Federal Reports

At the request of the Coal Acquisition and Supply, Fossil Power Group, we initiated an inspection to review and obtain information related to a coal company’s cost and profitability assertions. The company leases land from TVA and pays TVA a royalty fee per ton on all coal removed from a mine which is on the leased premises. Due to increased costs and reduced profitability, the company has requested TVA to consider revising the contract to reduce the royalty fee payments.In summary, our review of selected financial and production report information and supporting cost documentation pertaining to the TVA mine found (1) nothing to indicate cost and profitability assertions were not accurate, (2) some costs and coal revenues were a function of market conditions which impacted the company’s profitability, and (3) the company began allocating costs on internal financial reports in August 2006 which more accurately depicted profitability. In addition, the company discovered royalty fee payments were underpaid by approximately $15,000 when providing requested information during our review. Summary Only

To obtain further information, please contact the OIG Office of Counsel at OIGCounsel@oig.treas.gov, (202) 927-0650, or by mail at Office of Treasury Inspector General, 1500 Pennsylvania Avenue, Washington DC 20220.

To obtain further information, please contact the OIG Office of Counsel at OIGCounsel@oig.treas.gov, (202) 927-0650, or by mail at Office of Treasury Inspector General, 1500 Pennsylvania Avenue, Washington DC 20220.

We audited $5.6 million of costs billed by a TVA contractor for providing construction and modification services for TVA generating plant switchyards, substations, electrical transmission system, and power control communication facilities. We found TVA had been overbilled an estimated $186,378 for (1) craft labor costs that exceeded amounts provided for by TVA’s labor agreements, (2) misclassified subcontractor labor, (3)ineligible subsistence allowance payments, and (4) unsupported costs. The contractor agreed with most of our issues and provided credits to TVA. However, the contractor stated it planned to perform a 100 percent review of craft labor costs associated with the audit period rather than rely on the audit estimate of the overbilling. TVA management plans to work with the contractor to recover the overbilled craft labor costs. Summary Only

TVA provides engineering and technical assistance to the Federal Emergency Management Agency (FEMA) for major disasters and emergencies using TVA retirees who are working for a TVA subcontractor. In April 2006, the Department of Homeland Security requested all Offices of the Inspector General to perform a review of the 2005 Gulf Coast Hurricane Assignments performed by their agency to evaluate their agency's procedures pertaining to the billing and reimbursements for FEMA mission assignments.Our review found TVA (1) did not have adequate controls in place to ensure the accuracy of costs TVA paid to its contractor and subsequently billed to FEMA and (2) could not provide documentation of FEMA's approval of TVA's use of a markup rate to recover its costs of administering the retiree subcontract. TVA management subsequently instituted new procedures to correct the deficiencies identified by our audit. Based on the new procedures, we determined TVA is generally in compliance with federal guidelines pertaining to the billing and reimbursements for FEMA mission assignments. However, we recommended FEMA provide written authorization for TVA's use of a specific markup to recover its costs of administering the retiree subcontract. Summary Only