Federal Reports

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.

EAC OIG, through the independent public accounting firm of Clifton Gunderson LLP, conducted and assessment of EAC's program and financial operations focusing on management processes and controls.

The report dealing with the review of compliance with the ARC J-1 Visa Waiver program

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.

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.

The report dealing with the review of compliance with the ARC J-1 Visa program