Federal Reports

Semiannual Report to Congress

October 2010 Semiannual Report

EAC OIG, through the independent public accounting firm of Leon Snead & Co., conducted an audit of EAC's compliance with the requirements of the Federal Information Security Management Act for fiscal year 2010.

We audited $51.2 million in costs billed to TVA by a contractor for financial management and consulting services under two contracts. Our objective was to determine if the costs billed from July 2003 through December 2008 were in compliance with the provisions of the contracts. In summary, we found $4.8 million of costs billed by the contractor were unsupported or not in accordance with the terms of the contracts as follows.$3,328,704 was overbilled because the contractor did not limit its overtime billings as it represented it would in its proposals and in the final terms of one of the contracts. (The overbilling included about $890,000 that occurred from the end of our audit period through March 31, 2010.)$514,669 in labor costs were overbilled due to unapproved job categories or incorrect billing rates, timesheet discrepancies, and unallowable administrative labor.An estimated $51,233 was billed for unallowable or unsupported travel expenses and travel agency fees.$1,020,454 in overbillings occurred because costs had been performed prior to the issuance of a contract work authorization, exceeded the CWA funding limits, or was not authorized under the terms of a CWA.The overbillings itemized above included $108,877 that was included in more than one finding. Accordingly, the net overbilling after removing this duplication was $4,806,183. Summary Only

We audited $24.9 million in payments made by TVA from 2007 through 2009 to a contractor for providing engineering, design, and construction support. In summary, we found the contractor overbilled TVA an estimated $39,915, including (1) $26,182 in overbilled labor and fee costs and (2) $13,733 in overbilled direct costs. We recommended TVA management take action to recover the overbilled costs. The contractor agreed with our findings and recommendations.and stated it would issue a credit invoice to TVA. Summary Only

The Office of Inspector General (OIG) works to promote efficiency, effectiveness, and integrity in the programs and operations of the U.S. Department of Education (Department). Through our audits, inspections, investigations, and other reviews, we continue to identify areas of concern within the Department’s programs and operations and recommend actions the Department should take to address theseweaknesses. The Reports Consolidation Act of 2000 requires OIG to identify and summarize the most significant management challenges facing the Department each year. Last year, we reported three management challenges: the American Recovery and Reinvestment Act of 2009 (Recovery Act); student financial assistance (SFA) programs, with a focus on the Ensuring Continued Access to Student Loans Act of2008; and information security and management. All three have been updated as challenges for fiscal year (FY) 2011, and Data Quality and Reporting, previously a sub-area, is presented as a separate challenge.

An appendix to this report is available at the link below.

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.

We audited $6.9 million in payments TVA made to a contractor for providing labor, material, and equipment to reclear or provide maintenance for existing transmission line right-of-way areas under two contracts from January 5, 2004, through April 19, 2010. In summary, we found the contractor had overbilled TVA about $1,400 due to miscellaneous billing errors. However, TVA's invoice approvers had found and adjusted most of the errors prior to paying the contractor. Summary Only

Perimeter Network Security

USITC Management and Performance Challenges

Inspector General Identified Management Challenges

This review was the result of broad interest surrounding the safety and condition of TVA dams after the ash spill at the Kingston Fossil Plant. The objectives of this review were to determine if TVA's Dam Safety Program identified and adequately addressed significant risks, was in compliance with TVA policies and procedures as well as applicable laws and regulations, and encompassed all the aspects of a comprehensive dam safety program. This review found TVA was taking steps to identify and mitigate its risks; adhering to the federal guidelines for dam safety with a few exceptions; and had a comprehensive dam safety program, but opportunities existed to strengthen the program. Specifically, we found:TVA was moving from being reactive to proactive by mitigating and anticipating risks. However, based on interviews with TVA plant personnel, we identified improvement opportunities that would further enhance the identification and mitigation of dam safety risks.TVA's policy was to follow the federal guidelines for dam safety, although not required under federal law. TVA is adhering to the federal guidelines with the exception of certain aspects of the operations and maintenance (O&M) manuals, training and awareness program, and emergency action plans (EAPs).TVA management agreed with our findings and recommendations and has taken or plans to take corrective actions.

The OIG reviewed TVA's storage and handling of anhydrous ammonia to determine whether (1) TVA's policies and procedures complied with relevant ammonia-related Occupational Safety and Health Administration (OSHA) and other federal regulations, and (2) TVA fossil plants were in compliance with TVA's policies and procedures covering ammonia storage and management. In addition, we assessed the general physical security surrounding TVA's ammonia storage tanks and related appurtenances.In summary, we found TVA has two procedures, TVA Safety Procedures 219 and 901, which are intended to implement the requirements of OSHA 29 CFR 1910.119. However, our audit disclosed (1) TVA does not have a formal policy addressing the requirements of American Natonal Standards Institute (ANSI) Standard K61.1 (CGA Standard G-2.1) - Storage and Handling of Anhydrous Ammonia or OSHA 1910.111, "Storage and Handling of Anhydrous Ammonia;" (2) TVA's Procedure 219, "Process Safety Management," does not address all of the requirements included in OSHA 1910.119, "Process Safety Management of Highly Hazardous Chemicals;" and (3) certain sites did not (a) complete all of the process hazard analysis requirements included in Procedure 219, (b) certify their operating procedures on an annual basis, (c) follow ammonia training requirements for its employees or have a mechanism for ensuring the required training of its employees who handle ammonia or perform maintenance on ammonia systems was timely, and (d) satisfy the nameplate and/or marking requirements for its ammonia storage tanks as required by ANSI Standard K61.1.We also found there was no "trigger" to inform visitors or nonplant TVA personnel that ammonia training may be required prior to entering the plants other than (1) Procedure 901, which requires that "Ammonia Awareness trainin shall be required for all employees or visitors to plants with SCR or any employee who may have exposure to ammonia," or (2) reliance upon the visitor's or nonplant employee's site contact for such information. Summary Only

We are pleased to present our report for the period March 31, 2010, through October 1, 2010. The hard work of our TVA OIG employees resulted in almost $20.5 million in recoveries, fines/penalties, potential savings, questioned costs, or funds which could be put to better use during this reporting period as well as numerous recommendations to improve TVA programs.We continue to monitor the progress TVA is making with both the Kingston coal ash clean-up efforts and TVA's overall record of environmental performance.

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 September 30, 2010.

EAC OIG, through the independent public accounting firm of Clifton Gunderson LLP, audited $17.7 million in funds received by the Montana 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.

OIG reviewed the Dickson Electric System (Dickson), a distributor for TVA power based in Dickson, Tennessee. The OIG's review found (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) noncompliance with certain power contract provisions in following the Federal Energy Regulatory Commission chart of accounts; and (3) internal controls could be strengthened related to certification documentation for manufacturing customers, accuracy of contract demand entered in the billing system, and executed contracts for accounts with a contract demand value in the billing system. We also found TVA could enhance oversight of the distributors by clarifying that the Standard Industrial Classification (SIC) code to be used to determine eligibility for the manufacturing schedules should be the SIC code for the customer's facility that's located in the distributor's service area.TVA and Dickson agreed with the OIG's recommendations and have or are taking actions to correct the identified issues.

As part of our annual audit plan, we reviewed the process for ensuring that counterparty credit analysis is performed and monitored. We identified issues related to the cultural factors affecting the credit risk monitoring process, performance of initial credit analysis, and monitoring of counterparty creditworthiness. Specifically, we determined that Corporate Credit has historically lacked authority to determine which counterparties require a credit analysis and when performance assurance is required. Because of the lack of a central, governing body, the process has become siloed with business units establishing their own criteria for requiring a credit analysis and deciding whether to implement Corporate Credit's recommendations. As a result, we identified counterparties that met the business unit's (BU) guidelines or Corporate Credit's expectations of requiring a credit review, but a request for credit analysis was not made by the business unit. We also identified issues related to lack of documentation supporting the credit analysis and the counterparty creditworthiness monitoring processes. In addition, we determined that Corporate Credit relies heavily on commercial credit ratings in both initially determining and monitoring a counterparty's creditworthiness.The credit analysis, performance assurance, and monitoring processes were not always performed timely. Specifically, we identified (1) BU requests for credit analysis made either less than one week prior to or after the contract start date; (2) credit memos dated after the contract date; (3) financial analyses conducted with outdated financial statements; (4) contracts executed with outdated credit memos; and (5) contract-required performance assurance not obtained in a timely manner. In addition, we determined that active counterparties were not being consistently monitored. Treasury agreed with all of the recommendations, with the exception of one related to the monitoring of the BU activity by Corporate Credit to ensure compliance with the Credit Standard Program and Processes and specific BU policies related to counterparty credit risk management. The OIG revised the report and recommendations, as necessary, to address the disagreement. Summary Only

EAC OIG, through the independent public accounting firm of Clifton Gunderson LLP, audited $34.1 million in funds received by the Connecticut 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 conducted an evaluation of EAC's use of appropriated funds purpose of settling a claim brought by a candidate for the position of general counsel, at the request of U.S. Representative Jo Ann Emerson. The objectives of the evaluation were to determine whether (1) EAC had authority to enter into such a settlement agreement, (2) EAC used proper fiscal year funds, and (3) EAC followed appropriate protocols in entering into the settlement agreement.

TVA OIG retained Marshall Miller & Associates, Inc. (Marshall Miller) to conduct a peer review of the Stantec Consulting Services, Inc. (Stantec) stability calculations and construction documents for the Dike C Buttress at the Kingston Fossil Plant (Kingston). Dike C refers to the remaining section of the Kingston coal ash containment that did not fail in the December 22, 2008, spill. It is Marshall Miller's opinion that the planned Dike C Buttress produces stability enhancements that are sufficient based on Stantec's drained slope stability analyses. Marshall Miller also believes that the construction improvements will satisfactorily address issues of "piping"/internal erosion, surface erosion, and scour over those Dike C areas that will be covered with an aggregate filter and be buttressed. However, Marshall Miller found that the specific design bases/criteria, relative improvement in stability, and reasoning for certain variations in the buttress configuration were not well documented within the materials that were supplied for review. The significance of the Marshall Miller observations and recommendations are dependent on the approach and conservatism that are applied in the design of the final closure plan. To address this report, TVA management had Stantec review and respond to the findings of Marshal Miller's report. TVA management and Stantec provided additional information on the findings and recommendations in Marshal Miller's report. Marshall Miller concluded that the additional information provided adequately addressed the concerns and recommendations identified in its report.

As part of the Office of the Inspector General's (OIG) ongoing commitment to provide oversight in this area, we assessed Tennessee Valley Authority's (TVA) Kingston ash spill clean-up and recovery efforts. We assessed TVA's progress in two areas: (1) the clean-up of the ash and returning the area to its previous condition and (2) reparations to victims and restoration of the community.We found comprehensive efforts have been completed and are still ongoing pertaining to the clean-up of the spill. TVA is making significant progress in the clean-up and continues to consider human health and the environment in the recovery. Specifically, TVA (1) met its goal of removing the time critical ash necessary to reopen the Emory River by the end of May 2010, (2) implemented a removal plan for non-time critical ash in spring 2010 to facilitate a smooth transition between clean-up phases, (3) developed a good working relationship with the Environmental Protection Agency (EPA) and the Tennessee Department of Environment and Conservation (TDEC) to manage and facilitate the clean-up, and (4) coordinated with EPA and TDEC to provide continuous environmental monitoring.We found TVA made a concerted effort to address restoration and regain public trust. Specifically, TVA immediately established a process to handle real and personal property, loss of business, and mileage claims. In addition, TVA's adjudication of the claims was consistent and in accordance with approved processes and guidelines. Other TVA actions to restore the community and regain public trust included, (1) committing $43 million to economic development in Roane County, (2) initiating projects to improve community infrastructure, lessen the impact of recovery operations on the public, and promote Roane County, (3) promoting the sharing of information and coal ash research, (4) implementing various mechanisms to improve communications, address inquiries, and provide information to the Kingston residents and media, and (5) providing independent health screenings.

Marshall Miller & Associates, Inc. (Marshall Miller) was engaged by the Tennessee Valley Authority (TVA) Office of Inspector General to review the Transportation and Disposal Plans prepared by the Tennessee Valley Authority (TVA) in response to the ash release that occurred on December 22, 2008 at its Kingston Fossil Plant (KIF). Specifically, Marshall Miller was asked to determine if appropriate steps are being taken to minimize the environmental impacts and if regulatory requirements are being met. In summary, Marshall Miller found that TVA is taking appropriate steps to minimize the environmental impacts of transporting ash from KIF to the Arrowhead Landfill in Perry County, Alabama. Furthermore, no significant deficiencies in documents reviewed, regulatory requirements, or in the landfill operations were found. Marshall Miller found at the Arrowhead Landfill that the (1) ash removal and rail car wash systems and procedures appear to be adequate for minimizing the potential for residual ash to enter the nearby surface water, (2) storm water management practices appear to be effective for segregating and managing storm water runoff, (3) roads, work, and vegetated areas appear to be maintained such that sediment runoff is minimized, (4) surface water features in the immediate vicinity did not exhibit signs of excess sedimentation, debris build-up, or other potential adverse impacts that could be associated with a landfill, and (5) leachate management and disposal practices appear to minimize, to the extent practicable, the potential for off-site exposure from ash constituents.While Marshall Miller did not find significant deficiencies in the operation of the landfill, several areas were noted where improvements could be made. The Rail Yard and Landfill Best Management Practice Plans do not effectively describe and document the actual activities, procedures, equipment and operations that were observed during Marshall Miller's site visit on April 21, 2010. The Spill Prevention Control and Countermeasures Plans appear to provide adequate protection; however, the Plans do not include spill volume estimates for certain spill scenarios, discussion of secondary containment for mobile tankers, and locations for spill kits and equipment. Lastly, Marshall Miller noted one of the National Pollutant Discharge Elimination System discharge points is located at a point that could be affected by runoff from land that is not part of the landfill. This issue had already been identified and is currently being addressed by the landfill owner.TVA management agreed with the recommendations and we concur with their planned and completed actions.

Marshall Miller & Associates, Inc. (Marshall Miller) was engaged by the Tennessee Valley Authority (TVA) Office of Inspector General to review the adequacy and completeness of environmental recovery plans prepared by TVA in response to the ash spill that occurred on December 22, 2008, at the Kingston Fossil Plant (KIF). Generally, Marshall Miller found no significant deficiencies in any of the proposed alternatives for the restoration of the Swan Pond Embayment, including the selected alternative. The documents prepared by TVA appear to be substantially in compliance with applicable regulatory requirements stated in the Administrative Order and Agreement on Consent between TVA and the United States Environmental Protection Agency (EPA) and meet the removal action objectives outlined in the Non-Time Critical Removal Action Embayment/Dredge Cell Engineering Evaluation/Cost Analysis or as is more commonly known the EE/CA. There were some discrepancies noted in the Human Health Risk Assessment, with regard to certain selected input parameters, such as toxicity and exposure factors. However, since the selected alternative includes the removal of all ash, any risk associated with leaving the ash in place is reduced, and revisions to the risk assessment are not necessary. TVA has committed to incorporating the findings in future Human Health Risk Assessments. While Marshall Miller found no significant deficiencies in any of the proposed alternatives, the following observations were noted:Both the EE/CA and Non-Time Critical Removal Action Embayment/Dredge Cell Action Memorandum (Action Memorandum) are intended to provide only a conceptual design of each of the three alternatives. Since an alternative has been selected, a more detailed design will be needed, along with revised sampling plans for monitoring potential environmental impacts during excavation of the ash and closure of the Dredge Cell. Additionally, the EE/CA provides limited detail on the long-term monitoring of various media for potential environmental impacts.A more detailed understanding of groundwater flow and associated contaminant migration from the Dredge Cell to adjacent surface water is required in order to properly establish locations for long-term monitoring of wells.TVA management agreed with our findings and recommendations and plans to take or has taken corrective actions.

The Inspector General (IG) Criminal Investigator Academy (IG Academy) was officially established in February 1994 by a Memorandum of Understanding between the Federal Law Enforcement Training Center (FLETC) and the President's Council on Integrity and Efficiency (PCIE). The training academy is located at FLETC in Glynco, Georgia. The PCIE was superseded by the Council of the Inspectors General on Integrity and Efficiency (CIGIE) under the Inspector General Reform Act of 2008. Therefore, CIGIE assumed accountability for the IG Academy. In this review which was performed as a service for CIGIE, we found a definite lack of resources for the IG Academy, which impacts the learning methodologies utilized and the overall quality of the programs being delivered. If the IG Academy is to exhibit the attributes of an effective training program, CIGIE must provide it with human capital and infrastructure resources, including instructional, information technology, curriculum, and administrative support.We recommended CIGIE consider the following resource needs, among others, for the IG Academy:Staffing or access to staffing to conduct timely updates of curricula and lesson plans, assist in instructional systems design, and teach coursesInformation technology supportThe implementation of an electronic learning management system-a software application that provides, among other assets, administration, documentation, tracking, and reporting of training programs, classroom and online events, e-learning programs, and training contentAdministrative supportThe means to address a legal support deficiencyRemarkably, the IG Academy has been able to provide training to investigators who consistently give very positive feedback despite the lack of resources identified in this report. Our review revealed a small but dedicated staff achieving far more than the bare statistics suggest should be possible. The Director and her staff are to be congratulated for holding together a program that enjoys the support of the majority of the IG community and continues to provide a valuable service.

Since 1933, Tennessee Valley Authority's (TVA) dam and reservoir construction program has acquired approximately 1.3 million acres of land for the creation of 34 reservoirs in five of the seven states in the Tennessee Valley region. Water flooded approximately 470,000 acres as part of the construction and operation of the reservoir system. Approximately 508,000 acres have been transferred or sold primarily to other federal and state agencies for public uses, leaving approximately 293,000 acres currently owned by TVA and managed to meet development needs and improve the quality of life in the Tennessee Valley. These reservoir properties, together with adjoining private lands, have been used for public parks, industrial development, commercial recreation, residential development, and a variety of other needs associated with local communities and government. Section 4(k)(a) of the TVA Act gives TVA the power "to convey by deed, lease, or otherwise, any real property in the possession of or under the control of the Corporation to any person or persons, for the purpose of recreation or use as a summer residence, or for the operation on such premises of pleasure resorts for boating, fishing, bathing, or any similar purpose."As part of our annual audit plan, we reviewed recreational land transactions. Our audit objectives were to assess the (1) process for entering into recreational land transactions and (2) monitoring and enforcement of those transactions as of August 26, 2009. In addition, our review included information related to the valuation of campgrounds and marinas. As a result of our review, we identified several areas for improvement. Specifically, we determined (1) Stewardship Guidelines do not include adequate criteria to provide for consistency in awarding recreational land agreements; (2) licenses have been used for long-term encumbrances of recreational lands; (3) no formal process is in place to track changes in campground or marina ownership which could affect fees charged; (4) reevaluations of annual fees have not been consistently performed; (5) reviews of monthly invoicing for campground and marina operators may not be adequate; (6) TVA does not have an accurate listing of recreational properties that hinders adequate monitoring; (7) no process is in place for identifying data errors or noncompliance issues related to agreement terms, other than "visual" violations on the properties; (8) TVA does not exercise its right of reentry for properties sold under Section 4(k)(a) when the properties are used in violation of the deed; (9) structures have been built on TVA properties without TVA approval; (10) sporadic usage of "approvable actions" (i.e., permits issued after construction or changes have been made to the property without TVA approval); and (11) TVA faces reputational risk due to external and internal cultural factors, primarily related to the monitoring and enforcement of violations and encroachments.TVA management agreed with our recommendations and is taking corrective action to address these issues. Summary Only

See link below for the full report, report summary, multimedia or any agency follow-up.

Audit of remedies in UPL cases.

OIG reviewed the Lenoir City Utilities Board (LCUB), a distributor for TVA power based in Lenoir City, Tennessee. LCUB also operates nonelectric businesses that include gas, water, and sewer utilities. The OIG's review found multiple concerns, including (1) customer classification and metering issues that could impact the proper reporting of electric sales and/or nondiscrimination in providing power to members of the same rate class; (2) noncompliance with certain power contract provisions on executing customer contracts and allocating joint costs between service departments; and (3) weak internal controls related to accuracy of contract demand entered in the billing system and policies over charitable contributions. We also found TVA could enhance oversight of the distributors by developing guidance regarding verification of Standard Industrial Classification (SIC) codes to ensure a company qualifies to receive certain credits.TVA and LCUB agreed with the OIG's recommendations and are taking actions to correct the identified issues. Summary Only

We reviewed the design of a TVA contractor's process for administering subcontracted work for the Watts Bar Nuclear Plant Unit 2 construction project. Specifically, we reviewed the contractor's (1) invoice review process, (2) process for scheduling work, and (3) process for ensuring subcontractor work meets the contractor's specifications. In addition, we made inquiries regarding concerns raised about the management of measuring and testing equipment (M&TE). Although we performed interviews and reviewed documentation to determine how the contractor schedules subcontracted work, we did not test the effectiveness of this scheduling. Our audit determined the design of the invoice review process was sufficient to achieve the desired results, and we found nothing to indicate the contractor's process for ensuring subcontractor compliance with contractor specifications was ineffective. However, we determined (1) invoices were not being approved by the engineering or construction manager as required by the subcontract administration procedure; (2) verification of the qualifications of certain key subcontractor personnel was not performed; (3) subcontractor invoices were not compared to the contractor's invoice concurrence forms to ensure TVA reimbursed the contractor accurately; and (4) shortages of measuring and testing equipment caused work inefficiencies and were identified as a potential cause of future work inefficiencies and/or delays. In addition, we identified one instance where travel time and mileage for a subcontract employee to travel to the job site to prevent their badge from expiring was billed to TVA. TVA management agreed with our recommendations and will ensure the contractor (1) amends the Subcontract Administration Procedure to provide review and approval authority to the Project Director or his designee for subcontractor invoices, (2) reinforces their process related to delegation for subcontract invoice approvals by reviewing subcontract invoice approval authorization letters to verify they are current, and (3) transfers the responsibility for M&TE from Unit 2 to Unit 1. In addition, TVA management agreed to evaluate the conditions surrounding termination of badges for subcontractors on a case-by-case basis to determine the most cost-efficient arrangement and will begin adding subcontractor invoices to the list of randomly reviewed billing data. TVA management agreed with our recommendations and will ensure the contractor (1) amends the Subcontract Administration Procedure to provide review and approval authority to the project director or designees for subcontractor invoices received, (2) reinforces its process related to delegation for subcontract invoice approvals by reviewing subcontract invoice approval authorization letters to verify these are current, and (3) transfers the responsibility for M&TE from Unit 2 to Unit 1. In addition, TVA management agreed to evaluate the conditions surrounding termination of badges for subcontractors on a case-by-case basis to determine the most cost-efficient arrangement and will begin adding subcontractor invoices to the list of randomly reviewed billing data. Summary Only