Federal Reports

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

The OIG assessed whether TVA performed adequate analysis in its decision to implement a new expense management application. Auditors reviewed the analysis performed to make the decision to implement the application as of May 31, 2011, as well as other documentation supporting that decision. Auditors were unable to verify TVA systems development processes were followed and system and business protocols were considered during the implementation of the application, because the project was merged with the upgrade to another system.The OIG concluded, based on the review of project documentation and discussions with project management, adequate analysis was not performed to support the decision to implement the expense management application. Specifically, we found management circumvented controls and the decision was made without adherence to TVA project management policies. This resulted in time delays within the project, inadequate budget planning, duplication of efforts including possible waste of resources, and project management inefficiencies. Even though steps were taken to (1) define a business need, (2) derive estimates for cost and time implementation and identify ownership, (3) evaluate alternative system solutions, (4) obtain approvals and define a budget, and (5) assess the current and future business conditions, these efforts were made after the application was chosen as the system solution. Without understanding the reasons and parameters for implementing a new expense management system, the project team's efforts to follow the process as outlined in the project management policies were ineffective and resulted in schedule delays as well as project management team frustrations. We recommended the Vice President and Controller ensure project management policies are followed with TVA's mission in mind by communicating those policies to individuals within the organization and stressing the importance of (1) adequately defining the business need for a project prior to selecting the solution, (2) validating assumptions used in decision-making, evaluating business conditions and alternative solutions, and (3) determining project budget limits and obtaining project approval. TVA management agreed with the recommendations.

The OIG audited the electric system of Memphis Light, Gas, and Water Division (Memphis), a distributor based in Memphis, Tennessee. The objective of the audit was to determine compliance with provisions of the power contract between TVA and Memphis during the period January 2009 through December 2010. For the twelve-months ended June 30, 2010, Memphis reported it provided power to approximately 406,000 customers and earned electric sales revenue of approximately $1.2 billion.The OIG's audit of Memphis found (1) an erroneous adjustment made to a customer account resulted in a $3.6 million underpayment to TVA in January 2010, and (2) other isolated instances of noncompliance related to the proper reporting of electric sales, including customer misclassifications and a metering issue. Additionally, Memphis could improve compliance with other contract provisions and/or Memphis' policy by (1) obtaining and maintaining required documentation and (2) increasing accuracy of contract demand in the billing system.The OIG also identified two areas where TVA's oversight of distributors should be enhanced. The two issues, (1) the lack of guidance related to permitted expenditures and (2) the lack of a joint cost study, were included in previous OIG distributor audit reports, and TVA has agreed to take corrective action to address these issues.The OIG made 10 specific recommendations that require action by Memphis, and recommended TVA's Senior Vice President, Policy and Oversight, work with Memphis to resolve the findings. These recommendations generally related to (1) complying with power contract provisions and (2) remediating classification and metering issues. Memphis and TVA management generally agreed with our recommendations and are taking action to address the findings.

The OIG audited $15.4 million in costs billed to TVA by Pressure's On, Inc. (POI), for providing hydro blasting services at the Tennessee Valley Authority (TVA) locations, including $14.82 million in costs paid by TVA to POI as of January 16, 2009. In addition, the OIG reviewed $596,789 in costs for hydro blasting services incorrectly billed under a separate contract that TVA had with POI for vacuuming services only. In summary, it was determined POI had overbilled TVA $4,145,909 including:$2,482,444 in unsupported costs related to (1) missing cost details, (2) unclassified costs, (3) subcontractor costs, (4) labor costs, and (5) equipment and materials.$1,113,702 in costs for hydro blasting services because POI billed (1) excessive hours for equipment operating time and (2) hourly rates for equipment and employees not provided for in the contract.$393,848 of ineligible costs for (1) equipment and materials, (2) labor costs, (3) mobilization / demobilization, (4) travel, meals, and per diem, and (5) fuel surcharges.$135,941 due to the use of incorrect billing rates.$41,837 in duplicate billings.Credit for $21,863 in discounts that had been provided by POI.The OIG also noted numerous instances where POI did not pay its employees in accordance with the Project Maintenance and Modification Agreement (PMMA) labor provisions in the contract. In addition, POI did not submit "Weekly Statement of Payroll Compliance" reports to TVA's Contract Officer as required by the PMMA.We recommended TVA management recover the $4,145,909 in net overbilled costs from POI and ensure POI complies with the PMMA requirements.

Confidential and Proprietary Business Information

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

Harmonized Tariff Schedule

The initial objective of our audit was to determine whether the Department had a process for handling embargoed regulations and protocols related to the protection of sensitive information for Department staff involved in the negotiated rulemaking process. A few months into our fieldwork, we determined that in order to adequately address concerns being raised by members of Congress and public interest groups, we needed to significantly expand the scope of our audit work to include communications that took place between Department officials and outside parties. We subsequently revised our audit objective. The revised objective of our audit was to determine whether the Department appropriately handled sensitive information during the negotiated rulemaking process, specifically between the end of the public negotiated rulemaking sessions in January 2010 and the publication of the NPRM in July 2010.

The OIG audited the electric system of Knoxville Utilities Board (KUB), a distributor based in Knoxville, Tennessee. The objective of the audit was to determine compliance with provisions of the power contract between TVA and KUB for the audit period July 2008 through June 2010. For fiscal year (FY) 2010, KUB provided power to approximately 197,000 customers resulting in electric sales revenue of approximately $455 million to KUB.Our audit found KUB generally complied with key contract provisions for (1) proper reporting of electric sales and (2) nondiscrimination in providing power, but we noted noncompliance related to (3) approved use of electric revenues. Additionally, we noted a few other minor issues regarding required documentation and information in the billing system.We also identified two areas where TVA's oversight of distributors should be enhanced. The two issues, addressing (1) distributors using electric funds for economic development and (2) the lack of a joint-cost study, have been reported in previous OIG distributor audit reports, and TVA has agreed to take corrective action on these issues.We make six specific recommendations in this report that require KUB action and recommend TVA's Senior Vice President, Policy and Oversight, work with KUB to resolve them. These recommendations generally relate to (1) complying with Power Contract provisions and (2) remediating classification issues.KUB and TVA management disagreed with our finding regarding the noncompliant use of electric system funds for economic development purposes. KUB stated it intends to continue the practice of using modest amounts of electric system funds for economic development purposes. TVA stated it does not plan to take any action prior to completion of its currently ongoing review of TVA regulatory policy and the TVA Board's action on that review.KUB and TVA management generally agreed with our other recommendations, and KUB stated it has taken action on the majority of the recommendations prior to issuance of this report.

Seek link below for the full report.

ED OIG Semiannual Report 64 Final 508

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

The WBN Unit 2 construction project has experienced significant schedule and cost overruns. The project was originally expected to be completed in October 2012 at a cost of just under $2.5 billion. However, TVA will not meet these targets. On April 5, 2012, TVA announced an additional $1.5 billion to $2 billion would be required to complete the project with an estimated time of completion between September and December 2015. TVA's Board of Directors approved the revised schedule and budget on April 26, 2012.Since TVA began construction on Watts Bar Nuclear Plant (WBN) Unit 2 in October 2007, the OIG has had staff assigned to attend meetings at the project site in order to keep abreast of management challenges as the OIG conducts its various reviews. During meetings attended by the OIG at the WBN Unit 2 project site, construction issues discussed were characterized by management as recoverable or normal construction problems. Each project schedule, based on its associated assumptions, showed how everything was on track for meeting the early target finish date. Additionally, pertinent information critical of the project's performance was not provided to the OIG by former TVA management when requested by our office. These actions made it harder to identify the extent and potential consequences of the problems on the project. However, in 2010, it became evident many of the issues raised in meetings were symptomatic of much broader problems that increased the risk of exceeding the project's schedule and budget. As a result, we began this review. In mid-2011, we met with TVA executives to brief them on our concerns surrounding the project. In August 2011, we briefed the Audit, Risk, and Regulation Committee on our concerns and the preliminary findings of this report.We conducted this review to (1) assess TVA's schedule and cost performance on this project and (2) identify any weaknesses in the project's set-up and management and recommend actions to improve schedule and cost performance on this and future projects. We found two primary reasons for the schedule and cost overruns. Based on our assessment of the individual issues raised in various meetings, discussions with WBN Unit 2 and TVA personnel, and reviews of project documentation, we determined that the poor performance experienced at WBN Unit 2 was attributable primarily to (1) deficiencies in project set-up and (2) ineffective management oversight as discussed below.Problems with the original project set-up included the following: (1) the detailed scoping, estimating, and planning study was not as in-depth as it should have been; (2) inability to implement prime subcontractors' agreements contributed to project delays; (3) Bechtel was the American Society of Mechanical Engineers (ASME) certification holder, limiting TVA's ability to remove them from the project if problems occurred; and (4) construction began before adequate engineering had been completed.Project management in key areas was also ineffective. Specifically, TVA management did not: (1) perform effective oversight of the engineering, procurement, and construction contractor; (2) address certain warning signs that the project was in trouble; and (3) adequately mitigate known problems related to staffing, work order packages, timeliness and quality of information provided to the Nuclear Regulatory Commission, and the procurement of materials that require a long lead time to obtain.TVA recognizes the problems associated with the construction of WBN Unit 2 and has publicly acknowledged them. In addition, TVA has taken several actions to address the problems identified at WBN Unit 2 and offer an accurate reflection of the progress of the project, engage and improve the relationship with the project workers, and promote transparency. Further, Nuclear Construction and TVA Corporate's planned actions include a review of the accuracy of the Bellefonte estimate, restructuring the independent Project Assurance Organization, and developing a contracting strategy for various project classifications. TVA's actions are positive and should help to improve the process for WBN Unit 2 and future projects.TVA management agreed with our recommendations to: (1) develop a consistent and thorough approach for planning and estimating nuclear construction projects including, but not limited to, a range of estimates with probabilities, key risk assumptions, and contingency amounts; (2) develop contingencies for supplementing contractors' expertise in case they are unable to provide qualified resources; (3) develop contingencies for obtaining the American Society of Mechanical Engineers certifications for future projects as applicable; (4) require design engineering to be substantially complete before starting construction on nuclear projects; (5) establish controls over the development and reporting of project performance data and provide for independent verification of the data; (6) assess the cultural climate to determine if the actions of certain former key management have affected the organizational culture and provide a venue for WBN unit 2 personnel to voice their concerns; (7) evaluate project incentives to ensure they will deliver the desired results; (8) address aging nuclear workforce issues by developing a program for transferring knowledge; and (9) work collaboratively with TVA's Board of Directors to evaluate the benefits of retaining the services of nuclear construction experts to monitor large nuclear construction projects' progress and report results directly to the Board.

In light of recent gas-related explosions in the utility industry, we conducted a review of Tennessee Valley Authority's (TVA) safety of gas line and gas plant operations. The objective of our review was to determine if TVA has taken appropriate steps to identify and mitigate risk associated with the operation of gas plants and gas lines. We found that the vast majority of gas-related explosions were gas line related. According to TVA personnel, TVA is not responsible for gas until it reaches the reducing stations on TVA property. This significantly decreases TVA's risk of a gas-related incident. We did identify explosions in Middletown, Connecticut and Garner, North Carolina that occurred at gas plants due to improper commissioning. In both instances, fuel gas was used to clean or purge gas pipes of debris, air, or other substances. TVA has taken steps to mitigate this risk by using compressed air instead of gas to clean or purge gas pipes.As part of TVA's Risk Management program, the organization has identified asset performance vulnerability. Asset performance vulnerability impacts TVA's ability to provide power when there is a demand. The risk for asset performance vulnerability is driven by equipment-failure-related incidents that cause forced-outage events and planned-outage extensions of significant duration. According to TVA's Risk Management program, the severity for asset performance vulnerability is moderate. TVA has mitigated these risks. In addition, TVA has completed the draft of a Natural Gas Piping System Management manual. This manual provides the primary standards and methodology required for the commissioning, maintenance, and integrity management of natural gas piping systems found at TVA fossil power group properties.

On Monday December 22, 2008, the ash containment area at the Kingston Fossil Plant failed. Approximately 5.4 million cubic yards of fly ash and bottom ash were released onto land and adjacent waterways. As part of the OIG's ongoing commitment to provide oversight of the Kingston ash spill cleanup, we reviewed TVA's non-time-critical Kingston Ash Recovery Project activities.The objectives of this review were to determine (1) the overall status of the non-time-critical phase of the Kingston Ash Recovery Project and (2) if TVA is meeting the schedule for non-time-critical activities. During our review, we found that TVA has made significant progress in the non-time-critical phase of the Kingston Ash Recovery Project. Specifically, TVA has recently completed the following activities: (1) removing ash from the North Embayment, (2) buttressing of Dike C, (3) transferring a portion of a nearby ball field to the Kingston Fossil Plant, and (4) replacing the skimmer wall in the intake channel. In addition, TVA has ongoing non-time-critical activities that include: excavating ash from the Middle Embayment, constructing the Perimeter Wall Stabilization around the on-site disposal areas, disposing of ash on-site, studying the effects of residual ash on the river system, and creating a master plan for park and recreation areas. While TVA is making progress in the completion of non-time-critical activities, we found that five of nine activities reviewed did not meet the scheduled completion date. If the project continues late completion of activities, there is an increased risk that the overall project completion date of 2015, disclosed in the company's financial statements, could be delayed.We recommend TVA's Senior Vice President, Generation Construction, evaluate the current schedule to determine if the identified delays have caused overall schedule slippage. If it is determined that the overall schedule will be delayed beyond the date disclosed in the footnotes to TVA's financial statements, then the disclosure should be updated. TVA management agreed with our recommendation and has taken actions to address it.

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

At the request of the Tennessee Valley Authority's (TVA) Supply Chain, we audited Westinghouse Electric Company LLC's billed and estimated remaining material escalation costs under Contract No. 65717. In summary, we determined Westinghouse overbilled a net $26,917 in escalation costs and overestimated the remaining material escalation costs by $137,408. In addition, we identified compensation terms in the contract that need to be clarified to reduce the potential for billing discrepancies.Westinghouse agreed with our findings that escalation costs were overbilled and overestimated. Accordingly, TVA management should ensure (1) TVA recovers $26,917 in overbilled escalation, and (2) the remaining escalation costs are billed in accordance with the contract. TVA and Westinghouse agreed the compensation terms need to be clarified, and the contract is being revised.May 2, 2012 - Review of Energy Efficiency and Demand Response - 2011-14061 We initiated a review of the effectiveness of Tennessee Valley Authority's (TVA) Energy Efficiency and Demand Response (EEDR) organization. We conducted this review because energy efficiency and demand reduction initiatives are important components of TVA's plan to meet future power needs in its service territory. The objectives of this review were to determine (1) how TVA measures the effectiveness of its energy efficiency and demand response programs and (2) if its goals in these areas are being met. We found EEDR (1) has contracted with an independent consultant to provide evaluation, measurement, and verification services and (2) achieved its planned energy efficiency and demand reduction for 2011 and only missed its planned demand reduction in 2009 and 2010 by 2 MW and 16 MW, respectively. The Green Power Switch program came close to achieving its goals for 2009 and 2010; however, it fell significantly short of its goal in 2011. This report was issued for informational purposes only.

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

Semiannual Report to Congress

This Semiannual Report to Congress summarizes the activities of our office for the 6-month period

During the recent semiannual period, the OIG issued two evaluation reports and the 2011 financial statement audit report. The evaluation reports contained twelve recommendations; eleven related to systems deficiencies at the NEA, and one related to an NEA grantee. Corrective actions for the eleven recommendations to the NEA are in process, and the grantee recommendation was cleared during this reporting period. The 2011 Financial Statement Audit Report was issued with an unqualified (clean) opinion, and the 2011 FISMA evaluation report found that although NEA made progress in complying with FISMA, some additional improvements were needed.

NLRB OIG's April 2012 Semiannual Report

This report summarizes the oversight work performed by EAC OIG during the 6-month period ended March 31, 2012.