Federal Reports

The United States is facing an energy crisis of historic proportions and when coupled with the recent national economic instability, these two factors present utility companies like TVA with unique challenges. The electric utility industry is a very capital-intensive industry requiring TVA to make large scale capital investment decisions. Risk is inherent in the process. How TVA manages those risks is particularly important today. We examined TVA’s enterprise risk management program in this semiannual reporting period as part of our continued vigil as to how TVA is coping with challenging conditions.Like many organizations in America today, IT security is a significant risk at TVA and one that is being carefully examined both by TVA management and the OIG. TVA is making admirable strides to secure information technology in an ever increasingly risky environment. Our work in this area was recognized by the President’s Council on Integrity and Efficiency this past October in Washington, D.C., with an Award of Excellence. Our auditors who worked in this area are justly deserving of this special commendation for their contributions to a more effective and robust IS and IT program at TVA.I also want to congratulate our Investigations department and its team of investigators and auditors for their PCIE Award. The excellent work they did in the Kinder Morgan case achieving our largest civil settlement ever truly merits such recognition.This semiannual period we introduce a new series of inspection reports all designed to answer the basic question, “How is TVA doing?” My observation after more than five years as the Inspector General at TVA is that while there are multiple sources of information about TVA, many are hyper-technical and many are simply anecdotal – neither adequately informs TVA stakeholders as to exactly how TVA is doing in key areas. Some sources require interpretation from TVA management which lacks needed objectivity. With our reports on how TVA is doing with customer relations, financial strength, operational performance, and environmental stewardship, we hope to provide a reliable and readable analysis of “How TVA is doing.” The reports follow the tradition of Inspectors General in keeping the head of federal agencies and theCongress “fully and currently informed about problems and deficiencies relating to the administration of such programs and operations and the necessity for and progress of corrective action.” We believe that our benchmarking reports such as the one on customer relations will better serve Congress, the TVA Board, and the residents of the Tennessee Valley.As always, we are aware of the fact that our work was made infinitely better by the high level of support for our recommendations that we received from both the TVA Board and TVA management.

We reviewed the qualifications for contractor and subcontractor employees working on the Watts Bar Nuclear Plant Unit 2 (WBN U2) construction project to assess the hiring process and determine if those hired met minimal qualifications for their designated labor category (grades). We determined:TVA's engineering, procurement, and construction contract did not include minimum requirements for the 20 specified labor categories; moreover, the contractor lacked corporate criteria specifying minimum requirements for filling these positions at WBN U2. To establish the hiring requirements for positions to be filled for the WBN U2 project, the contractor relied on the job requisition process, resulting in varying and inconsistent minimum requirements for these positions.Requirements established through this requisitions process were sometimes not met. For example, when we compared employee qualifications to requirements in the associated job requisitions, we found 8 of the 56 individuals reviewed, or 14.3 percent, did not meet the requirements outlined in the requisitions. However, when questioned, the contractor provided explanation and asserted that all individuals were qualified for the work being performed.We recommended the Vice President, WBN U2, Nuclear Generation, Development and Construction, in conjunction with the contractor Project Director (1) require that job requisitions include minimum requirements for each position and the requirements be reviewed and approved by the contractor's Human Resource personnel to ensure consistency among job classifications and eliminate errors and document the rationale for hiring any candidate not meeting the minimum requirements but who is deemed qualified for the position; (2) evaluate the qualifications of the employees not meeting the qualifications in the job requisitions to determine if they are qualified to perform the assigned work; and (3) take steps to ensure resumes are thoroughly reviewed, and identified discrepancies are resolved prior to individuals being hired. Summary Only

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, 2008.

We audited $7.9 million of costs billed to TVA by a contractor for supplying ammonia and providing engineering and technical services for ammonia facilities to various TVA fossil plants. In summary, we found (1) the prices billed for $2.8 million of the ammonia delivered to five TVA fossil plants could not be verified because prices for the ammonia were not included in the contract, (2) TVA was overbilled $106,054 for ammonia shipments to a fossil plant because an incorrect markup had been used, and (3) TVA was billed $4,375 for ineligible surcharges that were not provided for by the contracts. Additionally, we found that TVA did not have a process in place to verify the amount of ammonia that was delivered and subsequently billed to its plants. We recommend TVA management (1) recover the overbilled costs, (2) determine the reasonableness of the ammonia prices billed for the five TVA fossil plants, and (3) implement controls to independently verify the quantities of ammonia being delivered to TVA's plants.

This review was the first in a series of reviews that will benchmark TVA's performance in key areas and answer the question, "How is TVA doing in regards to Customer Relations." 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.

Since the Office of the Inspector General's previous review of TVA's risk program in 2003, TVA has enhanced its Enterprise Risk Management (ERM) capabilities in the following areas: risk identification and assessment; management tone; strategic decision-making support; commitment to ERM staffing; and promotion of an ERM culture. The areas in need of improvement include: linking risks and objectives to effectively identify and prioritize risks, focus discussions, and allocate resources; clearer mapping of likelihood and severity with associated risk; measurement of inherent risk to identify critical risks with a higher need for monitoring; role of the Board and executive management in defining risk tolerance which is policy driven; a formal, comprehensive risk policy approved by the Council and Board; and increased reporting and discussions of ERM with the Board. We recommended TVA address the areas needing improvement. Management generally agreed and is taking or plans to take appropriate action.

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.

The Office of the Inspector General's review of TVA's compliance with the Federal Information Security Management Act (FISMA) of 2002 determined that TVA had improved (1) tracking of security weaknesses, remediation actions, and incidents and (2) measures to ensure appropriate personnel complete role-based security training. While TVA continues to make progress in implementing information technology controls required by FISMA, we noted additional controls are needed to improve (1) oversight and evaluation of contractor systems, (2) completing system certifications and accreditations, (3) defining and tracking configuration management metrics, and (4) consideration of e-authentication risks at TVA.

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.

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.

Peer Review of FLRA OIG 2008

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 reviewed the contractor's processes and key controls for tracking and accounting for costs used in invoicing TVA for its work. Based on the review, we believe the contractor's system increases the risk of improper billing. Specifically, the system used for TVA billings (1) has limited design documentation and prescribed controls; (2) requires significant manual data entry; (3) increases the hours spent to prepare project invoices; and (4) results in numerous adjustments which, according to TVA management, have totaled more than $1 million. These adjustments include additional charges and credits to reflect actual expenses.To address the issues, we recommended the Vice President, Watts Bar Nuclear Plant Unit 2, in conjunction with the contractor project director, either (1) further assess the feasibility of amending the billing terms to allow the use of the contractor's standard systems, (2) consider an alternative billing system, or (3) require improvements to the current system and processes to address the (a) systemic issues resulting in billing adjustments, (b) lack of key control activities, and (c) other reconciliation/documentation issues. In addition, we recommended all aspects of the billing process and key control activities be documented and tested. TVA management generally agreed with our findings and recommendations and has taken or plans to take corrective action.

Based on concerns expressed to the Office of the Inspector General, we initiated an inspection of TVA's easement with the Tishomingo County Development Foundation (TCDF). The objective of the review was to determine whether easement payments were made in accordance with the agreement. We found that while TCDF was not in compliance with amended easement payment provisions, the payment provisions were recently amended for the second time to provide the developer, Pickwick Pines Marina (PPM), an opportunity to develop and operate the marina. We also noted that the minimum investment provision of the easement has not been met. On August 6, 2008, TCDF sent PPM a notice of default.

We reviewed certain Browns Ferry Unit 1 (BFN U1) operating issues that have occurred since the restart in May 2007. We found the operating issues were primarily caused by improper installation of a fitting during the restart project and another fitting during initial construction, original plant design errors, failure to identify the correct root cause of a previous issue in a timely manner, and failure to identify a missing wood support during walkdowns. The root causes for the SCRAMs (safety control rod axe man) appear to not be the result of work performed under project milestones tied to the Unit One Executive Compensation plan. In addition, we found the total cost of the BFN U1 project to be approximately $1.8 billion through fiscal year 2007.

At the request of the Chief of Police (Chief), the Office of Inspector General (OIG) conducted a review to determine if the Department complied with its directive to conduct periodic criminal history checks to ensure that United States Capitol Police (USCP) employees had not engaged in criminal conduct that could be detrimental to their employment. OIG conducted this review to determine whether (1) the 42 employees with criminal history prior to their employment with USCP fully disclosed that history during the pre-employment screening process, (2) the Department fully vetted such disclosed information during the pre-employment screening process, and (3) the 16 employees with criminal complaints during their employment with USCP complied with USCP directives, which requires the employee to report incidents through their cognizant chain of command.

Consistent with the partnership between the Office of Inspector General (OIG) and the United States Capitol Police (USCP or the Department) to improve financial management and reporting at the Department and in preparation of the fiscal year 2008 financial statement audit, OIG contracted with Cotton and Company to conduct agreed-upon procedures solely to assist in evaluating the recorded book value of property, plant, and equipment (PP&E) accounts, and related accumulated depreciation as of September 30, 2007.

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.

Report presents the results of the audit of the Commission's financial statement

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.

At the request of the Chief of Police. the Office of Inspector General (OIG) conducted a review of United States Capitol Police (USCP or the Department) specialty assignment and proficiency pay programs. Our objectives were to determine (1) if USCP complied with applicable directives related to the personnel compensation programs such as eligibility requirements, (2) the efficiency and effectiveness of the current payment cycles for the various programs, and (3) the criteria or benchmarks used for determining payment amounts. Our scope included the Specialty Assignment Pay Program, Hazardous Duty Pay, Physical Fitness Incentive Program, Plainclothes Pay, Firearms Proficiency Pay, and Field Officer Training Pay during FYs 2005 through 2007.

The Office of Inspector General (OIG) conducted an audit of the United States Capitol Police’s (USCP or Department) diversity program. Our objectives were to (1) identify and assess the diversity program(s) within the Department to determine if the program is yielding the desired results, creating a more diverse population of women and minorities in top leadership positions (Senior Level and GS-15, or equivalent); (2) evaluate the accuracy and completeness of complaints and discrimination data being reported to Congress; and (3) assess to what degree the diversity office is independent of the Department's General Counsel and the agency head.

EAC OIG, through the independent public accounting firm of Clifton Gunderson LLP, audited $44.5 million in funds received by the Minnesota 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, for a matching contribution, and for maintenance of a base level of state outlays.

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

We audited $19 million of costs billed to TVA for subcontract services on the Browns Ferry Unit 1 recovery project. We determined the costs billed by the subcontractor for providing professional and technical support personnel were fairly stated and in accordance with the terms of the subcontract.

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

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

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

We performed an interim audit of costs billed to TVA by a contractor for providing (1) modification and supplemental maintenance services at TVA nuclear plants (operating unit work) and (2) construction services for the restart of Browns Ferry Nuclear Plant (BFN) Unit 1. The scope of our review included $492.4 million of craft labor costs billed by the contractor through October 29, 2006, which had not previously been audited including: (1) $214 million for modification and supplemental maintenance services and (2) $278.4 million for the BFN Unit 1 services. In summary, we found TVA had been overbilled $1,986,254 because the contractor had (1) used a labor classification not provided for by TVA's contract, (2) miscalculated its payroll tax costs, (3) overpaid certain craft employees as a result of duplicate hours and ineligible double-time labor costs, and (4) misclassified some employees when it paid them. TVA management is planning to review the audit findings in detail to determine what amounts should be recovered from the contractor.

While TVA has taken several actions to better protect social security numbers (SSNs), we found opportunities to further protect or reduce the usage of SSNs that will lower the risk of exposure. TVA's Information Services has several initiatives under way to improve protection of SSNs. We are recommending several actions to further protect SSNs. Management agreed and has initiated corrective actions.

We initiated a special project to determine if (1) TVA's policies, procedures, and practices for handling lost or stolen computer equipment were adequate; (2) those policies, procedures, and practices were followed; and (3) the lost or stolen computers contained sensitive or restricted information. We found:TVA's policies, practices, and procedures for maintaining an accurate inventory of computer equipment were not adequate. Since the August 2004 implementation of the HP Service Desk (HPSD), which contains an inventory of TVA computers, TVA has been unable to track over 5,550 computers. The inability to adequately track, as well as the lack of encryption, on these computers increases the risk for the disclosure of sensitive or restricted information.The policies for handling/reporting stolen computers were not consistently followed. At least one of the stolen computers contained personally identifiable information-employee social security numbers. We have not been able to confirm whether the remaining stolen computers contained sensitive or restricted information, although we believe the risk is moderate.

We audited $22.1 million of costs paid by TVA to a contractor for construction and modification services at TVA facilities. In summary, we foundAn estimated $20.8 million billed by the contractor for craft augmentation labor using hourly billing rates was inflated by approximately $619,000 because the contractor's billing rates included (a) overstated payroll tax costs and (b) calculation errors; andThe contractor billed TVA $25,658 for subcontract services it had not incurred. We recommended TVA management recover the inflated and overbilled costs and take steps to ensure the contractor's billing rates for craft augmentation labor are reasonable based on the company's actual costs. Summary Only

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, 2007. The required information on TVA's renewable energy initiative, "Green Power Switch," was provided to CRS. No exceptions were identified. Summary Only

ED OIG Semiannual Report 56 Final 508

EAC OIG audited $19.3 million in funds received by the New Mexico Secretary of State under the Help America Vote Act. The objectives of the audit were to determine whether the Secretary of State (1) expended HAVA payments in accordance with the Act and related administrative requirements and (2) complied with the HAVA requirements for establishing an election fund, meeting its matching share requirement, and maintaining state expenditures for elections at a level not less than the level expended in fiscal year 2000.

We determined that TCI met requirements in the HEA and regulations for institutional (excluding the 90/10 rule), program, and student eligibility and for award calculations. However, our review disclosed that (1) TCI improperly paid $440,487 to FFEL lenders to pay off its students’ loans and prevent their default; and (2) TCI had internal control deficiencies in the administration of Title IV programs during the period under review.

We reviewed $14.2 million of costs billed to TVA by a contractor for providing right-of-way clearing and restoration services and found:TVA had been overbilled $81,533 including (a) $38,796 in unallowable miscellaneous material costs, (b) $34,776 in duplicate billings for initial clearing costs, and (c) $7,961 in unsupported labor costs. Additionally, we found the contractor had underbilled TVA $5,776 due to various invoicing errors. The contractor agreed with our finding regarding unsupported labor costs and provided explanations for why it believed the remaining items were billed correctly. TVA management agreed with the findings regarding unallowable material costs, unsupported labor costs, and underbilled costs and stated they are conducting a review of the $34,776 in suspected duplicate billings for initial clearing services. Prior to award of the contract, Procurement's contract manager had requested the contractor to change its proposed billing rates to "TVA Valley-wide" rates. That action, which the contractor agreed to, caused TVA's costs to increase $522,212 because most of the rates that had been proposed by the contractor were lower than TVA Valley-wide rates. Procurement informed us that TVA had deployed a strategy to negotiate consistent pricing among all suppliers and that would be more favorable to TVA. Procurement further stated that although some of the prices were higher than the contractor's initial offer, lower prices were achieved in four areas (line items) where TVA expected the majority of the expenditures to take place; however, since the actual quantities of work performed under the various line items were other than anticipated, the resulting charges increased TVA's total cost by approximately 3.7 percent. Procurement plans to use this experience in some lessons-learned sessions. Summary Only

At the request of the Capitol Police Board (Board), the Office of Inspector General (OIG) conducted an audit of the United States Capitol Police (USCP or the Department) Memorial Fund (the Fund). Our objectives were to determine if USCP (1) properly accounted for contributions and distributions made to and from the Fund, (2) had established adequate internal controls over Fund processes, and (3) complied with applicable laws and USCP Board regulations pertaining to the management and administration of the Fund.  Our scope included contributions and distributions made after the transfer of the Fund from the House of Representatives to USCP in July 2001 through March 31, 2008. 

A review of trust funds administered by Economic Development (ED) found the majority of the trust funds were inactive, and according to ED management, had been established between 1983 and 1991 for a variety of purposes. ED management said they found no activity in the majority of these trusts. ED had closed approximately 11 inactive trust funds as of July 27, 2007. Our review further found that documentation of these trust agreements was limited. TVA management could not provide documentation to show the recipients of fund balance distributions or the reallocation of the funds beyond a 2006 closeout memorandum from TVA to the recipients that certified that the contract requirements had been met and that funds had been used as required by the contract. In addition, TVA management could not provide us with account statements for 11 of the 16 trust accounts, bank account numbers for 6 of the 16 trusts, or the underlying agreements for half the trusts. Because of the limited documentation, we were unable to determine whether the trust funds are being administered in accordance with the terms of the agreements and whether the trust funds are being administered in accordance with the terms of the agreements and applicable laws and regulations. According to the Senior Vice President, ED, TVA no longer establishes trust accounts, and it does not intend to do so in the future.

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