Federal Reports

Internal Review of the Federal Services Impasses Panel

EAC OIG, through the independent public accounting firm of Clifton Gunderson LLP, conducted this audit to determine whether (1) the necessity of using personally identifiable information for processing was properly evaluated; (2) the EAC had established adequate procedures governing the collection, use and security of personally identifiable information; and (3) EAC had properly complied with the prescribed procedures to prevent unauthorized access to and the unintended use of personally identifiable information.

Following are observations from the review of documentation for 30 claims:Of the 12 claims that were disputed, 2 of the dispute letters were not submitted within 30 days after the notice of injury, as required by federal code.One claim did not include the supervisor's signature on the form.In one instance, the claim was not submitted to the Office of Workers' Compensation Programs within ten business days, due to a supervisor not forwarding his/her completed portion of the form within the allotted eight days, as required by federal code and TVA policy, respectively.We found prescribed services for TVA's Workers' Compensation (WC) department and assigned site personnel go beyond the Federal Employees' Compensation Act's WC requirements. However, when we interviewed selected managers, nurses, TVA site WC contacts, and other staff at seven TVA site locations, we were told the WC program support could be improved by: (1) increasing the expertise in the WC department, including medical knowledge of personnel; (2) improving education and training for personnel responsible for facilitating the WC process at TVA sites; (3) enhancing communications from the WC department; and (4) addressing the abundance of hearing loss claims.

Audit of the OCIO's controls for laptop security.

We audited $211.6 million of costs billed to TVA by a contractor from January 1, 2006, through December 31, 2007, for the administration of TVA's medical benefit program. 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 potentially been overbilled up to an estimated $473,024. The overbilling included (1) $327,513 in potentially duplicate line item charges; (2) $71,518 for unallowable procedures and services; (3) $4,659 for claims that exceeded plan limits; (4) $61,840 of audit recoveries that had not been credited to TVA; and (5) $7,494 of miscalculated claim payments.In addition, we found TVA had been billed an additional $1 million due to payment provisions the contractor had negotiated with some of the providers in its preferred provider organization network. These provisions, referred to as stop-loss provisions, effectively offset discounts TVA would have otherwise received when providers' costs exceeded specified amounts. Summary Only

We reviewed TVA's process for ensuring it does not knowingly contract with vendors that have been: (1) debarred or suspended by the federal government and/or (2) found unsatisfactory within TVA. In summary, we determined:TVA does not have formal procedures for ensuring TVA does not knowingly contract with vendors that have been debarred or suspended by the federal government. However, Procurement requires its Contract Managers/Procurement Agents to review the Excluded Parties Listing System (EPLS), which is the federal government's database of debarred and suspended vendors, before awarding contracts over $100,000. Although we found TVA had not awarded contracts to vendors that were included on the EPLS during our review period (2005-2008), TVA's process was not always followed and/or documented.The Federal Acquisition Regulations (FAR) include certain requirements that if implemented by TVA could improve TVA's process and further ensure that TVA does not do business with contractors and subcontractors that are debarred or have committed a civil or criminal offense.TVA does not have a formal process for internally identifying vendors that have been found unsatisfactory within TVA. The lack of such a process could result in TVA not being aware of problems it has had with vendors prior to awarding contracts to them.We recommended TVA Procurement develop written procedures detailing its vendor debarment process. In addition, TVA should improve its process by requiring more verification of the debarment status of contractors and subcontractors as prescribed by the FAR, including certifications and notifications by contractors regarding debarment and/or civil or criminal actions. TVA should also develop a process for (1) identifying TVA vendors that should be on a "watchlist" based on certain serious offenses committed by the vendor and (2) reporting any significant misconduct by contractors to the federal government. Summary Only

EAC OIG, through the independent public accounting firm of Clifton Gunderson LLP, conducted this evaluation to determine whether EAC had implemented effective controls to ensure compliance with internet usage policies.

We found TVA's process for the disposal of surplus computer equipment does not adequately protect TVA resources or track the disposition of surplus equipment. Specifically, (1) the equipment inventory in HP Service Desk was not correctly updated when equipment was removed from service; (2) equipment transferred from Information Services (IS) to Technology Initiative (TI) was not tracked to prevent unnecessary storage, loss, or theft; (3) TI did not maintain an inventory of equipment received for disposal or reconcile equipment received with equipment that was put in surplus by IS, and (4) the disposition records maintained by TI do not account for the disposition of 6,631, or 63.9 percent, of the computers put in surplus by IS.

We reviewed TVA's VISA purchasing card program to (1) identify and assess the operating effectiveness of controls over the program and (2) determine if they incorporate identified best practices. The scope of the project covered all transactions from October 1, 2005, through December 31, 2007. Our review determined:Key internal controls were not functioning as intended with regard to (1) the review of purchasing card transactions and their supporting documentation and (2) transaction limits.Certain purchases were made that were disallowed by TVA policy or questionable in nature.TVA's purchasing card program incorporates some best practices, but key best practices were absent.TVA employees were not reporting all instances of known or suspected waste, fraud, and abuse or violation of law to the OIG as required by Business Practice 2.Management agreed with most findings and recommendations and has initiated or plans to initiate corrective action

Annual audit of the financial statements.

TVA contracted with Ernst & Young LLP (E&Y) to audit TVA's balance sheet as of September 30, 2008, and the related statements of income, changes in proprietary capital, and cash flows for the year then ended. In addition, the contract called for the review of TVA's fiscal year 2008 interim financial information filed on Form 10-Q with the Securities and Exchange Commission. The contract required the work be performed in accordance with generally accepted government auditing standards. We evaluated E&Y's work to determine compliance with these standards. The objective of our review was not intended to enable us to express, and we did not express, an opinion on TVA's financial statements or on management's conclusions about the effectiveness of its system of internal control. E&Y is responsible for the auditor reports dated December 12, 2008, and the conclusions expressed in those reports. However, our review disclosed no instances where E&Y did not comply, in all material respects, with generally accepted government auditing standards.

The objective of our review was to assess the procedures and key control activities used to track and account for tools on the Watts Bar Nuclear Plant Unit 2 Construction Project (WBN U2 Project). Our review of the WBN U2 Project tool program found (1) nothing to indicate significant discrepancies in the tool inventory at this time; (2) data entry errors in the Tool Hound system; (3) opportunities exist to improve controls, based on our review of the contractor's Small Tools and Small Capital Equipment Procedure; and (4) some non-compliances with the contractor's Small Tools and Small Capital Equipment Procedure. We recommend the contractor (1) ensure accuracy of data entry in the Tool Hound system; (2) consider modifying the contractor's WBN U2 Project small tool procedure to include the additional control opportunities identified and the valuation criteria for bulk items; (3) ensure compliance with the contractor's Small Tools and Small Capital Equipment Procedure; and (4) enhance controls over inventory contained in unlocked sea/land containers. Management agreed with our findings and has initiated or plans to initiate corrective action.

TVA contracted with the independent certified public accounting firm of PricewaterhouseCoopers LLP (PwC) to audit revisions to the balance sheets and the related statements of income, changes in proprietary capital, and cash flows as of September 30, 2007 and 2006, for the purpose of restating TVA's previously issued financial statements. The contract required the audit be done in accordance with generally accepted government auditing standards. Our review disclosed no instances where PwC did not comply, in all material respects, with generally accepted government auditing standards.

We reperformed certain procedures due to changes in data previously reviewed by the OIG, the results of which were reported in our October 24, 2008, report under project No. 2008-12062. In reperforming the procedures, we found the (1) actual year-to-date input for the revised fiscal year (FY) 2008 Non-Fuel Operations & Maintenance TVA-wide metric agreed with the underlying support provided by the Controller's organization on December 4, 2008, and (2) revised FY 2008 scorecard and weighted scorecard payout percentages were mathematically accurate. Summary Only

ED OIG Semiannual Report 57 Final 508

We audited $25.24 million of costs billed to TVA by a contractor for subcontract services between September 30, 2002, and December 31, 2007. The subcontractors provided personnel to perform asbestos abatement and sampling, along with removal and installation of other insulation material at TVA nuclear plants and subsequently in support of the Browns Ferry Nuclear Plant Unit 1 Recovery Project. In summary, we found that TVA had been overbilled $132,657 as a result of (1) craft labor costs that were not provided for or were in excess of TVA's Project Maintenance and Modification Agreement, (2) duplicate billings for some materials, and (3) inaccurate insurance cost adjustments. We recommended TVA management recover the $132,657 in overbilled costs from the contractor. Summary Only

We audited the costs billed to TVA by a contractor for providing professional engineering and technical support services associated with the restart of Browns Ferry Nuclear Plant (BFN) Unit 1. Our audit, which included $110 million of payments TVA made to the contractor from June 2004 through October 2007, found the contractor had overbilled or not credited TVA an estimated $276,484 for (1) home office labor and related costs that should have been covered by the contractor's overhead rate, (2) certain miscellaneous labor costs and markups that were not allowable, (3) unspent employee recognition costs, (4) home office computer and facility charges for some employees who did not meet the contract eligibility requirements, and (5) overbilled provisional payroll taxes and insurance. Additionally, we found that changes TVA made to the contract resulted in TVA paying $343,548 in excessive paid time off costs for certain contractor personnel assigned to the BFN Unit 1 project. Summary Only

We reviewed TVA's efforts to implement telework as well as any planned telework initiatives. Our review determined (1) Business Practice 20, Off-site Use of Business Equipment (BP 20), provides a framework for telework; however, we found little evidence of compliance with the policy, especially as related to required training and method of approval; (2) pockets of teleworkers exist throughout TVA; however, TVA has no system for tracking individuals who telework and the extent to which they telework; and (3) employees are approved to telework by being granted remote access to TVA systems instead of following the BP 20 approval process. We also reviewed TVA's Continuity of Operations Plan (COOP) and Pandemic Plan and determined both adequately included the use of telework in those programs. However, the COOP does not require essential employees to take their laptop computers home in the evenings to ensure continuity of operations in the event they are unable to move to the alternative location during an emergency.We recommended the Chief Administrative Officer and Executive Vice President of Administrative Services (CAO) (1) work with other TVA organizations to determine which jobs and functions in TVA are conducive to telework; (2) consider a pilot program that would assist in future decisions about telework and identify ways to use telework to facilitate COOP planning and responding to emergency situations such as pandemics or natural disasters; (3) implement a telework policy that provides a method for approving employees to telework, appropriate training to supervisors and all employees authorized to telework, a tracking system for individuals who telework, and effective communication of TVA's telework policy to TVA employees; (4) consider designating a Telework Managing Officer; (5) consider requiring that essential employees take their laptop computers home at the end of their workday in the event an emergency occurs and they are unable to move to the alternative location.The CAO agreed to work with other TVA organizations to determine which jobs and functions in TVA are conducive to telework. Upon completion of that assessment, the CAO will take appropriate actions regarding our other recommendations.

EAC OIG, through the independent public accounting firm of Clifton Gunderson LLP, audited EAC's financial statements for the fiscal years ended September 30, 2008, and September 30, 2007.

EAC OIG, through the independent public accounting firm of Clifton Gunderson LLP, audited $158.5 million in funds received by the Florida 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 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, conducted an evaluation of EAC's security programs and practices for fiscal year 2008.

EAC OIG, through the independent public accounting firm of Clifton Gunderson LLP, audited $74.3 million in funds received by the North Carolina 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 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.

We performed four agreed-upon procedures solely to assist management in determining the validity of the Winning Performance payout awards for the year ended September 30, 2008. In summary, we found:The fiscal year 2008 Winning Performance goals were properly approved. However, during our review, we noted the definition sheets describing the formulas for the three TVA incentivized measures were not approved by the Board. We also found that although the PSO - Transmission System Services (TSS)'s performance measures were solely comprised of metrics from other scorecards that were approved on November 6, 2007, the approval of these metrics for measuring TSS's performance for purposes of the payout did not occur until September 8, 2008.Actual year-to-date inputs for the sampled metrics agreed with the respective supporting documentation.Actual inputs for the three incentivized TVA-wide metrics agreed with the underlying support provided by the Strategic Business Units with one exception related to the equivalent availability factor metric. This one exception did not affect the payout.The payout percentages were mathematically accurate after noted exceptions were corrected. Summary Only