Federal Reports

ED OIG Semiannual Report 62 Final 508

We reviewed TVA cost recovery for tritium production under Interagency Agreement DE-A102-00DP00315 with the Department of Energy (DOE). The audit covered the period from January 2000 through December 2009 with some scope restrictions due to incomplete accounting data. We were unable to determine if tritium production costs were accurately identified and invoiced or if any negative impacts on plant operation from tritium production were reimbursed by DOE due to inadequate documentation. Specifically, Nuclear Power Group (NPG) management: (1) had incomplete accounting data, (2) negotiated rates that did not accurately reflect NPG's anticipated costs, (3) did not address $9 million in under-recovered overhead identified in the previous Office of the Inspector General audit on the tritium agreement, (4) did not invoice standby payments and overhead in compliance with agreement terms, (5) did not identify all additional operating costs caused by tritium production, (6) did not have support for $22.9 million in expenses and an unknown amount of revenues, and (7) misclassified revenue. Possible consequences of the audit findings include noncompliance with the Economy Act, noncompliance with the TVA Act resulting in rate-payer subsidy of tritium production, and unreliable NPG financial/performance data.

EAC OIG, through the independent public accounting firm of Clifton Gunderson LLP, audited $144.0 million in funds received by the Pennsylvania Bureau of Commissions, Elections and Legislation under the Help America Vote Act. The objectives of the audit were to determine whether the Bureau (1) used payments authorized by Sections 101, 102, and 251 of HAVA in accordance with HAVA and applicable requirements; (2) accurately and properly accounted for property purchased with HAVA payments and for program income; and (3) met HAVA requirements for Section 251 funds for an election fund and for a matching contribution except for the requirements for maintenance of a base level of state outlays, commonly referred to as Maintenance of Expenditures (MOE).

EAC OIG, through the independent public accounting firm of Clifton Gunderson LLP, audited $155.5 million in funds received by the Illinois State Board of Elections under the Help America Vote Act. The objectives of the audit were to determine whether the state Board of Elections (1) used payments authorized by Sections 101, 102, and 251 of HAVA in accordance with HAVA and applicable requirements; (2) accurately and properly accounted for property purchased with HAVA payments and for program income; and (3) met HAVA requirements for Section 251 funds for an election fund and for a matching contribution except for the requirements for maintenance of a base level of state outlays, commonly referred to as Maintenance of Expenditures (MOE).

Tennessee Valley Authority's (TVA) fossil fleet consists of 56 operating units at 11 fossil plants in the Tennessee Valley. Through the third quarter of fiscal year (FY) 2010, TVA purchased 25.2 million tons of coal totaling $1.36 billion and burned 25.7 million tons totaling $1.50 billion. TVA's fuel inventory as of June 30, 2010, was $518,658,383. We assessed the operating effectiveness of the controls over the receipt and burning of coal at the fossil plants, including inventory adjustments. Specifically, we determined:The variance reports are generated using information in the Daily Coal Report (DCR). However, the vendor name listed in the DCR does not consistently represent the respective coal company, coal mine, or loading point, which could prevent the identification of significant issues.Variance investigations are not always coordinated between Coal and Gas Services (CGS) and plant personnel, which could impact the efficiency of the investigations.Material tests, which ensure the accuracy of the TVA scales, are not being conducted on all receipt and burn scales on an annual basis at the 11 TVA fossil plants. According to TVA personnel, Problem Evaluation Reports (PERs) have been written at Allen and Gallatin fossil plants for infrastructure deficiencies preventing material testing.Documentation is not consistently maintained for the daily belt scale checks, weekly belt scale calibrations, and material flow checks. Therefore, we were unable to determine whether these checks were consistently conducted.No formal process exists for conducting investigations on inventory adjustments that exceed the tolerable limit. According to TVA management, the Fossil Power Group (FPG) began utilizing Maximo to document and track PERs for inventory adjustment investigations in FY 2011. Summary Only

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Semiannual Report to Congress

April 2011 Semiannual Report.

Log Management

Analysis of the cost to process cases in the NLRB's Regional Offices.

The OIG performed an audit of Florence Electricity Department (Florence), a distributor of Tennessee Valley Authority (TVA) power based in Florence, Alabama. Florence also operates water, waste water, and gas departments, and provides billing services for these utilities and other municipalities. Annual revenues from electric sales were approximately $116 million in fiscal year (FY) 2009. The objective of our audit was to determine compliance with key provisions of the power contract between TVA and Florence.Our audit of Florence found improvements were needed in the areas of (1) customer classification, (2) metering, (3) contract compliance, and (4) distributor internal controls.In addition, we found Florence had enough cash on hand at June 30, 2009, to cover actual FY 2010 capital expenditures and provide a cash reserve equivalent to a cash ratio of about 8 percent, which is within TVA's established guidelines for an adequate cash ratio of 5 to 8 percent.Finally, we found two opportunities to enhance TVA's oversight of the distributors that was also reported in previous Office of the Inspector General distributor audits. TVA is in the process of addressing these findings, which include (1) providing definitive guidance for distributors on what constitutes prudent expenditures and (2) updating joint cost allocations in the time period recommended by the TVA Accountants' Reference Manual.Florence and TVA management agreed with our recommendations and have taken or are taking actions to address the recommendations. The target completion date for all corrective actions is September 2012.

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

This report summarizes the oversight work performed by EAC OIG during the 6-month period ended March 31, 2011.

The importance of data protection and privacy within the Federal government and commercial enterprises is constantly increasing and requires continuous attention. The challenges will be even greater in the future as the potential use of new technologies (e.g., cloud computing, more prolific use of wireless mobile computing devices) and changes to business processes and work arrangements (e.g., increased focus on telework) will create new risks to be managed. There is also a general increasing concern among individuals about the use and privacy of their personal information controlled by Federal agencies. For any entity handling personally identifiable information (PII), the effort to sustain an effective and defensible privacy program that meets the public’s expectations and applicable legal requirements can be a substantial task.

EAC OIG, through the independent public accounting firm of Clifton Gunderson LLP, audited $26.8 million in funds received by the Utah Office of Lieutenant Governor under the Help America Vote Act. The objectives of the audit were to determine whether the Office of Lieutenant Governor (1) used payments authorized by Sections 101, 102, and 251 of HAVA in accordance with HAVA and applicable requirements; (2) accurately and properly accounted for property purchased with HAVA payments and for program income; and (3) met HAVA requirements for Section 251 funds for an election fund and for a matching contribution.

As part of our annual inspection plan, we initiated a review of the fire protection systems at the Raccoon Mountain Pumped-Storage Plant. In meeting with plant personnel, we were informed that in July 2010, Marsh Risk Consulting issued a report which included a number of recommendations for the plant to improve fire protection at the site. Based upon this, we decided to perform a walkdown of the site and a limited review of testing/inspection documentation for a sample of the fixed fire protection systems at the site.We noted no issues during our walkdown of the facility. However, we did note one deficiency with the testing/inspection of one of the fixed fire protection systems at the site, which was communicated to plant management. Despite the one identified deficiency, we determined that no further work in this area is warranted by our office at this time.

This report contains Sensitive Information and will not be posted.

This report presents the results of the audit of the Commission Financial statements for the fiscal year.

Evaluation of the rate of hard drive failures for the NLRB's computers.

TVA entered into contract No. 65419 with Bechtel Power Corporation on October 19, 2007, to provide engineering, construction, and procurement work related to the restart of Unit 2 at Watts Bar Nuclear Plant (WBN U2). Section II-13 - Correction of the Work Prior to Commencement of Warranty Period of the contract stipulates the guidelines related to what does and does not constitute rework as it relates to determining Bechtel's performance fee. In addition, Bechtel receives an annual performance fee that is calculated as a percentage of the total amount billed during the fiscal year (FY). However, any amount of direct labor that has been associated with rework during the FY will be deducted from the total costs billed during the FY prior to the final calculation of Bechtel's performance fee for the FY.Since inception of the contract, there have been three projects classified as rework projects-two in FY 2008 and one in FY 2009-that have resulted in a reduction of the total costs prior to calculation of the final performance fee. The rework projects in FY 2008 totaled $40,000, and the FY 2009 rework project totaled $124,000. As of September 30, 2010, there were 13 issues classified by TVA as rework that were still outstanding or being reviewed by TVA and six rework issues that had been closed with Bechtel agreeing to two of the issuesAs part of our annual audit plan, we reviewed the rework projects identified at WBN U2 to determine if WBN U2 rework has been correctly identified, tracked, and billed in accordance with the contract terms. As a result of our review, we identified one area for improvement. Specifically, we determined some rework project costs are being settled based upon an estimated amount. However, the actual costs are not being tracked by the contractor in accordance with the contract terms.We recommended the Vice President, WBN U2, if they continue to accept the cost of rework based upon an estimated amount and not the actual amount as stipulated in the contract, amend the terms of the contract to allow for an estimated amount for rework and determine what documentation should be maintained by the contractor supporting the estimated rework amount and the amount used in the calculation of the performance fee. In TVA management's response, they stated that the contract language is adequate to address the issue. TVA management stated that it is more of an issue of TVA notification to Bechtel that soft costs should be tracked for recovery. In addition, Article II-24 of the contract, even though not formally documented as a dispute, allows both parties the latitude to interpret and resolve such issues. We agree with their response. Summary Only

FOIA

EAC OIG, through the independent public accounting firm of Clifton Gunderson LLP, audited $20.6 million in funds received by the West Virginia Secretary of State under the Help America Vote Act. The objectives of the audit were to determine whether the Secretary of State (1) used payments authorized by Sections 101, 102, and 251 of HAVA in accordance with HAVA and applicable requirements; (2) accurately and properly accounted for property purchased with HAVA payments and for program income; and (3) met HAVA requirements for Section 251 funds for an election fund and for a matching contribution.

EAC OIG, through the independent public accounting firm of Clifton Gunderson LLP, audited $238.1 million in funds received by the New York State Board of Elections under the Help America Vote Act. The objectives of the audit were to determine whether the State Board of Elections (1) used payments authorized by Sections 101, 102, and 251 of HAVA in accordance with HAVA and applicable requirements; (2) accurately and properly accounted for property purchased with HAVA payments and for program income; and (3) met HAVA requirements for Section 251 funds for an election fund and for a matching contribution.

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