Reporting Requirements TVA Hydroelectric Dam Caledonia ALABAMA Under the Inspector General Act
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Tennessee Valley Region Table of Contents Message from the Inspector General . .5 W.V. Executive Summary. 6 IL. KENTUCKY Office of the Inspector General . .10 Paradise Fossil Plant Shawnee Fossil Plant VIRGINIA Kentucky MISSOURI Marshall Dam & Lock Clear Creek Combustion Turbine Beaver Creek Special Feature . 16 Ft. Patrick Henry South Holston Boone Wilbur Doakes John Sevier Fossil Plant Creek & Dam Cumberland Watauga Fossil Plant Noteworthy Undertakings . .19 AR. Gleason Gallatin Fossil Plant &Combustion Turbine Combustion Turbine Norris Cherokee Bull Run Nolichucky Johnsonville Fossil Plant Douglas Fossil Plant & Combustion Turbine Kingston Melton Fossil Hill Lock Audits . .22 Plant & Dam TENNESSEECedar Great Falls Ft. Loudoun Dam & Lock Pin Oak Tellico NORTH Lagoon Creek Redbud Combustion Turbine Beech Dogwood Watts Bar Watts Bar CAROLINA Nuclear Plant Dam & Lock Pine Lost Creek Inspections . .28 Sycamore Normandy Fontana Sequoyah Nuclear Plant Apalachia Hiwassee Tims Ford Dam Ocoee #1 Chickamauga Dam & Lock Ocoee #2 Chatuge Investigations . .32 Allen Fossil Plant, Combustion Turbines, & Methane Facility Pickwick Landing Dam & Lock Nickajack Dam & Lock SOUTH Ocoee #3 CAROLINA Colbert Fossil Raccoon Nottely Plant & Mountain Combustion Wheeler Dam Pumped Blue Ridge Turbine & Lock Widows Creek Storage Browns Ferry Fossil Plant Legislation and Regulations . .36 Wilson Nuclear Plant Dam & Lock Cedar Creek Guntersville Little Bear Creek Dam & Lock LEGEND Bear Creek State Line Appendices . .38 Upper Bear Creek GEORGIA Water MISSISSIPPI Power Service Area TVA Watershed Appendix 1 – Index of Reporting Requirements TVA Hydroelectric Dam Caledonia ALABAMA Under the Inspector General Act . .39 Combustion Turbine TVA Non-Power Dam TVA Coal-Fired Plant TVA Nuclear Plant Appendix 2 – Audit and Inspection Reports Issued . 40 TVA Combustion Turbine Plant TVA Pumped-Storage Plant TVA Customer Service Office Kemper Appendix 3 – Audit and Inspection Reports Issued with Questioned Combustion Turbine TVA Economic Development Office Green Power Switch® Solar Site Costs and Recommendations for Better Use of Funds . .41 Green Power Switch® Wind Site Green Power Switch® Methane Site 0204060 mi. Appendix 4 – Investigative Referrals and Prosecutive Results . .42 June 2006 N t Appendix 5 – Audit and Inspection Reports v with Corrective Actions Pending . .43 a Appendix 6 – Highlights . .44 3 o Glossary, Abbreviations, and Acronyms . .45 i g Semiannual Report | Challenging Times Message From The Inspector General media to the Exxon Valdez spill) pre- Our reports provide an independent cipitated intense Congressional scru- perspective of TVA operations in key tiny at two public hearings as well as a strategic areas . We issued the customer barrage of media coverage . Congress relations report during the prior OIG has vowed to provide more oversight semiannual period, and the remaining of TVA and the ensuing litigation from reports will be issued during the next residents of Roane County, Tennessee, semiannual period . promises to keep TVA in the spotlight The work of the OIG for this report- for years to come . As one TVA execu- ing period spans a broad gamut of risk tive aptly put it…“this event—painful areas for TVA . Our goal is to help TVA and uncharacteristic as it may be—is reduce those risks as they address the now part of our history as well” despite gaps that we identify . TVA manage- the laudable contributions of TVA to This report to Congress and the TVA ment’s response has been positive and the Valley and the Nation in years past . Board comes at a time of historic commitments have been made to make challenges for TVA. We chronicle These events with significant adverse the necessary corrections . some of those recent challenges economic consequences for TVA are Finally, we are grateful that our work is in the “Special Feature” on page compounded by an economy that has understood and fully supported by the 16 of our report. In many ways, a driven down revenues for TVA due to TVA Board which enables us to fulfill “perfect storm” has developed that business constrictions across the Ten- our mission . has changed the landscape of TVA nessee Valley region . TVA’s rates to its forever. As we note, a federal district wholesale customers have fluctuated court in Asheville, North Carolina, with the sharp increases drawing fire >> Challenging Times has ruled that a number of TVA’s fos- from retail residential customers while sil fuel plants have created a “pub- reductions in rates by TVA receive scant lic nuisance” that must be abated attention . Thus, TVA finds itself seem- Richard W. Moore in short order. This has significant ingly embattled on almost every front . Inspector General t implications for the composition of v Message from the We raise the question in the Special TVA’s energy fleet and requires re- a Feature article, “How is TVA doing?” thinking how TVA will meet the de- While this question is of particular rele- Inspector mand for power across the Valley. 5 vance today, the OIG started posing the o General Perhaps the darkest of clouds for TVA question before TVA was beset with the came on the night of December 22, current crisis . We had previously com- i 2008, when a coal ash pond at Kings- mitted to doing assessments that would g ton, Tennessee, spilled five million relay to TVA’s stakeholders how TVA cubic yards of water and coal fly ash was doing with regard to finances, cus- onto approximately 300 acres including tomer relations, environmental stew- about 8 acres of privately owned prop- ardship, and operational effectiveness . erty . This incident (compared in the Semiannual Report | Challenging Times Representative Audits and Inspections In these challenging times for indi- equipment placed in surplus and sub- from business with the federal govern- viduals and businesses, government sequently disposed of; (3) packing and ment; (2) could improve its process by corporations such as the Tennessee labeling monitors in surplus to ensure including certain requirements from Valley Authority (TVA) are not im- disposals comply with environmental the Federal Acquisition Regulations in mune to the wide-spread liquidity requirements; (4) certifying hard drives its procedures; and (3) lacked a formal and credit pressures of the troubled on resold, donated, or redistributed process for identifying parties that have economy. It is times such as these equipment are wiped; and (5) ensuring been found unsatisfactory by TVA and that greater need for and reliance on current procedures are followed . preventing them from transacting fu- the Office of the Inspector General ture business with TVA . (OIG) to ferret out waste, fraud, and Internal Control Audits of nearly $350 million of con- abuse is sought by the company’s Reviews tract expenditures identified potential stakeholders. This report describes The OIG continued its support of TVA overbillings and waste of up to approx- the initiatives of our office in these initiatives to comply with Section 404 imately $1 2. million . The questioned regards: a brief synopsis of the more of the Sarbanes-Oxley Act of 2002 costs were discovered during contract significant audits, inspections, and (SOX) . During the period, business compliance audits of the TVA medical investigations performed during this process and information system con- benefits plan administrator and ven- semiannual period follows. trols were tested again for operational dors providing nuclear engineering and effectiveness . This included follow-up asbestos abatement services to TVA . testing of controls to provide TVA IT Audits TVA is taking or has taken action to Our audit of general computing con- management assurance of continued recover these dollars . trols at a vendor which hosts a TVA effectiveness or successful remediation system significant to TVA financial of controls where initial tests showed Monitoring of External reporting found the vendor needs to: improvements were needed . >> Challenging Times Auditors’ Work (1) strengthen account management The OIG is responsible for all audits procedures to ensure accountability; Contract Audits of TVA, whether performed by federal (2) develop a standard configuration TVA spends billions of dollars annu- or nonfederal auditors, to assure the t baseline for all systems on the produc- ally for goods and services provided work is performed in accordance with v Executive tion network; (3) implement sufficient by contractors . TVA needs assurance generally accepted government audit- a security to detect attempted or success- it is not contracting with those parties ing standards . TVA contracted with an ful system intrusions; and (4) strength- or entities that have been debarred or Summary independent registered accounting firm 7 en physical security controls . suspended from doing business with for the audit of its fiscal year (FY) 2008 the federal government or found un- o A review of TVA’s practices for track- financial statements and the review of its satisfactory by TVA as a result of prior i ing and disposing of surplus computer interim reports filed with the Securities relations . An audit of TVA’s contracting g equipment found TVA needs to im- and Exchange Commission (SEC) . In process found TVA: (1) lacked formal prove its processes for: (1) updating addition, TVA contracted with another procedures to assure the company inventory records for computer equip- independent registered accounting firm does not knowingly contract with par- ment taken out of service and placed for the audit of its restated FY 2007 and ties previously debarred or suspended in surplus; (2) recording all computer FY 2006 financial statements . The OIG Semiannual Report | Challenging Times monitored the work of these firms and Inspections tools used in the nuclear unit construc- Administrative in- We also investigated a matter in which found no instances of noncompliance tion project showed improvements Statistical Highlights A review of qualifications of contractor October 1, 2008 ~ March 31, 2009 quires during this a contractor at the John Sevier Fossil with standards by either firm . were needed to: (1) ensure the accuracy and subcontractor employees assigned Audit Reports Issued . 14.