Federal Reports

Our audit determined that the Department could improve its management of the Federal Real Property Assistance Program (FRPA). FRPA allows the Department to sell or lease, at a Public Benefit Allowance discount, surplus Federal real property to eligible entities for educational purposes. We found that although the Department’s FRPA awarding process was generally appropriate, it did not compile surplus property screening lists in accordance with its own criteria, did not always correctly calculate applicants’ Public Benefit Allowance discounts, and approved incomplete applications. As a result, the Department may not be considering all potentially eligible entities and may be awarding properties to entities that will not provide the greatest and longest lasting public benefit, are unable to maintain the property, or will not be using the property for an education-related purpose. We also found that the Department needed to improve its monitoring of program participants, as participants did not consistently submit required utilization reports and the Department did not request the reports when they were not submitted by the deadline. In addition, the Department did not always document or timely complete follow-up activities to address issues identified during its review of utilization reports and did not schedule required site visits within the first 12 months following conveyance for almost all of the properties that we reviewed. In some cases, property files were missing site inspection reports and documentation of required follow-up. Thorough, timely, and consistent monitoring is necessary to ensure that properties are being used for agreed-on educational purposes and to mitigate the potential for misuse. Noncompliance can result in the denial of services to those who could benefit from the use of such property and represents a loss to the interests of the Federal Government. We made eight recommendations to improve the Department’s FRPA awarding and monitoring processes through standardization, employee training, and enhanced supervisory review.

We found that the Department complied with Executive Order 13520, adequately addressed improper payment risks, and described an adequate level of oversight to reduce and recapture improper payments for FY 2011. However, it did not address monitoring or oversight of Pell Grant program recipients who did not use the IRS Data Retrieval Tool (IRS DRT) when completing their FAFSA or recipients who were not selected for verification in its improper payment monitoring and oversight efforts. Verification is a process schools are required to conduct to confirm specific information reported on the FAFSA by the applicant. The IRS DRT is an optional tool that enables Federal student aid applicants and, as needed, parents of applicants to transfer certain tax return information from an IRS Web site directly to their online FAFSA. Only 22 percent of all FAFSAs submitted for the 2011–2012 academic year used the IRS DRT. By not studying the population of applicants who do not use the IRS DRT and who are not selected for verification, the Department may miss opportunities to further reduce and recapture improper payments. We recommended that the Department study Pell Grant program recipients who do not use the IRS DRT and who are not selected for verification to determine whether the Department has adequate controls in place or needs to implement additional controls to mitigate the risk of improper payments to this population of Pell Grant recipients.

Citrix

The Postal Service’s pension surplus was projected to be $13.1 billion as of the end of fiscal year 2011. Most of the surplus – $11.4 billion – is in the Federal Employees’ Retirement System (FERS) pension program. A surplus occurs when assets exceed accrued liability. FERS has been in surplus since 1992, and the OIG wanted to investigate the reasons behind this persistent surplus. Are there distinctive characteristics of the Postal Service and its employees that cause the surplus? And can the surplus be expected to continue?

Top Performance Challenges

Top Management Challenges for FLRA

Top management challenges.

We are pleased to present our report for the period March 31, 2012, through October 1, 2012. Once again our theme focuses on navigating risks faced by the Tennessee Valley Authority (TVA)-specifically, cyber security risk. Business leaders and government officials alike recognize the significant risk posed from cyber security threats that are constantly changing. As discussed in the feature article in this semiannual report, given what is at stake, it is imperative that agencies are agile enough to handle not only their identified historical threats, but any future threats as well.All of the work that we do in the Office of the Inspector General (OIG) is aimed at reducing risks for TVA. Our accomplishments for this semiannual period all reflect, in one way or the other, how the OIG has made TVA better by reducing risks. Our audit, evaluation, and investigation activities resulted in almost $28 million in recoveries, fines/penalties, waste, potential savings, questioned costs, or funds which could be put to better use, as well as numerous recommendations to help TVA become better and recognize areas where additional controls may be necessary to adequately manage risks.

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

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

Highlighted grants with unused balances and limited activity

ARC administered grants with limited activity, expired end dates and potential for closing and/or de-obligations

Seek link below for the full report.

VA Management inappropriately used VA's Enhanced Use Lease authority to procure office space, parking, and domiciliary services at the Louis Stokes VA Medical Center. The space and services procured through the Enhanced Use Lease with Veterans Development, LLC significantly exceeded any in-kind consideration for the Brecksville campus. By using VA's Enhanced Use Lease authority, VA Management was able to circumvent the normal rules and processes for procuring space and services, including healthcare services. This eliminated competition and caused VA to overpay for space and services and caused an increase risk in security. VA Management largely disagreed with our findings; however, our review of their response found it to be unsupported and unresponsive to our concerns and findings.

TVA's Board of Directors approved a Financial Trading Pilot Program in September 2003 to hedge or otherwise limit the economic risks associated with the price of commodities covered by TVA's Fuel Cost Adjustment (FCA). At that time, the maximum Value at Risk (VaR) was not to exceed $5 million on an annual basis without the approval of the TVA Board. In May 2005 the TVA Board approved the request to expand and fully implement the Financial Trading Program (FTP). The FTP currently has an aggregate transaction limit of $130 million (based on one-day VaR) of which $90 million is allocated to natural gas hedging.TVA's hedge strategy requires a minimum of 50 percent to a maximum of 75 percent of the forecasted natural gas volume for the fiscal year be hedged. From FY 2006 through the first quarter of FY 2012, TVA's natural gas-related costs have been $3.14 billion; the FTP hedging program contributed another $840 million for total costs of $3.98 billion. This contribution reflects the difference between the locked-in price of natural gas and the market price of natural gas at the time of delivery. TVA management stated the $840 million is a result of the dramatic drop in the price of natural gas over the period. In addition, TVA, as of December 31, 2011, expects the hedging program to add $421 million to natural gas costs of $3.7 billion for the period January 2012 to December 2017 for total natural gas costs of $4.1 billion. Although this situation could reverse in an environment with rising gas prices, it illustrates the significant potential impact, positive and negative, the FTP can have on TVA's FCA. As a result of the growth in FTP financial positions and the inherent risk with the program, we audited the program to evaluate (1) management oversight and the design of controls in place to mitigate operational risk exposure, (2) the program objectives and related performance measures, (3) whether TVA was meeting defined performance objectives, and (4) how the FTP impacts TVA's overall risk tolerance.In summary, we determined the design of TVA's FTP control structure was appropriate. However, we identified several areas where improvement is needed to validate the usefulness and effectiveness of the program as well as to ensure TVA's stakeholders' understanding of the program. Specifically,TVA has not conducted a comprehensive cost benefit analysis to determine whether the benefits derived from the FTP are greater than the inherent risks of the program.TVA does not currently measure the performance of the FTP against defined program objectives.a back-testing was not performed on a routine basis.TVA's communications with its customers did not sufficiently convey the FTP's impact on rates.TVA Management generally agreed and plans to take appropriate action.

Because of the importance of successful capital project management, and in light of recent capital project cost overruns and schedule delays, we initiated a review of Tennessee Valley Authority's (TVA's) capital project management. The objective of our work was to determine whether the Project/Portfolio Management (PPM) function of PowerPlant meets the needs of the strategic business units (SBU).PowerPlant replaced TVA's Project Justification System on March 7, 2011, at a cost of about $7 million. PowerPlant was implemented to replace the assets module within the Enterprise Financial Management System, while also providing the functionality to centralize project and portfolio management. TVA achieved some project and portfolio management capability with the new system, but considerable opportunity for improvement exists. Specifically, as a result of our review, we identified (1) the PowerPlant PPM tools do not currently meet all needs identified by the SBUs, (2) users feel they have not been adequately trained on some functions of the system, and (3) communication of defects that have been resolved would benefit users.We recommended management consider (1) implementing additional project management functionality available in the PowerPlant system or purchasing another system to provide a PPM tool to more efficiently and effectively manage TVA's capital projects, (2) completing additional PowerPlant training as planned, and (3) developing a strategy for communicating system changes, upgrades, and modifications.

TVA established the Direct Load Control (DLC) program in the 1970s as a means to shift load from on-peak/high-priced periods to off-peak/low-priced periods. At the time of our audit, there were 12 distributors participating in the DLC program. Credits provided to these distributors during 2011 ranged from $5,909 to more than $1 million for a total cost to TVA of $2,365,819. The OIG audited TVA's DLC program to address concerns received regarding the benefits of the program. Our specific audit objectives were to assess the effectiveness of the program and TVA's oversight of the program. In summary, we determined the DLC program was not operating effectively, and TVA was not employing two key oversight mechanisms afforded by the DLC contract.The program was not operating effectively because much of the DLC program equipment was outdated and in disrepair, and the program cost was substantially higher than the savings TVA achieved.TVA was not using two key contractual oversight mechanisms for verifying the program was operating as intended and distributor reports to TVA were accurate.We made three recommendations that pertained to determining whether the DLC program was cost-beneficial and TVA used contractual oversight mechanisms available. TVA management generally agreed with our recommendations and findings.

We audited $10.4 million in costs billed to the Tennessee Valley Authority (TVA) by Hartford Steam Boiler Inspection and Insurance Company of Connecticut for nuclear Authorized Inspection Agency service under several contracts. The $10.4 million billed included (1) $4.8 million billed between October 1, 2001 and December 31, 2008 under one contract; (2) $4.1 million billed between December 1, 2007 and August 19, 2011, under second contract; and (3) $1.5 million billed between January 1, 2009, and July 22, 2011, under a third contract. Our objective was to determine if the costs billed were in compliance with the terms of the contracts. In summary, we determined Hartford had overbilled TVA an estimated $679,370, including:$524,623 of ineligible labor costs, including $517,358 in excessive labor costs because Hartford did not bill actual employee wages, associated labor burden, and fees as specified by the contracts and $7,265 of ineligible labor costs billed for corporate personnel.$147,358 in temporary living allowance costs for which Hartford could not provide the contracts' required eligibility certifications and other related documentation.An estimated $7,389 in unsupported or ineligible travel and miscellaneous costs.September 21, 2012 - Review of Lessons Learned During Construction of the Lagoon Creek Combined-Cycle Combustion Turbine - 2011-13781 Because of the potential usefulness of a sound lessons-learned process in completing generation construction projects effectively and efficiently, we reviewed the lessons learned process used during the construction of the Lagoon Creek Combined-Cycle Combustion Turbine. We determined Generation Construction (GC) has a process in place for lessons learned management, but we identified some potential areas of improvement in the GC process. Specifically, we determined (1) there are no documented criteria or review processes for determining what is or is not a lesson learned, (2) the process for documenting lessons learned could be improved, and (3) there were no mechanisms to reasonably assure project teams were reviewing lessons learned from previous projects or relevant lessons learned were incorporated into the project's scope. We also determined improvements can be made in sharing lessons learned across TVA organizations. TVA management generally agreed with our recommendations; however, further action is not planned for two of our six recommendations.

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

For a version of this report subsequently released in connection with Freedom of Information Act litigation brought by The New York Times in the Southern District of New York, please click the hyperlink below.

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

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

In furtherance of its annual plan, the Office of Inspector General (OIG) for the U.S. Capitol Police (USCP) conducted a quality assessment review of the Office of Professional Responsibility (OPR).  Because this is the first OIG review of OPR, our objective was to gain an understanding of the processes as well as assess the efficiency and effectiveness of the OPR operation. Our scope included OPR investigations closed between October 1, 2011, and August 1, 2012.

With the age of TVA generating assets, the need to understand the condition of these assets and use this information to effectively plan is critical. As a result, the OIG initiated a review to determine how TVA assesses the condition of electric assets and uses this information in planning. This review did not include assessing the condition of TVA assets. The organizations reviewed included Nuclear Power Group (NPG), Fossil Power Group (FPG), Energy Delivery, and River Operations (RO).We found the condition of assets is identified through system, program, and component health assessments; however, the process varies among the organizations. According to process descriptions and interviews, all organizations we reviewed use asset condition information to identify corrective actions when necessary. RO personnel stated they take actions to address any system with poor ratings even though the RO process does not specifically require this as the other organizations' do.We also found the condition of assets information is used by TVA for planning purposes, and by the organizations to develop and prioritize projects for business planning purposes and system planning for future costs. In addition, TVA has instituted a capital productivity initiative to improve management of capital and operations and maintenance (O&M) projects to capture savings. As part of the new initiative, projects will be reviewed by a project review board, and the condition of assets information could be a factor for consideration in its project reviews.We made two recommendations that pertained to requiring defined actions where assessments resulted in poor ratings in the RO organization, and including the condition of assets information as an evaluation factor for proposed capital or O&M projects where the condition is relevant. TVA management generally agreed with our findings and recommendations.