Federal Reports

During our routine activity of seeking reimbursement for local travel, we noted that the United States Capitol Police (USCP or the Department) could enhance its Draft interim guidance, by clarifying what receipts are needed for cab,In accordance with our Fiscal Year (FY) 2009 annual plan, the Office of Inspector General (OIG) conducted a performance audit of the United States Capitol Police’s (USCP or Department) Purchase Card Program for a 15-month period beginning October 1, 2007 through December 31, 2008. Our objectives were to determine whether (1) existing controls were designed to provide reasonable assurance that improper purchases would be prevented or detected in the normal course of business, (2) expenditures were made in compliance with laws and regulations, as well as Department policies and procedures, and (3) purchases were made for a reasonable cost and a valid government need. parking, and other local travel expenditures.  

The object of this performance audit was to evaluate internal control procedures related to the financial management of the agency.

This review was the second 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 financial performance." In conducting this review, we: (1) assessed key performance measures and their alignment with the key strategic objectives, (2) evaluated TVA's results relative to targets and available benchmark information, and (3) identified key management challenges that could affect how successful TVA is in achieving these strategic objectives.In our judgment, TVA's overall financial performance for this assessment period was adequate; however, the agency faces several significant financial challenges, some of which have recently emerged. This conclusion is based on our analysis of TVA's financial health in three areas: (1) maintaining adequate revenues, (2) making sound capital investments, and (3) containing costs. In summary:TVA's ability to set its own rates and the implementation of a fuel cost-adjustment clause provides flexibility to help maintain adequate revenues to cover costs. Additionally, TVA operates in a service area that is largely free from competition and has a large diverse customer base.TVA has made certain investment decisions in the past that did not pay off. TVA is seeking to improve its capital investment decisions and the financial performance of its capital assets. However, TVA's ability to make these large investments pertaining to (1) new generation and transmission assets, (2) environmental requirements, and (3) existing assets that are aging and need regular updates to keep running, will be a challenge given its financing structure and legislative debt ceiling.TVA is attempting to reduce certain costs to improve its financial position. TVA fairs poorly when compared to other electric utilities with respect to non-fuel operation and maintenance (O&M) costs. TVA is seeking to reduce non-fuel O&M costs but has made limited progress to date. TVA has also focused on reducing interest costs as a percentage of revenues and has made progress in doing so in recent years.Recent events have negatively affected TVA financially including: (1) a wet coal fly ash spill at the Kingston Fossil Plant, (2) a downturn in the economy causing declining power sales, (3) a court ruling on a lawsuit brought by the state of North Carolina, and (4) significant losses on accounts established to fund pensions and asset retirements. Our report includes discussions of the necessity to manage commodity price, investment price, credit, and capital requirement risks, and the risk that interest rates might rise. In addition, while TVA's bond rating is based primarily more on its federal ties that its financial position, TVA management has identified maintaining the AAA bond rating as a risk factor in its 2008 U.S. SEC Annual Form 10-K.

EAC OIG, through the independent public accounting firm of Clifton Gunderson LLP, audited $33.9 million in funds received by Oregon 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.

Tennessee Valley Authority (TVA) is engaged in responding to one of the largest spills in its history, the ash spill at Kingston Fossil Plant (KIF) in which 5.4 million cubic yards of ash poured onto adjacent land and into the Emory River. This report focuses on (1) TVA's initial emergency response, including implementation and utilization of the National Incident Management System (NIMS); (2) TVA's actions to quickly respond to the media; and (3) reparations to the victims and restoration of the affected Roane County community. In summary, we found:TVA has not implemented NIMS in accordance with Homeland Security Presidential Directive (HSPD)-5 which hampered communications and delayed certain emergency response actions following the spill.TVA's actions for responding quickly to media and public inquiry resulted in releases of inaccurate and inconsistent information and subsequent public criticism which caused reputational harm.TVA has responded effectively to victims in the affected area, however, failure to communicate the claims policy and decisions in a timely manner increased settlement expectations for some.TVA management generally agreed with and is taking actions to address the recommendations. Specifically, management plans to: (1) fully implement NIMS, ensure required NIMS training is completed, and evaluate the implementation of best practices identified by the Roane County Emergency Management Director; (2) document the protocol and verification process for the release of media statements and maintain verification that the appropriate processes were followed; and (3) continue to work with the communities and local residents to improve the communications related to TVA's efforts with property acquisition and claims process.

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

The Federal Maritime Commission OIG reviewed the system of quality control for the audit organization of the EAC OIG in effect for the year ended March 31, 2009. This report discusses their findings.

We audited the costs billed to TVA by a contractor for providing turbine generator outage services at TVA nuclear plants. Our audit included $57.4 million in payments TVA made to the contractor. We found the contractor overbilled or had not provided services to TVA totaling an estimated $281,023, including: (1) $171,150 of labor and per diem costs that were either unsupported or unallowable; (2) $6,729 of overbilled fixed price labor; and (3) $103,144 of engineering services that were not provided in accordance with the terms of the contract. Summary Only

This redacted Report of Administrative Inquiry regarding a personnel matter was released on September 14, 2009, in response to an administrative appeal of a FOIA request.The OIG reported that a TVA employee provided false information to the OIG during an OIG inspection of the Maintain and Gain (M&G) Program.

This report presents the results of the audit of the Commission's financial statement

We completed agreed-upon procedures to assist the Center for Resource Solutions (CRS) in determining TVA's compliance with the annual reporting requirements of CRS' Green Pricing Accreditation Program for the year ended December 31, 2008. The required information on TVA's renewable energy initiative, "Green Power Switch," was provided to CRS, including five identified exceptions and explanations. Summary Only

ED OIG Semiannual Report 58 Final 508

We audited the costs billed to TVA by a contractor for the design, engineer, and delivery of air preheater equipment for TVA fossil plants. Our audit, which covered $23.2 million TVA had paid the contractor, found TVA had been overbilled at least $2,232,780.The contract provided for all work, with the exception of a baseline project at Allen Fossil Plant, to be performed on a cost reimbursable basis. However, we found the contractor had overbilled TVA at least $2,025,739 on four additional fossil plant projects because it had billed fixed prices instead of using the required cost reimbursable terms. The actual overbilling may have been higher because our calculation of the overbilling used a maximum fee rate the contractor would have been eligible to receive. In addition, the contractor overbilled $207,041 for field technician services because incorrect billing rates had been used.We recommended TVA management recover the overbilled costs from the contractor. Summary Only

The OIG performed a review of Lewisburg Electric System (LES) which is a distributor for TVA power based in Lewisburg, Tennessee. Our review of LES found no material issues related to (1) the proper reporting of electric sales and (2) nondiscrimination in providing electricity to members of the same rate class. However, we found a contract compliance issue regarding LES's execution of contracts with customers with demand greater than 50 kW.In addition, we found that LES had more than enough cash on hand to fund planned capital expenditures and provide a cash reserve. While TVA has established guidelines to determine if a distributor has adequate cash reserves (cash ratio of 5 to 8 percent), TVA has not established guidelines to determine if a distributor's cash reserves are excessive. As of June 30, 2008, LES reported cash of $7.5 million and planned capital expenditures of about $4.8 million which left cash reserves of about $2.7 million.Finally, we also identified opportunities to enhance TVA oversight of the distributors. Specifically, TVA has not (1) provided definitive guidance for distributors on what constitutes prudent expenditures and (2) defined criteria for determining when a distributor's cash reserves are excessive.We recommended the Chief Financial Officer (CFO) take action to ensure LES complies with contract provisions for formal customer contracts. In addition, the CFO, in collaboration with the TVA Board of Directors, where necessary, should (1) provide additional guidance on proper use of funds and (2) develop criteria to be used in determining whether a distributor's cash reserves are excessive.TVA and LES management generally agreed with and are taking actions to address the recommendations.

The OIG performed a review of Monroe County Electric Power Association (Monroe) which is a distributor for TVA power based in Amory, Mississippi. Our review of Monroe found no material issues related to (1) the proper reporting of electric sales, and (2) nondiscrimination in providing electricity to members of the same rate class. However, we found improvements were needed regarding (1) Monroe's accounting for prepaid expenses to ensure conformity with FERC guidelines and (2) Monroe?s execution of contracts with customers with demand greater than 50 kW.In addition, we found Monroe had more than enough cash on hand to fund planned capital expenditures and provide a cash reserve. While TVA has established guidelines to determine if a distributor has adequate cash reserves (cash ratio of 5 to 8 percent), TVA has not established guidelines to determine if a distributor's cash reserves are excessive. As of June 30, 2008, Monroe reported about $2.9 million in cash and $4.9 million in the TVA Power Invoice Prepayment Program and planned capital expenditures of about $5 million which left cash reserves of about $2.7 million.Finally, we also identified opportunities to enhance TVA oversight of the distributors. Specifically, TVA (1) does not include cash paid in advance to TVA for future delivery of power in the calculation of the cash ratio for rate review purposes and has not defined criteria for determining when a distributor's cash reserves are excessive, (2) has not provided definitive guidance for distributors on what constitutes prudent expenditures, and (3) has not adequately defined how often meters should be tested by the distributors.We recommended the Chief Financial Officer (CFO) take action to ensure Monroe complies with contract provisions regarding accounting practices and formal customer contracts. In addition, the CFO, in collaboration with the TVA Board of Directors, where necessary, should (1) provide additional guidance on proper use of funds, (2) review its calculation of the cash ratio for distributors with prepaid power accounts, (3) develop criteria to be used in determining whether a distributor's cash reserves are excessive, and (4) provide guidance on the frequency of meter testing.TVA and Monroe management generally agreed with and are taking actions to address the recommendations.

Semiannual Report to Congress

April 2009 Semiannual Report.

During our routine activity of seeking reimbursement for local travel, we noted that the United States Capitol Police (USCP or the Department) could enhance its Draft interim guidance, by clarifying what receipts are needed for cab, parking, and other local travel expenditures.  

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, 2009.

This report to Congress and the TVA Board comes at a time of historic challenges for TVA. We chronicle some of those recent challenges in the "Special Feature" on page 16 of our report. In many ways, a "perfect storm" has developed that has changed the landscape of TVA forever. As we note, a federal district court in Asheville, North Carolina, has ruled that a number of TVA's fossil fuel plants have created a "public nuisance" that must be abated in short order. This has significant implications for the composition of TVA's energy fleet and requires rethinking how TVA will meet the demand for power across the Valley.Perhaps the darkest of clouds for TVA came on the night of December 22, 2008, when a coal ash pond at Kingston, Tennessee, spilled five million cubic yards of water and coal fly ash onto approximately 300 acres including about 8 acres of privately owned property. This incident (compared in the media to the Exxon Valdez spill) precipitated intense Congressional scrutiny at two public hearings as well as a barrage of media coverage. Congress has vowed to provide more oversight of TVA and the ensuing litigation from residents of Roane County, Tennessee, promises to keep TVA in the spotlight for years to come. As one TVA executive aptly put it..."this event-painful and uncharacteristic as it may be-is now part of our history as well" despite the laudable contributions of TVA to the Valley and the Nation in years past.These events with significant adverse economic consequences for TVA are compounded by an economy that has driven down revenues for TVA due to business constrictions across the Tennessee Valley region. TVA's rates to its wholesale customers have fluctuated with the sharp increases drawing fire from retail residential customers while reductions in rates by TVA receive scant attention. Thus, TVA finds itself seemingly embattled on almost every front.We raise the question in the Special Feature article, "How is TVA doing?" While this question is of particular relevance today, the OIG started posing the question before TVA was beset with the current crisis. We had previously com-mitted to doing assessments that would relay to TVA's stakeholders how TVA was doing with regard to finances, customer relations, environmental stewardship, and operational effectiveness.Our reports provide an independent perspective of TVA operations in key strategic areas. We issued the customer relations report during the prior OIG semiannual period, and the remaining reports will be issued during the next semiannual period.

EAC OIG, through the independent public accounting firm of Clifton Gunderson LLP, 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 arising from that audit that should be brought to management's attention.

In accordance with our Fiscal Year (FY) 2009 annual plan, the Office of Inspector General (OIG) conducted an audit to determine whether (1) the United States Capitol Police (USCP or Department) had developed a privacy program that adheres to federal standards and best practices and (2) the program safeguards assisted the Department in protecting stakeholder information from potential disclosure, specifically those of Congressional members and their staff. Our scope included the Department's privacy program(s) in effect as of October l, 2008.

The FY 2007 Financial Statement Audit disclosed a lack of controls with regard to the accuracy of United States Capitol Police (USCP or Department) processing of travel vouchers. Thus, in accordance with our FY 2009 Annual Plan, the Office of Inspector General (OIG) conducted a review of USCP travel vouchers. Our objective was to determine if the Department complied with USCP guidance and/or applicable Government travel regulations. Our scope included travel vouchers processed during FY 2007 through March 31. 2008. 

Fiscal Year 2009 Management Challenges