Federal Reports

As we continue to mark the 25th Anniversary of the Inspector General Act, we devote a portion of this report to note the TVA OIG accomplishments over the last 18 years. Reflecting on the contributions we have added to TVA over these many years demonstrates the value of independent reviews of TVA programs and personnel. On our contract audit efforts alone (including preaward audits), our office has identified on average about $30 million annually in savings and potential avoided costs since 1986. While the work of the OIG has contributed to TVA’s “bottom line,” that is only part of the story. Much of our work focuses on strengthening controls at TVA in significant ways which cannot always be measured in dollars and cents. This is particularly critical given widely reported corporate failures in recent years.As reflected in this semiannual report, we continue to both add to TVA’s “bottom line” and to encourage implementing and maintaining proper internal controls over TVA programs, practices, and systems. Our preaward contract audits identified $12 million in potential savings, contract compliance audits identified nearly$5 million in questioned costs, and we found that TVA had miscalculated and misapplied indirect cost recovery rates that resulted in under recovery of $9.4 million of TVA’s indirect costs from the Department of Energy in connection with the tritium program. On the control side, we examined TVA’s 2003 financial statements and found no material problems, recommended enhancement of the enterprise-wide risk management program, and completed five audits that concluded that TVA’s information technology security system has improved due in part to an increased emphasis on incorporating security best practices.This semiannual report comes with a new feature, “Highlights,” which is designed to summarize the report and provide a helpful key to matters of interest to our stakeholders. We are dispensing with the hard copy of the report in favor of the e-government format of a compact disc and access on our website, www.oig.tva.gov, from which the entire report can be printed if desired. We are interested in feedback on this new feature.I am gratified by the support for our work from the TVA Board, TVA management, and Congress. We appreciate this support and are committed to continuing the OIG tradition of adding value to the work of TVA as we have for all these many years.

The audit objectives were to determine whether program funds were managed in accordance with the ARC and Federal grant requirements

The enclosed report presents the results of the audit of the Commission's financial statements for the fiscal year