Review of Recreational Land Transactions

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