Federal Reports

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.