Federal Reports

KPMG LLP, the auditor under contract having performed the audit of the United States Mint’s Fiscal Year 2005 Financial Statements, has withdrawn its opinion on the financial statements as a result of subsequent discovery of material errors. Accordingly, the previously issued independent auditors' report and management letter associated with the financial statements have been removed from the OIG websiteand Oversight.gov): Audit of the United States Mint's Fiscal Year 2005 Financial Statements, report number OIG‐06‐031, dated June 28, 2006 (RECALLED BY AUDITORS)

We conducted a review to assess the TVA role as rate regulator over municipal utilities and cooperatives (collectively "distributors") which purchase TVA power. The TVA Act imposes only one regulatory requirement, prohibiting discrimination between consumers of the same class. The TVA Act, however, also gives the Board authority to include terms and conditions in power contracts as needed to carry out the purposes of the Act, which include keeping rates as low as feasible. Pursuant to this authority, most power contracts include, in addition to the required nondiscriminatory provision, terms and conditions related to resale rates, use of revenues, and financial and accounting requirements. In summary, we determined the following:TVA is in a unique position as both a seller of electric power and a regulator over the rates charged by many of its customers. We believe there is an increasing inherent conflict in TVA serving as a regulator while working to ensure good customer relations. TVA routinely reviews and approves resale rates and use of funds for nonelectric system purposes. We determined TVA should develop additional guidelines to assist in their reviews. Thirteen distributors used electric system funds for nonelectric purposes, while the joint use agreements may not have been modified to permit such use. TVA management agreed with our recommendations, and we concur with their planned actions.

We performed a limited scope review to determine if claims are being adjudicated in accordance with the provisions of the TVA Dental Benefit Plan. While the majority of claims reviewed were adjudicated properly, we did identify an adjudication error associated with charges for preventive services. TVA Employee Benefits had also discovered the error and subsequently addressed the issue. The dental claim administrator had reimbursed TVA in the amount of $5,353.22 and reimbursement for 16 additional charges identified by our review was pending. Summary Only

We audited the employee recognition costs billed to TVA by a contractor under two contracts for engineering services provided in support of BFN Unit 1. In summary, we found the contractor had (1) not refunded TVA for $71,406 of unspent funds under one contract and (2) billed TVA $49,093 for employee recognition costs under the second contract. Although the second contract did not provide for TVA to receive a refund, the amounts paid by TVA had been agreed to based on the contractor's representations that it would be incurring employee recognition costs. TVA management plans to pursue recovery of the unspent funds under the two contracts. Summary Only

We audited $12.4 million of costs billed to TVA by a contractor for performing welding services for fossil and hydro projects. In summary, we found TVA had been overbilled $539,194 for (1) labor costs due to unsupported records and the contractor's use of incorrect labor rates; (2) mobilization, travel, and per diem costs that were ineligible or billed at incorrect rates; (3) duplicate costs and invoice calculation errors; (4) equipment costs due to the contractor's use of incorrect billing rates; and (5) unsupported costs. TVA management (1) has instructed the contractor to provide any additional or clarifying documentation to support its billings and (2) is planning to recover any overbilled and unsupported costs. Summary Only