APRIL 1, 1998 ~ SEPTEMBER 30, 1998

OFFICE OF THE INSPECTOR GENERAL

SEMIANNUAL REPORT

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TVA

INSPECTOR

GENERAL

Call toll free:

1-800-323-3835

423-632-3550 (Knoxville)

Tennessee Valley Authority

400 West Summit Hill Drive ET 4C

Knoxville, Tennessee 37902-1499 Hotline

Hotline

The Office of the Inspector General

(OIG) is an independent organization

charged with reporting to the

Tennessee Valley Authority (TVA) Board

of Directors and Congress on the

overall efficiency, effectiveness, and

economy of TVA programs and

operations. The OIG meets this

responsibility by conducting audits,

investigations, and other reviews.

The OIG focuses on the prevention,

identification, and elimination of

(1) waste, fraud, and abuse; (2) violations of laws, rules, or regulations; and

(3) inefficiencies in TVA programs and

operations.

If you want to report any matter

involving TVA programs, operations, or

employees, you should call the OIG

Hotline or write the Inspector General's

office.
SEMIANNUAL REPORT/APRIL 1, 1998 ~ SEPTEMBER 30, 1998

Tennessee Valley Authority, 400 West Summit Hill Drive, Knoxville, Tennessee 37902-1499 Tennessee Valley Authority

George T. Prosser

Inspector General

October 30, 1998

TO THE TVA BOARD OF DIRECTORS AND THE UNITED STATES CONGRESS

This, our 25th semiannual report, describes the accomplishments of our office for the six-month period

ending September 30, 1998.

During this reporting period, we completed 27 audits which identified almost $1.8 million in questioned

costs and more than $200,000 in funds that could be used more effectively. Our auditors conducted

performance reviews of TVA operations and contract preaward and compliance audits. We also

conducted 11 special projects, which identified over $14.7 million in potential savings.

Our investigations group completed 81 investigations, substantiating allegations in over 34 percent of the

cases we investigated. During this reporting period, our investigations resulted in over $3.6 million in

savings and recoveries, five subjects indicted, and nine subjects convicted. Further, as a result of our

investigations of alleged misconduct, administrative and disciplinary action was taken against 22

individuals, and management took additional corrective action in 8 cases.

During this reporting period, I noted with interest the congressional hearings on the Inspector General

Act. Those hearings illustrated the continuing needs for Inspectors General, and the significant results

we are achieving. Congress’ foresight in creating Inspectors General has provided lasting benefits to

the federal government, including TVA. I am proud of the accomplishments of the Inspector General

community and look forward to continuing our work as we move into the next century.

Sincerely,

George T. Prosser
SEMIANNUAL REPORT/APRIL 1, 1998 ~ SEPTEMBER 30, 1998

1 Executive Summary

2 TVA Profile

3 Office of the Inspector General

5 Special Feature

Appendices Appendices

1. OIG Audit Reports Issued During the Six-Month Period Ending September 30, 1998

2. OIG's Report on Management Decisions for the Six-Month Period Ending September 30, 1998

3. Investigative Referrals and Prosecutive Results

4. TVA Management's Report on Final Actions for the Six-Month Period Ending September 30, 1998

5. OIG Reporting Requirements

8 Audits

12 Investigations

20 Special Projects

OFFICE OF THE

INSPECTOR

GENERAL

SEMIANNUAL

REPORT

APRIL 1 THROUGH

SEPTEMBER 30, 1998

C O N T E N T S ■
TVA/OFFICE OF THE INSPECTOR GENERAL

This report

summarizes the

activities and

accomplishments

of TVA's OIG

during the sixmonth period

ending

September 30,

1998.

■ E X E C U T I V E S U M M A R Y

We continued our efforts to support

TVA’s goals by providing quality service

with audits, investigations, and special

projects. We completed 27 audits

which identified almost $1.8 million in

questioned costs and more than

$200,000 in funds that could be used

more effectively. Eleven special projects

identified over $14.7 million in potential

savings. We closed 81 investigations

which led to over $3.6 million in savings

and recoveries. Investigations of alleged

misconduct led to administrative and

disciplinary action taken against 22

individuals and other corrective action in

8 cases.

Our audit activities included performance reviews of TVA programs,

processes, and systems, as well as

compliance and preaward audits of TVA

contractors. Representative audits

include reviews of Transmission and

Power Supply’s overtime policy, a

contractual arrangement to provide

procurement assistance to small

businesses, selected contracts, controls

on access security in an ADP system,

and one of the fiscal year 1999 performance goals submitted in accordance

with the Government Performance and

Results Act of 1993.

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We also conduct special project reviews

of high-profile issues as requested by

our customers, primarily the Board of

Directors, TVA executive management,

and the Congress. During this reporting

period, the areas we reviewed included

the Investment Recovery operations,

the Visa Gold Card program, a

$24.7 million uranium mill reclamation

claim, and fuel used by the ridesharing

program. We also participated on

TVA’s Supply Chain Redesign Team.

Our investigative activities included

inquiries into environmental crimes,

criminal misuse of TVA economic

development funds, workers’ compensation fraud, contractors’ fraudulent

claims for temporary living expenses,

nuclear-related issues, health-care

overpayments, and employee misconduct. One investigation led to a former

TVA senior executive and a contractor

being indicted on 20 counts of mail

fraud. Other investigative results include

a conviction of a husband and wife for

workers’ compensation fraud and

various findings of misconduct.
SEMIANNUAL REPORT/APRIL 1, 1998 ~ SEPTEMBER 30, 1998

TVA's 13,818

employees serve

an 80,000-squaremile region

spanning seven

states.

T V A P R O F I L E ■

Craven Crowell is the Chairman, and

Johnny H. Hayes and William H.

Kennoy are Directors.

TVA’s goals are Customer Driven,

Employee Sensitive, Environmentally

Responsible, and Growth Oriented.

TVA’s vision is “to be the recognized

world leader in providing energy and

related services, independently and in

alliances with others, for society’s global

needs.”

TVA is a federal corporation responsible

for developing and conserving the natural

resources of the Tennessee River Valley.

TVA's 13,818 employees are involved in

regional development, integrated resource management, and the production of low-cost electricity. The power

system is funded by power sales, and

TVA's other programs are funded

primarily by congressional appropriations.

TVA is governed by a three-member

Board of Directors appointed by the

President and confirmed by the Senate.

Chattanooga

•

•

•

•

•

•

• •

Knoxville

Columbus

Nashville

Jackson

Memphis

Huntsville

Muscle

Shoals

Bowling Green•

Bristol •

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■ O F F I C E O F T H E I N S P E C T O R G E N E R A L

Office Authority

The TVA Board of Directors administratively established the OIG during

October 1985. During its early years of

operation, the OIG operated much like

its statutory counterparts and exercised

subpoena powers granted by a provision

in a TVA appropriations bill. When

Congress enacted the Inspector

General Act Amendments of 1988,

TVA's OIG became one of the statutory

offices whose Inspector General is

appointed by the agency head. TVA's

Inspector General is independent and

subject only to the general supervision of

the Board of Directors.

George T. Prosser became TVA’s third

Inspector General on April 1, 1994.

Organization

The OIG’s Audit Operations unit consists

of three operational departments. One is

devoted to contract-related topics, both

preaward and post award reviews; the

two other departments focus on performance, financial, ADP-related issues, and

special projects.

The OIG’s Investigative Operations unit

consists of an investigative services and

hotline group and two investigative

departments. While both departments

work a variety of cases, including

employee integrity and environmental

issues, one department focuses on

contract and workers’ compensation

cases, while the other focuses on

nuclear issues and benefits and entitlement programs.
SEMIANNUAL REPORT/APRIL 1, 1998 ~ SEPTEMBER 30, 1998

O F F I C E O F T H E I N S P E C T O R G E N E R A L

Staffing and Budget

The OIG's offices are in the TVA headquarters in Knoxville, Tennessee. The

OIG also has investigative satellite offices

in Chattanooga, Tennessee, and Huntsville, Alabama.

The OIG's fiscal year 1998 budget is

about $7.3 million, and during this

reporting period, the OIG had

83 employees.

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OFFICE OF THE INSPECTOR GENERAL

Legal Counsel

■

Richard P. Levi

Manager

(Human Resources)

■

Kay T. Myers

INSPECTOR GENERAL

■

George T. Prosser

Financial

Investigations

James M. Reed

Manager

Internal

Investigations

Ron W. Taylor

Manager

Investigative

Services and

Hotline

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Assistant

Inspector General

(Investigations)

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G. Donald Hickman

Financial and

ADP Audits

Deborah Meyers Thornton

Manager

Contract

Audits

Ben R. Wagner

Manager

Operational Audits

and Special

Projects

Lewis M. Ogles

Manager

OIG ADP and

Audit Quality

James L. Sweet

Coordinator

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■

■

Assistant

Inspector General

(Audits)

■

Ted R. Ping
TVA/OFFICE OF THE INSPECTOR GENERAL

■ S P E C I A L F E A T U R E

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ENVIRONMENTAL CRIMES JOINT

TASK FORCE (ECJTF)

The ECJTF’s mission is to (1) focus

enhanced law enforcement resources

against individuals and companies

involved in environmental crimes and

(2) prosecute those individuals and

companies by applying the most

effective federal and state criminal and

civil statutes. The ECJTF grew out of

an awareness of pollution problems in

East Tennessee and informal cooperation between the Department of Justice

(DOJ) Environmental Crimes Section,

the U.S. Attorneys’ Office, the Federal

Bureau of Investigation (FBI), and the

Tennessee Department of Environment

and Conservation. During the 1990s,

this informal group grew in size to

include other federal law enforcement

agencies. The increased resources

enabled the group to investigate and

prosecute more cases with corresponding successes. These successes built a

momentum which resulted in the

current task force with 16 different state

and federal agencies and a history of

significant prosecutions. Highlights of

the investigative results during this

reporting period include the following.

Members of the Environmental Crimes Joint Task Force are from left to right: Members of the Environmental Crimes Joint Task Force are from left to right (standing) Special Agent Bruce Harkleroad (FBI), Assistant (standing)

U.S. Attorney Guy Blackwell (Eastern District of Tennessee), Special Agent Roger Holland (DCIS), Assistant U.S. Attorney John MacCoon (Eastern

District of Tennessee), Special Agent Bob Gibson (FBI), Special Agent Joe Boehr (TVA OIG), Supervisory Special Agent Gary Steed (FBI), Special

Agent Dennis Daniels (TBI), and Special Agent Andy Derryberry (TVA OIG) (sitting) Special Agent Joe Cole (EPA CID), Special Agent in Charge Jim (sitting

Johnson (EPA CID), Special Agent Randall Kizer (DOE OIG), Departmental Attorney Sprightly Ryan (DOJ), and Attorney Betty Obenshain (EPA CID)
SEMIANNUAL REPORT/APRIL 1, 1998 ~ SEPTEMBER 30, 1998

S P E C I A L F E A T U R E

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■ A family owned business contracted

with Arnold Engineering Development

Center (AEDC)—located at Arnold Air

Force Base, Tullahoma, Tennessee—to collect and dispose of

grease waste. Investigation revealed

the company’s owner directed his

employees to illegally discharge

grease waste into a manhole at a

shopping center in nearby Winchester, Tennessee. (Samples taken

from the disposal site were determined, through spectroscopic

analysis, to be identical to grease

collected at AEDC.) The owner pled

guilty to violating the Clean Water Act

and was sentenced to five months’

imprisonment followed by one year of

supervised probation, which will

include five months’ home detention.

Additionally, the individual was

ordered to pay $9,890 in restitution to

the Winchester Utility System.

■ An individual doing business as a

hazardous waste and used oil

transporter illegally discharged waste

oil into U.S. waters in Bradley

County, Tennessee. The individual

pled guilty to violating the Clean

Water Act and is awaiting sentencing. (The plea agreement stipulates

the individual will permanently cease

operation of his waste oil pumping

service.)

■ A certified wastewater plant operator,

responsible for operation of several

wastewater treatment plants in

Greene and Cocke counties (Tennessee) was required to conduct

sampling and testing to ensure

compliance with the National

Pollutant Discharge Elimination

System permits for each plant. He

was also required to submit monthly

operating reports to the Tennessee

Department of Environment and

Conservation (TDEC). The ECJTF’s

inquiry revealed he submitted false

reports to TDEC. The individual

certified on the reports he sampled

and tested water when, in fact, he

was not physically at the plants. As

a result of the task force investigation, the individual pled guilty to

violating Tennessee state law by

falsifying data he submitted to TDEC.

FBI Special Agent Bob Gibson addressing a recent

Task Force meeting in Chattanooga, Tennessee.
TVA/OFFICE OF THE INSPECTOR GENERAL

S P E C I A L F E A T U R E

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He was ordered to pay a $1,000 fine

and was sentenced to 12 months’

confinement (9 months’ suspended

after serving 90 days) and 1 year

probation.

Assistant U.S. Attorney Guy Blackwell

summarized the work of the task force

as follows.

“Investigating environmental crimes is

time and manpower intensive. It

involves hazardous and radioactive

waste and pollutants, often fraud and

false statements, and by its very nature

includes an active concealment. Issues

are often complex, and cases can turn

on the interpretation or application of a

regulation or a scientific principle or

protocol. Prosecutive successes have

been measured by the collective efforts

of each member of the task force.

Whether assembling teams for a

surveillance, executing a search

warrant, sharing expertise and resources, or planning proactive initiatives,

the task force has been the most

effective way to attack environmental

criminals. In the Eastern District of

Tennessee, the focus is on the sum of

the parts, not an individual agency,

agent, or lawyer. The collective goal is

aggressive and quality prosecutions, a

stronger state enforcement program,

increased environmental awareness,

and a cleaner and safer environment

now and for the future.” We are proud

to be a member of this task force.
SEMIANNUAL REPORT/APRIL 1, 1998 ~ SEPTEMBER 30, 1998

A U D I T S ■

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Audits are initiated from (1) the OIG

annual workplan, (2) issues identified by

the OIG subsequent to the annual

workplan, (3) issues identified by cooperative efforts with TVA management, or

(4) concerns raised by TVA management

or others. During this reporting period,

we issued 27 audit reports which

identified almost $1.8 million in questioned costs and more than $200,000 in

funds which could be put to better use

(see Appendix 1).

Summary of

Representative Audits

Our audits included performance reviews

of TVA programs, processes, and

systems, as well as compliance and

preaward audits of TVA contractors.

EFFICIENCY IN CONTROLLING

OVERTIME COSTS ACHIEVED

On July 1, 1997, TVA’s Transmission

and Power Supply (TPS) implemented

an overtime policy to better manage

and control overtime costs. At the

request of TPS management, we

assessed (1) the effectiveness of the

policy in reducing overtime costs and

(2) compliance with the policy. Our

review covered the period July 1

through December 31, 1997, and

included comparisons with the period

July 1 through December 31, 1996. In

our opinion, TPS’s overtime policy was

effective in reducing overtime costs.

We found that (1) overtime costs

decreased about 66 percent from

$3.6 million to $1.2 million, (2) overtime

reduction did not appear to negatively

affect TPS’s operational performance,

and (3) total labor costs decreased only

slightly due to increased labor rates and

bonuses. Based on the results of our

samples, we concluded that TPS’s

employees generally complied with the

overtime policy with some minor

exceptions.

IMPROVEMENTS RECOMMENDED

IN PROCUREMENT ASSISTANCE

PROGRAM

TVA contracted with a non-profit

organization to provide (1) contract

procurement assistance to small

businesses and manufacturers and

(2) special assistance and encouragement to minority- and woman-owned

firms in contracting with government

prime contractors. Under the terms of

the contract, TVA provided technical

assistance and contributed $125,000 to

the contractor annually. Our audit

covered the period October 1, 1994

through September 30, 1997. Although

TVA contracted with a specific contractor, all contract responsibilities and

financial transactions were handled by

another organization. We found several

deficiencies in contract administration
TVA/OFFICE OF THE INSPECTOR GENERAL

A U D I T S

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attributable to both the contractor and

TVA, including concerns about (1) which

organization performed under the

contract, (2) closure of the separate

interest bearing bank account,

(3) workplans and budgets, and

(4) compliance with the Single Audit Act

of 1984. We also questioned certain

expenses that were not adequately

supported by the contractor’s records

or incurred for project purposes. The

contractor and TVA management

agreed with our recommendations and

are taking steps to correct the

deficiencies.

OPPORTUNITIES FOR

IMPROVEMENT IN

ADMINISTRATION OF CONSULTING

CONTRACTS

TVA paid almost $6.9 million to a

consulting firm under six consulting

contracts since 1988 to provide managerial assessments and guidance on

human resource issues. We estimated

the firm has performed at least 900

assessments of TVA employees and

employee candidates. Our review of

four of the contracts with payments

totaling almost $5.6 million found the

following: (1) nearly $30,000 for assessments, other labor services, and travel

which were not paid in accordance with

the contract terms; and (2) opportunities

for improvement in contract

administration.

TVA management and the firm agreed

with our findings.

CONTROLS OVER ADP SYSTEM

COULD BE STRENGTHENED

TVA’s Business Information Delivery

System (BIDS) is a web-based application that processes financial and nonfinancial information from the Interactive

Variance Reporting System and other

TVA information systems into report

formats. BIDS controlled its access

security through computer software

using identifications and passwords. We

found the controls surrounding BIDS

need to be improved to adequately

protect TVA against inappropriate

disclosure of sensitive information.

Specifically, we found the following

controls need improvement: (1) access

authorization and periodic review

processes and (2) written procedures for

both the above processes. TVA

management has agreed to implement

the recommendations.

$5 MILLION CONSTRUCTION

CONTRACT REVIEWED

TVA entered into a three-year partnering

agreement for the performance of

construction and modifications work for

TVA generating plant switchyards,

substations, electrical transmission

system, and other TVA facilities. We

assessed whether the contractor
SEMIANNUAL REPORT/APRIL 1, 1998 ~ SEPTEMBER 30, 1998 10

complied with the cost provisions

involving equipment and material

charges under the contract from

March 14, 1996 through March 13,

1997, by reviewing about $2.6 million of

the $5 million in billings. We identified

net overbillings and unnecessary sales

tax expense on third-party equipment

rentals. Based on our sample results,

we estimated the total overbillings and

unnecessary sales taxes for the period

in question exceeded $200,000. TVA

management agreed to pursue (1) recovery of the overbillings and (2) a

solution to avoid unnecessary taxes.

NUCLEAR ENGINEERING

CONTRACT REVIEWED

We assessed whether the contractor

complied with the cost provisions of

contracts for startup engineering and

time and material tasks at TVA’s Watts

Bar Nuclear Plant (WBN). Of the

$20.2 million paid for these tasks, we

identified less than $100,000 in

overbillings. TVA management agreed

to pursue recovery of these overbillings.

$39 MILLION NUCLEAR DESIGN AND

ENGINEERING CONTRACT

REVIEWED

Our review of a contractor’s costs

totaling $39 million billed for design and

engineering services at WBN during the

period November 1994 through April

A U D I T S

1996 disclosed questioned costs

totaling over $900,000. We also found

potential problems concerning living

expense reimbursements which were

referred to OIG investigators for further

review. TVA management plans to

pursue recovery of the amounts

questioned.

FOSSIL PLANT EQUIVALENT

AVAILABILITY FACTOR FOUND TO

BE RELIABLE

The Government Performance and

Results Act of 1993 (GPRA) requires

government agencies to report planned

performance goals, expressed with

performance indicators. TVA submitted

26 performance goals for fiscal year

1999. Proposed GPRA changes may

require agency OIGs to verify and

validate selected data sources and

information systems used to support

performance reports and strategic

plans. One performance goal submitted for fiscal year 1999 was the Fossil

Plant Equivalent Availability Factor

(EAF). TVA uses the EAF as a measure of customer service performance.

We reviewed the process used by TVA

to calculate the EAF indicator and the

systems that provide source data for

the calculation. We found TVA’s EAF

calculation could be relied upon to

accurately indicate the EAF of TVA’s

fossil (coal-fired) plants.
TVA/OFFICE OF THE INSPECTOR GENERAL

A U D I T S

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UNRESOLVED AUDIT REPORTS WHICH WERE

ISSUED PRIOR TO APRIL 1, 1998

Listed below are audit reports we issued before this reporting period began and for

which no management decision was made by September 30, 1998.

Date Audit Why Management Decision

Issued Number Report Title Has Not Been Made

There were no audit reports in this reporting category as of September 30, 1998.
SEMIANNUAL REPORT/APRIL 1, 1998 ~ SEPTEMBER 30, 1998

I N V E S T I G A T I O N S ■

During the last six months, we substantiated allegations in 28 of the 81 investigations we closed—over 34 percent.

Our investigations resulted in over

$3.6 million in savings and recoveries,

five subjects indicted, and nine subjects

convicted. Representative investigations are highlighted below.

Summary of

Representative

Investigations

MISUSE OF TVA FUNDS

With the FBI and Kentucky State Police,

we investigated an allegation that the

former executive director of a Kentucky

non-profit corporation misappropriated

several thousand dollars. The corporation—which managed a bondassurance fund to assist minority and

female contractors—received contributions from various federal, state, and

local government agencies, including

$100,000 from TVA. As a result of our

investigation, a grand jury charged the

former executive director with fraudulently obtaining over $700,000 and

money laundering in excess of $100,000

from the fund. The grand jury indicted

the individual on the following charges:

bank fraud (1 count), money laundering

(7 counts), and criminal forfeiture

(2 counts). The individual pled guilty to

all ten counts and is awaiting

sentencing.

In a second case, our investigation

revealed a treasurer of a Western

Kentucky economic development

agency embezzled funds from a

$100,000 TVA grant. Prior to our

investigation, the individual paid the

economic development agency $10,000

for questioned expenditures. Our

inquiry, however, uncovered an inappropriate diversion of $29,225 from the

grant by the former treasurer. As a

result of our investigation, the individual

pled guilty to theft of government

property. A federal judge ordered the

individual to pay an additional $19,225 in

restitution to TVA and sentenced him to

five years’ probation, which includes

eight months’ home detention.

In a third case, as a result of our

investigation, a former senior TVA

executive and a former TVA contractor

were indicted by a federal grand jury on

20 counts of mail fraud related to

contracts for a quality management

program provided by the contractor.

(The senior executive resigned his TVA

position during August 1998.)

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TVA/OFFICE OF THE INSPECTOR GENERAL

I N V E S T I G A T I O N S

According to the indictment:

■ The contractor had never developed

a quality training program prior to

entering the TVA contract and had

no educational background in quality

management systems. When the

executive directed that TVA enter the

initial contract, the contractor was a

full-time employee of another power

company and did not have a consulting company or any employees.

■ The two individuals schemed to

defraud TVA of money by means of

false and fraudulent representations,

which included the contractor

plagiarizing quality management

training material with the executive’s

knowledge.

■ TVA was the contractor’s only client;

and between July 1991 and February

1997, TVA paid the contractor

approximately $3.6 million under five

separate contracts.

A trial date in U.S. District Court is

pending.

FALSE CLAIMS - TEMPORARY

LIVING EXPENSES (TLE)

We continued our efforts to reduce TVA

contract costs by identifying fraudulent

and ineligible TLE paid to TVA contractors. During this reporting period, our

investigations led to recoveries of over

$200,000. Specifically,

■ A former Bechtel Power Corporation

contractor employee at Browns Ferry

Nuclear Plant (BFN) entered into a

settlement agreement in connection

with alleged fraudulent TLE claims.

As a result of the settlement, the

former contractor employee will pay

the United States $125,000. TVA will

receive $99,642, which is the

disputed amount of TLE the individual

received. The individual was allowed

into a federal pretrial diversion

program.

■ A former Performance Controls

Company contractor employee at

BFN entered into a settlement

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SEMIANNUAL REPORT/APRIL 1, 1998 ~ SEPTEMBER 30, 1998

agreement in connection with alleged

fraudulent TLE claims. Under the

terms of the agreement, the individual paid the United States

$25,960. (The disputed amount of

TLE the individual received is

$17,306.)

■ Two former United Energy Services

Corporation contractor employees at

WBN were sentenced for fraudulently

obtaining TLE as follows.

A federal judge ordered one individual

to pay TVA full restitution ($13,393)

and sentenced the individual to

one year at a halfway house and

three years’ supervised release.

A federal judge ordered another

individual to pay full restitution

($36,179) and sentenced him to

3 months’ home detention,

200 hours’ community service, and

3 years’ supervised probation.

FALSE CLAIMS - OFFICE OF

WORKERS’ COMPENSATION

PROGRAM (OWCP)

During this reporting period, our Federal

Employees’ Compensation Act fraud

investigations led to recoveries and longterm savings of over $1.4 million.

Highlights of those investigative results

follow.

■ Investigation revealed a former

Sequoyah Nuclear Plant steamfitter

collected over $140,000 in federal

disability compensation without

reporting his active participation in a

trucking company owned by his wife.

(From 1994 through 1996, the

company’s gross income exceeded

$230,000.)

A jury in the Middle District of Florida

convicted the individual on five counts

of making false statements to receive

OWCP benefits. Additionally, the jury

found the individual and his wife guilty

of conspiracy in connection with his

fraudulent claims. The two are

awaiting sentencing.

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I N V E S T I G A T I O N S
TVA/OFFICE OF THE INSPECTOR GENERAL

I N V E S T I G A T I O N S

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The individual’s OWCP benefits were

terminated, resulting in long-term

savings to TVA of over $700,000.

■ Investigation revealed a former

Colbert Steam Plant steamfitter

fraudulently obtained almost $50,000

in OWCP benefits while operating

two businesses in his local community, from which he earned over

$106,000.

The former employee pled guilty to

making a false statement to obtain

OWCP benefits and is awaiting

sentencing.

The individual’s OWCP benefits were

terminated, resulting in long-term

savings to TVA of over $595,000.

EMPLOYEE MISCONDUCT

Investigation revealed two employees

accepted golf excursions and other

gratuities from a contractor doing

business with TVA, in violation of federal

ethics regulations. We also concluded

one of the individuals falsified travel

vouchers and made false statements to

the OIG. (The other individual was less

than forthcoming during our investigation.) As a result of our reports to

management, both employees received

suspensions without pay. Additionally,

our findings prompted management to

issue a written reminder to the contractor, conveying the importance of ethics

regulations as they apply to TVA

employees.

Investigation revealed an employee

claimed overtime he did not work and

also had absences from work without

taking leave. Additionally, the employee

provided false information to the OIG.

As a result of our investigation, the

individual agreed to resign his TVA

employment and provide over $9,000 to
SEMIANNUAL REPORT/APRIL 1, 1998 ~ SEPTEMBER 30, 1998 16

I N V E S T I G A T I O N S

TVA to compensate for his false overtime

claims and unapproved absences.

Our inquiry revealed an employee used

TVA time and materials, including wood

he took from his job site’s warehouse, to

build a “bow horse” (a device used in

building archery bows). During the

course of our investigation, the individual

also made false statements to the OIG.

As a result of our findings, the employee

received a suspension without pay.

Investigation revealed four coworkers

used inappropriate sexual language on

the job. Additionally, one of the employees accosted and threatened another

over a comment that was made, and

two of the employees constructed a

sexually graphic depiction in their work

area. As a result of our inquiry, all four

received suspensions without pay, their

foreman and supervisor received warning

letters, and their department management received training and coaching in

sexual harassment issues.

BACKGROUND INVESTIGATIONS

At the request of TVA management,

we continued to perform background

investigations for sensitive positions.

These investigations ensure employees

being hired for sensitive positions meet

applicable requirements. TVA saves

money by using the OIG, rather than

the U.S. Office of Personnel Management, to perform these investigations.
TVA/OFFICE OF THE INSPECTOR GENERAL

I N V E S T I G A T I O N S

17

NUCLEAR-RELATED ISSUES

At TVA management’s request, we

investigate complaints related to

Section 211 of the Energy Reorganization Act to provide factual and independent information regarding potential

employee misconduct related to

hindering the expression of nuclear

safety concerns.

During this reporting period, we investigated one case involving a complaint

filed with the Department of Labor under

Section 211. In addition, we completed

six investigations involving other nuclearrelated issues. In each nuclear-related

case we investigated, we found no

misconduct.
SEMIANNUAL REPORT/APRIL 1, 1998 ~ SEPTEMBER 30, 1998

I N V E S T I G A T I O N S

18

*Prosecutive referrals are shown at Appendix 3.

15%

21%

Resignations/

Terminations Suspensions/

Demotions

Administrative and Disciplinary Actions Since

October 1, 1992*

Total = 414

Oral/Written

Warnings

Reemployment

Flagged

18% 12%

31%

Business

Services

Transmission & Power

Supply Group

26%

6%

Fossil &

Hydro

Group

TVA Nuclear

2%

2%

9%

24%

Other

Resource

Group

Customer Service &

Marketing Group

The breakdown of the 81 closed investigations involving

TVA organizations are shown below.

34%

Counseling/

Management Techniques
19 TVA/OFFICE OF THE INSPECTOR GENERAL

I N V E S T I G A T I O N S

All Hotline Contacts During This Reporting Period

Total = 3,410

TVA/Contractor

Employees

General

Public

Former TVA

Employees

38% 51%

11%

Information

Requests

Referrals for

OIG Investigations or

Audit Action

OIG Business

Calls

Referrals to TVA

for Management Action

2%

21%

1%

76%

Nature of Calls

Referrals for OIG Investigations or Audit Action

Total = 73

Sources of Calls

Raising Concerns
SEMIANNUAL REPORT/APRIL 1, 1998 ~ SEPTEMBER 30, 1998

In addition to conducting audits and

investigations, our office continues to

perform special projects upon request

by our customers, primarily the Congress, the Board of Directors, and TVA

executive management. During this

reporting period, we conducted 11 such

projects which identified over $14.7 million in potential savings.

TVA’S INVESTMENT RECOVERY

OPERATIONS

At the request of TVA Procurement, we

assessed TVA’s Investment Recovery

Center (HIRC) operations and General

Investment Recovery (GIR) operations

related to (1) controls to mitigate

business risks and (2) compliance with

prescribed practices. HIRC is responsible for warehousing and handling

materials for redeployment, shared

inventories, and auxiliary storage. GIR is

responsible for non-nuclear surplus

materials that are available for redeployment or sale. We found that both

organizations are meeting their missions

and are generally aware of the risk

areas we identified. We suggested

additional improvements in certain areas

to further reduce risks. TVA Procurement outlined an action plan to address

the issues that we identified. We

concurred with management’s planned

actions.

REVIEW OF TVA VISA GOLD CARD

PROGRAM

We reviewed selected TVA Visa Gold

Card charges for the period from May

1996 through June 1998. This review

resulted in recoveries of over $2,000

and two referrals for investigation. Our

review also noted concerns about

(1) repeated payment of sales taxes on

purchases, (2) compliance with per diem

requirements, and (3) little consistency in

review and documentation methods.

We plan to address these concerns in a

comprehensive program review next

fiscal year.

URANIUM MILL RECLAMATION

COSTS

The Department of Energy (DOE)

reached a favorable decision regarding

TVA’s claim for reimbursement of

uranium mill tailings reclamation costs.

This brings to a close OIG support for

TVA’s claim effort that has been

ongoing since 1994. TVA originally

claimed reimbursement for more than

$24.7 million in 1994, and DOE disallowed about $14.7 million of that

claimed amount. DOE’s recent

favorable decision reinstated the

previously disallowed amount. DOE

cited two letters furnished by the OIG as

a partial basis for the favorable decision.

S P E C I A L P R O J E C T S ■

20
21 TVA/OFFICE OF THE INSPECTOR GENERAL

S P E C I A L P R O J E C T S

FUEL USED BY RIDESHARE

PROGRAM REVIEWED

We reviewed the use of fuel cards by

rideshare van drivers. Our review of fuel

transaction information identified two

opportunities for management to

enhance the business operations of the

rideshare program. First, fuel transaction data should be more complete

which would facilitate monitoring fuel

purchase irregularities. Second,

program monitoring activities should be

enhanced. TVA management is

implementing our suggestions.

SUPPLY CHAIN REDESIGN TEAM

PARTICIPATION

The OIG participated on the Supply

Chain Redesign team by reviewing the

team’s data flow diagrams. Our review

was limited to an overview of the

deliverables from an internal control and

audit perspective. Our concerns were

communicated to the team leader, and

the team incorporated them into the

final process.
SEMIANNUAL REPORT/APRIL 1, 1998 ~ SEPTEMBER 30, 1998

■ A P P E N D I C E S
TVA/OFFICE OF THE INSPECTOR GENERAL

OIG AUDIT REPORTS ISSUED DURING

THE SIX-MONTH PERIOD ENDING SEPTEMBER 30, 1998

The following table summarizes final audit reports issued by the OIG from April 1 through September 30, 1998.

FUNDS

DATE REPORT QUESTIONED UNSUPPORTED TO BE PUT TO

ISSUED NUMBER REPORT TITLE COSTS COSTS BETTER USE

4/1/98 96-028P-03 Visions Five Group - $30,778

Contract TV-85523V

4/8/98 98-024S Shook & Fletcher - Preaward

4/24/98 98-018S Applied Decision Analysis, Inc. 36,120 $284 $58,000

4/28/98 98-017C Williams Union Boiler - Contract

96P6A-188004 Craft Labor

4/29/98 98-019S Vanguard Research, Inc. 155,711

and Peat, Inc. - Preaward

5/4/98 98-020S Strategic Decisions, Inc.

5/20/98 98-047F Fossil (Coal-Fired) Plant Equivalent

Availability Factor

5/29/98 97-044C Millennium Computer Technology 11,783

5/29/98 98-005F Tennessee Valley Procurement 18,823 14,076

Center, Inc.

6/9/98 97-066S BTG, Inc.

6/12/98 98-041C Fitzgerald & Company 5,400

6/22/98 98-026F Controls In Bids That Protect Sensitive

Information From Disclosure to

Application Users

7/10/98 97-022S RHR International Company 28,970

7/24/98 98-022C-04 Coopers & Lybrand -

Chicago Office

7/28/98 97-024C Westinghouse Electric Corporation - 59,239

Contract 92NNP-79283A

7/28/98 97-025C Westinghouse Electric Corporation - 33,189

Contract 94NNX-112361

8/4/98 98-036S Aerotek Engineering Services

Appendix 1

Page 1 of 2
SEMIANNUAL REPORT/APRIL 1, 1998 ~ SEPTEMBER 30, 1998

FUNDS

DATE REPORT QUESTIONED UNSUPPORTED TO BE PUT TO

ISSUED NUMBER REPORT TITLE COSTS COSTS BETTER USE

8/11/98 96-037C-01 Raytheon Engineers &

Constructors, Inc. - Contract

TV-82466V (3/1/92 through

10/31/94)

8/27/98 97-045C The L. E. Myers Company $232,262 $107,998

8/27/98 98-023S Meta-Power, Inc. 299,029 404

9/2/98 98-070C Law Engineering and $6,200

Environmental Services -

Preaward

9/3/98 96-037C-02 Raytheon Engineers & 919,409 589,088

Constructors, Inc. - Contract

TV-82466V (11/1/94 through

4/30/96)

9/14/98 98-044C Williams Union Boiler - Contract 47,154

96P6A-188004 - Staff Labor

9/18/98 98-032P Transmission and Power Supply’s

Overtime Policy

9/18/98 98-046C McDaniel Fire Systems 2,323

9/21/98 97-059C TSW International, Inc. 44,668

9/21/98 98-039C Midpoint International Corporation

TOTAL 27 $1,769,147 $711,850 $219,911

Appendix 1

Page 2 of 2
TVA/OFFICE OF THE INSPECTOR GENERAL

OIG’S REPORT ON MANAGEMENT DECISIONS FOR THE

SIX-MONTH PERIOD ENDING SEPTEMBER 30, 1998

The following Tables I and II summarize management decisions made by TVA management on OIG

recommendations contained in final audit reports. The tables reflect amounts which were questioned and

recommended to be put to better use and track the disposition of these amounts through management decision.

TABLE I

TOTAL QUESTIONED AND UNSUPPORTED COSTS

NUMBER QUESTIONED UNSUPPORTED

AUDIT REPORTS OF REPORTS COSTS COSTS

A. For which no management

decision has been made by

the commencement of the period 1 $585,244 $65,854

B. Which were issued during

the reporting period 14 1,769,147 711,850

Subtotal (A + B) 15 $2,354,391 $777,704

C. For which a management

decision was made during

the reporting period 14 2,309,723 777,704

1. Dollar value of

disallowed costs 11 1,656,307 711,850

2. Dollar value of

costs not disallowed 4 653,416 65,854

D. For which no management

decision has been made by

the end of the reporting

period 1 44,668 0

E. For which no management

decision was made within

six months of issuance 0 0 0

* The total number of reports differs from the sum of C.1 and C.2 when the same reports contain both costs

disallowed and not disallowed by management.

*

*

Appendix 2

Page 1 of 2
SEMIANNUAL REPORT/APRIL 1, 1998 ~ SEPTEMBER 30, 1998

TABLE II

FUNDS TO BE PUT TO BETTER USE

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 6 $6,392,592

B. Which were issued during

the reporting period 3 219,911

Subtotal (A + B) 9 $6,612,503

C. For which a management

decision was made during

the reporting period 9 6,612,503

1. Dollar value of

disallowed costs 6 5,168,625

2. Dollar value of

costs not disallowed 5 1,443,878

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

* The total number of reports differs from the sum of C.1 and C.2 when the same reports contain both costs

disallowed and not disallowed by management.

Appendix 2

Page 2 of 2

*

*
TVA/OFFICE OF THE INSPECTOR GENERAL

INVESTIGATIVE REFERRALS AND PROSECUTIVE RESULTS

INVESTIGATIVE REFERRALS SUBJECTS RESULTS THIS PERIOD

Subjects referred to U.S. Attorneys 13 5 Indicted

9 Convicted

6 Referrals Declined

Subjects referred to other agencies 5 OWCP terminated benefits for

for investigative or administrative action two individuals, resulting in longterm savings of $1,390,775.

TOTAL 18

Appendix 3

Page 1 of 1
SEMIANNUAL REPORT/APRIL 1, 1998 ~ SEPTEMBER 30, 1998

November 4, 1998

TO THE UNITED STATES CONGRESS:

We are providing TVA’s Report on Final Actions on Inspector General audit recommendations, in

keeping with Section 5(b) of the Inspectors General Act of 1978, as amended.

The members of the TVA Board appreciate the work of the Inspector General’s office in helping TVA

improve its efficiency, productivity, and competitiveness as we strive to meet our goals and position TVA

to compete in the global marketplace of the 21st century.

Sincerely,

Craven Crowell

Enclosure

Appendix 4

Page 1 of 4
TVA/OFFICE OF THE INSPECTOR GENERAL

TVA MANAGEMENT’S REPORT ON FINAL ACTIONS FOR THE SIX-MONTH

PERIOD ENDING SEPTEMBER 30, 1998

The following Tables I and II summarize final action taken by management on OIG audit reports. The tables

reflect amounts which were agreed to by management and track the disposition of these amounts through

final action. Table III contains the explanations by audit report for final actions not taken within one year of the

management decision dates.

TABLE I

DISALLOWED COSTS

NUMBER AMOUNTS

OF AGREED TO BY

AUDIT REPORTS REPORTS MANAGEMENT

A. For which final action by

management had not been

taken by the commencement

of the period 10 $3,003,602

B. On which management decisions

were made during the reporting

period 14 1,656,307

Subtotal (A + B) 24 $4,659,909

C. For which final action was

taken by management during the

reporting period 12 300,359

1. Amounts that were

recovered by management 12 110,276

2. Amounts that were not

recovered by management 6 190,083

D. For which management has

taken no final action by

the end of the reporting period 12 4,359,550

* The total number of reports differs from the sum of C.1 and C.2 when a final audit action includes both

amounts recovered and amounts not recovered for a single audit report.

*

*

Appendix 4

Page 2 of 4
SEMIANNUAL REPORT/APRIL 1, 1998 ~ SEPTEMBER 30, 1998

TABLE II

RECOMMENDATIONS THAT FUNDS BE PUT

TO BETTER USE

NUMBER AMOUNTS

 OF AGREED TO BY

AUDIT REPORTS REPORTS MANAGEMENT

A. For which final action by

management had not been

taken by the commencement

of the period 1 $1,408,000

B. On which management decisions

were made during the reporting

period 9 5,168,625

Subtotal (A + B) 10 $6,576,625

C. For which final action was

taken by management during

the reporting period 9 5,168,625

1. Dollar value of

recommendations

implemented by

management 9 135,533

2. Dollar value of

recommendations

not implemented by

management 5 5,033,092

D. For which management has

taken no final action by

the end of the reporting period 1 1,408,000

* The total number of reports differs from the sum of C.1 and C.2 when the same reports contain both

recommendations implemented and recommendations not implemented for a single audit report.

Appendix 4

Page 3 of 4

*

*
TVA/OFFICE OF THE INSPECTOR GENERAL

TABLE III

EXPLANATIONS FOR FINAL ACTIONS NOT TAKEN

AUDIT REPORT DATE DISALLOWED FUNDS PUT TO EXPLANATION FINAL

NUMBER ISSUED COSTS BETTER USE ACTION NOT TAKEN

Review of Environmental 1/3/97 N/A N/A TVA has finalized a new

Restricted Awards List procedure which will be issued

Contracting Process to all organizations.

96-056P

Review of Contractor’s 6/6/96 $1,073,291 $1,408,000 TVA is assessing options.

Financial Conditions

96-035P

N/A - Not Applicable

NOTE: This table excludes two reports in judicial appeal according to the reporting guidelines of the

Inspector General Act.

Appendix 4

Page 4 of 4
SEMIANNUAL REPORT/APRIL 1, 1998 ~ SEPTEMBER 30, 1998

OIG REPORTING REQUIREMENTS

Information required by the Inspector General Act of 1978, as amended, is included in this semiannual report as

indicated below.

Section 4(a)(2) Review of Legislation and Regulations *

Section 5(a)(1) Significant Problems, Abuses, and Pages 5-21

Deficiencies

Section 5(a)(2) Recommendations With Respect to Pages 5-21

Significant Problems, Abuses, and

Deficiencies

Section 5(a)(3) Recommendations Described in Previous None

Semiannual Reports on Which Corrective

Action Has Not Been Completed

Section 5(a)(4) Matters Referred to Prosecutive Appendix 3

Authorities and the Prosecutions

and Convictions That Have Resulted

Sections 5(a)(5) Summary of Instances Where Information **

and 6(b)(2) Was Refused

Section 5(a)(6) Listing of Audit Reports Appendix 1

Section 5(a)(7) Summary of Particularly Significant Reports Pages 8-21

Section 5(a)(8) Status of Management Decisions for Appendix 2

Audit Reports Containing Questioned Costs

Section 5(a)(9) Status of Management Decisions for Appendix 2

Audit Reports Containing Recommendations

That Funds Be Put to Better Use

Section 5(a)(10) Summary of Unresolved Audit Reports Page 11

Issued Prior to the Beginning of the

Reporting Period

Section 5(a)(11) Significant Revised Management Decisions ***

Section 5(a)(12) Significant Management Decisions With ****

Which the Inspector General Disagreed

* There were no significant legislation or regulations reviewed during this reporting period.

** There were no instances where information or assistance was unreasonably refused or not provided.

*** There were no significant revised management decisions.

**** There were no significant management decisions with which the Inspector General disagreed.

Appendix 5

Page 1 of 1
TVA/OFFICE OF THE INSPECTOR GENERAL

FOR SEMIANNUAL REPORTING PERIODS

SEPT 30, MAR 31, SEPT 30, MAR 31, SEPT 30,

1998 1998 1997 1997 1996

ANNUAL BUDGET (In Millions of Dollars) 7.3 7.3 7.3 7.3 7.3

CURRENT STAFFING 83 81 83 86 94

AUDITS & SPECIAL PROJECTS

AUDITS IN PROGRESS

Carried Forward 46 40 34 41 42

Started 34 50 46 29 50

Canceled (13) (14) (10) (14) (6)

Completed (27) (30) (30) (22) (45)

In Progress at End of Reporting Period 40 46 40 34 41

AUDIT RESULTS (Thousands)

Questioned Costs $1,769 $1,191 $552 $602 $2,555

Disallowed by TVA 1,656 636 530 542 2,756

Recovered by TVA 110 2,029 434 434 1,167

Funds to Be Put to Better Use $220 $2,359 $10,585 $1,671 $28,276

Agreed to by TVA 5,169 696 5,707 5,262 31,576

Realized by TVA 136 696 1,078 4,494 22,950

SPECIAL PROJECT RESULTS

Completed 11 13 24 15 19

Cost Savings Identified/

 Realized (Thousands) $14,704 $843 $5,700 $38,200 $3,000

INVESTIGATIONS

INVESTIGATION CASELOAD

Carried Forward 142 139 157 157 153

Opened 78 78 56 96 110

Closed 81 74 77 93 105

In Progress at End of Reporting Period 140 144 139 160 158

INVESTIGATIVE RESULTS (Thousands)

Recoveries $284 $946 $481 $2,439 $2,364

Savings 3,388 645 9 2,377 3,374

ADMINISTRATIVE AND

DISCIPLINARY ACTIONS

Recommended (# of Cases) 20 24 12 21 24

Actions Taken (# of Subjects) 22 12 14 15 17

Counseling/Management

 Techniques (# of Cases) 8

PROSECUTIVE ACTIVITIES (# of Subjects)

Referred 12 11 15 22 17

Indicted 5 2 7 1 1

Convicted 9 6 3 8 12

* Adjusted from previous semiannual reports.

** Category added to Highlights this reporting period.

* * * * *

H I G H L I G H T S

**
OFFICE OF THE INSPECTOR GENERAL OF THE TENNESSEE VALLEY AUTHORITY

400 WEST SUMMIT HILL DRIVE

KNOXVILLE, TENNESSEE 37902-1499