Federal Reports

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

October 25, 2006 - Browns Ferry Nuclear Plant (BFN) Materials Inventory Accounting Practices - 2006-530IAt 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.

EAC OIG audited $184.1 million in funds received by the Texas Secretary of State under the Help America Vote Act. The objectives of the audit were to determine whether Texas (1) expended HAVA payments in accordance with the Act and related administrative requirements and (2) complied with the HAVA requirements for replacing punch card or lever voting machines, for establishing an election fund, for appropriating a 5 percent match for requirements payments, and for maintaining state expenditures for elections at a level not less than expended in fiscal year 2000. Specifically, we audited expenditures from May 1, 2003 through December 31, 2005, and reviewed controls to assess their adequacy over the expenditure of HAVA funds. We also evaluated compliance with certain HAVA requirements for the following activities: accumulating financial information reported to EAC on the Financial Status Reports (standard forms number 269); accounting for property; purchasing goods and services; accounting for salaries; charging indirect costs; and spending by counties. We also determined whether Texas had complied with the requirements in HAVA applicable to Section 251 requirements payments for: establishing and maintaining the election fund; appropriating funds equal to five percent of the amount necessary for carrying out activities financed with Section 251 requirements payments; and sustaining the State's level of expenditures for elections.