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Caledonia State Line TVA Combined-Cycle Plant Combined-Cycle Plant Water TVA Combustion Turbine Plant Power Service Area TVA Diesel Generator TVA Pumped-Storage Plant Mississippi TVA Watershed State TVA Customer Service Office University TVA Hydroelectric Dam TVA Non-Power Dam TVA Economic Development Office TVA Watershed Team Office TVA -Fired Plant Green Power Switch® Solar Site TVA Nuclear Plant Kemper Green Power Switch® Wind Site Combustion TVA Nuclear Plant Turbine Under Construction Green Power Switch® Methane Site Meridian Diesel Generator 0 20 40 60 mi. Sept. 2011 N

TVA Power Generation FY 2011 (in millions of kilowatt hours)

Natural gas Nonhydro and/or oil-fired renewable 5% resources <1% VV Coal - 74,583 Coal 52% Hydroelectric VV Nuclear - 49,562 9%

VV Hydroelectric - 12,706

VV Natural gas and/or oil-fired - 6,809 Nuclear 34% VV Nonhydro renewable resources - 17

Source: TVA FY 2011 Annual Report Table contents The Challengeof of managing change

Message from the Inspector General ...... 4

Special Feature ...... 7

Executive Overview ...... 19

Organization ...... 23

Audits ...... 29

Evaluations ...... 39

Investigations ...... 41

Legislation and Regulations ...... 47

Appendices ...... 52

Appendix 1 – Index of Reporting Requirements Under the Inspector General Act . . . 53

Appendix 2 – OIG Audit and Evaluation Reports Issued ...... 54

Appendix 3 – Audit and Evaluation Reports Issued With Questioned and Unsupported Costs and Recommendations for Better Use of Funds . . . 56

Appendix 4 – Audit and Evaluation Reports With Corrective Actions Pending . . . . . 58

Appendix 5 – Investigative Referrals and Prosecutive Results ...... 60

Appendix 6 – Highlights ...... 61

Appendix 7 – Government Contractor Audit Findings ...... 62

Appendix 8 – Peer Reviews of the TVA OIG ...... 63

Glossary ...... 65

Abbreviations and Acronyms ...... 66

...... TVA OIG Semiannual Report | 3 Message from the INSPECTOR GENERAL

I am pleased to present our report for the period October 1, 2011, through March 31, 2012 . The theme of our semiannual is “Managing Change,” and our feature highlights the challenges with managing one particular change—the decision to increase the Valley Authority’s (TVA) reliance on nuclear energy .

In TVA’s lengthy history, one As you will see from the results Group; thing that has remained constant of this semiannual period, the and the effectiveness of is change . This is especially true hard work of our OIG team has remediating problem today as TVA works to realign resulted in about $12 million evaluation reports at Watts its generation portfolio, which in recoveries, fines/penalties, Bar Unit 2 . includes constructing new plants potential savings, questioned and idling others while keeping costs, or funds put to better VV Governance and compliance rates low and continuing high use . We also identified other reviews, including reviews reliability . The utility industry monetary losses resulting of TVA’s budget process, has always faced the need to be from a capital project that had information technology nimble in adjusting to a volatile no realized benefits . Finally, security and data protection, market . Today, however, the we have provided numerous Winning Performance challenges for companies like recommendations to help payouts, demurrage costs, TVA seem to come more quickly . TVA improve . Some of the coal quality adjustments, The effective management highlights include: contract compliance reviews of change has become even related to other TVA program more critical . VVTVA nuclear power program areas, and other reviews reviews, including a look at related to compliance with The role of the Office of the the Browns Ferry Nuclear federal requirements . Inspector General (OIG) Plant Extended Power Uprate in this area is: (1) providing project and the Watts Bar VV Investigations resulting in four an objective, fact-based Nuclear Plant (Watts Bar) convictions, five indictments, look at how well TVA is Unit 2 project cost and and one pretrial diversion managing change; schedule; preaward reviews related to falsification of (2) identifying risk areas of engineering, support, quality control documents associated with managing and inspection services cost at Watts Bar Unit 2; a change; and (3) providing proposals; nuclear-related kickback scheme involving recommendations to contract compliance reviews; the president of a distributor reduce risks . performance trends in the and a distributor contractor;

...... 4 | TVA OIG Semiannual Report a Ponzi scheme presented as management team who during In the end, our collaborative an opportunity to assist in the this last reporting period have efforts will benefit all of our Kingston ash spill clean-up; requested reviews by the OIG stakeholders . workers’ compensation fraud; and who have given their full and misuse of TVA funds . cooperation in identifying challenges for TVA programs

Finally, I would like to thank and then adopted appropriate Richard w . Moore the many members of TVA’s solutions for those challenges . Inspector General

...... TVA OIG Semiannual Report | 5 THE CHALLENGE of MANAGING CHANGE TVA OIG SEMIANNUAL REPORT SpecialTHE CHALLEN FeatureGE OF MANAGING CHANGE

Since its creation in 1933, TVA has a long history of benefiting the . While TVA has had much success, it has also faced significant challenges . For all of those years, one constant remains: change . How those entrusted with oversight and management of TVA have managed change has largely determined the degree of success the agency has achieved .

Many changes over TVA’s well or how poorly TVA manages August 2011, the TVA Board storied history were beyond the change within its control . approved the completion control of TVA Boards or TVA of management . Some changes In this feature article, the OIG (Bellefonte) Unit 1 in Alabama, were driven by the anticipation highlights one particular change which would add 1,260 MW of of deregulation, weather, and by TVA: the strategic decision to generating capability . At an shifting political forces that increase its reliance on nuclear April 5, 2012, press conference, had their effect on the agency . energy . The strategic shift to TVA management announced There remains, however, much rely more on nuclear power they would ask the TVA Board that both the TVA Board and to meet generation needs is a for an additional $1 .5 billion TVA management can control, change that must be managed to $2 billion and to extend and focusing on what TVA can well if it is to make the lives of Watts Bar Unit 2’s completion actually control has become people in the Valley better . date to December 2015 . This increasingly critical . For decision would also postpone example, TVA most assuredly TVA currently has six nuclear construction of Bellefonte can control its own strategy, units at three sites in Tennessee Unit 1 because TVA has said its oversight of the enterprise, and Alabama with a total of construction would not begin and the culture its leadership about 6,700 megawatt (MW) until Watts Bar Unit 2 was chooses to build . Therefore, summer net capability 1. In completed and fuel was loaded . creating and executing a clear, August 2007, the TVA Board achievable strategy, providing of Directors approved The role of the OIG in this area oversight, and having a strong the completion of Watts Bar is to offer objective, fact-based culture to support change Unit 2 at a cost of about audits and investigations that becomes of paramount $2 .5 billion, which would accurately reflect how well TVA importance . The successes and increase nuclear generation is managing change, identify failures of TVA, in one form or capability by approximately risk areas associated with another, all emanate from how 1,200 MW in 2013 . Also, in managing change, and provide

1 Net capability is defined as the ability of an electric system, generating unit, or other system component to carry or generate power for a specified time period .

...... TVA OIG Semiannual Report | 7 information to help TVA reduce vision are to be (1) our nation’s projections may vary, nuclear its risks . While this feature leader in improved air quality, will provide a potential hedge article focuses on TVA’s strategic (2) our nation’s leader in for reduced reliance on coal . decision to increase its reliance increased nuclear generation, In other words, even if TVA’s on nuclear energy, we do not and (3) the Southeast’s leader in projections about future load suggest that what we present increased energy efficiency . demand are wrong, TVA here is a comprehensive picture has determined that nuclear on this topic . What we offer is In April 2011, TVA’s Board makes sense for many reasons . limited to work we have done of Directors approved an Although nuclear plants are during this reporting period Integrated Resource Plan (IRP),2 expensive and complicated and a review of Watts Bar Unit 2 which provides a framework for to build, nuclear is seen as a construction, which was issued TVA’s long-term vision . The IRP reliable source of base load in May 2012 . While our work in provides for a more balanced that produces large quantities the nuclear area has revealed generation portfolio by reducing of electricity and, after hydro, significant issues, TVA’s public coal-fired generation capacity has the lowest production costs . acknowledgement of the reasons and increasing nuclear, gas, According to TVA, one nuclear for the problems with the Watts and renewables generation unit can produce as much Bar Unit 2 project suggests that capacity, while placing more electricity as 5 to 10 coal units, there are real “lessons learned” emphasis on energy efficiency without producing emissions that hopefully will help TVA and demand response options . attributed to smog, haze, acid avoid the same mistakes in The IRP projects, even with rain, and climate change . Prior the future . an emphasis on increased to 2007, TVA generated more energy efficiency, TVA will need than 60 percent of its power Change in Strategic additional generating capacity to from coal-fired plants, about Vision and Integrated handle future growth and replace 30 percent from nuclear power Resource Plan aging coal units that are being plants, and the remainder from retired to reduce the need for hydro and other resources . For most of TVA’s past, coal has significant capital investments to Under the new direction from been the leading generating meet environmental regulations . the IRP, nuclear could become source . Faced with challenging TVA has committed to idle or the largest source at 41 percent, economic conditions, an retire 2,700 MW of coal-fired coal at 31 percent, and gas, aging generating fleet, generation by 2017 or about hydro, and other sources would environmental regulations, and 18 of its 59 fossil units . As of constitute the remaining changing energy demand, TVA March 2012, TVA had idled 28 percent of TVA’s generation reexamined its strategic 11 units . portfolio . direction for its generation mix . In August 2010, TVA announced The IRP calls for increasing TVA has announced a clear its vision to become “one of the contribution of nuclear vision for the future that involves the nation’s leading providers of generation between 1,150 and substantial change . Managing low-cost and cleaner energy by 5,900 mw . While demand this change is likely to be the 2020 ”. Three components of the

2 Integrated Resource Plan –TVA’s Environmental and Energy Future (http://www .tva .gov/environment/reports/irp/) serves as a roadmap to help TVA in making choices to meet the electricity demands of the Valley through 2029 . In addition to TVA personnel, a Stakeholder Review Group was formed to provide TVA with their viewpoints, and the public was provided opportunities to participate in the process ...... 8 | TVA OIG Semiannual Report most important challenge for is in short supply, meeting disadvantaged area . TVA built TVA . Moving toward more environmental requirements, to control floods, improve nuclear will require successful having adequate capital navigation, and generate management of existing funding available, and handling electricity . TVA developed operational units while also congressional and public fertilizers, taught farmers new managing multi-billion dollar perceptions . techniques to help yield better construction projects . TVA crops, and improved the habitat has recognized that building The Historical for wildlife and fish . As a result a supportive employee Perspective of this investment in the Valley, culture is key to its success . the region began drawing Any student of TVA’s history Organizational health is a long- industries and jobs to the area . knows that over the last term goal requiring sustainable In the 1940s, World War II 79 years, TVA has recognized the progress to meet TVA’s increased the need for electricity, need to change and has shifted considerable challenges . Some and TVA began one of the the strategic direction of its of the challenges TVA faces largest hydropower construction generation portfolio accordingly . in managing change include programs ever undertaken and TVA’s Board, management, and remediating Nuclear Regulatory built the first of its coal-fired employees worked diligently to Commission (NRC) compliance generation plants . In the 1950s, make these changes successful issues at all three existing TVA continued construction so TVA would remain an asset sites, overseeing costs and on hydroelectric and coal-fired to the region . When TVA was schedules for construction plants, and Congress passed created in 1933, the Tennessee projects, obtaining craft legislation making the TVA Valley was a very poor and and specialty skill labor that power system self-financing .

...... TVA OIG Semiannual Report | 9 The 1960s brought demand and increasing VVThe voluntary shutdown by unprecedented economic construction costs resulted in TVA in 1985 of its nuclear growth to the Tennessee Valley . TVA canceling several nuclear units at Browns Ferry and Electric rates were among the plants, as did other utilities lowest in the nation and stayed around the nation . TVA (Sequoyah) after experiencing low as larger more efficient completed six units on three repeated outages caused by generating units were brought sites in Tennessee and Alabama equipment and maintenance into service . With the Valley’s between 1974 and 1996 . problems and delaying its power needs expected to Since the 1970s, TVA’s nuclear request for the operating continue to grow at a high program has had its share of license for Watts Bar . rate, TVA began looking to challenges including: According to the NRC, nuclear plants as a new source TVA had demonstrated of economical power . In 1966, VVA major fire in 1975 that led “ineffective management TVA embarked on an ambitious to the shutdown of two units in many areas of its nuclear nuclear construction program at Browns Ferry Nuclear Plant program” and identified three to build 17 units at seven sites (Browns Ferry) for 18 months general areas of concern: across the Valley . However, and fundamentally changed (1) programmatic and forecasted demand from the the concept of fire protection management deficiencies; 1960s did not materialize, and and associated regulatory (2) plant-specific deficiencies the economy of the Valley and requirements for United at Browns Ferry, Sequoyah, the nation took a downward States (u .S .) nuclear power and Watts Bar; and (3) a lack turn . The decreasing energy plants . of confidence expressed

1930s Era of Flood Control

Even by Depression standards, the Tennessee Valley was in sad shape in 1933. Much of the land had been farmed too hard for too long, eroding and depleting the soil. TVA, which was signed into existence by President Franklin D. Roosevelt, built dams to harness the region’s rivers. The dams controlled floods, improved navigation, and generated electricity.

From to a New Century to the NRC by a number of TVA employees . TVA management set forth a strategy to remediate issues and revamp the nuclear program for TVA . The Sequoyah units were the first to be put back into production in 1988 . Browns Ferry’s three units were put back into production in 1991, 1995, and 2007 respectively . Browns Ferry Nuclear Plant

VVNRC findings at each of TVA’s nuclear sites during the past identified issue with a valve; a “white” finding (low to year, which means TVA’s Watts Bar received a “greater moderate safety significance) units are subject to increased than green” finding (very during the first quarter of oversight and inspection by low safety significance) in 2012 due to the number of the NRC . Specifically, Browns December 2011 as a result of unplanned reactor shutdowns Ferry received a “red” finding issues discovered in recent in an 18-month period . (high safety significance) in physical security inspections; In April 2012, the NRC May 2011 because of a TVA and Sequoyah Unit 1 received announced it was lifting the

1950s Era of the Coal-Fired Power Plants

By the end of the war, TVA had completed a 650-mile (1,050-kilometer) navigation channel the length of the and had become the nation’s largest electricity supplier. Senator George W. Norris of Nebraska, known as the Father of TVA, is shown here at 1940s Era of the Dams Norris Dam. 1960s Era of the Nuclear Power Plants During World War II, TVA engaged in one of The 1960s saw the largest hydropower unprecedented economic construction programs ever growth in the Tennessee undertaken in the United Valley. Expecting the States. In early 1942, when Valley’s electric power the effort reached its peak, needs to continue to 12 hydroelectric projects grow, TVA began building and a steam plant were nuclear plants as a new under construction at the source of economical same time. power. “white” finding and returning Outstanding Improvement Browns Ferry Unit 3 for Sequoyah to a “green” in Performance “ . . . in scheduled refueling and status . recognition of the most maintenance but not before extensive restart effort in the setting a record for the While TVA’s record in nuclear nuclear industry, culminating longest period all three units generation has been plagued in the successful return to have run continuously . by events, such as those service of Unit 1 as the first highlighted on the previous nuclear generating plant to Nuclear Industry page, most of TVA’s stakeholders come online in more than a realize that they have benefited decade .” According to the u .S . Energy from TVA safely generating a Information Administration tremendous amount of power VVOver the past 10 years, TVA’s (EIA), the u .S . is the world’s from its nuclear plants . TVA nuclear units have supplied largest producer of nuclear has had successes in nuclear almost 479 million kilowatt power . While natural gas and construction and operations, hours of electricity, according coal represents the largest share such as: to TVA’s 10-K and annual of electric power generation reports . capacity in the u .S ., for cost VV TVA successfully completed and technical reasons, nuclear construction of Browns Ferry VVTVA has had long continuous power plants are generally Unit 1 in 2007, on time and runs where a unit or all the utilized more intensively, just slightly over budget . The units at a site have produced according to EIA . In addition, American Nuclear Society power without a forced companies have made technical presented TVA with the 2007 outage . Most recently, in modifications to existing plants Utility Achievement Award for April 2012, TVA shut down (uprates) over the years to

1990s Era of Deregulation

As the electric-utility industry moved toward restructuring, TVA began preparing for competition. It cut operating costs by nearly $800 million a year, reduced its workforce by more than half, increased the generating capacity of its plants, stopped building nuclear plants, and developed a plan to meet the energy needs of the Tennessee Valley through the year 2020.

1970s and 1980s

The average cost of electricity in the Tennessee Valley increased fivefold from the 1970s to the 1980s. Consequently, TVA began improving efficiency and productivity while cutting costs. By the late 1980s, TVA had stopped the rise in power rates and paved the way for a 10-year period of rate stability. increase capacity . EIA also Chernobyl in 1986, and OIG Reports states “ . . . uprates, combined Fukushima Daiichi in 2011— with high utilization, have which caused the industry As discussed above, the role enabled nuclear to consistently and its regulator, NRC, to of the OIG in this area is to maintain a share of about 20% of review the causes and issue offer objective, fact-based total electricity output .” TVA is new requirements to improve audits and investigations that not the only utility to have filed safety . On March 12, 2012, the accurately reflect how well TVA for approval to build or refurbish NRC issued the first regulatory is managing change, identify risk nuclear units . In February 2012, requirements for the nation’s areas associated with managing Southern Company received 104 operating reactors based on change, and provide information approval to build two units at the lessons learned at the latest to help TVA reduce its risks . its Vogtle site in Georgia at nuclear disaster, Fukushima, During this semiannual reporting a cost of $14 billion for two in Japan . These requirements period, we completed several 1,100 MW units . The economy, must be implemented no later audits and investigations that aid as well as lower gas prices, than December 2016 . Major TVA management in identifying however, has again caused some events, such as those described areas where programs are, or utility companies to slow their above, typically lead to are not, working well . Our plans for additional nuclear additional modifications, which discussion below is limited to capacity . increase the capital costs for OIG work involving TVA’s nuclear nuclear generation . power program during this The industry has encountered reporting period and our review three major nuclear events— of the Watts Bar Unit 2 cost and Three Mile Island in 1979, schedule, which was issued in

2010s TVA is working to improve its core business in the areas of low rates, high reliability, and responsibility and meet the region’s needs for the future by: leading the nation in improving air quality and increased nuclear production as well as leading the Southeast in increased energy efficiency.

TVA affirmed its commitment to improve the region’s 2000s environment when plans were adopted to retire 18 of TVA’s 59 coal-fired units by the end of 2017. In During the first decade of the 21st century, TVA November 2011, plans were approved for completing introduced the first green power program in the one of the two partially built reactors at Bellefonte Southeast when it launched the Green Power by 2020. Switch® program on Earth Day 2000. In 2004, TVA established a nine-member part-time board in place of its three-member full-time board.

To meet growing power demand, the last of the three reactor units at Browns Ferry was returned to service as scheduled in May 2007. In August 2007, plans were approved to complete construction of Watts Bar Unit 2.

On Dec. 22, 2008, a storage pond dike failed at the Kingston Fossil Plant in prompting a massive cleanup and restoration of the area. May 2012 . Some highlights of are committed to improving TVA personnel, and reviews our work include: the culture of TVA through of project documentation, transformation initiatives and we determined the poor Browns Ferry Extended other actions including creating performance experienced at Power Uprate—This review was and maintaining an environment Watts Bar Unit 2 was attributable requested by TVA management where all employees feel primarily to (1) deficiencies in because of concerns they had comfortable raising concerns to project set-up and (2) ineffective over this project . During 1999, management or through any of management oversight . TVA began conceptualizing an the multiple available avenues . Extended Power Uprate (EPU) Problems with the original project, which would increase Watts Bar Unit 2 - Cost and project set-up included the the generation capacity Schedule—The Watts Bar following: of Browns Ferry by 15 percent . Unit 2 construction project has The project began in 2001 and experienced significant schedule VVThe project’s detailed was expected to be completed and cost overruns . The project scoping, estimating, and in two to four years based was originally expected to be planning study was not as on industry-wide experience; complete in October 2012 at a robust as it should have been however, the Browns Ferry cost of just under $2 .5 billion . to provide accurate schedule project remains incomplete . However, TVA will not meet and cost estimates . The OIG performed an these targets . The OIG alerted extensive inquiry and identified the TVA Board that the schedule VVCertain planned prime the primary causes for the and budget were in jeopardy subcontractor agreements continuing delays and cost due to various problems . In were not implemented, overruns . The OIG concluded mid-2011, we met with TVA ultimately requiring TVA to TVA senior management’s executives to brief them on enter into direct contracts . decisions early in the EPU our concerns surrounding the project were the most significant project . In August 2011, we VVTVA’s ability to remove factor in the lack of progress in briefed the TVA Board’s Audit, from the project the project . TVA spent Risk, and Regulation Committee if problems occurred was about $97 million on direct on our concerns and gave them limited because Bechtel EPU costs and $26 .5 million the preliminary findings that are was the American Society on incremental fuel costs since now contained in the written of Mechanical Engineers 2001 . Additionally, TVA’s report completed after the certification holder . marginal costs for replacement briefings . power ranged from $373 million VVConstruction began before to $448 million as a result of We found two primary reasons engineering progress not achieving the EPU by the for the schedule and cost had reached a sufficient targeted dates . TVA executive overruns . Based on our level, causing significant management acknowledged assessment of the issues raised productivity and work quality cultural issues, which may in various meetings, discussions issues . still exist, and stated they with Watts Bar Unit 2 and

...... 14 | TVA OIG Semiannual Report Watts Bar Nuclear Plant

Project management in key areas TVA has taken several actions to the project’s progress, engage was also ineffective . Specifically, address the problems identified and improve the relationship TVA management did not: at Watts Bar Unit 2 . These with the project workers, and actions include management promote transparency . VVPerform effective oversight changes, developing an updated of the engineering, cost and schedule estimate, and Effectiveness of Remediation procurement, and conducting an extensive root- of Problem Evaluation construction contractor . cause analysis to understand Reports—Nuclear employees the underlying issues, including and contractors have various VVAddress certain warning the development of corrective methods that can be used signs that the project was in actions to address the identified to identify and promptly trouble . issues . Some of the corrective report problems and adverse actions include developing conditions for evaluation and VVAdequately mitigate known weekly project and high- corrective action . Concerns problems related to staffing, level status reports, a project may be reported through line work order packages, assurance function, an alignment supervision, the Corrective information provided to the and engagement strategy, a Action Program, or either TVA’s NRC, and the procurement of communication plan, and team or the contractor’s Employee materials that require a long rules . These items are intended Concerns Program . When lead time to obtain . to offer an accurate reflection of problems are identified, a

...... TVA OIG Semiannual Report | 15 problem evaluation report (PER) Nuclear Power Group’s to initiatives that focused on is initiated so the problem can Performance Trends—The equipment reliability and a gap- be captured, categorized by a Institute of Nuclear Power based business plan . We also project review committee, and Operations (INPO) compiles reviewed elements of the culture remediated . As a result of issues performance trends for nuclear in the Nuclear Power Group and discussed during meetings at performance, safety, and noted that while management Watts Bar, we reviewed the reliability of nuclear facilities . has taken some corrective PER process for Watts Bar We reviewed INPO index data, actions, the culture could be Unit 2 and the effectiveness of an industry standard, for the further enhanced by addressing remediation . In summary, we years 2005 through 2010 . We certain issues . found opportunities to improve found TVA’s nuclear group the effectiveness and efficiency performance with respect to the Falsification of Quality Control of the process, most notably in INPO index, declined through Documents—Prior to this the areas of timely closing of 2007 primarily because of reporting period, investigations Corrective Action Plans (CAP) planned and forced outages, revealed a contractor electrician and improving trending of PERs . but performance improved and his supervisor falsified from 2008 through 2010 due quality control documents at

...... 16 | TVA OIG Semiannual Report Watts Bar Unit 2 . The electrician management to effectively (4) TVA had “no easy catch had been assigned to inspect oversee the construction of metrics” that could be used in and measure cables that were nuclear reactors . Essential to TVA’s oversight process to give to carry energy to systems TVA’s success in building new insight into when things were inside the containment area, nuclear generation capacity is not going right . including to safety equipment . transparency and accountability . Not only did TVA management The electrician attested he There is evidence TVA is making step up and name their completed microreadings of a deliberate decision to be mistakes, they also cited what the cables when he had not . more transparent in explaining steps TVA is taking to avoid The subordinate subsequently its operations when mistakes these mistakes again . TVA came to his supervisor admitting are made . What should also be management also indicated micrometer measurements apparent to TVA stakeholders is they would be reviewing their had not been done at the evidence that TVA management plan for Bellefonte in light of time the job should have been is owning their problems in the problems at Watts Bar completed . The supervisor then a transparent way and taking Unit 2 . Applying lessons directed the subordinate to responsibility for management learned from Watts Bar Unit 2 enter micrometer measurements failures . to future projects is critical to onto the appropriate quality TVA’s success in building new control forms . After the Perhaps more than anything generation capacity to achieve false entries were made, the else, TVA’s press conference a more balanced generation supervisor executed a work on April 5, 2012, addressing portfolio . closure form certifying the work the Watts Bar Unit 2 schedule had been completed when he and budget overruns suggests Despite the significant failure knew the work had not been that TVA is more likely to of TVA management to meet done . During this semiannual apply lessons learned to its projections on Watts Bar, period, the electrician and his future construction of nuclear this level of transparency is supervisor were each sentenced generation facilities . Rather than critical to TVA stakeholders who to 100 hours of community deflect blame, TVA leadership have an interest in how well service and two years of stepped up and specifically TVA manages the construction probation . named what mistakes were and operation of its nuclear made . In the press conference, fleet . We would also add that Transparency and Mike Skaggs, Senior Vice the OIG has engaged in good Accountability President, Nuclear Construction, faith dialogue with current stated TVA was refocusing and TVA management during The audits and investigations “trying to get back on track .” these reviews . This type of that we conducted in the He stated there were four dialogue fosters an atmosphere nuclear area resulted in findings causes for the schedule and cost of improving TVA rather than that highlight significant estimates being so far off base . merely finding fault or shifting problems in TVA’s nuclear Specifically, Mr . Skaggs cited blame . In the end, better program . Specifically, the OIG (1) “leadership,” (2) “cost solutions for a better TVA are report on the Watts Bar Unit 2 estimate was too low,” being found . This is a critical schedule and budget overruns (3) “management failed to part of effectively managing naturally raises questions execute the project as it had change at TVA and, ultimately, about the competency of TVA defined in its own plans,” and making TVA better .

...... TVA OIG Semiannual Report | 17 executive overview TVA OIG SEMIANNUAL REPORT Executive overVIEw

Change is one thing that has endured over TVA’s 79 years . Today is no different . TVA’s vision is to be “one of the nation’s leading providers of low-cost and cleaner energy by 2020 .” To achieve this vision requires changing the generation portfolio—less coal-fired capacity and more nuclear and renewable energy capacity as well as more focus on energy efficiency . How well TVA manages these changes will determine its success . In our feature, we talk about one of the areas of change—the strategic decision to increase TVA’s reliance on nuclear energy . TVA Towers, Knoxville

The OIG’s role is to (1) offer fact- OIG also identified numerous Contract Audits based audits and investigations opportunities for TVA to improve To support TVA management that accurately reflect how well program operations . in negotiating procurement TVA is managing change, actions, we completed four (2) identify risk areas, and Operational Audits preaward reviews of cost (3) provide information to help In order to provide assurance proposals submitted by TVA reduce its risks . In this on the reliability of TVA’s companies proposing to provide semiannual report to Congress, system of operational controls, (1) engineering services for work we highlight key audits, we completed an audit of at Bellefonte Unit 1, (2) indirect evaluations, and investigations demurrage costs, which support services at Watts Bar, that provide insight into how identified almost $4 million in (3) a perimeter stabilization TVA can improve its operations . questioned costs and funds that project for a TVA fossil plant, could be put to better use . In and (4) inspection services to AUDITS addition, we completed three support TVA’s nuclear power reviews related to TVA’s budget program . Our audits identified During this reporting period, process, the effectiveness $6 .2 million of potential savings the TVA OIG completed of PERs at Watts Bar Unit 2, opportunities for TVA to 20 audits, reviews, and and coal quality adjustments . negotiate . We also completed agreed-upon procedures Finally, we applied agreed- three compliance audits of related to TVA’s nuclear power upon procedures to TVA’s contracts with expenditures program, coal, contracting, 2011 Winning Performance totaling $384 million related to information technology (IT), (WP) payout and performed (1) modification, supplemental corporate governance, and procedures to monitor the maintenance services, and compliance with various federal external auditors’ fiscal year (FY) technical support services at requirements . This work 2011 audit of TVA’s financial TVA nuclear plants; (2) identified almost $12 million in statements . The Operational management services; questioned costs and funds that Audits section begins on and (3) modifications and could be put to better use . The page 29 of this report . supplemental maintenance work

...... TVA OIG Semiannual Report | 19 Kingston Fossil Plant

at TVA fossil and hydro plants . appropriate controls are in place, different vendors; (3) security These audits identified potential the IT Audits team completed controls for one TVA facility; overbillings of $1 .6 million . The five audits pertaining to: (1) the and (4) TVA compliance with the Contract Audits section begins Federal Information Security Maritime Transportation Security on page 33 of this report . Management Act (FISMA) of Act (MTSA) of 2002 . The IT 2002; (2) data protection controls Audits section begins on IT Audits for TVA’s personally identifiable page 34 of this report . To ensure TVA’s IT assets information (PII)/personal health are properly secured and information (PHI) held by two

...... 20 | TVA OIG Semiannual Report Corporate Governance and Evaluations section begins on Finance Audits page 39 of this report . With a focus on TVA’s role as a regulator, TVA distributors’ INVESTIGATIONS compliance with the wholesale power contracts, and TVA’s During this reporting period, financial reporting, we our findings produced four completed a mandated review convictions, five indictments, of TVA’s compliance with the and one pretrial diversion . Improper Payment Information Individuals were prosecuted Act (IPIA) of 2002, as amended, in state and federal venues on as well as two audits of TVA various charges, such as workers’ distributors to determine compensation fraud, mail and compliance with key contract wire fraud, false statements, terms between TVA and the and theft . Additionally, one distributors . The Corporate administrative investigation Governance and Finance Audits identified $97 million spent on section begins on page 36 of this an unsuccessful nuclear report . power EPU project as well as $26 .5 million in incremental EVALUATIONS fuel costs and an estimated $373 million in marginal We assessed the Nuclear Power costs for replacement power . Group’s performance trends and Other investigations garnered certain cultural elements . The restitution, fines, and fees exceeding $19,000 . We opened STATISTICAL HIGHLIGHTS 178 investigations and closed October 1, 2011 - March 31, 2012 202 . The Investigations section begins on page 41 of this report . Audit Reports Issued 20 Evaluations Completed 1 Questioned Costs $5,110,209 Disallowed Costs $5,695,122 Funds Recovered $1,143,164 Funds to Be Put to Better Use $6,701,600 Funds Realized by TVA $2,440,634 Investigations Opened 178 Investigations Closed 202 Recoveries/Savings/Fines/Penalties $19,217 Other Monetary Loss $496,500,000 Criminal Actions 10 Administrative Actions (No. of Subjects) 19

...... TVA OIG Semiannual Report | 21 TVA OIG Organization

Inspector General

Deputy Inspector General

Assistant Inspector General, Assistant Inspector General, Assistant Inspector General, Legal Counsel Investigations Audits and Evaluations Administration

Special Agent in Charge Deputy Inspector General, Audits Manager, Human Resources Deputy Legal Counsel

Special Agent in Charge Director, IT Audits Public Affairs Officer

Director, Operational Audits

Director, Corporate Governance and Finance Audits

Director, Contract Audits

Director, Evaluations ORGANIZATION

The OIG’s most important resource is its people . Our team is made up of experienced auditors, investigators, and administrative staff . The OIG is an independent office within TVA and is headquartered opposite TVA corporate offices in TVA’s East Tower, overlooking downtown Knoxville .

Inspector General Richard Moore believes that in order to effectively provide oversight to TVA, we must be strategic in our placement of OIG employees . As such, the Inspector General (IG) has worked to ensure that our office has a presence at or near all major TVA facilities Downtown Knoxville throughout the Tennessee Valley .

In late September, OIG organizational health . Key Audits . The Directors of these management announced a aspects of the reorganization three teams report directly to reorganization of the OIG’s are mentioned in the following the Deputy AIG for Audits . audits and inspections function department descriptions . The V and the establishment of a upper management position VThe Audits’ quality assurance Deputy Assistant Inspector changes that took place to (QA) function now reports to General (AIG) for Audits . support the reorganization are the Deputy IG . described below . TVA OIG OfficeL ocations The reorganization is a part V of our strategic planning VThe AIG for Audits and The OIG has a major satellite to ensure a high performing Inspections’ title was changed office in the Edney Building in OIG . Performance is driven by to AIG for Audits and Chattanooga, Tennessee, where two key components: Evaluations . the Evaluations unit, members (1) operational excellence and of the Corporate Governance V (2) organizational health . The VA new Deputy AIG for Audits and Finance team, and several changes have helped us function position was created . This investigators are located . There better operationally and have position focuses primarily on are also staffed field offices at continued to support good Contract, IT, and Corporate Watts Bar in Tennessee; and Governance and Finance also in Nashville, Tennessee;

...... TVA OIG Semiannual Report | 23 Fontana Dam

Huntsville, Alabama; and designed to drive and enhance stakeholders . Based upon the Mayfield, Kentucky . productivity in achieving office results of these engagements, goals . Responsibilities include the Audits and Evaluations group As of March 31, 2012, the personnel administration, budget makes recommendations to OIG had a total staff of 105 . and financial management, enhance the effectiveness and The number of personnel purchasing and contract efficiency of TVA programs and located at each staffed office services, facilities coordination, operations . is: Knoxville-81, Watts Bar-1, office-wide meeting planning, Chattanooga-16, Nashville-2, communications facilitation, and The group uses an impact- and Huntsville-4, and Mayfield-1 . IT support . risk-based approach to develop an annual work plan . The ADMINISTRATION AUDITS AND EVALUATIONS plan considers TVA’s strategic plans, major management The Administration team works The Audits and Evaluations challenges, TVA’s enterprise risk closely with the IG, Deputy IG, group performs a wide variety management process, and other and AIGs to address the day-to- of engagements designed input from TVA management . day operations of the OIG and to to promote positive change The planning model also develop policies and procedures and provide assurance to TVA evaluates each potential

...... 24 | TVA OIG Semiannual Report engagement from the standpoint This dynamic team is made up conducts operational reviews of materiality (i .e ., costs or of four departments—Contract to assess the results as well as value of assets), potential Audits, Corporate Governance the economy and efficiency of impact, sensitivity (including and Finance Audits, IT Audits, TVA’s financial programs . public and/or congressional and Operational Audits . interest), and the likelihood it VVIT Audits has lead will result in recommendations VVContract Audits has lead responsibility for audits for cost savings or process responsibility for contract relating to the security improvements . The result of the compliance and preaward of TVA’s IT infrastructure, Audits and Evaluations planning audits . In addition, this group application controls, and process is a focus on those issues performs reviews of TVA general controls associated of highest impact and risk to contracting processes and with TVA systems . This group TVA . provides claims assistance as also performs operational well as litigation support . reviews of the effectiveness of The Audits team, primarily IT-related functions . based in Knoxville, generates VVCorporate Governance and and oversees comprehensive Finance Audits, formerly VVOperational Audits, formerly financial and performance audits Distributor Audits, has lead Financial and Operational of TVA programs and operations, responsibility for oversight Audits, became a separate providing an inclusive picture of TVA’s regulatory activities, unit to focus on risk and of TVA’s overall fiscal and including TVA distributors’ impact-driven operational Fontana Dam operational health . compliance with the audit work . The team wholesale power contract and performs audits of operational

Bellefonte Nuclear Plant

...... TVA OIG Semiannual Report | 25 effectiveness and efficiency, and analytical information, as well as TVA compliance monitoring compliance, with laws and regulations . measuring performance, assessing the efficiency and The Evaluations team, formerly effectiveness of operations, Inspections, seeks to ensure and/or conducting inquiries that program objectives into allegations of fraud, waste, and operational functions abuse, and mismanagement . are achieved effectively and efficiently . It performs both Audit and evaluation issues comprehensive reviews and vary depending on the more limited scope policy and objectives of the project . The program reviews . In accordance following graphic shows some with the Quality Standards for representative examples of Dam Inspection and Evaluation, the issues commonly reported by objectives of the unit include each department . providing a source of factual

Types of Audit & Evaluation Issues

Corporate Governance and Operational Audits Finance Audits • Operational Inefficiency • Improvements Needed in • Not Achieving Intended Results TVA Oversight • Inferior Performance • Internal Control Deficiencies • Legal/Regulatory Noncompliance • Material Misstatements • Fraud • Legal/Regulatory Noncompliance • Fraud

Information Evaluations Contract Audits Technology Audits • Internal Control Deficiencies • Inflated Proposals • Unauthorized Access • Operational Inefficiency • Contract Overpayments • Inadequate Controls • Policy Noncompliance • Inferior Performance • Lack of Data Integrity • Fraud • Fraud • Fraud

...... 26 | TVA OIG Semiannual Report Major Categories of Investigations

Contract Fraud Theft of Government Defrauding TVA through Property and Services its procurement of goods Theft of TVA property and “schemes and services, fraud schemes to defraud . . . designed to deprive of misrepresenting costs, individuals, the people, or the overbilling of charges, product government of intangible rights, such substitution, and falsification as the right to have public officials of work certifications. perform their duties honestly.”

Environmental Crime Health Care Fraud Illegal Hacking Into TVA Violations of environmental criminal Intentional misrepresentation of Computer Systems law pertaining to the Tennessee River health care services, expenses, Accessing a TVA computer system and its watershed, along with billings, needs, or coverage that without authorization or any violations relating to TVA land and results in unauthorized payments exceeding authorized access. facilities. or other benefits.

Workers’ Employee Misconduct Compensation Fraud Misuse of TVA furnished Includes employee fraud, equipment, travel voucher fraud, medical fraud, premium fraud, and a multitude of miscellaneous and employer fraud, most matters of abuse. often a false claim of disability to receive benefits.

INVESTIGATIONS The investigators partner with operations, and programs of the other investigative agencies and OIG and/or TVA . Additionally, The Investigations team organizations on special projects this team provides legal advice uncovers activity related to and assignments, including as needed for administrative, fraud, waste, and abuse in TVA interagency law enforcement audit, evaluation, and programs and operations . This task forces on terrorism, the investigative projects . team performs its investigations environment, and health care . in accordance with the Quality Above are major categories of Standards for Investigations. investigations . The investigators maintain liaisons with federal and state LEGAL prosecutors and file reports with the Department of Justice The Legal Counsel team whenever the OIG has reason monitors existing and proposed to believe there has been a legislation and regulations violation of federal criminal law . that relate to the mandate,

...... TVA OIG Semiannual Report | 27 REPRESENTATIVE AUDITS TVA OIG SEMIANNUAL REPORT SummaryRepresentative of Audits

During this semiannual period, our Audits team completed 20 audits, reviews, and agreed-upon procedures . This work identified almost $12 million in questioned costs and funds that could be put to better use . Below is a discussion of completed reviews in the following areas: (1) operational, (2) contract preaward and compliance, (3) IT, and (4) corporate governance, finance, and distributors of TVA power .

Kentucky Dam

Operational Audits costs . In summary, we identified necessary language to hold almost $4 million in questioned the contractor accountable During this semiannual period, costs and funds that could be for origin demurrage costs Operational Audits completed put to better use and several until January 1, 2011, when a four reviews related to areas for improvement, which new contract was put in place, demurrage costs, TVA’s budget would help TVA minimize these resulting in unrecoverable process, the effectiveness of costs, as detailed below . demurrage costs of $784,000 . PERs at Watts Bar Unit 2, and coal quality adjustments . In VV$1,036,100 in origin VVDue to inconsistencies addition, we applied agreed- demurrage costs had not in demurrage contract upon procedures to TVA’s 2011 been billed back to a terms for coal delivered WP payout and performed contractor as provided for in to the Cumberland Fossil procedures to monitor the the contract . Plant (CUF), TVA incurred external auditors’ FY 2011 audit approximately $764,400 in of TVA’s financial statements . VVTVA had not fulfilled its unrecoverable costs; changes contractual obligation to to the unload time under this TVA’s Demurrage Costs provide a contractor with same contract could save TVA Demurrage is the fee charged applicable portions of barging about $327,600 annually . by barge and rail companies agreements, resulting in for delays in the loading or $537,440 in unrecoverable VVA clause in TVA’s contract for unloading of coal from company- demurrage costs . delivery to the Allen Fossil owned assets . We reviewed Plant (ALF) was not aligned demurrage costs incurred from VV$376,667 in demurrage costs with the operating conditions October 1, 2004, through were incurred and billed back at the plant, which prevented June 13, 2011, totaling to the contractor but had not TVA from using a provision to $14 million, to assess why been paid . mitigate demurrage costs . demurrage costs were incurred and what actions, if any, TVA VVTVA’s agreement with VVOrigin and destination could take to minimize these a contractor lacked the demurrage costs were

...... TVA OIG Semiannual Report | 29 Coal Barge

not tracked separately, In addition, we determined that design of the budget process which prevented TVA from more effective knowledge of appeared to be sufficient to transferring origin demurrage the contract demurrage terms; achieve the desired results . costs to the supplier . monitoring of the contracts; We found nothing to indicate and communication among the benchmarking process is VV Eliminating barge damage terminal, barge, and rail contract not sufficient to allow TVA to charges at ALF could reduce administrators, the Coal and Gas benchmark itself against its costs by at least $145,000 per Services personnel responsible peers . We also found nothing year . for demurrage payments, and to indicate the budget review Yard Operations personnel are and approval process was VV Addressing operational needed . insufficient . However, we did challenges at ALF and CUF identify opportunities where the could reduce demurrage TVA management agreed process could be strengthened costs at these plants . with our findings and and improved . Specifically, we recommendations and is taking determined: As a result of the operational corrective action to address challenge at ALF, we also noted these issues . VV A formal written procedure that when the focus of a business directing the budget process unit is on their individual goals Effectiveness of TVA’s Budget did not exist . rather than TVA goals, the Process overall strategic business unit’s We reviewed the effectiveness VV Operating and maintenance budget and, ultimately, TVA’s of TVA’s budget process to targets were set using expenses can be impacted . This determine the adequacy of the historical data rather than was previously identified in OIG methods used in preparing, being tied to fundamental Audit 2002-911E, Review of the reviewing, and adopting the business drivers . Coal Procurement Process . FY 2011 budget . In general, we determined the overall

...... 30 | TVA OIG Semiannual Report VV A control to ensure each Watts Bar, an audit was initiated and critical success factors . submitted business plan to (1) assess the process The WP program is based on aligns resources with strategic for remediating PERs for the the principle that operational goals was not operating as Watts Bar Unit 2 project and improvements, reduced costs, intended . (2) determine the effectiveness and improved revenues can of remediation stemming from be achieved by applying VV The budget process the PER process . management focus and offering addressed risk management monetary incentives . initiatives at the organizational We identified improvements level; however, entity-wide needed in the effectiveness and We applied four agreed-upon risk management was not efficiency of the PER process . procedures requested solely directly addressed . Specifically, we determined the to assist management in process could be improved to determining the validity of the VV The process for prioritizing assure CAPs were closed out WP payout awards for the year capital and operating and timely by tracking those that ended September 30, 2011 . maintenance projects among were not approved within organizations could be 30 calendar days of review by In summary, we found: improved . the Project Review Committee . Prior to the issuance of our VV The FY 2011 WP goals were VV The budget process relied report, Watts Bar Unit 2 issued properly approved . Of heavily on compiling data a PER to address all CAP the two change forms for from multiple spreadsheets, timeliness issues from a project- FY 2011, the Chief Executive which was manually intensive, wide standpoint . We also Officer approved one on time consuming, and can be identified an opportunity to August 15, 2011, and one on error-prone . improve the trending of PERs August 24, 2011 . The two and recommended the Watts change forms affected TVA management generally Bar Unit 2 QA Manager expand 16 scorecards, which resulted agreed with our findings and the trending analysis guidelines in increases to payout . recommendations and has taken to include categorizing of PERs corrective action to address by level of importance and VV The actual year-to-date results these issues . analyzing trends according to for September 2011 for all importance as well as quantity . measures on the Strategic Effectiveness of Remediation Business Unit and Business of Problem Evaluation Agreed-Upon Procedures Unit scorecards agreed with Reports at Watts Bar Unit 2 Applied to 2011 Winning the respective supporting When nuclear employees and Performance Payouts documentation provided . contractors identify problems TVA’s WP Incentive Plan is a and adverse conditions, a PER performance management VV The actual year-to-date results is initiated so the problem can program designed to promote for the two incentivized be captured, categorized by a teamwork, focus on continued TVA Corporate balanced project review committee, and high performance, and motivate scorecard measures agreed remediated . As a result of issues and reward employees for with the underlying support . discussed during meetings at achieving strategic objectives Subsequent changes to the

...... TVA OIG Semiannual Report | 31 Shawnee Fossil Plant

Net Cash Flow actual year- Coal Quality Adjustments of the total dollar adjustments to-date result were received In coal contracts, there is a exceeding $1 million and as of November 7, 2011, and provision that adjustments to processed during the period . compared to the supporting payments can occur if the quality Additionally, we tested the Statement of Cash Flows . of coal TVA receives differs from mathematical accuracy and We determined there would the quality of coal called for in compliance with contract terms be no impact to the payout the contract terms . Coal Quality of 35 CQARs whose dollar percentage . Adjustment Reports (CQAR) adjustments were less than are generated when the actual $1 million, totaling about VV The FY 2011 WP payout coal quality exceeds or does not $16 .3 million . In summary, percentages were provided meet the standards specified in we found that CQARs were by the Performance Analysis the contract . The adjustments calculated accurately . and Productivity organization are based upon the quality on October 21, 2011 . content of moisture, ash, and/or FY 2011 Financial Subsequent changes to sulfur as well as the coal’s British Statement Audit actual data and goals were Thermal Units . We reviewed the TVA contracted with the received through October 28, CQARs to determine if they were independent public accounting 2011 . We recalculated the calculated in accordance with the firm of Ernst & Young, LLP, to payout percentages based terms of the contracts . audit TVA’s balance sheet as of on those changes without September 30, 2011, and the exception . A subsequent From October 2007 through related statements of income, change to the actual year-to- May 2010, TVA processed changes in proprietary capital, date result for the Net Cash 642 CQARs with net adjustments and cash flows for the year . This Flow measure was received totaling about $110 million . also included the audit of TVA’s through November 7, 2011 . We assessed the accuracy of internal controls over financial This change did not impact 18 CQARs representing about reporting as of FY end . The firm any payout percentages . $24 .6 million, or 100 percent also reviewed TVA’s FY 2011

...... 32 | TVA OIG Semiannual Report interim financial information filed $1 .6 million . Highlights of our (1) $631,131 in unallowable on Form 10-Q with the Securities completed compliance audits craft labor costs and and Exchange Commission . follow . associated fees; (2) $99,448 The contract required the work in costs not provided for in be performed in accordance VV We audited $67 .9 million the subcontract; (3) $7,489 with Government Auditing in costs billed to TVA by in unsupported costs; and Standards. Our monitoring of a contractor for providing (4) a credit of $23,780 this work disclosed no instances modification, supplemental for an invoice that was where the firm did not comply, maintenance services, and underpaid by TVA . in all material respects, with technical support services Government Auditing Standards. at TVA nuclear plants . Our »» $279,288 was overbilled objective was to determine for payroll tax costs on Contract Audits if the contractor had billed nonmanual employees . TVA in accordance with the The contractor Preaward Contract Reviews contract terms and conditions . subsequently provided a To support TVA management In summary, we found $279,288 refund for the in negotiating procurement TVA had been overbilled overbilled payroll taxes . actions, we completed four $1,229,401 as follows: preaward reviews of cost »» $225,463 was overbilled proposals submitted by »» $714,288 was overbilled for for labor costs including companies proposing to provide subcontractor costs for the (1) $190,804 in fringe (1) engineering services for work contractor’s sister company . benefit costs for nonmanual at Bellefonte Unit 1, (2) indirect The overbilling included employees who did not support services at Watts Bar, (3) a perimeter stabilization project for a TVA fossil plant, and (4) inspection services to support TVA’s nuclear power program . Our audits identified $6 .2 million of potential savings opportunities for TVA to negotiate . The savings opportunities were primarily related to overstated wage rates and indirect cost recovery rates .

Contract Compliance Reviews During this semiannual period, we completed three compliance audits of contracts with expenditures totaling $384 million and identified potential overbillings of

...... TVA OIG Semiannual Report | 33 receive fringe benefits; »» The contractor overbilled controls for TVA PII/PHI held by (2) $26,349 in unsupported TVA at least $295,495 for two different vendors; (3) security and duplicate labor daily ash management controls for one TVA facility; and billings; and (3) $8,310 costs . The overbilling (4) TVA compliance with MTSA . for nonmanual labor costs included $16,000 of billed at incorrect markup cost billed in excess of 2011 FISMA Review Identified rates . fixed annual billing rates Needed Improvements and $279,495 of excess FISMA was meant to bolster »» $10,362 was billed for excavation costs that computer and network security ineligible fees applied to were not supported by within the federal government . fitness for duty/badging the contractor’s records . In accordance with FISMA and costs . The actual overbilling for guidance from the Office of the excess excavation Management and Budget (OMB), VVWe audited the revenues paid costs is most likely higher TVA and the OIG are required and the costs billed to TVA because inventory records to report on agency-wide IT by a contractor for providing maintained by John Sevier security and privacy practices fly ash management services Fossil Plant indicated the annually . In our 2011 review at TVA’s John Sevier Fossil contractor’s records were of TVA’s information security Plant from July 1, 1999, not accurate . program, we found that while through March 31, 2009 . TVA has made some progress The scope of our review VV We audited $314 .9 million in implementing the IT controls included (1) the revenues to a contractor billed to TVA required by FISMA and work on be provided by the contractor for modifications and some previously recommended to TVA under one contract supplemental maintenance actions continues, additional and (2) $1,913,782 of costs work at TVA fossil and efforts are needed to strengthen the contractor billed under hydro plants and other compliance of TVA’s security three other contracts . In TVA-controlled facilities . In program with existing controls summary, our review of the summary, we determined the and address additional concerns . ash management payments contractor’s billings to TVA We identified opportunities and billings to TVA found complied with the terms of to improve all control areas the contractor underpaid or the contract except for we reviewed except for TVA’s overbilled TVA $378,818 as $3,783 in net overbillings of programs for incident response follows: craft labor . The contractor and reporting and remote access agreed with our findings and management . In addition, »» The contractor underpaid plans to issue TVA a credit for we identified an opportunity TVA $83,323 for revenues the overbilled costs . for TVA to improve agency- and associated interest wide security oversight . TVA because the contractor did IT Audits management agreed with our not pay TVA for all pyrite- findings and recommendations free bottom ash it removed During this semiannual period, and is implementing remediation (and marketed) from John we completed five audits in the actions . Sevier Fossil Plant . IT environment pertaining to (1) FISMA; (2) data protection

...... 34 | TVA OIG Semiannual Report Data Protection Controls effectively protect PII/PHI during program . We performed an Were Generally Effective transmission and processing and audit for one of these generating TVA contracts with vendors to (2) complied with the security facilities to assess the adequacy provide employment-related terms included in the TVA of general, logical, and services and, due to the nature of contract . However, we identified physical controls . We found the contracted services, provides control improvements for each weaknesses in each of the these vendors with information, of the vendors and TVA that, if control areas tested during the which is classified either as PII implemented, would strengthen audit . Unauthorized access or PHi . During this reporting data protection controls . TVA originating from non-network period, we completed audits management agreed with our resources, such as USB memory of the vendor who provides findings and recommendations products, and leveraging the relocation services for TVA and is implementing the security weaknesses could employees and the vendor who improvements . allow a malicious attacker to provides health management cause unplanned outages and services for TVA employees IT General Controls for a equipment damage . TVA and eligible retirees and their Generating Facility Could Be management agreed with our dependents . We audited the Improved findings and recommendations . (1) security controls for protecting TVA has certain generating and TVA data during transmission transmission facilities that have TVA Complied with the and processing and (2) adequacy been identified as critical assets Maritime Transportation of and compliance with TVA using the criteria provided by Security Act contract terms for security and the North American Electric After the terrorist attacks on data protection . In summary, we Reliability Corporation and, September 11, 2001, the determined both vendors (1) had as such, are subject to the MTSA was enacted . With the appropriate controls in place to Critical Infrastructure Protection MTSA, a series of stringent

...... TVA OIG Semiannual Report | 35 requirements were put in place with IPIA requirements that key contract provisions included for port authorities along with were applicable to TVA . In (1) proper reporting of electric vessel and facility operators that our opinion, TVA was only sales, (2) nondiscrimination in report to the u .S . Department required to comply with the providing power, and (3) use of of Homeland Security (DHS) . IPIA requirement to conduct a electric revenue for approved TVA has four port facilities program specific risk assessment . purposes . The following that receive cargos that are describes the issues noted in our regulated under the MTSA . We TVA performed a risk assessment audits . performed an audit to evaluate for FY 2011 and determined the TVA’s compliance with the primary program susceptible VVUse of Electric System Funds MTSA . Although we found TVA to improper payments is its for Nonelectric Purposes is in compliance, we identified a supply chain programs . TVA Both of the distributors few minor administrative issues calculated the total amount of reviewed used electric and program improvements payments subject to review as department funds for that should be corrected or $10,098,354,626 . IPIA nonelectric purposes that implemented to improve TVA’s defines significant improper were inconsistent with the operational efficiencies . TVA payments as $10 million of all provisions in the contracts management agreed with our program activity payments and with TVA . findings and recommendations 2 .5 percent of program outlays . for correcting the administrative TVA’s improper payments totaled VV Misclassifications issues and is implementing the $7,446,226 and 0 .074 percent One of the distributors improvements . of program outlays . As a result, had misclassified certain TVA’s improper payments fell commercial accounts Corporate Governance below IPIA threshold amounts . because it had not used the and Finance Audits As of the date of its IPIA report, classification criteria in the TVA reported it had recaptured Wholesale Rate Schedule . During this semiannual period, $6,524,681 of the total improper Also, we noted instances Corporate Governance and payments of $7,446,226 where customers were not Finance Audits completed identified for FY 2011 . classified properly and similar a mandated review of TVA’s customers were not classified compliance with the IPIA and Distributor Audits the same at both distributors . two audits of TVA distributors to TVA sells power under the The impact of these issues, determine compliance with key contracts it has established with where we had adequate contract provisions . 155 distributors—municipalities information to estimate, was and cooperatives . These not significant . TVA FY 2011 Compliance distributors resell TVA power to with the Improper Payment consumers across the Tennessee VVOther Contract Information Act of 2002 Valley . We audited the power Requirements The OIG performed an audit contracts TVA had with two The distributors were not of TVA’s compliance with IPIA distributors to assess compliance complying with certain for FY 2011 . In summary, we with the contract provisions . The other contract requirements found TVA was in compliance

...... 36 | TVA OIG Semiannual Report including: (1) evaluation We also identified three areas pledging electric funds is of customers for a demand where TVA needed to improve not allowed under the power meter; (2) determination of its oversight of distributors . contract and stated it plans to minimum bill amounts; Specifically, we found TVA did recommend formal approval (3) entering of contract not (1) prevent distributors’ by the TVA Board of a use demand values in the billing pledging of electric system funds of revenues policy . TVA also system; (4) cost allocations as guarantees for customer stated (1) it plans to educate applied at one distributor economic development loans distributors on the need to follow for joint use of property and with Rural Development; Rural Development guidelines, services not approved by TVA; (2) provide adequate guidance including appropriate due and (5) contracts lacking for related to the due diligence diligence; and (2) consideration customers whose demand process for cooperative of cooperative distributors’ exceeded the threshold distributors and, as a result, capital credit allocations is requirement for customer electric system funds were used inherent in TVA’s revised retail contracts . to guarantee loans to customers rate making and approval from funds provided by Rural process . VVInternal Controls Development; and (3) review We noted an opportunity to cooperative distributors’ capital help a distributor improve its credit allocations during TVA’s internal control over customer retail rate setting process . classification and billing data . TVA management agreed

...... TVA OIG Semiannual Report | 37 REPRESENTATIVE EVALUATIONS TVA OIG SEMIANNUAL REPORT SummaryRepresentative of Evaluations

During this semiannual period, our Evaluations team conducted a review of TVA’s Nuclear Power Group performance trends and found that while TVA had taken steps to improve the culture in the Nuclear Power Group, it could be further enhanced by addressing some concerns . More information on this review is below .

Watts Bar Nuclear Plant

Nuclear Power Group’s reliability issues . Factors the adequacy of standards Performance Trends contributing to performance as compared to industry, This review was conducted improvement included a gap- (b) clarifying the expectations because of the importance based business plan and other and standards that everyone of TVA’s nuclear operating new initiatives, including a focus should follow, and (c) reinforcing performance to its ability to meet on equipment reliability within those standards throughout demand for power in the Valley . the organization . the organization; (2) continue The review included identifying to promote the fleet mentality (1) performance trends based As part of this project, we throughout the organization on the INPO reports, (2) major reviewed the following elements and consider input from contributing factors affecting of the Nuclear Power Group the workforce when making the performance trends, and culture: (1) alignment, decisions that would directly (3) patterns of behavior that (2) progress, (3) standards, affect their work; (3) continue have an impact on culture . We (4) accountability, and efforts to be proactive in reviewed INPO index data, an (5) attitude . We found identifying opportunities that industry standard in trending management had taken actions would improve the organization; nuclear performance, safety, that enhanced the alignment (4) work to build relationships and reliability for the years 2005 and progress of cultural and trust throughout Nuclear through 2010 . We found that elements . In the areas of Power Group, which would the Nuclear Power Group’s (1) standards, (2) accountability, encourage the workforce performance with respect and (3) attitude, we noted to embrace new initiatives, to the INPO index declined that while management had foster a fleet mentality, and through 2007 but has shown taken some corrective actions, increase their drive to perform; improvement through 2010 . The the culture could be further and (5) implement actions to data showed planned and forced improved by addressing improve the CAP to increase outages were major contributing certain issues . the workforce’s reliance on the factors to the changes in INPO program . TVA management performance . The majority of We recommended the Chief agreed with our findings and the unplanned outages appear Nuclear Officer: (1) increase the recommendations and is to be a result of equipment focus on standards within the implementing corrective actions . organization by (a) evaluating

...... TVA OIG Semiannual Report | 39 REPRESENTATIVE INVESTIGATIONS TVA OIG SEMIANNUAL REPORT SummaryRepresentative of Investigations

This reporting period, our investigations produced four convictions, five indictments, and one pretrial diversion . Individuals were prosecuted in state and federal venues on various charges, such as workers’ compensation fraud, mail and wire fraud, false statements, and theft . Additionally, one administrative investigation identified $97 million spent on an unsuccessful nuclear power EPU project as well as $26 .5 million in incremental fuel costs and an estimated $373 million in marginal costs for replacement power .

Other investigations garnered identified the primary causes VVTVA’s switch to AREVA fuel restitution, fines, and fees for the continuing delays during the Blended Enriched exceeding $19,000 . We and cost overruns . The OIG Uranium Fuel project resulted opened 178 investigations and concluded senior management’s in the NRC permanently closed 202 . Highlights of our early decisions were the most rejecting Browns Ferry’s investigative accomplishments significant factor in the lack of attempted use of non-NRC follow . progress in the EPU project, approved methodology in including the following: August 2002 . Browns Ferry Nuclear Plant Extended Power Uprate VVIn 2001, senior management From August 2002 through Project Did Not Achieve directed staff to keep the June 2004, Browns Ferry spent Intended Benefits EPU proposal within a substantial financial and human A power uprate was certain cost, requiring the resources repackaging the conceptualized during 1999 to staff to report an artificially project-licensing application increase the maximum operating optimistic scope . Evidence using an NRC-approved level of Browns Ferry by indicates this resulted in the methodology . From 2004 15 percent . The project, known contractor proposing use of through 2010, industry as EPU, began during 2001 and a methodology that was not complexities beyond TVA’s was expected to be completed approved by the NRC . control made obtaining EPU in two to four years based licensure significantly more on industry-wide experience; VVIn 2001, senior management difficult . TVA failed to manage however, the Browns Ferry ignored concerns TVA the complications successfully, project remains incomplete . engineering staff raised though five other reactors at four related to the feasibility non-TVA plants achieved similar The OIG performed extensive and safety of the proposed EPUs during this same time inquiry at the request of methodology . period . current TVA management and

...... TVA OIG Semiannual Report | 41 TVA spent about $97 million to completing microreadings on direct EPU costs and of the cables when he had not . $26 5. million on incremental fuel (Approximately 200 such entries costs since 2001 . Additionally, were submitted that were either TVA’s marginal costs for inaccurate or were provided for replacement power ranged from measurements of cables that did $373 million to $448 million as a not exist .) As a result of his plea, result of not achieving the EPU the electrician was sentenced to by the targeted dates . 100 hours of community service and two years of probation . TVA executive management acknowledged the cultural issues “Falsifying work records is a Hiawassee Dam that may still exist and stated serious federal offense that they are committed to improving could ultimately affect public was sentenced to 100 hours of the culture of TVA through safety . We are pleased that TVA community service and two years transformation initiatives and was able to uncover this matter of probation . other actions including creating through their system of checks and maintaining an environment and balances involving the Investigation Results where all employees feel startup of this nuclear facility,” in Sentencing for False comfortable raising concerns to said u .S . Attorney William C . Statements Related to Clean management or through any of (Bill) Killian, Eastern District of Water Action Violations the multiple available avenues . Tennessee . We previously reported an investigation of a Niota, Two Nuclear Contractor The contractor’s supervisor, Tennessee, sewage-treatment Employees Sentenced for also a contractor electrician, plant operator/employee who Falsification of Quality was charged with and pled pled guilty to 12 counts of a Control Documents guilty to one count of the 72-count indictment charging Prior to this reporting period, same federal statute . His plea him with violating the Clean a contractor electrician was stipulated the subordinate came Water Act . According to the charged in federal court with to him admitting micrometer indictment, the employee two felony counts of knowingly measurements had not been falsified chlorine records and making written, material false done at the time the job discharge-monitoring reports statements within the jurisdiction should have been completed . over a two-year period, affirming of a federal agency and pled The supervisor then directed wastewater was chlorinated guilty to one count of the the subordinate to enter at correct levels when, in fact, indictment . The electrician micrometer measurements nondisinfected wastewater was had been assigned to inspect onto quality control forms . discharged into the Little North and measure cables that were After the fabricated entries Mouse Creek (a tributary of the to carry energy to systems were complete, the supervisor Hiawassee River and part of inside the containment area, executed a work closure form the Tennessee River Watershed including safety equipment, falsely certifying the work had management area) . The at Watts Bar Unit 2 . His plea been done when he knew it had individual has been sentenced agreement stipulated he attested not . The supervisor recently

...... 42 | TVA OIG Semiannual Report to six months of imprisonment, environment by falsifying reports contractor paid $51,500 to six months of home detention, will be vigorously prosecuted .” the former president over a two years of probation, and six-month period, including 150 hours of community Former Utility President and $40,000 to a commercial debt- service . (We participated in this Two Contractors Indicted in recovery firm to reduce the investigation as members of Kickback Scheme former president’s personal debt; the Environmental Crimes Joint Our investigation resulted in and the elder contractor issued Task Force, Eastern District of three individuals indicted in checks totaling $16,015 to the Tennessee .) federal court in the Middle former president in exchange for District of Tennessee, charged work billed to the utility totaling u .S . Attorney Killian commented, with a combined total of $32,150 over a period of seven “By falsifying the reports and 72 counts of wire and mail fraud . months . (The utility requested claiming that he was properly The indictment alleged that, our investigation and cooperated disinfecting the waste water prior during a nine-month stint as fully with our inquiry .) to its discharge, [this individual] president of a potentially put others at risk for electric utility company, an Federal Criminal Information coming in contact with microbial individual approved no-bid Charges Tennessee Resident organisms that could cause consulting work for various With Ponzi Scheme serious illnesses and diseases . projects purportedly performed A Tennessee small-business This prosecution and sentence by a father and son who owned owner who held various positions sends a clear message that separate consulting businesses . of trust in his community and those who would undermine our The indictment alleged that political party is charged in a federal programs intended to in exchange for work totaling 13-count information with money protect human health and the $156,139 .39, the younger laundering and bank, wire, and mail fraud, in the Middle District of Tennessee . The information states the individual knowingly wrote numerous worthless checks and collected more than $16 million from investors to pay other investors and to finance a lifestyle of gambling and debt .

The information alleged the individual used his reputation to gain investors in three bogus enterprises—a farm-machinery supply company, a construction company created to build local greenways, and the “TVA Coal Ash Cleanup Investment,” which Widows Creek Fossil Plant garnered the greatest dollar loss to investors . It is alleged he

...... TVA OIG Semiannual Report | 43 failed to notify OWCP or TVA the former employee died, so her benefit checks continued to be mailed . Our investigation found the OWCP recipient’s adult daughter received and deposited OWCP checks, which totaled $14,939, after her mother’s death . The deceased’s brother, serving as executor of the estate, endorsed some of the checks and assisted in the daughter’s bank deposits . The u .S . Attorney’s Office declined prosecution in favor of available administrative remedies .

We forwarded our findings to OWCP, which corresponded with the executor about the questioned amount . Although the executor claimed his actions were legitimate, OWCP did not agree and formally notified the executor he must repay the full amount .

Browns Ferry Nuclear Plant TVA Reimbursed for Former Employee’s Abuse of Time, Leave, and Per Diem deceived investors into believing state, and local agencies worked We investigated allegations an their funds were being used this investigation . employee was paid for hours by the Tennessee Emergency not worked, and we found the Management Agency to clean Deceased Office of individual was absent from work up the coal ash spill at TVA’s Workers’ Compensation without approved leave for four Kingston Fossil Plant; and, Program Recipient’s Checks days during a 6-day vacation toward that end, he produced Fraudulently Cashed and an 11-day private school forged work orders and other We were informed the family excursion unrelated to the faked documentation . The OIG of a former TVA employee who employee’s official TVA duties . and Internal Revenue Service received total disability benefits In addition, the employee Criminal Investigation Division from the Office of Workers’ claimed per diem and mileage with assistance of other federal, Compensation Program (OWCP) reimbursement from TVA for

...... 44 | TVA OIG Semiannual Report expenses related to personal company’s owner pled guilty to VV A new, TVA-wide, fully travel during this period . The theft of property in connection detailed SPP, “Outside employee’s position at TVA was with this activity . We reported Employment,” was issued scheduled to end due to lack our findings to TVA Supply dealing solely with outside of work; however, as a result Chain, which acted to debar the employment activities of of our inquiry, the individual management services company TVA employees . This SPP is was issued warnings from TVA and its owner from receiving available to employees online . management and suspended federal contracts through with pay for the remaining days December 31, 2012 . VV Approvals for outside employed . TVA recovered employment were expanded the cost of the unapproved Investigation Leads to TVA- and clearly defined to include leave and illegitimate travel Wide Process Improvement the supervisor through the expenses ($2,490) from the We investigated an allegation organization’s officer (Vice employee’s annual leave balance . that a TVA employee was President or above) . After Additionally, the OIG requested engaged in an unreported forms are completed, they Personnel Security take the personal consulting business are required to be sent to and results of this investigation into that conflicted with his TVA maintained by TVA’s Ethics account should the individual duties . The conflict of interest Program staff, which will serve seek future TVA employment . was not substantiated because as the central repository for (The u .S . Attorney’s Office he had reported his outside the forms . in the Eastern District of employment according to a Arkansas declined prosecution subsection of TVA’s Standard VV Employees must now submit in this case .) Programs and Processes (SPP) a new request at least once entitled “Business Ethics,” and every three years or when Management Services had completed TVA’s “Request necessitated by a change Company and Owner for Approval of Outside of duties or other factors . Debarred Through 2012 Employment or Consulting The Ethics Program staff will A corporation directly Work,” which was signed by his request updated forms every contracting with TVA engaged immediate supervisor . three years . a subcontractor company to provide management services, In discussing the investigation VV The outside employment including distributing TVA with the Vice President of the form was revised to include funds over various divisions of employee’s organization, a a description of any the corporation . During the question arose about the level of relationships that the outside course of our investigation guidance in TVA’s Business Ethics employer or organization of the management services SPP and approvals required has with TVA, including any subcontractor, we discovered on the request form . The Vice secondary relationships (for the corporation had audited President had a PER issued example, an outside employer the subcontractor and found to examine TVA’s process for who has a relationship with its owner had taken more than approval of outside employment . a contractor doing business $137,000 from its account, As a result, the following with TVA) . which was funded by deposits changes were made . from TVA . The subcontractor

...... TVA OIG Semiannual Report | 45 legislation Regulations & TVA OIG SEMIANNUAL REPORT Legislation regulati&ons

In fulfilling its responsibilities under the IG Act of 1978, as amended, the OIG follows and reviews existing and proposed legislation and regulations that relate to the mandate, operations, and programs of TVA . Although TVA’s Office of the General Counsel reviews proposed or enacted legislation that could affect TVA activities, the OIG independently follows and reviews proposed legislation that affects the OIG and/or relates to economy and efficiency or waste, fraud, and abuse of TVA programs or operations .

John Sevier Dam

BILLS INTRODUCED sector entities to: assess the current criteria in FISMA SINCE THE PREVIOUS cybersecurity risks; develop risk- for conducting IG evaluations SEMIANNUAL PERIOD based cybersecurity performance and change the requirement requirements; implement cyber in the bill for IGs to include The TVA OIG has been tracking response and restoration plans; a “conclusion” regarding the following major pieces of and more . The bill defines the effectiveness of agency legislation: “critical infrastructure;” amends information security practices FISMA to revise information to require an “assessment” S 2105 – CYBERSECURITY security requirements for thereof; (2) maintain the current ACT OF 2012 federal agencies; and amends FISMA provision that allows Senator Lieberman, I-CT, the Homeland Security evaluations to be based upon introduced this bill on Act of 2002 to consolidate audits, evaluations, or reports, February 14, 2012, which has existing DHS resources for rather than restricting the IGs to had hearings held before the cybersecurity within a National perform one evaluation for the Committee on Homeland Center for Cybersecurity and purpose of this bill; (3) include a Security and Government Communications (NCCC), which statutory Freedom of Information Affairs . Among other things, the bill establishes (as does Act exemption for information the bill sets requirements for Senator Lieberman’s bill: S 413 – and information systems; and securing critical infrastructure Cybersecurity Act of 2011, listed (4) require the u .S . Government as well as directs the Secretary on page 49) . Accountability Office instead of DHS, in consultation with of CIGIE to establish specific owners and operators of critical The Council of the Inspectors technical guidance for infrastructure, the Critical General on Integrity and information security program Infrastructure Partnership Efficiency (CIGIE) has evaluations . Advisory Council, and other recommended the following federal agencies and private changes to the bill: (1) maintain

...... TVA OIG Semiannual Report | 47 S 2151 – STRENGTHENING The bill, among other things, with preventing, investigating, or AND ENHANCING (1) authorizes private entities mitigating threats to information CYBERSECURITY BY to employ countermeasures security; (3) requires federal RESEARCH, EDUCATION, and use cybersecurity systems contractors of electronic INFORMATION, AND to obtain, identify, or possess communication, remote TECHNOLOGY ACT OF 2012 cyber threat information on its computing, or cybersecurity (SECURE IT) own networks or the networks of services to immediately provide Senator McCain, R-AZ, another entity with such entity’s the contracting agency with introduced this bill, authorization; (2) allows private any cyber threat information co-sponsored by six additional entities, nonfederal government directly related to the contract senators, on February 29, agencies, and state, tribal, and and permits contractors to also 2012, and it has since had local governments to voluntarily provide such information to a hearings held before the disclose cyber threat information cybersecurity center; (4) directs Committee on Commerce, to designated cybersecurity federal agencies receiving such Science, and Transportation . centers or to each other to assist contractor-provided information to disclose it immediately to a cybersecurity center; (5) permits cyber threat information provided to a cybersecurity center to be disclosed to, or used by, the federal government for a cybersecurity or national security purpose or to prevent, investigate, or prosecute various criminal offenses for which law enforcement officials are authorized, under existing law, to seek a court order authorizing an interception of wire, oral, or electronic communications; (6) prohibits federal, state, tribal, and local agencies from directly using such information to regulate an entity’s lawful activities and sets forth conditions with regard to information provided to a cybersecurity center; and (7) provides legal protections to entities engaged in authorized cybersecurity activities and directs the Director of National Intelligence and Secretary of

...... 48 | TVA OIG Semiannual Report Defense to develop policies and procedures .

HR 4263 – STRENGTHENING AND ENHANCING CYBERSECURITY BY USING RESEARCH, EDUCATION, INFORMATION, AND TECHNOLOGY ACT OF 2012 (SECURE IT) Congresswoman Mary Bono Mack (R-CA) and Congresswoman Marsha Blackburn (R-TN), introduced a bill on March 27, 2012, that mirrors S 2151 . Notably, the information sharing and S 300 – GOVERNMENT Bono Mack-Blackburn bill also availability of information to CHARGE CARD ABUSE removes the legal roadblocks the public by reducing and PREVENTION ACT OF 2011 for companies to take vital minimizing information control This bill requires (1) agencies necessary steps to protect their designations . The bill further to increase regulations and networks from cyber assaults and requires the IG of each federal enforcement to safeguard strengthens criminal penalties agency to randomly audit government purchase card for hacking into servers . The unclassified information with expenditures and (2) agency IGs bill has been referred to the information control designations . to report to OMB semiannually Committee on Science, Space, on violations of this Act if the and Technology and in addition S 241 – NON-FEDERAL agency incurs more than to the Committees on Oversight EMPLOYEE $10 million in purchase card or and Government Reform, the WHISTLEBLOWER convenience check spending and Judiciary, Armed Services, and PROTECTION ACT OF 2011 to conduct periodic assessments Intelligence (Permanent Select) . The bill replaces provisions of purchase card or convenience BILLS LISTED IN THE prohibiting reprisals against check programs . PREVIOUS SEMIANNUAL whistleblower employees of government contractors for S 413 – CYBERSECURITY The following bills have been disclosing to a federal official AND INTERNET FREEDOM described in the previous information relating to gross ACT OF 2011 semiannual report and their mismanagement, waste, danger Among other things, the bill statuses have not changed . to safety, abuse of authority, or prohibits the government violation of law related to an from turning off the Internet, HR 209 – REDUCING agency contract, subcontract, or establishes an Office of INFORMATION CONTROL grant . The bill also provides the Cyberspace Policy, establishes DESIGNATIONS ACT complainant access to the IG’s NCCC within DHS, establishes The purpose of the bill is to investigative file . United States Computer increase governmentwide Emergency Readiness Team

...... TVA OIG Semiannual Report | 49 S 743 – WHISTLEBLOWER PROTECTION ENHANCEMENT ACT OF 2011 This bill expands the types of disclosures that are protected whistleblower disclosures and amends the IG Act of 1978 to allow federal agency employees to report to the IG information of an urgent concern to Congress and to provide for the appointment of a Whistleblower Protection Ombudsman in the OIG to educate agency personnel about whistleblower rights . TVA Electric Car HR 1875 – BUILDING OUR CLEAN ENERGY FUTURE within the NCCC, and auditor, as determined by the IG NOW ACT establishes a Federal Information of the agency . This bill provides grants for Security Taskforce, which shall be the use of clean fuel in public the principal interagency forum S 717 – PUBLIC ONLINE transportation vehicles, provides for collaboration regarding best INFORMATION ACT OF 2011 federal employees with a fringe practices for agency information HR 1349 – PUBLIC ONLINE benefit for using public transit, security . The bill requires IGs INFORMATION ACT OF 2011 and requires public utilities to to assess the adequacy and These companion bills establish develop a plan to support plug- effectiveness of the information a Public Online Information in hybrid and electric vehicles . security program . Advisory Committee to coordinate the government’s S 1030 – FREEDOM FROM HR 1136 – EXECUTIVE efforts to make information RESTRICTIVE EXCESSION CYBERSPACE from all three branches of EXECUTIVE DEMANDS AND COORDINATION ACT OF government available on the ONEROUS MANDATES ACT 2010 Internet and to issue and update OF 2011 This bill establishes a National nonbinding guidelines on how This bill requires federal agencies Office of Cyberspace with the government should make to periodically review agency oversight responsibilities for public information available . rules that have a significant information security policies The bills also provide that the adverse economic impact on and practices . The annual audit IG of each agency will conduct small entities (small businesses, required by this bill shall be periodic reviews regarding organizations, and governmental performed by the agency’s IG agency compliance with Internet jurisdictions) . Compliance or by an independent external publication requirements . guidance provided to these small

...... 50 | TVA OIG Semiannual Report entities is also reviewed . Such reviews are to be conducted every nine years . Compliance will be reviewed by the agency’s IG, who will report uncorrected deficiencies to Congress .

S 1212 – GEOLOCATIONAL PRIVACY AND SURVEILLANCE ACT This bill generally prohibits intercepting the geolocation information of another person . Examples of exceptions include emergency situations, prior consent, and by warrant . Penalties for violations are included and persons whose S 1338 – REGULATOR identify federal spending that is geolocation information is CAPTURE ACT OF 2011 highly susceptible to improper improperly obtained or used may This bill creates the Office of payments . Under this bill, each recover civil damages . Regulatory Integrity within agency will report any high- the OMB to be headed by an dollar, improper payments to the S 1246 – ACT TO REDUCE Administrator . The Administrator agency’s IG on a quarterly basis . THE NUMBER OF NON- is tasked with investigating ESSENTIAL NEW VEHICLES the influence of concentrated HR 2340 – TRANSPARENCY PURCHASED AND economic interests on agencies, IN GOVERNMENT ACT LEASED BY THE FEDERAL which results in actions or The primary purpose of the GOVERNMENT regulations that do not advance bill is to create more This bill requires agencies to the goals of the agency or causes transparency in Congress . determine the number and the public to lose confidence However, Section V amends cost of nontactical and civilian in the agency regulatory the Federal Funding and vehicles purchased or leased in process . The Administrator may Accountability Act of 2006 2010 . Agency budgets for 2012 coordinate investigative efforts by requiring IGs to periodically will then be reduced by with the agency IG . audit the data provided 20 percent of the total 2010 to the OMB Web site, cost for such vehicles . The S 1409 – IMPROPER www .usaspending .gov, which money saved will be returned PAYMENT ELIMINATION provides information about to the Treasury . The bill AND RECOVERY ACT entities receiving federal funds . also requires agency IGs to This bill attempts to identify, review the agency’s system for reduce, and recover payments monitoring the nonofficial use of made by the federal government government vehicles . Once the in error or because of fraud . The review is complete, the results bill tasks the Director of OMB to will be reported to Congress .

...... TVA OIG Semiannual Report | 51 appendices

TVA OIG SEMIANNUAL REPORT Appendix 1

INDEX OF REPORTING REQUIREMENTS UNDER THE INSPECTOR GENERAL ACT

REPORTING REQUIREMENT PAGE

Section 4(a)(2) Review of Legislation and Regulations 47-51

Section 5(a)(1) Significant Problems, Abuses, and Deficiencies 29-45

Recommendations With Respect to Significant Problems, Abuses, Section 5(a)(2) 29-45 and Deficiencies

Recommendations Described in Previous Semiannual Reports in Section 5(a)(3) Appendix 4 Which Corrective Action Has Not Been Completed

Matters Referred to Prosecutive Authorities and the Prosecutions Section 5(a)(4) Appendix 5 and Convictions That Have Resulted Section 5(a)(5) Summary of Instances Where Information Was Refused None and 6(b)(2)

Section 5(a)(6) Listing of Audit and Evaluation Reports Appendix 2

Section 5(a)(7) Summary of Particularly Significant Reports 29-45

Status of Management Decisions for Audit and Evaluation Reports Section 5(a)(8) Appendix 3 Containing Questioned Costs

Status of Management Decisions for Audit and Evaluation Reports Section 5(a)(9) Appendix 3 Containing Recommendations That Funds Be Put to Better Use

Summary of Audit and Evaluation Reports Issued Prior to the Section 5(a)(10) Beginning of the Reporting Period for Which No Management None Decision Has Been Made

Section 5(a)(11) Significant Revised Management Decisions None

Significant Management Decisions With Which the Inspector General Section 5(a)(12) None Disagreed

Information under Federal Financial Management Improvement Act of Section 5(a)(13) None 1996

Appendix of results of any peer review conducted by another Office of the Section 5(a)(14) Inspector General during the reporting period and, if none, a statement of Appendix 8 the date of the last peer review

List of outstanding recommendations from any peer review conducted by Section 5(a)(15) another Office of the Inspector General, including a statement describing None the status of the implementation and why implementation is not complete

List of peer reviews conducted of another Office of the Inspector General during the reporting period, including a list of any outstanding Section 5(a)(16) None recommendations made from any previous peer review that remain outstanding or have not been implemented

...... TVA OIG Semiannual Report | 53 Appendix 2

OIG AUDIT REPORTS • Issued During the Six-Month Period Ended MARCH 31, 2012

Report Number Questioned Unsupported Funds Put To Title and Date Costs Costs Better Use CONTRACT AUDITS 2009-12389 Appalachian Products, Inc. – Ash Management at John Sevier $378,818 $279,495 $0 10/04/2011 Fossil Plant 2010-13281 G-UB-MK Constructors $3,783 $3,783 $0 12/08/2011 2011-14222-1 Proposal to Provide Indirect Support Services $0 $0 $94,000 12/12/2011 2011-14305 Review of Cost Recovery Rates for Engineering Services $0 $0 $3,076,000 12/15/2011 2009-12779 Williams Plant Services, LLC $1,229,401 $7,489 $0 01/12/2012 2011-14155 Review Request for Rate Increases for Contract Extension $0 $0 $859,000 02/08/2012 2011-14360 Review of Overhead Rate for Contract Extension $0 $0 $2,200,000 02/29/2012 CORPORATE GOVERNANCE AND FINANCE AUDITS 2011-14340 Review of TVA’s Compliance with IPIA FY 2011 $0 $0 $0 03/13/2012 2010-13285 Distributor Audit of Volunteer Energy Cooperative $0 $0 $0 11/16/2011 2010-13659 Distributor Audit of Meriwether Lewis Electric Cooperative $0 $0 $0 03/22/2012 OPERATIONAL AUDITS 2010-13295 Effectiveness of TVA’s Budget Process $0 $0 $0 11/15/2011 2010-13656 Review of TVA Demurrage Costs $3,498,207 $0 $472,600 12/20/2011 2010-13264 Review of the Effectiveness of the Remediation $0 $0 $0 01/10/2012 of Problem Evaluation Reports at Watts Bar Unit 2 2010-13662 Review of Coal Quality Adjustment Reports $0 $0 $0 02/23/2012 2011-14236 Agreed-Upon Procedures for TVA Fiscal Year 2011 Performance $0 $0 $0 11/10/2011 Measures INFORMATION TECHNOLOGY AUDITS 2011-13747 Controls for Handling TVA Private Information – ActiveHealth $0 $0 $0 11/04/2011 Management 2011-13760 Federal Information Security Management Act Evaluation $0 $0 $0 11/17/2011 2011-13721 Controls for Handling TVA Private Information – Cartus Corporation $0 $0 $0 11/29/2011 2010-13671 TVA Generating Plant – Security Assessment $0 $0 $0 12/15/2011 2011-14066 TVA Maritime Transportation Security Act Compliance $0 $0 $0 01/20/2012

TOTAL $5,110,2091 $290,767 $6,701,600 AUDITS (20)

1 Questioned costs include $2,085,440 for unreasonable or unnecessary expenditures not recoverable .

...... 54 | TVA OIG Semiannual Report Appendix 2

OIG EVALUATION REPORTS • Issued During the Six-Month Period Ended MARCH 31, 2012

Report Number Questioned Unsupported Funds Put To Title and Date Costs Costs Better Use 2010-13233 Review of Nuclear Power Group’s Performance Trends $0 $0 $0 12/08/2011

Total $0 $0 $0 EVALUATIONS (1)

Note: A summary of, or link to, the full report may be found on the OIG’s Web site at www.oig.tva.gov.

Allen Fossil Plant

...... TVA OIG Semiannual Report | 55 Appendix 3

TABLE I • TOTAL QUESTIONED AND UNSUPPORTED COSTS • AUDITS

Number Questioned Unsupported Audit Reports of Reports Costs Costs

A. For which no management decision has been made by 1 $640,420 $640,420 the commencement of the period

B. Which were issued during the reporting period 4 $5,110,209 $290,767

Subtotal (A+B) 5 $5,750,629 $931,187

C. For which a management decision was made during the 51 $5,750,629 $931,187 reporting period

1. Dollar value of disallowed costs 5 $5,695,122 $931,187

2. Dollar value of costs not disallowed 1 $55,507 $0

D. For which no management decision has been made by the 0 $0 $0 end of the reporting period

E. For which no management decision was made within six 0 $0 $0 months of issuance

1 The total number of reports for which a management decision was made during the reporting period differs from the sum of C(1) and C(2) when the same report(s) contain both recommendations agreed to by management and others not agreed to by management .

TABLE I • TOTAL QUESTIONED AND UNSUPPORTED COSTS • EVALUATIONS

Number Questioned Unsupported Evaluation Reports of Reports Costs Costs

A. For which no management decision has been made by the 0 $0 $0 commencement of the period

B. Which were issued during the reporting period 0 $0 $0

Subtotal (A+B) 0 $0 $0

C. For which a management decision was made during the 0 $0 $0 reporting period

1. Dollar value of disallowed costs 0 $0 $0

2. Dollar value of costs not disallowed 0 $0 $0

D. For which no management decision has been made by the 0 $0 $0 end of the reporting period

E. For which no management decision was made within six 0 $0 $0 months of issuance

...... 56 | TVA OIG Semiannual Report Appendix 3

TABLE II • FUNDS TO BE PUT TO BETTER USE • AUDITS

Number Funds To Be Put Audit Reports of Reports To Better Use

A. For which no management decision has been made by the commencement of the period 2 $3,782,900

B. Which were issued during the reporting period 5 $6,701,600

Subtotal (A+B) 7 $10,484,500

C. For which a management decision was made during the reporting period 6 1 $9,625,500

1. Dollar value of recommendations agreed to by management 6 $9,558,234

2. Dollar value of recommendations not agreed to by management 1 $67,266

D. For which no management decision has been made by the end of the reporting period 1 $859,000

E. For which no management decision was made within six months of issuance 0 $0

1 The total number of reports for which a management decision was made during the reporting period differs from the sum of C(1) and C(2) when the same report(s) contain both recommendations agreed to by management and others not agreed to by management .

TABLE II • FUNDS TO BE PUT TO BETTER USE • EVALUATIONS

Number Funds To Be Put Evaluation Reports of Reports To Better Use

A. For which no management decision has been made by the commencement of the period 0 $0

B. Which were issued during the reporting period 0 $0

Subtotal (A+B) 0 $0

C. For which a management decision was made during the reporting period 0 $0

1. Dollar value of recommendations agreed to by management 0 $0

2. Dollar value of recommendations not agreed to by management 0 $0

D. For which no management decision has been made by the end of the reporting period 0 $0

E. For which no management decision was made within six months of issuance 0 $0

...... TVA OIG Semiannual Report | 57 Appendix 4

AUDIT AND EVALUATION REPORTS WITH CORRECTIVE ACTIONS PENDING

As of the end of the semiannual period, final corrective actions associated with seven audits and four evaluations were not completed within twelve months of the final report date. Presented below for each audit and evaluation are the report number, date, and a brief description of the open recommendations as well as the date management expects to complete final action.

Audit Report Report Title and Recommendation(s) for Which Final Action is Not Complete Number and Date

Review of TVA Actions to Protect Social Security Numbers and Eliminate Their Unnecessary Use 2007-11216 06/02/2008 TVA agreed to implement protective measures for applications and reports containing social security numbers, such as restricting access and logging downloads. Management expects final action to be completed by May 31, 2013.

Sequoyah Nuclear Plant – Cyber Security Assessment 2007-11388 TVA agreed to conduct risk assessments on the use of identified third-party applications and evaluate 08/21/2008 the elimination of clear text protocols where technically feasible. Management expects final action to be completed by August 30, 2012.

Hydroelectric Plant Automation – General, Physical, and Security Controls Review 2008-12127 09/24/2009 TVA agreed to implement the new access control system at all sites and further restrict access to key components. Management expects final action to be completed by June 1, 2013.

Use and Protection of Personally Identifiable Information 2009-12650 TVA agreed to improve the privacy program by (1) defining security officer responsibilities and (2) updating 05/19/2010 the privacy assessment process. Management expects final action to be completed by September 30, 2012.

Effectiveness of Cyber Security Monitoring Follow-up Review 2010-13033 10/12/2010 TVA agreed to perform a risk assessment of TVA’s intrusion detection/prevention system device implementation. Management expects final action to be completed by November 30, 2012.

Federal Information Security Management Act Evaluation 2010-13446 12/02/2010 TVA agreed to continue the redesign of the certification and accreditation process and complete security configuration baselines. Management expects final action to be completed by August 30, 2012.

Follow-up Review of TVA’s Role as a Rate Regulator – Use of Electric Revenues for Nonelectric Purposes TVA agreed to (1) determine when distributor reserves become excessive and should be returned to the 2009-12699 ratepayers in the form of rate reductions and (2) review and ensure all distributors using electric system 12/09/2010 revenues for nonelectric system purposes have appropriate protections in place. TVA distributor staff will look for electric system use of revenue for nonelectric system purposes when they perform their annual review of distributor financial information. As part of this review, any unapproved use of electric system revenues for nonelectric system purposes will be evaluated for further action. Management expects final action to be completed by September 30, 2012.

...... 58 | TVA OIG Semiannual Report Appendix 4

AUDIT AND EVALUATION REPORTS WITH CORRECTIVE ACTIONS PENDING (CONTINUED)

Evaluation Report Report Title and Recommendation(s) for Which Final Action is Not Complete Number and Date

Review of Physical and Environmental Controls for the Chattanooga Data Center

2005-518I TVA agreed to replace the Chattanooga office complex telephone system with a system operating on the Internet Protocol to eliminate three specific failure modes, which could hamper or eliminate 08/31/2005 TVA’s communication ability. Implementation of the new communication system has been delayed by management due to what is considered higher priority projects. Management is targeting final action to be completed by December 31, 2012.

Distributor Review of Monroe County Electric Power Authority 2008-12007 05/13/2009 TVA agreed to (1) consider feasibility of a comprehensive guideline for permissible expenditures; and (2) recommend to the Board that additional financial metrics, including when cash reserves become excessive, be implemented in the rate setting process. Management expects final action to be completed by April 30, 2012.

Distributor Review of Lewisburg Electric System 2008-12040 TVA agreed to (1) consider feasibility of a comprehensive guideline for permissible expenditures; and 05/13/2009 (2) recommend to the Board that additional financial metrics, including when cash reserves become excessive, be implemented in the rate setting process. Management expects final action to be completed by April 30, 2012.

Review of TVA Records Retention 2008-11829 06/02/2010 TVA agreed to continue with current plans to replace the Electronic Document Management System. Management expects final action to be completed by December 31, 2013.

...... TVA OIG Semiannual Report | 59 Appendix 5

INVESTIGATIVE REFERRALS AND PROSECUTIVE RESULTS1

Referrals

Subjects Referred to U.S. Attorneys 14

Subjects Referred to State/Local Authorities 1 Results

Subject Indicted 5

Subjects Convicted 4

Pretrial Diversion 1

Referrals Declined 8

1 These numbers include task force activities and joint investigations with other agencies .

...... 60 | TVA OIG Semiannual Report Appendix 6

HIGHLIGHTS – STATISTICS

MAR 31, SEPT 30, MAR 31, SEPT 30, MAR 31, 2012 2011 2011 2010 2010 AUDITS AUDIT STATISTICS Carried Forward 34 46 40 60 44 Started 23 16 29 28 46 Canceled (2) (2) (3) (7) (4) Completed (20) (26) (20) (41) (26) In Progress at End of Reporting Period 35 34 46 40 60

AUDIT RESULTS (Thousands) Questioned Costs $5,110 $1,327 $4,846 $2,713 $980 Disallowed by TVA 5,695 655 1,303 1,879 2,255 Recovered by TVA 1,143 1 326 763 1,9212 2,6553

Funds To Be Put To Better Use $6,702 $4,945 $24,963 $13,696 $9,703 Agreed to by TVA 9,558 20,005 7,450 149 8,853 Realized by TVA 2,441 4 1,162 12,750 5 2,091 480

OTHER AUDIT-RELATED PROJECTS Completed 9 19 13 27 10 Cost Savings Identified/Realized (Thousands) $0 $0 $0 $0 $0

EVALUATIONS Completed 1 8 3 9 2 Cost Savings Identified/Realized (Thousands) $0 $0 $0 $0 $0

INVESTIGATIONS6 INVESTIGATION CASELOAD Opened 178 190 190 199 168 Closed 202 228 161 221 198 In Progress at End of Reporting Period 146 163 199 167 189

INVESTIGATIVE RESULTS (Thousands) Recoveries $17.5 $8 $2,144 $36.2 $41.8 Savings 0 0 2,515 4,028 0 Fines/Penalties 1.7 1 453 8 7 5.9 Other Monetary Loss $496,500 $9,693 8

MANAGEMENT ACTIONS Disciplinary Actions Taken (No. of Subjects) 19 23 7 14 7 Counseling/Management Techniques Employed (No. of Cases) 24 18 24 31 25 Debarment 2 0 1 9

PROSECUTIVE ACTIVITIES (No. of Subjects) Referred to U.S. Attorneys 14 22 22 51 16 Referred to State/Local Authorities 1 3 1 2 2 Indicted 5 6 1 7 4 Convicted 4 5 1 8 3 Pretrial Diversion 1 1 0 1 2

1 Includes $198,352 recovered in excess of amounts decided by management . 2 Adjusted to correct amount reported in prior semiannual reports . 3 Ibid . 4 Includes $18,474 savings realized in excess of amounts decided by management . 5 Includes $304,036 savings realized in excess of amounts decided by management . 6 These numbers include task force activities and joint investigations with other agencies . 7 Adjusted to correct amount reported in prior semiannual reports . 8 Category added in semiannual period ended September 30, 2011 . 9 Category added in semiannual period ended March 31, 2011 ...... TVA OIG Semiannual Report | 61 Sequoyah Nuclear Plant

Appendix 7

Government Contractor Audit Findings

The National Defense Authorization Act for FY 2008, P .l . 110-181, requires each IG appointed under the IG Act of 1978 to submit an appendix on final, completed contract audit reports issued to the contracting activity that contain significant audit findings—unsupported, questioned, or disallowed costs in an amount in excess of $10 million or other significant findings—as part of the Semiannual Report to Congress . During this reporting period, the OIG issued no contract review reports under this requirement .

...... 62 | TVA OIG Semiannual Report Appendix 8 Peer Reviews of the TVA OIG

Audits Peer Review Investigations Peer Review IG audit organizations are required to undergo The Investigations organization undergoes an an external peer review of their system of quality external peer review, Quality Assessment Review control at least once every three years, based on (QAR), at least once every three years . During requirements in the Government Auditing Standards the semiannual period ended March 31, 2011, (Yellow Book) . Federal audit organizations can the Office of Personnel Management (OPM) OIG receive a rating of pass, pass with deficiencies, or completed a QAR of the TVA OIG Investigative fail . The TVA OIG underwent its most recent peer Operations . The OPM OIG found the review of its audit organization after FY 2010 . An ad “ . . . system of internal safeguards and management hoc team appointed by CIGIE and led by the u .S . procedures for the investigative function of the Department of Education (Education) OIG performed TVA OIG in effect for the year ending August 1, the review . Education OIG issued the report, dated 2010, is in compliance with the Quality Standards March 21, 2011, in which it concluded that the TVA for Investigations and the Attorney General OIG audit organization’s system of quality control guidelines . These safeguards and procedures for the FY ended September 30, 2010, was suitably provide reasonable assurance of conforming designed and complied with to provide the OIG with with professional standards in the conduct of reasonable assurance of performing and reporting investigations .” The QAR report can be found on in conformity with applicable professional auditing our Web site at http://oig .tva .gov/peer-review .html . standards in all material respects . Accordingly, the TVA OIG received a rating of pass . The peer review report is posted on our Web site at http://oig .tva .gov/peer-review .html .

Tennessee River

...... TVA OIG Semiannual Report | 63 glossary, abbreviations acronyms TVA OIG SEMIANNUAL REPO&RT Glossary

Disallowed Cost - A questioned cost that management, in a management decision, has sustained or agreed should not be charged to the agency .

Final Action - The completion of all management actions, as described in a management decision, with respect to audit findings and recommendations . When management concludes no action is necessary, final action occurs when a management decision is made .

Funds Put To Better Use - Funds, which the OIG has disclosed in an audit report, that could be used more efficiently by reducing outlays, deobligating program or operational funds, avoiding unnecessary expenditures, or taking other efficiency measures .

Management Decision - The evaluation by management of the audit findings and recommendations and the issuance of a final decision by management concerning its response to such findings and recommendations .

Questioned Cost - A cost the IG questions because (1) of an alleged violation of a law, regulation, contract, cooperative agreement, or other document governing the expenditure of funds; (2) such cost is not supported by adequate documentation; or (3) the expenditure of funds for the intended purposes was unnecessary or unreasonable .

Unsupported Costs - A cost that is questioned because of the lack of adequate documentation at the time of the audit .

Improper Payment - Any payment that should not have been made or was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements, as defined in the IPIA .

...... TVA OIG Semiannual Report | 65 Abbreviations & Acronyms

The following are abbreviations and acronyms widely used in this report.

AIG...... Assistant Inspector General ALF...... Allen Fossil Plant Bechtel...... Bechtel Power Corporation Bellefonte ...... Bellefonte Nuclear Plant Browns Ferry...... Browns Ferry Nuclear Plant CAP...... Corrective Action Plans CIGIE...... Council of Inspectors General on Integrity and Efficiency CQAR...... Coal Quality Adjustment Reports CUF ...... DHS...... U.S. Department of Homeland Security Education...... U.S. Department of Education EIA...... U.S. Energy Information Administration EPU ...... Extended Power Uprate FISMA...... Federal Information Security Management Act FY ...... Fiscal Year IG ...... Inspector General INPO...... Institute of Nuclear Power Operations IPIA...... Improper Payment Information Act IRP...... Integrated Resource Plan IT ...... Information Technology MTSA...... Maritime Transportation Security Act of 2002 MW...... Megawatt NCCC...... National Center for Cybersecurity and Communications NRC...... Nuclear Regulatory Commission OIG...... Office of the Inspector General OMB...... Office of Management and Budget OPM...... Office of Personnel Management OWCP...... Office of Workers’ Compensation Programs PER...... Problem Evaluation Report PHI...... Personal Health Information PII ...... Personally Identifiable Information QA...... Quality Assurance QAR...... Quality Assessment Review Sequoyah...... Sequoyah Nuclear Plant SPP...... Standard Programs and Processes TVA...... Tennessee Valley Authority U.S...... United States Watts Bar ...... Watts Bar Nuclear Plant WP...... Winning Performance

...... 66 | TVA OIG Semiannual Report Office of the Inspector General 400 West Summit Hill Drive Knoxville, Tennessee 37902

The OIG is an independent organization Report Concerns to the OIG EmPowerline charged with conducting audits, evaluations, and investigations relating to TVA programs and operations, while keeping the TVA Board and Congress fully and currently informed about problems and deficiencies relating to the administration of such programs and operations . EMPOWERLINE

The OIG focuses on (1) making TVA’s programs A confidential connection for reporting fraud, and operations more effective and efficient; waste or abuse affecting TVA. (2) preventing, identifying, and eliminating waste, fraud, and abuse as well as violations of laws, rules, How to Report a Concern or regulations; and (3) promoting integrity in financial reporting . Call toll-free: 855-882-8585 If you would like to report to the OIG any concerns or report on the web: about fraud, waste, or abuse involving TVA programs or violations of TVA’s Code of Conduct, www.OIGempowerline.com you should contact the OIG EmPowerline system . The EmPowerline is administered by a third-party contractor and can be reached 24 hours a day, seven days a week, either by a toll-free phone call (1-855-882-8585) or over the Web (www .oigempowerline com). . You may report your concerns anonymously or you may request confidentiality .

OIG

LeadershipPHILOSOPHY

The TVA OIG strives to be a high performing organization made up of dedicated individuals who are empowered, motivated, competent, and committed to producing high quality work that improves TVA and life in the Valley.

Each of us has important leadership, management, team, and technical roles. We value integrity, people, open communication, expansion of knowledge and skills, creative problem solving, and collaborative decision making.

...... TVA OIG Semiannual Report | 67 THE CHALLENGE OF MANAGING Change