Federal Reports

Based upon questions posed to OIG personnel regarding TVA's criteria for the adjustment of tributary water levels, the OIG conducted a review of TVA's Reservoir Operations. Our objectives were to determine (1) whether criteria exist to balance the competing objectives of managing water in TVA reservoirs, (2) how those objectives compare to those of the U.S. Army Corps of Engineers, and (3) whether TVA was following its criteria. This report encompasses TVA-managed lakes, tributaries, and overall Reservoir Operations.Our review found TVA has Board-approved guidelines that were developed with public input in 2004. We noted in discussion with two offices of the U.S. Army Corps of Engineers that they balance similar objectives and manage their reservoirs in a like manner as TVA. We performed testing based upon the approved TVA guidelines and found no issues. Specifically, we found that there were no issues related to the following summer criteria: (1) Recreational Releases (releases water to enhance recreation opportunities). (2) Chickamauga Flow (the required flow through Chickamauga Dam). (3) Tributary Balancing (ensuring that no individual tributary is disproportionately affected when meeting river system minimum flow goals). Lastly, we found there were no issues related to the following nonsummer criteria: (1) Minimum Flow Commitments, which is measured in pulse commitment violations (a pulse represents a release of an agreed-upon amount of water, and a violation is an instance where TVA does not provide the pulse on time). (2) Flood Storage Availability (flood storage is defined as the volume, or capacity, in a reservoir that is reserved for the storage of flood water, and anytime a tributary's headwater elevation exceeds the flood guide, it is in violation). Since we had no recommendations, this report was issued for informational purposes only.

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.

EAC OIG, through the independent public accounting firm of Clifton Gunderson LLP, audited $348.9 million in funds received by California 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.

Annual audit of financial statements.

Audit of NLRB use of official time for union activity.

Internal Review of FLRA's Checkout Process

Based on reports of government and contractor employees obtaining phony/counterfeit educational degrees, we conducted a review of Bechtel and subcontractor employees assigned to the Watts Bar Nuclear Plant Unit 2 Construction Completion Project (WBN U2 Project). Our objective was to validate, for selected personnel, the highest educational degree listed on the resume submitted for employment. Our review found no instances where an employee was hired based on a fraudulent degree. However, neither Bechtel nor the OIG was successful in verifying one employee's degree. Specifically, we recommended the Vice President, WBN U2 Project, in conjunction with the Bechtel Project Director, make certain that employees' educational degrees are verified if the degree is required for the position for which they are hired. Furthermore, a copy of a diploma supplied by an employee should not be considered adequate verification. TVA management agreed with our findings and recommendations and plans to take corrective action.

ED OIG Semiannual Report 59 Final 508

We reviewed TVA's decision to construct a gas plant in northeast Tennessee to determine if TVA's analyses supporting its decision were reasonable. TVA's decision was initiated by a court-ordered accelerated schedule to install emission control equipment at John Sevier Fossil Plant, which would require TVA to shut down units at the plant for about 20 months during the construction. Although TVA evaluated various alternatives, TVA's need to preserve the reliability of the power system was the most significant factor influencing its decision.In summary, we determined TVA's analyses appeared reasonable to make the decision to construct the gas plant in northeast Tennessee. Summary Only

This review was the third in a series of reviews that will benchmark TVA's performance in key areas and answer the question, "How is TVA doing in regard to operational performance." In conducting this review we: (1) assessed key performance measures and their alignment with the key strategic objectives, (2) evaluated TVA's performance relative to key performance indicators by using target metrics and available benchmark information, and (3) identified key management challenges confronting TVA. Our report found TVA's performance is positive with respect to system reliability and safety; however, system efficiency could be improved. In summary:Reliability: One of TVA's primary responsibilities is to serve as a reliable and cost competitive source of electric power to its customers. TVA has performed exceptionally well in terms of system reliability, delivering electric service with 99.999 percent reliability. TVA also performed better than the industry at large in all its key reliability performance metrics. In addition, TVA has maintained an adequate capacity reserve margin, which has contributed to this strong reliability performance.Efficiency: System efficiency is a measure of the effectiveness of TVA's expenditures on the operations and maintenance of its generation fleet. Additional focus in this area is warranted. Specifically, higher than average forced outage rates, especially for its fossil units, have negatively impacted TVA's system efficiency performance. In addition, while TVA's delivered cost of power ranked in the second quartile of a selected peer group, its average non fuel operations and maintenance costs ranked only in the third quartile. High operations and maintenance costs coupled with low plant availability combined to depress TVA's efficiency metrics. Two things clearly impacting TVA's efficiency performance included (1) an aging fossil generation fleet and (2) reduced availability of hydroelectric power.Safety: TVA ranked in the first quartile based on the number of recordable injuries per 200,000 hours worked as based on data provided by the Occupational Safety and Health Administration and comparable data provided by the 2007 Edison Electric Institute Benchmark Data. However, the recent death of a contractor employee involved in the Kingston Fossil Plant ash spill cleanup effort emphasizes to us that safety must be the first priority in everything we do.Additionally, TVA faces many significant management challenges in attaining and maintaining operational excellence. Our report discusses the areas of (1) an aging generation fleet and transmission system, (2) an aging work force, (3) generation mix, and (4) management culture. Summary Only

We audited $25 million of costs billed to TVA by a contractor from January 1, 2006, through December 31, 2008, for the administration of TVA's dental benefit plan. Our objective was to determine if the costs billed to TVA were in compliance with the contract terms and conditions. In summary, we found TVA had been overbilled $25,591, including: (1) $17,713 for duplicate claim payments; (2) $832 for claims which exceeded plan limits; and (3) $7,046 for ineligible orthodontic payments. In addition, due to the high amount ($132,000) of additional coinsurance that was billable to members during our audit period, we determined the "Alternative Benefits" provision in the dental benefit plan might be unclear as it relates to the member's responsibility when alternative procedures are used. We recommended TVA management (1) recover $25,591 in overbilled costs from the contractor, and (2) revise the dental benefit plan to more clearly define the member's responsibility as it relates to alternative procedures The contractor and TVA management agreed TVA had been overbilled $25,591. In addition, TVA management agreed to consider revising the dental benefit plan to clearly define the member's responsibility as it relates to alternative procedures. Summary Only

EAC OIG, through the independent public accounting firm of Leon Snead & Co., audited EAC's financial statements as of September 30, 2009, and for the year then ended. This letter discusses matters involving internal control and other operational matters for management's attention.

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, 2009, and September 30, 2008.

We performed three agreed-upon procedures which were requested solely to assist TVA management in determining the validity of TVA's Winning Performance (WP) payout awards for the year ended September 30, 2009. In summary, we found: (1) the fiscal year (FY) 2009 WP goals were properly approved; (2) actual year-to-date inputs for all the metrics agreed with the respective supporting documentation with one exception related to the Power System Operations Non-Fuel Operations and Maintenance metric which did not impact the WP payout; and (3) the payout percentages were mathematically accurate. Summary Only

Semiannual Report to Congress

October 2009 Semiannual Report.

EAC OIG, through the independent public accounting firm of Leon Snead & Co., conducted an evaluation of EAC's compliance with the requirements of the Federal Information Security Management Act for fiscal year 2009.

This report includes EAC OIG’s independent assessment of the top management challenges facing EAC in fiscal year 2010.

The OIG performed a review of Bolivar Energy Authority (Bolivar), a distributor for TVA power based in Bolivar, Tennessee. Our review of Bolivar found issues involving customer classification and metering that could impact (1) the proper reporting of electric sales, and (2) nondiscrimination in providing electricity to members of the same rate class. We were unable to estimate the monetary effect of all the classification and metering issues because in some instances information was not available; however, for those where information was available, the monetary effect on Bolivar and TVA would not be material. In addition, we found Bolivar had more than enough cash on hand to cover planned capital projects and provide a cash reserve of about 12 percent. While TVA has established guidelines to determine if a distributor has adequate cash reserves (cash ratio of 5 percent to 8 percent), TVA has not established guidelines to determine if a distributor's cash reserves are excessive.We also found improvements were needed to (1) comply with contract provisions regarding the co-mingling of funds; allocation of costs between departments; and customer contracts, and (2) improve Bolivar's internal controls related to the accuracy of contract demand data entered into the system, monitoring of manual data changes, monitoring of negative usage (kWh) amounts in billing data, and monitoring repetitive instances of zero usage. Finally, TVA has not: (1) performed a joint cost study in over 20 years even though the TVA Accountant's Reference Manual calls for one to be performed every three to four years or when major changes occur that affect joint operations; (2) adequately defined the process for granting the Small Manufacturing Credit to ensure proper documentation, including evidence of approval, is submitted and maintained; (3) provided adequate guidance on when a demand meter is required; and (4) defined criteria for evaluating when a distributor's cash balance is excessive.We recommended the Chief Financial Officer (CFO) work with Bolivar to: (1) remediate classification and metering issues and institute controls to prevent the issues from recurring; (2) assure compliance with contract provisions related to proper allocation of joint costs and customer contracts; and (3) assure internal controls are strengthened. In addition, the CFO should establish a process to document approval of distributor customer's credit applications. TVA is in the process of addressing findings from previous reviews that were also found at Bolivar related to: (1) contracts for customers whose demand exceeds 50 kW; (2) guidance for distributors on cash reserves; (3) performing joint cost studies; and (4) providing guidance on when a demand meter is required. TVA does not plan to take action regarding the co-mingling of electric and nonelectric funds, another issue we found at Bolivar and in previous audits; therefore, we suggested the power contract be modified to address the co-mingling funds language in existing contracts.TVA and Bolivar management are taking or have taken action to address certain recommendations. For the remaining recommendations, Bolivar does not plan to take additional actions.

Change is coming to TVA...and much of it is internally driven. Undoubtedly, the coal ash spill at the Kingston plant on December 22, 2008, set some of those changes in motion, but the TVA Board and TVA management have reacted with a commitment to make the changes necessary to make TVA better. Yes, Kingston was an environmental tragedy, but ultimately the TVA that is emerging is likely to be better able to serve the needs of Valley residents. As we have pointed out in our reports on Kingston, this was a disaster that did not need to occur. That is, however, true of most failures whether personal or, as in the case of TVA, institutional. And as with most failures, there are new opportunities for growth and TVA is seizing those opportunities.The Office of Inspector General at TVA is more than a proverbial "watchdog." In many ways we chronicle the history of the institution. Our inspections, audits, and investigations over the years weave TVA's story that is at times inspiring and at times distressing. Our two inspections that assessed TVA's reaction to the Kingston coal ash spill tell a tale that is mostly distressing. A noble institution with a proud heritage forgot its roots. Its reputation has been sullied both by the event and its failures in how it reacted to it.What is now happening within TVA, however, is inspiring. Instead of taking defensive half-steps, TVA management has given itself to righting the wrong. What we are seeing is not for "show" but a true commitment to change. The culture which in part led to the Kingston ash spill is being thoroughly dissected and analyzed by experts brought in with a charge by TVA management to find out what needs to be "fixed." Just as importantly, TVA is aggressively sifting through its institutional risks with a focus that inspires confidence.This inspiring story is not a story easily told by TVA. Its damaged image makes any positive story told by TVA suspect. Fortunately, the TVA Board and TVA management appear to be committed to doing the right thing whether or not they get credit for it. The fact is that TVA is on the move...and in the right direction. We report on some of that in the "Special Feature" section of this semiannual report.

EAC OIG conducted an evaluation of EAC's purchase of shirts and zip-hooded sweatshirts as an award to its employees using appropriated funds. The objectives of the evaluation were to determine whether (1) the purchase of shirts complied with federal requirements and other guidance, and (2) the use of appropriated funds was permissible.