary Only)

  October 7, 2021 - External Organizations Board Practice - 2021-17259

In response to requests from stakeholders, we scheduled an evaluation to determine if the Tennessee Valley Authority (TVA) complied with the 2016 Board Practice regarding memberships in external organizations.

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.

  Full Report

  October 6, 2021 - Organizational Effectiveness - Lagoon Creek Combustion Turbine Plant - 2021-17257

The Office of the Inspector General conducted a review of the Lagoon Creek Combustion Turbine (LCCT) Plant to identify factors that could impact LCCT's organizational effectiveness. During the course of our evaluation, we identified behaviors that had a positive impact on LCCT; however, we also identified some behavioral risks associated with team conflicts. In addition, we identified risks to operations that, if unaddressed, could hinder LCCT's effectiveness. These were related to (1) perceptions of not having parts needed to perform job responsibilities and a lack of money for projects or equipment repairs and (2) training.

  Full Report

  October 6, 2021 - Organizational Effectiveness - Lagoon Creek Combined Cycle Plant - 2021-17250

The Office of the Inspector General conducted a review of the Lagoon Creek Combined Cycle (LCCC) Plant to identify factors that could impact LCCC's organizational effectiveness. During the course of our evaluation, we identified behaviors that had a positive impact on LCCC including positive relationships between team members and most management. However, we also identified a behavioral risk related to communication with first-line management. In addition, we identified an operational risk related to training that could hinder LCCC's effectiveness. According to the LCCC manager-integrated combined cycle and combustion turbine site, actions are being taken to address these training concerns.

  Full Report

  October 5, 2021 - False Claims and Theft of Government Funds - 12E-16595

A TVA contractor's employee improperly received $146,359 in Temporary Living Allowance payments by claiming a house as his personal residence in which he did not actually live. Rather, he lived in a different dwelling, in a different state, and rented-out the house he claimed as his personal residence during his absence.

  Full Report

  October 5, 2021 - False Claims - 19-0203

A contractor employee received temporary living allowances of $80,857.70 to which he was not entitled. Contrary to what the contract employee claimed on his TLA applications, he did not have a qualifying dependent living at the claimed residence and did not incur substantially all of the expenses for the property. Moreover, he presented a false lease in support of his application.

  Full Report

  September 24, 2021 - Windows® Desktop and Laptop Patching - 2021-15778

Patching is the process for updating products and systems. Patches correct security and functionality problems in software and firmware. We performed an audit of the Tennessee Valley Authority's (TVA) patching of Windows® desktops and laptops to determine if high-risk vulnerabilities on desktops and laptops were patched in accordance with TVA policy and best practices. We found (1) TVA policies and procedures aligned with best practices, (2) the majority of Windows® desktops and laptops managed by TVA's automated patching system were patched for high-risk vulnerabilities in accordance with TVA policy, and (3) TVA had mitigated vulnerabilities for Windows® desktops and laptops that had not received updates. However, although the majority of Windows® workstations were managed by TVA's automated patching system, we found some desktops and laptops were at potential risk of compromise.

  Full Report

  September 22, 2021 - Privileged Account Management - 2021-15777

We performed an audit of the Tennessee Valley Authority's (TVA) management of privileged accounts. Our objective was to determine if TVA's management of privileged accounts is following TVA policy and best practices. A privileged user has an account that is authorized for the performance of security-related functions that ordinary users cannot perform. Privileged account management can be defined as managing and logging account and data access by privileged users.

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.

  Full Report

  September 21, 2021 - Organizational Effectiveness - Transmission Field Operations, North Maintenance - 2021-15801

The Office of the Inspector General conducted a review of the Transmission Field Operations, North Maintenance organization to identify factors that could impact its organizational effectiveness. During the course of our evaluation, we identified behaviors that had a positive impact on Transmission Field Operations - North Maintenance; however, we also identified needed improvements related to coworker interactions with a few employees. We also identified minimal risks to operations related to resource concerns, including inadequate staffing and equipment and/or tool needs.

  Full Report

  September 20, 2021 - TVA's Privacy Program - 2021-15779

We found several areas of the privacy program to be generally effective, including (1) completion of privacy impact assessments, (2) privacy related training taken by network users, (3) privacy considerations during the authority to operate process, (4) system categorization, (5) privacy incident response, (6) privacy-related contract terms and conditions, and
(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:
  1. Unsecured electronic restricted personally identifiable information on SharePoint and shared network drives.
  2. Unsecured hard copy restricted personally identifiable information.
  3. No end user notifications for e-mail security violations.
  4. No technical controls for removable media.
  5. We could not confirm that all desktops and laptops utilize encryption.
  6. Privacy Act notices on TVA forms did not include all required elements.
  7. 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.)
We also found gaps between TVA's policies and procedures and applicable federal privacy regulations and guidance.

  Full Report

  September 16, 2021 - Black & Veatch Corporation - Contract No. 10820 - 2020-15725

As part of our annual audit plan, we audited costs billed to the Tennessee Valley Authority (TVA) by Black & Veatch Corporation (B&V) for engineering services under Contract No. 10820. Our audit objective was to determine if costs were billed in accordance with the terms and conditions of the contract. Our audit scope included about $42.46 million in costs billed to TVA from November 2, 2015, through February 13, 2020. In summary:
  • 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.
(Summary Only)

  September 14, 2021 - Mesa Associates, Inc. - Contract No. 13191 - 2020-15701

As part of our annual audit plan, we audited costs billed to the Tennessee Valley Authority (TVA) by Mesa Associates, Inc. (Mesa) under Contract No. 13191 for engineering, design, and construction support services in support of TVA's dam safety, generation, and transmission work. The contract provided for TVA to compensate Mesa for these services on either a cost-reimbursable or fixed price basis. Our audit objectives were to determine if (1) costs were billed in accordance with the terms and conditions of the contract and
(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.
(Summary Only)

  August 26, 2021 - Solar Purchased Power Agreements - 2021-15782

As part of our annual audit plan, we audited the Tennessee Valley Authority's (TVA) utility-scale Solar Purchased Power Agreements (PPA). Our audit objectives were to determine if TVA has (1) approached Solar PPAs to better understand the industry and market trends being developed prior to entering into multiple agreements and (2) developed Solar PPAs to recognize positive financial value earlier in the term of the PPAs. The scope of our review was utility-scale solar PPAs in place as of December 31, 2020.

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.

(Summary Only)

  August 24, 2021 - Gas Plant Industrial Hygiene - 2020-15755

The Office of the Inspector General determined the Tennessee Valley Authority's (TVA) industrial hygiene (IH) planning and assessment process had weaknesses that resulted in some hazards not being identified and evaluated. Specifically, we identified the following IH process weaknesses: (1) TVA relied on limited information to identify health hazards;
(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.

  Full Report

  August 23, 2021 - Contractor Use of Purchasing Cards - 2021-15785

The Office of the Inspector General included an audit of contractor use of TVA's purchasing cards in its fiscal year 2021 Audit Plan, based on the significant amount of charges made using TVA purchasing cards assigned to contractors. The objective of the audit was to determine if adequate controls were in place to ensure purchases made by TVA contractors using a TVA purchasing card were (1) for TVA business purposes and not the use of another entity and (2) not being billed back to TVA.

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.

  Full Report

  August 20, 2021 - Hydro Plant Industrial Hygiene - 2020-15756

The Office of the Inspector General determined the Tennessee Valley Authority's (TVA) industrial hygiene (IH) planning and assessment process had weaknesses that resulted in some hazards not being identified and evaluated. Specifically, we identified the following IH process weaknesses: (1) TVA relied on limited information to identify health hazards;
(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.

  Full Report

  August 19, 2021 - Federal Sustainability Report and Implementation Plan - 2021-15783

The Office of the Inspector General included an audit of TVA's Federal Sustainability Report and Implementation Plan (SRIP) in its FY 2021 Audit Plan, based on the reputational risk of disseminating inaccurate information to the public. The objective of the audit was to determine if information in TVA's SRIP has been validated prior to being disseminated to the public in accordance with any best practices.

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.

  Full Report

  August 4, 2021 - Organizational Effectiveness - Generation Services, Field Services - 2021-15800

The Office of the Inspector General conducted a review of the Generation Services, Field Services organization to identify factors that could impact Field Services' organizational effectiveness. During the course of our evaluation, we identified many positive behaviors for engagement; however, we also identified needed improvements in behaviors in relation to first-line supervisors in three departments. We also identified risks to business operations, including experience, resource needs, such as funding, and staffing, and concerns related to reorganization efforts involving engineering. In addition, business partners discussed concerns, including areas for improvement related to support and collaboration.

  Full Report

  August 2, 2021 - Transmission and Power Supply Arc Flash Protection - 2020-15768

The Office of the Inspector General determined some requirements of the Tennessee Valley Authority's procedures related to arc flash protection and engineering calculations were not performed. Specifically, (1) some arc flash hazard analyses were not performed, (2) arc flash hazard analyses were not periodically reviewed, (3) some arc flash hazard analyses were incomplete or inaccurate, and (4) some hazards were not accurately communicated on warning labels as required. In addition, we found arc flash hazard calculations were not formatted, approved, or maintained as required. We also determined personal protective equipment was maintained and most training was completed as required by the arc flash procedure; however, we identified a few individuals who had not completed the assigned curriculum. Lastly, we identified an opportunity for improvement related to developing a Transmission and Power Supply specific arc flash procedure. Based on issues identified during the course of our evaluation, Transmission and Power Supply performed an assessment of its arc flash program and developed an action plan to address identified gaps.

  Full Report

  July 26, 2021 - The L.E. Myers Co. - Contract No. 9070 - 2020-15713

As part of our annual audit plan, we audited costs billed to the Tennessee Valley Authority (TVA) by The L.E. Myers Co. (LE Myers) under Contract No. 9070 for construction and modification services for TVA's Transmission and Power Supply Program. The contract provided for TVA to compensate LE Myers for these services on either a cost-reimbursable or fixed price basis. Our audit objective was to determine if costs were billed in accordance with the terms and conditions of Contract No. 9070. Our audit scope included about
$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.

(Summary Only)

  July 20, 2021 - Coal Plant Industrial Hygiene - 2020-15754

The Office of the Inspector General found the Tennessee Valley Authority's (TVA) industrial hygiene planning and assessment process had weaknesses that resulted in some hazards not being identified and evaluated. Specifically, we identified the following industrial hygiene process weaknesses: (1) TVA relied on limited information to identify health hazards;
(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.

  Full Report

  July 8, 2021 - Strategic Real Estate Plan - 2020-15750

Due to an increase in transactions regarding real estate, we performed an evaluation to assess the Tennessee Valley Authority's (TVA) development and implementation of its strategic real estate plan. However, TVA does not formally have a strategic real estate plan; therefore, we reviewed the goals and objectives of the Strategic Real Estate and Governance (SREG) organization to determine if they were being achieved.

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.

  Full Report

  July 8, 2021 - Organizational Effectiveness-Sequoyah Nuclear Plant Chemistry/Environmental - 2020-15752

The Office of the Inspector General conducted a review of the Sequoyah Nuclear Plant Chemistry/Environmental (SQN Chemistry) organization to identify factors that could impact SQN Chemistry's organizational effectiveness. During the course of our evaluation, we identified behaviors that had a positive impact on SQN Chemistry. These included relationships with most management. However, we also identified behavioral risks related to accountability, relationships within and outside Chemistry, low morale, and ethics. In addition, we identified risks to operations that have hindered SQN Chemistry's effectiveness. These risks were related to the physical work environment, monitoring effluents and collecting required samples, and inaccurate sample documentation.

  Full Report

  July 7, 2021 - Organizational Effectiveness - John Sevier Combined Cycle Plant - 2021-15802

The Office of the Inspector General conducted a review of the John Sevier Combined Cycle (JSCC) Plant to identify factors that could impact JSCC's organizational effectiveness. During the course of our evaluation, we identified behaviors that had a positive impact on JSCC. These included positive relationships between team members and management; however, we also identified minimal behavioral risks associated with communication and accountability. In addition, we identified minimal risks to operations that, if unaddressed, could hinder JSCC's effectiveness. These were related to resource needs, such as problems obtaining parts and materials needed to perform jobs, as well as a desire for additional training, including instrument mechanic and instrumentation training.

  Full Report

  June 22, 2021 - Transmission Switching and Clearance Procedures - 2020-15749

Due to the importance of switching and clearances being performed safely to avoid injuries and to minimize the possibility of unscheduled outages or equipment damage, we performed an evaluation to determine if switching and clearances, required training, and audits were performed in compliance with Transmission and Power Supply's switching and clearance procedures. We determined the selected procedural requirements for requesting and tracking of switching and clearances were generally performed in accordance with procedures. We could not assess most procedural requirements related to preparation and performance of switching orders because field personnel performing the work do not always submit the completed switching order. However, we identified several instances where switching order steps were not performed in sequence as required. We also determined employees who performed key functions received required training; however, tracking of training could be improved. In addition, while clearance audits were completed by the appropriate personnel within the required time frames, their effectiveness could be increased.

  Full Report

  June 15, 2021 - Organizational Effectiveness - Commercial Energy Solutions Fuels and Hedging - 2020-15762-04

The Office of the Inspector General conducted a review of the Commercial Energy Solutions Fuels and Hedging (F&H) organization to identify factors that could impact F&H's organizational effectiveness. During the course of our evaluation, we identified behaviors that had a positive impact on F&H. These included relationships with team members and most management. However, we also identified a behavioral risk related to relationships with a manager in one group. In addition, we identified risks to operations that could hinder F&H's effectiveness. These risks were related to inaccurate coal burn forecasts and interactions with business partners.

  Full Report

  June 4, 2021 - TVA Nuclear's Handling of Potentially Contaminated Liquids - 2021-15780

Due to concerns identified during Evaluation 2020-15743, Sequoyah Nuclear Plant Radiation Protection's Organizational Effectiveness (report issued December 10, 2020), we performed an evaluation of TVA Nuclear's handling of potentially contaminated liquids at its nuclear sites. The scope of our evaluation was limited to TVA Nuclear's process for releasing liquids from Radiologically Controlled Areas (RCA) for unrestricted use. We determined potentially contaminated liquids were released from RCAs at each nuclear site. This occurred because all applicable analyses were not performed on some liquids prior to release. In addition, we identified opportunities for improvement related to (1) TVA Nuclear's processes for tritium analysis prior to the release of liquids for unrestricted use and (2) documentation issues at each nuclear site, including the incomplete submittal of records, incomplete maintenance processes, and inaccurate logs.

  Full Report

  May 21, 2021 - Stantec Consulting Services, Inc. - Contract No. 13051 - 2020-15715

As part of our annual audit plan, we audited costs billed to the Tennessee Valley Authority (TVA) by Stantec Consulting Services, Inc. (Stantec) to provide coal combustion residual engineering services under Contract No. 13051. The contract provided for TVA to compensate Stantec for work on either a cost reimbursable, time and material (T&M), unit rate, or fixed price basis. Our audit objectives were to determine if (1) costs were billed in accordance with the terms and conditions of the contract and
(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.
(Summary Only)

  May 19, 2021 - Employee Misconduct - Conflict of Interest - 19-0170

The investigation substantiated that a TVA employee negotiated employment with a contractor for whom he approved invoices; however, he did so with the knowledge and apparent support of TVA management. After becoming an employee of the contractor, he continued to approve invoices for the contractor (now his employer) as he had done while employed by TVA. While working for the Contractor, the subject potentially had direct access to the sensitive business information of vendors in direct competition with the employing contractor. The employee did not consult TVA Ethics for guidance on this matter while still employed by TVA.

  Full Report

  May 18, 2021 - Siemens Energy, Inc. - Contract No. 10092 - 2020-15720

As part of our annual audit plan, we performed an audit of costs billed to the Tennessee Valley Authority (TVA) by Siemens Energy, Inc. (Siemens) under Contract No. 10092. This contract was a long-term service agreement for the Ackerman Combined Cycle Plant located in Ackerman, Mississippi. Under the contract, Siemens was to provide program management services; scheduled outage services; and supply any program parts, nonprogram parts, miscellaneous hardware, or services as requested by TVA. Our audit objective was to determine if the costs were billed to TVA in accordance with the contract's terms. The audit scope included $68,055,969 in costs TVA paid to Siemens from April 14, 2015, through February 29, 2020.

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.

(Summary Only)

  April 29, 2021 - False Records - Temporary Living Allowance (TLA) - 20-0096

Contractor approved temporary living allowance (TLA) for contract employee based on a claim of permanent residence when the residence claimed was actually owned by the contract employee's father and rented at a low monthly rate that was paid sporadically. The contract between TVA and the contractor explicitly forbids the approval of TLA when the arrangement for the residence claimed is not part of an "arm's length" transaction. The contractor was aware of its employee's rental arrangement with his father and, yet, approved the payment of TLA which was subsequently billed to TVA.

  Full Report

  April 26, 2021 - Framatome Inc. - Contract No. 8786 - 2021-15792

We audited $137.7 million of costs billed to the Tennessee Valley Authority by Framatome Inc. under Contract No. 8786 to determine if costs billed to TVA were in compliance with contract's terms. We determined the costs billed by Framatome Inc. generally complied with the contract except for $80,862.

(Summary Only)

  April 20, 2021 - Organizational Effectiveness - Johnsonville Combustion Turbine - 2021-15790

The Office of the Inspector General conducted a review of the Johnsonville Combustion Turbine (JCT) organization to identify factors that could impact JCT's organizational effectiveness. During the course of our evaluation, we identified behaviors that had a positive impact on JCT. These included leadership actions and positive relationships with team members. However, we also identified minimal risks to operations that, if unaddressed, could hinder JCT's effectiveness. These were related to resource needs, such as specific training and budgetary needs for plant maintenance.

  Full Report

  April 15, 2021 - Employee Misconduct - Unauthorized Gifts and Gratuities - 21-0056

A TVA manager was accused of improperly providing employees with gifts. While no federal ethics standards were implicated, it was determined TVA Standard Programs and Processes 11.418, Employee Recognition and Acknowledgment (TVA SPP-11.418), was not followed.

  Full Report

  March 4, 2021 - G·UB·MK Constructors - Contract No. 11514 - 2020-15722

We audited $212.4 million of costs billed to the Tennessee Valley Authority (TVA) by G·UB·MK Constructors (GUBMK) under Contract No. 11514 to determine if costs billed to TVA were in compliance with contract's terms. We determined the costs billed by GUBMK generally complied with the contract except for $22,545.

(Summary Only)

  January 25, 2021 - Organizational Effectiveness - Commercial Energy Solutions Pricing, Structuring, Analysis/Contracts - 2020-15762-01

The Office of the Inspector General conducted a review of the Commercial Energy Solutions Pricing, Structuring, Analysis/Contracts (P&C) organization to identify factors that could impact P&Cs organizational effectiveness. During the course of our evaluation, we identified behaviors that had a positive impact on P&C. These included positive interactions with management and team members. However, we also identified behavioral risks in two groups related to accountability and reporting concerns or offering a differing opinion with management. In addition, we identified risks to operations that could hinder P&C's effectiveness. These risks were related to effective collaboration with business partners and resource needs in the organization.

  Full Report

  January 22, 2021 - Organizational Effectiveness - Commercial Energy Solutions Energy Services and Programs - 2020-15762-03

The Office of the Inspector General conducted a review of the Commercial Energy Solutions Energy Services and Programs (ES&P) organization to identify factors that could impact ES&Ps organizational effectiveness. During the course of our evaluation, we identified behaviors that had a positive impact on ES&P. These included relationships with team members and most management. However, we also identified a behavioral risk related to relationships with management in one group. In addition, we identified risks to operations that could hinder ES&P's effectiveness. These risks were related to interactions with business partners, frequency of program changes, and resource concerns in two groups.

  Full Report

  December 21, 2020 - 2020 Federal Information Security Modernization Act - 2020-15709

The Office of the Inspector General is required by the Federal Information Security Modernization Act of 2014 (FISMA) to conduct an annual independent evaluation that determines the effectiveness of the information security program (ISP) and practices of its respective agency. Our objective was to evaluate the Tennessee Valley Authority's ISP and agency practices for ensuring compliance with FISMA and applicable standards, including guidelines issued by Office of Management and Budget and National Institute of Standards and Technology. Our audit scope was limited to answering the FY 2020 IG FISMA metrics developed as a collaborative effort by the Office of Management and Budget, Department of Homeland Security, and Council of Inspector Generals on Integrity and Efficiency in consultation with the Federal Chief Information Officer Council.

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.

  Full Report

  December 16, 2020 - TVA's Response to COVID-19 - 2020-15757

In March 2020, the World Health Organization declared the coronavirus (COVID-19) outbreak a global pandemic. The Tennessee Valley Authority (TVA) began taking steps to keep employees and their families' safe, while also ensuring the agency could fulfill its mission of service. Due to the ongoing pandemic and its impact on TVA's workforce related to mandatory telework and staffing, we initiated an evaluation to assess TVA's response to COVID-19. The objective of our evaluation was to assess TVA's response to COVID-19. Our scope included actions taken by TVA related to staffing, employee safety, telework, and lessons learned.

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.

  Full Report

  December 16, 2020 - Organizational Effectiveness - Commercial Energy Solutions Origination and Renewables - 2020-15762-02

The Office of the Inspector General conducted a review of the Commercial Energy Solutions Origination and Renewables (O&R) organization to identify factors that could impact O&R's organizational effectiveness. During the course of our evaluation, we identified behaviors that had a positive impact on O&R. These included interactions with team members and leadership. While O&R met targets for a majority of their metrics and furthered initiatives within the organization, we also identified risks to business operations and achievement of future O&R initiatives. These included educational needs, such as the need for training and the lack of documented processes and procedures, technology needs, and insufficient staffing for the future within and outside O&R. In addition, business partners discussed areas for improvement, including collaboration and O&R strategy.

  Full Report

  December 15, 2020 - TVA Compliance With Executive Order 13950 - 2021-15781

The Tennessee Valley Authority (TVA) Board of Directors requested we review and assess TVA's compliance with the requirements of Executive Order 13950, Combating Race and Sex Stereotyping, in the form of a report submitted to the United States Office of Management and Budget. Our review found TVA had complied with those requirements of the Executive Order applicable to TVA.

  Full Report

  December 10, 2020 - Organizational Effectiveness - Sequoyah Nuclear Radiation Protection - 2020-15743

The Office of the Inspector General conducted a review of the Sequoyah Nuclear Plant (SQN) Radiation Protection (RP) organization to identify factors that could impact SQN RP's organizational effectiveness. While we identified certain behavioral attributes that had a positive impact on SQN RP, we also identified behavioral risks that could have a negative impact SQN RP's effectiveness. Specifically, these risks related to (1) relationships between individuals and (2) interactions with certain management. In addition, while we identified certain positive operational factors, we also identified operational risks which could hinder SQN RP's ability to execute its responsibilities and support Nuclear's vision and core principles. These risks related to (1) sampling for tritium and (2) training.

  Full Report

  December 10, 2020 - Turnover of Projects to Power Operations - 2019-15684

The Tennessee Valley Authority's (TVA) Generation Projects and Fleet Services organization supports the execution of TVA's strategic asset plan and outage plans through projects and services, including capital projects for the Power Operations (PO) organization to support equipment reliability at TVA's coal, gas, and hydro plants.

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.

  Full Report

  December 1, 2020 - Independent Examination of Cost Proposal for Engineering Services - 2020-15748

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for engineering, design, and construction support services. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned 5-year, $10 million contract.

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.
(Summary Only)

  November 24, 2020 - Purchasing Card Usage - 2020-15694

We audited the Tennessee Valley Authority's (TVA) purchasing card (P-Card) usage to determine if personnel complied with TVA's P-Card policies and procedures. Our audit scope included approximately $79.8 million in transactions occurring from October 1, 2017, through September 30, 2019.

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.

  Full Report

  November 18, 2019 - Monitoring of Ernst & Young LLP's Audit of the Tennessee Valley Authority Fiscal Year 2020 Financial Statements - 2020-15767

In keeping with its responsibilities under the Inspector General Act of 1978, as amended, the OIG monitored the audit of TVA's fiscal year 2020 financial statements performed by Ernst and Young LLP (EY) to assure their work complied with Government Auditing Standards. Our review of EY's work disclosed no instance in which the firm did not comply in all material respects with Government Auditing Standards.

  Full Report

  November 17, 2020 - Independent Examination of Cost Proposal for Engineering Services - 2020-15737

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for engineering, design, and construction support services. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned 5-year, $35 million contract.

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.

(Summary Only)

  November 16, 2020 - Maintenance of Coal Combustion Residual Storage Facilities - 2019-15661

Following the 2008 ash spill at Kingston Fossil Plant, TVA's Office of Inspector General, in conjunction with Marshall Miller & Associates (engineering consultant), performed an inspection that determined there was poor maintenance of coal combustion residual storage facilities, such as not addressing erosion, standing water, and piping issues. Additionally, the inspection found there was no formalized training for personnel who inspected the dikes.

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.

  Full Report

  November 16, 2020 - Agreed-Upon Procedures For TVA Fiscal Year 2020 Performance Measures - 2020-15753

The Office of the Inspector General (OIG) performed procedures that were requested and agreed to by Tennessee Valley Authority (TVA) management solely to assist management in determining the validity of the Winning Performance/Executive Annual Incentive Plan (WP) Measures for fiscal year (FY) ending September 30, 2020. The WP Measures data provided to the OIG and to which the agreed-upon procedures were applied is the responsibility of TVA management. In summary, procedures applied by the OIG found:
  • 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.
  Full Report

  October 30, 2020 - Employee Misconduct - Ethics - 19-0297

This investigation addressed an allegation that an employee violated federal ethics laws by obtaining outside employment with a TVA contractor while still employed with TVA. The investigation revealed that the employee obtained outside employment only after TVA eliminated his position and he began a 90-severance period during which TVA told him he could pursue employment with any outside company. Furthermore, there was no evidence the employee attempted to influence any official action at TVA during this period.

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.

  Full Report

  October 22, 2020 - Travel Expenses Reimbursed Within 50 Miles of Official Station - 2020-15726

We audited the Tennessee Valley Authority's (TVA) travel expenses reimbursed within 50 miles of an official station to determine if they complied with Federal Travel Regulation and TVA policies and procedures. Our audit scope included approximately $500,000 of travel expenses within 50 miles of a TVA employee's official duty station occurring from October 1, 2018, through March 26, 2020.

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.

  Full Report

  October 21, 2020 - Information Technology Contractor Access - 2020-15721

We audited TVA's onboarding actions completed for all active IT contractors as of March 26, 2020, including background investigations and cybersecurity awareness training requirements to determine if IT contractors are granted logical access in accordance with TVA policy. TVA Information Technology and TVA Police require contractors have various levels of background investigations completed for logical access to different classifications of information. We found that (1) TVA policy does not align between business units, (2) the majority of Tier 1 IT contractor suitability background investigations were not in accordance with TVA policy, and (3) the majority of IT contractor higher level background investigations were not in accordance with TVA policy. TVA management agreed with the recommendations.

  Full Report

  September 28, 2020 - Emergency Preparedness - Active Shooter - 2020-15728

We included an audit of the Tennessee Valley Authority's (TVA) plans for an active shooter incident in our annual audit plan due to the potential risk of an active shooter incident occurring. Our audit objective was to determine if TVA has adequate plans in place to prevent, prepare for, and manage active shooter incidents. The audit scope included all program documentation and records that support TVA's plans to prevent, prepare for, and manage active shooter incidents as of May 13, 2020.

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.

  Full Report

  September 28, 2020 - Business Meetings and Hospitality - 2020-15691

We audited the Tennessee Valley Authority's (TVA) business meeting and hospitality expenses to determine if they complied with TVA's Business Meetings and Hospitality policy and any other applicable TVA guidance. Our audit scope included approximately $6.5 million in business meeting and hospitality expenses occurring from October 1, 2018, through September 30, 2019.

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.

  Full Report

  September 24, 2020 - Organizational Effectiveness - Watts Bar Nuclear Plant Radiation Protection - 2020-15718

The Office of the Inspector General conducted a review of the Watts Bar Nuclear Plant (WBN) Radiation Protection (RP) organization to identify factors that could impact WBN RP's organizational effectiveness. Our report identified behaviors that had a positive impact on WBN RP. However, we also identified a behavior that could negatively affect WBN RP. Specifically, we identified a behavioral risk related to accountability that, if left unaddressed, could impact WBN RP's effectiveness and its continued ability to meet its responsibilities in support of WBN's mission. We also identified operational positives regarding WBN RP's working relationship with outside departments and having enough resources to do the work.

  Full Report

  September 24, 2020 - Coal Plant Overtime - 2019-15686

We determined significant amounts of overtime were worked by employees at all six of TVA's coal plants. Specifically, the overtime worked at these plants was the equivalent of
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.

  Full Report

  September 24, 2020 - Gas Plant Overtime - 2019-15685

We determined significant amounts of overtime were worked by employees at some gas plants. Specifically, we determined 69 percent (221,517 hours) of the 318,903 hours of overtime was performed at 7 of the 17 plants. The overtime worked at these 7 plants was the equivalent of 51 full-time employees. We also determined some employees worked significant amounts of overtime. For example, we found 51 instances during fiscal years 2018 and 2019 where employees worked over 1,000 hours of overtime and 2 of these employees had nearly 2,000 hours of overtime in a single year. Additionally, we determined the Tennessee Valley Authority (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.

  Full Report

  September 22, 2020 - Economic Development Loan Program - 2020-15706

We audited the Tennessee Valley Authority's (TVA) Economic Development (ED) loan program to determine if TVA ED loans were executed and administered in accordance with TVA policies and procedures. Our audit scope included 59 loans with outstanding balances of approximately $47.5 million as of December 31, 2019.

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.

  Full Report

  September 22, 2020 - Organizational Effectiveness - Treasury - 2020-15741

The Office of the Inspector General conducted a review of the Treasury organization to identify factors that could impact Treasury's organizational effectiveness. Our report identified behaviors that had a positive impact on Treasury. These included interactions with team members and leadership. We also identified risks to operations that, although minimal, could impede Treasury's effectiveness if unaddressed. While interviews with Treasury personnel indicated effective performance of job responsibilities, we identified risks, including (1) uncertainty in business model changes for one Treasury department and (2) risks related to effective service to business partners.

  Full Report

  September 17, 2020 - Contractors' Use of Equipment Provided by TVA's Equipment Support Services - 2020-15724

As part of our annual audit plan, we performed an audit to determine the effectiveness of the Tennessee Valley Authority's (TVA) process for managing heavy equipment provided to contractors through TVA's Equipment Support Services (ESS) group. ESS provides heavy equipment and other equipment support services to business units across TVA and charges specific projects for the equipment which is provided. ESS's customers include (1) TVA organizations obtaining services directly or (2) contractors performing work for the TVA organizations. In summary, we determined TVA was not effectively managing contractors' use of equipment provided by ESS. Specifically, we found:
  • 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.
  Full Report

  September 17, 2020 - Organizational Effectiveness - Enterprise Planning - 2020-15729

The Office of the Inspector General conducted a review of the Enterprise Planning (EP) organization to identify factors that could impact EP's organizational effectiveness. We identified behaviors that positively affected EP. These included leadership actions, relationships with team members, recognition programs, and a positive ethical culture. We also identified a risk to operations that, although minimal, if left unaddressed, could hinder EP's effectiveness. This risk was related to effective collaboration with business partners.

  Full Report

  September 15, 2020 - Employee Misconduct - 20-0181

This investigation was initiated after OIG auditors identified irregular transactions paid for with a TVA Purchasing Card. More specifically, the auditors discovered the Purchasing Card was used by a cardholder to make payments to an apartment complex. The subsequent investigation substantiated that the employee used the card to make several monthly rental payments to the apartment complex where she lived. To address this situation and prevent similar improper usage of the Purchasing Card in the future, the OIG made several recommendations.

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.

  Full Report

  September 3, 2020 - Organizational Effectiveness - Watts Bar Nuclear Plant Chemistry/Environmental - 2020-15719

The Office of the Inspector General conducted a review of the Watts Bar Nuclear Plant (WBN) Chemistry/Environmental (Chemistry) organization to identify factors that could impact WBN Chemistry's organizational effectiveness. Our report identified behavioral risks that could have a negative impact on WBN Chemistry's effectiveness, including those related to (1) interactions with certain management and (2) relationships between employees. We also identified operational risks that could hinder WBN Chemistry's ability to execute its responsibilities and support Nuclear's vision and core principles. These risks were comprised of (1) perceptions of inadequate qualified and/or experienced technicians and turnover in Nuclear Chemistry and (2) concerns with the technician training program. In addition, based on feedback received from other WBN organizations, we corroborated concerns about WBN Chemistry's staffing and personnel knowledge.

  Full Report

  September 1, 2020 - Independent Examination of Cost Proposal for Engineering Services - 2020-15732

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined a cost proposal for engineering, design, and construction support services. Our examination objective was to determine if the cost proposal was fairly stated for a planned 5-year, $300 million contract.

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.

(Summary Only)

  August 28, 2020 - Independent Examination of Cost Proposal for Engineering Services - 2020-15738

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for engineering, design, and construction support services. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned 5-year, $20.5 million contract.

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.

(Summary Only)

  August 28, 2020 - Historic Preservation Reviews - 2019-15663

In the National Historic Preservation Act of 1966, Congress established a comprehensive program to preserve the historical and cultural foundations of the nation as a living part of community life. Section 106 of the Act requires federal agencies to consider the effects of projects they carry out, approve, or fund on historic properties. The Tennessee Valley Authority's Cultural Compliance group performs historic preservation reviews (called Section 106 reviews) to assess (1) whether or not historic properties are present, (2) adverse effects of projects on historic properties, and (3) how to mitigate the adverse effects. Due to concerns raised about the efficiency of historic preservation reviews, we performed an evaluation to determine if the process for performing historic preservation reviews was efficient.

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.

  Full Report

  August 26, 2020 - Thalle Construction Company, Inc. - Contract No. 10061 - 2019-15632

As part of our annual audit plan, we performed an audit of costs billed to the Tennessee Valley Authority (TVA) by Thalle Construction Company, Inc. (Thalle) for construction and modification services for civil projects and coal combustion product management under Contract No. 10061. The contract provided for TVA to compensate Thalle for work on either a cost reimbursable, target cost estimate (TCE), or fixed price basis. Our audit objectives were to determine if (1) costs were billed in compliance with the terms and conditions of the contract and (2) tasks were issued using the most cost efficient pricing methodology. Our scope included about $16.2 million in costs billed to TVA from May 20, 2015, through December 20, 2018. This included about $14.7 million for fixed price projects, $1.3 million for TCE projects, and $186,000 for cost reimbursable projects. In summary, we determined:
  • 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.
We also noted several opportunities to improve contract administration by TVA.

(Summary Only)

  August 21, 2020 - Independent Examination of Cost Proposal for Engineering Services - 2020-15734

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for engineering, design, and construction support services. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned 5-year, $200 million contract.

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.

(Summary Only)

  August 20, 2020 - Management of Mac® Desktops and Laptops - 2020-15717

The Office of the Inspector General audited TVA's management of Mac® desktops and laptops to determine if Mac® desktop and laptop patching and configuration management followed TVA policy. In summary, we found (1) TVA is at potential risk for compromise of Mac® desktops and laptops due to inaccurate inventory, (2) TVA was not patching Mac® systems in the designated time frames in TVA policy, and (3) TVA did not have a Mac® baseline as required by TVA policy. TVA management agreed with our findings and recommendations.

  Full Report

  August 14, 2020 - Independent Examination of Cost Proposal for Engineering Services - 2020-15733

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for engineering, design, and construction support services. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned 5-year, $200 million contract.

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.

(Summary Only)

  August 13, 2020 - Independent Examination of Cost Proposal for Engineering Services - 2020-15735

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for engineering, design, and construction support services. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned 5-year, $90 million contract.

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.

(Summary Only)

  August 13, 2020 - Organizational Effectiveness - Watts Bar Nuclear Plant Site Security - 2019-15570

The Office of the Inspector General conducted a review of the Watts Bar Nuclear Plant (WBN) Site Security (SS) organization to identify factors that could impact WBN SS's organizational effectiveness. Our report identified strengths that positively affected WBN SS related to (1) organizational alignment, (2) positive interactions within WBN SS, (3) first-line management support, and (4) positive ethical culture. We also identified risks that could impact the effectiveness of WBN SS to achieve its responsibilities in support of the Nuclear vision and TVA mission. These risks included (1) communication deficiencies, (2) safety concerns, (3) perceptions of inadequate staffing, (4) reporting of performance data, and (5) ineffective relationships with support organizations.

  Full Report

  July 29, 2020 - Independent Examination of Cost Proposal for Engineering Services - 2020-15739

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for engineering, design, and construction support services. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned 5-year, $45 million contract.

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.

(Summary Only)

  July 15, 2020 - Power Operations Arc Flash Protection - 2019-15642

Due to the risk of personnel injury from arc flash hazards, we performed an evaluation to determine if (1) TVA's arc flash procedures were being performed as required, (2) required personal protective equipment (PPE) was available and properly maintained, and (3) required training was completed.

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.

  Full Report

  July 13, 2020 - Nuclear Arc Flash Protection - 2019-15644

Due to the risk of personnel injury from arc flash hazards at nuclear plants, we performed an evaluation to determine if (1) TVA's arc flash procedures were being performed as required, (2) required personal protective equipment was available and properly maintained, and (3) required training was completed.

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.

  Full Report

  July 13, 2020 - Trans Ash, Inc. - Contract No. 10059 - 2018-15599

As part of our annual audit plan, we audited costs billed to the Tennessee Valley Authority (TVA) by Trans Ash, Inc. (Trans Ash) for construction support services provided under Contract No. 10059. The contract provided that one or more compensation methods may be utilized to complete the work-cost reimbursable, target cost estimate, or fixed price. Our audit objectives were to determine if (1) costs were billed in accordance with the terms and conditions of the contract and (2) tasks were issued using the most cost efficient pricing methodology. Our audit scope included about $34.4 million in costs billed to TVA from May 20, 2015, through November 30, 2018. This included $20.9 million for cost reimbursable projects and $13.5 million for fixed price projects.

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.
We also noted several opportunities to improve contract administration by TVA. Specifically, we determined TVA paid an additional $137,190 in noncraft labor costs due to conflicting contract language. In addition, we found (1) TVA could not locate any of the exhibits to the contract, (2) Trans Ash did not submit an electronic billing file to the TVA Office of Inspector General (OIG) in the format and frequency provided for in the contract's terms, and (3) the contract's Order of Precedence clause included inconsistent guidance on which documents took precedence in the event of a conflict.

(Summary Only)

  July 9, 2020 - Grid Access Charge - 2020-15712

The Office of the Inspector General determined that the Tennessee Valley Authority's (TVA) implementation of a grid access charge was revenue neutral because it resulted in an immaterial change in revenue to TVA. We determined TVA collected about $2 million less in revenue from the local power companies that implemented the grid access charge in fiscal year 2019.

  Full Report

  June 4, 2020 - Morsey Constructors, LLC - Contract No. 9275 - 2019-15650

As part of our annual audit plan, we audited costs billed to the Tennessee Valley Authority (TVA) by Morsey Constructors, LLC (Morsey) for general construction and modification services performed under Contract No. 9275. Our audit included approximately $8.3 million in costs billed to TVA during calendar years 2014 through 2018. Our objective was to determine if Morsey billed TVA in accordance with the contract's terms.

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.

(Summary Only)

  June 3, 2020 - Organizational Effectiveness - Financial Operations and Performance - 2020-15702

The Office of the Inspector General conducted a review of the Financial Operations and Performance (FO&P) organization to identify factors that could impact FO&P's organizational effectiveness. Our report identified behaviors that positively affected FO&P. These included leadership actions and other drivers of engagement, such as positive relationships with team members and the use of an employee-driven recognition program. We also identified risks to operations that, although minimal, if left unaddressed, could hinder FO&P's effectiveness. These included (1) risks to adequate information sharing among FO&P departments and effective customer service and (2) perceived risks to achievement of FO&P's initiatives and operations.

  Full Report

  May 29, 2020 - Breach of Contract - Travel Expenses - 19-0175

This investigation addressed an allegation that a contract employee and his employer submitted mileage reimbursement expenses in the amount of $23,431.82 that were not allowed under their contract with the Tennessee Valley Authority (TVA). These travel expenses were submitted for the employee's travel to and from TVA's Watts Bar Nuclear Site between February 2017 and April 2019. The evidence substantiated that these expenses were not reimbursable under the contract.

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.

  Full Report

  May 27, 2020 - Breach of Contract - Travel Expenses - 19-0165

This investigation addressed an allegation that a contract employee and his employer submitted mileage reimbursement expenses in the amount of $34,173.15 that were not allowed under their contract with the Tennessee Valley Authority (TVA). These travel expenses were submitted for the employee's travel to and from TVA's Sequoyah Nuclear Site between August 2016 and June 2019. The evidence substantiates that these expenses were not reimbursable under the contract.

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.

  Full Report

  May 5, 2020 - Contract Misconduct - Miscellaneous - 18-0206

This investigation was initiated after concerns were reported to the Office of the Inspector General that the duties of a managed-task contract employee working at TVA placed him in a position to direct TVA contracts to his company. While it was determined that, as a contractor, criminal conflict of interest statutes did not apply to this contract employee, the OIG made several recommendations to address this situation.

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.

  Full Report

  May 5, 2020 - Organizational Effectiveness - Hydro Generation Rollup - 2019-15627

The Office of the Inspector General conducted a review of Hydro Generation (Hydro) to identify operational and cultural strengths and risks that could impact the organizational effectiveness of Hydro as a whole. Our review was based on the results of our prior evaluations in the five Hydro areas and additional interviews and data analyses conducted in this evaluation. Our report identified strengths within Hydro related to (1) organizational alignment, (2) positive interactions within and outside of Hydro, (3) effective leadership, and
(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.

  Full Report

  May 1, 2020 - National Emergency Assistance Inc. - Contract No. 11992 - 2019-15681

As part of our annual audit plan, we performed an audit of costs billed to the Tennessee Valley Authority (TVA) by National Emergency Assistance Inc., (NEA) under Contract
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.

(Summary Only)

  April 29, 2020 - Insider Threat Program - 2019-15619

The Office of the Inspector General audited TVA's Insider Threat Program (ITP) to determine if TVA had a program established to address insider threats that was consistent with best practices. We found several areas where TVA's ITP was consistent with best practices. Additionally, we found TVA had designated a senior official charged with overseeing classified information sharing and safeguarding efforts of the agency. Although TVA had not yet implemented its planned ITP, we determined TVA's program will be at a proactive maturity level upon its planned implementation. We identified best practices that were not currently included in the developed ITP related to monitoring and awareness training. TVA management agreed with our recommendations.

  Full Report

  April 28, 2020 - Allocation of Labor Expenses in Information Technology - 2019-15646

As part of our annual audit plan, we audited the allocation of labor expenses in the Tennessee Valley Authority's (TVA) Information Technology (IT) organization. Our audit objective was 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.

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.

  Full Report

  April 21, 2020 - Backup Verification of Mission Essential Data - 2020-15693

The Office of the Inspector General audited TVA's backup verification of mission essential data to determine if TVA's backups were being performed in accordance with business requirements and industry best practice. In summary, we determined that TVA's backups of mission essential data included industry best practice in their business requirements. However, we found three business requirements were not being met. Specifically, we found (1) TVA was not using the enterprise authentication solution as required by their common control catalog, (2) test restores were not performed for essential backup and infrastructure components, and (3) backup data in transit was not encrypted. TVA management agreed with our findings and recommendations.

  Full Report

  April 20, 2020 - BlueCross BlueShield of Tennessee, Inc. - Contract No. 11022 - 2019-15635

As part of our annual audit plan, we performed an audit of costs billed to Tennessee Valley Authority (TVA) by BlueCross BlueShield of Tennessee, Inc. (BCBST) under Contract
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.

(Summary Only)

  April 15, 2020 - Maximo Vendor Master File - 2019-15666

The Office of the Inspector General included an audit of TVA's Maximo vendor master file in our annual audit plan due to the risk of improper payments associated with the large amount of payments processed annually using Maximo data. Our audit objective was to determine if TVA's Maximo vendor master file is properly maintained according to best practices and Supply Chain Standard Programs and Processes 04.014, Supplier Maintenance. Our audit scope included the data in TVA's Maximo vendor master file as of November 20, 2019.

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.

  Full Report

  April 14, 2020 - TVA Observation Program - 2019-15662

Due to the importance of identifying and correcting safety issues, we performed an evaluation to determine if corrective actions were being implemented to address observations identified through the TVA Observation Program (TOP). We found corrective actions were generally being implemented to address observations identified through TOP. In addition, we found Local Health and Safety Committees were generally taking action to address negative trends in at-risk observations. However, we identified opportunities for improvement related to (1) at-risk observations that should not have been included as part of TOP, (2) documentation of corrective actions in SafetyNet, and (3) closure of some at-risk observations in SafetyNet.

  Full Report

  March 25, 2020 - Thalle Construction Company, Inc. - Project Change Request No. 017 to Purchase Order No. 3260693 - Contract No. 10061 - 2020-15704

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we audited Thalle Construction Company, Inc.'s (Thalle) project change request (PCR) No. 017 issued to Purchase Order (PO) No. 3260693 under Contract No. 10061. TVA issued PO No. 3260693 to Thalle on September 21, 2017, using a target cost estimate (TCE) pricing methodology to provide supervision, labor, equipment, and materials for the Bull Run Fossil Site, Process Water Basin.

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.
In addition, based on our cursory review of payments made under PO No. 3260693, we determined Thalle overbilled TVA $58,612 in ineligible G&A costs and fee paid on TVA provided equipment. As a result, we determined Thalle owes TVA $524,403 including (1) $465,791 for its applicable share of the TCE cost overrun and (2) $58,612 in ineligible G&A and fee paid on TVA provided equipment.

(Summary Only)

  March 20, 2020 - Nuclear Clearance Process - 2019-15678

Working in industrial environments is inherently dangerous and steps must be taken to ensure the safety of personnel performing work on energized equipment. The Tennessee Valley Authority's clearance procedures establish standardized clearance requirements to ensure equipment is isolated from its energy source and rendered nonoperative before performing work on machines or equipment where the unexpected energizing, start up, or release of stored energy could occur and cause injury or property damage. Due to the importance of the clearance procedure in preventing injury and/or property damage while equipment is being serviced, we performed an evaluation of the nuclear clearance process.

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.

  Full Report

  February 21, 2020 - TVA Network User Phishing Awareness - 2019-15621

The Office of the Inspector General audited the effectiveness of TVA's phishing training provided to TVA users and determined that it was ineffective. In addition, we found TVA does not have formal procedures for conducting periodic phishing exercises, follow-up training for users who failed the periodic exercises, or consequences for users who fail to take the required phishing training. TVA management agreed with our findings and recommendations.

  Full Report

  February 19, 2020 - TVA's Identity and Access Management Project - 2015-15275

The Office of the Inspector General audited the effectiveness of the Tennessee Valley Authority's (TVA) implementation of a new identity and access management (IAM) solution. We found the TVA project team has effectively implemented the IAM program and related projects. TVA expanded the IAM program to include additional user access management tools and processes, which included privileged identity management. We identified documentation concerns regarding privileged identity management that were (1) communicated to the project management team during the audit and (2) addressed by TVA management prior to completion of rollout.

  Full Report

  February 14, 2020 - Transmission, Power Supply and Support - Critical Spare Parts - 2019-15647

Due to the importance of having critical spare parts available to reduce the amount of recovery time after events that may affect the transmission system, we conducted an evaluation to determine if Transmission is effectively managing critical spare parts. Transmission manages its critical spare parts as storm restoration material.

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.

  Full Report

  February 12, 2020 - 2019 Federal Information Security Modernization Act - 2019-15653

The Federal Information Security Modernization Act of 2014 (FISMA) requires each agency's Inspector General (IG) to conduct an annual independent evaluation to determine the effectiveness of the information security program (ISP) and practices of its respective agency. Our objective was to evaluate the Tennessee Valley Authority's ISP and agency practices for ensuring compliance with FISMA and applicable standards, including guidelines issued by Office of Management and Budget and National Institute of Standards and Technology. Our audit scope was limited to answering the FY 2019 IG FISMA metrics developed as a collaborative effort by the Office of Management and Budget, Department of Homeland Security, and Council of Inspector Generals on Integrity and Efficiency in consultation with the Federal Chief Information Officer Council.

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.

  Full Report

  January 23, 2020 - Organizational Effectiveness - Hydro Generation, Central Region - 2019-15627-03

The Office of the Inspector General conducted a review of the Hydro Generation, Central Region (Hydro Central) to identify strengths and risks that could impact Hydro Central's organizational effectiveness. Our report identified strengths that positively affected the day-to-day activities of Hydro Central personnel. These strengths included (1) organizational alignment, (2) positive interactions within and outside of Hydro Central, (3) effective leadership, and (4) positive ethical culture. However, we also identified risks that could hinder Hydro Central's effective execution and its continued ability to meet its responsibilities in support of the Power Operations mission. These were comprised of risks related to
(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.

  Full Report

  January 22, 2020 - Nuclear Fatigue Rule at Watts Bar Nuclear Plant - 2019-15651

Nuclear Power Group Standard Programs and Processes 03.21, Fatigue Rule and Work Hour Limits, includes rules regarding required average minimum days off for covered individuals, as well as overtime rules for how many hours can be worked in specific time periods. Our review of sampled employee and contract employee work hours and badging records for October 1, 2017, through June 30, 2019, identified no violations of nuclear fatigue rule minimum days off or overtime rules. However, we identified an area of deficiency related to Watts Bar's performance of fatigue assessments. Additionally, we identified opportunities for improvement related to nuclear fatigue rule work-hour tracking and documentation.

  Full Report

  January 21, 2020 - Organizational Effectiveness - Hydro Generation, Raccoon Mountain - 2019-15627-04

The Office of the Inspector General conducted a review of Hydro Generation, Raccoon Mountain (Hydro RM) to identify operational and cultural strengths and risks that could impact Hydro RM's organizational effectiveness. Our report identified strengths within Hydro RM related to (1) organizational alignment, (2) positive interactions within and outside of Hydro RM, (3) effective leadership, and (4) positive ethical culture. However, we also identified risks that could impact Hydro RM's ability to meet its responsibilities in support of PO's mission. These were comprised of risks related to (1) an employee's behaviors that are inconsistent with TVA's Values, (2) inadequate staffing, and (3) outage execution and management.

  Full Report

  January 14, 2020 - Compliance with H-1B Visa Regulations - 2019-15633

We identified nine contractor employees who were H-1B visa nonimmigrants between January 31, 2017, and January 31, 2019. We determined the nine contractor employees we identified as being H-1B nonimmigrants met selected criteria of the visa regulations. However, we could not confirm the actual number of H-1B visa nonimmigrants or foreign nationals who worked at TVA during the scope of our evaluation because the data in citizenship and visa fields in TVA's Human Resources system was determined to be unreliable. Additionally, we identified an opportunity for improvement related to verifying documentation supporting nonimmigrant employment eligibility of contractor employees.

  Full Report

  January 9, 2020 - Enercon Services, Inc. - Contract No. 7757 - 2018-15539

As part of our annual audit plan, we audited costs billed to the Tennessee Valley Authority (TVA) by Enercon Services, Inc. (Enercon) for engineering services under Contract No. 7757. The contract provided for TVA to compensate Enercon for work on either a cost reimbursable or fixed price basis. Our audit objectives were to determine if (1) costs were billed in accordance with the terms and conditions of the contract and (2) tasks were issued using the most cost efficient pricing methodology. Our audit scope included about
$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.
We also noted issues with TVA's contract administration, including inadequate oversight of the (1) fee evaluation process and (2) process for evaluating fixed price proposals. Additionally, TVA may have missed the opportunity to receive $22,089 in volume rebates due to a September 2016 contract change with an effective date that benefitted Enercon.

Summary Only

  January 9, 2020 - Organizational Effectiveness - Hydro Dispatch Control Center - 2019-15627-05

The Office of the Inspector General conducted a review of the Hydro Dispatch Control Center (HDCC) to identify operational and cultural strengths and risks that could impact HDCC's organizational effectiveness. Our report identified strengths within HDCC related to (1) organizational alignment, (2) positive interactions within and outside of HDCC,
(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.

  Full Report

  December 18, 2019 - Review of a Contract for the Purchase of Natural Gas - 2019-15654

We performed an audit of costs billed to the Tennessee Valley Authority (TVA) by a company for the supply of natural gas to TVA's combined cycle or combustion turbine generation plants. Our audit included approximately $205 million in costs billed to TVA for gas delivered from June 1, 2017, to May 31, 2019. Our audit objectives were to determine if (1) the costs billed to TVA were in accordance with the contract's terms and conditions, (2) TVA's analysis to support current contract pricing was reasonable, and (3) the contract's current pricing methodology is reasonable for a potential extension when the pricing agreement expires.

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.

Summary Only

  December 2, 2019 - Day & Zimmermann NPS, Inc. - Contract No. 11515 - 2019-15630

We performed an audit of craft labor costs billed to the Tennessee Valley Authority (TVA) by Day & Zimmermann NPS, Inc. (DZ) under Contract No. 11515. Under the contract, DZ was to provide the services of qualified craft, noncraft, or staff augmented personnel to perform modification, outage, supplemental maintenance, or technical support at TVA Nuclear Power Group generating sites. Our audit included approximately $19.2 million in craft labor costs billed to TVA for work performed at Watts Bar Nuclear Plant from June 1, 2018, to November 30, 2018. Our audit objective was to determine if craft labor costs billed to TVA at Watts Bar Nuclear Plant were in compliance with Contract No. 11515.

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.

Summary Only

  November 18, 2019 - Monitoring of Ernst & Young LLP's Audit of the Tennessee Valley Authority Fiscal Year 2019 Financial Statements - 2019-15683

In keeping with its responsibilities under the Inspector General Act of 1978, as amended, the OIG monitored the audit of TVA's fiscal year 2019 financial statements performed by Ernst and Young LLP (EY) to assure their work complied with Government Auditing Standards. Our review of EY's work disclosed no instance in which the firm did not comply in all material respects with Government Auditing Standards.

  Full Report

  November 14, 2019 - Agreed-Upon Procedures for TVA Fiscal Year 2019 Performance Measures - 2019-15679

The Office of the Inspector General (OIG) performed procedures that were requested and agreed to by Tennessee Valley Authority (TVA) management solely to assist management in determining the validity of the Winning Performance/Executive Annual Incentive Plan (WP) Measures for fiscal year (FY) ending September 30, 2019. The WP Measures data provided to the OIG and to which the agreed-upon procedures were applied is the responsibility of TVA management. In summary, procedures applied by the OIG found:
  • 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.


  Full Report

  November 6, 2019 - Groundwater Monitoring at Shawnee Fossil Plant - 2019-17245

The Office of the Inspector General (OIG) contracted with ATC Group Services LLC (ATC) to conduct a review of groundwater monitoring activities at Shawnee Fossil Plant to determine the quality of the program and adherence to regulatory standards. ATC stated that in their opinion, monitoring activities performed at Shawnee Fossil Plant are in adherence with guidelines for the Environmental Protection Agency. Furthermore, ATC stated the work performed appears to be of high quality and does not likely result in any discrepancies for the program. However, ATC identified an omission from a plan that did not impact groundwater monitoring. TVA management completed actions to address the omission.

  Full Report

  November 6, 2019 - Organizational Effectiveness Follow-Up - Sequoyah Nuclear Plant Site Security - 2019-15682

The Office of the Inspector General previously conducted an evaluation of Sequoyah Nuclear Plant (SQN) Site Security (Evaluation 2018-15550, issued September 24, 2018) to identify strengths and risks that could affect SQN Site Security's organizational effectiveness. Our report identified several strengths and risks along with recommendations for addressing those risks. In response to that report, Tennessee Valley Authority management provided their management decision. The objective of this follow-up evaluation was to assess actions taken to address the concerns identified in our initial organizational effectiveness evaluation. In summary, we determined TVA management has taken actions to address the risks.

  Full Report

  October 24, 2019 - Organizational Effectiveness Follow-up - Human Resources' Employee Health - 2019-15688

The Office of the Inspector General previously conducted an evaluation of Human Resources (Evaluation Report 2016-15445-05, issued September 26, 2017) to identify operational and cultural strengths and areas for improvement that could impact Human Resources' organizational effectiveness. Our report identified several operational and cultural areas for improvement and included recommendations for addressing those areas. The objective of this follow-up review was to assess actions taken to address the concerns identified in our initial organizational effectiveness evaluation for one of Human Resources three departments - Employee Health. In summary, we determined actions have been taken to address the previously identified concerns.

  Full Report

  October 22, 2019 - Organizational Effectiveness Follow-up - Human Resources - 2019-15687

The Office of the Inspector General previously conducted a review of Human Resources (Evaluation Report 2016-15445-05, issued September 26, 2017) to identify operational and cultural strengths and areas for improvement that could impact Human Resources' organizational effectiveness. Our report identified several operational and cultural areas for improvement and included recommendations for addressing those areas. In response, we received Human Resources' management decision on December 4, 2017. The objective of this follow-up review was to assess actions taken to address concerns identified in the initial organizational effectiveness evaluation. In summary, we determined actions taken by Human Resources appear to have addressed the areas for improvement identified during our initial organizational effectiveness review.

  Full Report

  October 10, 2019 - AECOM Energy and Construction, Inc. - Contract No. 8273 - 2018-15554

At the request of the Tennessee Valley Authority (TVA), we performed an audit of costs paid by TVA to AECOM Energy and Construction, Inc. (AECOM) for engineering services under Contract No. 8273. The contract provided for TVA to compensate AECOM for work on either a cost reimbursable or fixed price basis. Our audit objective was to determine if the costs were billed in accordance with the terms and conditions of the contract. Our audit scope included about $21.6 million in costs paid by TVA from January 1, 2016, to April 30, 2018.

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.

Summary Only

   September 26, 2019 - Individual Performance Multiplier - 2019-15626

In 2016, TVA implemented an individual performance multiplier (IPM) that allows managers to adjust employees' annual Short-Term Incentive lump-sum payouts based on performance. Since alignment between the multiplier and performance are important to the success of the initiative, we scheduled an evaluation of TVA's IPM. Our objective was to determine if IPMs were in alignment with performance ratings.

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.

  Full Report

   September 24, 2019 - System Operations Center Site Selection - 2019-15641

Based on the importance of the System Operations Center to the transmission system, we performed an evaluation of the site-selection process to determine if the selected site
(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.

  Full Report

   September 24, 2019 - Hydro Generation Cybersecurity Controls - 2018-15530

The Office of the Inspector General audited TVA's Hydro Generation's cybersecurity controls. We found TVA had (1) a potential single point of failure that could affect TVA's ability to operate effectively in the event of a disaster, (2) not configured network devices in a consistent manner, and (3) not maintained updated network documentation. TVA management provided their planned actions to address the recommendations.

  Full Report

   September 19, 2019 - Organizational Effectiveness - Shawnee Fossil Plant - 2019-15571

The Office of the Inspector General conducted a review of Shawnee Fossil Plant (SHF) to identify operational and cultural strengths and areas for improvement that could impact SHF's organizational effectiveness. Our report identified strengths that positively affected the day-to-day activities of SHF personnel. These strengths related to (1) organizational alignment, (2) teamwork within working groups and with other SHF departments, (3) effective leadership, (4) positive ethical culture, and (5) resources necessary for job execution. However, we also identified a risk related to inadequate asset maintenance activities that could impact SHF's effectiveness and its continued ability to meet its responsibilities in support of Power Operations' mission.

  Full Report

   September 19, 2019 - Nuclear Outage Material Management - 2018-15601

Due to the risk of incorrectly dispositioning nuclear outage materials, we initiated an evaluation of nuclear outage material management. Our objective was to determine if TVA is managing designated outage material following an outage to maximize use and minimize cost.

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.

  Full Report

   September 17, 2019 - Employee Recognition Expenditures - 2019-15624

We audited the Tennessee Valley Authority's (TVA) employee recognition expenditures to determine if they complied with TVA policies and procedures. Our audit scope included approximately $2.6 million in TVA employee recognition expenditures occurring from October 1, 2016, through September 30, 2018.

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.

  Full Report

   September 11, 2019 - Organizational Effectiveness Follow-Up - Sourcing - 2019-15656

The Office of the Inspector General (OIG) previously conducted an evaluation of Sourcing (Evaluation 2017-15514, August 17, 2018) to identify strengths and risks that could affect Sourcing's organizational effectiveness. Our report identified several strengths and risks along with recommendations for addressing those risks. In response to a draft of that report, Tennessee Valley Authority (TVA) management provided their management decision. Prior to the commencement of this evaluation, the recommendations related to alignment risks, employee advancement, and collaboration within Sourcing were closed. The objective of this follow-up evaluation was to assess management's actions to address the two remaining risks, related to leadership and workload. In summary, we determined TVA management has taken actions to address the remaining risks.

  Full Report

   September 11, 2019 - Timely Access Removal - 2019-15634

Due to potential risks associated with employee separations where some Tennessee Valley Authority (TVA) employees ceased active work prior to their last official day of employment, we included an audit of timely access removal as part of our annual audit plan. Our audit objective was to determine if physical and logical access is removed when employees cease active work prior to retirement or other termination. Our scope included TVA employees whose employment ended during calendar year 2018 who ceased active work prior to retirement or other termination. In summary, we found (1) TVA's policies and procedures do not provide guidance for supervisors/managers regarding removal of an employee's logical or physical access if they stop active work prior to separation, and (2) employee's physical and logical access is not consistently removed on a timely basis when employees cease active work prior to retirement or other separation.

  Full Report

   September 11, 2019 - Executive Travel - 2018-15573

We audited the Tennessee Valley Authority's (TVA) executive travel expenses to determine if they complied with Federal Travel Regulation (FTR) and TVA's policies and procedures. Our audit scope included approximately $1.8 million in TVA executive travel expenses occurring from October 1, 2016, through July 31, 2018.

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.

  Full Report

   August 26, 2019 - Transmission System Perimeter Attacks - 2019-15636

The Office of the Inspector General audited TVA's transmission system's Internet security. We (1) identified vulnerabilities that increase TVA's risk of successful cyberattacks,
(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.

  Full Report

   August 23, 2019 - Organizational Effectiveness - Hydro Generation, North Eastern Region - 2019-15627-02

The Office of the Inspector General conducted a review of the Hydro Generation, North Eastern Region (Hydro NE) to identify operational and cultural strengths and risks that could impact Hydro NE's organizational effectiveness. Our report identified strengths within Hydro NE related to (1) organizational alignment, (2) positive interactions within and outside of Hydro NE, (3) first-line leadership, and (4) positive ethical culture. However, we also identified risks that could impact Hydro NE's ability to meet its responsibilities in support of Power Operations' mission. These included risks related to perceptions of (1) inadequate staffing and (2) lack of accountability.

  Full Report

   August 22, 2019 - Groundwater Monitoring at Kingston Fossil Plant - 2019-17234

The Office of the Inspector General (OIG) contracted with ATC Group Services LLC (ATC), to conduct a review of groundwater monitoring activities at the Kingston Fossil Plant Peninsula Disposal Unit to determine the quality of the program and adherence to regulatory standards. ATC stated that in their opinion, monitoring activities performed at TVA Kingston Fossil Plant Peninsula Disposal Unit are in adherence with guidelines for the Environmental Protection Agency and the Tennessee Department of Environment and Conservation. Furthermore, ATC stated the work performed appears to be of high quality and does not likely result in any discrepancies for the program.

  Full Report

   August 8, 2019 - Sargent & Lundy, L.L.C. - Contract Nos. 8444 and 12285 - 2018-15577

As part of our annual audit plan, we audited costs billed to the Tennessee Valley Authority (TVA) by Sargent & Lundy, L.L.C. (S&L) for engineering services under Contract Nos. 8444 and 12285. The contracts provided for TVA to compensate S&L for work on either a cost reimbursable or fixed price basis. Our audit objectives were to determine if (1) costs were billed in accordance with the terms and conditions of the contracts and (2) tasks were issued using the most cost efficient pricing methodology. Our audit scope included about $119.3 million in costs billed to TVA from July 19, 2014, through December 30, 2017. This included $21.0 million for cost reimbursable projects and $98.3 for fixed price projects. In summary, we determined:
  • 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.
We also noted issues with TVA's contract administration including inadequate oversight of the (1) fee evaluation process and (2) process for evaluating fixed price proposals. Additionally, TVA may have missed the opportunity to receive $121,083 in volume rebates due to certain contractual language that benefited S&L.

(Summary Only)

  August 5, 2019 - Organizational Effectiveness - Hydro Generation, South Western Region - 2019-15627-01

The Office of the Inspector General conducted a review of the Hydro Generation, South Western Region (Hydro SW) to identify operational and cultural strengths and risks that could impact Hydro SW's organizational effectiveness. Our report identified strengths within Hydro SW related to (1) organizational alignment, (2) positive interactions within and outside of Hydro SW, (3) effective leadership, and (4) positive ethical culture. However, we also identified risks that could hinder Hydro SW's effective execution and its continued ability to meet its responsibilities in support of the PO mission. These were comprised of risks related to (1) inadequate resources including training, materials, and staffing and
(2) perceptions of upper management support including spending and lack of hydro experience.

  Full Report

  July 17, 2019 - Organizational Effectiveness - Nuclear Security - 2018-15572

The Office of the Inspector General conducted a review of TVA's Nuclear Security organization to identify operational and cultural strengths and risks that could impact organizational effectiveness. Our report identified strengths within Nuclear Security related to (1) organizational alignment, (2) teamwork, (3) ethical culture, and (4) front-line management support. However, we identified risks that could impact the effectiveness of Nuclear Security to achieve its responsibilities in support of the Nuclear vision. These included (1) alignment risks related to the achievement of the Nuclear vision and (2) risks to effective execution of responsibilities.

  Full Report

  June 21, 2019 - Nuclear Fatigue Rule - Browns Ferry Nuclear Plant - 2018-15596

Nuclear Power Group Standard Programs and Processes 03.21, Fatigue Rule and Work Hour Limits, includes rules regarding required average minimum days off for covered individuals, as well as overtime rules for how many hours can be worked in specific time periods. Our review of sampled employee and contract employee work hours and badging records for fiscal years 2017 and 2018 identified no violations of nuclear fatigue rule (NFR) minimum days off or overtime rules. However, we identified areas of deficiencies with Brown Ferry's performance of (1) fatigue assessments and (2) NFR compliance reviews. Additionally, we identified areas for improvement related to NFR work-schedule tracking.

  Full Report

  June 12, 2019 - Accuracy of Payments Made for Workers' Compensation Benefits - 2018-15591

We evaluated the process TVA uses to verify the accuracy of payments made to the Department of Labor (DOL) for workers compensation benefits. We determined TVA did not have a formal process to verify the accuracy of payments made for schedule awards. Although TVA's Sarbanes-Oxley Act (SOX) controls verified certain aspects of the DOL billings, the SOX controls did not include steps to verify the accuracy of the elements in award of compensation letters and, as a result, some errors were not identified. Additionally, we found TVA was not performing a SOX control related to providing a summary of workers' compensation charges to the applicable organizations for review.

  Full Report

  May 29, 2019 - Enhanced Email and Web Security Compliance - 2018-15607

The Office of the Inspector General audited TVA's compliance with Office of Management and Budget's (OMB) memorandum (M) 15-13, Policy to Require Secure Connections across Federal Websites and Web Services, and Department of Homeland Security's (DHS) binding operational directive (BOD) 18-01, Enhance E mail and Web Security, regarding Web site and e-mail security practices. We determined that TVA was not in compliance with OMB M-15-13 and DHS BOD-18-01. In addition, we found TVA's Web site inventory was incomplete. TVA management agreed with our findings and recommendations.

  Full Report

  May 24, 2019 - Coal Operations' Design Change Notice Process - 2018-15587

The Tennessee Valley Authority's (TVA) drawing program is designed and maintained to document the configuration of TVA's systems, structures, and components. Drawings are utilized for a variety of reasons, including plant operation, maintenance activities, troubleshooting, and to establish clearance boundaries for isolating equipment so that work can be performed safely. Modifications to configuration should be captured through TVA's Design Change Notice (DCN) process to ensure configuration control is maintained and drawings are updated to reflect the changes. Due to the importance of accurate drawings to plant personnel safety, we initiated an evaluation of Coal Operations' DCN process. Our objective was to determine if the DCN process was being followed for modifications made to coal plant drawings.

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.

  Full Report

  May 22, 2019 - Organizational Effectiveness - Transmission Operations, Reliability, and Supervisory Control and Data Acquisition - 2018-15609

The Office of the Inspector General conducted a review of the Transmission Operations, Reliability, and Supervisory Control and Data Acquisition (TORS) organization to identify operational and cultural strengths and risks that could impact TORS' organizational effectiveness. Our report identified strengths within TORS related to (1) organizational alignment for the majority of TORS' personnel, (2) teamwork within departments, and (3) leadership of first-line supervisors. However, we identified risks related to (1) organizational reporting issues, (2) engagement risks related to career development opportunities and a perceived lack of accountability, and (3) execution risks related to perceptions of inadequate staffing and outage scheduling challenges. During our evaluation, management took action that addressed certain risks related to career development opportunities, inadequate staffing, and outage scheduling concerns.

  Full Report

  May 16, 2019 - Coal Plant Work Management - 2018-15581

Due to the importance of maintaining equipment in good operating condition and concerns raised during past Office of the Inspector General reviews, we conducted an evaluation to determine if (1) Coal Operations fully implemented the work management process improvements recommended by Reliability Management Group (RMG) and (2) performance metrics indicated the changes had improved work management.

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.

  Full Report

  May 16, 2019 - Organizational Effectiveness - IT Corporate Solutions - 2018-15610

The Office of the Inspector General conducted a review of the Information Technology (IT) Corporate Solutions organization to identify operational and cultural strengths and risks that could impact IT Corporate Solutions' organizational effectiveness. Our report identified strengths related to (1) organizational alignment in two departments, (2) positive interactions with management in one department, and (3) teamwork within and outside of Corporate Solutions' departments. However, we also identified risks related to (1) risks to effective organizational alignment to IT strategy, (2) engagement issues with management in two departments, and (3) risks to effective execution of the mission related to lack of customer focus and resource issues.

  Full Report

  May 15, 2019 - Reliability of Inventory Data in Maximo - 2018-15603

Based upon concerns regarding the reliability of data in Maximo, we conducted an evaluation of inventory data in Maximo to determine if (1) data entered into key inventory fields in Maximo was valid and (2) key inventory fields were utilized consistently.

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.

  Full Report

  May 15, 2019 - Organizational Effectiveness Follow-Up - Materials and Transportation Management - 2019-15638

The Office of the Inspector General previously conducted an evaluation of Materials and Transportation Management (M&TM) (Evaluation 2016-15586, July 27, 2017) to identify strengths and risks that could affect M&TM's organizational effectiveness. Our report identified several strengths and risks along with recommendations for addressing those risks. We subsequently completed a follow-up evaluation (Evaluation 2018-15578, September 28, 2018) that assessed management's actions to address risks from our initial organizational effectiveness evaluation. Our follow-up evaluation determined management had taken actions to address most of the risks outlined in our initial evaluation. However, three recommendations remained unresolved, including (1) one manager's behavior and teamwork at one location,
(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.

  Full Report

  April 17, 2019 - Qualifications for Safety-Sensitive Positions in Power Operations - 2018-15605

Due to the importance of having qualified personnel in safety-sensitive positions, we initiated an evaluation to determine if minimum job requirements for safety-sensitive positions in Power Operations were met at the time of promotion or hire.

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.

  Full Report

  April 17, 2019 - Gas Plant Emergency Preparedness and Response - 2018-15585

Due to the importance of an effective response in the event of an emergency, we conducted an evaluation to determine if (1) emergency response plans at gas plants were up to date and (2) required systems were available and functional.

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.

  Full Report

  April 16, 2019 - Information Systems Categorization Process - 2018-15598

The Office of the Inspector General audited TVA's information systems categorization process to determine if TVA's information systems categorization process was effective and in compliance with Federal Information Processing Standards Publication 199 and National Institute of Standards and Technology Special Publication (NIST SP) 800-60. We determined that portions of TVA's process were effective. However, we found gaps with implementing NIST SP 800-60 guidance. TVA management agreed with our findings and recommendations.

  Full Report

  April 12, 2019 - Coal Plant Emergency Preparedness and Response - 2018-15579

Due to the importance of an effective response in the event of an emergency, we conducted an evaluation to determine if (1) emergency response plans at coal plants were up to date and (2) required systems were available and functional.

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.

  Full Report

  March 28, 2019 - Required Nuclear Training - 2018-15549

We reviewed training for Nuclear Security, Emergency Preparedness, and Fire Brigade to determine if required nuclear training was being taken by TVA personnel. We reviewed training completion records for a sample of employees assigned to fire brigade, nuclear security, and emergency preparedness roles and found not all required training was completed. Specifically, we found (1) 1 of 54 employees did not complete the required emergency preparedness training, and (2) 3 of the 91 employees who perform fire brigade functions were missing a quarterly training. In addition, we determined some employees who perform the nuclear security and emergency preparedness functions exceeded the time frames for completing training established in TVA procedures. Additionally, we identified opportunities for improvement regarding the (1) establishment, assignment, and tracking of training requirements and (2) logs used to document fire brigade member assignments.

  Full Report

  March 28, 2019 - Human Capital Management Solution - 2019-15622

The Office of the Inspector General audited TVA's documentation related to vendor selection in TVA's project to replace the current human resource system with a cloud-based human capital management solution. We found TVA had not identified project risks related to ongoing changes in the federal government's strategy for the use of cloud services. In addition, we were unable to verify whether sufficient security architecture reviews were completed to mitigate one of the identified project risks due to the lack of documentation. TVA management agreed with the audit findings and recommendations.

  Full Report

  March 26, 2019 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2019-15623

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for civil projects and coal combustion residual program management work at TVA's steam electric power plants. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned
$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.

(Summary Only)

  March 14, 2019 - Organizational Effectiveness - Paradise Fossil Plant - 2018-15557

The Office of the Inspector General conducted an organizational effectiveness review of Paradise Fossil Plant (PAF) to identify operational and cultural strengths and risks that could impact PAF's organizational effectiveness. Our report identified strengths related to (1) organizational alignment, (2) teamwork within and between PAF departments, and
(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.

  Full Report

  February 28, 2019 - Tool Controls at Sequoyah Nuclear Plant - 2018-15574

As part of our annual audit plan, we audited the tool controls at Sequoyah Nuclear Plant (SQN). Our audit objective was to determine if SQN is in compliance with the Tennessee Valley Authority's (TVA) Nuclear Power Group Business Practice 226 (BP-226), Tool and Equipment Accountability.

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.

  Full Report

  February 20, 2019 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2018-15606

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for civil projects and coal combustion residual program management work at TVA's steam electric power plants. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned
$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.

(Summary Only)

  January 29, 2019 - Human Resource System Personally Identifiable Information Access Control - 2018-15531

The Office of the Inspector General audited TVA's internal controls in place to prevent, detect, and report unauthorized access and disclosure of human resource (HR) system Personally Identifiable Information (PII). We found TVA has weaknesses in its internal controls to prevent and detect unauthorized access and disclosure of HR system PII. TVA management agreed with our recommendations for improving the internal controls.

  Full Report

  January 25, 2019 - GE Mobile Water, Inc. - Contract No. 75130 - 2018-15542

As part of our annual audit plan, we performed an audit of costs billed to the Tennessee Valley Authority (TVA) by GE Mobile Water, Inc. (GE) for providing water processing services, chemicals, and other related products and services under Contract No. 75130. Our audit included approximately $40.898 million in costs billed to TVA from January 1, 2014, to
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.

(Summary Only)

  December 18, 2018 - 2018 Federal Information Security Modernization Act - 2018-15526

The Federal Information Security Modernization Act of 2014 (FISMA) requires each agency's Inspector General (IG) to conduct an annual independent evaluation to determine the effectiveness of the information security program (ISP) and practices of its respective agency. Our objective was to evaluate the Tennessee Valley Authority's (TVA) ISP and agency practices for ensuring compliance with FISMA and applicable standards, including guidelines issued by Office of Management and Budget (OMB) and National Institute of Standards and Technology. Our audit scope was limited to answering the FY2018 IG FISMA metrics developed as a collaborative effort by the OMB, Department of Homeland Security, and Council of Inspector Generals on Integrity and Efficiency in consultation with the Federal Chief Information Officer Council. The FY2018 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 FY2018 IG FISMA metrics, we found TVA's ISP was operating in an effective manner.

  Full Report

  December 17, 2018 - Independent Examination of Labor and Labor Markup Rates - 2018-15565

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the labor and labor markup rates included in a contract TVA has with a contractor. Our examination objective was to determine if the contract's labor and labor markup rates were fairly stated for the five-year, $100 million contract.

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.

(Summary Only)

  December 4, 2018 - Widows Creek Fossil Plant Demolition Program - 2018-15580

We performed an evaluation to determine whether demolition and decontamination activities at Widows Creek Fossil Plant (WCF) (1) adhered to safety principles found in the TVA Decommissioning, Deactivation, Decontamination, and Demolition (D4) Program Guide and (2) complied with selected safety criteria established in Brandenburg's Health and Safety Plan (HASP) for WCF. We determined TVA and Brandenburg met selected safety requirements established in TVA's D4 Program Guide and Brandenburg's HASP for WCF. However, during our site visit, we noted safety hazards related to an eyewash station and personal protective equipment that were immediately addressed.

  Full Report

  November 15, 2018 - Monitoring Of Ernst & Young LLP's Audit Of The Tennessee Valley Authority Fiscal Year 2018 Financial Statements - 2018-15597

In keeping with its responsibilities under the Inspector General Act of 1978, as amended, the OIG monitored the audit of TVA's fiscal year 2018 financial statements performed by Ernst and Young LLP (EY) to assure their work complied with Government Auditing Standards. Our review of EY's work disclosed no instance in which the firm did not comply in all material respects with Government Auditing Standards.

  Full Report

  November 14, 2018 - Ransomware - 2018-15529

The Office of the Inspector General audited TVA's controls in place to prevent, detect, and respond to ransomware incidents. In summary, we found TVA management generally has appropriate controls in place to prevent, detect, and respond to a ransomware incident. However, for one selected system, we found inappropriate administrative access. To strengthen access controls, TVA currently has an ongoing project to identify, track, and monitor administrative accounts, which is expected to be complete in 2020. In addition, we found improvements were needed in the Ransomware Incident Action Plan. TVA's Cybersecurity updated the Ransomware Incident Action Plan during our audit.

  Full Report

  November 14, 2018 - Agreed-Upon Procedures For TVA Fiscal Year 2018 Performance Measures - 2018-15602

The Office of Inspector General (OIG) performed procedures that were requested and agreed to by Tennessee Valley Authority (TVA) management solely to assist management in determining the validity of the Winning Performance/Executive Annual Incentive Plan (WP) Measures for fiscal year (FY) ended September 30, 2018. The WP Measures data provided to the OIG and to which the agreed-upon procedures were applied is the responsibility of TVA management. In summary, procedures applied by the OIG found:
  • 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.
  Full Report

  November 9, 2018 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2018-15562

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for civil projects and coal combustion residual program management work at TVA's steam electric power plants. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned
$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.

(Summary Only)

  October 30, 2018 - TVA's Helicopter Fleet - 2018-15556

In March 2018, we completed Audit 2017-15470, TVA's Fixed-Wing Aircraft. As a result of the audit findings and public interest, we initiated an audit to determine if similar issues existed with TVA's helicopter usage. Our audit objective was to determine whether TVA's use of its helicopter fleet is consistent with TVA policies and any applicable federal laws and regulations. Our audit scope included all helicopter flights from October 1, 2014, through December 31, 2017.

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.

  Full Report

  October 15, 2018 - Organizational Effectiveness - Gallatin Fossil Plant - 2018-15535

The Office of the Inspector General conducted an organizational effectiveness review of Gallatin Fossil Plant (GAF) to identify operational and cultural strengths and risks that could impact GAF's organizational effectiveness. Our report identified strengths related to (1) organizational alignment, (2) teamwork within departments, and (3) support of first-line supervisors. However, we also identified issues that could pose risks to GAF's effectiveness and its continued ability to meet its responsibilities. These issues related to (1) ineffective leadership and (2) safety concerns. Specifically, employees expressed concerns about (1) lack of collaboration between departments, (2) perception of inadequate staffing levels,
(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.

  Full Report

  October 11, 2018 - EnergyRight® Solutions Loan Obligations and Receivables - 2018-15534

We included an audit of loan obligations and receivables relating to the Tennessee Valley Authority's (TVA) EnergyRight® Solutions loan program in our annual audit plan after a review of TVA's financial statements indicated a significant outstanding receivables balance. As of September 30, 2017, TVA's loan obligations under the program were approximately $144.1 million, and the related loans receivable balance (net of discounts) was approximately $125.2 million.

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.

  Full Report

  September 28, 2018 - Organizational Effectiveness Follow-Up - Materials and Transportation Management - 2018-15578

The Office of the Inspector General previously conducted an evaluation of Materials and Transportation Management (M&TM) (Evaluation 2016-15586 issued July 27, 2017) to identify strengths and risks that could affect M&TM's organizational effectiveness. Our report identified several strengths and risks along with recommendations for addressing those risks. The objective of this follow-up evaluation was to assess management's actions to address risks included in our initial organizational effectiveness evaluation. In summary, we determined management has taken actions to address most of the risks outlined in our initial organizational effectiveness evaluation, and management actions appear reasonable to address the remaining risks. However, three recommendations remain unresolved, including (1) one manager's behavior and teamwork at one location, (2) instances where goals were not SMART, and (3) cross functional risks related to business units.

  Full Report

  September 28, 2018 - Organizational Effectiveness Follow-Up - Human Resources' Employee Health - 2018-15583

The Office of the Inspector General conducted an evaluation of the Human Resources (HR) organization (Evaluation Report 2016-15445-05 issued September 26, 2017) to identify operational and cultural strengths and risks that could impact HR's organizational effectiveness. Our report identified several strengths and risks along with recommendations for addressing those risks. The objective of this follow-up evaluation was to assess management's actions to address the risks included in our initial evaluation for one of HR's three departments-Employee Health (EH). We determined EH has taken actions to address some of the risks outlined in our initial evaluation. However, two of the five recommendations from the original evaluation remain unresolved, including (1) the medical case management process and (2) inclusion concerns.

  Full Report

  September 28, 2018 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2018-15536

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for civil projects and coal combustion residual program management work at TVA's steam electric power plants. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned
$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.
We estimated TVA could avoid about $17.63 million on the planned $50 million contract by negotiating appropriate reductions to (1) unit rates in the BRF proposal;
(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.

(Summary Only)

  September 27, 2018 - Organizational Effectiveness Follow-Up - Human Resources - 2018-15582

The Office of the Inspector General previously conducted an evaluation of the Human Resources (HR) organization (Evaluation Report 2016-15445-05 issued September 26, 2017) to identify operational and cultural strengths and risks that could impact HR's organizational effectiveness. Our report identified several strengths and risks along with recommendations for addressing those risks. The objective of this follow-up evaluation was to assess management's actions to address the risks included in our initial organizational effectiveness evaluation. We determined HR has taken actions to address some of the risks outlined in our initial organizational effectiveness evaluation. However, issues related to (1) differences between the Human Resource generalist (HRG) and senior HRG roles; (2) execution risks, including the HRG transition to a more strategic role, employee feedback mechanism, and role clarity; and (3) ethical and inclusion concerns remain unresolved.

  Full Report

  September 26, 2018 - Organizational Effectiveness - Paradise Combined Cycle Plant - 2018-15558

The Office of the Inspector General conducted a review of the Paradise Combined Cycle Plant (PCC) to identify operational and cultural strengths and risks that could impact PCC's organizational effectiveness. We identified strengths that positively affected the day-to-day activities of PCC's personnel and performance including, (1) organizational alignment,
(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.

  Full Report

  September 26, 2018 - Coal Condition Reports - 2017-15511

Tennessee Valley Authority business units are expected to find, analyze, and fix conditions that affect personnel safety, asset reliability, adverse trends, or other conditions that do not meet expectations. Condition reports (CR) are created to record how problems are found, analyzed, and solved. Due to the importance of finding, analyzing, and resolving concerns identified at coal plants, we conducted an evaluation of CRs at TVA coal plants to determine if (1) Coal Operations generated CRs for reported safety, environmental, and operational incidents; and (2) actions taken to address coal CRs were timely and effective.

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.

  Full Report

  September 25, 2018 - Coal Operations' Clearance Procedure - 2018-15560

Due to the importance of the clearance procedure to plant personnel safety, and in response to recent fatalities resulting from clearance violations, we initiated a review of TVA's coal operations' clearance procedure. We determined the clearance procedure was being performed for work requiring clearances. However, the effectiveness of the clearance process is limited because (1) some clearances were not in compliance with the clearance procedure, (2) required training had not been completed by all personnel holding or working on clearances, and (3) audits performed were not in compliance with the procedure. We also identified opportunities for improvement related to procedure clarification and training.

  Full Report

  September 24, 2018 - Hearing Loss Claims - 2017-15512

Due to concerns with the high number of hearing loss claims filed by employees, we performed an evaluation of the actions taken to minimize TVA's financial exposure for hearing loss claims. We determined some Hearing Conservation Program requirements were not met, including: (1) personal noise monitoring and noise surveys in nuclear and (2) annual audiograms and training. Additionally, we identified opportunities for improvement related to (1) hearing loss claims documentation provided to DOL, (2) management statements provided to DOL, and (3) documentation of disciplinary actions for hearing protection violations. In addition, we determined that TVA did not verify the accuracy of the amounts billed by DOL.

  Full Report

  September 24, 2018 - Nuclear Oversight Work Environment Follow-Up - 2018-15541

We evaluated Nuclear Oversight to determine if the work environment was conducive to raising concerns without fear of retaliation. We found the work environment within Nuclear Oversight is not always conducive to raising concerns without fear of retaliation. Specifically, while all Nuclear Oversight employees indicated that they would report nuclear safety or quality problems and concerns, some expressed fear of retaliation for raising issues. We also found some aspects of the work environment within Nuclear Oversight have improved or stayed about the same, while others have declined since our previous evaluation. TVA has also taken steps to address employee concerns regarding how the use of rotational positions might negatively affect the independent performance of nuclear oversight roles. However, some employees continued to express concerns regarding rotational positions.

  Full Report

  September 24, 2018 - Organizational Effectiveness - Sequoyah Nuclear Plant Site Security - 2018-15550

The Office of the Inspector General conducted a review of Sequoyah Nuclear Plant's (SQN) Site Security (SS) organization to identify operational and cultural strengths and risks that could impact SQN SS's organizational effectiveness. Our report identified strengths within SQN SS related to (1) organizational alignment, (2) teamwork, and (3) frontline management support. However, we also identified risks that could impact the effectiveness of SQN SS to achieve its responsibilities in support of the Nuclear mission. These risks included (1) ineffective senior management support related to communication, accountability, behaviors, and resources; and (2) perceptions of unethical actions.

  Full Report

  September 13, 2018 - Key Sarbanes-Oxley Financial Spreadsheets - 2017-15451

The Office of the Inspector General audited the controls for key Sarbanes-Oxley (SOX) spreadsheets to determine if the controls are sufficiently defined, appropriately designed, and operating effectively. The audit's scope was information technology general controls for the SOX critical spreadsheets within TVA. We identified several issues that could provide a stronger control environment for critical spreadsheets. Specifically, we found (1) shared passwords used to modify critical spreadsheets are not appropriately managed, (2) one spreadsheet was accessible using a shared account with no known business need, (3) TVA's SOX Control Environment group's inventory controls over critical spreadsheets are ineffective, (4) critical spreadsheets are not documented consistently in SOX control narratives maintained by TVA's SOX Control Environment group, (5) naming convention controls are not being enforced which limits TVA's ability to quickly assess if critical spreadsheets are properly stored for access control and backup purposes, and (6) TVA's SOX Control Environment group's spreadsheet policy could be strengthened by adding controls for user training, baselining, templates, and testing. TVA management agreed with our findings and recommendations.

  Full Report

  September 6, 2018 - CLEAResult, East Operating, LLC - Contract Nos. 5586 and 6632 - 2015-15344

As part of our annual audit plan, we audited costs billed to the Tennessee Valley Authority (TVA) by CLEAResult East Operating, LLC (CR) for providing services to assist TVA in the Valley-wide implementation of its energy efficiency programs under Contract Nos. 5586 and 6632. Our audit included approximately $45.9 million in costs paid by TVA between April 1, 2014, and March 31, 2016. Our audit objective was to determine if the costs billed to TVA were in compliance with the terms and conditions of Contract Nos. 5586 and 6632.

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.

(Summary Only)

  August 27, 2018 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2018-15547

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for civil projects and coal combustion residual (CCR) program management work at TVA's steam electric power plants. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned
$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.
We estimated TVA could avoid $1.96 million on the planned $25 million contract by (1) negotiating appropriate reductions to material costs, bond costs, equipment costs, and labor burden rates; and (2) limiting the company's fee rate to the RFP's maximum allowable rates. In addition, we suggest TVA (1) negotiate revisions to the company's contract rate attachments to correct errors and more accurately reflect the company's actual wage ranges and costs, (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) modify the contract terms to reflect the company's intended methodology for recovering overhead and G&A costs.

(Summary Only)

  August 23, 2018 - Independent Examination of Labor and Labor Markup Rates - 2018-15569

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the labor and labor markup rates included in a contract TVA has with a contractor. Our examination objective was to determine if the contract's labor and labor markup rates were fairly stated for a planned 5-year contract extension.

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.

(Summary Only)

  August 22, 2018 - TVA's Server Operating System Baselines - 2018-15545

The Office of the Inspector General reviewed TVA's three operating system baselines and how they are applied to the tools used to deploy and manage TVA systems. In summary, we found TVA management aligned two of the three server operating system baselines with the identified best practices and had documentation to support any deviations. However, we found one of the three operating system baselines did not fully align with the identified best practices and was not completely applied to the tools used to deploy and manage TVA server configurations. TVA management agreed with the audit findings and recommendation.

  Full Report

  August 20, 2018 - Independent Examination of Labor and Labor Markup Rates - 2018-15564

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the labor and labor markup rates included in a contract TVA has with a contractor. Our examination objective was to determine if the contract's labor and labor markup rates were fairly stated for a planned 5-year contract extension.

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.

(Summary Only)

  August 17, 2018 - Sourcing's Organizational Effectiveness - 2017-15514

The Office of the Inspector General conducted a review of Supply Chain's Sourcing organization to identify operational and cultural strengths and risks that could impact Sourcing's organizational effectiveness. Our report identified strengths within Sourcing related to (1) teamwork, (2) direct management support for 3 of 4 departments, (3) perceptions of an ethical culture, and (4) customer support. However, we also identified issues that, if left unresolved, could increase the risk that Sourcing will be unable to effectively meet its objective in the future. These risks related to (1) alignment, (2) the selection process, (3) management behaviors, and (4) work management.

  Full Report

  August 13, 2018 - Network Architecture - Nuclear - 2017-15454

The Office of the Inspector General audited the network architecture of a nuclear facility to determine if the network architecture and assets in use to support a specific nuclear plant's business and operational functions are compliant with TVA policies, procedures and identified best practices. In summary, we found TVA management used proven best practices in the design of the corporate physical and wireless networks and the control network. However, we found cabling that was not following manufacturer's guidelines and several control network device configurations deviated from TVA baselines and industry best practices. TVA management agreed with our findings and recommendations.

  Full Report

  August 6, 2018 - Review of Coal Quality Adjustment Report Payments - 2017-15517

We evaluated TVA's administration of Coal Quality Adjustment Reports (CQAR) to determine if the Coal Quality Adjustment Reports were accurately calculated in accordance with the contract terms. We determined CQARs were not always calculated in accordance with the applicable contractual terms, and as a result, TVA did not accurately adjust the payments made to some coal vendors. The miscalculations were due to incorrect (1) rounding of moisture, ash, and British thermal units (BTU) quality adjustment rates and
(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.

  Full Report

  July 31, 2018 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2018-15548

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for civil projects and coal combustion residual program management work at TVA's steam electric power plants. Our examination objective was to determine if a company's cost proposal was fairly stated for a planned
$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.
We estimated TVA could avoid $5.57 million on the planned $50 million contract by (1) negotiating appropriate reductions to the company's proposed overhead/general and administrative rates, equipment costs, labor burden rates, and temporary living allowance costs; (2) limiting the company's fee rate to the request for proposal's maximum allowable rate; and (3) negotiating appropriate revisions to the company's bond costs to reflect its actual bond costs. 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.

(Summary Only)

  July 30, 2018 - Heat Rate Input Calculations - 2017-15516

The Tennessee Valley Authority estimates the dispatch costs for coal and gas on a combination of elements including fuel pricing, physical operating characteristics, estimates of variable operating and maintenance costs, and other variables. Since heat rates are one of the primary physical characteristics used in the calculation of dispatch costs, we performed an evaluation to determine if inputs used in the development of heat rate curves were calculated accurately. The scope of our review was limited to the July 2017 heat rate updates for coal and combined cycle (CC) plants.

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.

  Full Report

  July 23, 2018 - Capital Projects - Post-Project Economic Assessment Review - 2018-15544

We included an audit of the Tennessee Valley Authority's (TVA) capital projects post projects economic assessment process in our annual audit plan because of the capital-intensive nature of the electric utility industry. TVA spent $2.076 billion on capital expenditures in fiscal year (FY) 2017 and anticipates capital expenditures of $1.974, $1.885, and
$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.

  Full Report

  July 18, 2018 - TVA Economic Development Grants - 2017-15488

We included an audit of the Tennessee Valley Authority's (TVA) economic development (ED) grants in our annual audit plan based on findings from our 2013 audit of TVA's Valley Investment Initiative, where we found TVA's oversight of that program could be improved. Currently, there are two main grant programs utilized-Performance Grant Program and InvestPrep Program. Our audit objectives were to determine if TVA has (1) adequate processes and procedures in place for awarding ED grants and (2) established performance metrics to determine if grant program objectives are met. The scope of the audit included ED grants active between June 1, 2015, and May 31, 2017.

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.

  Full Report

  July 5, 2018 - Review of TVA Fixed-Wing Aircraft Flights to Oxford, Mississippi - 2018-15567

We recently completed an audit of TVA's use of fixed-wing aircraft (FWA). Subsequent to issuance of our report (on March 29, 2018), we received a concern that TVA-owned FWA flew to Oxford, Mississippi, home of TVA's Board Chair, at least 76 times between January 2013 and February 2018. The concern stated "These trips to Oxford may represent additional occurrences of fraud and/or abuse, which deserve investigation by OIG. At the least, the Oxford trips are likely an inefficient use of TVA resources, which resulted in a significant number of flight legs where the aircraft [was] empty of passengers."

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.

  Full Report

  June 13, 2018 - Strategy and Performance's Organizational Effectiveness - 2017-15514-01

The Office of the Inspector General conducted a review of Supply Chain's Strategy and Performance (S&P) organization to identify operational and cultural strengths and risks that could impact S&P's organizational effectiveness. Our report identified strengths within S&P related to (1) organizational alignment, (2) teamwork within departments, and
(3) management support of employees. We did not identify any significant risks.

  Full Report

  June 13, 2018 - Organizational Effectiveness Follow-Up - Environmental Permitting and Compliance - 2018-15559

The Office of the Inspector General previously conducted an evaluation of Environmental Permitting and Compliance (EP&C) (Evaluation Report 2016-15366 issued September 28, 2016) and identified strengths and risks along with recommendations for addressing those risks. We conducted a follow-up evaluation (Evaluation Report 2017-15497 issued September 28, 2017) and determined that EP&C had taken actions to address most of the risks outlined in our initial organizational effectiveness evaluation; however, concerns with two managers' behaviors remained unresolved. The objective of this follow-up evaluation was to assess management's actions to address the remaining risks from our initial and follow-up EP&C organizational effectiveness evaluations. We determined EP&C has taken actions to address the remaining risks outlined in our initial organizational effectiveness evaluation. Specifically, EP&C (1) addressed the risks associated with management behaviors and (2) developed a metric to measure adherence to agreed schedules with business partners.

  Full Report

  June 13, 2018 - TVA's Privacy Program - 2017-15453

The Office of the Inspector General conducted a review to determine if TVA's privacy program is effective and in compliance with applicable regulations, guidance, policies, and procedures. We found several areas of the privacy program to be generally effective, including (1) controls protecting privacy information on TVA-owned mobile devices, (2) privacy training taken by network users, (3) regular reviews of the privacy program by TVA management, (4) encryption controls protecting data in privacy systems, and (5) appropriate use and protection of reports in privacy systems. However, we identified several issues that should be addressed by TVA management to further increase the effectiveness of the privacy program. We also found gaps between TVA's policies and procedures governing the privacy program and applicable federal privacy regulations and guidance. TVA management agreed with our findings and recommendations.

  Full Report

  June 5, 2018 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2017-15515

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for civil projects and coal combustion residual program management work at TVA's steam electric power plants. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned
$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.
We estimated TVA could avoid about $27.6 million on the planned $200 million contract by (1) negotiating the appropriate reductions to the company's proposed equipment costs, subcontract costs, material costs, and G&A rate; (2) limiting the company's fee rate to the RFP's maximum allowable rate; (3) eliminating contingency costs on the CUF project and future cost reimbursable projects; and (4) negotiating changes to the company's proposed labor costs to more accurately reflect its actual labor rates. In addition, we suggest TVA
(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.

(Summary Only)

  May 30, 2018 - Early Payment Discounts on Vendor Invoices - 2017-15500

As a follow-up to an audit of a contractor where the Tennessee Valley Authority (TVA) missed early payment discount opportunities of $1,029,965, we audited TVA's management of early payment discounts on vendor invoices. Early payment discounts are offered by some contractors for payments made prior to the due dates on invoices. Our audit objective was to determine if early payment discounts are appropriately managed by TVA. Our scope included invoices from Supply Chain contracts and purchase orders with greater than
$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.

  Full Report

  May 29, 2018 - Williams Plant Services, LLC - Contract No. 5487 - 2015-15343-01

As part of our annual audit plan, we audited costs billed to the Tennessee Valley Authority (TVA) by Williams Plant Services, LLC (WPS) for providing indirect support services for Watts Bar Nuclear Plant Unit 2 start-up. Our audit included $104.3 million in costs paid by TVA between January 1, 2013, and August 31, 2015. Our audit objective was to determine if the costs WPS billed to TVA were in accordance with the terms of Contract No. 5487. In summary, we found WPS overbilled TVA $4,376,936 as follows:
  • $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.
In addition, we found WPS did not provide labor classifications for $20,458,040 in nonmanual employee labor costs when it billed TVA. Accordingly, TVA could not validate if the labor classifications were eligible for reimbursement or determine if the wage rates that were billed were within the ranges specified in the contract for each labor category.

(Summary Only)

  May 15, 2018 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2018-15546

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for civil projects and coal combustion residual (CCR) program management work at TVA's steam electric power plants. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned
$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.

(Summary Only)

  May 4, 2018 - Lagoon Creek Combined Cycle Plant's Organizational Effectiveness - 2018-15523

The Office of the Inspector General conducted an evaluation of Lagoon Creek Combined Cycle Plant (LCCC) to identify strengths and risks that could impact LCCC's organizational effectiveness. Our evaluation identified strengths related to (1) teamwork, (2) a supportive plant manager, and (3) organizational alignment. However, we also identified issues that could pose risks to LCCC's effectiveness and its continued ability to meet its responsibilities. Specifically, some employees expressed concerns related to expired certifications because of lack of training to maintain those certifications, and their lack of in-depth knowledge regarding the operating systems at LCCC. In addition, several employees stated that communication could be improved to better share information across groups.

  Full Report

  April 30, 2018 - ThyssenKrupp Elevator Americas - Contract No. 8527 - 2017-15462

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we performed an audit of costs billed to TVA by ThyssenKrupp Elevator Americas (TKE) for providing elevator maintenance and repair services under Contract No. 8527. Our audit included approximately $2.83 million in costs billed to TVA from October 7, 2014, to December 31, 2016. Our audit objective was to determine if TKE billed TVA in compliance with the contract's terms and conditions.

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.

(Summary Only)

  April 25, 2018 - Browns Ferry Nuclear Plant Site Security's Organizational Effectiveness - 2017-15503

The Office of the Inspector General conducted a review of Browns Ferry Nuclear Plant (BFN) Site Security to identify operational and cultural strengths and risks that could impact BFN Site Security's organizational effectiveness. Our report identified strengths within BFN Site Security related to (1) organizational alignment, (2) teamwork within departments, and (3) direct management support of employees. However, we also identified risks related to (1) ineffective leadership above first-line leaders due to inadequate communication, lack of individual accountability, insufficient management support, and noninclusive behaviors; (2) lack of collaboration between departments within BFN Site Security; (3) ineffective work management processes; and (4) perceptions of unethical behaviors.

  Full Report

  April 17, 2018 - Restoration Services, Inc. - Contract No. 6122 - 2017-15502

As part of our annual audit plan, we audited costs billed to the Tennessee Valley Authority (TVA) by Restoration Services, Inc. (RSI) for project control services for TVA's Generation Construction under Contract No. 6122. Our audit included approximately $12.5 million in costs billed to TVA from January 1, 2015, to June 30, 2017. Our audit objective was to determine if RSI billed TVA in accordance with the contract's terms.

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.

(Summary Only)

  April 12, 2018 - Lagoon Creek Combustion Turbine Plant's Organizational Effectiveness - 2018-15524

The Office of the Inspector General conducted an evaluation of Lagoon Creek Combustion Turbine Plant (LCCT) to identify strengths and risks that could impact LCCT's organizational effectiveness. Our evaluation identified strengths related to (1) teamwork and (2) organizational alignment. However, we also identified issues that could pose risks to LCCT's effectiveness and its continued ability to meet its responsibilities. These issues related to (1) low morale caused by a lack of accountability and (2) perceptions of unethical behavior.

  Full Report

  March 29, 2018 - TVA's Fixed Wing Aircraft - 2017-15470

The Tennessee Valley Authority (TVA) purchased two new fixed-wing aircraft (FWA) through sole source contracts in May 2015 for $17.7 million. We audited TVA's FWA to determine (1) whether TVA's decision to purchase these aircraft was reasonable compared to aircraft used by other utilities, (2) how the cost and use of the aircraft compared to that of other utilities and industry standards, and (3) whether the use of the aircraft is consistent with applicable federal laws and regulations.

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.

  Full Report

  March 28, 2018 - Management of Employee Medical Work Restrictions and Accommodations - 2017-15510

We evaluated TVA's management of employee medical work restrictions and accommodations to determine if they were effectively managed. We determined there were gaps in the management of employee medical work restrictions and accommodations which resulted in the process being ineffective. Specifically, (1) the medical case management process was not consistently followed, including (a) restrictions and accommodations were not managed in accordance with the medical case management process, (b) time limits of work assignment forms and follow-ups were not consistently met, and (c) the monthly constraint review process was not consistently performed; and (2) some line managers were unaware of the restrictions placed on their employees. We also identified other areas for improvement related to Medgate system limitations and training.

  Full Report

  March 28, 2018 - Data Used to Calculate Fuel Cost Adjustments - 2017-15490

We evaluated TVA's fuel cost adjustment (FCA) calculations to determine whether TVA was using the appropriate data to calculate the FCA. We determined TVA was not using the appropriate sales data to calculate the FCA due to (1) inaccurate unbilled energy sales, (2) the misclassification of sales made to small direct-served customers, and (3) inaccurate hourly energy loads. In addition to the errors identified, we also determined the FCA process could be improved to reduce the risk of errors in the FCA. Specifically, the FCA process is reliant on many hand offs, manual calculations, queries, and complex spreadsheets. Further heightening the risk of error, we found TVA's FCA process was not documented.

  Full Report

  March 21, 2018 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2017-15491

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for civil projects and coal combustion residual program management work at TVA's steam electric power plants. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned
$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.

(Summary Only)

  February 27, 2018 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2017-15501

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for civil projects and coal combustion residual program management work at TVA's steam electric power plants. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned
$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.

(Summary Only)

  January 22, 2018 - Browns Ferry Plant Corrective Action Program - 2017-15465

We evaluated TVA's Corrective Action Program (CAP) to determine if the CAP was effective in resolving employee concerns at Browns Ferry Nuclear Plant. We determined reinforcement is needed on the importance of addressing CAP condition reports (CRs) in an effective and timely manner. Specifically, we determined some CRs classified as CAP were not resolved effectively because (1) a corrective action did not adequately address a condition, and (2) some actions were not completed by scheduled finish dates. In addition, we identified a CR that was inappropriately closed because a corrective action stated an employee completed a training course that was never taken.

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.

  Full Report

  January 10, 2018 - TVA Nuclear's Process for Addressing Nuclear Regulatory Commission's 2009 Confirmatory Order - 2017-15448

In March 2016, the Nuclear Regulatory Commission (NRC) issued a Chilled Work Environment Letter to Watts Bar Nuclear Plant as a result of an investigation that concluded that a chilled work environment existed in the Operations Department because of a perception that operators were not free to raise safety concerns using all available avenues without a fear of retaliation. In response to the Chilled Work Environment Letter, TVA assessed the actions taken in response to a Confirmatory Order (CO) issued in 2009 and determined that not all of the actions had been implemented effectively. As a result of the ineffective implementation, we initiated a review of the process TVA used to address the 2009 CO.

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.

  Full Report

  December 22, 2017 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2017-15493

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for civil projects and coal combustion residual program management work at TVA's steam electric power plants. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned
$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.

(Summary Only)

  December 21, 2017 - 2017 Chief Human Resource Office's Organizational Effectiveness - 2016-15445

The Office of the Inspector General conducted a review of the Chief Human Resource Office's (CHRO) organization to identify operational and cultural strengths and risks that could impact CHRO's organizational effectiveness. Our report identified strengths within CHRO related to (1) organizational alignment, (2) development of the CHRO strategy, and
(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.

  Full Report

  December 21, 2017 - 2017 Federal Information Security Modernization Act - 2017-15489

The Federal Information Security Modernization Act of 2014 (FISMA) requires each agency's Inspector General (IG) to conduct an annual independent evaluation to determine the effectiveness of the information security program (ISP) and practice of its respective agency. Our objective was to evaluate the Tennessee Valley Authority's (TVA) strategy and the progress of TVA's ISP and agency practices for ensuring compliance with FISMA and applicable standards, including guidelines issued by the Office of Management and Budget and the National Institute of Standards and Technology. Our audit scope was limited to answering the fiscal year (FY) 2017 IG metrics developed as a collaborative effort by Office of Management and Budget, Department of Homeland Security, and Council of Inspector Generals on Integrity and Efficiency in consultation with the Federal Chief Information Officer Council. The FY2017 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 FY2017 IG FISMA metrics, we found TVA's ISP was operating in an effective manner.

  Full Report

  December 19, 2017 - Sequoyah Nuclear Plant Corrective Action Program - 2017-15464

We evaluated TVA's Corrective Action Program (CAP) to determine if the CAP was effective in resolving employee concerns at Sequoyah Nuclear Plant. We determined the Sequoyah CAP was generally effective in resolving employee concerns during calendar years 2015 and 2016. Specifically, we determined condition reports (CRs) classified as CAP were addressed effectively and in a timely manner. However, we identified areas for improvement related to (1) the classification of CRs, (2) routing and documentation of anonymous CRs, and (3) CAP training.

  Full Report

  December 18, 2017 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2017-15504

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for civil projects and coal combustion residual program management work at TVA's steam electric power plants. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned $100 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) 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.

(Summary Only)

  December 7, 2017 - TVA's Interruptible Pricing Products - 2017-15478

The Tennessee Valley Authority's (TVA) Interruptible Power (IP) program implemented new products in October 2015 as part of the product redesign of TVA's demand response portfolio. We initiated this audit in response to concerns forwarded to our office regarding (1) the amount of credits provided through TVA's interruptible products and (2) whether or not these products were a cost effective way for TVA to obtain power. Our audit objective was to determine if the monetary value obtained by TVA during fiscal years 2016 and 2017 was more than the cost of providing these interruptible pricing products to customers. Our audit included interruptible product credits issued and other financial data related to interruption events for participating commercial and industrial customers from October 1, 2015, through March 31, 2017, which totaled $78.5 million.

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.

(Summary Only)

  November 17, 2017 - Bechtel Power Corporation - Contract No. 65419 - 2015-15319

As part of our annual audit plan, we performed an audit of costs billed to the Tennessee Valley Authority (TVA) by Bechtel Power Corporation (Bechtel) for providing engineering, procurement, construction, and related services in support of the completion of TVA's Watts Bar Nuclear Plant Unit 2 under Contract No. 65419. Our audit included about
$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.
(Summary Only)

  November 14, 2017 - Monitoring of Ernst & Young LLP's Audits of the Tennessee Valley Authority Fiscal Year 2017 Financial Statements - 2017-15507

In keeping with its responsibilities under the Inspector General Act of 1978, as amended, the OIG monitored the audit of TVA's fiscal year 2017 financial statements performed by Ernst and Young LLP (EY) to assure their work complied with Government Auditing Standards. Our review of EY's work disclosed no instance in which the firm did not comply in all material respects with Government Auditing Standards.

  Full Report

  November 8, 2017 - TVA Nuclear Corrective Action Program - Watts Bar - 2017-15461

We evaluated TVA's Corrective Action Program (CAP) to determine if the CAP was effective in resolving anonymous condition reports (CRs) at Watts Bar Nuclear Plant. We determined TVA took actions to address the anonymous CAP CRs in a timely manner. Specifically, we found for 22 of the 25 CAP CRs tested, the actions were completed within a reasonable time frame. The remaining 3 CAP CRs were appropriately closed to another CR that was previously initiated for the same concern and is scheduled for completion in
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.

  Full Report

  November 8, 2017 - Agreed-Upon Procedures For TVA Fiscal Year 2017 Performance Measures - 2018-15522

The Office of Inspector General (OIG) performed procedures which were requested and agreed to by TVA management solely to assist management in determining the validity of the Winning Performance (WP) payout awards for fiscal year (FY) ended September 30, 2017. The WP payout award data that was provided to the OIG and to which the agreed-upon procedures were applied is the responsibility of TVA management. In summary, procedures applied by the OIG found:

  • 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.


  Full Report

  October 27, 2017 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2017-15499

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for civil projects and coal combustion residual program management work at TVA's steam electric power plants. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned
$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.

(Summary Only)

  September 29, 2017 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2017-15494

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for civil projects and coal combustion residual program management work at TVA's steam electric power plants. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned
$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.
We estimated TVA could avoid about $6.6 million on the planned $150 million contract by negotiating appropriate reductions to (1) equipment, labor, and material costs and G&A and small tools rates in the CUF proposal and (2) 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.

(Summary Only)

  September 28, 2017 - Organizational Effectiveness Follow-Up - Environmental Permitting and Compliance - 2017-15497

The Office of the Inspector General previously conducted an evaluation of Environmental Permitting and Compliance (EP&C) (Evaluation Report 2016-15366 issued September 28, 2016) to identify strengths and risks that could impact EP&C's organizational effectiveness. Our final report identified several strengths and risks along with recommendations for addressing those risks. In response to a draft of that report, Tennessee Valley Authority management provided their management decision. The objective of this follow-up evaluation was to assess management's actions to address risks from our initial organizational effectiveness evaluation. In summary, we determined EP&C has taken actions to address most of the risks outlined in our initial organizational effectiveness evaluation. However, concerns with two managers' behaviors remained unresolved. Management had taken some actions to address behaviors of one manager but had not addressed the behaviors of the other manger. In addition, employees expressed continued concerns related to the process and database used to request environmental reviews of projects and accountability.

  Full Report

  September 26, 2017 - Wind Power Contracts - 2017-15471

We scheduled an audit of the Tennessee Valley Authority's (TVA) long-term wind power contracts after noting TVA paid about $37.7 million to four wind farm contractors for energy it did not receive between November 1, 2012, and January 3, 2017. Our audit objectives were to determine if (1) TVA's decision to enter into long-term wind power contracts was in TVA's economic interest and (2) the $37.7 million in energy curtailment payments were in TVA's economic interest.

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:
  1. 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.
  2. 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.
TVA management concurred with our recommendations and noted actions taken to address them.

(Summary Only)

  September 26, 2017 - Human Resources' Organizational Effectiveness - 2016-15445-05

The Office of the Inspector General conducted a review of Human Resources (HR) to identify operational and cultural strengths and risks that could impact HR's organizational effectiveness. Our report identified strengths within HR related to (1) organizational alignment, (2) collaboration within the departments, and (3) management support from some HR management. However, we also identified risks related to (1) management responsibilities and behaviors, including (a) performance reviews, (b) opportunities for advancement, (c) training and resources, and (d) relationship issues with three managers; (2) execution of HR strategy and programs; (3) perceptions by some of unethical practices; and
(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.

  Full Report

  September 19, 2017 - Surplus and Disposal of Information Technology Equipment - 2017-15455

The Office of the Inspector General audited the adequacy of the Tennessee Valley Authority's (TVA) process to surplus and dispose of information technology (IT) equipment due to the risk of (1) protected information disclosure and (2) environmental compliance and regulatory compliance violations associated with the surplus and disposal of IT equipment. We found weaknesses with TVA's policies, procedures, and process to surplus and dispose of IT equipment, including (1) surplus IT equipment was not properly sanitized, tracked, and processed; (2) badge access control reviews of areas holding surplus IT equipment were not being performed as required by policy; and (3) processes for the surplus and disposal of cathode ray tubes do not address environmental regulations to prevent release of the lead into the environment. TVA management agreed with our findings and recommendations.

  Full Report

  September 14, 2017 - TVA Coal Plant Surplus Materials - 2017-15469

The Tennessee Valley Authority (TVA) Standard Programs and Processes (SPP) 04.021, TVA Inventory Management Process, defines "surplus" as material that is not expected to be used within the next 3 years by TVA. Due to the risk of disposing of needed materials, and as a result of employee concerns shared during organizational effectiveness reviews at Cumberland and Kingston Fossil Plants in 2015, we initiated an evaluation of TVA's coal plant surplus materials process. The objective of our evaluation was to determine if coal plant materials designated for surplus were appropriate. The scope of our evaluation was materials surplused between October 1, 2013, and March 31, 2017.

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.

  Full Report

  September 11, 2017 - Proposal for Civil Projects and Coal Combustion Residual Program Management Work - 2017-15492

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for civil projects and coal combustion residual program management work at TVA's steam electric power plants. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned
$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.
We estimated TVA could avoid about $11.1 million on the planned $100 million contract by (1) negotiating the appropriate reductions to the company's proposed equipment costs, material costs, and overhead rate, and (2) limiting the company's fee rate to the RFP's maximum allowable rate. In addition, we suggest TVA negotiate revisions to the company's T&M rates to more accurately reflect its actual costs and require compliance with the RFP's cost reimbursable provisions.

(Summary Only)

  September 7, 2017 - Transmission and Power Supply's Direct Charge Materials - 2016-15435

Due to concerns identified in a prior review related to the length of time Transmission and Power Supply (TPS) direct charge materials had been stored at the Muscle Shoals Distribution Center (MSDC), we initiated an evaluation to determine if TPS direct charge materials were being managed appropriately. In summary, we determined TPS direct charge materials were not being managed appropriately because: (1) direct charge materials were not purchased in accordance with TVA policy, (2) TPS does not keep track of direct charge materials stored at MSDC, and (3) direct charge materials are being stored at MSDC even though the work orders for which they were purchased have closed. Inappropriately managing TPS direct charge materials could increase the risk of loss, theft, or the over purchase of materials. In addition, project costs could be overstated and funds spent on items that go unused.

  Full Report

  September 7, 2017 - Safety and Performance Improvement's Organizational Effectiveness - 2016-15444

The Office of the Inspector General conducted an evaluation of Safety and Performance Improvement (SPI) to identify strengths and risks that could impact SPI's organizational effectiveness. Our evaluation identified strengths within SPI related to (1) organizational alignment, (2) customer focus, (3) management support of employees, (4) employee teamwork and collaboration, and (5) proactive identification of safety risk behaviors. However, we identified issues that, if left unresolved, could increase the risk that SPI will be unable to effectively meet its objective in the future. These issues include (1) mixed messaging on the importance of safety, including the use of Recordable Injury Rate in TVA's Winning Performance Program, placement of the Designated Agency Safety and Health Official within TVA's organizational structure, and frequent movement and reorganization of the safety function and (2) nuclear Safety Consultants reporting structure. However, none of these risks are within the control of SPI, but are dependent on other TVA organizations for resolution.

  Full Report

  August 31, 2017 - Actions to Address Issues Identified in Assessments of Nuclear Quality Assurance - 2017-15466

TVA's Nuclear Quality Assurance (QA) provides monitoring and assessment of plant activities to ensure they are conducted in a quality manner. Periodically, reviews are performed (internal and external) of QA that identify improvement opportunities. Due to the importance of QA's role in monitoring and assessing nuclear plant activities, we initiated an evaluation to determine if QA has taken actions to address issues identified during the internal and external reviews. We determined QA generally took actions to address issues identified during reviews of QA. However, we determined better documentation was needed when actions are not deemed necessary.

  Full Report

  August 28, 2017 - Gas Secure Room Cyber Security - 2017-15452

The Office of the Inspector General audited cyber security of the Tennessee Valley Authority's (TVA) gas secure rooms that provide remote logical access to all TVA gas fired plants. We found the architecture, current standard programs and processes, and draft standard operating procedures contain appropriate information as suggested by best practices. However, we found the logical controls for the gas secure rooms could be strengthened. Specifically, we found issues with the (1) network devices at the gas secure rooms and a sample of combined cycle and combustion turbine plants and (2) workstations and servers at the gas secure rooms. Additionally, we found the gas secure rooms were not being used for access as originally intended. TVA management agreed with our findings and recommendations.

  Full Report

  August 28, 2017 - Williams Plant Services, LLC - Contract No. 4067 - 2015-15343-02

As part of our annual audit plan, we audited costs billed to the Tennessee Valley Authority (TVA) by Williams Plant Services, LLC (WPS) for providing facilities maintenance services and technical support services for Bellefonte Nuclear Plant under Contract No. 4067. Our audit included $23.9 million in costs paid by TVA between January 1, 2013, and August 31, 2015. Our audit objective was to determine if the costs WPS billed to TVA were in accordance with the terms of Contract No. 4067. In summary, we found WPS overbilled TVA $2,595,222 as follows:

  • $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.
(Summary Only)

  August 23, 2017 - Talent Acquisition and Diversity's Organizational Effectiveness - 2016-15445-03

The Office of the Inspector General conducted a review of Talent Acquisition and Diversity (TAD) to identify strengths and risks that could impact TAD's organizational effectiveness. Our evaluation identified strengths within TAD related to (1) organizational alignment, (2) collaboration, (3) support from TAD management, and (4) department morale and ethics. However, we also identified potential risks that could negatively affect the achievement of the mission. These risks include (1) the potential for increased noncompliance risk due to (a) the use of social media in the recruitment process and (b) no documentation requirements for hiring interns, (2) talent acquisition process inefficiencies, and (3) the potential for ineffective inclusion metrics and programs.

  Full Report

  August 16, 2017 - TVA Internet-Accessible Web Sites - 2017-15450

The Office of the Inspector General audited Tennessee Valley Authority (TVA) Internet-accessible Web sites to identify cyber security weaknesses through penetration testing. In summary, 37 Internet-accessible Web sites were tested, and 7 high risk vulnerabilities were identified. Two of the high risk vulnerabilities that were identified require additional testing by TVA's Information Technology for confirmation. TVA management agreed with our findings and recommendations.

  Full Report

  August 11, 2017 - Organizational Effectiveness Follow-Up - Bull Run Fossil Plant - 2017-15483

The Office of the Inspector General previously conducted an evaluation of Bull Run Fossil Plant (BRF) (Evaluation Report 2015-15357 issued March 30, 2016) to identify strengths and risks that could impact BRF's organizational effectiveness. Our final report identified several operational and cultural areas for improvement along with recommendations for addressing those issues. The objective of this follow-up evaluation was to assess management's actions in response to our recommendations from our initial organizational effectiveness evaluation. In summary, we determined the actions taken by BRF appear to address most areas for improvement identified during our initial organizational effectiveness evaluation, and for the most part, individuals reported seeing positive changes at BRF. Some concerns remain related to specific areas in the work management process, including planning of work and communication of work order and condition report statuses. However, resolution of these concerns relies on funding decisions that are generally outside of BRF's control.

  Full Report

  July 27, 2017 - Materials and Transportation Management's Organizational Effectiveness - 2016-15386

The Office of the Inspector General conducted an evaluation of Materials and Transportation Management (M&TM) to identify strengths and risks that could impact M&TM's organizational effectiveness. Our evaluation identified strengths within M&TM related to (1) employee teamwork, (2) customer service, and (3) management's support of employees. However, we identified issues that, if left unresolved, could increase the risk that M&TM will be unable to effectively meet its objective in the future. These issues include (1) 3 managers' behaviors and teamwork at 1 location, (2) process inefficiencies in completing purchase requisitions and inventory review processes, (3) the warehouse layout at 1 nuclear site, (4) communication concerns, (5) incomplete performance management documentation, and (6) cross-functional risks between M&TM, Sourcing, and the plants.

  Full Report

  July 19, 2017 - Cyber Security Patch Management of High-Risk Desktops and Laptops - 2016-15369

The OIG audited the overall effectiveness of the Tennessee Valley Authority's (TVA) patch management process for high-risk, end-user desktops and laptops as they are most vulnerable to spear phishing, a very common tactic used in today's environment to infiltrate computer networks and spread malware. We found (1) TVA is at potential risk for compromise as the patching status was unknown for 12 percent of desktops and laptops in our sample due to desktops and laptops not being managed in patch management tools; (2) 1 of 162 desktops and laptops tested had a missing patch that could lead to remote code execution that has a public exploit available; and (3) the patching process for Mac desktops and laptops is not formally documented. TVA management agreed with our findings and recommendations.

  Full Report

  July 11, 2017 - Transmission and Power Supply Preventive Maintenance - 2016-15431

Preventive maintenance (PM) includes tasks carried out on a predetermined interval to reduce the likelihood of a failure. Due to the importance of PM on the reliable operation of assets and as a result of findings identified related to nuclear and coal PM in previous evaluations, we initiated an evaluation of the TVA's transmission PM. The objective of our evaluation was to determine if transmission PM was performed in accordance with established schedules and, if not, what effects the deviations had.

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.

  Full Report

  June 29, 2017 - Gas Plant Preventive Maintenance - 2016-15391

Preventive maintenance (PM) consists of servicing and data collection activities carried out at predetermined intervals and is intended to reduce the likelihood of equipment failures. Due to the importance of PM to the reliable operation of TVA's generating assets and as a result of findings identified related to nuclear and coal PM in previous evaluations, we initiated an evaluation of TVA's gas plant PM to determine if PM had been performed in accordance with established schedules and, if not, what effect the deviations had.

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.

  Full Report

  June 29, 2017 - Compensation and Benefits' Organizational Effectiveness - 2016-15445-04

The Office of the Inspector General conducted a review of Compensation and Benefits (C&B) to identify strengths and risks that could impact C&B's organizational effectiveness. Our evaluation identified strengths within C&B related to (1) organizational alignment, (2) teamwork, (3) direct management support, (4) knowledge and experience, and
(5) customer service. However, we also identified an employee engagement risk related to a relationship issue with one manager.

  Full Report

  June 21, 2017 - Organizational Effectiveness Follow-Up - Coal and Gas Services - 2017-15486

The Office of the Inspector General previously conducted an evaluation of Coal and Gas Services (Evaluation Report 2016-15365 issued August 29, 2016) to identify strengths and risks that could impact Coal and Gas Services' organizational effectiveness. Our final report identified several strengths and risks, along with recommendations for addressing those risks. The objective of this follow-up evaluation was to assess management's actions in response to risks and recommendations included in our initial organizational effectiveness evaluation. In summary, we determined actions taken by Coal and Gas Services appear to address the risks identified during our initial organizational effectiveness evaluation. In addition, employees felt management's actions taken to date have resulted in positive changes.

  Full Report

  June 13, 2017 - Fuel Cost Adjustment Calculation - 2017-15463

TVA has both fixed and variable costs that it must recover. Since fuel and purchased power cost can fluctuate significantly with changes in weather and shifts in global supply and demand, TVA recovers these variable costs through a monthly fuel cost adjustment (FCA). The TVA Act assigns rate setting duties to the TVA Board of Directors (Board). The rates approved by the Board include the formula used to calculate the monthly FCA, which represents approximately one-third of the wholesale rate. Due to the importance of TVA correctly calculating the FCA, we performed an evaluation to determine whether the FCA was calculated according to the Board-approved formula.

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.

  Full Report

  June 12, 2017 - ScottMadden, Inc. - Contract Nos. 3526, 8579, and 8689 - 2016-15441

At the request of the Tennessee Valley Authority (TVA) Supply Chain's former Director of Sourcing, we audited costs billed to TVA by ScottMadden, Inc. (ScottMadden) under Contract Nos. 3526, 8579, and 8689. Under the contracts, ScottMadden provided consulting services that included, but were not limited to, financial management and business management services. Our audit scope included about $19.6 million in costs that ScottMadden billed to TVA from January 1, 2012, through December 31, 2015, under the three separate contracts. Our audit objectives were to determine if (1) the costs billed to TVA by ScottMadden were in compliance with the contracts' terms and (2) task authorizations awarded under the contracts were in compliance with TVA policies, processes, and procedures.

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.

(Summary Only)

  May 23, 2017 - Non-Competed Contracts - 2016-15408

The Tennessee Valley Authority (TVA) Act of 1933 and TVA Standard Programs and Processes 04.0, Management of the TVA Supply Chain Process, require that any contract action in excess of $25,000 be competed unless the contract action on a noncompetitive basis is properly justified and approved. To ensure compliance with these requirements, we scheduled an audit to determine if TVA's non-competed contracts are (1) identified in TVA systems and (2) executed in accordance with TVA policies and procedures.

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.

  Full Report

  May 18, 2017 - Learning, Growth, and Management's Organizational Effectiveness - 2016-15445-02

The Office of the Inspector General conducted a review of Learning, Growth, and Management (LG&M) to identify strengths and risks that could impact LG&M's organizational effectiveness. Our evaluation identified strengths within the LG&M organization related to (1) organizational alignment, (2) collaboration within the departments, (3) LG&M management support of employees, and (4) positive relationships with other organizations. However, we also identified employee engagement risks related to management communication and morale that, if left unaddressed, could stifle the maturity of LG&M programs and negatively affect the ability of LG&M to contribute to the mission of the Chief Human Resources Office. Specifically, some individuals mentioned (1) communication issues related to perception of having unproductive meetings and the need for communicating through direct supervisors prior to communicating to other levels of management and (2) low morale due to potential workload fatigue, which affected employee development opportunities.

  Full Report

  May 18, 2017 - Human Resources Business Office and Ombudsman's Organizational Effectiveness - 2016-15445-01

The Office of the Inspector General conducted a review of the Human Resources Business Office and Ombudsman (HRBO) to identify strengths and risks that could impact HRBO's organizational effectiveness. Our evaluation identified strengths within HRBO related to (1) organizational alignment, (2) leadership, (3) teamwork/collaboration, (4) direct management support, and (5) relationships with customers. However, we also identified risks that could impact the effectiveness of HRBO to contribute to the overall mission of the Chief Human Resources Office. These risks are (1) noncompliance with Equal Employment Opportunity regulations and (2) employee engagement.

  Full Report

  May 12, 2017 - Kingston Fossil Plant Organizational Effectiveness Follow-Up Evaluation - 2017-15482

The Office of the Inspector General previously conducted an evaluation of Kingston Fossil Plant (KIF) (Evaluation Report 2015-15329, dated March 10, 2016) to identify operational and cultural strengths and areas for improvement that could impact KIF's organizational effectiveness. Our final report identified several operational and cultural areas for improvement, along with recommendations for addressing those issues. We subsequently received KIF's management decision on June 20, 2016. The objective of this follow-up evaluation was to assess management's actions to address areas for improvement from our initial organizational effectiveness review. In summary, we determined the actions taken by KIF appear to address most areas for improvement identified during our initial organizational effectiveness evaluation. Some concerns remain related to the administration of discipline and unresolved conflict in one group. However, in general, individuals reported seeing positive changes at KIF.

  Full Report

  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

The Office of the Inspector General (OIG) received an EmPowerline complaint on January 4, 2016, alleging a chilled/hostile working environment in Operations at Watts Bar Nuclear (WBN) plant. The OIG investigated the allegation and communicated information related to the chilled work environment to the Nuclear Regulatory Commission (NRC). On March 23, 2016, the NRC issued TVA a chilled work environment letter (CWEL) and required TVA to conduct a root cause analysis and take other actions.

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.
The amount of stress and fear noted in the survey comments over the past several years, as well as current interviews undertaken by OIG, and the recent NRC inspections and TVA commissioned independent assessment results, are atypical of an organization on its way to improved performance, but rather, one that could well reach negative outcomes. It is imperative that the trust issues be addressed and remedied to permit other corrective actions to be successful. Unless and until TVA addresses the harassment, intimidation, retaliation, and discrimination (HIRD) behaviors of management (WBN senior leadership team and others), TVA will not be able to overcome the trust 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."

  Full Report

  March 30, 2017 - Tax Payments Made on TVA's Credit Cards - 2016-15424

We audited the Tennessee Valley Authority's (TVA) corporate card transactions from October 1, 2013, through June 30, 2016, totaling $45.2 million to determine the effectiveness of the processes TVA has in place for tax-exempt credit card transactions. We found the processes TVA has in place for tax-exempt corporate card transactions are not effective. Specifically, we identified (1) an estimated $2.48 million of taxes TVA paid on tax-exempt transactions; (2) tax information provided by TVA's credit card supplier, Comdata Network, Inc., was inaccurate; and (3) transactions were approved in TVA's Expense Reimbursement System without adequate support.

  Full Report

  March 29, 2017 - Proposal for Coal Combustion Product Handling and Maintenance - 2016-15372

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a company for handling and maintenance of coal combustion products. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned
$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.
We estimated TVA could avoid about $8.934 million on the $100 million contract by negotiating the appropriate reductions to the company's proposed T&M and fixed unit rates.

(Summary Only)

  February 28, 2017 - Proposed Sale of Bellefonte Nuclear Plant Site - 2016-15376-01

This report is a follow-up to an interim report we issued on July 11, 2016, regarding TVA's proposed sale of Bellefonte Nuclear Plant site (Evaluation 2016-15376). Under the interim report, we determined TVA had taken reasonable actions to date to promote transparency of the sales process and evaluated alternative uses for the site. In addition, we determined TVA appears to have considered the significant risks associated with selling the Bellefonte site.

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.

  Full Report

  February 27, 2017 - Proposal for Nuclear Modification and Supplemental Maintenance - 2016-15436

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a contractor for nuclear modifications, outage and supplemental maintenance, and technical support services at TVA's three operating nuclear plants. Our examination objective was to determine if the company's cost proposal was fairly stated for a planned $950 million contract. In our opinion, the company's cost proposal was fairly stated. Specifically, the labor markup rates proposed were supported by the company's actual historical costs.

(Summary Only)

  February 9, 2017 - Ammonia Staffing and Training at Coal Plants - 2015-15345

The Tennessee Valley Authority (TVA) uses anhydrous ammonia in selective catalytic reduction systems to aid in the removal of nitrogen oxide, a by-product of burning coal. Anhydrous ammonia is hazardous when inhaled, ingested, or when it comes in contact with the eyes, skin, or mucous membranes. Based on safety risks associated with the handling of ammonia, we initiated an evaluation to determine the adequacy of staffing and training of ammonia operations at coal plants.

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.

  Full Report

  January 24, 2017 - John Sevier Fossil Plant Demolition Program - 2016-15390

John Sevier Fossil Plant (JSF) is the first in a series of planned plant retirements to enter the demolition phase of the Tennessee Valley Authority's (TVA) Decommissioning, Deactivation, Decontamination, and Demolition (D4) process. In the demolition phase, the plant, associated equipment, facilities, and structures are removed. Demolition also includes creating conditions for proper site drainage and establishing vegetation.

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.

  Full Report

  January 11, 2017 - 2016 Federal Information Security Management Act - 2016-15407

The OIG analyzed the metrics and associated maturity levels defined within the Fiscal Year (FY) 2016 Inspectors General (IG) Federal Information Security Modernization Act of 2014 (FISMA) Reporting Metrics and found TVA's maturity levels for the five cybersecurity functional areas ranged from level 1, ad hoc, to level 3, consistently implemented. The Chief Information Officer (CIO), Information Technology ( IT), in consultation with TVA executive management, will continue to be responsible for determining the desired level of maturity to achieve in each of the five functional areas, and actions necessary to reach the desired maturity level, while considering efficiency and budgeting constraints. The OIG will continue to reassess progress and TVA status on an annual basis as prescribed by the Office of Management and Budget and the Department of Homeland Security, utilizing the annual IG metrics and maturity models prescribed by the Council of Inspectors General on Integrity and Efficiency. We recommended the CIO, IT, perform a risk assessment of the FY 2016 IG metrics not met and determine actions necessary to reduce cybersecurity risk to TVA in FY 2017.

(Summary Only)

  January 6, 2017 - Proposal for Non-Nuclear Modification and Supplemental Maintenance - 2016-15401

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a contractor for non-nuclear modification and supplemental maintenance services and technical support services. Our objective was to determine if the cost proposal was fairly stated for a planned $950 million contract. In our opinion, the cost proposal was overstated. Specifically, the proposal included overstated nonmanual payroll tax rates and fringe benefit rates. We estimated TVA could avoid $1.14 million on the planned $950 million contract by negotiating reduced (1) non-manual payroll tax rates that are fixed for the contract term and (2) fringe benefit rates.

(Summary Only)

  December 20, 2016 - TVA Vendor Management System Data Security and Integrity Controls - 2016-15381

The Tennessee Valley Authority (TVA) vendor management system is a cloud based system physically located away from TVA facilities and outsourced to a third party. The OIG audited the vendor management system to assess the (1) data processing and application controls to ensure data integrity and reliability and (2) logical security controls to ensure only authorized access to system resources and protection of sensitive information. Our scope included TVA's vendor management system and its interfaces to TVA systems. We found TVA system interfaces associated with the vendor management system had reasonable data processing and application controls to ensure data integrity and reliability. However, we found weaknesses in the logical security controls that increase the risk of unauthorized access to TVA data. TVA and the third party responsible for the vendor management system agreed with our findings and recommendations.

(Summary Only)

  December 13, 2016 - Proposal for Construction Services for TVA Bottom Ash Dewatering Facilities - 2016-15429

At the request of the Tennessee Valley Authority (TVA) Supply Chain, the OIG examined the cost proposal submitted by a company for construction services for TVA bottom ash dewatering facilities. Our objective was to determine if this company's cost proposal was fairly stated for a planned $100 million contract. In our opinion, the company's cost proposal was overstated. Specifically, the company's cost proposal for the Kingston Fossil Plant (KIF) baseline project included overstated fees and costs. We estimated TVA could avoid about $4.5 million on the $100 million contract by (1) negotiating reductions to the proposed fee rate and only applying fee to costs specified in TVA's request for proposal, and (2) revising the KIF baseline project estimated costs to eliminate unsupported engineering costs and reflect the correct markup rates. Additionally, we found the company's cost proposal included incorrect craft labor rates.

(Summary Only)

  December 2, 2016 - Proposal for Engineering and Management Services - 2016-15362

At the request of the Tennessee Valley Authority (TVA) Supply Chain, the OIG examined the cost proposal submitted by a company for engineering and management services for hydroelectric power train and associated systems. Our objective was to determine if the company's cost proposal was fairly stated for a planned $90 million contract. In our opinion, the markup rates included in the company's proposal were fairly stated. However, we estimated that TVA could avoid about $2.88 million on the $90 million contract by (1) utilizing TVA personnel to purchase materials needed for the scope of work rather than having this company procure necessary materials, and (2) ensuring the markup rates applied to affiliate company subcontract labor costs are limited to rates applied to this company's labor costs. In addition, we found the contract's compensation terms and related attachments were inconsistent with the methodology TVA intends to use to compensate the company.

(Summary Only)

  November 15, 2016 - Monitoring of TVA's Financial Statement Audit by Ernst and Young LLP - 2016-15446

In keeping with its responsibilities under the Inspector General Act of 1978, as amended, the OIG monitored the audit of TVA's fiscal year 2016 financial statements performed by Ernst and Young LLP (EY) to assure their work complied with Government Auditing Standards. Our review of EY's work disclosed no instance in which the firm did not comply in all material respects with generally accepted government auditing standards.

  Full Report

  November 8, 2016 - Proposal for Construction Services for TVA Bottom Ash Dewatering Facilities - 2016-15430

At the request of the Tennessee Valley Authority (TVA) Supply Chain, the OIG examined a cost proposal submitted by a company for construction services for TVA bottom ash dewatering facilities. Our objective was to determine if the company's cost proposal was fairly stated for a planned $100 million contract. In our opinion, the cost proposal was overstated. Specifically, the company's proposal included: (1) overstated fees, (2) excessive subcontractor craft labor costs, and (3) contingency costs that could inflate the final costs paid for the services. We estimated TVA could avoid about $10.81 million on the planned $100 million contract by: (1) negotiating reductions to the proposed fee rate and only applying fee to costs specified in TVA's request for proposal (RFP), (2) limiting subcontractor craft labor billing rates to the rates for the company's craft labor employees as required by the RFP, and (3) eliminating contingency costs from cost-based target cost estimate projects. Additionally, we found the company's cost proposal included incorrect craft labor rates.

(Summary Only)

  November 4, 2016 - Agreed-Upon Procedures for TVA Fiscal Year 2016 Performance Measures - 2017-15456

The OIG performed procedures which were requested and agreed to by TVA management solely to assist management in determining the validity of the Winning Performance (WP) payout awards for fiscal year (FY) ended September 30, 2016. The WP payout award data that was provided to the OIG and to which the agreed-upon procedures were applied is the responsibility of TVA management. In summary, procedures applied by the OIG found:
  • 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.


  Full Report

  October 27, 2016 - Information Technology's Use of Contractors - 2016-15380

The OIG audited Information Technology's (IT) use of non-craft staff augmentation (SA) contractor employees working in IT positions during February 2016 for which TVA paid about $1.8 million in labor costs and associated labor markups. Overall, we found the majority of the 207 SA contractor employees had straight-time hourly pay rates less than or equal to TVA midpoint hourly pay rates and the rates were comparable to TVA employee pay rates for the corresponding job codes. However, we also found (1) TVA management's approval of SA contractor employee compensation exceeding the midpoint rate did not take into account the contractor's indirect cost markup rates applied to the pay rate, (2) IT does not currently have a policy in place requiring knowledge transfer from contractor to TVA employees, (3) manual data entry is required to update minimum and midpoint pay rates from the TVA human resource information system, People Lifecycle Unified System, into TVA's contractor system, IQNavigator (IQN), and (4) IQN compares a contractor employee's hourly rate change (e.g., pay increase) to the midpoint rate in effect for the job code when the assignment was made, rather than to the current midpoint rate, unless a new assignment is created.

  Full Report

  October 25, 2016 - Physical and Logical Network Architecture - 2016-15378

The OIG audited the physical and logical network architecture at a TVA location and found (1) TVA management used proven best practices in the design of the physical and wireless corporate networks; (2) the network was appropriately architected; and (3) the cable plant was installed in a neat and organized manner. However, we found the TVA network equipment was located in an unsecured room and configurations of some network devices did not follow TVA suggested baselines.

(Summary Only)

  October 14, 2016 - Generation Construction Projects' Organizational Effectiveness - 2016-15384

The OIG identified strengths within the Generation Construction (GC) Projects organization related to (1) organizational alignment, (2) collaboration within GC departments,
(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.

  Full Report

  October 6, 2016 - CSX Transportation, Inc. - 2016-15399

As part of our annual audit plan, the OIG audited costs billed to the Tennessee Valley Authority (TVA) by CSX Transportation, Inc. (CSXT) for the transportation of coal from various coal mines and blending facilities to the Bull Run Fossil Plant (BRF) under contract numbers 65133, 14474, 86072, 85702, and 85770. Our audit included approximately $41.5 million in costs CSXT billed to TVA from October 1, 2014, to March 31, 2016, under these five contracts. Our objective was to determine if the costs billed to TVA by CSXT were in compliance with the contracts' terms and conditions. In summary, we determined CSXT overbilled TVA $8,045,846 for costs billed under contract numbers 65133 and 85702. The overbilling included (1) $8,040,045 for overstated adjustments of per-ton rates under contract number 65133 dating back to January1, 2007, and (2) $5,801 for overstated fuel price adjustments under contract number 85702.

(Summary Only)

  October 6, 2016 - Physical and Logical Access for TVA's High Risk Assets - 2016-15374

The OIG audited TVA's compliance with the North American Electric Reliability Corporation's (NERC) Critical Infrastructure Protection (CIP) standards for logical and physical access for systems and locations that are considered high risk assets under NERC CIP standards. We found TVA was within the NERC CIP compliance standards for logical and physical access to high risk systems and locations with minor exceptions that were addressed during the audit. In addition, during our testing, we noted discrepancies between initial clearance dates in the hard copy and electronic records that were addressed during the audit.

(Summary Only)

  September 30, 2016 - Wireless Local Area Network Deployment - 2016-15393

The OIG found the implementation of wireless local area network physical and logical access controls generally followed recommended best practices. However, we found TVA could strengthen wireless security and improve unauthorized wireless access point detection.

(Summary Only)

  September 28, 2016 - Cumberland Fossil Plant Organizational Effectiveness Follow-up Review - 2016-15420

Actions taken at the Cumberland plant appear to have addressed areas for improvement identified in our initial organizational effectiveness review. Employees and management reported positive change at the plant, including better communication, an improved safety culture, and a general acknowledgement by employees of management's efforts to improve its relationship with them.

  Full Report

  September 28, 2016 - Environmental Permitting and Compliance Organizational Effectiveness - 2016-15366

Environmental Permitting and Compliance (EP&C), a business unit falling under TVA's Safety, River Management, and Environment, is responsible for providing oversight, consistency, and standardization in TVA's permitting and compliance activities, interactions with regulators, and alignment of environmental policy with line organization execution. EP&C's long-term vision is to "continue to improve TVA's environmental performance and reputation through integrated project planning and execution, compliance guidance and oversight, and strong regulatory strategy and engagement." The OIG assessed strengths and risks that could affect EP&C's organizational effectiveness.

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.

  Full Report

  September 27, 2016 - Physical and Logical Network Architecture - Hydroelectric - 2016-15367

The OIG audited the hydroelectric dam network architecture at a TVA facility to identify security zones and perimeters and analyze network devices and the physical infrastructure for compliance with policies, procedures, and best practices. We found TVA has used proven best practices in the design of the physical and wireless corporate networks, as well as the control network. These networks were architected appropriately and the cable plant was installed in a neat and organized manner. However, we found one corporate network switch was physically unsecure and another lacked a remote access list which would reduce the risk of inappropriate access.

(Summary Only)

  September 26, 2016 - Environmental Operations Organizational Effectiveness - 2016-15383

Environmental Operations (EO) is responsible for the environmental site and field support for all operations, including inspections, environmental sampling, regulatory reporting, and oversight. The OIG assessed strengths and risks that could affect EO's organizational effectiveness.

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.

  Full Report

  September 22, 2016 - Proposal for Holistic Industrial Wastewater Treatment Program Services - 2016-15419

At the request of TVA Supply Chain, the OIG examined the cost proposal submitted by a contractor, for engineering, design, and construction support for Holistic Industrial Wastewater Treatment Program services at TVA fossil plants. Our objective was to determine if the cost proposal was fairly stated for a planned $45 million contract. In our opinion, the cost proposal was overstated. We estimated TVA could save about $3.68 million on the planned $45 million contract by negotiating reductions to the proposed labor markup rates, including labor markup rates for work performed at TVA sites, and negotiating reductions to the proposed escalation rate and fee rate. In addition, we found the contractor did not propose labor wage ranges for cost reimbursable work, as required by the request for proposal. We also identified compensation terms in the draft contract that needed to be revised to reduce the potential for future billing discrepancies.

(Summary Only)

  September 21, 2016 - Work Environment for Operators at Browns Ferry Nuclear Plant - 2016-15397

In March 2016, the Nuclear Regulatory Commission (NRC) issued a Chilled Work Environment Letter for Watts Bar Nuclear Plant. The NRC concluded a chilled work environment existed in the Operations Department because of a perception that operators were not free to raise safety concerns using all available avenues without fear of retaliation. According to the NRC Policy Statement for Nuclear Employees Raising Safety Concerns Without Fear of Retaliation, "A reluctance on the part of employees to raise concerns is detrimental to nuclear safety."

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.

  Full Report

  September 21, 2016 - Work Environment for Operators at Sequoyah Nuclear Plant - 2016-15396

In March 2016, the Nuclear Regulatory Commission (NRC) issued a Chilled Work Environment Letter for Watts Bar Nuclear Plant. The NRC concluded a chilled work environment existed in the Operations Department because of a perception that operators were not free to raise safety concerns using all available avenues without fear of retaliation. According to the NRC Policy Statement for Nuclear Employees Raising Safety Concerns Without Fear of Retaliation, "A reluctance on the part of employees to raise concerns is detrimental to nuclear safety."

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.

  Full Report

  September 20, 2016 - Enterprise Project Management Office Organizational Effectiveness - 2016-15384-01

The Enterprise Project Management Office (EPMO) is responsible for the development and deployment of project management processes, systems, tools, and training to project organizations within Generation Construction, Projects, and Services, as well as TVA fleet-wide. Additionally, the EPMO is responsible for evaluating project performance. The OIG assessed the strengths and risks that could impact the organizational effectiveness of the EPMO.

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.

  Full Report

  September 15, 2016 - Work Environment for Nuclear Oversight - 2016-15398

In March 2016, the Nuclear Regulatory Commission (NRC) issued a Chilled Work Environment Letter for Watts Bar Nuclear Plant. The NRC concluded a chilled work environment existed in the Operations Department because of a perception that operators were not free to raise safety concerns using all available avenues without fear of retaliation. According to the NRC Policy Statement for Nuclear Employees Raising Safety Concerns Without Fear of Retaliation, "A reluctance on the part of employees to raise concerns is detrimental to nuclear safety." The Nuclear Oversight group, through the Quality Assurance (QA) function, should provide reasonable assurance that plant safety functions are performed in a satisfactory manner. Additionally, Nuclear Oversight's Employee Concerns Program (ECP) is charged with providing an independent avenue for employees to raise concerns. With these key roles, it is crucial that employees in Nuclear Oversight feel free to raise concerns without fear of retaliation.

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.

  Full Report

  August 29, 2016 - Coal and Gas Services Organizational Effectiveness - 2016-15365

The Office of the Inspector General found Coal and Gas Services (CGS) met its reliability metrics for gas and coal in fiscal year (FY) 2015 through January, FY 2016. However, some of its cost-effectiveness and fuel flexibility targets during the same period were not met because of outside factors. We identified strengths related to (1) employee teamwork, (2) management support of its employees, (3) employee engagement, and (4) working relationships with other TVA organizations. However, we also identified issues that if left unresolved could negatively impact CGS's effectiveness both now and in the future. Specifically, we identified employee perceptions concerning management favoritism and lack of transparency in specific areas which could be the result of alignment and goal measurement issues in CGS performance reviews. In addition, we noted conditions that could negatively affect business relationships with gas pipeline companies and result in increased transportation risk. Finally, we identified issues related to knowledge transfer. TVA management agreed with our findings and recommendations and provided planned actions to address our recommendations.

  Full Report

  August 19, 2016 - Local Power Company Rate Review Process - 2016-15361

The Office of the Inspector General audited local rate adjustments processed during fiscal year 2015 to determine if TVA's process for reviewing Local Power Company (LPC) rate change requests complied with the approved Revised Rate Review Process (RRRP) in the TVA regulatory policy. We found TVA's process for reviewing LPC rate change requests did not comply with the approved RRRP in the TVA regulatory policy due to improper and unapproved calculations of the Guideline Amount in two areas. We also noted the method used to initially calculate an LPC's cash ratio excluded loans and investments of electric system funds to third parties. We recommended TVA's Vice President, Operational and Regulatory Assurance calculate the Guideline Amount as stated in the RRRP or obtain approval for the current calculation method and include any loans or investments of electric system funds in the initial calculation to determine the LPC's cash ratio.

  Full Report

  August 15, 2016 - Organizational Effectiveness Follow-up Review - Corporate Accounting - 2016-15422

The Office of the Inspector General previously conducted a review of Corporate Accounting (Evaluation Report 2015-15313, issued November 5, 2015) to identify operational and cultural strengths and areas for improvement that could impact Corporate Accounting's organizational effectiveness. Our report identified several operational and cultural areas for improvement and included recommendations to address this. In response, we received Corporate Accounting's management decision on January 4, 2016. The objective of this follow-up review was to assess management's actions taken to address areas for improvement since our initial review. In summary, we determined actions taken by Corporate Accounting appear to have addressed the areas for improvement identified during our initial organizational effectiveness review. In addition, employees felt management's actions taken to date have resulted in positive change.

  Full Report

  August 4, 2016 - Proposal for Holistic Industrial Wastewater Treatment Program Services - 2016-15405

At the request of the Tennessee Valley Authority (TVA) Supply Chain, the Office of the Inspector General examined the cost proposal submitted by a contractor, for engineering, design, and construction support for Holistic Industrial Wastewater Treatment Program services at TVA fossil plants. Our objective was to determine if the contractor's cost proposal was fairly stated for a planned $45 million contract. In our opinion, the cost proposal was overstated. We estimated TVA could save about $1.12 million on the planned $45 million contract by negotiating reductions to the proposed labor markup rates and fee rate, including labor markup rates for work performed at TVA sites, and removing the markup on subcontract costs. In addition, we identified compensation terms in the draft contract that need to be revised to reduce the potential for billing discrepancies.

(Summary Only)

  July 28, 2016 - Actions Taken to Address Risks Related to Coal Plant Ductwork - 2016-15359

Along with steam, the coal combustion process produces hot gases (called flue gases), including sulfur dioxide, nitrogen oxides, and ash particles. Flue gas moves through ductwork to various air pollution control devices prior to being emitted through the stack. The objective of our evaluation was to determine if TVA is taking actions to address environmental and safety risks related to flue gas ductwork at coal plants. Since scrubbers increase the risk of corrosion within flue gas ductwork, our evaluation included plants with operational scrubbers. We found TVA has completed repairs to address environmental risks associated with flue gas ductwork at coal plants. However, TVA's framework for repairing and reporting ductwork leaks could be improved by (1) clarifying thresholds to repair and report cumulative leaks, (2) establishing realistic repair timelines, and (3) prioritizing the most environmentally damaging leaks for repair. We also found TVA has completed some repairs designed to address safety risks associated with ductwork, but TVA site management indicated long-term capital projects are needed and planned for remediation at Bull Run Fossil Plant and Cumberland where the worst material conditions were present. In addition, we found weakness in the identification of safety concerns related to ductwork at the sites. Additionally, we determined TVA is incurring risk by adopting a strategy to apply internal thermal coatings to ductwork at Cumberland to resist corrosion. Thermal coatings have not previously been used for this application nor have they been through a technical review involving Generation Engineering. This could result in TVA spending several million dollars on a solution that may not work.

  Full Report

  July 27, 2016 - TVA Fraud Risk Management - 2016-15377

The OIG audited TVA's fraud risk management activities to determine if it had incorporated the practices in its organizational culture and structure conducive to fraud risk management as identified by the U.S. Government Accountability Office (GAO) framework for managing fraud risk. In summary, we found while TVA has attempted to demonstrate a senior-level management commitment to integrity through various ethics and code of conduct policies, improvements are needed in TVA's practices to combat fraud and involve all levels of the agency in setting an antifraud tone. In addition, TVA management has not formally designated an entity to design and oversee fraud risk management activities.

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.

  Full Report

  July 18, 2016 - Proposal for Construction Management Services - 2016-15394

At the request of the Tennessee Valley Authority (TVA) Supply Chain, the OIG examined the cost proposal submitted by a contractor for construction management services. Our objective was to determine if the contractor's cost proposal was fairly stated for a planned $100 million contract. In our opinion, the proposed general and administrative (G&A) rates were overstated in the proposal, compared to the G&A rates included in a current contract TVA has with this contractor. We estimated TVA could avoid about $4.1million on the planned $100 million contract by reducing the proposed G&A rates to the rates established in the other contract.

(Summary Only)

  July 11, 2016 - Proposed Sale of Bellefonte Nuclear Plant Site - 2016-15376

This interim report provides the results of an OIG review of the transparency of the sale of the Bellefonte Nuclear Plant site, evaluation of alternative uses for the site, and risks associated with the potential sale. We determined TVA has taken reasonable actions to date to promote transparency of the sales process and evaluated alternative uses for the site. In addition, we determined TVA appears to have considered the significant risks associated with selling the Bellefonte site.

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.

  Full Report

  July 7, 2016 - ABB, Inc. - Contract No. 4645 - 2015-15318

The OIG audited costs billed to the Tennessee Valley Authority (TVA) by ABB, Inc. (ABB), for providing large and medium power transformers under Contract No. 4645. Our audit included $83.3 million in costs paid by TVA between June 1, 2011, and March 31, 2015. Our objective was to determine if the costs billed to TVA were in compliance with the contract terms and conditions. In summary, we determined TVA missed payment discount opportunities of $1,029,965, including (1) $936,596 due to incorrect payment terms input into the Maximo system on purchase orders (PO) for which TVA opted to make progress payments, and (2) $93,369 for POs for which TVA opted not to make progress payments. Also, ABB overbilled TVA $155,577 for transformer and other costs, and TVA is due a $188,000 rebate for a transformer that had been purchased. In addition, we noted several opportunities to improve contract administration by TVA. Specifically, we found (1) ABB billed TVA $10,293,437 for materials, equipment, and services not provided for under the contract scope of work; (2) TVA payments exceeded the contract monetary limits; (3) ABB billed TVA $506,592 for instrument transformer purchases that should have been ordered and paid for under a different contract TVA had with ABB; and (4) ABB had not provided the price adjustment formulas for each transformer design type required by the contract.

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.

(Summary Only)

  June 29, 2016 - Information Technology Organizational Effectiveness - 2014-15063

In 2008, the Tennessee Valley Authority's (TVA) Office of the Inspector General (OIG) performed an audit (2007-11348, Information Services Organizational Effectiveness, March 27, 2008) on the effectiveness of the Information Technology (IT) organization and made several recommendations for improvements. In 2011, TVA OIG completed a follow-up audit (2010-13366, Information Technology Organizational Effectiveness, April 5, 2011) and determined the actions taken were not carried through year to year, and as a result, effectiveness in many areas decreased. Accordingly, recommendations in that audit report were focused on creating sustainable processes. In addition, TVA's former Chief Information Officer created a program titled 1,000 Days to Success (IT1K) to address findings from the 2011 audit as well as other observations he made as to the current state of IT.

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.

(Summary Only)

  June 24, 2016 - Delivered Cost of Fuel Calculations for Coal and Gas - 2015-15268

The objective of this evaluation was to determine if the Tennessee Valley Authority's (TVA) delivered costs of fuel included all appropriate costs and were calculated consistently across commodities. We hired a consultant, Synapse Energy Economics, Inc. (Synapse), to (1) review TVA's delivered cost of fuel components and calculations and (2) research industry practices related to calculating fuel costs for dispatch purposes.

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.

(Summary Only)

  May 31, 2016 - Medco Health Solutions, Inc. - Contract No. 00077345 - 2014-15043

As part of the OIG's annual audit plan, we audited $172.6 million in costs billed to the Tennessee Valley Authority (TVA) by Medco Health Solutions, Inc. (Medco), for prescription drug benefits services from January 1, 2012, through December 31, 2013, under Contract No. 00077345. The contract required Medco to provide a fully integrated prescription drug program that would include retail pharmacy, mail order pharmacy, and specialty drug pharmacy services. In summary, we determined Medco overbilled TVA $562,498 and overbilled program participants $121,048 because Medco did not use the contractually defined methodology for pricing certain claims. Medco also overbilled TVA $106,788, including (1) $50,000 for performance standard penalties not paid to TVA, (2) $38,815 for ineligible claim dispensing fees, (3) $13,820 in duplicate claim costs, and (4) $4,153 in ineligible utilization management fees. Medco issued a $50,000 credit to TVA for the performance standard penalties on October 19, 2015. In addition, we noted instances of inadequate contract administration. Specifically, we found Medicare eligible individuals were enrolled in the Commercial account, rather than the Medicare Supplement account, which we estimated has cost TVA up to $200,420 in federal subsidies. We also determined TVA did not perform any independent analyses to verify Medco had achieved the contractually defined operational and pricing guarantees.

(Summary Only)

  May 31, 2016 - Verification of TVA's Compliance with the Green Pricing Accreditation Program Requirements for Calendar Year 2015 - 2016-15395

The OIG completed procedures agreed to by TVA and the Center for Resource Solutions (CRS) to assist in determining TVA's compliance with the annual reporting requirements of the CRS's Green-e Energy program for the reporting year 2015. Results of the agreed-upon procedures applied were provided to TVA and CRS.

(Summary Only)

  May 10, 2016 - Firearms and Ammunition at Coal Plants - 2015-15346

Maintenance personnel at coal plants use firearms (i.e., shotguns) to remove boiler slag, which is the buildup of molten ash. The objective of this evaluation was to determine if firearms and ammunition at coal plants are properly accounted for and safeguarded. In summary, we determined TVA does not have standardized guidance related to the accountability of firearms and ammunition used at coal plants. Instead, each plant has implemented individualized accountability processes. Although three plants have written guidance related to accounting for and safeguarding firearms and ammunition, two plants did not. Our review of the written guidance and actual practices utilized at each plant found they were insufficient to account for and safeguard firearms and ammunition. Additionally, a firearm sent to Cumberland Fossil Plant by TVA Police & Emergency Management could not be located by plant personnel.

  Full Report

  May 5, 2016 - Aggregated Demand Response Proof of Concept Agreement with Seven States Power Corporation - Contract No. 544179 - 2015-15341

The OIG audited the payments TVA made to Seven States Power Corporation (Seven States) under Contract No. 544179 for a demand response pilot study in which Seven States was to demonstrate its capability to provide aggregated demand response (ADR) services. Under the ADR Proof of Concept (POC) program, Seven States serves in an administrative role, coordinating recruitment of customers, communication with TVA, and tracking of program performance. Participating customers are incentivized to reduce power usage at specific times when called on by TVA. Seven States aggregates the load reduction estimates submitted by participating customers each month and provides TVA with an overall estimate of the load reduction available for the ADR POC program as a whole. End-use customers are compensated through separate agreements.

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.

(Summary Only)

  April 20, 2016 - Power Generation Facility Cyber Security - 2015-15286

The OIG audited cyber security at a power generation facility to determine (1) the adequacy of physical and environmental controls, logical security controls, network infrastructure controls, and general controls such as backup and recovery, change control, and incident response, and (2) compliance with the Maritime Transportation Security Act (MTSA). In summary, we found opportunities for improvement in the areas of (1) physical access and environmental controls, (2) logical access controls, (3) network infrastructure controls, and (4) general controls. Additionally, during our review of MTSA requirements, we found no issues with compliance. Lastly, we identified no control weaknesses during our testing of (1) a sample of business network laptops, desktops, and servers, (2) wireless access points, and (3) modems. TVA management generally agreed with our findings and recommendations.

(Summary Only)

  April 14, 2016 - TVA Mitigation of Risks from Bulk Industrial Gases - 2014-15081

The Tennessee Valley Authority (TVA) uses bulk industrial gases, including oxygen, hydrogen, nitrogen, and carbon dioxide as part of its normal operations. Due to hazards associated with handling bulk industrial gases and the importance of worker and public safety at TVA, the OIG initiated an audit of TVA's mitigation of risks from bulk industrial gases. We limited our scope to the explosive and flammable risks of hydrogen and oxygen and the asphyxiation risks of nitrogen and carbon dioxide. Our objective was to determine whether TVA designed mitigating actions for fire, explosion, and asphyxiation risks related to hydrogen, oxygen, nitrogen, and carbon dioxide bulk industrial gases. We determined TVA designed mitigating actions for fire, explosion, and asphyxiation risks related to hydrogen, oxygen, nitrogen, and carbon dioxide bulk industrial gases. However, we identified several areas for improvement to further mitigate the risks from bulk industrial gases. Specifically, we found (1) contract terms did not require a supplier to provide TVA with inspection and maintenance reports for bulk gas tanks, (2) emergency plans do not list types and quantities of on-site gases, and (3) unsecured portable compressed gas cylinders at Gallatin Fossil Plant and Widows Creek Fossil Plant. We recommended the Senior Vice President, Power Operations, update site emergency plans to identify types and quantities of compressed gases and cryogenic fluids stored at generating plants and assess the root cause of unsecured compressed gas cylinders at Gallatin Fossil Plant and Widows Creek Fossil Plant and address as appropriate. In addition, we recommended the Vice President, Supply Chain, amend gas supplier contracts to require suppliers to provide TVA with inspection and maintenance reports that show contractor compliance with appropriate inspection/maintenance-related codes and regulations and enable TVA to confirm the supplier is meeting its obligations for tank safety. TVA management agreed with our findings and provided the actions they have taken or plan to take to address each of our recommendations.

  Full Report

  March 30, 2016 - Bull Run Fossil Plant Organizational Effectiveness - 2016-15357

The OIG assessed operational and cultural strengths and areas for improvement that could impact Bull Run Fossil Plant's (BRF) organizational effectiveness. We determined, overall, BRF has significant opportunity to improve its effectiveness. While we identified strengths associated with trust of first-line supervisors and teamwork, BRF's performance in fiscal year 2015 was mixed, and the morale of the workforce was low primarily due to the impacts of corporate decisions and limited trust between plant management and employees. The specific areas identified for operational improvement included: (1) plant performance, (2) equipment condition, (3) work management, (4) safety, and (5) staffing. In addition, we found a number of factors that impacted trust and employee morale, including: (1) corporate decisions, (2) behaviors displayed by a manager, (3) an increase in contractor usage, and (4) ineffective communication between plant management and employees. These operational and work environment issues, if left unresolved, could increase the risk that BRF employee engagement and performance levels will not be sufficient for the plant to meet its mission.

  Full Report

  March 29, 2016 - EnergySolutions LLC - 2014-15241

As part of its annual audit plan, the OIG audited $16.7 million in costs billed to the Tennessee Valley Authority (TVA) by EnergySolutions, LLC (ES) under Contract No. 69836. The contract provided for ES to furnish personnel, equipment, chemicals, and consumables necessary to process liquid radioactive waste for all three TVA nuclear operating sites. Our objective was to determine if the costs billed to TVA were in accordance with the provisions of TVA's Contract No. 69836 with ES. In summary, we determined ES overbilled TVA $85,246, including: (1) $42,229 in ineligible and unsupported supply, per diem, and travel costs for spent fuel pool cleanout work; (2)$28,967 in ineligible equipment costs; (3) $11,500 in unauthorized waste shipments; and (4) $2,500 in ineligible dewatering and cask costs. ES agreed the ineligible equipment costs were overbilled and issued a credit to TVA on January 14, 2015. In addition, we found $68,898 in costs paid under Contract No. 69836 that should have been paid under Contract No. 69885. We recommended TVA management take action to (1) recover the remaining $56,279 in overbilled costs from ES and (2) ensure future costs paid to ES are paid under the correct contract.

(Summary Only)

  March 23, 2016 - Proposal for Engineering and Management Services - 2016-15358

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, the OIG examined a cost proposal submitted for engineering and management services for hydroelectric power train and associated systems. Our objective was to determine if the vendor's cost proposal was fairly stated for a planned $90 million contract. In our opinion, proposed overhead rate to be applied to noncraft salaries was fairly stated. However, we found the proposed 13 percent profit rate to be applied to total costs was (a) double its actual historical profit margins and (b) not in accordance with the application base requested by TVA. We estimated TVA could avoid about $3.45 million on the planned $90 million contract by negotiating a profit rate to be applied to fully burdened noncraft labor costs only and unnecessary markup rates for craft burden, project related insurance, and performance and payment bonds. In addition, we identified compensation terms in the draft contract that needed to be revised to reduce a potential for billing discrepancies.

(Summary Only)

  March 10, 2016 - Kingston Fossil Plant Organizational Effectiveness - 2015-15329

We assessed operational and cultural strengths and areas for improvement that could impact Kingston Fossil Plant's (KIF) organizational effectiveness. We determined overall, KIF has significant opportunity to improve its effectiveness. While we identified strengths associated with trust of first-line supervisors and teamwork, KIF's operational performance in fiscal year 2015 was mixed, and the morale of the workforce was low primarily due to a lack of trust between plant management and employees. The specific areas we identified for operational improvement included: (1) work management, (2) ammonia operations staffing, (3) training, and (4) inventory. In addition, we found a number of factors that impacted trust and employee morale, including: (1) behaviors displayed by a few influential employees, (2) consistency of disciplinary actions, (3) ineffective communication, and (4) unresolved conflict. We also identified concerns based on corporate decisions surrounding staffing levels and management selections that have directly impacted employees. These operational and work environment issues, if left unresolved, could increase the risk that KIF employee engagement and performance levels will not be sufficient for the plant to meet its mission.

  Full Report

  March 3, 2016 - Proposal for Construction and Modification Services - 2015-15324

At the request of the Tennessee Valley Authority (TVA) Supply Chain, the OIG examined a cost proposal submitted for construction and modification services. Our objective was to determine if the vendor's cost proposal was fairly stated for a planned $100 million contract. In our opinion, the proposal (1) included inconsistent and overstated labor markup rates; (2) did not comply with the request for proposal requirements related to nonmanual wages, resulting in overstated wage rates; and (3) included multiple fees in the Paradise Fossil Plant baseline costs. We estimated TVA could avoid about $3.34 million by (1) negotiating reduced labor markup rates and (2) reimbursing the contractor's actual salaries within established wage ranges instead of paying a single estimated wage rate for each labor classification. In addition, we found the contract's compensation terms and related attachments were inconsistent with the methodology TVA intends to use to compensate the contractor.

(Summary Only)

  February 29, 2016 - Audit of TVA Ethics Program - 2015-15312

The OIG audited TVA's Ethics Program to determine (1) compliance with applicable statutes and regulations and (2) if management has identified and incorporated best practices. In summary, we did not identify any areas where TVA's Ethics Program did not comply with requirements for federal agencies' ethics programs in Title 5, Code of Federal Regulations, § 2638.203. Additionally, TVA's Ethics Program has incorporated many of the best practices identified, with the exception of having embedded ethics champions throughout the organization. We also found references to an Ethics Council in TVA's Code of Conduct, but we found the Council has been inactive since at least 2011. We recommended TVA's Executive Vice President and General Counsel and Designated Agency Ethics Official consider (1) having ethics champions embedded throughout the organization who could emphasize the importance of ethical conduct at an individual and organizational level and (2) reinstating the Ethics Council or removing references to it from the TVA Code of Conduct. TVA management agreed with our findings and recommendations and plans to take corrective actions.

  Full Report
The OIG performed this audit to evaluate the effectiveness of TVA's Information Technology (IT) Enterprise Solutions Delivery (ESD) group in meeting TVA's mission and values. In summary, we found that ESD's operational maturity is well defined; however, there are opportunities to improve efficiencies in the documentation of IT development work. In addition, Enterprise Data Warehouse efforts in IT's 1,000 Days to Success transformation initiative were not fully implemented as originally planned. TVA management agreed with our findings and recommendations.

  Full Report
The OIG performed this evaluation to determine whether the Nuclear Employee Concerns Program (ECP) was addressing employee concerns in an effective and timely manner for fiscal years 2013 and 2014. In summary, we determined Nuclear ECP generally addressed employee concerns in an effective manner; however, we identified areas for improvement related to documentation, the resolution follow-up process, and reporting to site management. We could not form an overall conclusion related to timeliness in addressing Nuclear ECP cases because there was no defined timeliness goal for some types of cases; however, the Nuclear ECP did not meet its timeliness goal of 45 days for eight of ten sample cases we reviewed that were classified as Concerns (i.e., issues that require ECP to open an investigation). TVA management agreed with our findings and recommendations.

  Full Report
The OIG audited costs billed to the Tennessee Valley Authority (TVA) by URS Energy and Construction, Inc. (URS), under contract numbers 66777 and 72142. The audit included approximately $113.6 million in costs URS billed to TVA from January 1, 2012, to November 26, 2013.

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.

(Summary Only)
The OIG performed this audit to evaluate the effectiveness of TVA's Information Technology Infrastructure Delivery (ID) group in meeting TVA's mission and values. In summary, we found that ID's operational maturity is well defined. However, there are opportunities for ID to improve its disaster recovery program and improve communications within one of ID's operational groups. TVA management agreed with our findings and recommendations.

  Full Report
At the request of the Tennessee Valley Authority's (TVA) Supply Chain, the OIG examined proposed hourly labor rates and drilling services unit rates for a managed task contract for TVA's Dam Safety Assurance Program. Our objective was to determine if the proposed hourly labor rates and drilling services unit rates were fairly stated. In our opinion, the proposed hourly labor rates were fairly stated. However, we found (1) the proposed drilling services unit rates included overstated labor markup rates, and (2) the hourly labor rates did not include a driller helper labor classification to be utilized for drilling services when additional helpers were needed. TVA's Supply Chain subsequently entered into a contract with the vendor and was successful in negotiating a (1) reduction in proposed drilling services unit rates which will potentially save TVA $46,300, based on TVA's plans to spend $40 million over 5 years, and (2) new labor category within drilling services for use when additional support is needed in the field. In addition, we compared the vendor's effective profit included in the proposed hourly labor rates to the profit rates included in a similar contract TVA has with the vendor and found the mix of field and home office labor will determine which contract would result in lower costs to TVA.

(Summary Only)
At the request of the Tennessee Valley Authority's (TVA) Supply Chain, the OIG examined a cost proposal submitted for construction/modification services. Our objective was to determine if the cost proposal was fairly stated for a planned $100 million contract. In our opinion, the cost proposal (1) included inconsistent equipment and labor markup rates, (2) included overstated labor markup rates, (3) overstated the Paradise Fossil Plant baseline project price, and (4) overstated the minimum non-manual wage rates. We estimated TVA could avoid about $4.1 million on the planned $100 million contract by negotiating reduced markup rates and ensuring fixed price estimates are calculated correctly with negotiated rates. In addition, we found the contract's compensation terms and related attachments were inconsistent with the methodology TVA intends to use to compensate the contractor.

(Summary Only)
FISMA is meant to bolster computer and network security within the federal government. In accordance with FISMA and guidance from the Office of Management and Budget, TVA and the TVA OIG are required to report on agency-wide IT security and privacy practices annually. In our 2015 review of TVA's information security program, we found TVA was in compliance in the security program control areas of (1) identity and access management, (2) incident response and reporting, (3) plan of action and milestones, (4) remote access management, and (5) contingency planning. However, TVA still has ongoing actions in the following areas: (1) continuous monitoring management, (2) configuration management, (3) risk management, (4) security training, and (5) contractor systems control. Additionally, we found controls over the issuing of virtual private network tokens could be improved. TVA management agreed with our findings and recommendations and is implementing its remediation plan.

(Summary Only)
At the request of the Tennessee Valley Authority's (TVA) Supply Chain, the OIG examined a cost proposal submitted for construction/modification services. Our objective was to determine if the vendor's cost proposal was fairly stated for a planned $100 million contract. In our opinion, the cost proposal (1) overstated the other direct cost (ODC) markup rate in the Gallatin Fossil Plant and Paradise Fossil Plant baseline project prices, (2) overstated the payroll tax rate in the craft labor rate schedule, and (3) included non-manual hourly wage ranges that were not reflective of actual salary costs. We estimated TVA could save about $1.2 million on the planned $100 million contract by negotiating reductions to the proposed ODC markup rate and craft labor payroll tax rate. In addition, we found the contract's compensation terms and related attachments were inconsistent with the methodology TVA intends to use to compensate the contractor.

(Summary Only)
The OIG audited corporate card transactions totaling $17.3 million for the period March 1, 2014, through August 31, 2014, to determine if appropriate policies and controls were in place to mitigate the risk of charge card fraud and abuse. We found policies could be strengthened and appropriate controls put in place to mitigate the risk of charge card fraud and abuse. We also found there was no documentation to explain the various database tables or the contents of corporate card data fields in the Employee Reimbursement System (ERS). Additionally, potential cost savings may not be achieved due to insufficient tax-related data and confusion within the organization and among vendors regarding TVA's tax status. Our recommendations to TVA management included: (1) requiring annual training for approvers, (2) implementing multiple ERS modifications to strengthen automated controls and enhance compliance with policies, (3) reviewing potentially duplicate and ineligible transactions identified to determine if TVA was due reimbursement, (4) performing periodic review of ERS data to identify potentially ineligible charges, (5) evaluating the appropriateness of delegation of supervisory approval, (6) formally documenting ERS, and (7) determining which corporate card transactions are exempt from state and local taxes. TVA management agreed to or has taken actions to address some, but not all of our recommendations to mitigate the risk of charge card fraud and abuse.

  Full Report
The Inspector General Act of 1978, as amended, requires federal inspectors general, including the Tennessee Valley Authority (TVA) OIG to review the work of nonfederal auditors to assure their work complies with Government Auditing Standards (GAS) as set forth by the Comptroller General of the United States. We reviewed the work of Ernst & Young LLP (EY) in relation to its audit of TVA's fiscal year 2015 financial statements and internal control over financial reporting. Our review, as differentiated from an audit in accordance with GAS, was not intended to enable us to express, and we do not express, an opinion on TVA's financial statements or the effectiveness of TVA's internal control over financial reporting. EY is responsible for the auditor's reports dated November 20, 2015, and the conclusions expressed in those reports. However, our review of EY's work disclosed no instances where they did not comply, in all material respects, with GAS.

  Full Report
At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we examined the cost proposal submitted by a contractor for construction and modification services. Our examination objective was to determine if the contractor's cost proposal was fairly stated for a planned $100 million contract. In our opinion, the cost proposal (1) overstated the rates in the equipment rate schedule, (2) understated the overhead and general and administrative (G&A) rates in the labor markup rate schedule, (3) overstated subcontractor costs in the coal plant's baseline project price, and (4) overstated the minimum and maximum non-manual wage rates. We estimated TVA could achieve a net savings of about $2.96 million on the planned $100 million contract by reducing the equipment rates, increasing the labor markups, and ensuring an indirect cost markup is not applied to subcontractor costs. In addition, we found the contract's compensation terms and related attachments were inconsistent with the methodology TVA intends to use to compensate the contractor.

(Summary Only)
The OIG performed procedures which were requested and agreed to by Tennessee Valley Authority (TVA) management solely to assist management in determining the validity of the Winning Performance (WP) payout awards for the fiscal year (FY) ended September 30, 2015. TVA management is responsible for the WP payout award data. In summary, we found the FY 2015 WP goals for the enterprise-wide and Strategic Business Unit (SBU) measures were properly approved. Two scorecard adjustment change forms for FY 2015 were approved on February 4, 2015; one change form was approved on March 2, 2015; and one change form was approved on June 24, 2015. The change forms affected seven scorecards and seven measures and/or payout percentages. The FY 2015 goals (i.e., target) for the corporate multiplier measures were properly approved. The actual year-to-date results for the SBU 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 2015 WP payout percentages provided by the Benchmarking and Performance Analysis organization on November 4, 2015, were mathematically accurate and agreed with OIG calculations.

  Full Report
Corporate Accounting provides financial services to the Tennessee Valley Authority (TVA) and is comprised of the following functional areas: (1) Accounting Reporting and Research, which includes Accounting Policy and Research, External Reporting, and Fuel Accounting; (2) Disbursement Services, which includes Payment Services and Payroll Operations; (3) Revenue; and (4) Sarbanes-Oxley. As of March 24, 2015, Corporate Accounting had 72 employees. Our review assessed operational and cultural strengths and opportunities for improvement within Corporate Accounting. We used operational expectations as defined in Corporate Accounting's business plan and behavioral expectations as defined by TVA's values as the criteria for the review. We identified several operational and cultural strengths within Corporate Accounting. Specifically, we found Corporate Accounting effectively provides business support to TVA operations and works well with other TVA organizations. Additionally, employees reported they have the financial information systems they need to do their jobs. We also found Corporate Accounting has an ethical environment, engaged workforce, leadership that is trusted and respected, strong teams, and opportunities for input that are satisfactory to employees. However, we also identified several operational and cultural areas for improvement within Corporate Accounting. Operational areas for improvement included missing and misaligned performance measures for core services, not formally soliciting customer feedback, and differing management and employee perspectives around adequacy of staffing resources. Cultural areas for improvement included minimal response to prior cultural surveys, perceived unfairness in hiring and promotion practices, lack of cohesion between Corporate Accounting departments, relationship issues with two managers, and perceived negative impacts from reorganizations and recent cost-cutting measures. These types of issues, if left unresolved, can undermine employee trust in management and negatively impact both employee engagement and operational performance.

  Full Report
Cumberland Fossil Plant (CUF) is one of the fossil plants relied upon to assist the Tennessee Valley Authority (TVA) in meeting its mission. CUF's mission, in support of the overarching TVA mission, is "to provide low cost, reliable generation and ancillary services while keeping our people safe and ensuring compliance with environmental regulations." Our review identified operational and cultural strengths and opportunities for improvement at TVA's CUF. We used operational expectations as defined in the business plan and behavioral expectations as defined by TVA values as the criteria for the review. We identified several operational and cultural strengths at CUF. Specifically, we found CUF is currently meeting or exceeding expectations related to key measures in its current business plan. In addition, the plant manager is generally seen as open, approachable, and respected, and some managers within midlevel management are viewed as trusted and supportive of their crews. We also found CUF employees exhibit a high degree of enthusiasm and commitment to the plant mission and seem genuinely motivated to make the plant a highly successful operation. Additionally, employees generally view CUF's safety program framework favorably. However, employees expressed frustrations related to a number of management decisions and actions. These decisions and actions included mixed messaging related to safety, unintended consequences of safety accountability, enforcement of the sick leave policy, use of contractors, perceptions of inadequate staffing, disposal of materials, distrust of some midlevel management, use of an integrated supplier, overreactions by management, perception of conflicting priorities, and Fossil versus Nuclear.

  Full Report
As part of our annual audit plan, the OIG audited costs billed to the Tennessee Valley Authority (TVA) by VECTOR. VECTOR is a joint venture between Bechtel Power Corporation and Sargent & Lundy, L.L.C. (S&L) that provided engineering services for Bellefonte Nuclear Plant Unit 1. Our objective was to determine if the $26.8 million in S&L costs paid by TVA from October 1, 2010, through December 31, 2012, were in accordance with the contract terms and conditions. In summary, we determined VECTOR overbilled TVA $322,535 for S&L's services. The overbilled costs included (1) $236,224 in excessive labor markup costs, (2) $50,685 in ineligible temporary living allowance and travel costs, (3) $14,171 in other ineligible costs, and (4) $21,455 in unsupported costs.

(Summary Only)
In August 2008, numerous newspaper articles questioned the fairness of a TVA Maintain and Gain transaction granting water access to The Cove at Blackberry Ridge LLC (Blackberry). The articles raised questions about whether the Blackberry's primary investor, a Congressman, used his position to influence TVA's decision to grant Blackberry's request for water access. Because doubt was cast on the fairness of a TVA process, the OIG conducted an inspection and found no evidence of pressure on TVA from the Congressman to give Blackberry water access on this lakefront project. However, the appearance of possible favoritism resulted in reputational harm to both the Congressman and TVA. As a result of that inspection, TVA and the Board of Directors developed the "Obtaining Things of Value from TVA Protocol" (Protocol) in June 2009 to provide a means to identify the potential of actual or apparent conflicts of interest or the appearance of the exertion of undue influence on the part of a person applying for a TVA benefit.

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.

  Full Report
The TVA developed an integrated resource plan (IRP) to guide the organization in meeting future energy demand. Due to the importance of the TVA's IRP as a directional document for TVA's future, the OIG evaluated the adequacy of TVA's development process for the 2015 IRP, including demand-side and supply-side strategies. We determined TVA's process for developing the 2015 IRP was adequate in considering potential future uncertainties and associated responses. Specifically, we determined the IRP project team met stakeholder input objectives by engaging numerous stakeholders and incorporating public opinions into the development of the IRP; considered project risks, including those related to project management; and incorporated practices commonly seen in integrated planning processes, as well as best practices, into the IRP. In our opinion, the IRP team improved on integrated resource planning efforts as the 2015 IRP incorporated lessons learned from the 2011 IRP, where applicable. Additionally, we determined scenario and strategy development and consideration of IRP inputs were consistent with those of other organizations. TVA developed metrics to analyze the portfolios generated in the 2015 IRP that reflected stakeholder input, where applicable, and were consistent with TVA's strategic mission and imperatives. Lastly, we determine considerations included in the Supplemental Environmental Impact Statement were adequate.

  Full Report
The OIG audited TVA's Contractor Workforce Management (CWM) process for acquiring craft and noncraft staff augmentation contractors to determine whether the process was operating as intended and risks were being adequately mitigated. The purpose of the process was to "maintain the highest performing contractor workforce at the lowest total cost of ownership."

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.

(Summary Only)
In October 2014, the OIG completed an audit of the TVA executive retention. As a follow-up to that audit, we initiated an audit of TVA's executive incentives. Our objectives were to determine (1) if executive incentives align with TVA's objectives and goals, and (2) whether processes for establishing executive incentive performance measures are followed. TVA currently has two executive incentive plans, the Executive Annual Incentive Plan (EAIP) and the Executive Long-Term Incentive Plan (ELTIP), which include performance-based incentives tied to the achievement of TVA's goals and objectives. The performance measures associated with EAIP are based on the accomplishment of approved goals identified in TVA's Winning Performance Team Incentive Plan balanced scorecards. Since the performance measures associated with EAIP are not executive specific, we focused this audit on the alignment and development of ELTIP performance measures. We determined long-term performance measures currently included in the ELTIP align with three of the five strategic imperatives included in TVA's Strategic Plan. However, we noted two of the five strategic imperatives, Debt and People and Performance Excellence, are not incentivized in the ELTIP.

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.

  Full Report
The OIG performed this audit to determine TVA Information Technology Enterprise Customer Operations' (ECO): (1) current effectiveness, (2) actions completed in the implementation of management action plans and Information Technology (IT) 1K initiatives in relation to achieving outcomes, and (3) design of the management action plans in response to Audit No. 2010-13366 and IT1K program for gaps related to any outcomes not met. ECO has worked to improve the end-user experience by adopting industry standard best practices, building a new customer operations center, offering expanded self-service options to end users, and providing strong and constructive leadership to its staff, creating a positive work environment. While ECO has succeeded in many efforts, it has yet to establish proper application service levels. Field Operations Services provides technical support across the valley, including network, desktop, phone, and server support. While the group is managing the current workload, there are concerns the quality of work and customer wait times may suffer if the workload increases. According to IT management, one IT1K outcome relating to manual inventory and tagging of IT assets was not completed, and the management action plan related to Service Level Agreements made in response to Audit No. 2010-13366 was not implemented. TVA management agreed with our recommendations.

  Full Report
The OIG performed this audit to determine whether (1) TVA systems development processes were being followed and (2) business processes were considered during implementation of the project. In summary, we determined the TVA project team followed TVA systems development processes and included consideration of business processes during implementation. However, we noted (1) three individuals had access to the sensitive data without the appropriate security clearance, (2) access groups which control work order approval levels were not being maintained, and (3) historical supporting documents have not been properly linked to transactions within the application. TVA management agreed with our recommendations to improve controls and address the document linkage for the remaining historical documents.

(Summary Only)
The OIG performed this audit to (1) identify excessive amounts of overtime, (2) determine if overtime was properly approved and (3) determine if controls are in place to prevent situations where fatigue could reduce the ability of operating personnel to work in a safe condition. During our audit, we found overtime hours were not passed to TVA's payroll system for payment until they had been approved in the time-reporting system, eWorkplace. Although the post approval process appears adequate, we found inconsistent methods for documenting preapproval of overtime. Additionally, we noted TVA lacks organizational guidance for management of fatigue and work-hour limits in all operational areas other than TVA Nuclear.

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.

  Full Report
The OIG performed this audit to determine TVA Information Technology Operation Solution Delivery's (OSD) current effectiveness, including alignment with TVA values. During our interviews with OSD personnel and customers, we found both groups expressed concern regarding the number of resources assigned to OSD. While OSD is currently able to meet needs and cover the workload for supporting operational applications, OSD's resources are stretched, and as new technologies and needs arise, the current level of staff may not be able to meet customers' needs. In addition, the OSD staff expressed frustrations with the time it takes for changes to be applied to software and other services to be received from other IT organizational groups. TVA management agreed with our recommendations.

  Full Report
The OIG audited the Area Access Manager (AAM) application to determine the adequacy of: (1) data processing and application controls to ensure data integrity and reliability, (2) logical security controls to ensure only authorized access to system resources and protection of sensitive information, and (3) automated controls for granting physical access to sensitive TVA locations. In summary, we determined logical security controls were generally operating effectively and controls around granting physical access to sensitive TVA locations were operating in accordance with TVA policy. However, we found: (1) electronic copies of completed TVA form 15589, TVA Facility Access Request, which included the requester's social security number, were not stored encrypted, as required by TVA Standard Programs and Processes; (2) the level of access for three system administrators appeared to be greater than what was needed to perform their jobs; and (3) documentation of periodic reviews of the AAM was not maintained. (Note: We found AAM performs limited data processing and does not update any other systems. Therefore, we did not test data processing and application controls.) TVA management (1) corrected the system administrators' level of access during the audit, (2) agreed with our recommendations to secure the electronic copies of completed TVA form 15589 and to maintain documentation of periodic reviews, and (3) has begun or is planning to take action to implement the recommendations.

(Summary Only)
At the request of the Tennessee Valley Authority's (TVA) Supply Chain and Watts Bar Nuclear Plant Unit 2 (WBN2) construction management, we reviewed a contractor's potential rework and damages liability in association with work performed at WBN2. Our objective was to determine the reasonableness of TVA's methodology for identifying and estimating the contractor's rework and damages liability. In summary, we found TVA's methodology could be improved and recommended TVA management take action to improve its processes for identifying and estimating the contractor's rework and damages liability. TVA management agreed with our findings and is taking action to address the recommendations.

(Summary Only)
At the request of the TVA Supply Chain, we reviewed a cost proposal submitted for a planned $30 million contract to provide hydro modernization, unit rehabilitation, and functional support services in support of TVA's hydro facilities. The objective of our review was to determine if the cost proposal was fairly stated. In summary, except for excessive costs included in the proposed markup rates and labor and burden rates, nothing came to our attention that indicated the cost proposal was not fairly stated. We concluded TVA could avoid up to $2.11 million on the planned $30 million contract by negotiating reductions to the labor and burden rates and certain markup rates that correspond to the proposing company's actual 2014 costs and expected future costs.

(Summary Only)
The OIG performed this audit to determine Enterprise Architecture and Planning's (EAP) current effectiveness and actions completed in the implementation of management action plans in response to a previous audit, and TVA IT's 1,000 Days to Success initiative (IT1K). The TVA OIG also assessed the design of the management action plans and IT1K program as well as identified gaps related to any outcomes not met.

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:

  1. IT resource engagement, including level of involvement and resource availability.
  2. Level of IT senior leadership team's project engagement.
  3. Project Manager (PM) effectiveness, including the level of authority to acquire resources and the impact of PM turnover on projects.
  4. Inconsistent business engagement in IT projects.
  5. Inconsistent project processes, including the identification, documentation, testing, and tracking of business and functional requirements.
(Summary Only)
The likelihood of fire is lower at hydro plants than at coal plants, but hydro plants are not without fire risk. Hydroelectric stations share many of the same fire hazards as coal plants, such as oil-filled transformers, electrical cables and switchgear, air-cooled generators, and large quantities of combustible hydraulic oil. Hydro plants are typically an underground/underwater windowless structure. In many ways, a hydro plant poses more extreme safety issues and rescue risks, because of limited building access, lack of natural lighting, and embedded structures, all of which increase the potential a fire on a higher level will trap workers on a lower level.

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.

  Full Report
This review was initiated to assess recent efforts by the TVA Nuclear Power Group (NPG) to improve outage performance. The objective of the OIG's review was to determine whether the initiatives implemented by the NPG to improve outage performance achieved planned results and current improvement efforts can be improved. We found cost structure development and controls initiatives improved outage performance with respect to cost; however, outage duration and dose continue to miss business plan goals. Additionally, we found outage performance initiatives continually changed and excellence/improvement initiative plans did not include all planned actions. While some initiatives have been completed, others are ongoing and have rolled over to different plans, making it a challenge to tie changes to measurable results.

  Full Report
In response to increasing workplace violence occurring throughout the country and weaknesses identified in a previous OIG evaluation, 2012-14636 - Master Key Program Management - Property and Natural Resources, the OIG initiated a review of TVA firearms and ammunition. The objective of our review was to determine if firearms and ammunition are properly accounted for and safeguarded. Our review found TVA Police and Emergency Management (TVAP&EM) were accounting for and safeguarding firearms and ammunition; however, coal plant-owned shotguns on the 2014 inventory were not included in the annual hands-on inventory list. Unissued firearms are safeguarded in secured storage areas. These firearms, and those issued to TVAP&EM employees, are accounted for through an annual hands-on inventory. During testing, TVAP&EM were able to provide documentation for a sample of firearms that were either destroyed or transferred. While TVAP&EM guidelines require all TVA-issued firearms to be carried while on duty, one employee was unable to initially provide a firearm for physical inventory due to the firearm being in his home. Additionally, while TVAP&EM were able to provide documentation for destroyed and transferred firearms, some improvements could be made to better comply with guidelines for the documentation of transfers. Finally, there were a few instances in the guidelines regarding firearms and ammunition responsibility that did not match actual practice.

(Summary Only)
Due to TVA aging equipment and the risk parts would be unavailable, the OIG scheduled a review of Hydro Generation obsolete equipment. The objective of our review was to determine if Hydro Generation was effectively managing obsolete equipment. During our review, we found Hydro Generation could more effectively manage obsolete equipment. We found there was no documented guidance to specify how obsolete equipment should be managed. In addition, we found obsolete equipment had extended outage durations. We also found some equipment condition assessments (ECA) included an "Availability of Spare Parts" indicator, which measures the availability and willingness of the original equipment manufacturer to support existing, installed equipment with parts and service; however, the indicator was not always included in the equipment condition assessments.

  Full Report
Fires in substations can severely impact the supply of power to customers and the utility company's revenue and assets. These fires can also create a fire hazard to utility personnel, emergency personnel, and the general public. There are 14 sites managed by Transmission that have fire protection systems to protect their 500-kilovolt transformers. According to TVA management, fire protection systems have been established where needed; however, the risk that fire protection systems will not function effectively is increased by the condition of systems and systems not meeting national code or TVA requirements. The current systems have antiquated equipment that is being replaced as funding allows. The upgrades do not include modifying the current system's water supply which does not meet National Fire Protection Association code or TVA Standard Process and Procedure requirements. While TVA management indicated TVA is not required to meet national code, not doing so in the case of the water supply could limit the effectiveness of the fire protection system if it were engaged during a fire. According to TVA management, maintenance on fire protection equipment is performed or requested by personnel at the Transmission Service Center; however, maintenance is not always documented. We found there were no requirements to track the fire protection systems or their condition. In addition, the inspections of fire protection equipment that were part of the preventive maintenance program were not conducted consistently. There is an increased risk an issue could go unrecognized if systems are not being consistently inspected and the condition tracked. We made recommendations to management to address the findings.

  Full Report
The OIG audited electronic communications by the TVA Board of Directors. The objective was to evaluate controls over the electronic distribution of TVA business information to and from the Board by non-TVA managed mediums. We determined current Board email practices were consistent with the Presidential and Federal Records Act Amendments of 2014. In addition, we found the third-party service used to distribute sensitive documents to the Board had appropriate processes and controls in place as reported by another independent audit company. However, improvements could be made to reduce the risk of exposing TVA business information. The Board of Directors agreed with the findings and will continue to explore options around the recommendations.

  Full Report
The OIG evaluated the efficiency of TVA's hiring process from when the need to hire an annual employee was identified until the position was filled. We determined the process was inefficient due to the following: (1) a lack of training in (a) the use of the People Lifecycle Unified System (PLUS) to initiate a vacancy, (b) requesting a recruiting strategy, and (c) policies for obtaining approvals and posting vacancies within and outside TVA; delays in receipt of documentation by the hiring manager and fingerprinting potential candidates; a lack of defined job requirements for job codes; redundancy in the application and background investigation process; lack of a repository to capture feedback on Human Relations' performance; and deficiencies in PLUS that hinders updating of data by applicants, running queries, and issuance of unique employee identification numbers; and (2) issues impacting the usefulness of the time-to-fill metric as a reliable performance measure. In addition, we identified two areas where TVA does not comply with the Office of Personnel Management requirements related to Selective Service registration and internal requirements for psychological evaluations for system operators and dispatchers. Three additional matters came to our attention during the audit related to completing psychological evaluations and motor vehicle checks for certain positions. These three matters were not directly related to our audit objectives but were included in the report for management's consideration and action, as necessary.

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.

  Full Report
Nuclear Power Group (NPG) Business Practice (BP) 247, Revision 9, Emerging Regulatory Issues Management Process, "establishes a process to identify, categorize, manage, monitor and provide statuses to senior management on issues that may have regulatory impacts on Nuclear Power Group (NPG) or NPG managed material licenses." The OIG determined the process for addressing nuclear emerging regulatory issues (ERI) is generally effective.

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.

  Full Report
At the request of TVA Supply Chain, the OIG audited the costs billed to TVA by Hayward Baker, Inc. (HBI), for remediation work performed at Blue Ridge Hydro Dam under Contract No. 6902. Our objective was to determine if the costs billed were in accordance with the contract terms and conditions. The audit included $2,928,773 in costs and fee billed by HBI for work performed between December 2012 and April 2013. TVA disputed $947,282 of the amount billed and paid HBI $1,981,491 on December 31, 2013. The audit found the costs HBI billed to TVA were in accordance with the contract terms and conditions. TVA and HBI reached preliminary agreement on May 27, 2015, and final settlement occurred on June 11, 2015.

(Summary Only)
The OIG audited TVA's invoice approval process to (1) assess TVA's policies and procedures related to the review and approval of invoices, (2) determine compliance with applicable policies and procedures, and (3) determine if TVA's invoice approvers have adequate information, including clear contractual compensation provisions and sufficient invoice detail to effectively perform their role. The scope of our audit included Supply Chain non-receiving contracts and purchase orders with fiscal year 2013 payments totaling $3,363,603,152.

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.

  Full Report
The OIG performed this audit to determine Enterprise Information Security and Policy (EISP) organization's (1) current effectiveness, (2) actions completed in the implementation of management action plans in response to a previous audit and TVA IT's 1,000 Days to Success initiative (IT1K); and (3) the design of management action plans and the IT1K program and identify gaps related to any outcomes not met. EISP has improved operations through the expansion of internal processes. While EISP has improved operations, some process improvements may not be not sustainable, had inconsistent engagement in some areas and small gaps in staff experience and skills. In addition, TVA's defined values were not always reflected in EISP's work and communications. Concurrent with this audit the new EISP Director, who started his position in November 2014, was engaged in meeting with EISP staff and identified many of the same issues as noted in the report findings. In response, the Director of EISP began taking actions to address these issues.

(Summary Only)
The OIG completed procedures agreed to by TVA and the Center for Resource Solutions (CRS) to assist CRS in determining TVA compliance with annual reporting requirements of its Green-e Energy program for the reporting year 2014.This is a requirement of the CRS accreditation and certification program. Results of the procedures performed were provided to CRS and TVA.

(Summary Only)
As part of the OIG's annual audit plan, we audited costs billed to the Tennessee Valley Authority (TVA) by Geosyntec Consultants, Inc., for professional environmental services under Contract No. 00050771. Our audit included $6 million in costs paid by TVA between November 14, 2011, and May 1, 2014. Our objective was to determine if the costs billed to TVA were in compliance with the contract terms and conditions. In summary, we determined Geosyntec overbilled TVA $162,307, including (1) $95,425 in travel costs and (2) $66,882 in miscellaneous expenses. Additionally, we found Geosyntec (1) did not obtain advance written approval from TVA's Contracting Officer for $333,556 in subcontract costs billed and (2) billed TVA $32,386 using lump sum pricing provisions not provided for in the contract.

(Summary Only)
At the request of Tennessee Valley Authority's (TVA) Supply Chain, we audited AREVA NP, Inc.'s, calendar year 2012 and 2013 rate adjustments required under Contract No. 004027. The contract provided for AREVA to complete engineering, licensing, construction, and start-up operations of a single Bellefonte Nuclear Plant unit by the end of 2017. The objective of our audit was to determine if AREVA's rate adjustments were in accordance with the contract terms. In summary, we determined AREVA's 2012 and 2013 rate adjustments totaling $5,107,878 were overstated by $1,817,940. AREVA previously issued TVA credits totaling $607,637. Accordingly, TVA is due the remaining $1,210,303. In addition, we found AREVA billed $5,618,666 in labor costs and associated fee in 2012 and 2013 using cost center rates not included in the contract.

(Summary Only)
At the request of Tennessee Valley Authority (TVA) management, the Office of the Inspector General (OIG) audited the TVA project to implement ComTrac for use in managing TVA's coal supply fuel chain. Our objectives were to evaluate whether (1) federal and TVA systems development processes were being followed and (2) server and application controls were considered during implementation of the project. In summary, we determined the TVA project team followed TVA systems development processes and included consideration of business processes during implementation. During the audit, items of potential risk and concern identified by the OIG were communicated to the project management team, project sponsors, and/or Executive Steering Committee. The project team addressed all of our findings by either implementing our recommendations or accepting the risk to the project prior to the time ComTrac went live.

(Summary Only)
Personally identifiable information (PII) is defined by the U.S. Office of Management and Budget in Memorandum 07-16 and refers to information which can be used alone to distinguish or trace an individual's identity. This includes an individual's name, social security number, biometric records, or when combined with other personal/identifying information, is linked or linkable to a specific individual, such as date and place of birth or mother's maiden name. The OIG conducted this audit as an independent review of TVA's use of PII in accordance with privacy provisions of the Consolidated Appropriations Act of 2005.

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.

(Summary Only)
The Federal Information Security Management Act of 2002 (FISMA) is meant to bolster computer and network security within the federal government. In accordance with FISMA and guidance from the U.S. Office of Management and Budget, TVA and the TVA OIG are required to report on agency-wide IT security and privacy practices annually. In our 2014 review of TVA's information security program, we found TVA was in compliance in the areas of: (1) incident response and reporting, (2) plan of action and milestones, (3) remote access management, (4) contingency planning, and (5) security capital planning. However, TVA needs improvements in the areas of: (1) continuous monitoring management, (2) configuration management, (3) identity and access management, (4) risk management, (5) security training, and (6) contractor systems. We recommended TVA implement additional improvements in its security configuration management program, update its security awareness and training, update interconnection security agreements, and update the FISMA system inventory. TVA management agreed with our findings and recommendations and is implementing its remediation plan.

(Summary Only)
While, generally, TVA effectively monitors gas and pipeline transportation costs and efficiently manages storage capacity, the OIG identified opportunities to improve the monitoring of natural gas and transportation costs. Specifically, we determined TVA did not (1) track the financial impact of penalties, (2) consistently witness pipeline meter testing, and (3) verify the accuracy of the variable cost portion of pipeline transportation invoices. We also determined TVA's reconciliation process addressed the risk of overpayments to natural gas suppliers; however, we identified a $20,000 credit provided to TVA by a natural gas supplier that management determined was credited in error. Additionally, TVA was efficiently managing storage capacity; however, TVA did not actively manage pipeline transportation capacity due to a strategic decision to base firm transportation capacity needs on a percentage of the plants' capacities to ensure reliability. We recommended the Senior Vice President, Power Operations, perform a periodic assessment of gas pipeline penalties and require meter tests be consistently witnessed by appropriately trained personnel. We recommended the Senior Vice President, Power Operations, in collaboration with the Vice President and Controller, Corporate Accounting, implement a process to verify the accuracy of transportation invoices and take action to reimburse the $20,000 mistakenly credited to TVA.

  Full Report
As part of our annual audit plan, the OIG performed an interim audit of costs billed to the Tennessee Valley Authority (TVA) by Canal Barge Company, Inc. (Canal) for transporting coal by barge to the Cumberland Fossil Plant under contract number 40753. Our audit included $141.3 million in costs paid by TVA from February 1, 2009, through May 7, 2014. The contract's original compensation provisions were effective February 1, 2009, through December 31, 2011, and provided for TVA to pay per ton rates to Canal for barge services based on the origin loading point. The compensation provisions were amended effective January 1, 2012, to provide for (1) fixed monthly rate(s) for the number of boats Canal utilized and (2) a variable rate per ton based on the origin loading point. Our objectives were to determine if (1) the costs Canal billed to TVA were in accordance with the contract terms and conditions and (2) the data and assumptions TVA used in its analysis to support the amended pricing structure were reasonable. In summary, we found Canal billed costs to TVA in accordance with the contract terms and conditions. However, TVA's analysis for determining a revised pricing methodology for its contract with Canal used assumptions that were not supported by the contract or available historical information. As a result, the amended pricing structure will result in TVA paying up to an estimated $6 million more from January 1, 2012, to December 31, 2014, than would have been incurred under the original pricing structure. In response to our draft audit report, TVA management stated they agreed with the conclusions and recommendation and will (1) work to ensure that measures used in the analysis are reasonable based on contract provisions and (2) utilize historical information where it is relevant and available. However, management also stated (1) Coal and Gas Services (C&GS) had received differing legal opinions regarding how to value liquidated damages when it constructed the contract amendments, and (2) historical information is only one of several inputs utilized in generating potential scenarios. We agreed with TVA management's stated actions. However, with regard to management's other statements, (1) C&GS could not provide documentation that it had received differing legal opinions regarding how to value liquidated damages, and (2) historical information was the most reliable data source to determine towing capacity scenarios, but it was not a key data component used in TVA's analysis.

(Summary Only)
The OIG audited approximately $3.36 million in costs billed to TVA by Bristol Tennessee Essential Services (BTES) as of September 30, 2014. In summary, we found costs billed to TVA were supported by invoices paid to third parties by BTES. However, we noted (1) instances where costs billed were not supported by evidence the work associated with invoices had been completed, (2) BTES had not completed all actions required under the contract, and (3) TVA had not determined the benefits of the project. Finally, we noted TVA was providing excessive credits to BTES each month under an existing Direct Load Control (DLC) program based on documentation provided to us by BTES. We recommended TVA (1) ensure all payments made to BTES under contract number 00072597 are for work completed in accordance with the specifications and timelines required by the contract and determine what actions to take if all switches are not installed and working properly by January 30, 2015, (2) receive adequate support to ensure all work related to an invoice has been completed prior to payment and make receipt of key deliverables a requirement for payment under any future research and development related contracts, and (3) determine, based on the findings of the project, whether load control schemes produce the desired effect for TVA, distributors, and residential customers before moving into a new program. Additionally, we recommended TVA reduce the monthly credits given to BTES under the existing DLC program to reflect BTES documentation of switches installed under that program. TVA management is working on plans to address the recommendations in the report.

(Summary Only)
As part of our annual audit plan, we audited costs billed to the Tennessee Valley Authority (TVA) by VECTOR JV. VECTOR is a joint venture between Bechtel Power Corporation and Sargent & Lundy LLC, providing engineering services for Bellefonte Nuclear Plant Unit 1. Our objective was to determine if the $60.7 million in costs paid by TVA for Bechtel's services from October 1, 2010, through December 31, 2012, were billed in accordance with the contract terms and conditions. In summary, we determined VECTOR overbilled TVA an estimated $358,434 in costs for Bechtel's services, including:

  • $246,353 in ineligible other direct costs.
  • An estimated $47,978 in temporary living costs.
  • $64,103 in ineligible labor costs.
In addition, we noted several opportunities to improve contract administration by TVA. Specifically, we found TVA paid VECTOR (1) an estimated $1,747,353 in temporary living allowance (TLA) costs for Bechtel employees for time periods not shown on employee TLA certification forms and (2) an estimated $50,486 in excess costs because temporary living monthly allowances were not included in the contract's compensation terms until April 30, 2011.

(Summary Only)
As part of our annual audit plan, we audited costs billed to the Tennessee Valley Authority (TVA) by Nexant, Inc., for commercial and industrial energy efficiency services. Our audit included $63.6 million in costs paid by TVA between December 29, 2009, and March 21, 2014. Our objective was to determine if the costs billed to TVA were in compliance with the contract's terms and conditions. In summary, we determined Nexant overbilled TVA an estimated $431,846, including:

  • $269,009 in subcontractor costs.
  • An estimated $144,570 in labor costs.
  • An estimated $18,267 in travel costs.
Additionally, we found TVA overpaid $67,189 in incentive payments of which Nexant has refunded $15,685.

(Summary Only)
As part of our annual audit plan, we performed an interim audit of costs billed to the Tennessee Valley Authority (TVA) by Bechtel Power Corporation for providing engineering, procurement, construction, and related services in support of the completion of TVA's Watts Bar Nuclear Plant Unit 2. Our audit included about $520 million in noncraft costs billed to TVA from January 1, 2010, to September 30, 2013, (craft costs will be audited separately). Our objective was to determine if Bechtel billed TVA in accordance with the contract terms and conditions. In summary, we determined Bechtel overbilled TVA an estimated $2,066,495, including:

  • $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.


(Summary Only)
The OIG monitored the work of TVA's external auditor, Ernst & Young LLP (EY), to assure the work was performed in accordance with generally accepted government auditing standards (GAGAS). Our review of their work, as differentiated from an audit in accordance with GAGAS, was not intended to enable us to express, and we did not express, an opinion on TVA's financial statements or on the effectiveness of TVA's system of internal control over financial reporting. EY is responsible for the auditor's reports dated November 14, 2014, and the conclusions expressed in those reports. Our review disclosed no instances where EY did not comply in all material respects with GAGAS.

  Full Report
The OIG performed six agreed-upon procedures requested solely to assist management in determining the validity of the Winning Performance payout awards for the year ended September 30, 2014. Following are the results of the procedures applied.
  1. 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.
  2. The FY 2014 goals (i.e., target) for the corporate multiplier measures were properly approved.
  3. The actual year-to-date results for the Strategic Business Unit scorecard measures agreed with the respective supporting documentation, without exception.
  4. The actual year-to-date results for the enterprise-wide scorecard measures agreed with the underlying support, without exception.
  5. The actual year-to-date results for the corporate multiplier measures agreed with the underlying support, without exception.
  6. 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.


  Full Report
The Tennessee Valley Authority (TVA) engaged in three major initiatives during fiscal year (FY) 2009 through FY 2013 related to workforce productivity and operational performance: DeWolff, Boberg & Associates, Inc.'s (DBA) workforce performance, McKinsey and Company's Pilot and Performance Boost, and TVA's Diet and Exercise (D&E). Our audit objective was to assess the effectiveness of TVA's management of those productivity and operational performance improvement initiatives. Based on our assessment of the effectiveness of TVA's management of the DBA, McKinsey Pilot and Boost, and D&E initiatives, we determined TVA management did not effectively monitor achievement of all performance improvements. Specifically, we identified a deficiency in the control design related to monitoring and tracking for verification of savings claimed from the DBA and the McKinsey initiatives. In addition, the sustainability of the performance improvement initiatives was hindered by a lack of employee engagement and resource constraints that made operational efficiency improvements unachievable or unrealistic. Further, employee morale suffered during the DBA initiative due to employees' perceptions of disrespectful behavior towards them by DBA. Morale also suffered during the McKinsey initiative from a perceived lack of follow-through by TVA management to provide funding to implement improvements. Based on the above, we recommended TVA (1) assess the cultural climate through meaningful dialogue with employees about the impacts of the initiatives to determine the long-term effects on employee engagement and morale and (2) establish a standard process and procedure for future improvement programs. TVA management reviewed a draft of the report and agreed the contents were factually correct. TVA management is working on a plan to address our recommendations.

(Summary Only)
Over the last several years, there has been anecdotal information indicating a high level of turnover among the Tennessee Valley Authority's (TVA) executives. We initiated this audit to review the costs associated with the hiring and dismissal of executives brought in from outside TVA since the change to TVA's part-time Board of Directors. For the purposes of this audit, we considered an executive to be an employee with the title of vice president or above.

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.
We also compared the number of TVA's executive departures as reported to the Securities and Exchange Commission (SEC) to the reported departures of TVA's compensation peer group for the period of January 2007 through May 2014. Although we found TVA reported more executive departures than most of the peers, companies may interpret SEC filing requirements differently, making it difficult to ensure the information reported by TVA's peer group was consistent with TVA's reporting.

  Full Report
This review was initiated as part of the Office of the Inspector General's commitment to provide oversight of coal combustion product (CCP) management. The objective of our review was to determine if TVA was meeting its commitments for CCP management.

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.

  Full Report
This review was initiated as a follow-up to Inspection 2010-13530, Review of TVA's Fossil Fire Protection Systems, issued September 30, 2011. Fire protection systems are a combination of mechanical and electrical components and like power generation equipment, need regular attention. The objective of our review was to determine if the fire protection systems were adequately maintained and mitigating actions were taken to minimize the impact of fires at TVA fossil plants.

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.

  Full Report
As a result of findings in a recent evaluation 2012-14845, Review of TVA's Nuclear Power Group Preventive Maintenance, we conducted a review of coal plant preventive maintenance (PM). The objective of our review was to determine if PM was performed in accordance with established schedules and if not, what effect the deviations were having.

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.

  Full Report
Based on the findings of a previous review, we evaluated the TVA Nuclear Power Group (NPG) Groundwater Protection Program (GWPP). The objectives of our review were to determine if NPG's GWPP performed required monitoring and reporting and completed required corrective actions based on monitoring results.

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.

  Full Report
The Office of the Inspector General included a review of Revenue Billing's invoice preparation process for local power companies (LPC) on its annual audit plan because of the significance of this source of revenue to TVA. We audited the invoice preparation process for the period April 1, 2011, through July 31, 2013, to determine if: (1) wholesale invoices were calculated correctly, (2) controls to prevent/detect invoice errors were adequate, and (3) Oracle Utilities had appropriate/adequate information technology general and application level controls.

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.

  Full Report
The Office of the Inspector General audited costs billed to the Tennessee Valley Authority (TVA) by Bechtel Power Corporation for services provided by Bartlett Holdings, Inc. Bartlett was to furnish qualified personnel to Bechtel on a seconded basis for the Watts Bar Nuclear Plant Unit 2 construction completion project. Our audit included approximately $121.4 million in payments made by TVA for services provided under the subcontract from January 1, 2010, through September 30, 2013. Our objective was to determine if the costs billed to TVA were in accordance with the provisions of TVA's contract with Bechtel and Bechtel's agreement with Bartlett.

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.

(Summary Only)
The Office of the Inspector General performed this review as part of its ongoing effort to provide oversight of the Kingston Recovery Project to determine if TVA is meeting its commitments for the Kingston Recovery Project.

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.

  Full Report
The Office of the Inspector General initiated a review of the Energy Services Company (ESCO), currently known as the Federal Energy Services Program. The objective of the review was to evaluate whether the program was meeting its intended purpose of providing energy efficiency for the customer. TVA was unable to provide documentation to allow determination of the amount of actual energy efficiency achieved, specifically by ESCO, for two of the three current customers participating in the program. As a result, we were unable to determine the total impact of ESCO in providing energy efficiency for the customer and the degree ESCO supported the accomplishment of TVA's 2020 vision of greater energy efficiency. Also, as part of the audit, we assessed TVA GOES (government, oversight, execution, and support) and business case documentation and found that while substantial improvements were being made to the program, programmatic gaps and other opportunities for improvement existed.

  Full Report
The Office of the Inspector General evaluated the effectiveness of the Tennessee Valley Authority (TVA) processes for identifying and managing actual and potential environmental issues and risks. TVA's Environmental Management System (EMS) program was established to manage environmental impacts of TVA operations and help fulfill commitments of TVA's Environmental Policy. Within this purpose, EMS plays a significant role in managing environmental risks across TVA and sustaining a high level of environmental compliance in TVA operations.

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.

  Full Report
During a prior review of how TVA organizations assess the condition of its assets, we learned that asset condition assessments done by the Fossil Power Group (FPG) determined some generation assets were in poor condition. As a follow up to this prior work, we initiated a review to determine whether TVA was taking actions to address FPG systems and programs with poor ratings.

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.

  Full Report
The OIG audited the costs billed to TVA by Choctaw Generation Limited Partnership (CGLP) for power purchases. TVA and Choctaw Generation, Inc., entered into a contract with an effective date of February 20, 1997. Choctaw Generation, Inc. became CGLP through an assignment agreed to by TVA, effective April 30, 1998. The contract obligated TVA to buy 92 percent of the annual power generated for 30 years from a coal generation plant to be built by CGLP in Choctaw County, Mississippi.

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.
We recommended TVA management take action to (1) revise the electronic workbook to include a formula to address time periods when TVA directs RH to provide derated capacity and RH cannot produce any power; (2) recover $12,674 in unsupported costs; (3) establish a procedure for documenting and communicating adjustments to the RH meter data; and (4) recover $5,135 in overbilled costs.

(Summary Only)
The OIG found official stations were generally appropriate for TVA's most frequent travelers. However, we noted departments with employees who frequently travel to multiple locations assign official stations in differing ways. Additionally, controls and policies could be strengthened by including guidance on evaluating official stations and requiring approval from the appropriate level of management for decisions not to change official stations based on the dollar values of travel expenses incurred or expected to be incurred. As part of our audit we followed up on TVA management's actions taken in response to the OIG's previous travel review, Inspection 2006-522I, Review of TVA Travel Reimbursements, we noted action plans agreed to in the past do not appear to have been fully implemented.

  Full Report
The OIG audited TVA's payments to the Alabama Emergency Management Agency (AEMA) and the Alabama Department of Public Health (ADPH) under two contracts with the State of Alabama. Under the contracts, AEMA and ADPH cooperated in a program to operate and maintain the Radiological Emergency Preparedness (REP) programs for TVA's Browns Ferry and Sequoyah Nuclear plants. Our objective was to determine if the costs paid under the contracts were in compliance with the contract terms. Our audit included $6,601,445 TVA paid to AEMA ($5,666,875) and ADPH ($934,570) for the period October 1, 2007, through September 30, 2013.

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.

(Summary Only)
In a previous OIG review of how TVA organizations assess the condition of assets, we learned asset condition assessments completed by River Operations (RO) had determined some assets were deteriorated. As a follow up to our prior work, we reviewed whether TVA was taking action to address RO systems and components with deteriorated conditions. These assets were designated as "red" or "yellow." According to RO personnel, a red rating indicated equipment condition was poor, while a yellow rating indicated equipment condition was marginal.

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.

  Full Report
The OIG assessed the effectiveness of the Enterprise Risk Management (ERM) organization's role within TVA's overall risk management program. To aid in our assessment, we compiled the results of prior relevant audits and evaluations to identify common themes that bear on the ERM organization's effectiveness.

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.

(Summary Only)
At the request of the Tennessee Valley Authority (TVA) Supply Chain organization, the OIG audited $22.7 million in costs billed to TVA by Comdata Network, Inc. The contractor was to provide TVA with a MasterCard platform and issue fuel cards to TVA personnel to purchase fuel, vehicle fluids, and car washes for TVA-related business. The objective of the audit was to determine if costs paid by TVA from October 1, 2011, through June 30, 2013, were billed in accordance with contract terms. In summary, the OIG determined TVA was overbilled $1,044,302, including:
  • $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 addition, the contractor owes TVA $11,459 in interest on overpayments made by TVA due to duplicate invoices submitted by the contractor.

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.
The OIG recommended TVA management take action to recover:
  • $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.
(Summary Only)
The OIG reviewed Coal Operations' (CO) 4th quarter fiscal year (FY) 2012 and 2nd and 4th quarters FY2013 enterprise risk maps for asset performance vulnerability to assess whether risk mitigation plans and actions were established and properly designed to manage risks. We determined the 4th quarter FY2013 mitigation plans and actions were adequately designed to manage the risks. Although the risk rating and trend had increased from 2 years ago, in our opinion, mitigation plans and actions that consider utilization of assessment tools, replacing components during planned outages, development and implementation of projects and programs to avoid consequences, and reclassification of components to capital from operations and maintenance to increase investment in long-term improvements reasonably address the risk of asset performance vulnerability in CO. We also identified an opportunity to improve CO's risk mitigation documentation which was addressed during our audit.

  Full Report
During 2012, we completed an audit of TVA's Financial Trading Program (FTP) audit number 2011-14477. The program, which started in 2003, was designed to hedge or otherwise limit economic risk associated with the price of commodities recovered in TVA's fuel cost adjustment (FCA). Since the hedging of natural gas comprised the majority of the hedging program, we generally limited our scope to the gas hedging program. Although our audit determined the overall design of TVA's FTP control structure was appropriate, we also identified several areas where management oversight needed improvement to validate the usefulness and effectiveness of the program, as well as ensure TVA stakeholders' understanding of the program.

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.
TVA management generally agreed with the recommendations and provided a plan of action to address the recommendations.

  Full Report
In completing project number 2009-12883, Survey of TVA's Process for Determining Condition of Assets, with a report dated September 20, 2012, the OIG learned that asset condition assessments performed by the Nuclear Power Group (NPG) had determined some generation assets were in poor condition. As a follow up to our prior work, we performed a review to determine whether TVA was taking action to address NPG systems, components, and programs with poor ratings. Under NPG's health report process, actions were required when ratings were designated red or yellow. Red ratings are defined as requiring excessive monitoring/resources to maintain, and yellow ratings indicate a need for additional attention.

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
The Non-Nuclear Employee Concerns Program (ECP) is important to the Tennessee Valley Authority's current culture and environment. The OIG conducted a review to determine whether the program was addressing employee concerns in a timely and effective manner.

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.

(Summary Only)
The OIG audited costs billed to the Tennessee Valley Authority (TVA) by AMEC Environment and Infrastructure, Inc., for a broad range of geotechnical services to support engineering design for structures, earthwork, and environmental projects under Contract No. 21705. Our audit included $5.33 million in costs billed between June 1, 2009, and October 23, 2012. Our objective was to determine if the costs billed to TVA were in compliance with the contract terms and conditions.

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.

(Summary Only)
Due to the importance of reliable nuclear production at TVA, the OIG audited the risk of long term equipment reliability in the Nuclear Power Group (NPG). Our objectives were to assess whether risk mitigation plans and actions were established and properly designed to achieve the desired results and operating as intended, as well as identify opportunities to improve mitigation strategies for reducing long term equipment reliability risk in NPG. Our audit determined the mitigation plans identified were adequately designed to address this risk. However, the extent to which the mitigating actions were effectively reducing the risk could not be determined because of how the actions were prioritized. The audit also identified opportunities to enhance risk mitigation strategy and documentation, but we were unable to determine whether NPG had established an upper limit for the long term equipment reliability risk NPG was willing to accept. In response to our draft report, NPG management believed they had demonstrated appropriate action to address the findings and three recommendations in the report. NPG management agreed to review the long term equipment reliability risk map during upcoming quarterly reviews to determine if the associated enterprise risk could be further reduced or it should be removed from the risk map altogether. The OIG agreed with plans to reassess this risk.

(Summary Only)
The Tennessee Valley Authority (TVA) contracted with the independent public accounting firm of Ernst & Young LLP (EY) to audit the balance sheet as of September 30, 2013, and the related consolidated statements of operations, comprehensive income (loss), changes in proprietary capital, and cash flows for the year then ended. In addition, the contract called for the review of TVA's fiscal year 2013 interim financial information filed on Form 10-Q with the Securities and Exchange Commission. The contract required the work be performed in accordance with generally accepted government auditing standards. The objective of our review was not intended to enable us to express, and we do not express, an opinion on the TVA's financial statements or on management's conclusions about the effectiveness of its system of internal control. EY is responsible for the auditor's reports dated November 15, 2013, and the conclusions expressed in those reports. However, our review disclosed no instances where EY did not comply, in all material respects, with generally accepted government auditing standards.

  Full Report
The OIG audited the subcontracting process used by URS Energy & Construction, Inc. (URS), under contract numbers 66777 and 72142. Under the contracts, URS was to provide design, engineering, procurement, delivery, installation, and construction management services for TVA's (1) combined cycle combustion turbine or simple cycle combustion turbine projects and (2) various equipment for selective catalytic reduction and dry flue gas desulfurization precipitators. Our audit included subcontracts and related change orders for $256.3 million in subcontractor costs URS billed to TVA from December 14, 2007, to June 27, 2012.

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.

(Summary Only)
The OIG evaluated the adequacy of actions taken to mitigate combustible coal dust at TVA coal plants. Despite some improvements in combustible dust management, we determined actions taken to date were inadequate in improving deteriorating equipment conditions, addressing housekeeping challenges, and providing appropriate monitoring of combustible dust conditions at the coal plants.

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 OIG performed four agreed-upon procedures which were requested solely to assist management in determining the validity of the TVA Winning Performance payout awards for the fiscal year (FY) ended September 30, 2013. In summary, we found:
  1. 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.
  2. 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.
  3. 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.
  4. 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.
(Summary Only)
At the request of Tennessee Valley Authority's (TVA) Supply Chain and TVA's Senior Vice President, Generation Construction, we audited $66.4 million in costs billed to TVA by Phillips and Jordan, Inc. (P&J), under an Advance Authorization (AA) agreement and Contract No. 78268. The AA agreement and contract provided for P&J to unload and dispose of at least four million tons of coal combustion by-products from the coal combustion by-products spill at TVA's Kingston Fossil Plant in December 2008. Our objective was to determine if the costs billed from June 2, 2009, through September 4, 2011, were in compliance with the terms of the AA agreement and the contract.

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

(Summary Only)
The Tennessee Valley Authority (TVA) identified asset performance and operations as a major risk for the agency. Without effective management of critical spare parts, TVA could face equipment failure which could result in safety and generating failures. This review was initiated to determine if the Nuclear Power Group (NPG) and Coal & Gas Operations (C&GO) were effectively managing critical spare parts.

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
This review was initiated in follow up to a recent OIG review of TVA's project management software, PowerPlant. During that review, we identified several areas for further analysis related to timely project approvals, delegated approvals, and project charges allocated incorrectly. The objective of this review was to determine if the TVA capital project approval process was (1) efficient and timely, (2) performed in accordance with TVA policies, and (3) aligned with industry best practices.

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
Preventive maintenance (PM) is important to the reliable operation of assets. As a result of recent issues with nuclear performance, the OIG conducted a review of Nuclear Power Group's (NPG) PM program. The objective of this review was to determine if nuclear plant PM had been performed in accordance with established schedules, and if not, what effect the deviations were having.

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
The TVA has stated its future depends on effective succession planning and faces a potential workforce challenge due to retirement within the next five years. Also, TVA has identified a risk of senior leadership attrition that could leave a gap in key positions. This review was conducted as a follow-up to a previous OIG review of TVA's succession planning. The objective of this review was to assess TVA's succession planning.

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
TVA introduced the Valley Investment Initiative (VII) program as a means to incentivize customers to invest in the economic development of its geographic area. The OIG included a review of the VII program in its annual audit plan as the budget for this program has significantly increased since its inception in 2009. Our audit objective was to determine if TVA was exercising adequate oversight over the VII program. In summary, we found Economic Development personnel complied with TVA policies and procedures for oversight of program operations; however, TVA oversight of the VII program as a whole could be improved. For example, TVA had not established performance measures specific to the VII program nor performed an evaluation study to determine the effectiveness of the program. We also noted customer compliance audits could be improved by adding independent verification of customer reported information.

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.

(Summary Only)
At the request of the Tennessee Valley Authority's (TVA) Supply Chain and Senior Vice President, Generation Construction, the OIG audited the costs billed to TVA by AMEC Environment and Infrastructure, Inc., (AMEC) for loading coal combustion by-products from the spill at TVA's Kingston Fossil Plant onto rail cars and/or trucks for off-site disposal under an advance authorization agreement (AA) and AMEC's contract with TVA. The audit included $19.3 million in costs billed to TVA from June 2, 2009, through January 13, 2011. The objective was to determine if AMEC billed TVA in accordance with the terms and conditions of the AA agreement and contract. We determined AMEC overbilled TVA $2,187,410, which included $2,123,694 in overbilled and unsupported standby costs and $63,716 in overbilled tonnage costs.

(Summary Only)
The OIG audited the distributor compliance assessments completed through December 31, 2012, to determine if (1) the assessments were adequately planned and performed to verify distributors' compliance with key provisions of the wholesale power contract, (2) the assessments were performed in accordance with the Distributor Compliance Charter and applicable policies, and (3) there was adequate segregation between the group charged with developing, interpreting, and implementing TVA's retail regulatory policy, Retail Regulatory Affairs, and the group responsible for assessing distributors' compliance with TVA's regulatory policies and procedures, Distributor Compliance.

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 determined there was adequate segregation between Retail Regulatory Affairs and Distributor Compliance. However, certain work being performed by both groups was duplicative.

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.

  Full Report
Because of the importance of a reliable transmission system, the OIG audited the risk of significant equipment failure in the Energy Delivery (ED) organization. ED identified four specific actions in its enterprise risk management documentation to mitigate the risk of significant equipment failure. We found the identified mitigation strategy and supporting actions were appropriately designed; however, a lack of funding to the asset preservation program contributed to ED's inability to effectively reduce the risk as planned. While the risk was not being reduced as planned, ED was managing the risk by performing preventive maintenance and replacing assets as funding permitted. In addition, we found improvements were needed in ED's risk documentation. Specifically, we found certain actions included in ED's risk documentation did not directly affect the risk rating or mitigate risk. Conversely, the risk documentation lacked the preventive maintenance program and planned actions for implementing a critical spares program designed to further manage risk.

(Summary Only)
The OIG audited $4.8 million in costs billed to the Tennessee Valley Authority (TVA) by Nol-Tec Systems, Inc., to design, furnish, and install hydrated lime injection systems for SO3 mitigation at various TVA fossil plants. Our objective was to determine if the costs billed to TVA for the period January 1, 2011, through September 19, 2012, were in compliance with the terms and conditions of the contract.

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.

(Summary Only)
The OIG investigated allegations that TVA Board Chairman William "Bill" Sansom's personal financial interests and position at TVA constituted a conflict of interest and that he had a relative who worked at TVA in violation of TVA's nepotism policy. Federal conflict of interest law prohibits federal officials and employees from acting on a particular matter in their official capacity which affects personal financial interests. There was no evidence Mr. Sansom participated in any particular matter as part of his TVA duties which was related to his personal financial interests. In addition to the conflict of interest law, TVA has a policy which prohibits Board members from owning investments in distributors, entities in the electricity business and companies adversely affected by TVA's success. None of Mr. Sansom's financial interests fell into these categories. The nepotism claim was unfounded. The TVA employee in question had the same name as Mr. Sansom's son-in-law but was unrelated.

  Full Report
The OIG completed agreed-upon procedures to assist the Center for Resource Solutions (CRS) in determining TVA's compliance with the annual reporting requirements of the CRS Green Pricing Accreditation Program for the year ended December 31, 2012. The results of the procedures performed, which were related to TVA's renewable energy initiative, "Green Power Switch," were provided to the CRS.

(Summary Only)
We audited the risk program at Bellefonte Nuclear Plant (BLN) to determine the adequacy of TVA's consideration of risks associated with the construction of BLN Unit 1. The scope included BLN construction risk management program activities beginning August 2009 through November 2011 and subsequent changes to the risk management program. We determined that while a renewed emphasis has been placed on BLN's risk management program, previous program failures indicated significant improvements to the program were needed. Specifically, we identified a lack of a strong continuity in the risk management process, which affected program effectiveness. This lack of continuity included ineffective guidance and oversight of BLN's risk program by former TVA management and a lack of documentation for key risk information allowing for facilitation of the risk program. A new risk manager has been assigned to pilot and implement a new risk management process. As part of these renewed efforts, the new Risk Manager has taken steps to address these actions. We commend current BLN project management for taking steps to address guidance, oversight, and documentation. Current BLN project management recognized the failures of the initial attempts to develop and implement the risk management program, and the new processes being implemented are steps in the right direction. We verbally communicated an additional action that can be taken to ensure history does not repeat itself as the project moves forward. This action included the clarification and clear communication of (1) whether risk mitigation activities are to be included in the contingency estimate controlled at the project level and the management reserve amount controlled at the corporate level and (2) what that means in terms of the project's estimated cost.

(Summary Only)
As a result of delays and overruns on the Tennessee Valley Authority (TVA) Watts Bar Nuclear Unit 2 (WBN U2) construction project, questions have been raised about the quality of the work performed. Nuclear Construction (NC) Quality Assurance (QA) plays a key role in ensuring that work completed meets high-quality standards. The objective of our review was to determine if the NC QA program was effective in its oversight of the WBN U2 construction project. We found NC QA has generally been effective in its oversight of the construction project; however, a breakdown in the QA program resulted in a lack of oversight in one area. With the exception of the breakdown in QA discussed below, no significant issues were identified. In addition, we reviewed documentation that showed NC QA conducted oversight activities and Bechtel performed QA activities. As issues were identified, Problem Evaluation Reports (PERs) were generated to address those issues. A breakdown in the QA program related to the commercial-grade dedication program was identified by the Nuclear Regulatory Commission (NRC). Specifically, there was no oversight of the commercial-grade dedication program by QA since 2008. In response, TVA conducted an evaluation to see if problems existed in other areas. TVA's evaluation found a few areas that required minor adjustments, and those adjustments were made. Furthermore, TVA assembled an independent, technical team to review commercial-grade dedication packages, and as of May 2013, no significant issues had been identified. We also found, that while the turnover of one system has occurred, a process for transitioning the authority for the execution of the QA program from Bechtel QA to NC QA has not been implemented, which could limit the effectiveness of the NC QA's oversight efforts. The process for transition of authority from Bechtel QA to NC QA will provide evidence that the construction phase QA requirements in the Nuclear Quality Assurance Plan have been met and also help to prevent any steps or reviews from being missed. We made recommendations to management to address the findings in the report.

  Full Report
The OIG audited the costs billed to the Tennessee Valley Authority (TVA) by MPW Industrial Services, Inc. (MPW) for providing hydroblasting services at TVA locations under Contract No. 38764. Our scope included $2.33 million in costs paid by TVA from January 7, 2009, to December 27, 2011. This amount included $1.88 million paid under Contract No. 38764 and $0.45 million paid under stand-alone purchase orders which incorporated the pricing terms of Contract No. 38764. Our objective was to determine if MPW billed TVA in accordance with the contract terms and conditions.

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.
Additionally, MPW was overpaid $38,066 because certain invoices were paid twice by TVA.

(Summary Only)
The Office of the Inspector General audited the savings guaranteed to the Tennessee Valley Authority (TVA) by DeWolff, Boberg & Associates, Inc., (DBA) for work management improvement services. DBA guaranteed efficiency and productivity gains would result in minimum total cost savings to TVA of $17,971,760. Our objective was to determine if DBA complied with the terms of the contract and achieved the guaranteed cost savings. Although we did not find evidence of noncompliance with the contract, we could not determine if DBA achieved the guaranteed cost savings. We could not determine if the metrics used to measure improvements were valid, because TVA did not have management controls in place to ensure consistency. Accordingly, we could not determine the value TVA received from the $16.17 million it paid to DBA.

(Summary Only)
There have been a number of recent incidents requiring emergency response at TVA fossil plants, including the ash spill at Kingston Fossil Plant and fires at multiple plants. This review was initiated to assess TVA coal and gas fleet emergency preparedness.

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
Tennessee Valley Authority (TVA) Watts Bar Nuclear Plant Unit 2 (WBN2) management requested the Office of the Inspector General to perform a review of the commodity tracking process being implemented for the WBN2 construction project. This review was intended to help TVA gain confidence in their commodity tracking process, which is used in conjunction with other tools and metrics to gauge the project's progress.

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.

(Summary Only)
TVA provides biweekly vehicle allowances to eligible officers and key managers in accordance with Vehicle Allowance Guidelines that were put into effect April 1, 2006. Additionally, TVA maintains a light fleet of about 2,900 vehicles, which are available for assignment to any TVA employee with a business need. Business units with an assigned vehicle pay a monthly fee to TVA Fleet Services for use of the vehicle. In fiscal year 2011, TVA paid $648,050 in vehicle allowances to 65 employees. Also, business units paid approximately $9.66 million in monthly fees during fiscal year 2011 to Fleet Services for use of assigned vehicles.

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
This investigation was initiated after the Tennessee Valley Authority (TVA) Office of the Inspector General (OIG) received a complaint alleging the TVA Board of Directors (Board) failed to give proper notice as required by the Government in the Sunshine Act (Sunshine Act) when the Board selected William D. (Bill) Johnson as TVA's President and Chief Executive Officer (CEO).

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.
  Full Report
TVA's meter testing was identified as a key internal control in the revenue recognition process after TVA moved from end-use to wholesale billing. The OIG audited the adequacy of TVA's process for testing meters owned and read by TVA. The audit included (1) evaluating whether TVA meter testing policies and procedures met or exceeded identified industry standards, (2) verifying TVA tested the meters within the applicable time limits, in compliance with TVA meter testing policies and procedures, and (3) determining if TVA had procedures in place to identify all meters used to capture data for wholesale billing.

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.

  Full Report
The OIG audited TVA's fiscal year 2012 compliance with the Improper Payment Information Act of 2002, as amended. In summary, we found TVA was in compliance with applicable IPIA requirements.

  Full Report
In May 2004, the Nuclear Regulatory Commission (NRC) incorporated the National Fire Protection Association's (NFPA) Standard 805 as a voluntary alternative to the existing fire protection standards as published in Section 50.48, "Fire Protection," and Appendix R of the 10 Code of Federal Regulations (10 CFR 50). On March 4, 2009, the Tennessee Valley Authority (TVA) committed to the NRC to transition Browns Ferry Nuclear Plant (BFN) to NFPA 805 by a license amendment date of March 4, 2012.

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
At the request of Tennessee Valley Authority's (TVA) Supply Chain, we audited AREVA NP, Inc.'s calendar year 2011 rate adjustments required under the terms in its contract. The contract provided for AREVA to complete engineering, licensing, construction, and startup operations of a single Bellefonte Nuclear Plant unit by the end of 2017. The objective of our audit was to determine if AREVA's rate adjustments were in accordance with the contract terms.

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)
Tennessee Valley Authority's (TVA) Facilities Management (FM) business unit is responsible for managing TVA's facilities portfolio and providing services across TVA, such as building maintenance and grounds and property management. Within FM, Facilities Programs and Projects manages efforts for facility renovations, upgrades, major repairs, energy efficiency, sustainability, and other facilities' needs. These efforts include TVA's Facilities Asset Preservation (FAP) Program, which was designed "to ensure core facility related assets are maintained in a condition to satisfy their intended operational capabilities." The FAP team is responsible for gathering asset information, identifying deficiencies, recommending corrective actions, and implementation planning for approved projects.

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
As part of a series of reviews to evaluate the Tennessee Valley Authority's (TVA) actions to address key risks, we evaluated TVA's outage scheduling risk. The objective of this review was to evaluate TVA's outage scheduling risk to identify opportunities to improve mitigation strategies and assess whether mitigation strategies were designed appropriately to address the identified risk. Outage Scheduling was identified as a top five strategic business unit risk in the Internal Process and Procedures Risk category in FY 2011. The risk refers to failure in coordination of the outage schedule for TVA. Adherence to Standard Programs and Processes (SPP) 33.4, Outage and Derate Concurrence Process (Outage Concurrence Process), will ensure a formal outage change request process is followed by asset organizations requesting outage changes, and concurrence with outage schedules is given by all impacted organizations. This mitigation is currently ongoing.

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
The OIG audited $2.5 million in costs billed to the Tennessee Valley Authority (TVA) by G&A Environmental Contractors, Inc., for vacuuming services. Our objective was to determine if the costs billed to TVA for the period January 1, 2010, through September 30, 2011, were in compliance with the terms and conditions of the contract. In summary, we determined G&A overbilled TVA $254,060 including:
  • $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.
(Summary Only)
The OIG audited costs billed to the Tennessee Valley Authority (TVA) by Day & Zimmermann NPS, Inc. (DZNPS) for the Watts Bar Nuclear Plant's Unit 1 refueling outage during 2011. Under the contract, DZNPS was to provide the services of qualified personnel to perform modification, outage and supplemental maintenance services, and technical support services at TVA generating plants. Our audit included $27.7 million in costs billed by DZNPS from January 24, 2011, through June 19, 2011. Our objective was to determine if the costs billed were in compliance with the terms and conditions of 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.

(Summary Only)
The OIG audited costs billed to the Tennessee Valley Authority (TVA) by Day & Zimmermann NPS, Inc. (DZNPS) for the Watts Bar Nuclear Plant's Unit 1 refueling outage during 2011. Under the contract, DZNPS was to provide the services of qualified personnel to perform modification, outage and supplemental maintenance services, and technical support services at TVA generating plants. Our audit included $27.7 million in costs billed by DZNPS from January 24, 2011, through June 19, 2011. Our objective was to determine if the costs billed were in compliance with the terms and conditions of 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.

(Summary Only)
As part of a series of reviews to evaluate the Tennessee Valley Authority's (TVA) actions to address key risks, the OIG evaluated TVA's load forecast risk. Load forecast was identified as a top five strategic business unit risk in the Long Range Planning Process Risk Category in fiscal year (FY) 2011. The objective of this review was to evaluate TVA's load forecast risk to identify opportunities to improve mitigation strategies and assess whether mitigation strategies were designed appropriately to address the identified risk.

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 performed an audit of costs billed to the Tennessee Valley Authority (TVA) by Jacobs Engineering Group, Inc. for providing project planning, management, oversight, and environmental services to assist TVA in the recovery and remediation associated with the Kingston Fossil Plant Dredge Cell Incident. Our audit included about $37 million in costs billed to TVA from February 6, 2009, to December 31, 2011. Our audit objective was to determine if Jacobs billed TVA in accordance with the contract terms and conditions.

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.

(Summary Only)
As part of a series of reviews to evaluate Tennessee Valley Authority's (TVA) actions to address key risks, the OIG evaluated TVA's physical assaults risk. Physical assaults risk was identified in the 2011 Enterprise Risk Management Program. The objective of our review was to evaluate TVA employee, contractor, and visitor physical assaults risk, identifying opportunities to improve mitigation strategies and assess whether mitigation strategies were designed appropriately to address the identified risk. TVA developed a mitigation strategy to reduce risk that included (1) creating a comprehensive physical security plan, (2) expanding employee education, (3) replacing communication infrastructure and equipment, and (4) implementing a guard program.

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
As part of a series of reviews to evaluate Tennessee Valley Authority's (TVA) actions to address key risks, the OIG evaluated TVA's physical assaults risk. Physical assaults risk was identified in the 2011 Enterprise Risk Management Program. The objective of our review was to evaluate TVA employee, contractor, and visitor physical assaults risk, identifying opportunities to improve mitigation strategies and assess whether mitigation strategies were designed appropriately to address the identified risk. TVA developed a mitigation strategy to reduce risk that included (1) creating a comprehensive physical security plan, (2) expanding employee education, (3) replacing communication infrastructure and equipment, and (4) implementing a guard program.

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 OIG performed four agreed-upon procedures, which were requested solely to assist TVA management in determining the validity of the Winning Performance payout awards for the year ended September 30, 2012. In summary, we found:
  1. The fiscal year (FY) 2012 Winning Performance goals were properly approved.
  2. The actual year to date measures for the September 2012 Strategic Business Unit and Business Unit scorecards agreed with the respective supporting documentation provided.
  3. 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.
  4. 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.
(Summary Only)
TVA's Board of Directors approved a Financial Trading Pilot Program in September 2003 to hedge or otherwise limit the economic risks associated with the price of commodities covered by TVA's Fuel Cost Adjustment (FCA). At that time, the maximum Value at Risk (VaR) was not to exceed $5 million on an annual basis without the approval of the TVA Board. In May 2005 the TVA Board approved the request to expand and fully implement the Financial Trading Program (FTP). The FTP currently has an aggregate transaction limit of $130 million (based on one-day VaR) of which $90 million is allocated to natural gas hedging.

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,
  1. 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.
  2. TVA does not currently measure the performance of the FTP against defined program objectives.
  3. aR back-testing was not performed on a routine basis.
  4. TVA's communications with its customers did not sufficiently convey the FTP's impact on rates.
TVA Management generally agreed and plans to take appropriate action.

  Full Report
Because of the importance of successful capital project management, and in light of recent capital project cost overruns and schedule delays, we initiated a review of Tennessee Valley Authority's (TVA's) capital project management. The objective of our work was to determine whether the Project/Portfolio Management (PPM) function of PowerPlant meets the needs of the strategic business units (SBU).

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.

  Full Report
TVA established the Direct Load Control (DLC) program in the 1970s as a means to shift load from on-peak/high-priced periods to off-peak/low-priced periods. At the time of our audit, there were 12 distributors participating in the DLC program. Credits provided to these distributors during 2011 ranged from $5,909 to more than $1 million for a total cost to TVA of $2,365,819. The OIG audited TVA's DLC program to address concerns received regarding the benefits of the program. Our specific audit objectives were to assess the effectiveness of the program and TVA's oversight of the program. In summary, we determined the DLC program was not operating effectively, and TVA was not employing two key oversight mechanisms afforded by the DLC contract.
  • 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.
We made three recommendations that pertained to determining whether the DLC program was cost-beneficial and TVA used contractual oversight mechanisms available. TVA management generally agreed with our recommendations and findings.

  Full Report
We audited $10.4 million in costs billed to the Tennessee Valley Authority (TVA) by Hartford Steam Boiler Inspection and Insurance Company of Connecticut for nuclear Authorized Inspection Agency service under several contracts. The $10.4 million billed included (1) $4.8 million billed between October 1, 2001 and December 31, 2008 under one contract; (2) $4.1 million billed between December 1, 2007 and August 19, 2011, under second contract; and (3) $1.5 million billed between January 1, 2009, and July 22, 2011, under a third contract. Our objective was to determine if the costs billed were in compliance with the terms of the contracts. In summary, we determined Hartford had overbilled TVA an estimated $679,370, including:
  • $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.
(Summary Only)
Because of the potential usefulness of a sound lessons-learned process in completing generation construction projects effectively and efficiently, we reviewed the lessons learned process used during the construction of the Lagoon Creek Combined-Cycle Combustion Turbine. We determined Generation Construction (GC) has a process in place for lessons learned management, but we identified some potential areas of improvement in the GC process. Specifically, we determined (1) there are no documented criteria or review processes for determining what is or is not a lesson learned, (2) the process for documenting lessons learned could be improved, and (3) there were no mechanisms to reasonably assure project teams were reviewing lessons learned from previous projects or relevant lessons learned were incorporated into the project's scope. We also determined improvements can be made in sharing lessons learned across TVA organizations. TVA management generally agreed with our recommendations; however, further action is not planned for two of our six recommendations.

  Full Report
With the age of TVA generating assets, the need to understand the condition of these assets and use this information to effectively plan is critical. As a result, the OIG initiated a review to determine how TVA assesses the condition of electric assets and uses this information in planning. This review did not include assessing the condition of TVA assets. The organizations reviewed included Nuclear Power Group (NPG), Fossil Power Group (FPG), Energy Delivery, and River Operations (RO).

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
The OIG audited Tennessee Valley Authority's (TVA) craft labor staffing, which was identified by TVA as one of its top five risks in two risk categories, talent management and capacity expansion and construction. Our objectives were to assess TVA's mitigation of craft labor risks associated with competition from other companies and a shrinking labor pool and its process for identifying craft labor risks. We focused on TVA's plans with regard to contractor craft workforce. Our audit included mitigation plans as defined in TVA's Enterprise Risk Management document dated July 13, 2011 and additional mitigations for contractor craft labor within the Generation Construction, Coal Operations, Gas Operations, Nuclear Construction, and Nuclear Power Group organizations.

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
The OIG performed an interim audit of costs billed to the Tennessee Valley Authority (TVA) by Bechtel Power Corporation for providing engineering, procurement, and construction services in support of the completion of TVA's Watts Bar Nuclear Plant Unit 2. Our audit included about $397 million in costs billed to TVA from October 1, 2007 to December 31, 2009. Our objective was to determine if Bechtel billed TVA in accordance with the contract terms and conditions. We determined Bechtel overbilled TVA an estimated $1,449,752 including:
  • $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.
We recommend TVA management (1) recover $1,449,752 in overbilled costs from Bechtel, (2) ensure Bechtel separately invoices all seconded service costs, and (3) ensure seconded service costs are excluded from Bechtel's annual performance fee base.

(Summary Only)
The OIG completed agreed-upon procedures to assist the Center for Resource Solutions (CRS) in determining TVA's compliance with annual reporting requirements of the CRS Green Pricing Accreditation Program for the year ended December 31, 2011. The results of procedures applied to TVA's renewable energy initiative, "Green Power Switch," were provided to the Center for Resource Solutions.

(Summary Only)
The OIG audited $35.7 million in costs billed to the Tennessee Valley Authority (TVA) by Trans-Ash, Inc. The contracts provided for Trans-Ash to perform

(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.

(Summary Only)
The OIG assessed whether TVA performed adequate analysis in its decision to implement a new expense management application. Auditors reviewed the analysis performed to make the decision to implement the application as of May 31, 2011, as well as other documentation supporting that decision. Auditors were unable to verify TVA systems development processes were followed and system and business protocols were considered during the implementation of the application, because the project was merged with the upgrade to another system.

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 audited the electric system of Memphis Light, Gas, and Water Division (Memphis), a distributor based in Memphis, Tennessee. The objective of the audit was to determine compliance with provisions of the power contract between TVA and Memphis during the period January 2009 through December 2010. For the twelve-months ended June 30, 2010, Memphis reported it provided power to approximately 406,000 customers and earned electric sales revenue of approximately $1.2 billion.

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
The OIG audited $15.4 million in costs billed to TVA by Pressure's On, Inc. (POI), for providing hydro blasting services at the Tennessee Valley Authority (TVA) locations, including $14.82 million in costs paid by TVA to POI as of January 16, 2009. In addition, the OIG reviewed $596,789 in costs for hydro blasting services incorrectly billed under a separate contract that TVA had with POI for vacuuming services only. In summary, it was determined POI had overbilled TVA $4,145,909 including:
  • $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.
The OIG also noted numerous instances where POI did not pay its employees in accordance with the Project Maintenance and Modification Agreement (PMMA) labor provisions in the contract. In addition, POI did not submit "Weekly Statement of Payroll Compliance" reports to TVA's Contract Officer as required by the PMMA.

We recommended TVA management recover the $4,145,909 in net overbilled costs from POI and ensure POI complies with the PMMA requirements.

(Summary Only)
The OIG audited the electric system of Knoxville Utilities Board (KUB), a distributor based in Knoxville, Tennessee. The objective of the audit was to determine compliance with provisions of the power contract between TVA and KUB for the audit period July 2008 through June 2010. For fiscal year (FY) 2010, KUB provided power to approximately 197,000 customers resulting in electric sales revenue of approximately $455 million to KUB.

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
The WBN Unit 2 construction project has experienced significant schedule and cost overruns. The project was originally expected to be completed in October 2012 at a cost of just under $2.5 billion. However, TVA will not meet these targets. On April 5, 2012, TVA announced an additional $1.5 billion to $2 billion would be required to complete the project with an estimated time of completion between September and December 2015. TVA's Board of Directors approved the revised schedule and budget on April 26, 2012.

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 recognizes the problems associated with the construction of WBN Unit 2 and has publicly acknowledged them. In addition, TVA has taken several actions to address the problems identified at WBN Unit 2 and offer an accurate reflection of the progress of the project, engage and improve the relationship with the project workers, and promote transparency. Further, Nuclear Construction and TVA Corporate's planned actions include a review of the accuracy of the Bellefonte estimate, restructuring the independent Project Assurance Organization, and developing a contracting strategy for various project classifications. TVA's actions are positive and should help to improve the process for WBN Unit 2 and future projects.

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
In light of recent gas-related explosions in the utility industry, we conducted a review of Tennessee Valley Authority's (TVA) safety of gas line and gas plant operations. The objective of our review was to determine if TVA has taken appropriate steps to identify and mitigate risk associated with the operation of gas plants and gas lines. We found that the vast majority of gas-related explosions were gas line related. According to TVA personnel, TVA is not responsible for gas until it reaches the reducing stations on TVA property. This significantly decreases TVA's risk of a gas-related incident. We did identify explosions in Middletown, Connecticut and Garner, North Carolina that occurred at gas plants due to improper commissioning. In both instances, fuel gas was used to clean or purge gas pipes of debris, air, or other substances. TVA has taken steps to mitigate this risk by using compressed air instead of gas to clean or purge gas pipes.

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
On Monday December 22, 2008, the ash containment area at the Kingston Fossil Plant failed. Approximately 5.4 million cubic yards of fly ash and bottom ash were released onto land and adjacent waterways. As part of the OIG's ongoing commitment to provide oversight of the Kingston ash spill cleanup, we reviewed TVA's non-time-critical Kingston Ash Recovery Project activities.

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
At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we audited Westinghouse Electric Company LLC's billed and estimated remaining material escalation costs under Contract No. 65717. In summary, we determined Westinghouse overbilled a net $26,917 in escalation costs and overestimated the remaining material escalation costs by $137,408. In addition, we identified compensation terms in the contract that need to be clarified to reduce the potential for billing discrepancies.

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.

(Summary Only)
We initiated a review of the effectiveness of Tennessee Valley Authority's (TVA) Energy Efficiency and Demand Response (EEDR) organization. We conducted this review because energy efficiency and demand reduction initiatives are important components of TVA's plan to meet future power needs in its service territory. The objectives of this review were to determine (1) how TVA measures the effectiveness of its energy efficiency and demand response programs and (2) if its goals in these areas are being met. We found EEDR (1) has contracted with an independent consultant to provide evaluation, measurement, and verification services and (2) achieved its planned energy efficiency and demand reduction for 2011 and only missed its planned demand reduction in 2009 and 2010 by 2 MW and 16 MW, respectively. The Green Power Switch program came close to achieving its goals for 2009 and 2010; however, it fell significantly short of its goal in 2011. This report was issued for informational purposes only.

  Full Report
The Office of the Inspector General performed an audit of the TVA's compliance with the Improper Payment Information Act (IPIA) for FY 2011. In summary, we found TVA was in compliance with IPIA requirements that were applicable to TVA. In our opinion, TVA was only required to comply with the IPIA requirement to conduct a program specific risk assessment. We reviewed the process used by TVA to identify programs susceptible to improper payments and noted it is in compliance with IPIA guidance. TVA performed a risk assessment for FY 2011, and its primary programs susceptible to improper payments are its supply chain programs. IPIA defines an improper payment as any payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements.

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
The OIG audited the electric system of Meriwether Lewis Electric Cooperative (MLEC), a distributor based in Centerville, Tennessee. The objective of the audit was to determine compliance with provisions of the power contract between TVA and MLEC for the audit period July 2008 through June 2010. For fiscal year (FY) 2010, MLEC provided power to approximately 35,000 customers and reported electric sales revenue of approximately $69 million.

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
Two significant conditions impacted the OIG's determination of TVA compliance for fiscal year (FY) 2011 with the Improper Payments Information Act of 2002, as amended (IPIA).
  • 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).
Under the IPIA, TVA was required to conduct a program specific risk assessment for FY 2011. TVA determined its primary programs susceptible to improper payments were its supply chain programs. TVA determined its total amount of payments subject to review under IPIA was $10,098,354,626. The OIG reviewed TVA's process for identifying programs susceptible to improper payments and noted it is in compliance with the IPIA.

  Full Report
As part of the annual audit plan, the OIG audited Coal Quality Adjustment Reports (CQARs). Our objective was to determine if the CQARs were calculated in accordance with contract terms.

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.

(Summary Only)
We audited $67.9 million in costs billed to TVA between November 2006 and December 2009 for modification, supplemental maintenance, and technical support services provided at TVA nuclear plants by Williams Plant Services, LLC (Williams). Our objective was to determine if the costs billed by Williams were in accordance with the terms of the contract. In summary, we found TVA had been overbilled $1,229,401 as follows:
  • $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.
(Summary Only)
As a result of issues discussed during meetings at Watts Bar Nuclear Plant (WBN), an audit was initiated to (1) assess the process for remediating Problem Evaluation Reports (PER) for the WBN Unit 2 project, and (2) determine the effectiveness of remediation stemming from the PER process.

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.

(Summary Only)
OIG reviewed demurrage costs incurred from October 1, 2004, through June 13, 2011, totaling $14 million to assess why demurrage costs were incurred and what actions, if any, TVA could take to minimize these costs.

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.

(Summary Only)
We audited $314.9 million of costs billed to TVA by G-UB-MK Constructors for modifications and supplemental maintenance work at TVA fossil and hydro plants and other TVA-controlled facilities. In summary, we determined G-UB-MK's billings to TVA complied with the terms of the contract except for $3,783 in net overbillings for craft labor. The contractor agreed with our findings and plans to issue TVA a credit for the overbilled costs.

(Summary Only)
This review included identifying (1) performance trends based on Institute of Nuclear Power Operations (INPO) reports, (2) major contributing factors affecting performance trends, and (3) patterns of behavior that impact culture. Our review found Nuclear Power Group's (NPG) performance with respect to the INPO index, an industry standard in trending nuclear performance, safety, and reliability, declined through 2007 and then improved through 2010. We found outages, both planned and forced, were a major contributor to changes in performance. The majority of the unplanned outages appeared to be the result of equipment reliability issues. Factors contributing to performance improvement included a gap-based business plan and other new initiatives within the organization, including a focus on equipment reliability. As part of this project, we reviewed the following elements of NPG culture: (1) alignment, (2) progress, (3) standards, (4) accountability, and (5) attitude. We found management had taken actions that enhanced culture through alignment and progress. However, in the areas of standards, accountability, and attitude, we noted that while management had taken some corrective actions, culture could be further enhanced by addressing certain issues. We made recommendations, accordingly, to management.

  Full Report
The OIG audited the handling and processing of personally identifiable information (PII) provided to Cartus Corporation, a contractor for TVA. Our audit evaluated the (1) processes used to safeguard data transmitted from TVA to Cartus (2) handling, processing, and security of the data at Cartus, and (3) compliance with security-related contract terms. Generally, we found TVA controls for transmission of data to Cartus and its security controls for TVA data stored on its systems were effective in protecting the data. However, we identified control improvements that, if implemented, would strengthen Cartus' controls over data protection.

(Summary Only)
We reviewed the TVA compliance with the Federal Information Security Management Act (FISMA) of 2002. In summary, we determined that while TVA has made some progress in implementing information technology controls required by FISMA and work on some previously recommended actions continues, additional efforts were needed to strengthen compliance of TVA's security program with existing controls and address additional concerns. We identified opportunities to improve all control areas that we reviewed, except for TVA programs for incident response and reporting and remote access management. In addition, we identified an opportunity for TVA to improve agency-wide security oversight. TVA management agreed with our recommendations.

(Summary Only)
The OIG audited the electric system of Volunteer Energy Cooperative (Volunteer), a distributor based in Decatur, Tennessee. The objective of the audit was to determine compliance with provisions of the power contract between TVA and Volunteer for the period July 2008 through June 2010. For fiscal year (FY) 2010, Volunteer provided power to approximately 110,000 customers resulting in electric sales revenue of approximately $200 million. During the period audited, Volunteer also operated a natural gas division and a wholly owned propane subsidiary.

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
We reviewed the effectiveness of TVA's budget process. Our objective was to review the adequacy of the processes used in preparing, reviewing, and adopting the fiscal year 2011 budget. In general, we determined the overall design of the budget process was sufficient to achieve the desired results. We found nothing to indicate the benchmarking process was not sufficient to allow TVA to benchmark itself against its peers. We also found nothing to indicate the budget review and approval process was insufficient. However, we did identify opportunities where the process could be strengthened and improved. Specifically, we determined:
  • 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.
(Summary Only)
We performed four agreed-upon procedures that were requested solely to assist management in determining the validity of the Winning Performance payout awards for the year ended September 30, 2011.

Results of the procedures applied follow. In summary,
  1. 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.
  2. The actual year to date FY 2011 measures for the Strategic Business Unit and Business Unit scorecards agreed with the respective supporting documentation provided.
  3. The two actual year to date incentivized TVA Corporate balanced scorecard measures agreed with the underlying support provided.
  4. The mathematical accuracy of the payout percentages and subsequent changes were verified by the OIG through recalculation.
(Summary Only)
The OIG evaluated the (1) security controls for protecting TVA data transmitted to and handled by ActiveHealth and (2) adequacy of and compliance with TVA contract terms for security and data protection. In summary, we determined, (1) appropriate controls were in place to effectively protect personally identifiable information and protected health information transmitted to and handled by ActiveHealth, and (2) ActiveHealth complied with the security terms included in the TVA contract. However, we identified opportunities to improve (1) the ActiveHealth control environment, (2) TVA's contract terms for health services, and (3) TVA's communication of ActiveHealth's role in the health benefits package.

(Summary Only)
TVA's challenges are great with the need for financial flexibility to ensure the TVA mission of delivering low cost power is achieved. The current debt ceiling could limit TVA's financial flexibility and require TVA to seek higher cost financing options or require significant rate increases that could adversely affect the economic development of the Tennessee Valley region. Although TVA is in the process of evaluating options, TVA's position is that a financial metric (e.g., something similar to the debt service coverage ratio), rather than a debt ceiling stated in terms of an arbitrary dollar amount, would provide control of TVA's borrowing authority that is tied to TVA's ability to pay outstanding debt, similar to investor owned utilities, while still providing Congress with oversight and control.

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 generating capacity.

  Full Report
The objective of this review was to determine if the fire protection systems were adequately maintained and mitigating actions are taken to minimize the impacts of fires at TVA fossil plants. During our review, we identified a number of issues related to fire protection at TVA fossil plants. We found numerous impairments exist with fire protection systems at a number of sites, and most systems are not returned to service in a timely manner. During calendar year 2010, there were 30 impairments at Cumberland, 10 at Gallatin, 6 at John Sevier, 20 at Paradise, and 49 at Shawnee. The impairments in 2010 that have since been closed lasted between 40 and 158 days, depending on the site. We also found some fire brigade members have concerns about fire response preparedness. These concerns included poor fitting equipment, the condition of fire trucks, an inadequate staging area, bad communication equipment, not enough training, and insufficient staffing. Additionally, we found that lessons learned from fire events were not being consistently communicated across the fleet. Lessons learned were shared in different ways and were not always shared with fire brigade members. We also identified opportunities for improvement with fire prevention. During our review, we observed areas of significant coal dust accumulation and evidence of smoking at several sites. Lastly, we found instances of noncompliance with TVA policy regarding testing, inspection, and maintenance of fire protection equipment, pre-fire plans, and use of fire equipment. We identified some systems that were not inspected and tested as required, pre-fire plans were in need of updating, and fire equipment was being misused.

We recommended the Senior Vice President, Fossil Generation 1) take immediate steps to restore all 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 (a) the equipment needs of fire brigade members, including protective equipment and emergency communication devices, and take steps to provide that equipment, (b) what additional training is needed for fire brigade members and take steps to provide that training, and (c) if increased staffing is warranted for fire brigades; (3) create and implement a formal process for capturing and sharing lessons learned from fire events across the fleet, and capture all fire incidents and report them in a consistent manner in the OIC; (4) perform regular coal washdowns at all plants to minimize coal dust accumulations, and strictly enforce TVA's "No Smoking" policy; and (5) evaluate whether additional personnel are needed to properly inspect, test, and maintain fire protection equipment, update pre-fire plans to reflect current conditions, and reinforce that fire equipment is only to be used by fire brigade personnel. TVA management agreed with the recommendations.

  Full Report
The objective of this review was to determine whether TVA was meeting all requirements and planned actions for the removal of equipment containing polychlorinated biphenyls (PCBs). We found there were currently no requirements for the removal of PCB equipment, and previous planned actions for PCB equipment removal were not always completed. We believe continued use of PCB-containing equipment poses significant risk to TVA, as (1) TVA maintains one of the largest inventories of PCB equipment in the electric utility industry; (2) the condition of some PCB equipment at TVA increases the risk of an incident; and (3) TVA does not have an accurate inventory of its PCB-contaminated equipment.

We recommended the Chief Operating Officer (1) expedite removal of PCB equipment by (a) providing dedicated funding and (b) developing a standard methodology for assessing risk of PCB contaminated equipment to prioritize its removal; and (2) provide dedicated funding to expedite efforts to determine PCB-contaminated equipment inventory to prioritize and allocate funding, accordingly, for the removal of this equipment. Until the PCB-contaminated equipment inventory is completed, TVA should treat all fires involving electrical equipment as if it contained PCBs until determined otherwise.

  Full Report
The OIG audited the electric system of BVU Authority (BVU), a distributor of TVA power based in Bristol, Virginia. The objective of the audit was to determine compliance with key provisions of the power contract between TVA and BVU for the period July 2008 through June 2010. For fiscal year 2010, BVU provided power to approximately 16,500 customers resulting in electric sales revenue of approximately $49 million. During the period, BVU also operated a water division, wastewater division, and telecommunications division that included broadband, telephone, cable television, and managerial and consulting services. In addition, BVU provided billing services for the garbage collection division of the city of Bristol, Virginia.

Our audit found BVU generally complied with the contract provisions for (1) proper reporting of electric sales, (2) nondiscrimination in providing power, and (3) use of electric revenue for approved purposes. We also found BVU's multiple lines of business were adequately segregated, and the cost allocation methodology was reasonable and consistently applied. However, we found improvements were needed in (1) classifying customers, (2) obtaining manufacturing certifications from customers, (3) entering contract demand in the billing system, and (4) documenting rationale for adjustments.

BVU and TVA management agreed with our recommendations and have taken corrective actions.

  Full Report
We audited $9.58 million of costs billed to Bechtel Power Corporation (Bechtel) and subsequently to TVA by Williams Specialty Services, LLC (WSS) for asbestos abatement and valve refurbishment services at Watts Bar Nuclear Plant Unit 2 (WBN U2) under a subcontract agreement. We found the costs billed to Bechtel were inflated by at least $624,800 because the hourly rates WSS billed for craft and non-manual labor included overstated cost allowances. The inflated costs included:

(1) $274,800 of craft labor billings that resulted because WSS' craft billing rates included overstated allowances for payroll tax costs, and

(2) $350,000 for non-manual labor because the non-manual billing rates included excessive wage and burden rates.

Additionally, since Bechtel added a 2.5 percent markup when it billed TVA, the actual costs paid by TVA were inflated by $640,420. Accordingly, we recommended TVA management take action to recover $640,420 in inflated craft and non-manual labor costs.

(Summary Only)
The OIG evaluated key aspects of TVA's Section 26a process for effectiveness and efficiency. We determined (1) costs may not be fairly and consistently applied and opportunities exist to improve the cost-recovery process, (2) processes could be improved in the examination and use of customer satisfaction survey results, and (3) fee waivers were not properly documented. We also identified two other issues related to the segregation of duties for receiving and refunding application fees. Additionally, we determined that while Land & Shoreline Management has a defined list of estimated ranges for how much an applicant may pay, a listing of predetermined standard fees to be charged, methods for tracking application costs and cycle time and means for assessing customer satisfaction, use of these tools could be improved.

We made recommendations for the above to which TVA management agreed.

  Full Report
As part of our annual audit plan, the OIG (Office of the Inspector General) audited the Oak Ridge, Tennessee, electric system for compliance with the power contract with the Tennessee Valley Authority (TVA) for the period July 2007 through June 2009. Key contract provisions included (1) proper reporting of electric sales, (2) nondiscrimination in providing power, and (3) use of electric revenue for approved purposes. For fiscal year (FY) 2009, Oak Ridge provided power to approximately 16,000 customers that resulted in electric sales revenue of approximately $52 million. The Oak Ridge electric system is operated as part of the city municipal government rather than as a separate entity.

Oak Ridge and TVA management agreed with recommendations to (1) revise the account structure to comply with the Federal Energy Regulatory Commission (FERC) Uniform System of Accounts or prepare and maintain a reconciliation of the current account structure and the prescribed FERC account structure, (2) prepare the distributor annual report using (a) line item reporting guidance contained in the Accountants' Reference Manual and (b) amounts supported by the trial balance, (3) correct the general ledger to properly record the amounts due to the general fund as a payable, (4) correct billing system programming to use entire contract demand amount when classifying General Services Administration (GSA) customers, (5) correct customer misclassifications identified and implement procedures to assist in identifying residential accounts that need to be reclassified as commercial, (6) obtain TVA approval of allocation of joint costs currently being used, (7) obtain and maintain properly executed customer contracts for all GSA Part 3 and higher customers, (8) obtain appropriate approval for customer contracts on file without signatures, (9) obtain certification from customers under manufacturing schedules that meet the requirements of the schedule, and (10) implement a process to ensure all customers with contracts have the appropriate contract demand entered into the billing system and the contract demand values in the system agree with the customer's contract. TVA also agreed to implement process(es) for verifying the accuracy of distributors' annual report information to adequately identify and address reporting errors.

Oak Ridge and/or TVA management generally disagreed with recommendations to (1) review retail rates and/or operating costs and revise retail rates and/or operating costs as appropriate, (2) review and revise annual payment in lieu of tax amounts, (3) maintain a reasonable reserve before making payments in lieu of taxes, (4) revise billing system programming to use fractional data obtained from meter readings to classify customers, calculate bills, and report wholesale information to TVA, and (5) review TVA comprehensive services meter accuracy testing standards for tests performed on behalf of the distributor to ensure they comply with the standards stated in the power contract. Although Oak Ridge and TVA management interpreted the facts on which these recommendations were based differently than the OIG, we concur with actions taken and/or planned by Oak Ridge and/or TVA to correct the identified issues. Oak Ridge and TVA management disagreed with the recommendation to replace meters that do not meet accuracy standards. However, TVA management offers a new determination for accuracy of meters tested in the field versus meters tested under more accurate laboratory conditions in their comments to another recommendation in the report. The OIG suggests TVA communicate this new determination to all distributors.

  Full Report
As part of our annual audit plan, we reviewed the inspection and maintenance programs for TVA's transmission lines and structures. Specifically, we identified (1) instances in which transmission lines were not assigned a preventive maintenance inspection interval, (2) improvements that could be made to the manual and system documentation to allow recording of inspection results and additional trending of recurring maintenance issues, and (3) improvements that could be made in scheduling preventive maintenance inspections of tower lighting.

TVA management stated they agree with the facts found during the audit and with all of the recommendations. TVA management also provided clarifications related to the OIG's use of the word "assets" versus "locations" when referring to transmission line facilities and how trending of recurring maintenance issues is currently being performed. We revised the report, as necessary, to address these comments.

  Full Report
The OIG audited Sevier County Electric System's compliance with the power contract between the TVA and Sevier, a power distributor based in Sevierville, Tennessee, for the period July 2008 through June 2010. For fiscal year 2010, Sevier provided power to approximately 54,000 customers that resulted in revenues of approximately $134 million.

Our audit found Sevier generally complied with the contract provisions for (1) proper reporting of electric sales, (2) nondiscrimination in providing power, and (3) use of electric revenue for approved purposes. However, areas for improvement in contract compliance were noted relating to customer classification and customer contract maintenance. Sevier and TVA management agreed with our recommendations and have taken or are taking corrective actions. The target completion date for all corrective actions is June 2012.

  Full Report
The OIG audited Warren Rural Electric Cooperative Corporation's (WRECC) compliance with its power contract with TVA. WRECC is a power distributor based in Bowling Green, Kentucky. For fiscal year 2010, WRECC provided power to approximately 60,000 customers that resulted in revenues of approximately $157 million. WRECC also owns and/or operates nonelectric businesses including a security system and monitoring service division, a propane sales subsidiary, and a natural gas distribution subsidiary, and partially owns a nonelectric bill processing company. In addition, WRECC provides billing services for a water utility.

Our audit found WRECC was generally in compliance with the contract provisions for proper reporting of electric sales and nondiscrimination in providing power. However, we noted instances of noncompliance with other provisions of the power contract. The most important instances were related to use of electric revenues. Other areas for improvement in contract compliance were noted regarding co-mingling of electric and nonelectric funds, customer classification, and metering. We also identified one area where TVA's oversight of the distributor should be enhanced. This issue, regarding the lack of a current joint cost study, has been reported in previous OIG distributor audit reports.

WRECC and TVA management generally agreed with our recommendations and have taken or are taking corrective actions, except for our recommendation to create an independent general ledger and corresponding accounts for the security system and monitoring service division. The target completion date for all corrective actions is May 2012.

  Full Report
Marshall Miller & Associates, Inc. (Marshall Miller) was hired by the Office of Inspector General (OIG) to review the sampling and monitoring plans prepared by the Tennessee Valley Authority (TVA) for its Kingston Fossil Plant located in Harriman, Tennessee, following an ash release that occurred on December 22, 2008. Marshall Miller evaluated the adequacy and completeness of TVA's environmental recovery plans to determine whether these plans provide comprehensive and effective measures to adequately monitor the potential short- and long-term impacts to human and ecological receptors. The scope of the review included TVA's environmental recovery plans available through June 2010. In summary, Marshall Miller found no significant deficiencies in the plans or procedures used by TVA or its contractors in characterizing impacts resulting from the ash release or recovery efforts. It should be noted that the assessment of long-term impacts will be an ongoing process during and after the recovery effort.

While Marshall Miller did not find any significant deficiencies, early in the recovery process some of the analytical results did not pass prescribed quality assurance/quality control standards, and the data were invalidated. When the deficiency was noted, TVA took appropriate steps to correct the situation, and it does not appear that any decisions regarding the clean-up efforts were affected by the data quality.

Marshall Miller noted the following:
  • Bureau Veritas Laboratories used an incorrect analytical method for particulate monitoring from September 2009 to January 2010. This resulted in the Environmental Protection Agency invalidating the Particulate Matter data.
  • There has been limited research on how the ash and the metals associated with ash will affect the various organisms in the river system. Additional investigations by a variety of research organizations are underway, primarily in support of the River System Engineering Evaluation/Cost Assessment.
  • Data from air testing for metals and groundwater testing are not readily available to the public.
  • Due to "legacy" contaminants in the sediment in the lower 1.8 miles of the Emory River (associated with activities at the Oak Ridge National Laboratory) and the difficulty in removing the ash without distributing existing "legacy" and native river sediments, some ash will remain in the river after dredging is complete.
TVA management provided additional information on the findings and recommendations in this report. Marshall Miller incorporated TVA management's comments into the report as appropriate and provided additional comments where needed. TVA agreed with Marshall Miller's recommendations and has taken or plans to take action based on the recommendations.

  Full Report
TVA OIG retained Marshall Miller & Associates, Inc. (Marshall Miller) to conduct a peer review of the Stantec Consulting Services, Inc. (Stantec) report on geotechnical exploration and slope stability for the Ash Disposal Areas 2 and 3 at the Johnsonville Fossil Plant. Marshall Miller believes that Stantec's evaluations provide a reasonable assessment of the margin of safety associated with the evaluated conditions, which indicates that the facility is not in danger of imminent failure.

In Marshall Miller's opinion, Stantec followed generally accepted practices and arrived at reasonable predictions of exit gradients. With regard to Stantec's development of material shear strengths, Marshall Miller found Stantec arrived at reasonable shear strength properties for the generalized material layers and zones. However, Marshall Miller believes the calculated factors of safety against piping in the heterogeneous fill are overstated because Stantec used high values of critical gradient for the fill relative to its measured in-situ densities. Based on review of Stantec's slope stability analyses, it is Marshall Miller's opinion that Stantec performed stability analyses for static, long-term load conditions using appropriate methodologies and reasonable material properties.

  Full Report
TVA OIG retained Marshall Miller & Associates, Inc. (Marshall Miller) to conduct a peer review of the Stantec Consulting Services, Inc. (Stantec) report on geotechnical exploration and slope stability for the gypsum stack at the Widows Creek Fossil Plant. Marshall Miller believes that Stantec's evaluations of the Widows Creek gypsum stack provide a reasonable assessment of the margin of safety associated with the evaluated conditions, which indicates that the facility is not in danger of imminent failure.

Marshall Miller did find that additional analyses and corresponding documentation was needed in order to assess the overall factor of safety of the stack in the midterm and longterm. Marshall Miller also found that Stantec used a model that was 20 feet lower than the final height of the stack which does not reflect the final conditions of the pile. Additionally, Marshall Miller found that Stantec did not (1) perform adequate testing to support reliance on historical data and shear strength characterization of some materials, (2) calculate and document the exit gradient and factors of safety against piping for the 5-year build-out configuration, and (3) perform sufficient investigation of the clay foundation soils.

To address this report, TVA management had Stantec review and respond to the findings of this report. Marshall Miller reviewed Stantec's response and concluded that the additional information provided adequately addressed the concerns and recommendations identified in the report.

  Full Report
TVA OIG retained Marshall Miller & Associates, Inc. (Marshall Miller) to conduct a peer review of the Stantec Consulting Services, Inc. (Stantec) documents for proposed improvements to the stability of the Northeast Dike of the Ash Disposal Area No. 2 of the Johnsonville Fossil Plant. Based on Marshall Miller's technical review, Stantec used generally accepted methods and practices to design the stability improvements. Based on the Stantec Calculation Package, Stantec also designed a slope configuration that provides acceptable factors of safety for slope stability under long-term, steady-state seepage conditions.

Marshall Miller found the plans for construction prepared by Stantec provide suitable guidance for construction, however, they found the details of the graded filter portion of the stabilization berm do not conform closely with current standards of practice and present constructability issues at locations where the installation condition are more challenging.

To address this report, TVA management had Stantec review and respond to the findings of this report. Marshall Miller reviewed Stantec's response and concluded that the additional information provided adequately addressed the concerns and recommendations identified in the report.

  Full Report
This review was initiated because of questions raised during congressional testimony following the Kingston Ash Spill in December 2008. The objectives of this review were to determine whether the Tennessee Valley Authority (TVA) has (1) performed groundwater monitoring as prescribed by the permits and (2) found levels of constituents monitored that exceeded regulatory limits and, if so, implemented any required corrective actions.

During our review, we found that in some instances TVA was not performing monitoring as prescribed by the permits. For calendar years 2008 and 2009, TVA was monitoring for the required constituents and testing within the required time frames at ten coal combustion product (CCP) areas at seven fossil plants. However, TVA was not monitoring for all permit-required constituents at Cumberland and Johnsonville Fossil Plants. TVA has submitted letters to the Tennessee Department of Environment and Conservation (TDEC) requesting removal of all constituents that were not being tested from the permit and TDEC stated this would be approved.

Additionally, exceedances were found at eight of the nine fossil plants where monitoring is being conducted. TVA has two plants in Tennessee, Cumberland and Gallatin Fossil Plants, that have constituents that exceeded health-based limits and are working through the corrective action process described in Tennessee Rule 1200-1-7. Finally, TVA installed 29 monitoring wells at nine sites in 2010 and has committed to conducting at least one sampling event at each site by the end of fiscal year 2011.

We recommended the Senior Vice President, Environment & Technology, continue (1) plans to implement monitoring at all active CCP disposal areas, and (2) with the assessment plans and initiate corrective actions for Cumberland and Gallatin Fossil Plants. TVA management agreed with the recommendations.

  Full Report
The Office of the Inspector General reviewed the IT controls for granting and monitoring non-nuclear contractor access to TVA Assets, including general network access. The OIG found TVA's controls over processes for managing and tracking non-Nuclear contractor logical and physical access need to be strengthened to reduce the risk of loss or compromise of sensitive TVA data and physical assets. Specifically, the OIG found:
      Three enterprise risks identified by TVA's Enterprise Risk Council could be impacted by weak controls over contractor access identified in this report.
      The current maturity of TVA's contractor management process is relatively low.
      Certain contractors had access to sensitive TVA assets without proper background investigation and clearance.
      TVA's system for assigning physical access to TVA facilities does not clearly identify facilities for which special clearance is needed.
      TVA does not have a process to require complete and accurate entry for all non-nuclear contractors into the Human Resource Information System.
      The IT Customer Center does not ensure Virtual Private Network tokens used by contractors are returned when the contractor leaves TVA employment.
(Summary Only)
We audited $2.2 million in costs billed to TVA by Pressure's On, Inc. (POI), for providing vacuuming services at TVA's fossil and nuclear plants. Our objective was to determine if POI had billed TVA in accordance with the contract terms and conditions. In summary, we determined POI had overbilled TVA $686,466 including:
  1. $257,807 in unsupported costs related to (1) missing cost details and (2) labor.
  2. $6,789 in duplicate billings.
  3. $41,123 due to the use of incorrect billing rates.
  4. $386,176 of ineligible costs for (1) mobilization/demobilization, (2) per diem, (3) labor escalation, (4) equipment and materials, and (5) fuel surcharges.
  5. Credit for $5,429 in discounts that had been provided by POI.
We recommend TVA management recover $686,466 in overbilled costs from POI.

(Summary Only)
We completed agreed-upon procedures to assist the Center for Resource Solutions in determining TVA's compliance with the annual reporting requirements of CRS' Green Pricing Accreditation Program for the year ended December 31, 2010. The results of the procedures applied were provided to the Center for Resource Solutions.

(Summary Only)
In 2007, TVA issued a procedure to ensure consistancy in the tracking and handling of contract documents and associated files across TVA. The procedure established a standard method to be used by all TVA organizations for the storage and retrieval of contract documentation in Contracts Central, TVA's repository for contract records.

We conducted an audit of Supply Chain's centralized handling of contract documents to assess and determine compliance with the policy, We found Supply Chain was not in compliance with TVA' s policies regarding the use of Contracts Central. Specifically, our review of 225 contracts found only 120 contracts (53.3 percent) were available in Contracts Central. Although we identified several technical reasons for Supply Chain's noncompliance with TVA's policy, overall, it appeared many Contract Managers and Procurement Agents did not understand the importance of having contract documents located in a centralized location. Additionally, we found TVA's original Contracts Central policy had been superseded and much of the pertinent guidance and specific policy information had been ommitted.

TVA management agreed with our findings and plans to (1) reinforce the importance and benefits of Supply Chain's use of Contracts Central, (2) correct various technical deficiencies identified, and (3) provide training and enhanced guidance on the handling of contract documents.

(Summary Only)
We reviewed TVA cost recovery for tritium production under Interagency Agreement DE-A102-00DP00315 with the Department of Energy (DOE). The audit covered the period from January 2000 through December 2009 with some scope restrictions due to incomplete accounting data. We were unable to determine if tritium production costs were accurately identified and invoiced or if any negative impacts on plant operation from tritium production were reimbursed by DOE due to inadequate documentation. Specifically, Nuclear Power Group (NPG) management: (1) had incomplete accounting data, (2) negotiated rates that did not accurately reflect NPG's anticipated costs, (3) did not address $9 million in under-recovered overhead identified in the previous Office of the Inspector General audit on the tritium agreement, (4) did not invoice standby payments and overhead in compliance with agreement terms, (5) did not identify all additional operating costs caused by tritium production, (6) did not have support for $22.9 million in expenses and an unknown amount of revenues, and (7) misclassified revenue. Possible consequences of the audit findings include noncompliance with the Economy Act, noncompliance with the TVA Act resulting in rate-payer subsidy of tritium production, and unreliable NPG financial/performance data.

(Summary Only)
Tennessee Valley Authority's (TVA) fossil fleet consists of 56 operating units at 11 fossil plants in the Tennessee Valley. Through the third quarter of fiscal year (FY) 2010, TVA purchased 25.2 million tons of coal totaling $1.36 billion and burned 25.7 million tons totaling $1.50 billion. TVA's fuel inventory as of June 30, 2010, was $518,658,383. We assessed the operating effectiveness of the controls over the receipt and burning of coal at the fossil plants, including inventory adjustments. Specifically, we determined:
  1. The variance reports are generated using information in the Daily Coal Report (DCR). However, the vendor name listed in the DCR does not consistently represent the respective coal company, coal mine, or loading point, which could prevent the identification of significant issues.
  2. Variance investigations are not always coordinated between Coal and Gas Services (CGS) and plant personnel, which could impact the efficiency of the investigations.
  3. Material tests, which ensure the accuracy of the TVA scales, are not being conducted on all receipt and burn scales on an annual basis at the 11 TVA fossil plants. According to TVA personnel, Problem Evaluation Reports (PERs) have been written at Allen and Gallatin fossil plants for infrastructure deficiencies preventing material testing.
  4. Documentation is not consistently maintained for the daily belt scale checks, weekly belt scale calibrations, and material flow checks. Therefore, we were unable to determine whether these checks were consistently conducted.
  5. No formal process exists for conducting investigations on inventory adjustments that exceed the tolerable limit. According to TVA management, the Fossil Power Group (FPG) began utilizing Maximo to document and track PERs for inventory adjustment investigations in FY 2011.
(Summary Only)
The OIG performed an audit of Florence Electricity Department (Florence), a distributor of Tennessee Valley Authority (TVA) power based in Florence, Alabama. Florence also operates water, waste water, and gas departments, and provides billing services for these utilities and other municipalities. Annual revenues from electric sales were approximately $116 million in fiscal year (FY) 2009. The objective of our audit was to determine compliance with key provisions of the power contract between TVA and Florence.

Our audit of Florence found improvements were needed in the areas of (1) customer classification, (2) metering, (3) contract compliance, and (4) distributor internal controls.

In addition, we found Florence had enough cash on hand at June 30, 2009, to cover actual FY 2010 capital expenditures and provide a cash reserve equivalent to a cash ratio of about 8 percent, which is within TVA's established guidelines for an adequate cash ratio of 5 to 8 percent.

Finally, we found two opportunities to enhance TVA's oversight of the distributors that was also reported in previous Office of the Inspector General distributor audits. TVA is in the process of addressing these findings, which include (1) providing definitive guidance for distributors on what constitutes prudent expenditures and (2) updating joint cost allocations in the time period recommended by the TVA Accountants' Reference Manual.

Florence and TVA management agreed with our recommendations and have taken or are taking actions to address the recommendations. The target completion date for all corrective actions is September 2012.

  Full Report
As part of our annual inspection plan, we initiated a review of the fire protection systems at the Raccoon Mountain Pumped-Storage Plant. In meeting with plant personnel, we were informed that in July 2010, Marsh Risk Consulting issued a report which included a number of recommendations for the plant to improve fire protection at the site. Based upon this, we decided to perform a walkdown of the site and a limited review of testing/inspection documentation for a sample of the fixed fire protection systems at the site.

We noted no issues during our walkdown of the facility. However, we did note one deficiency with the testing/inspection of one of the fixed fire protection systems at the site, which was communicated to plant management. Despite the one identified deficiency, we determined that no further work in this area is warranted by our office at this time.

  Full Report
TVA entered into contract No. 65419 with Bechtel Power Corporation on October 19, 2007, to provide engineering, construction, and procurement work related to the restart of Unit 2 at Watts Bar Nuclear Plant (WBN U2). Section II-13 - Correction of the Work Prior to Commencement of Warranty Period of the contract stipulates the guidelines related to what does and does not constitute rework as it relates to determining Bechtel's performance fee. In addition, Bechtel receives an annual performance fee that is calculated as a percentage of the total amount billed during the fiscal year (FY). However, any amount of direct labor that has been associated with rework during the FY will be deducted from the total costs billed during the FY prior to the final calculation of Bechtel's performance fee for the FY.

Since inception of the contract, there have been three projects classified as rework projects-two in FY 2008 and one in FY 2009-that have resulted in a reduction of the total costs prior to calculation of the final performance fee. The rework projects in FY 2008 totaled $40,000, and the FY 2009 rework project totaled $124,000. As of September 30, 2010, there were 13 issues classified by TVA as rework that were still outstanding or being reviewed by TVA and six rework issues that had been closed with Bechtel agreeing to two of the issues

As part of our annual audit plan, we reviewed the rework projects identified at WBN U2 to determine if WBN U2 rework has been correctly identified, tracked, and billed in accordance with the contract terms. As a result of our review, we identified one area for improvement. Specifically, we determined some rework project costs are being settled based upon an estimated amount. However, the actual costs are not being tracked by the contractor in accordance with the contract terms.

We recommended the Vice President, WBN U2, if they continue to accept the cost of rework based upon an estimated amount and not the actual amount as stipulated in the contract, amend the terms of the contract to allow for an estimated amount for rework and determine what documentation should be maintained by the contractor supporting the estimated rework amount and the amount used in the calculation of the performance fee. In TVA management's response, they stated that the contract language is adequate to address the issue. TVA management stated that it is more of an issue of TVA notification to Bechtel that soft costs should be tracked for recovery. In addition, Article II-24 of the contract, even though not formally documented as a dispute, allows both parties the latitude to interpret and resolve such issues. We agree with their response.

(Summary Only)
The OIG performed an audit of Newport Utilities, a distributor for Tennessee Valley Authority (TVA) power based in Newport, Tennessee. Newport Utilities also operates nonelectric businesses, which are water and sewer utilities. Annual revenues from electric sales were approximately $50 million in fiscal year 2009. The objective of the audit was to determine compliance with key provisions of the power contract between TVA and Newport.

Our audit identified customer classification issues that could impact the proper reporting of electric sales to TVA and/or nondiscrimination in providing power to members of the same rate class. We were unable to estimate the monetary effect of the classification issues because, in some instances, information was not available; however, for those where information was available, the monetary effect on the distributor and TVA would not be significant.

We also found improvements were needed to (1) comply with other contract provisions regarding maintenance of customer contracts and (2) improve the distributor's internal controls related to the implementation of a corrected program code. In addition, we found the distributor had enough cash on hand to provide a cash reserve equivalent to a cash ratio of about 8 percent, which is within TVA's established guidelines for an adequate cash ratio of 5 to 8 percent.

TVA and the distributor generally agreed with the OIG's recommendations and have taken or are taking actions to correct the identified issues.

  Full Report
The OIG reviewed North Georgia Electric Membership Corporation (NGEMC), a distributor for Tennessee Valley Authority (TVA) power based in Dalton, Georgia. The objective of the review was to determine compliance with key provisions of the power contract between TVA and NGEMC. Our review found 34 misclassified customer accounts. While we estimated the monetary effect of the misclassifications were not significant, there were qualitative issues that were significant due to their systemic nature.

Some of the misclassifications identified resulted from an ongoing NGEMC policy to classify separately metered well pumps serving residences as residential rather than commercial and a discontinued policy to classify any facility that had living quarters, including group homes and cabins owned by individuals and/or organizations, as residential. We also identified certain opportunities to enhance TVA oversight of distributors which were also reported in previous distributor audits. TVA and NGEMC agreed with the OIG's recommendations and have taken or planned to take actions to correct the identified issues.

  Full Report
The OIG performed a follow up audit of Inspection No. 2005 522I, where we recommended TVA execute contract modifications with distributors who wish to pursue nonelectric business ventures, and TVA management agreed to do so. In addition, TVA management asserted they would formalize procedures to ensure consistent review of (1) distributor financial information and (2) business plans that propose the use of electric system revenues for nonelectric system purposes.

Our review found TVA management later decided on an alternative approach to protect its interests and those of all parties. Instead of formal contract modifications, TVA's approach now is to require written agreements with terms to protect the distributors, ratepayers, and TVA when approving the distributor to invest "reserves for renewals, replacements, contingencies, and working capital" in nonelectric business ventures. TVA management believes this approach and the resulting agreements provide greater protections for the involved parties.

TVA has designated the request evaluation and subsequent agreements for one distributor in 2008 as the "model" for handling future requests. While the new approach and "model" may prove effective for controlling risks, we noted areas where protection for the distributors, ratepayers, and TVA could be strengthened. Specifically, we found TVA has:
  1. Not documented guidelines for the review of business plans that propose the use of electric system revenues for nonelectric system purposes and the terms to be included in subsequent formal agreements.
  2. Not established guidelines to indicate when the amount of a distributor's reserves becomes excess revenues that should be returned to the ratepayer through rate reductions as required by the power contract.
  3. Not reviewed distributors previously approved to use electric system revenues for nonelectric system purposes or those using funds without approval to determine if appropriate protections (e.g., formal agreements) are in place.
We recommended the Group President, Strategy and External Relations (1) formally document procedures and guidelines for evaluating distributor requests to use electric system revenues for nonelectric system purposes, including acceptable limits for certain elements, (2) determine when distributor reserves are excessive and should be returned to the ratepayers in the form of rate reductions, and (3) review and ensure all distributors using electric system revenues for nonelectric system purposes have appropriate protections in place.

TVA management stated (1) they plan to have base line criteria/steps for evaluating distributor business plans developed by February 28, 2011; (2) they will present additional metrics to the TVA Board in the coming year for review and approval, and the target date for completing discussions with distributors and submitting revised policies for Board approval is November 2011; and (3) TVA staff will look for electric system use of revenue for nonelectric system purposes when they perform the annual review of distributor financial information. As part of this review, any unapproved use of electric system revenues for nonelectric system purposes will be evaluated for further action. Target completion date for this action is September 2011.

  Full Report
The OIG reviewed the Pulaski Electric System, a distributor for TVA power based in Pulaski, Tennessee. Pulaski also provides billing services for other city utilities and operates a broadband department that offers cable and Internet services. The OIG's review identified (1) customer classification issues that could impact the proper reporting of electric sales and/or nondiscrimination in providing power to members of the same rate class, (2) an overpayment to TVA as a result of an error in a spreadsheet formula used to calculate demand for one GSA classification reported on the Schedule 1, and (3) contract compliance issues regarding allocation of costs between service departments, customer applications for credits, calculation of credits, and maintenance of customer credit documentation. The OIG also identified certain opportunities to enhance TVA oversight of distributors reported in previous distributor audits.

TVA and Pulaski agreed with OIG recommendations and have taken or are taking actions to correct the identified issues.

  Full Report
The OIG reviewed the TVA's compliance with the Federal Information Security Management Act (FISMA) of 2002. Our review determined TVA made significant improvement in two FISMA control areas in the past year. However, overall progress in implementing information technology controls required by FISMA has slowed, while TVA continues work on previously recommended actions and redesigns some processes. Additional efforts are needed to improve compliance with existing controls and address concerns identified by the OIG in six control areas: (1) the certification and accreditation process, (2) security configuration management, (3) incident response and reporting, (4) security training, (5) remote access, and (6) contingency planning. We provided our results to TVA management for review.

(Summary Only)
The objectives of this review were to determine what actions TVA has taken since the Kingston Fossil Plant ash spill to address (1) deficiencies in ash management governance, (2) cultural issues identified, (3) stability of the other coal ash impoundments, and (4) deficiencies in the coal ash management program. The scope of this review included coal ash management and related risks. In summary, we found that since the Kingston Fossil Plant ash spill, TVA is taking appropriate actions to (1) improve ash management governance, (2) drive culture change, (3) evaluate the stability and corresponding safety factors pertaining to ash impoundments, (4) remediate risks, and (5) identify and address ash management deficiencies. Specifically, TVA has:
  1. Decided to include coal ash impoundments under the Dam Safety Program to increase governance and use the expertise of TVA's independent Hydro Review Board in assessing the safety and stability of coal ash impoundments.
  2. Taken action to drive organizational culture change, including (1) hiring an independent cadre of professionals to assess the TVA culture, (2) instituting an organizational effectiveness initiative, and (3) reorganizing to improve accountability.
  3. Hired Stantec, Inc., to evaluate the stability of facility ash impoundments and established an appropriate evaluation and remediation process.
  4. Taken immediate action to improve stability and mitigate risks pertaining to many TVA coal ash impoundments.
  5. Compiled a gap analysis of recommendations to TVA from the relevant review sources to ensure ash management problem areas are addressed. Development and implementation of quality assurance/control processes and the development of ash management policies and procedures are examples of key actions taken.
While TVA has made significant progress to date, it is important to note this is a long-term project that TVA must continue to make a priority.

  Full Report
The OIG performed four agreed-upon procedures, which were requested solely to assist management in determining the validity of the Winning Performance (WP) payout awards for the year ended September 30, 2010. Following are the results of the procedures applied:
  1. The fiscal year (FY) 2010 WP goals were properly approved. Nine change forms affecting 16 measures and/or payout percentages were also properly approved which resulted in nine increases and three decreases to the payout.
  2. Actual year-to-date data for September 2010 for all the measures on the strategic business unit and business unit scorecards agreed with respective supporting documentation provided. Subsequent changes to actual data were received through October 28, 2010, and traced to supporting documentation without exception.
  3. Actual year-to-date data for the two incentivized TVA corporate balanced scorecard measures agreed with underlying support. Subsequent changes to the net cash flow actual year-to-date data as of November 10, 2010, were received and compared to the supporting Statement of Cash Flows. These changes did not impact the payout percentage.
  4. The FY 2010 WP payout percentages provided by the Performance Analysis & Productivity organization on October 25, 2010, were recalculated and compared without exception. Subsequent changes to actual data and goals were received through October 28, 2010, and November 5, 2010, respectively. The payout percentages based on these changes were recalculated without exception. A subsequent change to the actual year-to-date data for the net cash flow measure through November 9, 2010 was received; however, this change did not impact the payout percentages.
(Summary Only)
We audited $51.2 million in costs billed to TVA by a contractor for financial management and consulting services under two contracts. Our objective was to determine if the costs billed from July 2003 through December 2008 were in compliance with the provisions of the contracts. In summary, we found $4.8 million of costs billed by the contractor were unsupported or not in accordance with the terms of the contracts as follows.
  1. $3,328,704 was overbilled because the contractor did not limit its overtime billings as it represented it would in its proposals and in the final terms of one of the contracts. (The overbilling included about $890,000 that occurred from the end of our audit period through March 31, 2010.)
  2. $514,669 in labor costs were overbilled due to unapproved job categories or incorrect billing rates, timesheet discrepancies, and unallowable administrative labor.
  3. An estimated $51,233 was billed for unallowable or unsupported travel expenses and travel agency fees.
  4. $1,020,454 in overbillings occurred because costs had been performed prior to the issuance of a contract work authorization, exceeded the CWA funding limits, or was not authorized under the terms of a CWA.
The overbillings itemized above included $108,877 that was included in more than one finding. Accordingly, the net overbilling after removing this duplication was $4,806,183.

(Summary Only)
We audited $24.9 million in payments made by TVA from 2007 through 2009 to a contractor for providing engineering, design, and construction support. In summary, we found the contractor overbilled TVA an estimated $39,915, including (1) $26,182 in overbilled labor and fee costs and (2) $13,733 in overbilled direct costs. We recommended TVA management take action to recover the overbilled costs. The contractor agreed with our findings and recommendations.and stated it would issue a credit invoice to TVA.

(Summary Only)
We audited $6.9 million in payments TVA made to a contractor for providing labor, material, and equipment to reclear or provide maintenance for existing transmission line right-of-way areas under two contracts from January 5, 2004, through April 19, 2010. In summary, we found the contractor had overbilled TVA about $1,400 due to miscellaneous billing errors. However, TVA's invoice approvers had found and adjusted most of the errors prior to paying the contractor.

(Summary Only)
This review was the result of broad interest surrounding the safety and condition of TVA dams after the ash spill at the Kingston Fossil Plant. The objectives of this review were to determine if TVA's Dam Safety Program identified and adequately addressed significant risks, was in compliance with TVA policies and procedures as well as applicable laws and regulations, and encompassed all the aspects of a comprehensive dam safety program. This review found TVA was taking steps to identify and mitigate its risks; adhering to the federal guidelines for dam safety with a few exceptions; and had a comprehensive dam safety program, but opportunities existed to strengthen the program. Specifically, we found:
  1. TVA was moving from being reactive to proactive by mitigating and anticipating risks. However, based on interviews with TVA plant personnel, we identified improvement opportunities that would further enhance the identification and mitigation of dam safety risks.
  2. TVA's policy was to follow the federal guidelines for dam safety, although not required under federal law. TVA is adhering to the federal guidelines with the exception of certain aspects of the operations and maintenance (O&M) manuals, training and awareness program, and emergency action plans (EAPs).
TVA management agreed with our findings and recommendations and has taken or plans to take corrective actions.

  Full Report
The OIG reviewed TVA's storage and handling of anhydrous ammonia to determine whether (1) TVA's policies and procedures complied with relevant ammonia-related Occupational Safety and Health Administration (OSHA) and other federal regulations, and (2) TVA fossil plants were in compliance with TVA's policies and procedures covering ammonia storage and management. In addition, we assessed the general physical security surrounding TVA's ammonia storage tanks and related appurtenances.

In summary, we found TVA has two procedures, TVA Safety Procedures 219 and 901, which are intended to implement the requirements of OSHA 29 CFR 1910.119. However, our audit disclosed (1) TVA does not have a formal policy addressing the requirements of American Natonal Standards Institute (ANSI) Standard K61.1 (CGA Standard G-2.1) - Storage and Handling of Anhydrous Ammonia or OSHA 1910.111, "Storage and Handling of Anhydrous Ammonia;" (2) TVA's Procedure 219, "Process Safety Management," does not address all of the requirements included in OSHA 1910.119, "Process Safety Management of Highly Hazardous Chemicals;" and (3) certain sites did not (a) complete all of the process hazard analysis requirements included in Procedure 219, (b) certify their operating procedures on an annual basis, (c) follow ammonia training requirements for its employees or have a mechanism for ensuring the required training of its employees who handle ammonia or perform maintenance on ammonia systems was timely, and (d) satisfy the nameplate and/or marking requirements for its ammonia storage tanks as required by ANSI Standard K61.1.

We also found there was no "trigger" to inform visitors or nonplant TVA personnel that ammonia training may be required prior to entering the plants other than (1) Procedure 901, which requires that "Ammonia Awareness trainin shall be required for all employees or visitors to plants with SCR or any employee who may have exposure to ammonia," or (2) reliance upon the visitor's or nonplant employee's site contact for such information.

(Summary Only)
OIG reviewed the Dickson Electric System (Dickson), a distributor for TVA power based in Dickson, Tennessee. The OIG's review found (1) customer classification issues that could impact the proper reporting of electric sales and/or nondiscrimination in providing power to members of the same rate class; (2) noncompliance with certain power contract provisions in following the Federal Energy Regulatory Commission chart of accounts; and (3) internal controls could be strengthened related to certification documentation for manufacturing customers, accuracy of contract demand entered in the billing system, and executed contracts for accounts with a contract demand value in the billing system. We also found TVA could enhance oversight of the distributors by clarifying that the Standard Industrial Classification (SIC) code to be used to determine eligibility for the manufacturing schedules should be the SIC code for the customer's facility that's located in the distributor's service area.

TVA and Dickson agreed with the OIG's recommendations and have or are taking actions to correct the identified issues.

  Full Report
As part of our annual audit plan, we reviewed the process for ensuring that counterparty credit analysis is performed and monitored. We identified issues related to the cultural factors affecting the credit risk monitoring process, performance of initial credit analysis, and monitoring of counterparty creditworthiness. Specifically, we determined that Corporate Credit has historically lacked authority to determine which counterparties require a credit analysis and when performance assurance is required. Because of the lack of a central, governing body, the process has become siloed with business units establishing their own criteria for requiring a credit analysis and deciding whether to implement Corporate Credit's recommendations. As a result, we identified counterparties that met the business unit's (BU) guidelines or Corporate Credit's expectations of requiring a credit review, but a request for credit analysis was not made by the business unit. We also identified issues related to lack of documentation supporting the credit analysis and the counterparty creditworthiness monitoring processes. In addition, we determined that Corporate Credit relies heavily on commercial credit ratings in both initially determining and monitoring a counterparty's creditworthiness.

The credit analysis, performance assurance, and monitoring processes were not always performed timely. Specifically, we identified (1) BU requests for credit analysis made either less than one week prior to or after the contract start date; (2) credit memos dated after the contract date; (3) financial analyses conducted with outdated financial statements; (4) contracts executed with outdated credit memos; and (5) contract-required performance assurance not obtained in a timely manner. In addition, we determined that active counterparties were not being consistently monitored. Treasury agreed with all of the recommendations, with the exception of one related to the monitoring of the BU activity by Corporate Credit to ensure compliance with the Credit Standard Program and Processes and specific BU policies related to counterparty credit risk management. The OIG revised the report and recommendations, as necessary, to address the disagreement.

(Summary Only)
TVA OIG retained Marshall Miller & Associates, Inc. (Marshall Miller) to conduct a peer review of the Stantec Consulting Services, Inc. (Stantec) stability calculations and construction documents for the Dike C Buttress at the Kingston Fossil Plant (Kingston). Dike C refers to the remaining section of the Kingston coal ash containment that did not fail in the December 22, 2008, spill. It is Marshall Miller's opinion that the planned Dike C Buttress produces stability enhancements that are sufficient based on Stantec's drained slope stability analyses. Marshall Miller also believes that the construction improvements will satisfactorily address issues of "piping"/internal erosion, surface erosion, and scour over those Dike C areas that will be covered with an aggregate filter and be buttressed. However, Marshall Miller found that the specific design bases/criteria, relative improvement in stability, and reasoning for certain variations in the buttress configuration were not well documented within the materials that were supplied for review. The significance of the Marshall Miller observations and recommendations are dependent on the approach and conservatism that are applied in the design of the final closure plan. To address this report, TVA management had Stantec review and respond to the findings of Marshal Miller's report. TVA management and Stantec provided additional information on the findings and recommendations in Marshal Miller's report. Marshall Miller concluded that the additional information provided adequately addressed the concerns and recommendations identified in its report.

  Full Report
As part of the Office of the Inspector General's (OIG) ongoing commitment to provide oversight in this area, we assessed Tennessee Valley Authority's (TVA) Kingston ash spill clean-up and recovery efforts. We assessed TVA's progress in two areas: (1) the clean-up of the ash and returning the area to its previous condition and (2) reparations to victims and restoration of the community.

We found comprehensive efforts have been completed and are still ongoing pertaining to the clean-up of the spill. TVA is making significant progress in the clean-up and continues to consider human health and the environment in the recovery. Specifically, TVA (1) met its goal of removing the time critical ash necessary to reopen the Emory River by the end of May 2010, (2) implemented a removal plan for non-time critical ash in spring 2010 to facilitate a smooth transition between clean-up phases, (3) developed a good working relationship with the Environmental Protection Agency (EPA) and the Tennessee Department of Environment and Conservation (TDEC) to manage and facilitate the clean-up, and (4) coordinated with EPA and TDEC to provide continuous environmental monitoring.

We found TVA made a concerted effort to address restoration and regain public trust. Specifically, TVA immediately established a process to handle real and personal property, loss of business, and mileage claims. In addition, TVA's adjudication of the claims was consistent and in accordance with approved processes and guidelines. Other TVA actions to restore the community and regain public trust included, (1) committing $43 million to economic development in Roane County, (2) initiating projects to improve community infrastructure, lessen the impact of recovery operations on the public, and promote Roane County, (3) promoting the sharing of information and coal ash research, (4) implementing various mechanisms to improve communications, address inquiries, and provide information to the Kingston residents and media, and (5) providing independent health screenings.

  Full Report
Marshall Miller & Associates, Inc. (Marshall Miller) was engaged by the Tennessee Valley Authority (TVA) Office of Inspector General to review the Transportation and Disposal Plans prepared by the Tennessee Valley Authority (TVA) in response to the ash release that occurred on December 22, 2008 at its Kingston Fossil Plant (KIF). Specifically, Marshall Miller was asked to determine if appropriate steps are being taken to minimize the environmental impacts and if regulatory requirements are being met. In summary, Marshall Miller found that TVA is taking appropriate steps to minimize the environmental impacts of transporting ash from KIF to the Arrowhead Landfill in Perry County, Alabama. Furthermore, no significant deficiencies in documents reviewed, regulatory requirements, or in the landfill operations were found. Marshall Miller found at the Arrowhead Landfill that the (1) ash removal and rail car wash systems and procedures appear to be adequate for minimizing the potential for residual ash to enter the nearby surface water, (2) storm water management practices appear to be effective for segregating and managing storm water runoff, (3) roads, work, and vegetated areas appear to be maintained such that sediment runoff is minimized, (4) surface water features in the immediate vicinity did not exhibit signs of excess sedimentation, debris build-up, or other potential adverse impacts that could be associated with a landfill, and (5) leachate management and disposal practices appear to minimize, to the extent practicable, the potential for off-site exposure from ash constituents.

While Marshall Miller did not find significant deficiencies in the operation of the landfill, several areas were noted where improvements could be made. The Rail Yard and Landfill Best Management Practice Plans do not effectively describe and document the actual activities, procedures, equipment and operations that were observed during Marshall Miller's site visit on April 21, 2010. The Spill Prevention Control and Countermeasures Plans appear to provide adequate protection; however, the Plans do not include spill volume estimates for certain spill scenarios, discussion of secondary containment for mobile tankers, and locations for spill kits and equipment. Lastly, Marshall Miller noted one of the National Pollutant Discharge Elimination System discharge points is located at a point that could be affected by runoff from land that is not part of the landfill. This issue had already been identified and is currently being addressed by the landfill owner.

TVA management agreed with the recommendations and we concur with their planned and completed actions.

  Full Report
Marshall Miller & Associates, Inc. (Marshall Miller) was engaged by the Tennessee Valley Authority (TVA) Office of Inspector General to review the adequacy and completeness of environmental recovery plans prepared by TVA in response to the ash spill that occurred on December 22, 2008, at the Kingston Fossil Plant (KIF). Generally, Marshall Miller found no significant deficiencies in any of the proposed alternatives for the restoration of the Swan Pond Embayment, including the selected alternative. The documents prepared by TVA appear to be substantially in compliance with applicable regulatory requirements stated in the Administrative Order and Agreement on Consent between TVA and the United States Environmental Protection Agency (EPA) and meet the removal action objectives outlined in the Non-Time Critical Removal Action Embayment/Dredge Cell Engineering Evaluation/Cost Analysis or as is more commonly known the EE/CA. There were some discrepancies noted in the Human Health Risk Assessment, with regard to certain selected input parameters, such as toxicity and exposure factors. However, since the selected alternative includes the removal of all ash, any risk associated with leaving the ash in place is reduced, and revisions to the risk assessment are not necessary. TVA has committed to incorporating the findings in future Human Health Risk Assessments. While Marshall Miller found no significant deficiencies in any of the proposed alternatives, the following observations were noted:
  1. Both the EE/CA and Non-Time Critical Removal Action Embayment/Dredge Cell Action Memorandum (Action Memorandum) are intended to provide only a conceptual design of each of the three alternatives. Since an alternative has been selected, a more detailed design will be needed, along with revised sampling plans for monitoring potential environmental impacts during excavation of the ash and closure of the Dredge Cell. Additionally, the EE/CA provides limited detail on the long-term monitoring of various media for potential environmental impacts.
  2. A more detailed understanding of groundwater flow and associated contaminant migration from the Dredge Cell to adjacent surface water is required in order to properly establish locations for long-term monitoring of wells.
TVA management agreed with our findings and recommendations and plans to take or has taken corrective actions.

  Full Report
The Inspector General (IG) Criminal Investigator Academy (IG Academy) was officially established in February 1994 by a Memorandum of Understanding between the Federal Law Enforcement Training Center (FLETC) and the President's Council on Integrity and Efficiency (PCIE). The training academy is located at FLETC in Glynco, Georgia. The PCIE was superseded by the Council of the Inspectors General on Integrity and Efficiency (CIGIE) under the Inspector General Reform Act of 2008. Therefore, CIGIE assumed accountability for the IG Academy. In this review which was performed as a service for CIGIE, we found a definite lack of resources for the IG Academy, which impacts the learning methodologies utilized and the overall quality of the programs being delivered. If the IG Academy is to exhibit the attributes of an effective training program, CIGIE must provide it with human capital and infrastructure resources, including instructional, information technology, curriculum, and administrative support.

We recommended CIGIE consider the following resource needs, among others, for the IG Academy:
  1. Staffing or access to staffing to conduct timely updates of curricula and lesson plans, assist in instructional systems design, and teach courses
  2. Information technology support
  3. The implementation of an electronic learning management system-a software application that provides, among other assets, administration, documentation, tracking, and reporting of training programs, classroom and online events, e-learning programs, and training content
  4. Administrative support
  5. The means to address a legal support deficiency
Remarkably, the IG Academy has been able to provide training to investigators who consistently give very positive feedback despite the lack of resources identified in this report. Our review revealed a small but dedicated staff achieving far more than the bare statistics suggest should be possible. The Director and her staff are to be congratulated for holding together a program that enjoys the support of the majority of the IG community and continues to provide a valuable service.

  Full Report
Since 1933, Tennessee Valley Authority's (TVA) dam and reservoir construction program has acquired approximately 1.3 million acres of land for the creation of 34 reservoirs in five of the seven states in the Tennessee Valley region. Water flooded approximately 470,000 acres as part of the construction and operation of the reservoir system. Approximately 508,000 acres have been transferred or sold primarily to other federal and state agencies for public uses, leaving approximately 293,000 acres currently owned by TVA and managed to meet development needs and improve the quality of life in the Tennessee Valley. These reservoir properties, together with adjoining private lands, have been used for public parks, industrial development, commercial recreation, residential development, and a variety of other needs associated with local communities and government. Section 4(k)(a) of the TVA Act gives TVA the power "to convey by deed, lease, or otherwise, any real property in the possession of or under the control of the Corporation to any person or persons, for the purpose of recreation or use as a summer residence, or for the operation on such premises of pleasure resorts for boating, fishing, bathing, or any similar purpose."

As part of our annual audit plan, we reviewed recreational land transactions. Our audit objectives were to assess the (1) process for entering into recreational land transactions and (2) monitoring and enforcement of those transactions as of August 26, 2009. In addition, our review included information related to the valuation of campgrounds and marinas. As a result of our review, we identified several areas for improvement. Specifically, we determined (1) Stewardship Guidelines do not include adequate criteria to provide for consistency in awarding recreational land agreements; (2) licenses have been used for long-term encumbrances of recreational lands; (3) no formal process is in place to track changes in campground or marina ownership which could affect fees charged; (4) reevaluations of annual fees have not been consistently performed; (5) reviews of monthly invoicing for campground and marina operators may not be adequate; (6) TVA does not have an accurate listing of recreational properties that hinders adequate monitoring; (7) no process is in place for identifying data errors or noncompliance issues related to agreement terms, other than "visual" violations on the properties; (8) TVA does not exercise its right of reentry for properties sold under Section 4(k)(a) when the properties are used in violation of the deed; (9) structures have been built on TVA properties without TVA approval; (10) sporadic usage of "approvable actions" (i.e., permits issued after construction or changes have been made to the property without TVA approval); and (11) TVA faces reputational risk due to external and internal cultural factors, primarily related to the monitoring and enforcement of violations and encroachments.

TVA management agreed with our recommendations and is taking corrective action to address these issues.

(Summary Only)
OIG reviewed the Lenoir City Utilities Board (LCUB), a distributor for TVA power based in Lenoir City, Tennessee. LCUB also operates nonelectric businesses that include gas, water, and sewer utilities. The OIG's review found multiple concerns, including (1) customer classification and metering issues that could impact the proper reporting of electric sales and/or nondiscrimination in providing power to members of the same rate class; (2) noncompliance with certain power contract provisions on executing customer contracts and allocating joint costs between service departments; and (3) weak internal controls related to accuracy of contract demand entered in the billing system and policies over charitable contributions. We also found TVA could enhance oversight of the distributors by developing guidance regarding verification of Standard Industrial Classification (SIC) codes to ensure a company qualifies to receive certain credits.

TVA and LCUB agreed with the OIG's recommendations and are taking actions to correct the identified issues.

(Summary Only)
We reviewed the design of a TVA contractor's process for administering subcontracted work for the Watts Bar Nuclear Plant Unit 2 construction project. Specifically, we reviewed the contractor's (1) invoice review process, (2) process for scheduling work, and (3) process for ensuring subcontractor work meets the contractor's specifications. In addition, we made inquiries regarding concerns raised about the management of measuring and testing equipment (M&TE). Although we performed interviews and reviewed documentation to determine how the contractor schedules subcontracted work, we did not test the effectiveness of this scheduling. Our audit determined the design of the invoice review process was sufficient to achieve the desired results, and we found nothing to indicate the contractor's process for ensuring subcontractor compliance with contractor specifications was ineffective. However, we determined (1) invoices were not being approved by the engineering or construction manager as required by the subcontract administration procedure; (2) verification of the qualifications of certain key subcontractor personnel was not performed; (3) subcontractor invoices were not compared to the contractor's invoice concurrence forms to ensure TVA reimbursed the contractor accurately; and (4) shortages of measuring and testing equipment caused work inefficiencies and were identified as a potential cause of future work inefficiencies and/or delays. In addition, we identified one instance where travel time and mileage for a subcontract employee to travel to the job site to prevent their badge from expiring was billed to TVA. TVA management agreed with our recommendations and will ensure the contractor (1) amends the Subcontract Administration Procedure to provide review and approval authority to the Project Director or his designee for subcontractor invoices, (2) reinforces their process related to delegation for subcontract invoice approvals by reviewing subcontract invoice approval authorization letters to verify they are current, and (3) transfers the responsibility for M&TE from Unit 2 to Unit 1. In addition, TVA management agreed to evaluate the conditions surrounding termination of badges for subcontractors on a case-by-case basis to determine the most cost-efficient arrangement and will begin adding subcontractor invoices to the list of randomly reviewed billing data. TVA management agreed with our recommendations and will ensure the contractor (1) amends the Subcontract Administration Procedure to provide review and approval authority to the project director or designees for subcontractor invoices received, (2) reinforces its process related to delegation for subcontract invoice approvals by reviewing subcontract invoice approval authorization letters to verify these are current, and (3) transfers the responsibility for M&TE from Unit 2 to Unit 1. In addition, TVA management agreed to evaluate the conditions surrounding termination of badges for subcontractors on a case-by-case basis to determine the most cost-efficient arrangement and will begin adding subcontractor invoices to the list of randomly reviewed billing data.

(Summary Only)
The OIG performed a review of the City of Scottsboro Electric Power Board (Scottsboro) which is a distributor for TVA power based in Scottsboro, Alabama. Scottsboro also operates a telecommunications department that offers cable, internet, and telephone services. Also, Scottsboro is one of four distributors to which TVA granted retail rate setting authority. In 2002, TVA Board of Directors approved and made available to distributors six wholesale power contract flexibility options. One of these available options terminated TVA's contract authority and obligations regarding retail rates. Four distributors (Scottsboro, Knoxville Utilities Board, Memphis Light, Gas and Water, and Meriwether Lewis Electric Cooperative) were granted this authority. As a result, these distributors have the authority to determine the retail rates charged to its customers with no or limited oversight by TVA. The TVA Board, however, did not relinquish the responsibility to ensure the power purchased is sold and distributed to the ultimate consumer without discrimination among consumers of the same class, and no discriminatory rate, rebate, or other special concession will be made or given to any consumer. According to agreements with three distributors, the options were provided (1) because the electric utility industry was undergoing changes and restructuring, and (2) to prepare for the prospect of legislation further altering the industry and the relationship between TVA and its distributors. The decision previously made by the TVA Board of Directors to allow the four distributors to regulate their own retail rates significantly increases the reputational risk to TVA surrounding their role as a regulator. The Office of the Inspector General (OIG) will address this issue separately after additional reviews are undertaken.

Our review of Scottsboro found issues involving customer classification and metering that could impact (1) the proper reporting of electric sales and/or (2) nondiscrimination in providing power to members of the same rate class. We also identified two other potential power discrimination issues related to Scottsboro (1) providing a specialized industrial rate to only one customer and (2) not passing wholesale fuel cost adjustments and wholesale rate increases/decreases to all customers. We were unable to estimate the monetary effect of all the classification and metering issues because in some instances information was not available; however, for the one instance where information was available, we estimated Scottsboro owed TVA approximately $88,000 in wholesale demand charges.

In addition, we found Scottsboro (1) had more than enough cash on hand to cover planned capital projects and provide a cash reserve of about 2 percent; however, this is less than TVA's established guidelines for adequate cash reserves of 5 to 8 percent and (2) used electric system funds to pay for expenses of the telecommunications department without loan documents in place showing principal and interest payments and recourse protections. We also found improvements were needed to comply with contract provisions regarding (1) the comingling of electric department funds and general ledger accounts with the telecommunications department and (2) costs not being allocated according to the most recent joint cost study. Finally, we noted Scottsboro's internal controls could be improved related to the (1) approval of retail rates, (2) documentation of retail rate schedules, (3) billing practices, and (4) customer contracts, monitoring of data changes.

In this review, we identified three opportunities to enhance TVA's oversight of the distributors, two, prudent expenditure guidance and performance of a current joint cost study, of which were also identified in previous distributor audits. As mentioned earlier, Scottsboro is one of four distributors to which TVA granted retail rate setting authority. For the four distributors with this authority, we found TVA had not developed guidance regarding necessary controls to ensure retail rates are properly designed, approved, and implemented to prevent discrimination or the perception of discrimination in providing power to customers.

We recommended the Group President, Strategy and External Relations, work with Scottsboro to (1) remediate classification, metering and other potential discrimination issues, (2) execute loan documents for internal loans between the electric department and telecommunications department (3) comply with contract provisions and (4) improve internal controls. In addition, the Group President, Strategy and External Relations, should (1) develop and provide guidance on controls over designing, approving and implementing retail rates for distributors who have authority to set their own retail rates and (2) review and recover amounts due to TVA for one customer without a demand meter. Scottsboro and TVA management agreed to take corrective action for some recommendations in this report. For the recommendations where Scottsboro did not agree or did not respond, the OIG maintains the recommendations would be beneficial to Scottsboro. TVA management stated they could not implement several recommendations because TVA does not regulate Scottsboro's resale rates. The OIG, in regards to TVA's contention that because they do not regulate Scottsboro's resale rates they cannot implement the recommendation regarding providing guidance on controls over designing, approving, and implementing retail rates for distributors who have authority to set their own retail rates, the OIG maintains that TVA should provide such guidance as part of its responsibility to ensure nondiscrimination. Also, the OIG concurs with TVA and Scottsboro's planned actions to evaluate the reinstatement of the retail rate regulation provisions in the power contract.

  Full Report
As part of our annual audit plan, we audited $35.07 million in costs billed to TVA by a contractor for providing quality control inspections and nondestructive examinations under two contracts. In summary, we found TVA had been overbilled $159,662 under one of the contracts, including (1) $136,030 in overstated payroll taxes, insurance, and related performance fees, (2) $18,228 in ineligible labor costs, and (3) $5,404 in duplicate fees. The contractor agreed with our findings and plans to reimburse TVA for the overbilled costs.

(Summary Only)
This review was the fourth in a series of reviews that will benchmark TVA's performance in key areas and answer the question, "How is TVA doing in regard to environmental performance." In conducting this review we: (1) assessed environmental performance, including key performance measures and, (2) evaluated TVA's performance relative to available benchmark information, and (3) identified key management challenges that could affect how successful TVA is in achieving these strategic objectives. Our report found that overall TVA's results in the area of environmental performance are mixed. In summary:

The ash spill at the Kingston Fossil Plant represented one of the largest environmental disasters in U.S history and demonstrated TVA's poor performance in managing coal ash. The ash spill released 5.4 million cubic yards of coal ash containing a number of toxic substances into the environment. As we reported previously, the culture surrounding the management of coal ash at TVA reflected a culture that coal ash was unimportant and relegated to the status of garbage at a landfill. There was very little recognition of the potential hazard to the public and the environment. TVA is now taking steps to clean up the spill, assess the stability of other ash ponds, and improve ash management practices. More importantly, TVA has taken effective steps to address the cultural problems that led to the spill.

TVA recently changed its approach to measuring its environmental performance. It now measures twelve industry-accepted metrics identified by the Global Reporting Initiative and six (6) measures for which there are not good industry benchmarks.

Through the production of energy by its coal-fired plants, TVA produces a large amount of air pollutants. While it has made advances in the reduction of air emissions over the last several decades, TVA, along with other utilities, is still a polluter based on the nature of its business. TVA has incurred high capital investments to comply with evolving environmental requirements, and the future costs of compliance and pending legislation addressing air pollution and climate change will continue to put upward pressure on power rates.

We assigned TVA a rating of "fair" for measures related to clean energy generation and renewable generation. This rating was achieved in large part due to TVA's hydro production efforts. However, pending standards may eliminate the use of hydro production as a renewable generation source. Additionally, hydro production is not a consistent source of generation due to fluctuating precipitation.

TVA performs in the middle of the pack compared to its peers with respect to measures such as number of "Reportable Environmental Events," amount of environmental fines, generation of low-level radioactive waste, and office materials recycled. However, TVA lags other utilities in the removal of polychlorinated biphenyl equipment. In two other categories, the amount of coal combustion products recycled and the Certified Clean Marinas, TVA performs comparatively well.

It is important to note that TVA faces many significant management challenges in incorporating effective environmental amelioration measures into its operations. Our report discusses the top five challenges that affect environmental performance, including: (1) increased environmental regulations related to sulfur dioxide (SO2), nitrogen oxide (NOx), mercury, carbon dioxide (CO2), and coal combustion waste disposal; (2) cleanup of the Kingston Fossil Plant ash spill; (3) remediation or improving stability of the ash and gypsum impoundments at TVA fossil plants; (4) mandated renewable portfolio standards; and (5) ability to maintain TVA's current low-cost of power while meeting environmental regulations.

  Full Report
We performed an audit $3.3 million in payments made by TVA to a contractor for geotechnical services between January 2003 and July 15, 2009. In summary, we determined the contractor overbilled TVA $395,479 as follows:
  1. $216,865 in labor costs, including (1) $110,016 due to the use of hourly billing rates instead of actual wages and markup as specified by the contract's compensation section, (2) $98,681 for overtime costs the company did not incur, and (3) $8,168 for miscellaneous duplicate and unsupported charges.
  2. $66,071 in estimated travel costs, because the contractor did not bill actual expenses as required by the contract.
  3. $55,524 in estimated drilling, sampling, and equipment costs, due to incorrect billing rates and unsupported costs.
  4. $51,224 in vehicle charges, because the contractor (1) billed both daily rates and mileage rates for certain vehicles and (2) could not document the accuracy of the billing rates it used for mileage.
  5. $5,795 in subcontractor costs, because the contractor billed more than its actual costs for the subcontracts.
The contractor agreed it should reimburse TVA at least $173,162 ($98,681 in labor costs, $66,071 in travel costs, $2,615 in vehicle charges, and $5,795 in subcontractor costs). The contractor also provided additional explanations and documentation for certain costs and requested TVA take into consideration certain extenuating circumstances in determining the total amount that should be reimbursed to TVA.

(Summary Only)
TVA Office of the Inspector General retained Marshall Miller & Associates, Inc. (Marshall Miller) to conduct a peer review of the report entitled "Report of Geotechnical Exploration and Slope Stability for Dike C," prepared by Stantec Consulting Services, Inc. (Stantec) of Lexington, Kentucky. In summary, it is Marshall Miller's opinion that Stantec generally performed a reasonable scope of investigation for the portion of Dike C covered in its report and applied appropriate investigative methods and evaluation techniques. However, according to Marshall Miller, Stantec applied site-wide characterization and application of shear strength parameters even though areas of significantly weaker material were identified. In addition, there was a lack of information on seepage and material conditions nearer the downstream toe of Dike C, which caused additional uncertainty about the Stantec study and its associated conclusions and opinions about the Dike C conditions. To address Marshall Miller's report, TVA management had Stantec and AECOM review and respond to the findings in this report. TVA management and its contractors disagreed with many of the findings and recommendations. Marshall Miller provided additional comments in response to AECOM and Stantec responses. In summary, Marshall Miller stands by the findings in the report and disagrees with some of the methodologies used by Stantec to evaluate Dike C. However, Marshall Miller feels that the Dike C improvement planned actions, referenced in the Stantec and AECOM responses, address or will address most of its findings and recommendations. The remaining findings and recommendations not fully addressed were not considered substantial.

  Full Report
We reviewed a contractor's tool program for the Watts Bar Nuclear plant (WBN) Unit 2 construction project. Our objective was to assess the procedures and key control activities used to track and account for tools used in the Watts Bar Nuclear (WBN) Unit 2 construction project. Our review of the WBN Unit 2 tool program determined the contractor's inventory controls were not functioning as intended. Currently, there are significant weaknesses related to tools inventory, checked-out tools, and tools received but not entered into the system processes. Specifically, for the items sampled and reviewed from the contractor's tool inventory system, we could not locate 55 percent of the tools valued at $210,352. In addition, no controls existed to ensure (1) the tools taken from the tool room after hours were properly checked out and (2) random inventories were performed as required by the contractor's procedure. We also identified individuals with tools checked out in their name who (1) had 100 or more tools checked out, (2) had been terminated, or (3) could not locate the tools. Further, we determined 10,948 items totaling $328,137 were paid for but were not received into the contractor's inventory system and we also identified inaccurate information in the inventory system due to keying errors. In addition, we found many issues described above had been cited in previous audit work. We made recommendations to contractor management and TVA. TVA management agreed with most of our recommendations and plans to (1) conduct an inventory count of the tool room and sea land containers, (2) conduct routine cycle counts of large dollar items, (3) implement an exception report to identify inventory with negative quantities or costs in the tool inventory system, (4) properly account for tools removed from the tool room after hours, (5) timely update the tool inventory system for any items issued on paper, damaged, lost, or written off, (6) utilize the tool inventory system's capabilities to identify low inventory items for reorder, (7) perform a periodic review of the Tools Out reports, especially for those individuals with 100 or more tools checked out for large dollar tools, (8) transition the responsibility for managing Measuring & Testing Equipment (M&TE) to Watts Bar Unit 1 personnel and use the Watts Bar Unit 1 program for tracking, (9) create a tool room within the Radiologically Controlled Area (RCA) to track and issue tools, (10) monitor the Tool Crib Clearance process by creating an exception report for identifying all individuals who have been terminated but still have tools checked out in their name, (11) communicate and enforce the use of a lost tool form and update the tool inventory system for damaged, lost, or stolen items timely for large dollar items, and (12) implement a process to ensure all tools on all purchase orders (PO) are processed and received in both the warehouse and the tool inventory system, except consumables. TVA management did not agree with our recommendations to (1) create a formal review process by a second person to verify data entered in the tool inventory system or (2) properly account for all tools from historical POs. In addtion, TVA management did not agree with our recommendation to hold (1) TVA employees and contractors signing out tools accountable for tool loss/theft and/or (2) supervisors with approval authority accountable when the tools were not returned. According to WBN Unit 2 management, the Project Maintenance and Modifications Agreement does not allow employees to be charged for tools used while performing their respective duties. TVA management did not address our recommendation to review the inventories performed by the contractor and any corresponding write-offs.

(Summary Only)
The OIG performed a review of the City of Chattanooga Electric Power Board (Chattanooga) which is based in Chattanooga, Tennessee and a distributor of TVA power. Our review of Chattanooga found issues involving customer classification and metering that could impact (1) the proper reporting of electric sales and (2) nondiscrimination in providing power to members of the same rate class. In addition, we found Chattanooga had more than enough cash on hand to cover planned capital projects and provide a cash reserve of about 13 percent. While TVA has established guidelines to determine if a distributor has adequate cash reserves (cash ratio of 5 to 8 percent), TVA has not established guidelines to determine if a distributor's cash reserves are excessive. We also found improvements were needed to (1) comply with contract provisions regarding the establishment of written contracts with customers and (2) improve Chattanooga's internal controls related to monitoring of data changes. Finally, we identified certain opportunities to enhance TVA oversight of the distributors. TVA is in the process of addressing these findings which include the lack of (1) guidance on what constitutes prudent expenditures, (2) a joint cost study addressing allocation of costs between the electric department and other municipal lines of business, and (3) criteria for evaluating when a distributor's cash reserves are excessive. We recommended the Group President, Strategy and External Relations, work with Chattanooga to (1) remediate classification and metering issues, (2) better comply with identified contract provisions related to customer contracts, and (3) add additional controls related to certain billing system data. TVA and Chattanooga management generally agreed with and are taking actions to address recommendations (1) and (2). Chattanooga plans to implement an additional quarterly test for misclassifications and quarterly review of customers with demand of 1 MW or more to determine if a contract is on file. The first tests are to be completed by September 30, 2010. Chattanooga believes billing system controls are in place to minimize the risk of a material misstatement in the data.

  Full Report
We audited $9.5 million of costs billed to TVA by a contractor for providing assistance in implementing a Power System Optimization Project. In summary, we found the contractor had overbilled TVA $234,406 including (1) $227,763 in overstated subcontractor costs and (2) $6,643 in unsupported subcontractor costs. The contractor acknowledged it had not billed in accordance with the contract provisions for subcontractors but stated the rates it had billed were (1) the same as those being charged to TVA by a previous supplier or (2) reasonable because the individuals were acting as employees of the contractor.

(Summary Only)
We performed an audit of $19.1 million in costs billed to TVA by a contractor for diving services between November 2003 and September 2009. In summary, we determined TVA paid $643,700 in inflated labor costs as follows:

(Summary Only)
We audited $59.5 million of costs billed to TVA by a contractor for the supply of ammonia and urea for TVA's Selective Catalytic Reduction systems. In summary, we found TVA (1) overpaid the contractor $188,231 due to invoice payment errors and the contractor's use of incorrect unit prices, (2) paid $12.4 million for certain charges that could not be validated because of inadequate or missing compensation provisions, and (3) site personnel at a certain fossil plant processed payments for ammonia before the ammonia had been received. Additionally, the quantities of ammonia billed to TVA at this fossil plant were not independently verified. We recommended TVA management recover the overbilled and overpaid costs. Additionally, TVA management should (1) provide training to site personnel on material payment procedures and institute a process for reconciling payments to material receipts, (2) ensure the contract is revised to provide compensation provisions for all costs that are payable by TVA, and (3) revise the receiving procedures at fossil plants to ensure that payments for ammonia are processed after the ammonia has been received and verified.

(Summary Only)
At the request of the Chief Executive Officer, we initiated a review of records retention policies and practices at TVA. The objectives of our review were to determine (1) whether records are being maintained in accordance with TVA policies and procedures and (2) if opportunities exist to improve records retention and disposal activities in light of office space consolidation initiatives. Our review found TVA complied with TVA records management policies, practices, and procedures, and records identified in sampling were generally maintained in accordance with the National Archives and Records Administration-approved record schedules. We did note some areas where compliance could be strengthened.In addition, while we found that TVA plans to replace its current electronic management system which should increase the efficiency and effectiveness of records management, areas for improvement exist in the Chattanooga Office Complex pertaining to (1) records management, (2) records retention, (3) disposal of records and material, (4) the maintenance and upkeep of office space, and (5) the identification of records.

(Summary Only)
We completed agreed-upon procedures to assist the Center for Resource Solutions (CRS) in determining TVA's compliance with the annual reporting requirements of CRS' Green Pricing Accreditation Program for the year ended December 31, 2009. The required information on TVA's renewable energy initiative, "Green Power Switch," was provided to CRS.

(Summary Only)
We audited $61.92 million in costs billed to TVA by a contractor, under two contracts for performing engineering services between October 2004 and December 2008 and found TVA had been overbilled $683,122 as follows:
  1. TVA was overbilled $70,838 because labor costs were billed using hourly billing rates instead of cost reimbursable payment terms as required by the contracts.
  2. TVA was billed $558,463 in ineligible and excessive temporary living costs because (1) short-term daily travel rates were paid to employees instead of (lower) long-term temporary living allowances, and (2) unauthorized local mileage costs were paid to personnel receiving temporary living allowances.
  3. TVA was overbilled an estimated $40,034 in travel costs due to (1) overstated mileage reimbursement rates, (2) meal costs for unidentified personnel, (3) unallowable rental car expenses, and (4) daily travel costs in excess of daily limits.
  4. TVA was overbilled $13,787 because (1) an ineligible markup was added to certain subcontractor costs, and (2) an incorrect billing rate for other direct costs was used.
The contractor (via a response submitted by an outside law firm) generally disagreed with most of the audit findings and stated its billings to TVA were correct, fair, reasonable, and in accordance with the plain language of the contracts, the contract manager's interpretation of ambiguous language and/or based upon the parties' pattern and practice of contract performance under both contracts. However, in our opinion, the contractor's comments did not provide additional evidence or documentation to support its claims that TVA had been billed in accordance with the terms of the subject contracts. Accordingly, we recommended TVA management take action to recover $683,122 of overbilled and excessive costs from the contractor.

(Summary Only)
As part of our annual audit plan, we reviewed the process for postponing and cancelling fossil capital projects. Our objective was to determine whether fiscal years 2007 and 2008 project postponements and cancellations were properly approved, effectively communicated, and monitored to prevent inappropriate charges. We determined that Fossil Generation (FG) projects were approved by the appropriate levels of authority and contained a capital classification designated by Fixed Asset Accounting (FAA). We noted that 15 FG cancelled projects contained a cancellation date prior to Strategic Business Unit approval for cancellation, which project management stated could be attributed to timing issues. In addition, we identified eight projects in which travel costs were split among projects. Although there is no policy governing the splitting of project costs, according to project management personnel, the dollar amount of costs allocated among projects would not be material. We also determined that Business Services is responsible for performing an independent review of project costs for reasonableness.

We determined there were control weaknesses that could allow business units to manipulate project costs in order to meet budget goals. Specifically, communication and monitoring controls were not adequately designed to mitigate the risk that project costs were (1) accurately and timely communicated for recording in the financial statements and (2) appropriately classified as capital costs, rather than operations and maintenance costs. We determined communication by FG to FAA of project cancellation did not occur for seven of the 24 cancelled projects we reviewed; communication by FG to FAA of an additional four of the 24 cancelled projects we reviewed did not occur within the required time frame; project documentation (1) was not updated with changes in project status as required for four of the 23 postponed and three of the 24 cancelled projects and (2) did not include a detailed reason for the postponement of one of the 23 postponed projects and 11 of the 24 cancelled projects; and several FG project cancellations occurred due to identification of a duplicate scope within other projects.

We made recommendations to the FG Senior Vice President (SVP) who responded to our draft report and agreed with our recommendations. The SVP, FG, also provided planned actions to address those recommendations. We concurred with FG management's planned actions.

  Full Report
As part of our annual audit plan, we reviewed the process for postponing and cancelling capital projects. Our objectives were to determine whether fiscal years 2007 and 2008 project postponements and cancellations for River Operations (RO) were properly approved, effectively communicated, and monitored to prevent inappropriate charges. We determined all sampled cancelled capital projects reviewed were approved by the appropriate levels of authority and contained a capital classification designated by Fixed Asset Accounting (FAA). However, we noted that project documentation was not updated with changes in project status as required. In addition, we determined that one project cancellation was not communicated to FAA; however, we noted that costs related to the project were written off in a timely manner. We made recommendations to address the above findings. The RO Senior Vice President responded to a draft report and agreed with our recommendations. The RO Senior VP also provided planned actions in addressing those recommendations.

  Full Report
As part of our annual audit plan, we reviewed the process for postponing and cancelling Power System Operations (PSO) capital projects. Our audit objectives were to determine whether fiscal years (FY) 2007 and 2008 project postponements and cancellations were (1) properly approved, (2) effectively communicated, and (3) monitored to prevent inappropriate charges.

Based on our review, we determined that PSO's postponed and cancelled projects (1) contained a capital classification designated by Fixed Asset Accounting (FAA), (2) were approved in accordance with Standard Programs and Processes 2.1, and (3) had valid justifications for postponement and/or cancellation. We also noted that project changes were communicated internally using a listing of projects known as the "checkbook," rather than Five Year Project Plans. We determined the use of the checkbook was a reasonable alternative to the Five-Year Project Plan.

We also determined that project cancellations required to be communicated to FAA were communicated to FAA in a timely manner. Finally, we noted that while there is no policy governing the splitting of project costs, there is an independent review of project costs performed by Financial Services personnel and an expectation for employees to appropriately charge their time to the specific project(s) they work on.

  Full Report
As part of our annual audit plan, we reviewed the process for postponing and cancelling Nuclear Power Group (NPG) capital projects. Our audit objectives were to determine whether fiscal years (FY) 2007 and 2008 project postponements and cancellations were (1) properly approved, (2) effectively communicated, and (3) monitored to prevent inappropriate charges.

Based on our review, we determined that NPG's postponed and cancelled projects contained a capital classification designated by Fixed Asset Accounting (FAA) and that justifications for postponing/cancelling projets were valid. However, we noted control weaknesses that could allow business units to manipulate project costs in order to meet budget goals. Specifically, communication and monitoring controls were not adequately designed to mitigate the risk that project costs were (1) appropriately and accurately charged to the projects, (2) appropriately classified as capital costs rather than operations and maintenance (O&M) costs, and (3) accurately and timely communicated for recording on the financial statements. We determined:
  1. Communication by NPG to FAA of one project cancellation occurred prior to the approval of that cancellation.
  2. One project cancellation was not communicated to FAA within the required time frame.
  3. No reviews independent of NPG project management were performed to determine whether costs were appropriately and accurately charged to projects.
  4. No criteria existed defining the process and requirement for (1) allocating capital and O&M costs to a project, (2) allocating costs among projects, and (3) borrowing funds from other projects.
  5. Project documentation was not retained in accordance with retention guidelines.
We made recommendations to the Chief Nuclear Officer and Executive Vice President, Nuclear Generation, in conjunction with other organizations regarding the above finidngs

  Full Report
We audited $4.27 million of costs billed to TVA by a contractor for providing preemptive full structural weld overlays on Sequoyah Nuclear Plant Units 1 and 2. In summary, we found the contractor billed TVA $320,700 in unsupported and ineligible costs including (1) $271,200 of unsupported delay costs, and (2) $49,500 of ineligible billings for the cleaning and handling of equipment that was contaminated before it was shipped to TVA. We recommended TVA management recover $320,700 in unsupported and ineligible costs from the contractor.

(Summary Only)
We performed an audit of the prices billed to the Tennessee Valley Authority by a contractor for certain equipment related to dry cask storage systems for spent nuclear fuel at Sequoyah Nuclear Plant and Browns Ferry Nuclear Plant (BFN). In summary, we found TVA had been overbilled $276,000 because the contractor overstated the price of a vertical crawler that had been delivered to BFN. The overstatement resulted because the contractor did not follow the contract's pricing criteria which required the price of the BFN vertical crawler to be set at cost plus 10 percent. We recommended TVA management recover the $276,000 overbilling by the contractor.

The contractor disagreed it had overbilled TVA $276,000 stating (1) the contract's pricing for the vertical crawler had been changed from cost plus 10 percent to fixed price because the crawler sent to BFN had been diverted from another utility, and (2) the fixed price took into account the companies increased risk associated with a replacement crawler sent to the other utility.

Although the contractor stated its price to TVA for the BFN crawler took into account its increased risk associated with the replacement crawler sent to another utility, our audit acknowledged that TVA would probably need to cover the contractor's increased cost for the replacement crawler. Accordingly, our recommendation for TVA to recover $276,000 allowed the contractor to be reimbursed for its cost of the replacement crawler sent to the other utility plus a 10 percent markup.

(Summary Only)
We reviewed TVA's Hearing Conservation Program (the Program) to determine whether (1) the Program complied with Occupational Safety and Health Administration's (OSHA) regulations, and (2) TVA organizations were in compliance with the Program guidelines. We also looked at actions taken to address recommendations in a prior, related OIG report. We found TVA's Hearing Conservation Program complied with significant provisions of 29 CFR Part 1910.95, "Occupational Noise Exposure" issued by OSHA. However, we found certain TVA sites did not (a) perform and/or use sound level surveys in accordance with the Program, (b) adhere to Program hearing protection requirements and/or discipline employees when hearing protection was not worn in designated areas, (c) ensure Program individuals' annual audiogram and training requirements were met, and (d) record loggable Standard Threshold Shifts (STS) on the OSHA 300 log. We also found TVA's current organizational structure does not allow for enforcement of the Program by Corporate Health and Safety. Finally, our review confirmed the existence of an employee culture which promotes the filing of hearing loss claims. This was also included in a report issued by the OIG in March 2009

  Full Report
The OIG performed a review of Murphy Power Board (Murphy), a distributor for TVA power based in Murphy, North Carolina. Our review of Murphy found issues involving customer classification and metering that could impact (1) the proper reporting of electric sales, and (2) nondiscrimination in providing electricity to members of the same rate class. We were unable to estimate the monetary effect of all the classification and metering issues because in some instances information was not available; however, for those where information was available, the monetary effect on Murphy and TVA would not be material. In addition, we found Murphy had more than enough cash on hand to cover planned capital projects and provide a cash reserve of about 12 percent. While TVA has established guidelines to determine if a distributor has adequate cash reserves (cash ratio of 5 percent to 8 percent), TVA has not established guidelines to determine if a distributor's cash reserves are excessive.

We also found improvements were needed to (1) comply with contract provisions regarding customer contracts and use of joint cost studies, and (2) strengthen internal controls. Finally, we found one TVA billing error as well as certain opportunities to enhance TVA oversight of the distributors that were also identified in previous distributor audits. TVA is in the process of addressing these findings which include a lack of: (1) guidance related to when a demand meter is required, (2) guidance on what constitutes prudent expenditures, and (3) criteria for evaluating when a distributor's cash reserves are excessive.

We recommended the Group President, Strategy and External Relations, work with Murphy to: (1) remediate classification and metering issues, (2) comply with contract provisions related to proper allocation of joint costs, and (3) strengthen its internal controls. In addition, we recommended the Group President, Strategy and External Relations: (1) recover amounts incorrectly credited to Murphy, and (2) determine if other Competitive Index Rate (CIR) customers with other distributors have been credited appropriately. TVA and Murphy management generally agreed with and are taking actions to address the recommendations. However, TVA management did not agree with the recommendation to recover incorrectly credited CIR amounts from Murphy since the customer receiving the credit is no longer in business and recovery through litigation is unlikely. In addition, TVA stated they have been focused on putting procedures and processes in place to better assure that TVA rates and pricing programs are implemented and carried out as intended in the future.

  Full Report
To facilitate public understanding of TVA's efforts to promote the use of green power in the Tennessee Valley, we reviewed the Green Power Switch? program. Specifically, we reviewed the program to determine whether (1) the methods used by TVA to market the program disclosed that green power goes into the general power mix, and (2) revenue from the program exceeded related marketing expenses. In summary, while not all advertising materials reviewed directly stated that green power is part of TVA's power mix, they did direct consumers to information disclosing that the green power goes into the general power mix. In addition, for fiscal years 2007 and 2008, the revenue generated from the Green Power Switch? program exceeded the related marketing expenses.

  Full Report
As part of our annual audit plan, our office reviewed the risks associated with the Tennessee Valley Authority's (TVA) pension plan and how those risks are mitigated. Our audit covered areas such as (1) controls designed to mitigate pension risk, (2) the TVA Retirement System's (TVARS) financial statement audit performed by their external auditor as it relates to the existence and valuation of assets, (3) the work of TVARS' actuary in determining TVA's pension liability, (4) funding and benefits decisions and other factors impacting the financial status of TVARS, and (5) concerns raised during the audit by TVARS members.

Our review determined TVARS' (1) controls were suitably designed and operating with sufficient effectiveness to provide reasonable assurance that the control objectives specified were achieved, (2) external auditor performed the work according to their audit program, and we found nothing to question their work or conclusions, and (3) method used to calculate the pension liability and funding contribution was acceptable.

We also determined that a combination of factors resulted in TVARS experiencing a significant shortfall between assets and projected obligations and being funded at a lower level relative to obligations than most other comparison utilities.

  Full Report
We audited $10.16 million in costs billed to TVA by a contractor for providiing professional engineering and technical support services associated with the detailed, scoping, estimating, and planning study related to the potential completion of Unit 2 at Watts Bar Nuclear Plant. In summary, we found (1) the contractor directly billed TVA $175,094 for home office senior management and administrative personnel that should have been recovered through its overhead rate; (2) the contractor overbilled TVA an estimated $9,393 due to miscellaneous unsupported and ineligible billings for payroll additive costs, relocation expenses, and travel costs; and (3) TVA paid the contractor an additional $33,000 in fees due to conflicting contract language regarding the application of fees for travel costs. We recommended TVA management (1) take action to recover the $184,487 in overbilled costs, and (2) determine the appropriateness of including travel costs in the contractor's fee base.

(Summary Only)
In comparison to the fiscal year (FY) 2008 FISMA report, we found TVA had generally improved in the area of establishing its inventory of systems requiring certification and accreditation and general security awareness training for network users. However, we identified several areas during this year's audit in which (1) performance had declined, or (2) TVA had not completed actions from the prior year's audits.

During our FY 2009 review we noted improvements were needed in the following areas: (1) the oversight and evaluation of contractor systems; (2) the POA&M process; (3) the C&A process; (4) incident reporting; and (5) security awareness training.

(Summary Only
We audited $147.7 million of costs billed to TVA by a contractor for providing security services for TVA facilities. In summary, we found (1) TVA made an erroneous payment of $206,531 to the contractor for costs related to another contract, (2) the contractor overbilled TVA an estimated $72,645 due to miscellaneous unsupported and ineligible costs, and (3) the contractor understated its provisional billing adjustments for 2007 and 2008 by $7,705.

The contractor subsequently refunded or provided credits for $247,438, including (1) the erroneous payment of $206,531, and (2) $40,907 of the miscellanious unsupported and ineligible expenses. We recommended TVA management recover the remaining overbilled costs.

(Summary Only)
The OIG performed a review of the Princeton Electric Plant Board (Princeton), which is a distributor for Tennessee Valley Authority (TVA) power based in Princeton, Kentucky. Our review of Princeton found issues involving customer classification and metering that could impact (1) the proper reporting of electric sales and (2) nondiscrimination in providing power to members of the same rate class. We were unable to estimate the monetary effect of all the classification and metering issues because in some instances information was not available; however, for those where information was available, the monetary effect on Princeton and TVA would not be material. In addition, we found Princeton did not have enough cash on hand as of June 30, 2008, to cover expenditures for planned capital projects and provide a cash reserve. However, Princeton obtained a loan in August 2009 to provide additional funds for capital expenditures.

We also found Princeton (1) did not comply with contract provisions for allocation of joint costs and establishing contracts for customers with demand above 50 kW and (2) could improve internal controls related to the completeness, accuracy, and validity of the billing and metering data. Finally, we have identified certain opportunities to enhance TVA oversight of the distributors that were also identified in previous distributor audits. TVA is in the process of addressing these findings which include: (1) the absence of a joint cost study being performed, (2) the lack of an adequately defined process to document approval of Small Manufacturing Credits, (3) the lack of guidance related to when a demand meter is required, and (4) the lack of guidance on what constitutes prudent expenditures.

Princeton has elected to terminate its power contract with TVA effective January 24, 2010. Consequently, we have no recommendations which require response from either Princeton or TVA. However, we provided specific suggestions to help Princeton strengthen its internal controls and accurately bill its customers in the future. Our suggestions included: (1) remediate classification and metering issues, (2) develop and document a consistent methodology for allocating all joint costs, (3) obtain contracts for customers as appropriate, (4) update the automated system (and manual customer cards, if maintained) with changes, including contract demand, on a timely basis, and (5) identify and utilize exception reports to ensure customers are classified correctly and identify problems that need to be addressed in a timely manner. As noted in the report, Princeton personnel corrected the classification issues and started reviewing additional exception reports.

  Full Report
The OIG performed a review of Tullahoma Utilities Board (Tullahoma) which is a distributor for TVA power based in Tullahoma, Tennessee. Our review of Tullahoma found issues involving customer classification and metering that could impact (1) the proper reporting of electric sales and (2) nondiscrimination in providing electricity to members of the same rate class. We were unable to estimate the monetary effect of all the classification and metering issues because in some instances information was not available; however, for those where information was available, the monetary effect on Tullahoma and TVA would not be material. In addition, we found Tullahoma had more than enough cash on hand to cover planned capital projects and provide a cash reserve of about 29 percent. While TVA has established guidelines to determine if a distributor has adequate cash reserves (cash ratio of 5 percent to 8 percent), TVA has not established guidelines to determine if a distributor's cash reserves are excessive. Based on prior distributor audit findings, TVA is in the process of defining criteria for determining when a distributor's cash reserves are excessive. We also noted that Tullahoma used electric system funds to pay for expenses of the fiber optic business prior to obtaining TVA approval to loan funds to the fiber department.

We also found improvements were needed to (1) comply with contract provisions regarding the allocation of costs between departments and customer contracts and (2) strengthen internal controls over the completeness, accuracy, and validity of billing system data. Finally, we identified certain opportunities to enhance TVA oversight of the distributors that were also identified in previous distributor audits. TVA is in the process of addressing these findings which include the (1) absence of a joint cost study being performed in over 20 years, (2) lack of an adequately defined process to document approval of credits, (3) lack of guidance related to when a demand meter is required, (4) lack of guidance on what constitutes prudent expenditures, and (5) lack of criteria for evaluating when a distributor's cash is excessive.

We recommended the Group President, Strategy and External Relations, work with Tullahoma to (1) remediate classification and metering issues, (2) comply with contract provisions related to proper allocation of joint costs, and (3) strengthen its internal controls. TVA and Tullahoma management generally agreed with and are taking actions to address the recommendations.

  Full Report
Based upon questions posed to OIG personnel regarding TVA's criteria for the adjustment of tributary water levels, the OIG conducted a review of TVA's Reservoir Operations. Our objectives were to determine (1) whether criteria exist to balance the competing objectives of managing water in TVA reservoirs, (2) how those objectives compare to those of the U.S. Army Corps of Engineers, and (3) whether TVA was following its criteria. This report encompasses TVA-managed lakes, tributaries, and overall Reservoir Operations.

Our review found TVA has Board-approved guidelines that were developed with public input in 2004. We noted in discussion with two offices of the U.S. Army Corps of Engineers that they balance similar objectives and manage their reservoirs in a like manner as TVA. We performed testing based upon the approved TVA guidelines and found no issues. Specifically, we found that there were no issues related to the following summer criteria: (1) Recreational Releases (releases water to enhance recreation opportunities). (2) Chickamauga Flow (the required flow through Chickamauga Dam). (3) Tributary Balancing (ensuring that no individual tributary is disproportionately affected when meeting river system minimum flow goals). Lastly, we found there were no issues related to the following nonsummer criteria: (1) Minimum Flow Commitments, which is measured in pulse commitment violations (a pulse represents a release of an agreed-upon amount of water, and a violation is an instance where TVA does not provide the pulse on time). (2) Flood Storage Availability (flood storage is defined as the volume, or capacity, in a reservoir that is reserved for the storage of flood water, and anytime a tributary's headwater elevation exceeds the flood guide, it is in violation). Since we had no recommendations, this report was issued for informational purposes only.

  Full Report
Based on reports of government and contractor employees obtaining phony/counterfeit educational degrees, we conducted a review of Bechtel and subcontractor employees assigned to the Watts Bar Nuclear Plant Unit 2 Construction Completion Project (WBN U2 Project). Our objective was to validate, for selected personnel, the highest educational degree listed on the resume submitted for employment. Our review found no instances where an employee was hired based on a fraudulent degree. However, neither Bechtel nor the OIG was successful in verifying one employee's degree. Specifically, we recommended the Vice President, WBN U2 Project, in conjunction with the Bechtel Project Director, make certain that employees' educational degrees are verified if the degree is required for the position for which they are hired. Furthermore, a copy of a diploma supplied by an employee should not be considered adequate verification. TVA management agreed with our findings and recommendations and plans to take corrective action.

  Full Report
We reviewed TVA's decision to construct a gas plant in northeast Tennessee to determine if TVA's analyses supporting its decision were reasonable. TVA's decision was initiated by a court-ordered accelerated schedule to install emission control equipment at John Sevier Fossil Plant, which would require TVA to shut down units at the plant for about 20 months during the construction. Although TVA evaluated various alternatives, TVA's need to preserve the reliability of the power system was the most significant factor influencing its decision.In summary, we determined TVA's analyses appeared reasonable to make the decision to construct the gas plant in northeast Tennessee.

(Summary Only)
This review was the third in a series of reviews that will benchmark TVA's performance in key areas and answer the question, "How is TVA doing in regard to operational performance." In conducting this review we: (1) assessed key performance measures and their alignment with the key strategic objectives, (2) evaluated TVA's performance relative to key performance indicators by using target metrics and available benchmark information, and (3) identified key management challenges confronting TVA. Our report found TVA's performance is positive with respect to system reliability and safety; however, system efficiency could be improved. In summary:

  1. Reliability: One of TVA's primary responsibilities is to serve as a reliable and cost competitive source of electric power to its customers. TVA has performed exceptionally well in terms of system reliability, delivering electric service with 99.999 percent reliability. TVA also performed better than the industry at large in all its key reliability performance metrics. In addition, TVA has maintained an adequate capacity reserve margin, which has contributed to this strong reliability performance.
  2. Efficiency: System efficiency is a measure of the effectiveness of TVA's expenditures on the operations and maintenance of its generation fleet. Additional focus in this area is warranted. Specifically, higher than average forced outage rates, especially for its fossil units, have negatively impacted TVA's system efficiency performance. In addition, while TVA's delivered cost of power ranked in the second quartile of a selected peer group, its average non fuel operations and maintenance costs ranked only in the third quartile. High operations and maintenance costs coupled with low plant availability combined to depress TVA's efficiency metrics. Two things clearly impacting TVA's efficiency performance included (1) an aging fossil generation fleet and (2) reduced availability of hydroelectric power.
  3. Safety: TVA ranked in the first quartile based on the number of recordable injuries per 200,000 hours worked as based on data provided by the Occupational Safety and Health Administration and comparable data provided by the 2007 Edison Electric Institute Benchmark Data. However, the recent death of a contractor employee involved in the Kingston Fossil Plant ash spill cleanup effort emphasizes to us that safety must be the first priority in everything we do.
Additionally, TVA faces many significant management challenges in attaining and maintaining operational excellence. Our report discusses the areas of (1) an aging generation fleet and transmission system, (2) an aging work force, (3) generation mix, and (4) management culture.

(Summary Only)
We audited $25 million of costs billed to TVA by a contractor from January 1, 2006, through December 31, 2008, for the administration of TVA's dental benefit plan. Our objective was to determine if the costs billed to TVA were in compliance with the contract terms and conditions. In summary, we found TVA had been overbilled $25,591, including: (1) $17,713 for duplicate claim payments; (2) $832 for claims which exceeded plan limits; and (3) $7,046 for ineligible orthodontic payments. In addition, due to the high amount ($132,000) of additional coinsurance that was billable to members during our audit period, we determined the "Alternative Benefits" provision in the dental benefit plan might be unclear as it relates to the member's responsibility when alternative procedures are used. We recommended TVA management (1) recover $25,591 in overbilled costs from the contractor, and (2) revise the dental benefit plan to more clearly define the member's responsibility as it relates to alternative procedures The contractor and TVA management agreed TVA had been overbilled $25,591. In addition, TVA management agreed to consider revising the dental benefit plan to clearly define the member's responsibility as it relates to alternative procedures.

(Summary Only)
We performed three agreed-upon procedures which were requested solely to assist TVA management in determining the validity of TVA's Winning Performance (WP) payout awards for the year ended September 30, 2009. In summary, we found: (1) the fiscal year (FY) 2009 WP goals were properly approved; (2) actual year-to-date inputs for all the metrics agreed with the respective supporting documentation with one exception related to the Power System Operations Non-Fuel Operations and Maintenance metric which did not impact the WP payout; and (3) the payout percentages were mathematically accurate.

(Summary Only)
The OIG performed a review of Bolivar Energy Authority (Bolivar), a distributor for TVA power based in Bolivar, Tennessee. Our review of Bolivar found issues involving customer classification and metering that could impact (1) the proper reporting of electric sales, and (2) nondiscrimination in providing electricity to members of the same rate class. We were unable to estimate the monetary effect of all the classification and metering issues because in some instances information was not available; however, for those where information was available, the monetary effect on Bolivar and TVA would not be material. In addition, we found Bolivar had more than enough cash on hand to cover planned capital projects and provide a cash reserve of about 12 percent. While TVA has established guidelines to determine if a distributor has adequate cash reserves (cash ratio of 5 percent to 8 percent), TVA has not established guidelines to determine if a distributor's cash reserves are excessive.

We also found improvements were needed to (1) comply with contract provisions regarding the co-mingling of funds; allocation of costs between departments; and customer contracts, and (2) improve Bolivar's internal controls related to the accuracy of contract demand data entered into the system, monitoring of manual data changes, monitoring of negative usage (kWh) amounts in billing data, and monitoring repetitive instances of zero usage. Finally, TVA has not: (1) performed a joint cost study in over 20 years even though the TVA Accountant's Reference Manual calls for one to be performed every three to four years or when major changes occur that affect joint operations; (2) adequately defined the process for granting the Small Manufacturing Credit to ensure proper documentation, including evidence of approval, is submitted and maintained; (3) provided adequate guidance on when a demand meter is required; and (4) defined criteria for evaluating when a distributor's cash balance is excessive.

We recommended the Chief Financial Officer (CFO) work with Bolivar to: (1) remediate classification and metering issues and institute controls to prevent the issues from recurring; (2) assure compliance with contract provisions related to proper allocation of joint costs and customer contracts; and (3) assure internal controls are strengthened. In addition, the CFO should establish a process to document approval of distributor customer's credit applications. TVA is in the process of addressing findings from previous reviews that were also found at Bolivar related to: (1) contracts for customers whose demand exceeds 50 kW; (2) guidance for distributors on cash reserves; (3) performing joint cost studies; and (4) providing guidance on when a demand meter is required. TVA does not plan to take action regarding the co-mingling of electric and nonelectric funds, another issue we found at Bolivar and in previous audits; therefore, we suggested the power contract be modified to address the co-mingling funds language in existing contracts.

TVA and Bolivar management are taking or have taken action to address certain recommendations. For the remaining recommendations, Bolivar does not plan to take additional actions.

  Full Report
We conducted four reviews to determine whether each coal supplier was in compliance with weighing and sampling provisions of the respective contract. We performed tests to verify that shipment weight documentation maintained at each mine supported the amounts used to support invoices to TVA for tonnage shipped. In summary, our reviews found documentation maintained at the respective mine for ten randomly selected shipments agreed with the information provided to TVA regarding tons shipped. Each supplier was also found to be in general compliance with the weighing and sampling requirements of the contracts. However, we did identify a few issues requiring management action related to bias testing. Specifically, we recommended the General Manager, TVA Fuel Supply:
  • Include in future coal contracts a specific frequency requirement pertaining to the periodic bias testing of samplers.
  • Follow up with one coal supplier to either identify a method of bias testing that is acceptable or amend the contract to extend the period in which the samplers need to be bias tested.
  • Follow up with one coal supplier regarding correction of the qualified opinion received from the independent lab in its 2009 dynamic bias test of Sampler #2 and determine whether any further corrective actions are warranted when current bias test results are received.
TVA management generally agreed with our findings and recommendations and plans to take corrective action.

(Summary Only)
At the request of the Senior Vice President of Environment and Research, we initiated reviews of the 11 Tennessee Valley Authority (TVA) managed campgrounds to determine if the (1) campgrounds were being operated in accordance with the program intent and (2) operating controls were functioning as intended. We found that the campgrounds were operating in accordance with the program intent, which was to provide public areas for recreation. In addition, we found the operating controls appeared to be functioning as intended and campground guidelines were generally being complied with. However, we noted:
  • Some minor overall program guideline inconsistencies.
  • For the four campgrounds with a resident manager, the resident manager contracts did not include some specific responsibilities identified in the TVA Resident Manager Manual.
  • The resident manager contract for one campground differed somewhat with regard to duties and responsibilities when compared to the other three resident manager contracts.
  • One resident manager contract had not been updated to reflect revised responsibilities.
TVA management generally agreed with our findings and recommendations and has taken or plans to take corrective actions.

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We performed a pre-implementation review of the Enterprise Asset Management (EAM) System, Phase 1 implementation, which provided for supply chain and work management processes. We determined plans and processes in place were adequate after actions were completed to address our concerns, regarding application access controls, system security, system testing, data conversion, and general controls. During our audit, the EAM Project Team and Information Services took actions to address our findings and initiated plans to implement additional corrective actions and address remaining concerns during subsequent system implementation phases.

(Summary Only)
The OIG performed a review of the Hickman-Fulton Counties Rural Electric Cooperative Corporation (Hickman-Fulton) which is a distributor for TVA power based in Hickman, Kentucky. Our review of Hickman-Fulton found metering issues that could result in (1) inaccurate billing of electric sales by the distributor to their customers and therefore, impact the electric sales reported on the distributor's financial reports to TVA and (2) disparate treatment among similarly situated customers that could be construed, under Section 5 Resale Rates of the power contract, as discrimination in providing power to members of the same rate class. We were unable to estimate the monetary effect because sufficient information was not available.

In addition, we found Hickman-Fulton had more than enough cash on hand to cover planned capital projects and provide a cash reserve. The cash reserve after planned capital projects was about 6 percent which was within the guidelines (cash ratio of 5 percent to 8 percent) TVA established to determine if a distributor has adequate cash reserves. We also found improvements were needed to comply with contract provisions in the area of customer contracts.

Finally, we also identified opportunities to enhance TVA oversight of the distributors. Specifically, TVA has not provided guidance for distributors on (1) what types of appurtenances are allowed or at what point in time the use must be predominately residential and (2) what constitutes prudent expenditures.

We recommended the Chief Financial Officer (CFO) work with Hickman-Fulton to (1) develop and implement a process to test in-house any meters identified during independent testing with a power factor below 85 percent and install demand meters that measure kVA as needed and (2) ensure all customers with appurtenances used for commercial operations are metered the same. In addition, the CFO should establish guidance for distributors on allowable appurtenances and at what point in time the use must be predominately residential to qualify for a residential rate. TVA is in the process of addressing findings from previous reviews that we also found at Hickman-Fulton related to a lack of guidance for distributors on what constitutes prudent expenditures.

TVA and Hickman-Fulton management agreed and are taking actions to address the first recommendation. However, TVA and Hickman-Fulton management disagreed with the recommendation related to ensuring all customers with appurtenances are metered the same and the recommendation to provide additional guidance to distributors on appurtenances.

  Full Report
We audited the costs billed to TVA by a contractor for providing (1) modification and supplemental maintenance services at TVA nuclear plants (operating unit work) and (2) construction services for the restart of Browns Ferry Nuclear Plant Unit 1 (BFN U1). The scope of our review included $272.2 million of noncraft costs billed by the contractor through December 31, 2007, including (1) $89.6 million for modification and supplemental maintenance services and (2) $182.6 million for the BFN U1 services.

In summary, we found TVA had overpaid the contractor (1) from $876,519 to $1,579,575 for BFN U1 performance fees due to an overstated fee base and inflated fee rates, (2) $268,538 due to ineligible and unsupported billings for labor costs, (3) $54,633 due to overbillings for temporary living and relocation costs, and (4) $6,650 due to miscellaneous overbilled costs. We recommended TVA management recover up to $1,909,396 in overpaid costs from the contractor.

(Summary Only)
We audited $25 million of costs billed to TVA by a contractor for providing research and development activities. In summary, we found (1) TVA made invoice payments in advance of the work being performed, thus losing an estimated $1,125,000 in interest over the audit period, (2) project status reports submitted by the contractor were incomplete and inaccurate, and (3) TVA was delinquent in recovering overfunded project amounts.

We recommended TVA management (1) discontinue the use of advanced payments unless the contractor is required to pay interest on the advanced payments; (2) require the contractor to provide a final status report for all projects worked, and (3) recover all unspent funds and institute procedures for ensuring the timely collections of all future overpayments.

(Summary Only)
We audited $2.8 million in subcontractor costs billed to TVA by a contractor for work related to the restart of Browns Ferry Nuclear Plant Unit 1. Our preliminary review of the costs billed by the subcontractors caused us to have concerns that certain costs that were billed may have also been billed to TVA under other contracts. We identified two direct contracts TVA had with the companies and expanded our review to include $985,984 TVA had paid to the companies under these contracts.

In summary, we found TVA had been overbilled $1,075,020 including (1) $174,912 of unsupported and ineligible labor and per diem costs, (2) $621,428 of unsupported and ineligible equipment costs, (3) $199,180 of unsupported material costs, and (4) $79,500 of overstated task costs.

(Summary Only)
This redacted Report of Administrative Inquiry regarding a personnel matter was released on September 14, 2009, in response to an administrative appeal of a FOIA request.

The OIG reported that a TVA employee provided false information to the OIG during an OIG inspection of the Maintain and Gain (M&G) Program.

  Full Report
The OIG performed a review of the City of Oxford Electric Department (Oxford) which is a distributor for TVA power based in Oxford, Mississippi. Our review of Oxford found issues involving customer classification and metering that could impact (1) the proper reporting of electric sales and (2) nondiscrimination in providing electricity to members of the same rate class. We were unable to estimate the monetary effect of all the classification and metering issues because in some instances information was not available; however, for those where information was available, the monetary effect on Oxford and TVA would not be material.

In addition, we found Oxford had more than enough cash on hand to cover planned capital projects and provide a cash reserve. The cash reserve after planned capital projects was about 6.6 percent which was within the guidelines (cash ratio of 5 percent to 8 percent) TVA established to determine if a distributor has adequate cash reserves. We also found improvements were needed to comply with contract provisions in the areas of (1) co-mingling of funds, (2) customer bill adjustments, (3) Oxford's accounting practices, and (4) customer contracts.

Finally, we noted opportunities to enhance TVA oversight of the distributors. Specifically, we noted TVA has not (1) performed a joint cost study in over 20 years when the TVA Accountant's Manual calls for one to be performed every three to four years or when major changes occur that affect joint operations, (2) provided adequate guidance on when a demand meter is required, (3) provided definitive guidance for distributors on what constitutes prudent expenditures, and (4) adequately defined how often meters should be tested by the distributors.

We recommended the Chief Financial Officer (CFO) work with Oxford to improve compliance with the contract. In addition, we recommended that the CFO (1) put procedures in place to perform joint cost studies with each distributor that shares costs with other entities at least every three to four years, and (2) develop guidance to indicate when a distributor should require that a demand meter be installed for GSA Part 2 customers. TVA is in the process of addressing findings from previous reviews that we also found at Oxford related to (1) a lack of guidance for distributors on what constitutes prudent expenditures and (2) how often meters should be tested by the distributors.

TVA and Oxford management generally agreed with and are taking actions to address the recommendations with the exception of our finding of co-mingling of funds where no management action is planned. If TVA management accepts the mingling of electric system funds and accounts with other funds and accounts of the Municipality, we suggest TVA consider modifying Section 1 of the power contract in their planned formal implementation of a rate change to no longer prohibit such actions.

  Full Report
We audited the cost billed to TVA by a contractor for performing preheat and post-weld heat treatment services and found the contractor (1) had billed certain tasks at lump sum prices instead of using the time and material billing rates provided for by the contract and (2) overbilled or could not provide support for $1,350 that had been billed as time and material.

We recomended TVA Supply Chain Management ensure the (1) contract documents how Procurement Agents will determine whether to use time and materials pricing or fixed prices for task assignments, and (2) Procurement Agents maintain documentation of how TVA assessed the reasonableness of the price for any work performed as fixed price. Additionally, we recommended TVA recover the $1,350 of overbilled/unsupported cost.

(Summary Only)
On December 22, 2008, a major dike failure occurred on the north slopes of the ash pond at the Tennessee Valley Authority's (TVA) Kingston Fossil Plant. This failure resulted in the release of approximately 5.4 million cubic yards of coal ash spilling onto adjacent land and into the Emory River. TVA's Chief Executive Officer (CEO) directed the TVA Office of the General Counsel to contract with a firm to do a root cause analysis of the spill, and AECOM Technology Corporation (AECOM) was commissioned with the task. The objectives of our review were to (1) provide an independent peer review of AECOM's root cause analysis and (2) review TVA's ash management for weaknesses. To assist us with technical aspects of this review, we hired Marshall Miller & Associates (Marshall Miller) to independently peer review TVA's root cause analysis and provide other observations about ash management practices at TVA. In summary, we found:
  • TVA management handled the root cause analysis in a manner that avoided transparency and accountability in favor of preserving a litigation strategy. TVA elected not to publicly disclose management practices that may have contributed to the Kingston Spill.
  • TVA could have possibly prevented the Kingston Spill if it had taken recommended corrective actions. TVA was aware of "red flags" that were raised over a long period of time signaling the need for safety modifications to TVA ash ponds.
  • AECOM overemphasized the "slimes" layer as a trigger for the Kingston Spill. Marshall Miller concluded that factors other than the "slimes" layer may have been of equal or greater significance.
  • Despite internal knowledge of risks associated with ash ponds, TVA's formal Enterprise Risk Management process, which began in 1999, had not identified ash management as a risk. While over the years there was internal discussion about placing the ash ponds under the TVA's Dam Safety Program, ultimately, TVA did not place the ash ponds under its Dam Safety Program. Treating the ash ponds like dams would have required more rigorous inspections and engineering.
  • Attitudes and conditions at TVA's fossil fuel plants that emanate from a legacy culture impacted the way TVA handled coal ash. Ash was relegated to the status of garbage at a landfill rather than treating it as a potential hazard to the public and environment.
In addition, this Office of the Inspector General report was presented to the TVA Board on July 14, 2009. After the OIG briefed the Board on its findings, a specially called Board meeting was held on July 21, 2009. A report prepared by McKenna Long and Aldridge that was commissioned by the Audit Committee of the Board in February of 2009 was released. TVA management acknowledged at the July 21, 2009, meeting many of the management failures that we identify in this report. These admissions reflect the type of transparency and accountability for TVA that the OIG has pressed for some time. We applaud the Board's leadership in this matter and TVA management's acknowledgement of TVA's role in the Kingston Spill.

TVA's CEO provided comments on a draft to this report. The CEO generally agreed with our recommendations and, in addition to identifying actions already taken, stated that actions in-process or planned include (1) implementing a cultural focusing initiative across the agency, incorporating lessons learned from the Kingston Spill, (2) using the detailed, technical explanation of what and how the Kingston dike failure occurred to ensure that it never happens again and to safely close the failed cell, (3) developing and implementing (a) more detailed and rigorous policies and procedures for storing, handling, and maintaining ash and ash disposal facilities and (b) a comprehensive program for future Coal Combustion Product remediation and conversion, and (4) implementing enterprise risk management improvements to better achieve the goals of the program.

  Full Report

  (Opening Statement of Richard W. Moore, Inspector General, Tennessee Valley Authority before the Subcommittee on Water Resources and Environment of the Committee on Transportation and Infrastructure - July 28, 2009)
We reviewed $9.98 million in costs billed to TVA by a contractor for right-of-way clearing and land restoration services for transmission line projects. In summary, we found the contractor overbilled TVA $34,678 including: (1) $28,925 in unallowable rental costs, and (2) $5,753 due to miscellaneous invoice errors. Additionally, we could not determine if price changes had been accurately accounted for under the contract because the contract's provisions relating to price changes were unclear. We recommended TVA recover $34,678 in overbilled costs and revise the price change clause in the contract to clarify when and how price changes should occur.

(Summary Only)
This review was the second in a series of reviews that will benchmark TVA's performance in key areas and answer the question, "How is TVA doing in regard to financial performance." In conducting this review, we: (1) assessed key performance measures and their alignment with the key strategic objectives, (2) evaluated TVA's results relative to targets and available benchmark information, and (3) identified key management challenges that could affect how successful TVA is in achieving these strategic objectives.

In our judgment, TVA's overall financial performance for this assessment period was adequate; however, the agency faces several significant financial challenges, some of which have recently emerged. This conclusion is based on our analysis of TVA's financial health in three areas: (1) maintaining adequate revenues, (2) making sound capital investments, and (3) containing costs. In summary:
  • TVA's ability to set its own rates and the implementation of a fuel cost-adjustment clause provides flexibility to help maintain adequate revenues to cover costs. Additionally, TVA operates in a service area that is largely free from competition and has a large diverse customer base.
  • TVA has made certain investment decisions in the past that did not pay off. TVA is seeking to improve its capital investment decisions and the financial performance of its capital assets. However, TVA's ability to make these large investments pertaining to (1) new generation and transmission assets, (2) environmental requirements, and (3) existing assets that are aging and need regular updates to keep running, will be a challenge given its financing structure and legislative debt ceiling.
  • TVA is attempting to reduce certain costs to improve its financial position. TVA fairs poorly when compared to other electric utilities with respect to non-fuel operation and maintenance (O&M) costs. TVA is seeking to reduce non-fuel O&M costs but has made limited progress to date. TVA has also focused on reducing interest costs as a percentage of revenues and has made progress in doing so in recent years.
Recent events have negatively affected TVA financially including: (1) a wet coal fly ash spill at the Kingston Fossil Plant, (2) a downturn in the economy causing declining power sales, (3) a court ruling on a lawsuit brought by the state of North Carolina, and (4) significant losses on accounts established to fund pensions and asset retirements. Our report includes discussions of the necessity to manage commodity price, investment price, credit, and capital requirement risks, and the risk that interest rates might rise. In addition, while TVA's bond rating is based primarily more on its federal ties that its financial position, TVA management has identified maintaining the AAA bond rating as a risk factor in its 2008 U.S. SEC Annual Form 10-K.

  Full Report
Tennessee Valley Authority (TVA) is engaged in responding to one of the largest spills in its history, the ash spill at Kingston Fossil Plant (KIF) in which 5.4 million cubic yards of ash poured onto adjacent land and into the Emory River. This report focuses on (1) TVA's initial emergency response, including implementation and utilization of the National Incident Management System (NIMS); (2) TVA's actions to quickly respond to the media; and (3) reparations to the victims and restoration of the affected Roane County community. In summary, we found:
  • TVA has not implemented NIMS in accordance with Homeland Security Presidential Directive (HSPD)-5 which hampered communications and delayed certain emergency response actions following the spill.
  • TVA's actions for responding quickly to media and public inquiry resulted in releases of inaccurate and inconsistent information and subsequent public criticism which caused reputational harm.
  • TVA has responded effectively to victims in the affected area, however, failure to communicate the claims policy and decisions in a timely manner increased settlement expectations for some.
TVA management generally agreed with and is taking actions to address the recommendations. Specifically, management plans to: (1) fully implement NIMS, ensure required NIMS training is completed, and evaluate the implementation of best practices identified by the Roane County Emergency Management Director; (2) document the protocol and verification process for the release of media statements and maintain verification that the appropriate processes were followed; and (3) continue to work with the communities and local residents to improve the communications related to TVA's efforts with property acquisition and claims process.

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We audited the costs billed to TVA by a contractor for providing turbine generator outage services at TVA nuclear plants. Our audit included $57.4 million in payments TVA made to the contractor. We found the contractor overbilled or had not provided services to TVA totaling an estimated $281,023, including: (1) $171,150 of labor and per diem costs that were either unsupported or unallowable; (2) $6,729 of overbilled fixed price labor; and (3) $103,144 of engineering services that were not provided in accordance with the terms of the contract.

(Summary Only)
We completed agreed-upon procedures to assist the Center for Resource Solutions (CRS) in determining TVA's compliance with the annual reporting requirements of CRS' Green Pricing Accreditation Program for the year ended December 31, 2008. The required information on TVA's renewable energy initiative, "Green Power Switch," was provided to CRS, including five identified exceptions and explanations.

(Summary Only)
We audited the costs billed to TVA by a contractor for the design, engineer, and delivery of air preheater equipment for TVA fossil plants. Our audit, which covered $23.2 million TVA had paid the contractor, found TVA had been overbilled at least $2,232,780.

The contract provided for all work, with the exception of a baseline project at Allen Fossil Plant, to be performed on a cost reimbursable basis. However, we found the contractor had overbilled TVA at least $2,025,739 on four additional fossil plant projects because it had billed fixed prices instead of using the required cost reimbursable terms. The actual overbilling may have been higher because our calculation of the overbilling used a maximum fee rate the contractor would have been eligible to receive. In addition, the contractor overbilled $207,041 for field technician services because incorrect billing rates had been used.

We recommended TVA management recover the overbilled costs from the contractor.

(Summary Only)
The OIG performed a review of Lewisburg Electric System (LES) which is a distributor for TVA power based in Lewisburg, Tennessee. Our review of LES found no material issues related to (1) the proper reporting of electric sales and (2) nondiscrimination in providing electricity to members of the same rate class. However, we found a contract compliance issue regarding LES's execution of contracts with customers with demand greater than 50 kW.

In addition, we found that LES had more than enough cash on hand to fund planned capital expenditures and provide a cash reserve. While TVA has established guidelines to determine if a distributor has adequate cash reserves (cash ratio of 5 to 8 percent), TVA has not established guidelines to determine if a distributor's cash reserves are excessive. As of June 30, 2008, LES reported cash of $7.5 million and planned capital expenditures of about $4.8 million which left cash reserves of about $2.7 million.

Finally, we also identified opportunities to enhance TVA oversight of the distributors. Specifically, TVA has not (1) provided definitive guidance for distributors on what constitutes prudent expenditures and (2) defined criteria for determining when a distributor's cash reserves are excessive.

We recommended the Chief Financial Officer (CFO) take action to ensure LES complies with contract provisions for formal customer contracts. In addition, the CFO, in collaboration with the TVA Board of Directors, where necessary, should (1) provide additional guidance on proper use of funds and (2) develop criteria to be used in determining whether a distributor's cash reserves are excessive.

TVA and LES management generally agreed with and are taking actions to address the recommendations.

  Full Report
The OIG performed a review of Monroe County Electric Power Association (Monroe) which is a distributor for TVA power based in Amory, Mississippi. Our review of Monroe found no material issues related to (1) the proper reporting of electric sales, and (2) nondiscrimination in providing electricity to members of the same rate class. However, we found improvements were needed regarding (1) Monroe's accounting for prepaid expenses to ensure conformity with FERC guidelines and (2) Monroe?s execution of contracts with customers with demand greater than 50 kW.

In addition, we found Monroe had more than enough cash on hand to fund planned capital expenditures and provide a cash reserve. While TVA has established guidelines to determine if a distributor has adequate cash reserves (cash ratio of 5 to 8 percent), TVA has not established guidelines to determine if a distributor's cash reserves are excessive. As of June 30, 2008, Monroe reported about $2.9 million in cash and $4.9 million in the TVA Power Invoice Prepayment Program and planned capital expenditures of about $5 million which left cash reserves of about $2.7 million.

Finally, we also identified opportunities to enhance TVA oversight of the distributors. Specifically, TVA (1) does not include cash paid in advance to TVA for future delivery of power in the calculation of the cash ratio for rate review purposes and has not defined criteria for determining when a distributor's cash reserves are excessive, (2) has not provided definitive guidance for distributors on what constitutes prudent expenditures, and (3) has not adequately defined how often meters should be tested by the distributors.

We recommended the Chief Financial Officer (CFO) take action to ensure Monroe complies with contract provisions regarding accounting practices and formal customer contracts. In addition, the CFO, in collaboration with the TVA Board of Directors, where necessary, should (1) provide additional guidance on proper use of funds, (2) review its calculation of the cash ratio for distributors with prepaid power accounts, (3) develop criteria to be used in determining whether a distributor's cash reserves are excessive, and (4) provide guidance on the frequency of meter testing.

TVA and Monroe management generally agreed with and are taking actions to address the recommendations.

  Full Report
This review was conducted to determine whether: (1) TVA gave anyone preferential treatment in the review and approval of Maintain and Gain transactions; and (2) the policies and procedures related to the design and execution of the Maintain and Gain process were adequate. We reviewed all Maintain and Gain transactions that had been approved since the inception of the program up to the date of this report and found:
  • Certain actions by TVA employees and by others created the appearance of preferential treatment and thereby increased TVA's risk of reputational harm.
  • TVA did not have a protocol in the Maintain and Gain process to ensure a transparent and independent review of applicants having known conflicts of interest.
  • The Maintain and Gain program has been administered in an arbitrary manner and requires substantial improvement if it is to be retained by TVA. We noted that exceptions were granted in seven of the ten key steps required in a Maintain and Gain Transaction.
  • TVA's failure to retain records of who filed applications and why those applications were rejected damages the integrity of the Maintain and Gain program.
  • The Maintain and Gain program may undermine the TVA Board's 2006 Land Policy and its apparent goal of restricting residential development on TVA shorelines.
We recommended TVA:
  • Eliminate the Maintain and Gain program and only consider changes to water access rights during the periodic update of the Shoreline Management Policy. Alternatively, if the Maintain and Gain program is retained, TVA should (1) evaluate the extent it may conflict with the Land Policy regarding residential development; (2) strengthen procedural guidelines to reduce the inconsistency in how matters are resolved; and (3) implement procedures to ensure adequate documentation of rejected and withdrawn applicants is maintained.
  • Establish a clearly defined protocol which creates a procedure for identifying inherent conflicts of interest by those applying for any TVA benefit and includes: (1) a definition of inherent conflicts of interest broad enough to capture the majority of cases that involve conflicted parties soliciting something of value from TVA; (2) a training program for TVA employees to enable them to recognize and report conflicts; (3) a process to refer these cases to the Ethics and Compliance Officer, the Designated Agency Ethics Officer (DAEO) and the OIG to track, review, and report on whether any preferential treatment occurred; and (4) a notice provision to any conflicted party applying for a TVA benefit advising them that their request or application will be the subject of a formal review and public report.
The Chief Executive Officer provided comments on the draft report and agreed to implement our recommendations. Specifically, in response to our recommendations, management plans to: (1) recommend to the TVA Board that the Maintain and Gain program be terminated; (2) incorporate policy and process concerns addressed in the report in the design of any future water access rights programs that would be recommended to the Board, and if such a future program is needed, recommend any future Maintain and Gain activities be made public early and be subject to TVA Board approval to add public notice and transparency to the process; and (3) develop, in coordination with the Audit, Governance, and Ethics Committee of the TVA Board, a policy that will provide a means to identify any potential actual or apparent conflicts of interest or the appearance of exertion of undue influence on the part of persons applying for a TVA benefit.

  Full Report

  (Referral Report to the Committee on Standards of Official Conduct - Redacted)
Following are observations from the review of documentation for 30 claims:
  • Of the 12 claims that were disputed, 2 of the dispute letters were not submitted within 30 days after the notice of injury, as required by federal code.
  • One claim did not include the supervisor's signature on the form.
  • In one instance, the claim was not submitted to the Office of Workers' Compensation Programs within ten business days, due to a supervisor not forwarding his/her completed portion of the form within the allotted eight days, as required by federal code and TVA policy, respectively.
We found prescribed services for TVA's Workers' Compensation (WC) department and assigned site personnel go beyond the Federal Employees' Compensation Act's WC requirements. However, when we interviewed selected managers, nurses, TVA site WC contacts, and other staff at seven TVA site locations, we were told the WC program support could be improved by: (1) increasing the expertise in the WC department, including medical knowledge of personnel; (2) improving education and training for personnel responsible for facilitating the WC process at TVA sites; (3) enhancing communications from the WC department; and (4) addressing the abundance of hearing loss claims.

  (Referral Report to the Committee on Standards of Official Conduct - Redacted)
We audited $211.6 million of costs billed to TVA by a contractor from January 1, 2006, through December 31, 2007, for the administration of TVA's medical benefit program. Our objective was to determine if the costs billed to TVA were in compliance with the contract terms and conditions. In summary, we found TVA had potentially been overbilled up to an estimated $473,024. The overbilling included (1) $327,513 in potentially duplicate line item charges; (2) $71,518 for unallowable procedures and services; (3) $4,659 for claims that exceeded plan limits; (4) $61,840 of audit recoveries that had not been credited to TVA; and (5) $7,494 of miscalculated claim payments.

In addition, we found TVA had been billed an additional $1 million due to payment provisions the contractor had negotiated with some of the providers in its preferred provider organization network. These provisions, referred to as stop-loss provisions, effectively offset discounts TVA would have otherwise received when providers' costs exceeded specified amounts.

(Summary Only)
We reviewed TVA's process for ensuring it does not knowingly contract with vendors that have been: (1) debarred or suspended by the federal government and/or (2) found unsatisfactory within TVA. In summary, we determined:
  • TVA does not have formal procedures for ensuring TVA does not knowingly contract with vendors that have been debarred or suspended by the federal government. However, Procurement requires its Contract Managers/Procurement Agents to review the Excluded Parties Listing System (EPLS), which is the federal government's database of debarred and suspended vendors, before awarding contracts over $100,000. Although we found TVA had not awarded contracts to vendors that were included on the EPLS during our review period (2005-2008), TVA's process was not always followed and/or documented.
  • The Federal Acquisition Regulations (FAR) include certain requirements that if implemented by TVA could improve TVA's process and further ensure that TVA does not do business with contractors and subcontractors that are debarred or have committed a civil or criminal offense.
  • TVA does not have a formal process for internally identifying vendors that have been found unsatisfactory within TVA. The lack of such a process could result in TVA not being aware of problems it has had with vendors prior to awarding contracts to them.
We recommended TVA Procurement develop written procedures detailing its vendor debarment process. In addition, TVA should improve its process by requiring more verification of the debarment status of contractors and subcontractors as prescribed by the FAR, including certifications and notifications by contractors regarding debarment and/or civil or criminal actions. TVA should also develop a process for (1) identifying TVA vendors that should be on a "watchlist" based on certain serious offenses committed by the vendor and (2) reporting any significant misconduct by contractors to the federal government.

(Summary Only)
We found TVA's process for the disposal of surplus computer equipment does not adequately protect TVA resources or track the disposition of surplus equipment. Specifically, (1) the equipment inventory in HP Service Desk was not correctly updated when equipment was removed from service; (2) equipment transferred from Information Services (IS) to Technology Initiative (TI) was not tracked to prevent unnecessary storage, loss, or theft; (3) TI did not maintain an inventory of equipment received for disposal or reconcile equipment received with equipment that was put in surplus by IS, and (4) the disposition records maintained by TI do not account for the disposition of 6,631, or 63.9 percent, of the computers put in surplus by IS.

  Full Report
We reviewed TVA's VISA purchasing card program to (1) identify and assess the operating effectiveness of controls over the program and (2) determine if they incorporate identified best practices. The scope of the project covered all transactions from October 1, 2005, through December 31, 2007. Our review determined:
  • Key internal controls were not functioning as intended with regard to (1) the review of purchasing card transactions and their supporting documentation and (2) transaction limits.
  • Certain purchases were made that were disallowed by TVA policy or questionable in nature.
  • TVA's purchasing card program incorporates some best practices, but key best practices were absent.
  • TVA employees were not reporting all instances of known or suspected waste, fraud, and abuse or violation of law to the OIG as required by Business Practice 2.
Management agreed with most findings and recommendations and has initiated or plans to initiate corrective action

  Full Report
TVA contracted with Ernst & Young LLP (E&Y) to audit TVA's balance sheet as of September 30, 2008, and the related statements of income, changes in proprietary capital, and cash flows for the year then ended. In addition, the contract called for the review of TVA's fiscal year 2008 interim financial information filed on Form 10-Q with the Securities and Exchange Commission. The contract required the work be performed in accordance with generally accepted government auditing standards. We evaluated E&Y's work to determine compliance with these standards. The objective of our review was not intended to enable us to express, and we did not express, an opinion on TVA's financial statements or on management's conclusions about the effectiveness of its system of internal control. E&Y is responsible for the auditor reports dated December 12, 2008, and the conclusions expressed in those reports. However, our review disclosed no instances where E&Y did not comply, in all material respects, with generally accepted government auditing standards.

  Full Report
The objective of our review was to assess the procedures and key control activities used to track and account for tools on the Watts Bar Nuclear Plant Unit 2 Construction Project (WBN U2 Project). Our review of the WBN U2 Project tool program found (1) nothing to indicate significant discrepancies in the tool inventory at this time; (2) data entry errors in the Tool Hound system; (3) opportunities exist to improve controls, based on our review of the contractor's Small Tools and Small Capital Equipment Procedure; and (4) some non-compliances with the contractor's Small Tools and Small Capital Equipment Procedure. We recommend the contractor (1) ensure accuracy of data entry in the Tool Hound system; (2) consider modifying the contractor's WBN U2 Project small tool procedure to include the additional control opportunities identified and the valuation criteria for bulk items; (3) ensure compliance with the contractor's Small Tools and Small Capital Equipment Procedure; and (4) enhance controls over inventory contained in unlocked sea/land containers. Management agreed with our findings and has initiated or plans to initiate corrective action.

  Full Report
TVA contracted with the independent certified public accounting firm of PricewaterhouseCoopers LLP (PwC) to audit revisions to the balance sheets and the related statements of income, changes in proprietary capital, and cash flows as of September 30, 2007 and 2006, for the purpose of restating TVA's previously issued financial statements. The contract required the audit be done in accordance with generally accepted government auditing standards. Our review disclosed no instances where PwC did not comply, in all material respects, with generally accepted government auditing standards.

  Full Report
We reperformed certain procedures due to changes in data previously reviewed by the OIG, the results of which were reported in our October 24, 2008, report under project No. 2008-12062. In reperforming the procedures, we found the (1) actual year-to-date input for the revised fiscal year (FY) 2008 Non-Fuel Operations & Maintenance TVA-wide metric agreed with the underlying support provided by the Controller's organization on December 4, 2008, and (2) revised FY 2008 scorecard and weighted scorecard payout percentages were mathematically accurate.

(Summary Only)
We audited $25.24 million of costs billed to TVA by a contractor for subcontract services between September 30, 2002, and December 31, 2007. The subcontractors provided personnel to perform asbestos abatement and sampling, along with removal and installation of other insulation material at TVA nuclear plants and subsequently in support of the Browns Ferry Nuclear Plant Unit 1 Recovery Project. In summary, we found that TVA had been overbilled $132,657 as a result of (1) craft labor costs that were not provided for or were in excess of TVA's Project Maintenance and Modification Agreement, (2) duplicate billings for some materials, and (3) inaccurate insurance cost adjustments. We recommended TVA management recover the $132,657 in overbilled costs from the contractor.

(Summary Only)
We audited the costs billed to TVA by a contractor for providing professional engineering and technical support services associated with the restart of Browns Ferry Nuclear Plant (BFN) Unit 1. Our audit, which included $110 million of payments TVA made to the contractor from June 2004 through October 2007, found the contractor had overbilled or not credited TVA an estimated $276,484 for (1) home office labor and related costs that should have been covered by the contractor's overhead rate, (2) certain miscellaneous labor costs and markups that were not allowable, (3) unspent employee recognition costs, (4) home office computer and facility charges for some employees who did not meet the contract eligibility requirements, and (5) overbilled provisional payroll taxes and insurance. Additionally, we found that changes TVA made to the contract resulted in TVA paying $343,548 in excessive paid time off costs for certain contractor personnel assigned to the BFN Unit 1 project.

(Summary Only)
We reviewed TVA's efforts to implement telework as well as any planned telework initiatives. Our review determined (1) Business Practice 20, Off-site Use of Business Equipment (BP 20), provides a framework for telework; however, we found little evidence of compliance with the policy, especially as related to required training and method of approval; (2) pockets of teleworkers exist throughout TVA; however, TVA has no system for tracking individuals who telework and the extent to which they telework; and (3) employees are approved to telework by being granted remote access to TVA systems instead of following the BP 20 approval process.

We also reviewed TVA's Continuity of Operations Plan (COOP) and Pandemic Plan and determined both adequately included the use of telework in those programs. However, the COOP does not require essential employees to take their laptop computers home in the evenings to ensure continuity of operations in the event they are unable to move to the alternative location during an emergency.

We recommended the Chief Administrative Officer and Executive Vice President of Administrative Services (CAO) (1) work with other TVA organizations to determine which jobs and functions in TVA are conducive to telework; (2) consider a pilot program that would assist in future decisions about telework and identify ways to use telework to facilitate COOP planning and responding to emergency situations such as pandemics or natural disasters; (3) implement a telework policy that provides a method for approving employees to telework, appropriate training to supervisors and all employees authorized to telework, a tracking system for individuals who telework, and effective communication of TVA's telework policy to TVA employees; (4) consider designating a Telework Managing Officer; (5) consider requiring that essential employees take their laptop computers home at the end of their workday in the event an emergency occurs and they are unable to move to the alternative location.

The CAO agreed to work with other TVA organizations to determine which jobs and functions in TVA are conducive to telework. Upon completion of that assessment, the CAO will take appropriate actions regarding our other recommendations.

  Full Report
We performed four agreed-upon procedures solely to assist management in determining the validity of the Winning Performance payout awards for the year ended September 30, 2008. In summary, we found:
  • The fiscal year 2008 Winning Performance goals were properly approved. However, during our review, we noted the definition sheets describing the formulas for the three TVA incentivized measures were not approved by the Board. We also found that although the PSO - Transmission System Services (TSS)'s performance measures were solely comprised of metrics from other scorecards that were approved on November 6, 2007, the approval of these metrics for measuring TSS's performance for purposes of the payout did not occur until September 8, 2008.
  • Actual year-to-date inputs for the sampled metrics agreed with the respective supporting documentation.
  • Actual inputs for the three incentivized TVA-wide metrics agreed with the underlying support provided by the Strategic Business Units with one exception related to the equivalent availability factor metric. This one exception did not affect the payout.
  • The payout percentages were mathematically accurate after noted exceptions were corrected.
(Summary Only)
We reviewed the qualifications for contractor and subcontractor employees working on the Watts Bar Nuclear Plant Unit 2 (WBN U2) construction project to assess the hiring process and determine if those hired met minimal qualifications for their designated labor category (grades). We determined:
  • TVA's engineering, procurement, and construction contract did not include minimum requirements for the 20 specified labor categories; moreover, the contractor lacked corporate criteria specifying minimum requirements for filling these positions at WBN U2. To establish the hiring requirements for positions to be filled for the WBN U2 project, the contractor relied on the job requisition process, resulting in varying and inconsistent minimum requirements for these positions.
  • Requirements established through this requisitions process were sometimes not met. For example, when we compared employee qualifications to requirements in the associated job requisitions, we found 8 of the 56 individuals reviewed, or 14.3 percent, did not meet the requirements outlined in the requisitions. However, when questioned, the contractor provided explanation and asserted that all individuals were qualified for the work being performed.
We recommended the Vice President, WBN U2, Nuclear Generation, Development and Construction, in conjunction with the contractor Project Director (1) require that job requisitions include minimum requirements for each position and the requirements be reviewed and approved by the contractor's Human Resource personnel to ensure consistency among job classifications and eliminate errors and document the rationale for hiring any candidate not meeting the minimum requirements but who is deemed qualified for the position; (2) evaluate the qualifications of the employees not meeting the qualifications in the job requisitions to determine if they are qualified to perform the assigned work; and (3) take steps to ensure resumes are thoroughly reviewed, and identified discrepancies are resolved prior to individuals being hired.

(Summary Only)
We audited $7.9 million of costs billed to TVA by a contractor for supplying ammonia and providing engineering and technical services for ammonia facilities to various TVA fossil plants. In summary, we found (1) the prices billed for $2.8 million of the ammonia delivered to five TVA fossil plants could not be verified because prices for the ammonia were not included in the contract, (2) TVA was overbilled $106,054 for ammonia shipments to a fossil plant because an incorrect markup had been used, and (3) TVA was billed $4,375 for ineligible surcharges that were not provided for by the contracts. Additionally, we found that TVA did not have a process in place to verify the amount of ammonia that was delivered and subsequently billed to its plants. We recommend TVA management (1) recover the overbilled costs, (2) determine the reasonableness of the ammonia prices billed for the five TVA fossil plants, and (3) implement controls to independently verify the quantities of ammonia being delivered to TVA's plants.

(Summary Only)
This review was the first in a series of reviews that will benchmark TVA's performance in key areas and answer the question, "How is TVA doing in regards to Customer Relations." In conducting this review, we (1) assessed key performance measures and their alignment with the key strategic objectives; (2) evaluated TVA's results relative to targets and available benchmark information; and (3) identified key management challenges that could affect how successful TVA is in achieving these strategic objectives.

We found, overall, TVA's performance results in the area of customer relations are excellent. TVA has delivered electric service with 99.999 percent reliability. Also, TVA's electricity rates are competitive given that rates are (1) 24 percent below the national average; (2) below the median when compared with neighboring utilities; and (3) at the median when compared to other utilities within one wheel of TVA. In addition, TVA slightly outperformed its potential competitors in fiscal year 2007 in overall customer satisfaction. The top four challenges that affect the area of customer relations include (1) high cost of new generation; (2) uncertainty around fuel cost and delivery; (3) managing an aging generation fleet with potential changes to regulatory requirements; and (4) inherent conflicts in TVA's role as a regulator.

  Full Report
Since the Office of the Inspector General's previous review of TVA's risk program in 2003, TVA has enhanced its Enterprise Risk Management (ERM) capabilities in the following areas: risk identification and assessment; management tone; strategic decision-making support; commitment to ERM staffing; and promotion of an ERM culture. The areas in need of improvement include: linking risks and objectives to effectively identify and prioritize risks, focus discussions, and allocate resources; clearer mapping of likelihood and severity with associated risk; measurement of inherent risk to identify critical risks with a higher need for monitoring; role of the Board and executive management in defining risk tolerance which is policy driven; a formal, comprehensive risk policy approved by the Council and Board; and increased reporting and discussions of ERM with the Board. We recommended TVA address the areas needing improvement. Management generally agreed and is taking or plans to take appropriate action.

(Summary Only)
The Office of the Inspector General's review of TVA's compliance with the Federal Information Security Management Act (FISMA) of 2002 determined that TVA had improved (1) tracking of security weaknesses, remediation actions, and incidents and (2) measures to ensure appropriate personnel complete role-based security training. While TVA continues to make progress in implementing information technology controls required by FISMA, we noted additional controls are needed to improve (1) oversight and evaluation of contractor systems, (2) completing system certifications and accreditations, (3) defining and tracking configuration management metrics, and (4) consideration of e-authentication risks at TVA.

(Summary Only)
We reviewed the contractor's processes and key controls for tracking and accounting for costs used in invoicing TVA for its work. Based on the review, we believe the contractor's system increases the risk of improper billing. Specifically, the system used for TVA billings (1) has limited design documentation and prescribed controls; (2) requires significant manual data entry; (3) increases the hours spent to prepare project invoices; and (4) results in numerous adjustments which, according to TVA management, have totaled more than $1 million. These adjustments include additional charges and credits to reflect actual expenses.

To address the issues, we recommended the Vice President, Watts Bar Nuclear Plant Unit 2, in conjunction with the contractor project director, either (1) further assess the feasibility of amending the billing terms to allow the use of the contractor's standard systems, (2) consider an alternative billing system, or (3) require improvements to the current system and processes to address the (a) systemic issues resulting in billing adjustments, (b) lack of key control activities, and (c) other reconciliation/documentation issues. In addition, we recommended all aspects of the billing process and key control activities be documented and tested. TVA management generally agreed with our findings and recommendations and has taken or plans to take corrective action.

(Summary Only)
Based on concerns expressed to the Office of the Inspector General, we initiated an inspection of TVA's easement with the Tishomingo County Development Foundation (TCDF). The objective of the review was to determine whether easement payments were made in accordance with the agreement. We found that while TCDF was not in compliance with amended easement payment provisions, the payment provisions were recently amended for the second time to provide the developer, Pickwick Pines Marina (PPM), an opportunity to develop and operate the marina. We also noted that the minimum investment provision of the easement has not been met. On August 6, 2008, TCDF sent PPM a notice of default.

  Full Report
We reviewed certain Browns Ferry Unit 1 (BFN U1) operating issues that have occurred since the restart in May 2007. We found the operating issues were primarily caused by improper installation of a fitting during the restart project and another fitting during initial construction, original plant design errors, failure to identify the correct root cause of a previous issue in a timely manner, and failure to identify a missing wood support during walkdowns. The root causes for the SCRAMs (safety control rod axe man) appear to not be the result of work performed under project milestones tied to the Unit One Executive Compensation plan. In addition, we found the total cost of the BFN U1 project to be approximately $1.8 billion through fiscal year 2007.

  Full Report
Review of selected marina and campground license and lease agreements were performed at the request of the Chief Financial Officer organization to determine whether (1) payments to TVA were accurate and timely and (2) TVA and the counterparties complied with key provisions of the agreements. In summary, our review of the eight selected marina and campground agreements found:
  • For five, payments appeared to be calculated in accordance with payment terms.
  • For two, a lack of records prevented the verification of lease payment calculations and compliance with other key provisions of the contract.
  • For four, there were unapproved additions at three campgrounds and an unapproved modification at a marina.
  • For three, seasonal guests were given preference to return to their site each year and were allowed to leave camping vehicles and equipment on site while the campground was closed.
  • TVA had provided no written guidance for the management of these agreements, including verification of the accuracy of payments received.
  • Operations Business Services personnel recently requested documentation from the counterparties to support gross revenues earned in the period prior to being invoiced by TVA. This appears to address certain invoicing and payment controls; however, the agreements had not been amended to reflect these changes.
We recommended the Vice President, Environmental Stewardship & Policy:
  • Implement written guidance, as deemed necessary, regarding the management of recreational facility agreements.
  • Determine whether the agreements should be amended based on the implementation of payment control activities.
For certain agreements, we recommended the Vice President, Environmental Stewardship & Policy:
  • Require the counterparty to comply with the documentation requirements of the agreement.
  • Require adequate documentation for any modifications to the agreement.
  • Implement necessary actions to ensure the counterparties comply with terms of the agreement and, when necessary, consider termination options.
  Review of Riley Creek Campground Lease Agreement

  Review of Skull Island Campground Lease Agreement

  Review of Buchanan Resort and Marina License Agreement

  Review of License Agreement for City of Lenoir City

  Review of Fooshee Pass Campground License Agreement

  Review of Goat Island Campground Lease Agreement

  Review of Normandy Cedar Point Public Use Area Lease Agreement

  Review of Terrace View Marina License Agreement

We audited $19 million of costs billed to TVA for subcontract services on the Browns Ferry Unit 1 recovery project. We determined the costs billed by the subcontractor for providing professional and technical support personnel were fairly stated and in accordance with the terms of the subcontract.

(Summary Only)
We performed an interim audit of costs billed to TVA by a contractor for providing (1) modification and supplemental maintenance services at TVA nuclear plants (operating unit work) and (2) construction services for the restart of Browns Ferry Nuclear Plant (BFN) Unit 1. The scope of our review included $492.4 million of craft labor costs billed by the contractor through October 29, 2006, which had not previously been audited including: (1) $214 million for modification and supplemental maintenance services and (2) $278.4 million for the BFN Unit 1 services. In summary, we found TVA had been overbilled $1,986,254 because the contractor had (1) used a labor classification not provided for by TVA's contract, (2) miscalculated its payroll tax costs, (3) overpaid certain craft employees as a result of duplicate hours and ineligible double-time labor costs, and (4) misclassified some employees when it paid them. TVA management is planning to review the audit findings in detail to determine what amounts should be recovered from the contractor.

(Summary Only)
While TVA has taken several actions to better protect social security numbers (SSNs), we found opportunities to further protect or reduce the usage of SSNs that will lower the risk of exposure. TVA's Information Services has several initiatives under way to improve protection of SSNs. We are recommending several actions to further protect SSNs. Management agreed and has initiated corrective actions.

(Summary Only)
We initiated a special project to determine if (1) TVA's policies, procedures, and practices for handling lost or stolen computer equipment were adequate; (2) those policies, procedures, and practices were followed; and (3) the lost or stolen computers contained sensitive or restricted information. We found:
  • TVA's policies, practices, and procedures for maintaining an accurate inventory of computer equipment were not adequate. Since the August 2004 implementation of the HP Service Desk (HPSD), which contains an inventory of TVA computers, TVA has been unable to track over 5,550 computers. The inability to adequately track, as well as the lack of encryption, on these computers increases the risk for the disclosure of sensitive or restricted information.
  • The policies for handling/reporting stolen computers were not consistently followed.
  • At least one of the stolen computers contained personally identifiable information-employee social security numbers. We have not been able to confirm whether the remaining stolen computers contained sensitive or restricted information, although we believe the risk is moderate.
  Full Report
We audited $22.1 million of costs paid by TVA to a contractor for construction and modification services at TVA facilities. In summary, we found
  • An estimated $20.8 million billed by the contractor for craft augmentation labor using hourly billing rates was inflated by approximately $619,000 because the contractor's billing rates included (a) overstated payroll tax costs and (b) calculation errors; and
  • The contractor billed TVA $25,658 for subcontract services it had not incurred.
We recommended TVA management recover the inflated and overbilled costs and take steps to ensure the contractor's billing rates for craft augmentation labor are reasonable based on the company's actual costs.

(Summary Only)
We completed agreed-upon procedures to assist the Center for Resource Solutions (CRS) in determining TVA's compliance with the annual reporting requirements of CRS' Green Pricing Accreditation Program for the year ended December 31, 2007. The required information on TVA's renewable energy initiative, "Green Power Switch," was provided to CRS. No exceptions were identified.

(Summary Only)
We reviewed $14.2 million of costs billed to TVA by a contractor for providing right-of-way clearing and restoration services and found:
  • TVA had been overbilled $81,533 including (a) $38,796 in unallowable miscellaneous material costs, (b) $34,776 in duplicate billings for initial clearing costs, and (c) $7,961 in unsupported labor costs. Additionally, we found the contractor had underbilled TVA $5,776 due to various invoicing errors. The contractor agreed with our finding regarding unsupported labor costs and provided explanations for why it believed the remaining items were billed correctly. TVA management agreed with the findings regarding unallowable material costs, unsupported labor costs, and underbilled costs and stated they are conducting a review of the $34,776 in suspected duplicate billings for initial clearing services.
  • Prior to award of the contract, Procurement's contract manager had requested the contractor to change its proposed billing rates to "TVA Valley-wide" rates. That action, which the contractor agreed to, caused TVA's costs to increase $522,212 because most of the rates that had been proposed by the contractor were lower than TVA Valley-wide rates. Procurement informed us that TVA had deployed a strategy to negotiate consistent pricing among all suppliers and that would be more favorable to TVA. Procurement further stated that although some of the prices were higher than the contractor's initial offer, lower prices were achieved in four areas (line items) where TVA expected the majority of the expenditures to take place; however, since the actual quantities of work performed under the various line items were other than anticipated, the resulting charges increased TVA's total cost by approximately 3.7 percent.
Procurement plans to use this experience in some lessons-learned sessions.

(Summary Only)
A review of trust funds administered by Economic Development (ED) found the majority of the trust funds were inactive, and according to ED management, had been established between 1983 and 1991 for a variety of purposes. ED management said they found no activity in the majority of these trusts. ED had closed approximately 11 inactive trust funds as of July 27, 2007. Our review further found that documentation of these trust agreements was limited. TVA management could not provide documentation to show the recipients of fund balance distributions or the reallocation of the funds beyond a 2006 closeout memorandum from TVA to the recipients that certified that the contract requirements had been met and that funds had been used as required by the contract. In addition, TVA management could not provide us with account statements for 11 of the 16 trust accounts, bank account numbers for 6 of the 16 trusts, or the underlying agreements for half the trusts. Because of the limited documentation, we were unable to determine whether the trust funds are being administered in accordance with the terms of the agreements and whether the trust funds are being administered in accordance with the terms of the agreements and applicable laws and regulations. According to the Senior Vice President, ED, TVA no longer establishes trust accounts, and it does not intend to do so in the future.

  Full Report
We audited $16.5 million of costs billed to TVA by a contractor for providing cleaning and removal services using high-powered vacuum and hydro-blasting services to various TVA locations. In summary, we found the contractor had (1) overbilled TVA an estimated $115,617 in unsupported and ineligible costs and (2) performed certain services and fixed price tasks not provided for by the contracts. The contractor agreed it had overbilled TVA for certain questioned costs and disagreed with other questioned overbillings. The contractor also agreed TVA had made payments for certain services and fixed price tasks not provided for by the contracts. TVA management agreed with our findings from the detailed review of invoiced costs but requested additional information regarding the methodology used for estimating the overbilling. Management, however, did not address how it planned to ensure prices being paid for services currently included in the contract are reasonable.

(Summary Only)
We previously issued an audit report (2007-019F) that noted (among other things) significant duct leaks at two fossil plants. Management agreed with our recommendation to work to promote a culture of transparent reporting throughout TVA organizations. We have now closed a joint investigation with the EPA Criminal Investigations Division that found installation of a Selective Catalytic Reduction system led to deterioration in the flue gas ductwork at the Widows Creek Fossil Plant. The deterioration caused extensive leaks that became progressively worse. In spite of the extent of the leaks, it appeared TVA gave little, if any, consideration to reporting them to regulatory authorities. While TVA patched the leaks as they occurred and eventually replaced large sections of the ductwork, we recommended management consult with the TVA Ethics and Compliance Officer to incorporate ethics and compliance considerations into daily operations at the fossil plants.

  Full Report
We performed a pre-implementation review of security, application testing, and data loading for TVA's Electronic Access Protection System (EAPS). We determined the EAPS security plans and procedures and TVA's plans for application testing and data loading provided adequate controls over security, testing, and data reliability.

(Summary Only)
We reviewed 40 contracts awarded by Procurement during fiscal year 2006 and found: (1) insufficient competition existed in the award of seven of the contracts because only one bid had been received and evaluated; (2) Technical Contract Managers contacted vendors and received pricing quotes prior to Procurement's involvement in five of the contract awards; and (3) with some exceptions, Procurement's contract managers and purchasing agents had appropriate documentation in the contract files. To help TVA assure it is receiving adequate competition, we recommended TVA Procurement: (1) require management approval for all contracts greater than $25,000 when only one bid is received; (2) reinforce compliance with TVA's requirement that only Procurement personnel are authorized to obtain proposals from potential suppliers; and (3) provide clear guidance as to the contract file documentation requirements. In addition, we suggested Procurement consider the benefits of creating a position of Competition Advocate, a position required for other federal agencies. TVA management is reviewing our recommendations to decide what actions should be taken to improve the contract award process.

(Summary Only)
The recent restructuring of the Information Services (IS) operations area mirrors leading practices. In addition, IS' methodologies and tools for conducting information technology projects are above those of its peers. However, our review showed some areas needed improvement, such as, TVA needs to (1) better integrate IS governance with TVA business strategy; (2) improve focus on strategic business partnering and communication with customers; (3) target organization and policy changes, performance measures, and service management toward aiding customers to achieve business goals; (4) consolidate procedures to increase usability; and (5) develop a strategy for handling the risk of the aging workforce and ensuring knowledge transfer. Management generally agreed with the recommendations and is taking corrective action.

  Full Report
While IT Security has made strides in establishing the technology infrastructure, we found (1) IT Security lacks a business-level mechanism to provide cross-agency oversight, a strategic TVA-wide approach, and grounding in risk management; (2) coordination and communication with business units were not well defined and could be more effective with increased training, communication, and business unit involvement in security planning; (3) procedures were outdated and did not address issues for all business segments; and (4) performance management was substantially undefined. Management agreed with the recommendations and is taking corrective action.

(Summary Only)
TVA entered into a contract with a vendor to provide a fully integrated prescription drug program that would include both retail and mail order prescription drug services. The contractor was required to (1) maintain a Participating Pharmacy Network to provide retail pharmacy services, (2) provide base administrative services including processing and adjudicating TVA's prescription drug claims in accordance with TVA's plan design, (3) issue checks to participating pharmacies and/or claimants on TVA's behalf, and (4) implement and administer health management programs. We reviewed the costs billed and formulary rebates credited to TVA by the contractor. Specifically, our inspection covered:
  • Claims payments by TVA to the contractor for the period December 22, 2001, through December 30, 2005.
  • Base administrative fee payments made by TVA to the contractor for the period January 5, 2002, through December 5, 2003. (There were no base administrative fee payments for calendar years 2004 and 2005.)
  • Formulary rebates credited to TVA for claims adjudicated and billed from January 1, 2002, through December 31, 2005.
We found, in general, the contractor billed costs in accordance with the contract terms and TVA plan provisions with the exception of certain Consumer Directed Health Plan (CDHP) claims. In addition, formulary rebates allocated to TVA exceeded the minimum guaranteed rebate amounts, when applicable, and nothing came to our attention during the limited testing of formulary rebates that would indicate TVA rebates were not determined in accordance with contract terms. TVA management generally agreed with our findings and recommendations and has taken or plans to take corrective action to resolve the issues identified regarding CDHP claims.

(Summary Only)
Our audit of $5.9 million of costs billed to TVA by a contractor that conducted various projects and programs from April 1999 through September 2007 found the costs were fairly stated and agreed with the terms of the contract. However, about 20 percent of the payments TVA had made to the contractor were related to a specific project under which TVA acts as an administrator, collecting funds from various federal agencies and disbursing the funds to the contractor. Since the benefits received by TVA for incurring the costs of administering the collection and disbursement of the funds for the project appear negligible, we recommended TVA consider transferring the administration function for the project to the contractor. TVA management and the contractor agreed with the audit recommendation. TVA management and the contractor agreed with the audit findings.

(Summary Only)
We identified 21 TVA contractors who held purchasing cards from March 28, 2004, to March 28, 2007, incurring 35,605 transactions totaling about $16.7 million. This included six contractors whose purchases each totaled more than $1 million for the period. A review of documentation supporting selected transactions found instances of noncompliance with TVA's policy and procedures. Specifically, we found (1) purchases that were, by policy, disallowed (e.g., computer equipment, computer software, fuel, rental of heavy equipment, and rental of vehicles); (2) transactions where it appeared the total charge was split to stay below the $5,000 transaction limit and avoid obtaining additional approval; (3) transactions with no detailed receipt showing the description and quantity of items purchased; (4) transactions with no receipt; and (5) transactions with receipts that were illegible. We also identified other control improvement opportunities. TVA management generally agreed with our findings and recommendations and has taken or plans to take corrective action.

  Full Report
We reviewed the TVA dam safety inspection process to determine whether it (1) met federal guidelines for dam safety, (2) was being followed by Dam Safety inspection personnel, and (3) was adequately supported by an information database. In summary, we determined River Operations' (1) inspection process met Federal Emergency Management Agency guidelines for periodic dam safety inspection programs; (2) inspection personnel appeared to adhere to the process for identifying, monitoring, and correcting inspection deficiencies based on the five dams we reviewed; (3) information databases provided adequate support for the inspection process; and (4) management had implemented planned corrective actions in response to recommendations in our 2001 audit. However, our review found (1) 57 out of 81 work orders/requests related to Maintenance and Repair (M&R) identified by the dam safety inspections for the five dams we reviewed were not completed by the estimated due date on the inspection report, and (2) there was a historical trend of not completing M&R items by the estimated due date. We recommended the Senior Vice President of River Operations consider implementing a prioritization and scheduling process that ensures timely completion of M&R projects. Management agreed with our findings and has initiated or plans to initiate corrective action.

  Full Report
As part of our annual audit plan, we audited $5.2 million in costs billed to TVA by a contractor for subcontract services provided on the Browns Ferry Nuclear Plant Unit 1 (BFN U1) recovery project. Under its subcontract, the subcontractor provided engineers for the BFN U1 project to assist in the resolution of technical issues developed during the field implementation of modifications. Our audit objective was to determine if the costs the contractor billed to TVA were in compliance with the provisions of the contract and the subcontract. In summary, we determined the contractor billed TVA $25,331 for costs that were not in accordance with the contract provisions. TVA management plans to recover the overbilled costs.

(Summary Only)
We determined the provisional billing adjustments a contractor calculated for calendar years 2005 and 2006 were understated by $267,040 due to various errors in the contractor's reconciliations of previously billed and incurred costs. Also, we found the contractor owed TVA an additional $636 due to various billing and payment errors. The contractor and TVA management agreed with our findings.

(Summary Only)
We identified issues related to (1) noncompliance with reporting requirements; (2) different interpretations on how some environmental occurrences should be classified; (3) environmental issues that were not documented and managed through TVA's corrective action program; (4) lack of a corporate reportable environmental events (REE) procedure; (5) inaccurate environmental data in the Electronic Corrective Action Program (eCAP), Environmental Event Reporting (EER) system, and REE registry; and (6) two instances where TVA did not externally report events because they did not feel it was required. We recommended TVA's Environmental Stewardship and Policy (1) clarify the environmental occurrences required to be classified as Environmental Events, (2) develop a corporate REE procedure, (3) clarify the environmental occurrences required to be managed through the corrective action process, and (4) review environmental data in the eCAP, EER system, and REE registry for accuracy, correct identified errors, and identify a method to prevent future environmental database errors. We further recommended TVA's Environmental Executive work with other TVA executives to promote a culture of transparent reporting throughout TVA organizations. This could include a periodic briefing of management or executives on the status of REEs, Environmental Events, Notices of Violation, and Environmental Management System findings. Management agreed with our recommendations.

(Summary Only)
Our review covered the external contractual services' conducted by RM. Our objectives were to determine if (1) work was performed in accordance with applicable policies and procedures and (2) costs associated with TVA employees working for outside entities/agencies were adequately recovered. In summary, we found:
  • The majority of fiscal year (FY) 2006 RM External Contractual Services' revenue was generated from work for other federal agencies, and the projects we selected for review appeared to be in compliance with the Economy Act of 1932, as amended (31 USC 1535). In addition, direct costs and approved overheads were captured on a project-specific basis and automatically billed to ensure cost recovery.
  • The work performed was not a TVA core business and did not appear to align directly with TVA's Strategic Plan. RM stated the work was consistent with the spirit and historical enablement of the TVA Act and was implicitly included and serves as an enabler for many parts of TVA's new Strategic Plan.
  • The work increased TVA's monetary, reputational, and environmental risks. RM stated, however, that they continue to improve the risk profile for the RM External Contractual Services' efforts through completion of high-risk projects, through their strategy on the nature of future work, and through actions and processes to mitigate financial risks including purchasing insurance and incorporating written indemnity clauses in certain contracts.
  • For 5 of the 14 projects reviewed, a contract could not be provided. In addition, key decisions required by RM policies and procedures were not documented, or documentation was incomplete.
Based on the risks and the lack of a clear direct nexus to TVA's core business as discussed above, our draft report recommended that the President and Chief Executive Officer terminate the RM External Contractual Services' program. Management stated in their comments to our draft report that RM plans to continue the program but will exit chemical agent work as it carries the greatest risk for TVA. Management also plans to (1) further review the risks associated with the program and update TVA's risk assessment as needed and (2) improve program documentation as TVA implements its new business management software in FY 2008. We agreed with management's planned actions.

  Redacted Report
TVA contracted with the independent certified public accounting firm of Pricewaterhouse-Coopers LLP (PricewaterhouseCoopers) to audit the balance sheets as of September 30, 2007, and 2006 and the related statements of income, changes in proprietary capital, and cash flows for each of the three years in the period ended September 30, 2007. The contract required the audit be done in accordance with generally accepted government auditing standards. Our review disclosed no instances where PricewaterhouseCoopers did not comply, in all material respects, with generally accepted government auditing standards.

  Full Report
We conducted three reviews to determine whether the coal supplier was in compliance with weighing, sampling, and shipping provisions of the respective contract. We performed tests to verify that shipment weight and coal test results documentation maintained at each mine supported the amounts used to (1) invoice TVA for tonnage shipped and (2) calculate coal-quality adjustments. In summary, our reviews found documentation maintained at the respective mine for ten randomly selected shipments agreed with the information provided to TVA regarding tons shipped and coal-quality test results. Each supplier was also found to be in general compliance with the weighing, sampling, and shipping provisions in the contract and/or applicable standards. However, we also found some control improvement opportunities. TVA management generally agreed with our findings and recommendations and has taken or plans to take corrective action.

(Summary Only)
In a prior audit, 2007-10997, Review of Temporary Shares for Sensitive Information, the OIG identified numerous incidents of Personally Identifiable Information (PII) and TVA sensitive information on temporary shares available to anyone with a TVA network ID. TVA's Information Services (IS) organization subsequently reviewed other temporary shares and identified additional instances of PII available on the shares. For this audit, we (1) reviewed the risk assessment methodology used to evaluate PII identified during the reviews of temporary shares and (2) determined if IS' conclusions regarding risk exposure of PII were reasonable. In summary, we found the (1) risk assessment methodology was consistent with the National Institute of Standards and Technology's and Office of Management and Budget's guidance, and (2) conclusions reached were reasonable.

  Full Report
We investigated the amount of coal being left in barges after they were unloaded at the Cumberland Fossil Plant. Information provided by the barge company showed that from August 1, 2006 through July 31, 2007, TVA abandoned roughly 14,000 tons of coal per month. Based on the average cost per ton, including transportation costs, we estimated TVA lost over $6 million annually. Management advised they would review the cost effectiveness of using a contractor to clean out barges and they would issue an early Request for Proposals to attempt to negotiate language to provide for dedicated barges or clean out services.

  Redacted Report
We reviewed hospitality expenses incurred by TVA October 1, 2005, through June 30, 2007, to (1) determine the type and level of expenditures; (2) assess compliance with policies and procedures; and (3) identify changes in hospitality policies since our last hospitality audit. We found total hospitality expenditures, including employee recognition expenses, averaged about $2.3 million per year during the period, representing a 64 percent reduction from fiscal year 2003 spending. For the period reviewed, TVA generally complied with policies and procedures, except as related to obtaining preapproval of hospitality expenditures. Management agreed with this finding and took corrective action.

  Full Report
We performed agreed-upon procedures, requested solely to assist management in determining the validity of the Winning Performance payout awards for fiscal year (FY) ending September 30, 2007. In summary, we found:
  • The FY 2007 Winning Performance goals were properly approved.
  • Actual year-to-date inputs for the sampled metrics agreed with the respective basis worksheet.
  • Actual inputs for the nine TVA-wide metrics agreed with the underlying support provided by the Strategic Business Units, except for the calculation of the Delivered Cost of Power (DCOP) metric, which was inconsistent with the Board-approved formula. This resulted in a one cent overstatement of the calculated DCOP, further resulting in a .25 percent increase in the TVA Scorecard percentage. Management agreed and made the appropriate correction during the engagement.
  • Also, in applying the procedures, we noted the Fuel Cost Adjustment (FCA) metric improperly included Browns Ferry Nuclear Plant precommercial costs. The FCA metric approved by the Board did not include these costs. Including these costs in the FCA metric resulted in an 8.25 percent overstatement in the TVA Scorecard percentage. After discussion with management, these costs were removed from the FCA metric and subsequently included in the DCOP metric. A revised payout report was provided for retesting. We noted during retesting, the precommercial costs were properly excluded from the FCA metric and included in the DCOP metric. We further noted Allowance for Funds Used During Construction was added to the DCOP metric.
  • The payout percentages were recalculated by the OIG based on the changes to the DCOP metric noted above.
(Summary Only)
We audited $324,000 of costs billed to TVA by a contractor for providing volunteer services using TVA retirees to determine if the contractor had billed TVA in accordance with the contract terms and conditions. In summary, we found the contractor had overbilled TVA $63,755 including (1) $44,855 of unsupported costs and (2) an estimated $18,900 of ineligible travel expenses. The contractor agreed it had overbilled TVA $30,022 but stated (1) it disagreed with $25,000 of unsupported costs because a TVA employee had authorized the expenses and (2) the ineligible travel expenses would be reduced to $10,167 if TVA retroactively changes a contract reimbursement rate for mileage expenses.

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

  Full Report
At the request of the Vice President, Paradise Fossil Plant (PAF), we conducted limited review to determine if ordered goods were received and properly recorded in PassPort at PAF. Our review included receipts at PAF from September 7, 2007, through September12, 2007. In summary, our review of selected receipts at PAF found the goods ordered for PAF were generally received, as ordered, and properly recorded in PassPort.

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

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

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

(Summary Only)
Our review of TVA's compliance with FISMA of 2002 determined that among improvements made during fiscal year 2007, TVA completed revisions to align the security program with NIST FIPS 199 standards and implemented measures to ensure personnel complete security training. While TVA continues to make progress in implementing information technology controls required by FISMA, we noted additional controls are needed to improve (1)oversight and evaluation of contractor systems, (2)the Privacy Program, and (3)consideration of e-authentication risks at TVA.

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

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

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

  Full Report
We conducted a review to determine whether the trust funds administered by River Operations and the Office of Environment and Research were administered in accordance with terms of the agreements and applicable laws and regulations. Our scope included all trust funds with balances or activity from October 2005-January 2007. In summary, we found:
  • No policies or procedures applicable to the creation or administration of trust funds existed; and
  • The majority of the trust funds were basically inactive; trust funds were established with appropriated funds; and the trust funds received limited oversight.
Management generally agreed with our findings and recommendations and is taking or plans to take corrective action.

  Full Report
TVA's successful effort to restart Unit 1 at Browns Ferry Nuclear Plant (BFN) provides an opportunity to transfer knowledge to future generation projects to (1) improve project oversight, (2) improve project efficiency and effectiveness, (3) generate cost savings opportunities, and/or (4) reduce TVA's risk of fraud, waste, and abuse. OIG reviews of the BFN Unit 1 Restart project and TVA management's evaluations of the restart activities identified opportunities for improvement in future generation projects. Specifically:
  • The OIG conducted reviews throughout the course of the project focusing on (1) payment of overheads and direct expenses, (2) craft time labor reporting, (3) equipment and tools controls, (4) inventory management and accounting, (5) the restart incentive program, and (6) contract compliance.
  • TVA management identified areas they felt were "hard spots" during the project and developed key project control activities to avoid these issues in the future. Some "hard spots" identified related to (1) staffing and training, (2) self-assessments, (3) development of a comprehensive plan, (4) turnover, and (5) material and equipment availability.
  Full Report
We reviewed control activities and the scale certification process applicable to TVA coal shipments at Calvert City Terminal (CCT). We found the terminal had controls and processes in place for the receiving, blending, weighing, and loading of the coal it handles for TVA. The terminal also appeared to have adhered to the scale certification requirements prescribed by the TVA contract. However, we:
  • Identified one barge shipment where terminal documentation showed the barge being sent to the TVA Colbert Fossil Plant (COF). According to TVA Fuel Supply (FS) personnel, the barge sank in August 2006, en route to COF. As of August10, 2007, FS had not recovered the loss.
  • Found discrepancies with some barge and train shipments that apparently resulted from keying errors on the part of TVA and CCT personnel. This included six train shipments recorded in FuelWorx as received at the wrong terminal.
Management generally agreed with our findings and recommendations and is taking or plans to take corrective action.

  Redacted Report
We reviewed 42 loans initiated through Economic Development's (ED) four loan programs (Economic Development Loan Fund, Minority Business Development Loan Fund, Business Incubator Loan Fund, and Special Opportunity Counties Loan Fund) and found:
  • Management had not fully implemented procedures governing the loan administrative process after closing, as agreed upon in response to Audit2004-011F.
  • Noncompliance with ED loan guidelines in 13 of 42 loan files reviewed.
  • Uncollectible ED loans were not written off in a timely manner as required by generally accepted accounting principles.
  • Explanations provided by ED management for 10 of the 13 loan files where noncompliance was noted indicated the Loan Approval Committee made exceptions and approved loan applications even though they were not in compliance with program guidelines. Of these ten loans, five were identified as being in default status indicating that departure from guidelines could have potentially contributed to the loan defaults. Our review noted no other specific trends in the loan files that appeared to contribute to loan defaults. At ED's request, we reviewed ED's draft Loan Manual and identified improvement opportunities.
Management generally agreed with our findings and recommendations and is taking or plans to take corrective action.

  Full Report
We conducted a review of 52 TVA non-compete contracts to determine whether non-competed contracts are issued and administered in compliance with TVA policies and procedures, including assessing the justification for the non-competed contract award. We found:
  • Two contracts could not initially be located for review and seven did not have Form17388 and/or the appropriate notification/approval required by TVA policies and procedures. Form17388 is required with the appropriate signatures and justification for the contract.
  • Three of the contracts reviewed did not appear to have an appropriate justification as outlined in Section9(b) of the TVA Act and INSTRUCTION1, Business Practice9, Implementing Procedures.
  • Multiple contracts not governed by BP9 are classified under a justification in PassPort that does not apply to the contract.
Management generally agreed with our findings and recommendations and is taking or plans to take corrective action.

  Full Report
We determined:
  • TVA's Privacy Summary Report to the OIG needed improvement in three areas.
  • TVA's privacy policies and procedures were generally consistent with federal requirements; however, we noted (1) five areas where we believe further guidance is needed, and (2) TVA is in the process of updating its privacy policies and procedures.
  • While TVA has made progress in implementing privacy program components, a focused effort is needed to strengthen the program by: (1) completing implementation of planned privacy assessments of all systems identified with Information in Identifiable Form (IIF), and (2) ensuring privacy activities are better integrated between TVA groups who have privacy responsibilities.
  • TVA needs to improve its privacy practices through (1) reviews and updates of Systems of Records notices and (2) implementation of best practices on systems with IIF.
At the completion of our fieldwork on March8, 2007, our review found there were no significant IIF compromises reported to the OIG for the two-year period ending December6, 2006, and no instances of criminal or civil liability relating to loss of personal information were reported by the General Counsel's office. However, an issue came to our attention subsequent to our review indicating IIF was available on temporary share drives to anyone with a TVA network account. TVA management generally agreed with our recommendations and has taken or is taking corrective action.

  Full Report
We determined:
  • The PRIS backup failure was due to (1)human error and (2)the lack of proper controls which would have detected PRIS was no longer on the master backup schedule which resulted in not having backups performed for PRIS.
  • The PRIS server failure was due to hardware failures and the impact was magnified by human error.
  • The Performance Review & Development data was not adequately secured when regenerated in recovery efforts.
TVA management agreed with the findings and has taken or is taking corrective action.

  Redacted Report
We audited $249million of costs for parts and services for Browns Ferry Nuclear Plant paid by TVA to a contractor from January1, 2000, through May31, 2006. We found the contractor overbilled TVA about $960,000 because the contractor had not always included discounts on prices it billed TVA as required by the contract. TVA management is working with the contractor to determine what impact, if any, a previous verbal agreement regarding the contract discount structure may have on the amount owed to TVA.

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

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

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

  Full Report
We evaluated the design, implementation, and effectiveness of TVA's Ethics and Compliance Program and found:
  • TVA's current ethics program was limited to the Office of Government Ethics' standards and requirements. The Designated Agency Ethics Officer (DAEO), currently within the General Counsel's office, is responsible for making sure the appropriate employees are trained in these standards. Currently, about 20 percent of TVA employees are required to participate in annual ethics training. The audit team found that leading practice provides ethics training to all employees and addresses how ethical behavior affects and supports a company's overall mission. It has been shown that such training provides an ethical foundation for employees which, in turn, provides the basis for a company's compliance program.
  • TVA's compliance program is comprised of "silos." Each business unit, such as TVA's nuclear and fossil power organizations, has experts in nuclear and environmental regulations who assist individual nuclear and fossil plants in complying with specific regulations. However, leading practice trends toward a more centralized corporate compliance management approach. This centralized approach provides for coordination of each business unit's compliance program and allows for better communication of issues across the organizations.
Based on these findings, we recommended to the Chief Executive Officer (CEO) that TVA establish a Chief Ethics and Compliance Officer (CECO) position and move the responsibility for TVA's Ethics Program from the General Counsels' office to the CECO, who would be responsible for directing the ethics program and coordinating compliance programs across TVA. We recommended the CECO report to TVA's CEO and Board of Directors. The CEO agreed with our recommendation to establish and fill the CECO position at TVA and indicated implementation details would be addressed after the appointment.

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

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

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

(Summary Only)
Our audit of costs billed to TVA by a contractor who provided engineering and technical support found that most of the contract employees had been transferred from staff augmentation contracts where they had been performing the same duties at a substantially lower cost to TVA. In total, we determined TVA's costs increased $689,000 when the staff augmentation contract employees were moved to the "managed task" contract, primarily due to a high overhead markup rate. By moving the contract employees to the "managed task" contract, it appeared TVA was attempting to avoid reporting this headcount as staff augmentation. Since it appeared doubtful TVA had received $689,000 worth of management oversight from the contractor, it is our opinion that TVA wasted $689,000 when it moved staff augmentation contract employees to the "managed task" contract.

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

  Redacted Report
We were requested by the Vice President, Paradise Fossil Plant (PAF), to assess the procedures and key controls used to track and account for PAF tools. In summary, we found:
  • No policies or procedures exist for tools at PAF.
  • Tools can be ordered without management approval.
  • Controls at the PAF for contractor tool rooms are inadequate to properly track and account for tools.
Management agreed with our findings and recommendations and is taking or plans to take corrective action.

  Redacted Report
The objective of our review was to determine (1) vendor compliance with contract force majeure provisions and (2) the adequacy of coal contract terms and conditions related to force majeure events. In summary, we found:
  • No documented instances in which (1) a vendor did not provide formal notification of a force majeure event and (2) the force majeure justification was not in accordance with the force majeure contract language.
  • Standard contract language exists for the development of a contract force majeure clause; however, the force majeure clause is often modified either in initial contract negotiations or subsequent contract supplements. This variation could result in increased cost to TVA.
  • Most of the force majeure events were not verified.
In addition, we also found (1) no policies and/or procedures specifically governing how to manage force majeure events, (2) no central repository for documenting force majeure events declared and the impact resulting from these force majeure events, and (3) limited and/or inconsistent documentation pertaining to force majeure events and Fuel Supply actions. Management agreed with our findings and recommendations and is taking or plans to take corrective action.

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

(Summary Only)
Full-time annual employees are eligible to participate in TVA's Tuition Reimbursement Program (TRP). The use of the program has grown significantly since fiscal year (FY) 2003. Payments to employees increased from about $339,000 in FY 2003 to over $985,000 in FY2006. The objective of our review was to assess compliance with TRP policies and procedures. In summary, we identified opportunities for improvement in TRP program controls. Specifically, we noted:
  • Instances of non-compliance with Business Practice18, "Tuition Reimbursement," related to (1) required documentation for program approvals, (2) evidence of satisfactory completion, (3) approval for cost increases, (4) reimbursements for non-allowable expenses, and (5) the requirement to drop inactive participants.
  • Opportunities to improve controls over the program including (1) requiring all participants to sign service agreements, (2) follow-up on satisfactory course completion when tuition reimbursement is approved prior to completion of coursework, (3) ensuring maximum reimbursements are not exceeded, and (4) clarifying acceptable coursework and active participation.
Management generally agreed with our recommendations, and we concur with TVA management's planned actions.

  Full Report
Gold Cards are issued to TVA Board members, officers, and other designated employees for travel, entertainment, hospitality, and incidental miscellaneous expenses and these charges are directly billed to TVA. Our review included Gold Card purchases made from October 1, 2004, to August 28, 2006. Of the 272 cardholders with charges during this period, 10 accounted for about 34 percent of all charges. In summary, we found:
  • VISA Gold Executive Expense Cards (Gold Card) are generally being used in accordance with TVA policies and procedures.
  • Policies addressing Gold Card use could be improved.
  • Gold Card expenditures were for various purposes, including travel, meals, hospitality/gifts, economic development, and employee meetings. We noted instances where documented justifications (i.e., purpose, risk to TVA, and benefit to TVA) did not appear adequate to show the potential benefits warranted the expenditures.
Management generally agreed with our findings and indicated that modifications would be made to policies and forms to strengthen controls governing Gold Card usage.

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

(Summary Only)
We performed a review to determine whether River Systems Operation & Environment (RSO&E) permitting policies and procedures (1) ensure reviews and approvals are conducted consistently and in accordance with applicable requirements and (2) are being followed. Our review included Reservoir Land Records (RSLR) established in RSO&E's Automated Land Information System during the period October 1, 2004, through July 31, 2006. In summary, we found:
  • RSO&E has implemented permitting guidelines which, if followed, should ensure (1) that TVA regulations (18 C.F.R. Part 1304) pertaining to Section 26a of the TVA Act are followed and (2) consistent review and approval of Section 26a applications. However, documentation requirements supporting permitting decisions could be improved.
  • For the 101 RSLR we reviewed, 37 had varying noncompliance issues and an additional 15 had RSLR data entry issues.
Management agreed with our findings and has taken or plans to take appropriate corrective action. Some of the corrective actions being considered include (1) revising guidelines to clarify proper record management and Shoreline Management Policy waiver documentation, (2) providing refresher training on processing Section 26a applications, and (3) enhancing the Section 26a electronic data system.

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

(Summary Only)
We surveyed TVA and financial institutions in the Tennessee Valley to identify (1) any TVA-owned cash accounts not currently accounted for by TVA's Treasury and (2) non-TVA-owned cash accounts set up in TVA's taxpayer identification number (TIN). In summary, we identified:
  • One TVA-owned certificate of deposit set up in TVA's TIN and not accounted for by TVA Treasury;
  • Three non-TVA-owned accounts incorrectly reported in TVA's TIN;
  • One account set up in TVA's TIN where sufficient information was not provided to determine if TVA owned the funds; and
  • Ten accounts reported by one financial institution where the name on the account included TVA or some derivation thereof; however, the institution would not confirm the TIN and these accounts were not accounted for by TVA Treasury.
TVA Treasury agreed to follow up with the financial institutions in these matters.

(Summary Only)
We conducted a review to determine whether TVA 's inventory management system, PassPort, accurately reflected the reported $14.3million in inventory housed at the Hartsville facility as of December20, 2006. We compared PassPort data to physical inventory on hand for 93 catalog identification numbers (CAT IDs). We found PassPort accurately reflected the location and quantity on hand for 89, or 95.7percent, of the CAT IDs selected for review. We also compared inventory on hand for 38 judgmentally selected CAT IDs to PassPort and found, (a) inventory held for use was commingled with surplus materials and (b) materials were not always accurately reflected, or were excluded, in PassPort. According to Procurement, it was waiting on plant direction for the disposition of several materials housed at Hartsville, including some items corresponding to the CAT IDs we reviewed. Management agreed with our findings and has taken or plans to take appropriate corrective action.

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

In summary, our review of selected financial and production report information and supporting cost documentation pertaining to the TVA mine found (1) nothing to indicate cost and profitability assertions were not accurate, (2) some costs and coal revenues were a function of market conditions which impacted the company’s profitability, and (3) the company began allocating costs on internal financial reports in August 2006 which more accurately depicted profitability. In addition, the company discovered royalty fee payments were underpaid by approximately $15,000 when providing requested information during our review.

(Summary Only)
We audited $5.6 million of costs billed by a TVA contractor for providing construction and modification services for TVA generating plant switchyards, substations, electrical transmission system, and power control communication facilities. We found TVA had been overbilled an estimated $186,378 for (1) craft labor costs that exceeded amounts provided for by TVA’s labor agreements, (2) misclassified subcontractor labor, (3)ineligible subsistence allowance payments, and (4) unsupported costs. The contractor agreed with most of our issues and provided credits to TVA. However, the contractor stated it planned to perform a 100 percent review of craft labor costs associated with the audit period rather than rely on the audit estimate of the overbilling. TVA management plans to work with the contractor to recover the overbilled craft labor costs.

(Summary Only)
TVA provides engineering and technical assistance to the Federal Emergency Management Agency (FEMA) for major disasters and emergencies using TVA retirees who are working for a TVA subcontractor. In April 2006, the Department of Homeland Security requested all Offices of the Inspector General to perform a review of the 2005 Gulf Coast Hurricane Assignments performed by their agency to evaluate their agency's procedures pertaining to the billing and reimbursements for FEMA mission assignments.

Our review found TVA (1) did not have adequate controls in place to ensure the accuracy of costs TVA paid to its contractor and subsequently billed to FEMA and (2) could not provide documentation of FEMA's approval of TVA's use of a markup rate to recover its costs of administering the retiree subcontract. TVA management subsequently instituted new procedures to correct the deficiencies identified by our audit. Based on the new procedures, we determined TVA is generally in compliance with federal guidelines pertaining to the billing and reimbursements for FEMA mission assignments. However, we recommended FEMA provide written authorization for TVA's use of a specific markup to recover its costs of administering the retiree subcontract.

(Summary Only)
We audited $22.2 million of costs billed by a TVA contractor for providing construction and modification services for TVA generating plant switchyards, substations, electrical transmission system, and power control communication facilities. We found overbillings and overpayments of about $58,000 including (1) overbillings for small tools due primarily to the contractors application of a recovery rate to an incorrect cost base, (2) craft wages and benefits that exceeded amounts provided for by TVA's labor agreements, and (3) miscellaneous overpaid and unsupported costs. The contractor and TVA management agreed with our findings except for the overbilled craft wages and benefits. In response to that issue, management stated TVA labor relations had decided certain variances from the labor agreements would be allowed and most of the variances identified in this review were within the guidelines established by labor relations.

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

Of the 482 tested coal shipments from nine fossil plants, 33 shipments were not recorded in the DCR in accordance with TVA weight documentation and/or vendor/terminal bills of lading.We also found that (1) significant variances exist between TVA coal weights and vendor/terminal shipment weights, based on the weights recorded in the DCR and (2) some practices are inconsistent between fossil plants.We recommended that the general manager, Fossil Fuel Supply, consider developing a standard process and procedure which: (1) defines how to account for missing or extra rail cars, (2) specifies the requirements for the tracking, reconciliation, and reporting of missing and extra rail cars, and (3) emphasizes that comments must be entered in the DCR when events occur that affect TVA and/or vendor/terminal weights.TVA management agreed with our findings and has initiated or plans to initiate corrective action.

(Summary Only)
The Tennessee Valley Authority (TVA) contracted with the independent certified public accounting firm of PricewaterhouseCoopers LLP (PwC) to audit the balance sheets as of September 30, 2006, and the related statements of income, changes in proprietary capital, and cash flows for each of the three years in the period ended September 30, 2006. The contract required the audit be done in accordance with generally accepted government auditing standards.Our review disclosed no instances where PwC did not comply, in all material respects, with generally accepted government auditing standards.

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

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

In summary, we found:
  • Seven instances where adjustments to the fiscal year 2006 goals were not properly approved. Four of the adjustments required TVA Board approval. Two of these adjustments will result in no payout and related to the Environmental Impact indicator on the TVA scorecard. In three of the four adjustments requiring Board approval, evidence was provided which showed a Board member informally approved the adjustment.
  • Actual year-to-date inputs for each indicator agreed with the respective "reason for improvement" sheet.
  • Actual inputs for the eight TVA-wide metrics agreed with the underlying support provided by the Strategic Business Units, with one exception which related to a miscalculation of the Productivity indicator. This one exception will not affect the payout. In addition, we noted actual performance for the Asset Availability indicator was not rounded consistently with that of other indicators, which will affect the payout. We were informed that the actual amount was truncated with the Chief Executive Officer’s approval, rather than rounded. We further noted no formal policy was in place to guide rounding decisions.
  • The payout percentages were recalculated without exception. However, it should be noted that two indicators at Colbert and John Sevier were included in the calculations at target rather than actual.
(Summary Only)
At the request of the TVA’s Chief Nuclear Officer and Executive Vice President, we conducted a review of inventory accounting practices at Browns Ferry Nuclear Plant. Specifically, we were requested to determine whether (1) proper accounting practices and TVA policies were followed when returning material and components (i.e., spare parts) to inventory after being removed from installed locations and (2) existing procedures provide adequate guidance on returning spare parts to inventory. In summary, we found:
  • Noncompliance with Generally Accepted Accounting Principles (GAAP) and TVA policies and procedures.
  • TVA policies and procedures do not adequately address (a) how to account for the return of material/components to inventory from installed locations (i.e., spare parts) and (b) the inventory tracking of spare parts.
  • While we found no indication of intent to manipulate the entries to achieve outage performance goals, the circumstances could create an appearance to do so.
TVA management agreed with our findings and has initiated or plans to initiate corrective action.

  Full Report
TVAN's CRP was designed to help ensure all TVA and contractor employees supporting TVAN "are free to express safety issues, concerns, or differing views to TVAN management without fear of reprisal and all such concerns and issues are investigated and resolved in a timely manner." We performed an inspection which assessed the willingness of TVA employees and contractors to report nuclear safety and quality issues through various avenues, including TVA's CRP. The scope of the review corresponded to the TVAN workforce, employees and contractors with unescorted access to TVA's nuclear facilities. Overall, we determined:
  • TVAN's workforce (i.e., TVA employees and contractor employees with unescorted access to TVA's nuclear facilities) generally felt free to raise nuclear safety and quality issues. However, many of the responses were not as affirmative as the prior survey.
  • Issues associated with the closed CRP files were generally addressed.
  • The number of allegations made directly to the Nuclear Regulatory Commission by TVAN's workforce has increased in the last three years. Despite this increase, the number of allegations remains lower than the high years 1996 ? 1997.
Based on these findings, we believe the fundamental mission of the CRP is being met.

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

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

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

While TVA has taken actions to address the issues arising from an aging workforce, the implementation of TVA Corporate HR initiatives by the business units can be improved. We recommended the Executive Vice President, Administrative Services:
  • Consider educating employees on the importance of self-reported retirement dates and how that information is used, along with providing on-going education on retirement benefits and planning from early in a TVA employee's career;
  • Ensure complete implementation of the Knowledge Retention Initiative, which supports compliance with and the success of the Integrated Staffing Plan Principle; and
  • Emphasize the importance of pipeline hiring to move TVA more towards being a developmentally oriented business.
TVA management agreed with our findings and has initiated or plans to initiate corrective action.

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

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

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

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

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

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

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

(Summary only)
At the request of TVA Occupational Health and Workers' Compensation, we performed a limited scope review to assess whether policies, procedures, and key control activities ensure compliance with TVA's Prescription Safety Eyewear Program requirements. In summary, we determined TVA's policies and procedures adequately address the eligibility requirements and process to be followed in order to obtain prescription safety eyewear. However:
  • Policies and procedures regarding prescription safety eyewear (1) do not address the retention of supporting documentation for purchases of prescription safety eyewear and (2) are not being complied with by all the Safety Eyewear Coordinators.
  • Policies and procedures could be strengthened to clearly identify the time frame constraints for obtaining replacement eyewear.
  • Current identifiers used for employees are not unique to a single employee.
TVA management agreed with our findings and recommendations and has taken or plans to take corrective action.

  Full Report
We compared Gallatin Fossil Plant (GAF) coal receipts using TVA and terminal shipment weights to identify whether any significant variances exist. Our review covered December 1, 2005, to May 3, 2006. We determined (1) coal receipt information input into FuelWorx (FWX) and the Daily Coal Report (DCR) were generally accurate and (2) significant variances exist between vendor/terminal invoiced weights and TVA delivered weights. Specifically:
  • All but 1 of the 64 tested coal shipments were input into FWX and the DCR accurately.
  • The net effect of all terminal versus TVA weight variances shows that TVA received approximately 31,000 tons more coal than reported on the terminal shipping notices.
We also noted that when TVA weights are unavailable, terminal weights are input as TVA weights. Two additional issues cited by GAF personnel were that (1) the responsible individual is not always informed when TVA weights are unavailable and (2) not all scale personnel receive formalized training.

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

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

In 2005, TVA and the Tennessee Valley Trades and Labor Council modified their memorandum of understanding, including Attachment A, Mandatory ? Eight/Ten Straight-Time Attendance Agreement (LRS-54). The change was made to increase productivity (e.g., to curtail absenteeism and tardiness). To comply, SWEC switched to five eight-hour days straight-time work schedules in October of 2005. SWEC developed the following key control activities to ensure compliance with LRS-54.
  • The AnalyzeTime application evaluates payroll data to identify inconsistencies and potential errors in time calculations.
  • Timesheets, which support payroll payments, are prepared and signed by a foreman and then approved by an applicable supervisor.
  • Gate-log reports are available to identify time reporting variances for employees working inside the secured area.
We determined (1) the AnalyzeTime application is working as intended, (2) over 99 percent of timesheets reviewed contained all required signatures, and (3) gate-log reviews are being conducted; however, these reviews provide only limited information for monitoring. We also noted that:
  • Absences are not tracked when an employee is temporarily assigned to another unit.
  • No process exists to ensure that excused absences are monitored to identify potential abuse.
  Full Report
We conducted a review to assess the TVA role as rate regulator over municipal utilities and cooperatives (collectively "distributors") which purchase TVA power. The TVA Act imposes only one regulatory requirement, prohibiting discrimination between consumers of the same class. The TVA Act, however, also gives the Board authority to include terms and conditions in power contracts as needed to carry out the purposes of the Act, which include keeping rates as low as feasible. Pursuant to this authority, most power contracts include, in addition to the required nondiscriminatory provision, terms and conditions related to resale rates, use of revenues, and financial and accounting requirements.

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

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

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

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

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

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

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

(Summary only)
We assessed TVA's compliance with applicable policies, procedures, and laws/regulations when conducting land disposal transactions. TVA's land disposal actions include easements, sales, abandonments, deed modifications, transfers, and leases. The TVA Act grants TVA authority to transfer land to government agencies, corporations, partnerships, or individuals. TVA's overall policy on the use, acquisition, and disposal of land is contained in TVA Code V, which was last updated in 1982. With regard to reservoir property:
  • TVA maintains 293,000 acres of reservoir property.
  • River Systems Operations and Environment (RSO&E) manages reservoir property and maintains Board-approved Land Management Plans for the major reservoir properties.
In summary, we determined:
  • TVA's policy on land disposals does not clearly articulate (1) criteria for considering which property is subject to disposal, (2) criteria for accepting or rejecting proposals, and (3) provisions for land swaps.
  • RSO&E generally complied with their land disposal processes including (1) obtaining appropriate reviews and approvals, (2) ensuring independent appraisals of land value, and (3) receipt of payment for appraised values. However, we found documentation could be improved related to the non-requirement of public notice.
  • Documentation is not required or being maintained for withdrawn or rejected Land Use Applications.
  • RSO&E has scheduled reassessment of TVA's Land Management Plans beyond their planned ten-year horizon.
  • No non-compliance with applicable laws and regulations.
TVA management generally agreed with our findings and recommendations and has taken or plans to take corrective action.

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

(Summary only)
We assessed the adequacy of controls applicable to the accounting for costs associated with non-nuclear insurable losses. TVA has negotiated and obtained insurance to cover two areas of non-nuclear operations: (1) non-nuclear property and (2) unplanned outages. The unplanned outage insurance covers Fossil's nine baseload units. In summary, we found that the Corporate Insurance Risk & Analysis Group (CIR&A) is in the process of developing policies and procedures to ensure identification of non-nuclear insurable losses and the accounting for associated costs. According to CIR&A, interim actions have been undertaken to capture the costs of non-nuclear insurable losses, including:
  • The Risk Management Information System was implemented in 2002 for the purpose of capturing insurable loss information as it relates to TVA's non-nuclear operations.
  • Insurable loss incidents are identified by maintaining contact with designated site personnel. CIR&A also reviews various reports and data generated within TVA to identify potential insurable loss incidents.
  • CIR&A has trained TVA business managers and designated site personnel to identify the costs that need to be captured in the event an insurable loss occurs.
Since this process is currently in a development stage, we plan to defer any further audit work until the process is fully implemented.

  Full Report
As a result of our review of the procedures and key control activities used to track and account for tools at Browns Ferry Nuclear Plant (Inspection No. 2005-526I), we performed an inspection to assess the processes and key control activities used to track and account for tools at SQN. TVA Nuclear (TVAN) Business Practice 226 (BP-226), Tool and Equipment Accountability, dated August 27, 2000:
  • Established and implemented a plant accountability system for tools and equipment.
  • Strengthened and standardized existing tool and equipment accountability practices.
  • Provided for periodic reporting to control and minimize equipment losses.
Our inspection identified a significant lack of tool accountability/tracking resulting from (1) noncompliance with processes and key control activities prescribed by TVAN BP-226 and (2) other process/control weaknesses. However, two control mechanisms were implemented to enhance tool room security -- access to the tool room was restricted using hand geometry and closed circuit cameras were installed in the tool room. Management agreed with our findings and has initiated corrective actions.

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

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

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

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

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

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

  • Inspecting TVA's 17,000 circuit miles of transmission lines in a seven-state region.
  • Aerial photography, laser mapping, and river and environmental surveys.
  • Construction support.
  • Clean air testing.
  • Right-of-way inspections.
  • Transportation of TVA executives.
  • Economic development activities, such as aerial tours of industrial megasites.
The aircraft can also be deployed for certain emergency contingencies such as floods, tornadoes, and ice storms.

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

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

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

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

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

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

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

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

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

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

  • Established and implemented a plant accountability system for tools and equipment.
  • Strengthened and standardized existing tool and equipment accountability practices.
  • Provided for periodic reporting to control and minimize equipment losses.
Our inspection found a significant lack of tool accountability/tracking resulting from (1) noncompliance with processes and key control activities prescribed by TVAN BP-226, and (2) other process/control weaknesses. Management agreed with our findings and has initiated corrective actions.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(Summary only)
We compared invoiced vendor/terminal weights to TVA delivered weights for both WCF rail and barge coal deliveries. We found (1) significant variances between vendor/terminal invoiced weights and TVA delivered weights, (2) weights were not recorded for many coal shipments, and (3) delivery weight documentation requirements or retention policy did not exist. Management agreed with our findings and plans to initiate corrective actions. OIG Investigations is reviewing selected trend variances to determine if any warrant further inquiry.

(Summary Only)
We reviewed controls pertaining to program and data backup storage and retrieval for TVA's data centers and the physical controls of an offsite storage facility to determine if controls surrounding the backup storage and retrieval process were adequate to ensure ongoing system operations, and if physical and environmental controls were sufficient to protect the off-site facilities from unauthorized access and environmental hazards. We determined that both the (1) storage and retrieval process controls and (2) environmental controls need improvement. Management agreed with our findings and plans to initiate corrective action.

(Summary Only)
We reviewed $615.5 million TVA paid a contractor from 1999 through 2004 for providing modification and supplemental maintenance services for TVA's fossil plants. We questioned $833,655, including (1) payroll taxes and G&A costs where recovery rates for these costs had been applied to non-salary costs, (2) additional G&A costs where craft employees had been classified as nonmanual craft supervisors, and (3) temporary living allowance payments for employees who may not have been eligible to receive the payments because they did not have adequate certifications and documentary evidence of permanent residences. TVA is (1) planning to recover any overbilled costs and (2) assessing our finding regarding the contractor's classification of craft employees as nonmanual craft supervisors.

(Summary Only)
We reviewed the physical and environmental controls at two of TVA's data centers to determine the adequacy of (1) physical controls to ensure only authorized access to system resources and (2) environmental controls to appropriately protect computing assets from hazards. We determined both data centers' physical access controls and one data center's environmental controls need improvement. TVA management agreed with the findings and initiated or plans to initiate corrective actions needed to implement our recommendations.

(Summary Only)
We reviewed TVA's progress in complying with federal security requirements. We found that TVA's security program structure is adequate to meet federal requirements, and TVA is making substantial progress in correcting significant security deficiencies.

(Summary Only)
We determined TVA was overbilled $56,023 (out of $5.3 million that had been billed) for services performed at BFN Unit 1 by a subcontractor. The overbilling occurred because the subcontractor used a craft labor classification that was not provided for by its subcontract. We also determined the subcontractor had not adjusted its workers compensation insurance costs to actual for the premium years ended July 1, 2003, and July 1, 2004, although its subcontract agreement required it. TVA is assessing our recommendations.

(Summary Only)
We found no instance where TVA's external auditor's reviews of TVA interim financial information for the third quarter of FY 2005 did not comply with Government Auditing Standards in all material respects, including required communications to appropriate parties.

  Full Report
We assessed the extent COO organizations were complying with the work management requirements outlined in COO SPP 7.0, COO Work Management. The work management process includes the "establishment of Program elements required to manage work in a safe, reliable, environmentally conscious, and efficient manner." In general, organizations were complying with the requirement to complete a work package. However, (1) most work package documentation was not retained, (2) inconsistencies exist in the development and use of work packages, and (3) multiple computer applications contribute to inconsistencies. The COO agreed with our findings and plans to initiate corrective actions.

(Summary Only)
We reviewed TVA's ethics practices and identified industry best practices which TVA could implement including (1) an ethics committee to oversee the ethics initiative, (2) a communication strategy that ensures all employees have ethics information, (3) requiring all employees to complete ethics training, (4) assessing and rewarding ethical conduct,(5) assessing the extent to which employees accept organizational values and policies, and (6) communicating to all employees that ethics standards are a high priority with top management. We provided this information to the President and Chief Operating Officer for his consideration.

  Full Report
We audited $33.6 million of costs billed to TVA by a contractor for the administration of TVA's dental benefit program. We questioned $381,392, including (1) unsupported and duplicate claims, (2) claims paid for ineligible individuals, (3) claim payments that exceeded plan limits, and (4) ineligible orthodontic benefits. TVA is negotiating resolution of the overbillings with the contractor.

(Summary Only)
e determined TVA had been overbilled $103,007 (out of $10.9 million that had been billed) for services performed at BFN Unit 1 by a subcontractor. The overbilling included (1) unsupported labor hours, (2) ineligible fees that had been applied to travel and relocation costs, and (3) ineligible jury duty hours. TVA is assessing our recommendations.

(Summary Only)
We determined market value payments (MVPs) to distributors for installed water heaters and heat pumps were generally applied correctly and total invoice amounts were generally accurate, including adjustments to applicable invoices. However, (1) the energy right ? Information System (erIS) does not provide the means to document and track adjustments, (2) some MVPs were paid without complete and/or accurate erIS information, (3) no verification occurred to ensure MVPs were made to distributors as approved by CS&M district specialists, and (4) distributors' noncompliance with certain energy right ? Program process/documentation requirements increased TVA's financial risks. Management agreed with the findings and is taking corrective actions.

  Full Report
We determined a contractor overbilled TVA $563,773 (out of $6.2 million that had been billed) for providing welding services for various nuclear projects. The overbilling included (1) labor costs due to the contractor's use of incorrect labor rates, misclassifications of personnel, and unsupported labor hours; (2) ineligible or unsupported mobilization, travel, and per diem costs; (3) direct billed overhead labor; and (4) duplicate costs. TVA agreed with most of our findings and is working with the contractor to resolve the overbillings.

(Summary Only)
We completed agreed-upon procedures to assist the Center for Resource Solutions (CRS) in determining TVA's compliance with the annual reporting requirements of CRS' Green Pricing Accreditation Program for the year ended December 31, 2004. The required information on TVA's renewable energy initiative, "Green Power Switch," was provided to CRS.

(Summary Only)
We reviewed $148.9 million billed to TVA by a contractor for providing uranium hexafluoride and enrichment services. We determined (1) TVA would need to revise the contract if it intended to pay the contractors actual market price for enrichment services and (2) the contractor could not comply with a contract requirement for determining a final price for enrichment services within 30 days after the end of TVA's fiscal year. TVA subsequently decided a contract revision would not be needed to ensure payment of the contractor's actual market price for enrichment services. However, TVA executed an amendment to the contract that outlines the billing process, including the timing of interim and final billings.

(Summary Only)
We determined controls related to the identification and reduction of inventory and financial reporting could be improved. Specifically, we determined (1) policy and procedure documentation were not complete, (2) business unit reviews for surplus/obsolete inventory were not effective, (3) signatory authorization of approval by the business units for inventory write-offs was not obtained, (4) inventory purchases were made for items held as surplus, and (5) inventory reserve calculations were incorrect, however, corrections were made for quarterly reporting accuracy).

  Full Report
We determined (1) current inventory cycle count controls may not ensure inventory on-hand is accurately counted and entered into PassPort; (2) in some warehouses, access to plant inventories is not restricted to Material Management Services (MMS) personnel or MMS-escorted personnel during non-standard work hours as required by policy; and (3) TVA's Risk Control Tracking System could be updated to more accurately reflect key financial controls of the manage site materials process. TVA management agreed with our findings and is implementing planned actions.

  Full Report
We determined a wireless carrier issued credits to TVA employees due to an internal system error. The credits pertained to inactive accounts and therefore had no impact on TVA's master account. The carrier was unable to validate (1) who the checks were issued to, (2) how many checks were issued, and (3) the total amount of the credits.

(Summary Only)
We determined TVA's depreciation policy and procedures do not accurately reflect (1) control activities described in TVA's Risk Control Tracking System and (2) current management practice. TVA management is assessing our recommendations.

  Full Report
We reviewed $104.4 million in costs paid by TVA to a contractor for providing construction services for the restart of BFN Unit 1. We found the contractor overbilled TVA $1.5 million due to (1) the use of a craft labor category, incentive fee, and safety awards not provided for by the contract, (2) wrong indirect cost markups and unsupported labor costs, and (3) other miscellaneous overbillings. Additionally, we estimated TVA would save $995,000 by disallowing the use of an unauthorized labor classification. TVA subsequently decided to disallow $1,087,914 of the questioned costs and to discontinue use of the labor classification.

(Summary Only)
We determined TVA's inventory receiving and inspecting (R&I) process controls were designed to prevent or detect material misstatements in significant accounts and the related inventory disclosures on a timely basis. However, TVA's Risk Control Tracking System could be updated to more accurately reflect key financial controls of the R&I process. TVA management agreed with our findings and has completed final action.

  Full Report
TWe found no evidence of fraud in connection with different vendors sharing the same bank account. Most vendors were related and there was no evidence that non-related vendors bid on contracts under different names, double billed TVA, or appeared to be shell companies. We noted, however, that some vendor records in Passport appeared to be inactive, and we suggested Procurement periodically purge inactive vendor records.

  Full Report
At the Chief Financial Officer organization's request, we assessed the cost effectiveness of the actual travel expense reimbursement program and the Chief Operating Officer (COO) flat rate reimbursement program. We determined that the COO flat rate method of travel expense reimbursement cost about $115,000 more than the actual expense reimbursement method during a 3-month period that we reviewed. We also identified control weaknesses, including a lack of system edits to prevent flat rate reimbursements which exceeded the allowable rate, and numerous instances where employees were reimbursed for direct billed hotel expenses under both methods of travel reimbursement. TVA management is considering appropriate corrective actions.

  Full Report
We found no instance where TVA's external auditors' reviews of TVA interim financial information for the second quarter of FY 2005 did not comply with Government Auditing Standards in all material respects, including required communications to appropriate parties.

  Full Report
We reviewed $109.8 million in costs paid by TVA to a contractor for providing engineering services associated with the restart of Browns Ferry Nuclear Plant (BFN) Unit 1. We questioned $2.5 million, including (1) the contractor's inclusion of the labor costs of its affiliate company in its performance base and (2) overcharges for labor and related costs and other direct costs. TVA decided to (1) allow the contractor to include the labor cost of its affiliate in its performance fee base and (2) recover any remaining costs that were not directly billable under the contract.

(Summary Only)
TWe determined TVA's contributions totaled $1.261 million and $1.646 million for FYs 2003 and 2004, respectively. TVA's Corporate Contributions organization administered about 51 percent of the contributions in FY 2003 and 36 percent in FY 2004; other TVA organizations administered the remaining contributions. In reviewing a sample of contribution transactions, we noted (1) the Contributions Committee did not review numerous transactions as required by policy and (2) several transactions, including $160,580 in purchasing card payments that appeared to be contributions, were charged to incorrect cost classifications. Also, TVA's Contribution Tracking System is not reconciled and may not reflect all TVA contributions. Management agreed with the findings and has taken or plans to take appropriate corrective actions.

  Full Report

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