Federal Reports

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

The OIG performed an audit of Newport Utilities, a distributor for Tennessee Valley Authority (TVA) power based in Newport, Tennessee. Newport Utilities also operates nonelectric businesses, which are water and sewer utilities. Annual revenues from electric sales were approximately $50 million in fiscal year 2009. The objective of the audit was to determine compliance with key provisions of the power contract between TVA and Newport.Our audit identified customer classification issues that could impact the proper reporting of electric sales to TVA and/or nondiscrimination in providing power to members of the same rate class. We were unable to estimate the monetary effect of the classification issues because, in some instances, information was not available; however, for those where information was available, the monetary effect on the distributor and TVA would not be significant.We also found improvements were needed to (1) comply with other contract provisions regarding maintenance of customer contracts and (2) improve the distributor's internal controls related to the implementation of a corrected program code. In addition, we found the distributor had enough cash on hand to 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.TVA and the distributor generally agreed with the OIG's recommendations and have taken or are taking actions to correct the identified issues.

EAC OIG, through the independent public accounting firm of Clifton Gunderson LLP, audited $16.6 million in funds received by the Hawaii Office of Elections under the Help America Vote Act. The objectives of the audit were to determine whether the Office 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.

EAC OIG, through the independent public accounting firm of Clifton Gunderson LLP, audited $40.9 million in funds received by the Alabama 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 $49.1 million in funds received by the Louisiana 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.

The United States Capitol Police (USCP or the Department) Office of Inspector General (OIG) conducted an audit of the Department’s financial statements for the years ended September 30, 2011.

The OIG reviewed North Georgia Electric Membership Corporation (NGEMC), a distributor for Tennessee Valley Authority (TVA) power based in Dalton, Georgia. The objective of the review was to determine compliance with key provisions of the power contract between TVA and NGEMC. Our review found 34 misclassified customer accounts. While we estimated the monetary effect of the misclassifications were not significant, there were qualitative issues that were significant due to their systemic nature.Some of the misclassifications identified resulted from an ongoing NGEMC policy to classify separately metered well pumps serving residences as residential rather than commercial and a discontinued policy to classify any facility that had living quarters, including group homes and cabins owned by individuals and/or organizations, as residential. We also identified certain opportunities to enhance TVA oversight of distributors which were also reported in previous distributor audits. TVA and NGEMC agreed with the OIG's recommendations and have taken or planned to take actions to correct the identified issues.

Section 11(d)(9) of the Inspector General Act of 1978, as amended, requires the Council of the Inspectors General on Integrity and Efficiency to submit to Congress and the President an annual report on the activities of the Integrity Committee. For more informatoin about the Integrity Committee, please visit the link below.

EDIS Security

Annual audit of the financial statements.

The OIG performed a follow up audit of Inspection No. 2005 522I, where we recommended TVA execute contract modifications with distributors who wish to pursue nonelectric business ventures, and TVA management agreed to do so. In addition, TVA management asserted they would formalize procedures to ensure consistent review of (1) distributor financial information and (2) business plans that propose the use of electric system revenues for nonelectric system purposes.Our review found TVA management later decided on an alternative approach to protect its interests and those of all parties. Instead of formal contract modifications, TVA's approach now is to require written agreements with terms to protect the distributors, ratepayers, and TVA when approving the distributor to invest "reserves for renewals, replacements, contingencies, and working capital" in nonelectric business ventures. TVA management believes this approach and the resulting agreements provide greater protections for the involved parties.TVA has designated the request evaluation and subsequent agreements for one distributor in 2008 as the "model" for handling future requests. While the new approach and "model" may prove effective for controlling risks, we noted areas where protection for the distributors, ratepayers, and TVA could be strengthened. Specifically, we found TVA has:Not documented guidelines for the review of business plans that propose the use of electric system revenues for nonelectric system purposes and the terms to be included in subsequent formal agreements.Not established guidelines to indicate when the amount of a distributor's reserves becomes excess revenues that should be returned to the ratepayer through rate reductions as required by the power contract.Not reviewed distributors previously approved to use electric system revenues for nonelectric system purposes or those using funds without approval to determine if appropriate protections (e.g., formal agreements) are in place.We recommended the Group President, Strategy and External Relations (1) formally document procedures and guidelines for evaluating distributor requests to use electric system revenues for nonelectric system purposes, including acceptable limits for certain elements, (2) determine when distributor reserves are excessive and should be returned to the ratepayers in the form of rate reductions, and (3) review and ensure all distributors using electric system revenues for nonelectric system purposes have appropriate protections in place.TVA management stated (1) they plan to have base line criteria/steps for evaluating distributor business plans developed by February 28, 2011; (2) they will present additional metrics to the TVA Board in the coming year for review and approval, and the target date for completing discussions with distributors and submitting revised policies for Board approval is November 2011; and (3) TVA staff will look for electric system use of revenue for nonelectric system purposes when they perform the annual review of distributor financial information. As part of this review, any unapproved use of electric system revenues for nonelectric system purposes will be evaluated for further action. Target completion date for this action is September 2011.

The OIG reviewed the Pulaski Electric System, a distributor for TVA power based in Pulaski, Tennessee. Pulaski also provides billing services for other city utilities and operates a broadband department that offers cable and Internet services. The OIG's review identified (1) customer classification issues that could impact the proper reporting of electric sales and/or nondiscrimination in providing power to members of the same rate class, (2) an overpayment to TVA as a result of an error in a spreadsheet formula used to calculate demand for one GSA classification reported on the Schedule 1, and (3) contract compliance issues regarding allocation of costs between service departments, customer applications for credits, calculation of credits, and maintenance of customer credit documentation. The OIG also identified certain opportunities to enhance TVA oversight of distributors reported in previous distributor audits.TVA and Pulaski agreed with OIG recommendations and have taken or are taking actions to correct the identified issues.

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

The OIG reviewed the TVA's compliance with the Federal Information Security Management Act (FISMA) of 2002. Our review determined TVA made significant improvement in two FISMA control areas in the past year. However, overall progress in implementing information technology controls required by FISMA has slowed, while TVA continues work on previously recommended actions and redesigns some processes. Additional efforts are needed to improve compliance with existing controls and address concerns identified by the OIG in six control areas: (1) the certification and accreditation process, (2) security configuration management, (3) incident response and reporting, (4) security training, (5) remote access, and (6) contingency planning. We provided our results to TVA management for review. Summary Only

FY 2010 Financial Statement

ED OIG Semiannual Report 61 Final 508

Cyberscope FISMA FY 2010

EAC OIG, through the independent public accounting firm of Leon Snead & Company, P.C., audited EAC's financial statements for the fiscal years ended September 30, 2010, and September 30, 2009.

EAC OIG, through the independent public accounting firm of Leon Snead & Co., audited EAC's financial statements for fiscal years 2010 and 2009. This letter contains supplementary stewardship information.

This report is Sensitive But Unclassified. 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.

Internal Control 2010

The objectives of this review were to determine what actions TVA has taken since the Kingston Fossil Plant ash spill to address (1) deficiencies in ash management governance, (2) cultural issues identified, (3) stability of the other coal ash impoundments, and (4) deficiencies in the coal ash management program. The scope of this review included coal ash management and related risks. In summary, we found that since the Kingston Fossil Plant ash spill, TVA is taking appropriate actions to (1) improve ash management governance, (2) drive culture change, (3) evaluate the stability and corresponding safety factors pertaining to ash impoundments, (4) remediate risks, and (5) identify and address ash management deficiencies. Specifically, TVA has:Decided to include coal ash impoundments under the Dam Safety Program to increase governance and use the expertise of TVA's independent Hydro Review Board in assessing the safety and stability of coal ash impoundments.Taken action to drive organizational culture change, including (1) hiring an independent cadre of professionals to assess the TVA culture, (2) instituting an organizational effectiveness initiative, and (3) reorganizing to improve accountability.Hired Stantec, Inc., to evaluate the stability of facility ash impoundments and established an appropriate evaluation and remediation process.Taken immediate action to improve stability and mitigate risks pertaining to many TVA coal ash impoundments.Compiled a gap analysis of recommendations to TVA from the relevant review sources to ensure ash management problem areas are addressed. Development and implementation of quality assurance/control processes and the development of ash management policies and procedures are examples of key actions taken.While TVA has made significant progress to date, it is important to note this is a long-term project that TVA must continue to make a priority.

The OIG performed four agreed-upon procedures, which were requested solely to assist management in determining the validity of the Winning Performance (WP) payout awards for the year ended September 30, 2010. Following are the results of the procedures applied:The fiscal year (FY) 2010 WP goals were properly approved. Nine change forms affecting 16 measures and/or payout percentages were also properly approved which resulted in nine increases and three decreases to the payout.Actual year-to-date data for September 2010 for all the measures on the strategic business unit and business unit scorecards agreed with respective supporting documentation provided. Subsequent changes to actual data were received through October 28, 2010, and traced to supporting documentation without exception.Actual year-to-date data for the two incentivized TVA corporate balanced scorecard measures agreed with underlying support. Subsequent changes to the net cash flow actual year-to-date data as of November 10, 2010, were received and compared to the supporting Statement of Cash Flows. These changes did not impact the payout percentage.The FY 2010 WP payout percentages provided by the Performance Analysis & Productivity organization on October 25, 2010, were recalculated and compared without exception. Subsequent changes to actual data and goals were received through October 28, 2010, and November 5, 2010, respectively. The payout percentages based on these changes were recalculated without exception. A subsequent change to the actual year-to-date data for the net cash flow measure through November 9, 2010 was received; however, this change did not impact the payout percentages. Summary Only

Audit of 2010 Financial Statement

Compliance with Laws and Regulations for 2010