Office of the Inspector General

Tennessee Valley Authority

Semiannual Report

April 1, 2014 - September 30, 2014
2 TVA OIG Semiannual Report

TVA Power Generation Six Months Ended September 30, 2014

(in millions of kilowatt hours)

• Coal - 62,525

• Nuclear - 53,778

• Hydroelectric - 13,228

• Natural gas and/or oil-fired - 12,615

• Nonhydro renewable resources - 5*

Nonhydro

renewable

resources

Hydroelectric <1%

9%

Natural gas 

and/or oil-fired

9%

Coal-fired

44%

Nuclear

38%

*Operation and maintenance issues reduced the available renewable 

 generation during 2014, 2013, and 2012 from several facilities, 

 including those utilizing methane, solar, and wind.
TVA OIG Semiannual Report 3

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

Special Feature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Executive Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Evaluations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Legislation and Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Appendix 1 – Index of Reporting Requirements Under the Inspector General Act . . . . 49

Appendix 2 – Audit and Evaluation Reports Issued . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Appendix 3 – Audit and Evaluation Reports Issued with Questioned and

 Unsupported Costs and Recommendations for Better Use of Funds . . . . 52

Appendix 4 – Evaluation Reports with No Management Decision . . . . . . . . . . . . . . . . 54

Appendix 5 – Audit and Evaluation Reports with Corrective Actions Pending . . . . . . . 55

Appendix 6 – Investigative Referrals and Prosecutive Results . . . . . . . . . . . . . . . . . . 59

Appendix 7 – Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

Appendix 8 – Government Contractor Audit Findings . . . . . . . . . . . . . . . . . . . . . . . . 61

Appendix 9 – Peer Reviews of the TVA OIG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

Appendix 10 – Peer Reviews Conducted of Another OIG . . . . . . . . . . . . . . . . . . . . . . 63

Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

Abbreviations and Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Table of Contents

Generating Power Through People
4 TVA OIG Semiannual Report

In this semiannual period, 

our audit, evaluation, and 

investigative activities identified 

more than $3.3 million in funds 

that could be put to better use, 

questioned costs, recoveries, 

savings and penalties as well as 

opportunities for TVA to improve 

its programs and operations. 

Some of the highlights include: 

• A preaward review that 

identified more than half a 

million dollars TVA could 

save in contract negotiations 

for valley-wide engineering 

services and four contract 

compliance audits that 

identified more than 

$2.6 million in overbillings.

• Audits of TVA’s invoice 

preparation process for billing 

local power companies for 

power subsequently delivered 

to end-use customers 

and assignment of official 

stations for travel purposes 

which identified areas for 

improvement.

• Audits that identified areas 

for improvement in TVA’s 

information technology (IT) 

environment around cyber 

security at a TVA facility, 

procuring IT equipment, and 

implementation of a human 

resources application as well 

as two other reviews related to 

security.

• Procedures pertaining to TVA’s 

green energy pricing as well 

as an evaluation that identified 

improvement opportunities 

in TVA’s Enterprise Risk 

Management (ERM) 

program and an audit of the 

effectiveness of TVA’s energy 

services contracts for federal 

customers. 

• Ten evaluations including 

a review of the Kingston 

Recovery Project more than 

five years after the coal ash 

spill at the Kingston Fossil 

Plant and a review of TVA’s 

coal combustion product 

management which found TVA 

has met or was in the process 

of meeting its commitments 

in both areas. In addition, 

I am pleased to present our report to Congress for the period April 1, 2014, 

to September 30, 2014. As always, the Office of the Inspector General 

(OIG) directs its resources to conduct audits and investigations based on 

the ranking of risks to the Tennessee Valley Authority (TVA). Whether it 

is cyber security issues, contracts with vendors that pose loss of funds, or 

TVA employees or contractors engaging in illegal activities, the OIG works 

with TVA management to reduce the harm to TVA. 

In our feature article for this semiannual report, we discuss the importance 

of a healthy organizational culture at TVA and how culture poses a 

potential risk. We discuss TVA’s efforts to assess its culture over the years 

and the attempts to sustain a more engaged workforce. In this feature 

article, we also announce the beginning of OIG reviews in January 2015 to 

assess organizational effectiveness at TVA. These reviews are designed 

to help TVA management assess how well they are doing both in meeting 

operational goals and in building a healthy culture. Given the significant 

challenges TVA faces, knowing how the level of employee engagement is 

affecting getting the desired results is imperative.

Message from

the Inspector General
TVA OIG Semiannual Report 5

reviews of River Operations 

(RO) and fossil equipment 

in poor condition, coal plant 

preventive maintenance, fossil 

fire protection, and nuclear 

groundwater all identified 

improvement opportunities.

• Completion of prosecution of 

a former TVA Vice President 

in Nuclear Operations and the 

sentencing of a TVA contractor 

indicted on five counts of wire 

fraud. Investigative activity 

also resulted in more than 

$200,000 in projected savings, 

restitution, and fines/penalties/

fees.

We have appreciated working 

with the Chair of the TVA Board 

of Directors Joe Ritch during his 

first term. We look forward to 

continuing to work with him and 

TVA Board members toward our 

mutual purpose of making TVA 

better.

Richard W. Moore

Inspector General

Watts Bar Nuclear Plant
6 TVA OIG Semiannual Report

SPECIAL FEATURE
TVA OIG Semiannual Report 7

Since its inception in 1933, TVA has focused on improving the quality of life for people in its seven-state region by 

delivering reliable, low-cost electricity, environmental stewardship, river management, technological innovation, and 

economic development across the region. Building the infrastructure, developing products to help farmers increase their 

yield, taming the waterways, and attracting industries to the Valley were formidable tasks to say the least. TVA’s Board 

and management formulated plans and its workforce delivered the results. Eighty years later, while the strategies and 

goals have changed, some things have remained the same—TVA’s Board and management define the strategies and 

goals and depend on its workforce to deliver the results. 

Special Feature: 

Generating Power through People

In this article, we are focusing on 

TVA’s ability and plans to engage 

the people that generate the 

power and carry out the mission 

of TVA. We do this, in part, 

because we accept the general 

proposition that how effective 

TVA is as an organization is 

dependent on the extent to 

which TVA management engages 

the hearts and minds of its 

workforce. We will examine: 

(1) TVA’s history of attempting 

to engage its workforce, 

(2) the risk posed by poor 

organizational health to TVA’s 

ability to accomplish its mission 

long term, and (3) the role and 

responsibilities of the OIG in 

analyzing TVA’s organizational 

effectiveness and reporting our 

findings. 

TVA’s people have proven to be 

remarkably resilient. Over the 

last ten years, TVA has had seven 

restructurings, with three of those 

being major reorganizations. The 

TVA workforce continues to pivot 

to respond to new challenges 

placed before them by the 

evolving nature of their service 

functions and by TVA leaders. 

Those leaders often come into 

TVA without a perspective on 

what previous leaders have asked 

those employees to do. If TVA 

management adheres to the 

belief that they must depend on 

employees to execute their new 

strategies to accomplish TVA’s 

mission, the interdependence 

between management and 

employees requires a high 

degree of respect, trust, 

accountability, and safe dialogue. 

Going forward, the OIG will 

be reporting on how TVA is 

doing in building a team based 

upon those principles that TVA 

acknowledges are key to building 

a productive workforce that gets 

results. 

The Emerging Risk

The connection between an 

engaged work force and desired 

organizational results has been 

the focus of much academic 

study over the last 30 years or 

so. Generally, there has been 

a growing consensus that the 

more engaged employees 

are, the more likely they are to 

contribute positively to their 

organization’s goals. Much of 

the study in this area focuses 

on what is commonly referred 

to as “organizational culture.”1

 

Organizations (including TVA 

as we will see) have recognized 

the importance of investing in 

people and have at times spent 

inordinate amounts of money 

trying to “change the culture.” 

This has historically been a poor 

investment according to studies 

that show most change efforts fail 

for various reasons.2

 

The Chartered Institute of Internal Auditors (CIIA) states: “There is no clear-cut agreement on the definition of organisational culture but it is commonly 

interpreted as ‘the way we do things around here,’” citing Terrence E. Deal and Allan A. Kennedy, Corporate Cultures: The Rites and Rituals of Corporate Life, 

New York, 1982, https://www.iia.org.uk/media/598939/0805-iia-culture-report-1-7-14-final.pdf. Another definition cited by the CIIA refers to organizational 

culture as “the taken-for-granted assumptions and behaviours that make sense of people’s organisational context and therefore contributes to how 

groups of people respond and behave in relation to issues they face,” citing Gerry Johnson et al, Exploring Strategy, 10th ed., 2014, https://www.iia.org.uk/

media/598939/0805-iia-culture-report-1-7-14-final.pdf.

Michael Beet and Nitin Nohria, Cracking the Code of Change, Harvard Business Review, May 2000, http://hbr.org/2000/05/cracking-the-code-of-change/

ar/1.

1

2
8 TVA OIG Semiannual Report

The work of the OIG shows 

that TVA has fallen into this 

same pattern; extensive effort 

and money spent with few 

sustainable results. From a 

“good government” perspective, 

TVA stakeholders might 

genuinely wonder, “why?” We 

hope to shed some light on that 

question.

Given the acknowledged 

importance of a healthy 

organizational culture, you 

might think that internal auditors 

and inspectors general would 

have been auditing this area 

for the last 30 years or so. We 

haven’t. Culture and its impact 

on organizational effectiveness 

is a relatively new concept in 

the auditing arena, although it 

continues to gain recognition as 

a significant auditable risk. For 

example, President and Chief 

Executive Officer of the Institute 

of Internal Auditors, Richard 

Chambers, recently stated: 

When I think about how 

the role of internal auditing 

is evolving, I am struck by 

the diversity of issues we 

address. Internal auditors 

deal with an ever-expanding 

portfolio of challenges that 

encompass operational risk, 

strategic decision-making, 

compliance, technology 

vulnerabilities, security 

threats, fraud prevention and 

detection, environmental risks, 

disaster preparedness . . . the 

list goes on and on. Even 

once-unthinkable subjects 

like corporate culture are now 

subject to audit. This is as it 

should be. We can’t deliver 

fully effective risk-based audit 

services if we ignore critical 

issues, such as a toxic corporate 

culture.3

Additionally, in September 2014, 

the Corporate Executive Board 

Corporate Executive Board Audit 

Leadership Council released its 

2015 Audit Plan Hot Spots, which 

identified and analyzed the top 

ten emerging issues that audit 

organizations will focus on during 

2015. One of these issues is the 

impact of organizational culture 

on a company’s “risk culture.” 

Specifically, there is growing 

recognition by regulators that 

“employee behaviors – including 

their comfort in reporting issues 

and the impact of their biases 

on decision making – is directly 

related to the quality of risk 

management.”4

 

The reality is that the TVA OIG 

has been auditing “culture” at 

TVA for a long time, but our 

reports have tended to focus 

on the operational processes 

rather than the dynamics of, for 

example, employee engagement. 

In hindsight, there are few reports 

that the OIG does that do not 

contain at least some cultural 

element. We have gradually 

come to recognize that culture 

is a risk that touches virtually any 

audit or evaluation we perform. 

Our recommendations in previous 

reports have focused on better 

processes for TVA but have often 

stopped short of addressing 

underlying culture problems. In 

all likelihood, a better operational 

process recommended by 

the OIG to TVA management 

without consideration of the 

potential underlying dynamics 

of the TVA team charged with 

3

 Richard Chambers, Auditing the Organizational Culture: A New Frontier for Internal Audit, July 2014, https://iaonline.theiia.org/auditing-the- 

 organizational-culture. 4 The Corporate Executive Board Audit Leadership Council, 2015 Audit Plan Hot Spots, September 2014, p. 14.
TVA OIG Semiannual Report 9

implementing that new process 

was not as helpful as it could have 

been. In our office, we constantly 

implore each other to “make TVA 

better.” We now recognize that 

to do that we have to be more 

cognizant about assessing the 

cultural elements that impact TVA’s 

operational performance.

For example, in fiscal year 

(FY) 2014, we assessed the 

effectiveness of the Enterprise Risk 

Management (ERM) organization’s 

role within TVA’s overall risk 

management program. As part 

of this evaluation, we summarized 

prior audits and evaluations 

performed by our office5

 related 

to risks identified and assessed at 

the Strategic Business Units (SBU) 

and/or Business Units (BU) level. 

Although we found improvements 

were made to the ERM program 

since the last OIG inspection in 

2008, we also identified areas 

where the ERM program could be 

strengthened. One of these areas 

related to TVA’s risk management 

culture. 

Risk management culture refers 

to the way a company, through 

its leaders and employees, thinks 

about and manages risks. For 

example, an organizational 

culture where employees are not 

encouraged to bring up issues 

or where employees experience 

retaliation for doing so increases 

the likelihood that potentially 

significant risks will not be 

addressed. Similarly, leaders 

who are perceived to not hold 

their employees accountable 

could increase the risk that their 

employees will not proactively 

identify and adequately manage 

significant risks. 

As part of our audit, we found 

that TVA’s risk management 

culture was not fully embedded 

throughout the organization and 

that the importance of the ERM 

process may not have been fully 

appreciated and/or understood 

by SBU/BU personnel responsible 

for completing risk assessments. 

In addition, there was significant 

leadership turnover in the 

ERM group since 1999, which 

could have affected the level of 

employee engagement. Doubt 

about “who is in charge” can 

dampen employee enthusiasm for 

a new initiative. This can increase 

the likelihood that a significant risk 

will not be identified early enough 

to prevent or mitigate it.

Perhaps nothing makes the 

case for the importance of 

understanding the culture of 

an organization more than 

the Kingston coal ash spill of 

2008. In the OIG report6

 on this 

environmental disaster, we noted 

both the process failures and the 

culture failures that contributed to 

this catastrophic event. As cited in 

our report, TVA culture relegated 

ash to the status of garbage at a 

landfill rather than treating it as a 

potential hazard to the public and 

the environment. These attitudes 

resulted in culture hitting the 

bottom line for TVA both in terms 

of money and reputation. The 

TVA Board demanded a culture 

change initiative to address both 

the process issues and the culture 

issues by bringing in McKinsey & 

Company (McKinsey) to design 

the program and to implement it 

across TVA.

 

What the TVA Board implicitly 

acknowledged by addressing 

culture in relation to the coal ash 

spill was that there was, in fact, a 

connection between employee 

attitudes and corporate risk. 

Unfortunately, as we point out in 

this article, TVA’s management 

of the effort to change the 

culture through McKinsey’s work 

was compromised by a number 

of factors. TVA spent millions 

of dollars and implemented 

myriad process changes, but it is 

debatable whether TVA’s culture 

is less risky today than it was in 

2008 when the Kingston coal 

ash spill occurred. It is simply an 

unknown. While TVA has excelled 

at rectifying the physical damage 

around the Kingston plant, 

the same success in rebuilding 

an engaged workforce is less 

apparent.

Fortunately, TVA’s current 

management appears cognizant 

of both TVA’s history in attempting 

to engage its workforce and 

5 These audits and evaluations were conducted in the past three years.

6 Inspection Report 2008-12283-02, Review of the Kingston Fossil Plant Ash Spill Root Cause Study and Observations About Ash Management, July 23, 2009.
10 TVA OIG Semiannual Report

what must be done to build an 

interdependent team to achieve 

TVA’s mission. This is a long-term 

effort that to be successful must 

be sustained beyond the tenure 

of the current TVA leadership. 

The OIG’s work going forward 

will report on the status of these 

efforts. 

Culture Change at TVA

Culture Change is Personal

Today, TVA’s organizational health 

is more relevant than ever. As 

we noted earlier, the actions and 

behaviors of TVA’s employees are 

a manifestation of the state of 

TVA’s organizational health, and 

a healthy organization is more 

likely to survive and be successful 

than one with deficiencies. 

At its core, TVA’s employees 

determine, to a large extent, 

whether TVA will be successful in 

its future endeavors. Ultimately, 

good culture can result if 

employees have confidence 

that management will act and 

speak in ways consistent with 

good leadership and challenge 

management when these 

behaviors are not exhibited. 

Improved culture and employee 

and organizational productivity 

can increase management’s 

motivation to embrace and 

sustain good leadership 

behaviors. Thus, there is a 

symbiotic relationship between 

management and employees—

both groups are responsible for 

achieving good culture, with each 

group benefitting from the other 

and providing the incentive for 

the other group to sustain it.

Robert E. Quinn, an expert 

on organizational change and 

effectiveness, in his book Deep 

Change, Discovering the Leader 

Within, stated: 

Deep change requires more 

than the identification of the 

problem and a call for action. 

It requires looking beyond 

the scope of the problem and 

finding the actual source of 

the trouble. The real problem 

is frequently located where 

we would least expect to find 

it, inside ourselves. Deep 

change requires an evaluation 

of the ideologies behind the 

organizational culture...Culture 

changes start with personal 

change. We become change 

agents by first altering our own 

maps. Ultimately, the process 

returns us to the “power of 

one” and the requirement 

of aligning and empowering 

oneself before successfully 

changing the organization.7

 

If this is true, no culture change 

initiative will be successful if the 

focus is on anything other than 

changing individual employee 

attitudes and behaviors. For 

Kingston Fossil Plant

7 Robert E. Quinn, Deep Change, Discovering the Leader Within, John Wiley & Sons, Inc., San Francisco, 1996, p. 103.
TVA OIG Semiannual Report 11

example, efforts to “change 

the company,” but which let 

key executives opt out of any 

change initiative, are doomed 

to fail. Our review of TVA 

history indicates this too is a 

pattern in TVA change efforts. 

Employees who do not see their 

manager’s behavior change 

are clever enough to figure out 

that the “change initiative” is 

about “fixing” the employees 

as opposed to building a 

committed team starting with the 

managers. 

Snapshots from the Field

Since the creation of our office in 

1985, the OIG, through its audits, 

evaluations, and investigations, 

has provided “snapshots” of 

TVA’s culture that have been 

sometimes directly referred to as 

“culture” but, more often than 

not, labeled as “leadership” or 

“process control” issues. As a 

result, the OIG has been in a 

position to chronicle, although 

indirectly, culture shifts at TVA. 

We should say at the outset 

that while conducting numerous 

interviews of TVA employees 

we found pockets of great 

culture with examples of sterling 

leadership. These islands of 

engaged employees getting 

great results emphasize the fact 

that there is no single “TVA 

culture.” Individual leaders in 

organizations can and do make 

a profound difference despite 

whatever else is going on in the 

organization. This actually bodes 

well for advancing the current 

TVA leadership’s commitment 

to enlisting support for specific 

values and behaviors in the 

workplace. Unfortunately, the 

OIG interviews of TVA employees 

over the years also suggest that 

those pockets of good culture in 

TVA historically were outliers. 

In recent history, TVA has 

gone through three major 

organizational health initiatives. 

• The Total Quality (TQ) 

movement, which ran from 

1990 through 1997, focused 

primarily on problem solving 

and customer relations. 

• Strategic Teamwork for Action 

and Results (STAR) 7 was 

implemented in 1996, with the 

last formal training conducted 

in 2007. STAR 7 goals 

were to provide a common 

understanding about TVA’s 

mission, goals, and values; 

strengthen the TVA workforce 

as a team; and enable the 

workforce to adapt to rapid 

change. 

• Finally, in 2009, TVA 

implemented the 

Organizational Effectiveness 

Initiative (OEI), led by McKinsey 

consultants, which attempted 

to remediate the issues 

identified after the Kingston 

ash spill in December 2008. 

We observed a pervasive theme 

whether the change effort was 

the TQ movement, STAR 7, or 

OEI. Employees seemed to 

have watched TVA leadership 

carefully and concluded that 

the change effort must not be 

authentic because they didn’t see 

individual managers changing. 

Granted this may have been selfserving justification by employees 

to not be more accountable, but 

the result was the same. Trust 

remained low and the change 

effort largely failed. In the past 

there have been occasions 

where employees believed 

(rightly or wrongly) that while 

TVA management appeared to 

be supporting the new program 

with their words, their actions 

suggested that they were 

“opting-out” of organizational 

health change efforts and without 

consequence. 

One recent review by the OIG 

demonstrates how management 

sometimes unintentionally 

projects a lack of respect for 

its employees with lingering 

effects. Several years ago, TVA 

management, in an attempt 

to improve productivity and 

performance, negatively 

impacted the culture in at least 

one TVA business unit due 

to TVA management’s lack of 

oversight of the consultant 

leading the effort. The 

employees felt disrespected 

by management due to the 

perceived adverse treatment 
12 TVA OIG Semiannual Report

by the consultant performing 

the work. The consultant in 

an effort to boost productivity 

tracked what they called “lost 

time” such as lunch and breaks. 

They also started “scoring” 

employees’ performance without 

the employees’ supervisors 

explaining why the consultants 

were following the employees 

around. This basic lack of 

consideration for employees was 

interpreted by the employees 

we interviewed as a breach 

of the relationship with their 

management. Unfortunately, the 

employees we interviewed did 

not feel safe to raise this as an 

issue. 

Although most of the 

management involved are no 

longer with TVA and several 

years had passed by the time 

OIG auditors conducted the 

interviews, the employees were 

still reticent to discuss what had 

occurred. They did so apparently 

because one employee was 

emphatic that what happened 

should have been reported. 

Perhaps equally disconcerting 

was the fact that after putting 

those employees through a 

poorly managed process all in 

the name of productivity, no 

one ever came back to those 

employees to report what was 

gained for that effort. This 

perceived slight of employees 

likely built resistance to future 

similar efforts. We cannot 

extrapolate this experience 

across TVA, but it is consistent 

with other similar incidents that 

we have observed over the 

years. Holding employees more 

accountable (a universal common 

theme by management) starts 

with building trust with those 

employees by demonstrating 

respectful behaviors. While 

this appears obvious, it proves 

challenging to do in a sustainable 

way.

Another example of a 

productivity initiative not 

achieving its desired results 

and also alienating employees 

was work done by McKinsey 

and their pilot program. The 
TVA OIG Semiannual Report 13

OIG reviewed this initiative, 

which encouraged employee 

participation to identify ideas 

to improve TVA plants. As 

part of this initiative, the pilot 

was initiated at one of the 

plants to help employees and 

management identify ways to 

improve the most significant 

gaps in the plant’s operational 

and organizational performance 

with the plant “to serve as the 

‘beacon’ for improvements at 

other fossil plants.” According 

to TVA, employees at the 

pilot plant contributed more 

than 1,300 ideas with savings 

forecasted from $50 to 

$60 million annually. However, 

funds were not initially available 

to implement the improvements 

which discouraged employees 

involved in the initiative. As one 

source stated, it was frustrating 

to know TVA was paying 

consultants millions of dollars, 

but a plant could not get $30,000 

to fix a pump. When another 

phase of this initiative began at 

the same plant, there was very 

little employee buy-in because, 

according to plant personnel, 

those plant employees felt 

the initiative was “flavor of 

the day” after the majority of 

the pilot initiatives were not 

implemented. This experience 

has become part of TVA folklore 

and is known across various TVA 

plants and operations. It is, of 

course, impossible to gauge the 

real effect on TVA employee’s 

attitudes but surmising that 

there was a loss of trust in TVA 

leadership does not seem to be a 

stretch. 

Building a trusting workforce 

that is engaged, accountable, 

and loyal is hard work. 

Historically, TVA’s efforts to 

create a healthy culture that 

gets results appears to suffer 

from three key impediments: 

(1) shifting leadership with no 

consistent organizational health 

focus, (2) some employees 

becoming jaded after being 

subjected to what they may 

feel are “flavor of the day” 

initiatives, and (3) a fundamental 

misunderstanding on the part 

of management about what 

creates a safe environment for 

employees to stay in dialogue 

with management. This is 

certainly not peculiar to TVA, but 

given current challenges for the 

organization, taking a different 

approach that doesn’t repeat 

the mistakes of the past will be 

important to TVA’s future success. 

The OIG’s Role

The OIG is charged with 

promoting economy and 

efficiency throughout TVA while 

also preventing and detecting 

fraud, waste, and abuse. 

Although it is the agency’s 

responsibility to identify and 

mitigate risks, the OIG plays 

an integral role in assessing 

risk and how well the agency is 

mitigating its risks. Each year, we 

plan our audits and evaluations 

based on where we see the top 

risks in the agency. In recent 

years, we have recognized the 

impact poor organizational 

health can have on the TVA’s 

organizational effectiveness. TVA 

is currently rolling out new and 

revised values, competencies 

and behavior expectations 

to all of its leadership and 

employees and integrating 

these into their human 

resources structure (through 

feedback tools, performance 

management, training, selection, 

etc.). Ultimately, the goal of 

this new structure is to help TVA 

achieve its broad mission and 

performance and operational 

goals. Based on TVA’s history of 

past cultural and organizational 

effectiveness initiatives which we 

described earlier, TVA is at risk 

that the new integrated structure 

might not be accepted and/or 

sustained. 

As TVA and its workforce 

navigates the current 

organization changes in an 

effort to help TVA become 

a stronger organization, the 

OIG is well positioned through 

our audits and evaluations to 

help TVA identify areas where 

cultural issues may be affecting 

the organization’s ability to 

succeed. In FY 2015, our 

office will undertake a series of 

“organizational effectiveness” 

reviews. Our intent in 

conducting these reviews is 
14 TVA OIG Semiannual Report

to provide TVA management 

with independent observations 

of areas for improvement and 

identified best practices. Our 

hope would be that this can then 

be used to further TVA’s change 

efforts and ultimately produce 

better operational results. 

Our work will be conducted in 

two phases. The first phase 

will be a risk assessment to 

determine allocation of OIG 

resources. This will be comprised 

of two components—cultural 

and operational performance. 

To conduct this assessment, we 

will review previous OIG audits, 

evaluations, and investigations; 

employee concerns received 

through various venues; available 

survey data; input from TVA 

stakeholders; and each BU’s 

performance against their 

operational goals. The OIG will 

use these results to assess which 

BUs may be highest risk. 

Based on our risk assessment 

results, we will select the BUs 

to be reviewed in greater 

depth. For the selected BUs, 

we will focus on identifying the 

strengths and areas of concern, 

both culturally and operationally, 

through techniques such as 

use of a survey, focus groups, 

interviews, and a review of 

other documentation. Our final 

product will include cultural and 

operational strengths and areas 

of concern, and potential causal 

factors to these areas of concern 

as well as recommendations for 

them. 

Conclusion

In the last 30 years, the 

TVA workforce has become 

accustomed to an environment 

that creates uncertainty for them. 

Recently, as financial pressures 

increased, management 

reevaluated the functions being 

performed and made decisions 

to discontinue some functions to 

match costs with revenues. As 

discussed earlier, TVA employees 

have been through multiple 

reorganizations and leadership 

changes. Leadership changes 

bring new programs or initiatives 

rolled out to employees. All 

of this can create a level of 

uncertainty for employees and 

most certainly impacts their trust 

level. Understanding what the 

workforce mindset is and what 

could be impacting their decision 

to “buy in” or not is critical.

Creating a psychological 

safe space for employees to 

offer differing opinions from 

management is a hallmark of 

a healthy culture. Creating 

forums that employees deem 

“safe” generally differs from 

what management deems safe 

for employees. Employees 

who believe they have actually 

been heard tend to be quicker 

to “buy in” to management’s 

new requests of them. With 

any new initiative announced by 

management, it is usually not 

the details of the initiative that 

employees question. Rather, 

it is management’s intent that 

employees question. Building 

trust in this environment 

requires enormous skill and 

patience, often making the “do 

it because I said so” approach 

more immediately appealing to 

management. 

The OIG is currently engaged 

in a healthy dialogue with TVA 

management about much of 

what we have addressed in this 

article. We are encouraged by 

their obvious commitment to 

building a TVA team that gets 

results and does so in the right 

way. The fact that the OIG and 

TVA management can offer 

differing opinions to each other 

on this subject bodes well for 

both the current TVA change 

management effort and the 

usefulness of the OIG’s upcoming 

reviews of TVA’s organizational 

effectiveness. We appreciate the 

level of professionalism we see in 

TVA management, and we look 

forward to building a better TVA 

together. 
TVA OIG Semiannu

al Report 15

Bull Run Fossil Plant
16 TVA OIG Semiannual Report

EXECUTIVE OVERVIEW
TVA OIG Semiannual Report 17

In recent years, the TVA OIG has become increasingly aware of the impact of culture on achieving organizational 

objectives as research evidences the two are intrinsically connected. This semiannual report’s feature article, “Generating 

Power Through People,” focuses on the importance of an engaged workforce in achieving the mission of TVA and 

introduces our upcoming organizational effectiveness reviews. As we have said before, our audit, evaluation, and 

investigative activities are focused on Making TVA Better. In the pages ahead, we highlight the results of our activities 

that provide TVA objective information designed to help improve performance.

Executive Overview

AUDITS

The TVA OIG audit organization 

completed 15 audit, review, 

and agreed-upon procedures 

engagements. This work 

identified more than $2.6 million 

in questioned costs for TVA to 

recover and $512,000 in funds 

the company could put to better 

use. We also identified several 

opportunities for TVA to improve 

the effectiveness and efficiency 

of its programs and operations.

Contract Audits

To support TVA management in 

negotiating procurement actions, 

we completed one preaward 

review of a cost proposal 

submitted by a company 

providing TVA valley-wide 

engineering services. Our review 

identified $512,000 of potential 

savings opportunities for TVA to 

negotiate. We also completed 

four contract compliance audits 

with expenditures totaling 

$551 million related to (1) a 

subcontractor providing staff 

augmentation personnel for the 

completion of TVA’s Watts Bar 

Nuclear Plant Unit 2; (2) TVA 

corporate credit card purchases 

of fuel, vehicle fluids, and car 

washes for TVA-related business; 

(3) purchased power; and 

(4) operating and maintaining 

the radiological emergency 

preparedness programs for TVA’s 

Browns Ferry and Sequoyah 

Nuclear plants. These audits 

identified potential overbillings 

of $2.6 million. The Contract 

Audits section begins on page 25 

of this report.

Corporate Governance and 

Finance Audits

With a focus on TVA’s regulatory 

activities, compliance with 

applicable laws and regulations, 

and financial reporting, we 

completed audits of TVA 

Revenue Billing’s invoice 

preparation process for billing 

local power companies (LPCs) for 

power subsequently delivered 

to end-use customers and TVA’s 

assignment of employees to 

official stations. 

In addition to our audit work, 

we monitored the work of the 

external auditor in its review of 

TVA’s second and third quarter 

financial information for 

FY 2014 to assure compliance 

with generally accepted 

government auditing standards. 

We also provided assistance 
18 TVA OIG Semiannual Report

to the external auditor during 

interim testing for the year-end 

financial statement audit. The 

Corporate Governance and 

Finance Audits section begins on 

page 27 of this report.

IT Audits 

We completed five audits in the 

IT environment pertaining to: 

(1) implementation for a new 

human resources application; 

(2) controls related to cyber 

security at a TVA facility; 

(3) controls over the IT Supply 

Chain process for procuring 

IT equipment; (4) controls for 

network security zones and 

perimeter architecture; and 

(5) controls over database 

security. We identified areas for 

improvement in all five reviews. 

The IT Audits section begins on 

page 29 of this report.

Operational Audits

Operational Audits applied 

certain agreed-upon procedures 

to assist the Center for Resource 

Solutions (CRS) in determining 

TVA’s compliance with the annual 

reporting requirements of the 

Green Pricing Accreditation 

Program. We performed an 

evaluation of TVA’s ERM program 

and identified improvement 

opportunities. The team 

completed an audit assessing 

whether TVA was adequately 

addressing environmental risks. 

Lastly, we performed an audit 

that identified opportunities to 

improve the effectiveness of 

TVA’s energy services contracts 

for federal customers. The 

Operational Audits section 

begins on page 31 of this report.

EVALUATIONS

We completed ten evaluations 

during this semiannual period. 

Two were related to the Kingston 

Recovery Project and TVA’s 

management of coal combustion 

products. Another three 

addressed systems and programs 

with poor ratings, preventive 

maintenance, and fire protection 

at coal plants. Two were 

related to nuclear groundwater 

monitoring and RO systems and 

components with poor ratings. 

Additionally, an evaluation 

of TVA’s ERM program was 

performed by our Operational 

Audits department which was 

previously discussed under that 

department’s work. Due to the 

sensitive subject matter of two 

evaluations completed in the 

period, no discussion of these 

is included in this report. The 

Evaluations section begins on 

page 36 of this report.

INVESTIGATIONS

Our investigative results 

included criminal sentencing 

of three individuals, numerous 

administrative actions, and 

savings and restitution to TVA 

and to a private entity exceeding 

$200,000. We opened 

134 cases and closed 123. 

The Investigations section begins 

on page 42 of this report.

STATISTICAL HIGHLIGHTS

April 1, 2014 - September 30, 2014

Audit Reports Issued 15

Evaluations Completed 10

Questioned Costs $2,611,842

Questioned Costs Agreed to by TVA $2,611,842

Questioned Costs Recovered by TVA $483,598

Funds to Be Put to Better Use $512,000

Savings Realized by TVA $13,113,740

Investigations Opened 134

Investigations Closed 123

Recoveries/Fines/Penalties/ Projected Savings $214,935

Criminal Actions 0

Administrative Actions (No. of Subjects) 14
TVA OIG Semiannu

al Report 19

Norris Dam
20 TVA OIG Semiannual Report

ORGANIZATION

Ben R. Wagner

Deputy Inspector 

General

Robert E. Martin

Assistant Inspector General, Audits & Evaluations

Richard W. Moore

Inspector General

Jill M. Matthews

Assistant Inspector

General, Administration

Kathy H. Kirkham

Manager, Human 

Resources

Terri Beatty

Manager, Organizational 

Health

W. David Winstead

Legal Counsel

Paul B. Houston

Assistant Inspector 

General, Investigations

Nancy J. Holloway

Special Agent In Charge

James E. Hunter

Special Agent In Charge

Lisa H. Hammer

Director,

Operational Audits

David P. Wheeler

Deputy Assistant

Inspector General, 

Audits

Greg R. Stinson

Director, Evaluations

Phyllis R. Bryan

Director, IT Audits

Curtis C. Hudson

Director,

Contract Audits

Rick C. 

Underwood

Director, Corporate 

Governance & 

Finance Audits

Charles A. Kandt

Counselor to the IG
TVA OIG Semiannual Report 21

Since 1985, the OIG has worked to help TVA become better. Through our audits, evaluations, and investigations, we 

provide TVA management, the TVA Board, and Congress with an independent look at the economy, efficiency, and 

effectiveness of TVA programs and help prevent and detect fraud, waste, and abuse. Over the years, the OIG has helped 

TVA save or recover millions of dollars and recommended numerous program improvements. We credit our success 

to the efforts of our hardworking and talented staff and the professional responsiveness of TVA management to our 

recommendations.

Organization

TVA OIG Office Locations

The OIG has a work philosophy 

of being in the right place at 

the right time to do the best 

work possible. We support that 

philosophy by encouraging our 

OIG employees to work where 

they can be most effective 

whether that is in one of our 

physical offices, in the field, 

or in one of our virtual offices 

that enable our employees to 

telework from home or while 

traveling. 

The OIG has strategically located 

its offices near all major TVA 

offices throughout the Tennessee 

Valley. We are headquartered in 

TVA’s East Tower, opposite TVA’s 

corporate offices, overlooking 

downtown Knoxville.

The OIG has field offices in the 

Edney Building in Chattanooga, 

Tennessee, where the Evaluations 

unit, members of the Corporate 

Governance and Finance 

team, and several special 

agents are located, as well as 

in Nashville, Tennessee, and 

Huntsville, Alabama. We also 

have office locations at Watts 

Bar Nuclear Plant in Spring City, 

Tennessee; Bellefonte Nuclear 

Plant in Hollywood, Alabama; 

and Sequoyah Nuclear Plant 

in Soddy-Daisy, Tennessee. 

Staff work in these locations as 

needed. As of September 30, 

2014, the OIG had a total staff 

of 104. 

ADMINISTRATION

The Administration team

works closely with the IG, 

Deputy IG, and Assistant IGs 

to address the day-to-day 

operations of the OIG and to 

develop policies and procedures 

designed to drive and enhance 

productivity in achieving office 

goals. Responsibilities include 

personnel administration, budget 

and financial management, 

purchasing and contract services, 

facilities coordination, training 

event planning, communications 

facilitation, and IT support.

AUDITS AND 

EVALUATIONS

The Audits and Evaluations 

teams perform a wide variety 

of engagements designed 

to promote positive change 

and provide assurance to TVA 

stakeholders. Based upon the 

results of these engagements, 

the Audits and Evaluations 

teams make recommendations 

to enhance the effectiveness and 

efficiency of TVA programs and 

operations. 

The teams use an impactand risk-based approach to 

develop an annual work plan. In 

developing the plan, the OIG 

considers TVA’s strategic plans, 

major management challenges, 

TVA’s enterprise risk management 

process, and other input from 

TVA management. This planning 

model also evaluates each 

potential engagement from the 

standpoint of materiality (i.e., 

costs or value of assets), potential 

impact, sensitivity (including 

public and congressional 

interest), and the likelihood it will 

result in recommendations for 

cost savings, recovery of dollars, 

or process improvements. The 

result of the OIG Audits and 

Evaluations planning process is a 

focus on those issues of highest 

impact and risk to TVA. 
22 TVA OIG Semiannual Report

The Audits team, primarily 

based in Knoxville, generates 

and oversees comprehensive 

financial and performance 

audits of TVA programs and 

operations, providing an inclusive 

picture of TVA’s overall fiscal and 

operational health. This team is 

made up of four departments—

Contract Audits, Corporate 

Governance and Finance Audits, 

IT Audits, and Operational Audits. 

This team performs its work in 

accordance with Government 

Auditing Standards.

• Contract Audits has lead 

responsibility for contract 

compliance and preaward 

reviews. In addition, this 

team performs reviews of TVA 

contracting processes and 

provides claims assistance as 

well as litigation support.

• Corporate Governance and 

Finance Audits has lead 

responsibility for oversight of 

TVA’s (1) financial statement 

audit and related services 

performed by TVA’s external 

auditor and (2) regulatory 

activities. This team also 

conducts operational reviews to 

assess the results as well as the 

economy and efficiency of TVA’s 

financial programs. 

• IT Audits has lead responsibility 

for audits relating to the security 

of TVA’s IT infrastructure, 

application controls, and 

general controls associated with 

TVA systems. This team also 

performs operational reviews of 

the effectiveness of IT-related 

functions. 

• Operational Audits focuses 

on risk and impact-driven 

operational audit work. The 

team performs audits of 

operational effectiveness 

and efficiency, as well as TVA 

compliance with laws and 

regulations.

The Evaluations team seeks to 

ensure that program objectives 

and operational functions 

are achieved effectively and 

efficiently. It performs both 

comprehensive reviews and 

more limited scope policy and 

program reviews. In accordance 

with the Quality Standards for 

Inspection and Evaluation, the 

objectives of the unit include 

providing a source of factual and 

analytical information, monitoring 

compliance, measuring 

performance, assessing the 

efficiency and effectiveness of 

operations, and conducting 

inquiries into allegations of 

fraud, waste, abuse, and 

mismanagement. 

Corporate Governance 

and Finance Audits

• Internal Control Deficiencies

• Program Inefficiencies/Ineffectiveness

• Policy Noncompliance

• Fraud

Operational Audits

• Operational Inefficiency

• Not Achieving Intended Results

• Inferior Performance

• Legal/Regulatory Noncompliance

• Fraud

IT Audits

• Internal Control Deficiencies

• Policy Noncompliance

• Integrity of Data and Assets

• Fraud

Contract Audits

• Inflated Proposals

• Contract Overpayments

• Inferior Performance

• Fraud

Evaluations

• Internal Control Deficiencies

• Operational Inefficiency

• Policy Noncompliance

• Fraud

Types of Audit & Evaluation Issues
TVA OIG Semiannual Report 23

Audit and evaluation issues vary 

depending on the objectives of 

the project. The graphic shows 

some representative examples of 

issues our audit and evaluation 

projects are commonly designed 

to identify. 

INVESTIGATIONS

The Investigations team

proactively and reactively 

uncovers activity related to 

fraud, waste, and abuse in TVA 

programs and operations. This 

team performs its investigations 

in accordance with the Quality 

Standards for Investigations as 

prescribed by the Council of the 

Inspectors General on Integrity 

and Efficiency (CIGIE), applicable 

United States Attorney General 

Guidelines, and other guiding 

documents. The special agents 

maintain liaisons with federal 

and state prosecutors and notify 

the U.S. Department of Justice 

whenever the OIG has reason 

to believe there has been a 

violation of federal criminal law. 

The special agents partner with 

other investigative agencies and 

organizations on special projects 

and assignments, including 

interagency law enforcement 

task forces on terrorism, the 

environment, health care, and 

public corruption, as well as 

securities fraud. The graphic 

shows the major categories of 

investigations.

Legal

The OIG Legal Counsel team 

monitors existing and proposed 

legislation and regulations 

that relate to the mandate, 

operations, and programs of the 

OIG and TVA. Additionally, this 

team provides legal advice as 

needed for administrative, audit, 

evaluation, and investigative 

projects. 

Contract Fraud

Defrauding TVA through its 

procurement of goods and services 

including fraud schemes such as 

misrepresenting costs, overbilling 

charges, product substitution, and 

falsification of work certifications.

Theft of Government 

Property and Services

Theft of TVA property such as 

material, tools, equipment, or 

resources.

Environmental Crime

Violations of environmental criminal 

law pertaining to the Tennessee River 

system and its watershed, along with 

violations relating to TVA land and 

facilities. 

Health Care Fraud

Intentional misrepresentation of 

health care services, expenses, 

billings, needs, or coverage that 

results in unauthorized payments 

or other benefits.

Unauthorized 

Access Into TVA 

Computer Systems

Accessing a TVA computer 

without authorization or 

exceeding authorized access.

Workers’

Compensation Fraud

Falsification of documents to 

receive payments by employees, 

former employees, or health care 

providers.

Employee Misconduct

Misuse of TVA furnished 

equipment, travel voucher fraud, 

a multitude of miscellaneous 

matters of abuse, conflict of 

interest, and violations of code of 

conduct. 

Special Projects

Management requests, data 

mining and predictive analysis, 

congressional and TVA Board 

requests, and fraud risk 

assessments.

Major Categories of Investigations
24 TVA OIG Semiannual Report

REPRESENTATIVE AUDITS
TVA OIG Semiannual Report 25

During this reporting period, the TVA OIG Audit organization completed 15 audit, review, and agreed-upon procedures 

engagements. This work identified more than $2.6 million in questioned costs for TVA to recover and $512,000 in funds 

the company could put to better use. We also identified several opportunities for TVA to improve the effectiveness and 

efficiency of its programs and operations.

Summary of

REPRESENTATIVE AUDITS

Contract Audits

Preaward Contract Reviews

To support TVA management 

in negotiating procurement 

actions, we completed one 

preaward review of a cost 

proposal submitted by a 

company providing TVA valleywide engineering services. Our 

review identified $512,000 of 

potential savings opportunities 

for TVA to negotiate. The savings 

opportunities were related to 

overstated indirect cost recovery 

rates. 

Contract Compliance Audits

During this semiannual period, 

we completed four compliance 

audits of contracts with 

expenditures totaling 

$551 million and identified 

potential overbillings of 

$2,611,842. Highlights of our 

completed contract compliance 

audits follow.

• We audited $121.4 million

in costs billed by a 

subcontractor to a contractor 

(and subsequently to TVA) to 

furnish qualified personnel to 

the contractor on a seconded 

(staff augmentation) basis for 

the Watts Bar Nuclear Plant 

Unit 2 construction completion 

project. We determined TVA 

was overbilled $1,547,434 in 

costs and fees which included 

(1) $1,484,582 in excessive 

payroll tax and insurance costs 

and related fee, (2) $60,287 

in ineligible temporary living 

allowance costs, and (3) $2,565 

in excessive labor costs and 

related fee. 

• We audited $22.7 million in 

costs billed by a contractor to 

provide TVA with a MasterCard 

platform and issue fuel cards to 

TVA personnel to purchase fuel, 

vehicle fluids, and car washes 

for TVA-related business. We 

determined the contractor 

overbilled TVA $1,035,140. The 

overbilling included:

° $846,022 for duplicate 

invoices submitted by the 

contractor. 

° $83,271 in duplicate costs 

charged on merchant 

transactions. 

Watts Bar Nuclear Plant
26 TVA OIG Semiannual Report

° A net $97,012 in state taxes 

paid on fuel purchases 

which included (1) $253,337 

in state fuel taxes for 

which TVA was exempt, 

(2) $164,663 in state fuel 

excise taxes that had been 

stripped by the contractor 

for which TVA was liable, 

and (3) $8,338 in state 

excise taxes from states 

outside TVA’s service region 

from which TVA may be 

exempt. 

° $8,835 in unauthorized 

transactions. 

In addition, the contractor 

owed TVA $11,459 for interest 

on overpayments TVA made 

due to duplicate invoice 

billings. 

• We audited $400.3 million in 

costs billed by a contractor for 

power purchases. In summary, 

we found:

° TVA’s electronic workbook 

used to calculate the 

invoice amount did not 

contain a formula needed 

to account for unexcused 

hours when TVA directs the 

contractor to provide less 

than full capacity (derated) 

and the generation facility 

cannot produce any power. 

° TVA needed to improve 

documentation and 

communication of 

adjustments to the 

generation facility meter 

data. 

° The contractor billed TVA 

$12,674 in costs for meter 

readings not supported by 

actual meter data on the 

October 2011 invoice. 

° The contractor overbilled 

TVA a net $5,135 due to 

data entry errors made 

by TVA in the electronic 

workbook used to calculate 

the invoice amount. 

• We audited $6.6 million 

in costs paid to two state 

agencies to operate and 

maintain the Radiological 

Emergency Preparedness (REP) 

programs for TVA’s Browns 

Ferry and Sequoyah Nuclear 

plants in accordance with the 

requirements established by the 

Nuclear Regulatory Commission 

and the Federal Emergency 
TVA OIG Semiannual Report 27

Management Agency. The 

contract provided for TVA to 

reimburse expenses incurred 

by the two state agencies in 

carrying out the REP operation 

and maintenance activities. In 

addition, as part of the payment 

amount provided to one of the 

agencies, the agency agreed 

to transfer minimum amounts 

established in the contract 

to the five affected counties 

around Browns Ferry Nuclear 

Plant. 

In summary, we found the 

current contract’s compensation 

terms should be revised to 

(1) clarify whether TVA will 

reimburse costs incurred or 

pay an annual lump sum to 

the contractor and (2) require 

the two state agencies and the 

five counties to provide details 

to TVA on actual funds spent 

during a FY in support of the 

REP program. We also noted 

the salaries paid to emergency 

management personnel varied 

significantly between the five 

counties. 

Corporate Governance and 

Finance Audits

During this semiannual period, 

Corporate Governance and 

Finance Audits completed audits 

of TVA (1) Revenue Billing’s 

invoice preparation process 

for billing LPCs for power 

subsequently delivered to 

end-use customers and 

(2) assignment of employees 

to official stations. In addition, 

the team provided oversight of 

and assistance to TVA’s external 

auditor.

TVA Revenue Billing’s 

Invoice Preparation Process

TVA sells power at wholesale 

rates to 155 LPCs, who then 

resell the power to their end-use 

customers at retail rates. TVA’s 

total electricity sales were 

$10.8 billion in FY 2013, and 

Browns Ferry Nuclear Plant
28 TVA OIG Semiannual Report

revenue earned from the LPCs 

was $9.4 billion or 87 percent of 

total sales. 

TVA bills the LPCs based on 

meter readings for demand and 

energy amounts delivered. The 

majority of the amount billed 

on each invoice consists of 

two components: (1) monthly 

demand and energy totals 

determined by daily meter 

readings multiplied by (2) rates 

for the various classifications 

of users (e.g., residential and 

commercial/industrial). TVA 

utilizes the software package 

Oracle Utilities to produce the 

wholesale invoices.

The OIG included a review 

of Revenue Billing’s invoice 

preparation process in its annual 

audit plan because of the 

significance of LPCs revenue 

to TVA. We audited Revenue 

Billing’s invoice preparation 

process for the period April 1, 

2011, through July 31, 2013, 

to determine if (1) wholesale 

invoices were calculated 

correctly, (2) controls to prevent 

and detect invoice errors were 

adequate, and (3) Oracle Utilities 

had appropriate and adequate 

IT general and application 

level controls. This audit did 

not include testing of meter 

readings which was addressed 

in a previous audit, TVA Meter 

Testing, completed in March 

2013. 

Our audit focused on the 

Revenue Billing and the Power 

Billing departments’ roles and 

responsibilities in the revenue 

billing process. The Power 

Billing department is responsible 

for the validity of the demand 

and energy readings in Oracle 

Utilities. The Revenue Billing 

department is responsible for the 

accuracy and completeness of 

amounts invoiced. 

Our audit of TVA Revenue 

Billing’s invoice preparation 

process for LPCs during the 

period found (1) wholesale 

invoices were calculated correctly, 

(2) controls to prevent and detect 

invoice errors were adequate, 

and (3) Oracle Utilities had 

appropriate and adequate IT 

general and application level 

controls. However, we identified 

some minor issues where changes 

could strengthen and improve the 

revenue billing process and may 

decrease the likelihood of errors 

or adjustments. 

Per TVA personnel, beginning in 

January 2013, monthly meetings 

between the various departments 

involved with the invoicing 

process were conducted to 

review adjustments and higher 

risk areas to improve the process. 

As of July 31, 2013, the number 

of adjustments made by Power 

Billing and Revenue Billing had 

decreased 48 percent from 

FY 2012.
TVA OIG Semiannual Report 29

Based on the findings, we 

made recommendations to 

TVA management to improve 

the revenue billing process. 

TVA management generally 

agreed with our findings and 

recommendations and is taking 

corrective actions to address 

these issues.

TVA’s Official Stations

TVA incurs travel expenses 

when employees perform TVA 

business away from their official 

stations. The OIG included a 

review of the assignment of 

employee official stations on 

its annual audit plan based on 

concerns expressed to the OIG 

regarding the appropriateness 

of official stations assigned 

for frequent travelers. For 

FYs 2009 through 2013, a total 

of 13,350 employees incurred 

approximately $134 million 

in travel expenses. Our audit 

objectives were to determine 

(1) if TVA’s most frequent travelers 

were assigned to appropriate 

official stations and (2) whether 

controls were in place to assign 

employees to proper and/or cost 

effective official stations. 

In summary, we found the 

assignments of official stations 

generally appeared appropriate 

for TVA’s most frequent travelers. 

However, we noted departments 

with employees who frequently 

travel to multiple locations assign 

official stations in differing ways. 

Additionally, controls and policies 

could be strengthened by 

(1) including guidance on 

evaluating official stations 

and (2) requiring approval 

from the appropriate level of 

management for decisions not 

to change official stations based 

on the dollar values of travel 

expenses incurred or expected 

to be incurred. As part of our 

audit, we followed up on TVA 

management’s actions taken in 

a previous inspection, Review 

of TVA Travel Reimbursements, 

completed in August 2007. We 

noted action plans agreed to in 

the past did not appear to have 

been fully implemented. 

Based on the findings, we 

made recommendations to 

TVA management to improve 

guidance related to assignment 

and maintenance of official 

station assignments. TVA 

management generally 

agreed with our findings and 

recommendations and is taking 

corrective actions to address 

these issues.

IT Audits

During this semiannual period, 

we completed the following five 

audits in the IT environment: 

(1) implementation audit for a 

new human resources application; 

(2) controls related to cyber 

security at a TVA facility; 

(3) controls over the IT Supply 

Chain process for procuring 

IT equipment; (4) controls for 

network security zones and 

perimeter architecture; and 

(5) controls over database 

security.

New Human Resources 

Application Implementation

At the request of TVA 

management, we audited 

the implementation of a new 

human resources management 

application to evaluate whether 

(1) TVA systems development 

processes were being followed 

and (2) business processes 

were considered during 

implementation of the project. 

We determined the TVA project 

team followed TVA systems 

development processes and 

included consideration of 

business processes during 

implementation. 

During the audit, we 

communicated items of potential 

risk and concern to the project 

management team. The 

project team addressed all of 

our findings by implementing 

our recommendations prior to 

the system implementation. 

Additionally, we noted two areas 

where improved engagement by 

participating business units would 

have made the project team 

more successful.

Cyber Security Audit at a 

TVA Facility

We audited the cyber security 

controls at a TVA facility to 

evaluate the adequacy of: 
30 TVA OIG Semiannual Report

(1) logical security controls in 

place to prevent unauthorized 

access to system operations and 

data; (2) network infrastructure 

in place to minimize the risk to 

process control systems; 

(3) general controls in place 

for backup and recovery of 

critical systems and a change 

control process for ensuring only 

authorized changes were made 

to production systems and data; 

and (4) physical security and 

environmental controls in place to 

ensure system availability. 

While we found TVA had 

improved the cyber security 

position for this facility since our 

last audit in 2007, we identified 

potential control weaknesses 

(1) around wireless devices 

located at the facility and (2) in 

the areas of network infrastructure 

and logical security controls. 

We recommended TVA 

management identify 

unauthorized wireless access 

points located within the facility, 

implement a strategy/policy to 

manage such situations, and 

ensure personnel are properly 

trained regarding the updated 

policy. TVA management agreed 

with our recommendations and 

is taking corrective action to 

address the issues.

Procuring IT Equipment

In March 2012, the Government 

Accountability Office (GAO) 

issued a report titled, 

IT Supply Chain: National 

Security–Related Agencies 

Need to Better Address Risks. 

We audited TVA’s supply chain 

processes for procuring IT 

equipment to determine if TVA 

had implemented appropriate 

controls to address the risks 

identified in the GAO report. 

While TVA had agency-wide 

supply chain processes for 

procuring equipment which all 

organizations were to follow, 

we found there was no agencywide process for determining 

when it was necessary to 

perform assessments to uncover 

unintentional and intentional 

vulnerabilities on IT equipment 

prior to it being placed in 

service. Additionally, we were 

unable to determine how the IT 

Store was integrated into TVA’s 

procurement process.

We recommended TVA 

management: (1) in coordination 

with the business units, develop 

and implement policies and 

procedures that define which 

security measures should be 

employed and implemented 

to protect against supply chain 

threats; (2) document how 

monitoring will be implemented 

to verify compliance with and 

assess the effectiveness of 

the protection measures; and 

(3) update TVA procurement 

policies to describe the IT Store 

procurement process. TVA 

management agreed with our 

recommendations and is taking 

corrective action to address the 

issues.

Network Architecture Audit

TVA relies on the network 

infrastructure for communications, 

access to critical applications, 

and to operate its core business 

functions. TVA recently 

completed projects to upgrade 

the network functionality at 

some facilities. We audited the 

current network architecture to 

(1) review the logical and physical 

network architecture to identify 

security zones and perimeters, 

(2) perform a gap analysis of the 

network in relation to security 

zones and perimeters, and (3) test 

network access at security zone 

boundaries and at the perimeter. 

In summary, we found that TVA 

management has leveraged 
TVA OIG Semiannual Report 31

best practices in recent network 

upgrades. However, we also 

found (1) legacy network cabling 

design and capacity issues at one 

location, (2) a work instruction for 

periodic review of firewall rules 

was not being followed, 

(3) certain configurations could be 

improved to provide additional 

security, and (4) wireless 

controller configurations could be 

strengthened.

We recommended TVA 

management (1) reinstitute 

the firewall rule review, 

(2) review interface 

configurations, and (3) review 

best practices documentation 

provided by the equipment 

manufacturer for the wireless 

controllers and implement 

best practices that could 

provide better control of 

or security around TVA’s 

wireless environment(s). TVA 

management agreed with our 

recommendations.

Database Security Audit

As part of our annual audit plan, 

the OIG performed an audit of 

database security to determine 

the adequacy of (1) database 

security architecture, (2) Database 

Administrator (DBA) database 

access, (3) DBA log file access, 

(4) log file security architecture, 

and (5) database access control. 

We found (1) a lack of controls 

over DBA access to databases 

containing confidential and 

sensitive information and (2) weak 

general controls for configuration 

management and password 

enforcement.

We recommended TVA 

management improve security 

controls in its production 

environment by (1) identifying 

and deploying privileged user 

access controls, (2) adding 

additional audit options, 

(3) identifying and deploying 

database configuration 

management controls as outlined 

in NIST Special Publication 

800-53 Recommended Security 

Controls for Federal Information 

Systems, (4) reviewing and 

updating database password 

controls to meet TVA 

requirements, and (5) updating 

work instructions by adding 

database security requirements 

for development environments. 

TVA management agreed with 

our recommendations.

Operational Audits

Operational Audits applied 

certain agreed-upon procedures 

to assist the CRS in determining 

TVA’s compliance with the annual 

reporting requirements of the 

Green Pricing Accreditation 

Program. We performed an 

evaluation of TVA’s ERM program 

and identified improvement 

opportunities. The team 

completed an audit assessing 

whether TVA was adequately 

addressing environmental risks. 

Lastly, we performed an audit 

that identified opportunities to 

improve the effectiveness of TVA’s 

energy services contracts for 

federal customers. 

Verification of TVA’s 

Compliance with the Green 

Pricing Accreditation 

Program Requirements

TVA’s Green Power Switch 

Program produces electric power 

from renewable resources such 

as solar, wind, and methane 

gas, and adds such sources to 

TVA’s power mix. Both solar and 

wind power were produced in 

sufficient quantities to qualify 

for accreditation by the CRS. 

The OIG completed certain 

agreed-upon procedures to 

assist the CRS in determining 

TVA’s compliance with the annual 

reporting requirements of the 

CRS Green Pricing Accreditation 

Program for the year ended 

December 31, 2013. 

These procedures included steps 

to verify that the renewable 

energy supply was sufficient 

to meet sales; products met 

the Green-e criteria and stated 

product content; and marketing 

as well as product information 

was accurate and communicated 

to customers. The results of the 

procedures verified that TVA’s 

Green Power sales were based on 

electricity generated or acquired 

from eligible renewable sources 
32 TVA OIG Semiannual Report

and otherwise met the above 

aspects. CRS was provided with 

results of the procedures applied.

Effectiveness of 

TVA’s Enterprise Risk 

Management Program

According to TVA, its ERM 

program is an ongoing and 

evolving process designed 

to protect the value of 

the enterprise and realize 

opportunities for stakeholders 

by promoting efficient and 

effective risk management across 

TVA. TVA’s ERM organization 

is a critical function of this 

program and “is responsible for 

developing and improving the 

structure, processes, tools, and 

communication channels. . .” to 

support various critical elements 

of TVA’s risk management 

program through the following: 

(1) governance, oversight, and 

leadership; (2) identification and 

prioritization of enterprise risks; 

(3) assessment and analysis of 

high priority risks; (4) coordination 

of the development and approval 

of risk management plans; 

(5) monitoring and reporting 

trends in high priority risks; and 

(6) risk disclosure. The ERM 

organization also develops 

policies and procedures and 

works with TVA’s strategic SBUs 

and BUs to facilitate the risk 

identification and risk assessment 

process. However, due to ERM’s 

position in the organization, 

it does not generally have 

authority to enforce SBUs or 

BUs compliance with its policies, 

procedures, and initiatives. 

Over the past three years, the 

OIG has performed several audits 

and evaluations covering certain 

TVA risks identified and assessed 

by SBUs or BUs pursuant to 

Solar Powered Charging Kiosk Installed by TVA on Market Square
TVA OIG Semiannual Report 33

guidance issued by TVA’s ERM 

organization. In general, these 

audits and evaluations were 

designed to assess the adequacy 

of the respective SBUs’ or BUs’ 

strategies and/or actions to 

address these risks. Our most 

recent evaluation was initiated 

to assess the effectiveness 

of the ERM organization’s 

role within TVA’s overall risk 

management program. To aid 

in our assessment, we compiled 

the results of our prior audits and 

evaluations to identify common 

themes that bear on the ERM 

organization’s effectiveness. 

We found TVA had made 

improvements in its ERM program 

since the last OIG inspection in 

this area was performed in 2008, 

including the formalization of its 

risk management policies and 

procedures, continued efforts 

to drive the risk management 

culture into and across TVA, 

initiating efforts to improve the 

risk assessment process, and 

enhanced communications 

with the TVA Board and senior 

executives.

However, we also identified 

several areas for improvement 

that if not addressed could 

prevent TVA from having a 

sustainable, viable, and effective 

ERM program. Specifically, in 

comparing TVA’s ERM practices 

to identified ERM best practices, 

we determined (1) risks were not 

aligned to strategic objectives 

that support TVA’s mission, 

(2) TVA had not established 

and communicated a risk 

appetite (which describes the 

organization’s acceptance level 

of risk before it deems action to 

mitigate the risk is necessary) or 

risk appetite statement, (3) the 

risk management culture was not 

fully embedded throughout the 

organization, (4) risk tolerances 

reported by SBUs or BUs could 

be improved, and (5) multipoint risk assessments were 

not used as part of the risk 

assessment process. In addition, 

we determined (1) the current 

application used to collect 

and analyze risks limited the 

effectiveness and efficiency of the 

ERM program, and (2) information 

contained in the ERM policy and 

the process for reviewing the 

policy could be improved.

In an effort to align risks to 

strategic imperatives and 

improve communications on 

risk, during our evaluation, TVA 

transitioned away from using 

previous scorecard categories 

and objectives in favor of a 

multi-point risk reporting 

template to provide a broader 

perspective on risk and aid 

in gauging the appropriate 

level of mitigation required to 

manage risk within an acceptable 

tolerance level. 

We made six recommendations 

for improving the effectiveness 

of the ERM program. Prior to 

issuing our report, TVA addressed 

the deficiencies in its review of 

risk management guidelines and 

policy. Management generally 

agreed with the remaining 

findings and recommendations.

TVA Environmental Risk 

Management

We evaluated the effectiveness 

of TVA processes for identifying 

and managing actual and 

potential environmental issues 

and risks. TVA’s Environmental 

Management System (EMS) 

program was established to 

manage environmental impacts 

of TVA operations and help fulfill 

commitments listed in TVA’s 

Environmental Policy. Within this 

purpose, EMS plays a significant 

role in managing environmental 

risks across TVA and sustaining 

a high level of environmental 

compliance in TVA operations. 

Generally, TVA had effective 

processes for identifying and 

managing actual and potential 

environmental issues and risks at 

the end of FY 2013. However, we 

noted areas where environmental 

risk management processes could 

be strengthened. Specifically, 

we found environmental risks 

identified for business planning 

could be more comprehensive, 

more clearly defined, and 

integrated agency wide in order 

to help ensure their recognition 
34 TVA OIG Semiannual Report

and resource availability. 

In addition, weaknesses in 

environmental review processes 

increase TVA risks and could be 

strengthened to demonstrate 

regulatory compliance and 

due diligence in assessing the 

potential environmental impacts 

of proposed agency decisions. 

Many positive aspects of the 

EMS program were evident and 

demonstrated effectiveness of 

functions related to environmental 

risk management. However, we 

determined opportunities for 

enhancing TVA’s EMS program 

existed in communicating with 

regulators, coordinating planning 

processes, emergency response 

preparedness, environmental 

training, and sharing lessons 

learned.

We recommended process 

improvements related to 

identifying risks and integrating 

environmental information 

sources, system enhancements 

to strengthen environmental 

reviews, and enhancements to 

EMS functions. Management 

generally agreed with our findings 

and recommendations.

TVA’s Energy Services 

Contracts for Federal 

Customers

TVA provides energy efficiency 

services to federal customers 

under the Federal Energy 

Services Program (FESP). In 

the fall of 2013, TVA’s Industrial 

Marketing and Services group 

performed an evaluation of 

the FESP predecessor, Energy 

Services Company (ESCO) 

program, due to previously 

identified inconsistencies and 

gaps, including an absence of 

oversight or project controls and 

unclear roles and responsibilities. 
TVA OIG Semiannual Report 35

Due to the potential risk to TVA, 

we conducted a programmatic 

review of ESCO and FESP. The 

objective of our review was to 

determine if the program was 

meeting its intended purpose of 

providing energy efficiency for 

the customer. Specifically, we 

reviewed program documentation 

and conducted interviews to 

determine (1) whether the 

intended purpose of providing 

energy efficiency for the customer 

was achieved, (2) if the program 

aligned with TVA’s core mission 

and vision, (3) if programmatic 

gaps identified during TVA’s 

internal review and programmatic 

improvements were implemented 

to address the gaps, and 

(4) if other opportunities for 

improvements existed. 

TVA was unable to provide 

documentation to allow 

determination of the amount of 

actual energy efficiency achieved, 

specifically by ESCO, for two of 

three customers participating in 

the program (as of the date of 

our audit report, TVA had not 

initiated a new project under 

FESP); therefore, we were unable 

to determine the total impact 

of ESCO on providing energy 

efficiency for the customer. 

As a result, we were also unable 

to determine to what degree 

ESCO supported accomplishment 

of TVA’s 2020 vision of greater 

energy efficiency. As part of our 

audit, we also assessed TVA’s 

governance, oversight, execution 

and support analysis as well as 

business case documentation 

and found that while substantial 

improvements were made to 

the program, programmatic 

gaps and other opportunities 

for improvement existed. 

Management agreed with our 

findings and recommendations.

Fort Loudoun Dam
36 TVA OIG Semiannual Report

REPRESENTATIVE EVALUATIONS
TVA OIG Semiannual Report 37

We completed ten evaluations during this semiannual period. Two were related to the Kingston Recovery Project and 

TVA’s management of coal combustion products. Another three addressed systems and programs with poor ratings, 

preventive maintenance, and fire protection at coal plants. Two were related to nuclear groundwater monitoring and 

RO systems and components with poor ratings. Additionally, an evaluation of TVA’s ERM program was performed by 

our Operational Audits department which was previously discussed under that department’s work. Due to the sensitive 

subject matter of two evaluations completed in the period, no discussion of these is included in this report. More 

information on the results of our evaluations can be found below.

Summary of 

REPRESENTATIVE EVALUATIONS

Kingston Recovery Project

On Monday, December 22, 

2008, between midnight and 

1 a.m., a portion of the dike 

for an ash containment area 

at Kingston Fossil Plant failed. 

Approximately 5.4 million cubic 

yards of fly ash and bottom ash 

were released onto land and into 

adjacent waterways, including 

the Emory River that flows into 

the Clinch River near the plant. 

The approximate 1 billion gallons 

of coal combustion waste slurry 

covered about 300 acres of which 

8 were privately owned lands, not 

owned or managed by the TVA. 

The impacts of the coal ash spill 

destroyed and/or damaged 

(1) the railroad adjacent to the 

plant; (2) real and personal 

property; and (3) community 

infrastructure, including roads 

and utilities. TVA took immediate 

and ongoing actions to address 

the needs of those affected, clean 

up the spill, and protect human 

health and the environment. 

TVA also took action and made 

commitments to restore the area 

and regain public confidence.

TVA OIG committed to providing 

oversight where warranted 

and completed several 

reviews pertaining to the initial 

emergency response, root 

cause analysis, environmental 

monitoring, and impoundment 

stability. This review was initiated 

as part of that commitment to 

provide oversight of the Kingston 

Recovery Project. The objective 

of our review was to determine if 

TVA is meeting its commitments 

for the Kingston Recovery Project.

Our review found TVA has 

met, or is in the process of 

meeting, its commitments for 

the Kingston Recovery Project. 

Tom Kilgore, former President 

and Chief Executive Officer of 

TVA, testified before the U.S. 

Congress several times stating 

TVA’s commitment to clean up 

the spill, protect the public health 

and safety, restore the area, and 

look for opportunities as well 

as work closely with the leaders 

and residents of Roane County 

to make the area better than it 

was before the spill. Community 

leaders and regulatory personnel 

interviewed were satisfied 

with TVA’s actions to meet its 

commitments. 

Kingston Fossil Plant
38 TVA OIG Semiannual Report

In order to address these 

commitments, TVA has taken a 

number of steps. Specifically, 

TVA has cleaned up the ash spill 

and restored the area, protected 

public health and safety, kept the 

public and stakeholders informed 

and involved in the process, 

and helped with the economic 

development of Roane County. 

Some community leaders believe 

TVA has worked to make the area 

better than it was before the spill. 

The report did not contain any 

recommendations.

TVA’s Coal Combustion 

Product Management

As a result of the Kingston ash 

spill, on July 21, 2009, the TVA 

Board adopted resolutions, one 

of which was to provide a formal 

Fossil Remediation Plan covering 

not only Kingston, but also all 

other fossil ponds including all 

mitigation plans or remediation 

actions in process, prior to 

August 20, 2009. This review was 

initiated as part of the TVA OIG 

commitment to provide oversight 

of coal combustion product (CCP) 

management. The objective of 

our review was to determine if 

TVA is meeting its commitments 

for CCP management.

We found TVA was meeting 

its commitments for CCP 

management. We identified four 

areas of CCP management that 

TVA committed to improve: 

(1) programmatic improvements, 

(2) storage stability, (3) oversight, 

and (4) industry leadership. 

In order to address these 

commitments, TVA has taken a 

number of steps. Specifically, 

we found TVA has implemented 

programmatic improvements, 

stabilized its coal ash storage 

facilities, and improved 

oversight of CCP management. 

Additionally, we found TVA 

was taking steps to become 

an industry leader in CCP 

management. The report did not 

contain any recommendations.

Actions to Address 

Coal Plant Systems and 

Programs with Poor Ratings

During a September 2012 review 

of how TVA organizations assess 

the condition of its assets, 

Survey of TVA’s Process for 

Determining Condition of Assets, 

we learned that asset condition 

assessments done by Fossil 

Power Group (FPG) determined 

some generation assets were in 

poor condition. As a follow up 

to the prior work, we initiated a 

review to determine whether TVA 

was taking actions to address 

FPG systems and programs with 

poor ratings, defined as those 

designated with a red or yellow 

rating. Red ratings indicated 

unacceptable performance 

and required monitoring 

and resources to maintain 

or operate. Yellow ratings 

indicated performance needed 

improvement and required 

additional attention. 

We found actions were taken 

to address some programs and 

systems with poor health. We 

found 785 out of 1,617 programs 

and systems within FPG had 

been rated red or yellow. We 

randomly selected 35 programs 

and systems for detailed review. 

Actions taken by FPG to address 

the poor health resulted in an 

improvement in ratings or overall 

health of 17 programs and 

systems. However, there was no 

upgraded rating or improvement 

in system health for 18 systems. 

Of these 18 systems, 7 had no 

actions completed, while 11 had 

some actions completed without 

improvement in system health. 

The major reason cited for not 

completing actions was the lack 

of funding.

We also found system health 

reports were not completed 

or documented and required 

program health reports could 
TVA OIG Semiannual Report 39

not be provided. Additionally, 

TVA standard programs and 

processes, Performance of 

Engineering Programs and 

System Health Reports, were 

superseded by engineering 

guidance documents which 

had no requirements, only 

recommendations. This could 

increase the number of health 

reports not completed or not 

completed in a timely manner. 

The absence of accurate and 

timely equipment health reports 

could make it more difficult 

for TVA to effectively manage 

equipment reliability risk. 

We recommended the Senior 

Vice President, Power Operations, 

(1) document justification when 

actions are not taken to address 

systems and programs with red 

and yellow ratings, (2) reinforce 

the importance of consistent 

documentation of system health 

reports, and (3) consider the 

potential impact of eliminating 

the requirement to do asset 

health assessments on TVA’s 

non-nuclear asset condition risk 

and determine a schedule for 

completing health assessments 

that will mitigate the risk of 

equipment failure. 

Coal Plant Preventive 

Maintenance

Preventive maintenance (PM) 

is important to the reliable 

operation of assets. As a result 

of findings identified in a 

September 2013 evaluation, 

Review of TVA’s Nuclear Power 

Group Preventive Maintenance, 

we conducted a review of coal 

plant PM. PM is carried out 

at predetermined intervals, 

including PM routes, and 

intended to reduce the likelihood 

of a failure. The objective of 

our review was to determine if 

coal plant PM was performed 

in accordance with established 

schedules and if not, what effect 

the deviations were having.

We found compliance with 

PM schedules varied by plant 

and the PM compliance metric 

captured may not fully represent 

all PM activities deferred or not 

completed. The monthly PM 

compliance percentage varied 

from 10.5 to 100 percent. The 

most common reasons cited for 

not completing PM or adjusting 

the PM schedule was resource 

driven and/or due to emergent 

or sponsored work. We also 

found if a work order did not 

have the correct reconciliation 

code, a canceled PM work order 

would be counted as completed, 

which would skew the data. 

Reconciliation codes are essential 

for accurate reporting, but they 

were not a required field in the 

tracking system. 

We found that both uncompleted 

PMs and unestablished PMs 

contributed to equipment 

failures. In a review of 

65 Problem Evaluation Reports 

(PERs), we identified 6 PERs 

linking failures to PM issues. 

Four of those PERs related to 

equipment for which no PM 

schedule or requirement had 

been established, and 2 PERs 

related to uncompleted PMs. We 

also found plants were making 

progress implementing the new 

Maintenance Basis Optimization 

(MBO), but had experienced 

some delays in achieving target 

dates. Support of outages had 

impacted some site’s abilities 

to complete its MBO phases. 

Additionally, we found the 

absence of PM requirements 

could make it harder to manage 

equipment reliability risk.

We recommended the 

Senior Vice President, Power 

Operations, (1) increase 

PM completion and reduce 

deviations from PM schedules as 

well as reinforce importance of 

PM activities, (2) develop a way 

to more accurately capture and 

report PM compliance and other 

appropriate PM tracking metrics, 

(3) expedite MBO efforts, and 

(4) consider the potential impact 

of having PM governed only by 

guidelines and not requirements.

Coal Fire Protection 

Systems Follow Up

This review was initiated as 

a follow up to the Review of 

TVA’s Fossil Fire Protection 

Systems, September 30, 2011. 
40 TVA OIG Semiannual Report

Fire protection systems are a 

combination of mechanical and 

electrical components and, like 

power generation equipment, 

need regular attention. The 

objective of our review was to 

determine if the fire protection 

systems were adequately 

maintained and mitigating 

actions were taken to minimize 

the impact of fires at TVA fossil 

plants. 

We found TVA’s maintenance 

of fire protection systems was 

improving; however, there was 

heightened risk of damaging 

fires at TVA sites due to 

(1) restoration times for certain 

priority systems exceeding TVA 

targets; (2) delays in addressing 

fire protection work orders; 

(3) instances of noncompliance 

with TVA’s inspection, testing, 

and maintenance procedure; 

and (4) difficulties maintaining 

aging equipment. We noted 

improvements had also been 

made to minimize the impacts of 

fire, such as equipping fire trucks 

for each plant, replacing the fire 

brigade room at Kingston, and 

updating a portion of personal 

protective equipment for brigade 

members. However, many issues 

noted in the original inspection 

remained. For example, fire 

brigade members continued 

to have concerns about fire 

response preparedness, and 

lessons learned were not shared 

consistently across the fleet. 

We also found fire protection 

self-assessments presented the 

condition of TVA’s fire protection 

systems in a more positive 

manner than other sources might 

suggest were warranted. 

We recommended the Senior 

Vice President, Power 

Operations, (1) take steps to 

restore impaired fire protection 

systems as appropriate to service 

and determine if additional 

personnel or resources are 

needed to expedite repairs of fire 

protection systems in the future; 

(2) determine the equipment 

needs of fire brigade members 

and take steps to provide 

that equipment; (3) identify 

additional training needs for 

fire brigade members and 

take steps to provide that 

training; (4) determine whether 

increased staffing is warranted 

for fire brigades; (5) create and 

implement a formal process for 

capturing and sharing lessons 

learned from fire events across 

the fleet; (6) amend the Fire 

Protection Self-Assessments 

to include ratings of fire 

protection system equipment, 

provide a more objective 

means for determining whether 

preventive maintenance was 

performed, reflect prioritization 

of impairments and work orders 

that are outstanding, and provide 

a synopsis of additional drivers of 

fire risk at each site. 

TVA’s Nuclear Groundwater 

Protection Program

Based on the findings of our 

June 2011 review, TVA’s 

Groundwater - Monitoring at 

Coal Combustion Products 

Disposal Areas, we evaluated 

the TVA Nuclear Power Group 

(NPG) Groundwater Protection 

Program (GWPP). Groundwater 

contamination can result from 

routine nuclear plant activities 

such as wet storage of spent 

fuel, leaks from liquid waste 

pipelines and tanks, and leaks 

of contaminated cooling water. 

NPG’s GWPP was designed to 

prevent, detect, and mitigate 

impacts associated with potential 

subsurface and/or groundwater 

contamination. The objectives 

of our review were to determine 

if NPG’s GWPP (1) performed 

required monitoring and 

reporting and (2) completed 

required corrective actions based 

on monitoring results. 

While NPG’s GWPP performed 

required reporting, we could 

not verify the monitoring 

requirements in TVA’s NPG 

standard programs and 

processes were followed. 

Our review also found corrective 

actions were taken to address 

the leaks and spills at TVA’s 

nuclear plants reported to the 

NRC for the time frame of our 

review. However, we found 

opportunities for programmatic 

improvements. There were 

instances where programmatic 

weaknesses were identified 

several times, over the last 

5 years, and were not 

remediated. External 

assessments also noted 
TVA OIG Semiannual Report 41

deficiencies in the program that 

were downgraded or excluded 

when NPG performed its fleet 

self-assessment. In addition, 

there was not a formal process in 

place to ensure recommendations 

and/or action items made 

by external consultants were 

addressed.

We recommended the Vice 

President, Functional Area and 

Outage Governance, (1) develop 

and implement a process 

that includes (a) appropriately 

classifying and addressing 

recommendations and/or action 

items identified in external 

assessments, (b) requiring 

documentation of deviations from 

recommendations to 

correct deficiencies identified by 

external assessments, and 

(c) capturing outstanding site and 

fleet deficiencies within periodic 

fleet self-assessments; (2) require 

sites to revisit outstanding 

programmatic weaknesses to 

develop a remediation plan 

and establish a timeframe for 

completion and if no action is 

planned, document the reasons; 

and (3) incorporate the Senior 

Manager, Chemistry Oversight, 

in the remediation efforts for 

deficiencies identified by external 

consultants and industry groups 

to ensure issues are appropriately 

addressed and lessons 

learned and best practices are 

shared among NPG sites and 

implemented at a fleet level when 

needed.

Actions to Address River 

Operations Systems and 

Components with Poor 

Ratings

During a September 2012 

review of how TVA organizations 

assess the conditions of assets, 

Survey of TVA’s Process for 

Determining Condition of Assets, 

we learned asset condition 

assessments completed by RO 

had determined some assets 

were in deteriorated condition. 

As a follow up to the prior work, 

we reviewed whether TVA was 

taking actions to address RO 

systems and components with 

deteriorated conditions. Assets 

with deteriorated conditions 

were designated with a red or 

yellow rating. According to RO 

personnel, red ratings indicated 

equipment condition was poor, 

while yellow ratings indicated 

equipment condition was 

marginal. 

We found actions had been 

taken to address some systems 

and components with poor or 

marginal health. In RO, 1,438 

systems and components had 

been rated red or yellow. We 

randomly sampled 50 (8 reds 

and 42 yellows) for detailed 

review. Of the 8 systems and 

components with a red rating, 

all had either a project or work 

order developed to address 

the condition as required by 

the guidance, 5 had actions in 

progress, and 3 had no actions 

underway or planned within the 

next 3 years. Of the 42 systems 

and components with yellow 

ratings, 32 had no actions taken 

and 10 had projects developed to 

address the identified deficiency. 

Of the 10 systems and 

components that had projects 

developed, 2 had projects that 

were funded or being worked, 

7 had projects that were not 

currently funded, and 1 had a 

project that was completed. 

Additionally, we found TVA had 

identified asset condition of 

non-nuclear generation as a top 

enterprise risk in FY 2014. TVA’s 

policies and procedures were 

superseded by an engineering 

guidance document which 

had no requirements, only 

recommendations. This could 

result in health assessments 

not being completed. Without 

accurate and timely equipment 

health assessments, TVA cannot 

effectively manage equipment 

reliability risk. 

We recommended the Vice 

President, RO, (1) consider 

the potential impact to nonnuclear asset condition risk of 

eliminating the requirement to 

do asset health assessments 

and determine a schedule for 

completing health assessments 

that will adequately mitigate the 

risk of equipment failure and 

(2) document justification when 

actions are not taken to address 

systems and components with a 

red rating.
42 TVA OIG Semiannual Report

REPRESENTATIVE INVESTIGATIONS
TVA OIG Semiannual Report 43

Summary of

REPRESENTATIVE INVESTIGATIONS

This reporting period, our investigative results include criminal sentencing of three individuals, numerous administrative 

actions, and savings and restitution—to TVA and to a private entity—exceeding $200,000. We opened 134 cases and 

closed 123. Representative highlights of our activities follow.

Former TVA Vendor 

Sentenced

As previously reported, a TVA 

OIG investigation resulted in 

former TVA vendor Frank Lewis 

Conn’s indictment on five counts 

of wire fraud. Mr. Conn was 

an owner of a company that 

contracted with TVA to remove 

vegetation from power lines and 

other TVA property across the 

Tennessee Valley. The federal 

indictment alleged he devised 

a scheme to defraud TVA of 

$152,712 through the use of 

fraudulently inflated invoices. 

Based on his January guilty plea 

to one count of the indictment, 

he appeared for sentencing 

May 28, 2014. Mr. Conn was 

ordered to pay TVA $72,000 

restitution and sentenced to 

three months of home detention 

and two years of probation. The 

judge additionally mandated he 

write an essay for publication in 

his local newspaper describing 

the difference between a 

“mistake” and a deliberate 

choice. 

Prosecution Complete for 

Former TVA Vice President

During September 2013 

Masoud Bajestani, former Vice 

President, Watts Bar Nuclear 

Plant Unit 2, pled guilty to federal 

charges of conspiracy to violate 

the International Emergency 

Economic Powers Act and Iranian 

Transactions Regulations (one 

count), and filing false income 

tax returns (two counts). He 

also agreed to the forfeiture 

of $600,000 in U.S. currency, 

representing the funds used to 

promote his unlawful activity. On 

June 17, 2014, he was sentenced 

to two years of probation, 

120 hours of community service, 

and the $600,000 forfeiture 

agreed to in his plea.

On August 15, 2014, roughly 

20 percent of the $600,000 

forfeiture—$119,592—

was credited to TVA OIG 

Investigations, with the 

requirement, per U.S. Department 

of Justice guidelines, that it 

be used for law enforcement 

purposes only and not to replace 

or supplant existing budgeted 

resources. (The remainder of the 

$600,000 will be dispersed to 

other agencies, chiefly Homeland 

Security Investigations and the 

Internal Revenue Service Criminal 

Investigations Division.) 

TVA Senior Manager 

Resigns

Investigative activity revealed 

a TVA senior manager used 

TVA travel and credit cards, in 

violation of TVA policy, to make 

more than $16,000 in personal 

purchases or for purchases 

lacking documentation. The 

individual reimbursed questioned 

charges. Additionally, 

evidence indicates the senior 

manager falsified U.S. Office of 

Government Ethics Confidential 

Financial Disclosure Reports by 

not reporting personal travel 

paid for by outside companies. 

Prosecution was declined in 

these matters. As a result of our 

report to management, it was 

determined the senior manager 

could not continue to effectively 

serve, and the individual resigned 

from TVA. 

Medical Certificate 

Falsification

TVA OIG investigated an 

allegation that a TVA truck 

driver falsified the required 

Medical Examiner’s Certificate 

for an S05 Commercial Driver’s 

License (commonly referred to 

as an “S-5”), and submitted it to 

TVA. During an OIG interview, 
44 TVA OIG Semiannual Report

the individual acknowledged he 

falsified the S-5 by photocopying 

another employee’s card, 

inserting his own name, 

and faxing the result to TVA 

management. For approximately 

five months, management relied 

on the authenticity of the card 

to allow the driver to continue 

his duties. Following a report 

issued by TVA OIG, the employee 

was terminated, and his future 

TVA employment has been 

permanently restricted. 

Fraud Risk Assessments

OIG Investigations facilitates 

fraud risk assessments (FRA) 

to proactively assist TVA with 

fraud prevention. While not a 

traditional OIG audit, evaluation, 

or investigation, the OIG, 

acting in the role of facilitator, 

assists TVA through the FRA 

process with the dual purpose 

of preventing fraud and saving 

ratepayers unnecessary expense. 

The FRA process primarily 

focuses on the identification 

of potential fraud schemes, as 

well as existing fraud-prevention 

controls, with the objective of 

identifying opportunities for 

strengthening internal controls 

to reduce the potential for 

fraud. An effective FRA team 

includes stakeholders from the 

TVA business unit conducting the 

assessment who are willing to 

“think deviantly” to brainstorm 

and identify fraud schemes that 

could occur, then discuss controls 

to prevent those schemes. 

During this reporting period, 

the OIG facilitated FRA on the 

following: a major contractor 

company’s (Gilbert Union BoilerMorrison Knudsen) modification 

and supplementary maintenance 

services, TVA’s Natural Gas 

Services, Disbursement Services, 

and Occupational Health/

Workers’ Compensation Program.

Widows Creek Fossil Plant
TVA OIG Semiannual Report 45

Apalachia Dam
46 TVA OIG Semiannual Report

LEGISLATION & REGULATIONS
TVA OIG Semiannual Report 47

Section 4(a) of the Inspector General Act of 1978, as amended, provides that the IG shall review existing and proposed 

legislation and regulations relating to programs and operations of such establishment and make recommendations in 

the semiannual reports...concerning the impact of such legislation or regulations on the economy and efficiency in the 

administration of such programs and operations administered or financed by such establishment or the prevention and 

detection of fraud and abuse in such programs and operations. 

Legislation & regulations

In this section of our semiannual 

report, it is our intent to address 

only current and pending 

legislation which relates to 

the economy or efficiency of 

TVA operations when we have 

recommendations or comments 

to make to Congress regarding 

the legislation. At times, we 

may direct recommendations 

to general positions and 

issues, particularly when there 

are multiple bills dealing 

with the issue. At other 

times, we anticipate making 

recommendations relating to 

particular statutes and bills and 

their particular wording.

During this reporting period, 

we are not making any 

recommendations to Congress 

regarding current or pending 

legislation.

Colbert Fossil Plant
48 TVA OIG Semiannual Report

APPENDICES
TVA OIG Semiannual Report 49

REPORTING REQUIREMENT PAGE

Section 4(a)(2) Review of Legislation and Regulations 46-47

Section 5(a)(1) Significant Problems, Abuses, and Deficiencies 24-45

Section 5(a)(2) Recommendations With Respect to Significant Problems, Abuses, and 

Deficiencies 24-45

Section 5(a)(3) Recommendations Described in Previous Semiannual Reports in Which 

Corrective Action Has Not Been Completed Appendix 5

Section 5(a)(4) Matters Referred to Prosecutive Authorities and the Prosecutions and 

Convictions That Have Resulted Appendix 6

Section 5(a)(5) and 6(b)(2) Summary of Instances Where Information Was Refused None

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

Section 5(a)(7) Summary of Particularly Significant Reports 24-45

Section 5(a)(8) Status of Management Decisions for Audit and Evaluation Reports 

Containing Questioned Costs Appendix 3

Section 5(a)(9) Status of Management Decisions for Audit and Evaluation Reports 

Containing Recommendations That Funds Be Put to Better Use Appendix 3

Section 5(a)(10)

Summary of Audit and Evaluation Reports Issued Prior to the Beginning 

of the Reporting Period for Which No Management Decision Has Been 

Made

Appendix 4

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

Section 5(a)(12) Significant Management Decisions With Which the Inspector General 

Disagreed None

Section 5(a)(13) Information Under Federal Financial Management Improvement Act of 

1996

Not 

Applicable

Section 5(a)(14)

Appendix of results of any peer review conducted by another Office of the 

Inspector General during the reporting period and if none, a statement of 

the date of the last peer review.

Appendix 9

Section 5(a)(15)

List of outstanding recommendations from any peer review conducted by 

another Office of the Inspector General, including a statement describing 

the status of the implementation and why implementation is not complete.

None

Section 5(a)(16)

List of peer reviews conducted of another Office of the Inspector 

General during the reporting period, including a list of any outstanding 

recommendations made from any previous peer review that remain 

outstanding or have not been implemented.

Appendix 10

INDEX OF REPORTING REQUIREMENTS UNDER THE INSPECTOR GENERAL ACT

Appendix 1
50 TVA OIG Semiannual Report

OIG AUDIT REPORTS • Issued During the Six-Month Period Ended September 30, 2014

Report Number 

and Date Title Questioned

Costs

Unsupported 

Costs

Funds Put To

Better Use

CONTRACT AUDITS

2013-15239 

05/29/2014 Comdata Network, Inc. $1,046,599 $940,752 $0

2014-15186 

06/18/2014

State of Alabama (Alabama Emergency Management Agency and 

Alabama Department of Public Health) $0 $0 $0

2014-15039 

06/30/2014 Choctaw Generation LTD $17,809 $12,674 $0

2014-15036 

09/03/2014 Bartlett Holdings, Inc. $1,547,434 $0 $0

2014-15223 

09/17/2014 Proposed Rate Changes for Engineering Services $0 $0 $512,000

CORPORATE GOVERNANCE AND FINANCE AUDITS

2014-15027

06/23/2014 TVA’s Official Stations $0 $0 $0

2013-15106

09/04/2014 Revenue Billing’s Invoice Preparation $0 $0 $0

OPERATIONAL AUDITS

2014-15071 

06/19/2014

Agreed-Upon Procedures – Center for Resource Solutions’ 

Green-e Energy Program $0 $0 $0

2013-14959 

08/07/2014 TVA Environmental Risk Management $0 $0 $0

2014-15075 

08/20/2014 Energy Services Contracts for Federal Customers $0 $0 $0

INFORMATION TECHNOLOGY AUDITS

2011-14054 

06/17/2014 PLUS Implementation Audit $0 $0 $0

2013-15296 

06/24/2014 Plant Cyber Security Assessment $0 $0 $0

2013-15052 

07/23/2014 TVA Supply Chain Risks Associated with Procuring IT Equipment $0 $0 $0

2014-15065 

09/23/2014 Network Security Zones and Perimeter Architecture Audit $0 $0 $0

2014-15064 

09/29/2014 Oracle Database Security $0 $0 $0

TOTAL

AUDITS (15) $ 2,611,842 $ 953,426 $ 512,000

Appendix 2
TVA OIG Semiannual Report 51

OIG Evaluation REPORTS • Issued During the Six-Month Period Ended September 30, 2014 

Report Number 

and Date Title QuestionedCosts

Unsupported 

Costs

Funds Put To

Better Use

2013-15332 

06/02/2014 Effectiveness of TVA’s Enterprise Risk Management Program $ 0 $ 0 $ 0

2013-15157 

06/05/2014

Actions to Address River Operations Systems and Components 

with Poor Ratings $ 0 $ 0 $ 0

2013-15135 

07/30/2014

Actions to Address Coal Plant Systems and Programs with 

Poor Ratings $ 0 $ 0 $ 0

2014-15218 

09/03/2014 Kingston Recovery Project $ 0 $ 0 $ 0

2014-15056 

09/25/2014 Nuclear Groundwater Review $ 0 $ 0 $ 0

2014-15053 

09/29/2014 Coal Plant Preventive Maintenance $ 0 $ 0 $ 0

2014-15216 

09/29/2014 Follow-up Review of Coal Fire Protection $ 0 $ 0 $ 0

2012-14882 

09/30/2014 Injury Reporting at TVA $ 0 $ 0 $ 0

2014-15055 

09/30/2014

Process for Determining Cost Information Used in Making 

Commitment and Dispatch Decisions for Coal and 

Combined Cycle Plants

$ 0 $ 0 $ 0

2014-15217 

09/30/2014 Coal Combustion Product Management $ 0 $ 0 $ 0

TOTAL

Evaluations (10) $ 0 $ 0 $ 0

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

Appendix 2

South Holston Dam
52 TVA OIG Semiannual Report

TABLE I • TOTAL QUESTIONED AND UNSUPPORTED COSTS • AUDITS

TABLE I • TOTAL QUESTIONED AND UNSUPPORTED COSTS • EVALUATIONS

Audit Reports Number

of Reports

Questioned

Costs Unsupported Costs

A. For which no management decision has been made by the 

 commencement of the period 0 $0 $0

B. Which were issued during the reporting period 3 $2,611,842 $953,426

Subtotal (A+B) 3 $2,611,842 $953,426

C. For which a management decision was made during the 

 reporting period 3 $2,611,842 $953,426

 1. Dollar value of disallowed costs 3 $2,611,842 $953,426

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

D. For which no management decision has been made by the 

 end of the reporting period 0 $0 $0

Evaluation Reports Number

of Reports

Questioned

Costs

Unsupported

Costs

A. For which no management decision has been made by the 

 commencement of the period 0 $0 $0

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 

 reporting period 0 $0 $0

 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 

 end of the reporting period 0 $0 $0

Appendix 3
TVA OIG Semiannual Report 53

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

Audit Reports Number

of Reports

Funds To Be Put 

To Better Use

A. For which no management decision has been made by the commencement of the period 1 $414,250

B. Which were issued during the reporting period 1 $512,000

Subtotal (A+B) 2 $926,250

C. For which a management decision was made during the reporting period 1 $414,250

 1. Dollar value of recommendations agreed to by management 1 $414,250

 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 1 $512,000

Evaluation Reports Number

of Reports

Funds To Be Put 

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

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

Appendix 3
54 TVA OIG Semiannual Report

Evaluation Report 

Number and Date

Report Title, Summary, and Explanation of Reasons Management Decision was Not Made by the End of the 

Reporting Period

2013-14950

09/19/2013 TVA’s Succession Planning

The following evaluation report was issued before the commencement of the semiannual period; however, management decision on all the 

recommendations in this report had not been received by the end of the reporting period.

EVALUATION REPORTS WITH NO MANAGEMENT DECISION

Appendix 4

The TVA has stated its future depends on effective succession planning and faces a potential workforce challenge 

due to retirements within the next five years. Also, TVA has identified a risk of senior leadership attrition that could 

leave a gap in key positions. This review was conducted as a follow up to a previous OIG review to assess TVA’s 

succession planning.

Our review found TVA has made improvements to succession planning; however, areas for improvement still exist. 

Improvements include the use of a talent grid, implementation of succession planning metrics, and a more accurate 

attrition prediction model. In addition, we found TVA could strengthen some best practices. 

While TVA has made progress in its succession planning process, we found through interviews and review of 

documentation areas for improvement still exist, including: (1) follow up on action items identified in talent reviews, 

including the development of organizational action plans; (2) cross-pollination of talent; (3) reduction of talent review 

preparation time; and (4) less frequent revisions of the talent review and succession planning process, which have 

caused frustration among TVA management. Additionally, TVA is working to address areas of concern regarding 

populating the succession plans with realistic candidates. 

As part of this review, we identified succession planning best practices and compared them to the processes 

TVA currently has in place. Of ten best practices identified, we found TVA could strengthen executive ownership, 

onboarding of succession candidates, and transparency of the succession planning process. In addition to these 

findings, all TVA managers who were interviewed expressed concerns with the use of forced distribution for the 

talent grid. 

We recommended the Vice President, Human Resources: (1) work in conjunction with TVA organizations to improve 

follow-up actions by developing organizational action plans as stated in TVA-SPP-11.301, Succession Planning, 

Section 3.2.3; (2) evaluate options to incorporate cross-pollination of TVA organizations into the succession planning 

process, including a unified succession planning system that could also reduce talent review preparation; 

(3) determine if changes and initiatives to the talent review and succession planning process are working and 

intended results are achieved before additional changes are made; (4) complete and implement the Strategic 

Workforce Management, Standard Programs and Processes, including a unified definition for a mission critical 

position; (5) work with TVA management to develop a plan that promotes executive ownership of talent 

development; (6) consider developing formalized transition plans, similar to the Nuclear Power Group, in other 

organizations; (7) clarify the succession planning process by producing a high-level, TVA-wide communication that 

describes the talent review and succession planning process, and consider the merits of communicating performance 

and potential.

We did not receive management decision or a date for final action on two of the seven recommendations, numbers 

one and five above, by the end of the reporting period.
TVA OIG Semiannual Report 55

As of the end of the semiannual period, final corrective actions associated with 19 audits and seven evaluations/inspections reported in 

previous semiannual reports were not completed. Presented below for each audit and evaluation are the report number and date and a 

brief description of final actions planned to resolve the open recommendations, including the date management expects to complete final 

action.

Audit Report 

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

2010-13132

06/15/2011

Physical and Logical Access for Contractors

TVA agreed to create a cross-reference matrix of TVA roles to assets with the associated qualification/background 

requirements needed to gain access to that asset and develop a process to restrict contractor access to sensitive 

data and assets until the proper clearances have been obtained. Management expects to complete final action by 

December 31, 2014.

2011-14177

04/23/2012

Site Cyber Security Audit

TVA agreed to (1) review the three servers without logon banners and, if technically feasible, add the logon 

banner, perform a comprehensive review of unnecessary services and protocols, implement restrictions on the 

basis of operations requirement, and research utilizing Secure Shell (Version 2) for remote access with vendors 

and, if technically feasible, implement Secure Shell; and (2) monitor all production servers using the configuration 

management tool. Management expects to complete final action by December 31, 2014.

2011-14244

09/28/2012

TVA’s Direct Load Control Program

TVA agreed to develop a strategy for replacing the Direct Load Control Program. TVA recently informed the OIG it 

had bought out the ten-year contracts of ten of the twelve distributors participating in the program and does not plan 

to adjust the wholesale credits for these two participants until a replacement program is developed. Management 

expects to complete final action by January 30, 2015.

2012-14567

01/30/2013

Building and Infrastructure Failure Risks

TVA agreed to (1) reexamine its approach to challenged properties under its Strategic Real Estate Plan, (2) enhance 

Tririga functionality and other tools for building asset information, and (3) address weaknesses in the Tririga production 

database. Management expects to complete final action by September 30, 2015.

2013-14983

06/14/2013

Protection of Personally Identifiable Information on TVA Desktop and Laptop Computers

TVA management agreed to evaluate the feasibility of full-disc encryption and other methods of protection of data on 

TVA personnel computers. Management expects to complete final action by September 30, 2015.

2012-14619

06/18/2013

Effectiveness of Substation Modem Access

TVA Information Technology agreed to work with the business units to update the request and provisioning process 

and to develop processes for providing inventory information. TVA Energy Delivery is working with the meter 

interrogation vendor to modify the nightly program to include a check of password settings. Management expects to 

complete final action by September 30, 2014.

2013-15265 

10/10/2013

Proposal for Engineering Services

TVA will require the vendor to submit their actual salary ranges for the labor classifications in question and review 

these rates for incorporation into the contract. Management expects to complete final action by October 10, 2014.

2013-15185 

11/07/2014

Proposal for Engineering Services

TVA agreed to amend its contract with the vendor to add new salary ranges and revise the contract language. 

Management expects to complete final action by November 7, 2014.

2012-14631 

11/14/2013

Review of TVA’s Management of Combustible Coal Dust

TVA agreed to (1) use a previously created short- and long-term combustible dust projects spreadsheet that includes 

fleet-wide prioritization and funding requirements and update it quarterly; (2) develop policies and procedures to 

replace the Combustible Dust Program document; (3) continue to evaluate projects, such as installing shed plates to 

prevent reaccumulation of dust in hard-to-reach areas; and (4) develop a site-specific combustible dust procedure 

template that will be provided to all coal sites. Management expects to complete final action by November 14, 2014.

AUDIT AND EVALUATION REPORTS WITH CORRECTIVE ACTIONS PENDING 

Appendix 5 
56 TVA OIG Semiannual Report

Audit Report 

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

2012-14666

11/15/2013

URS Energy & Construction, Inc. 

TVA agreed to take action to ensure (1) URS obtains TVA technical contract manager (TCM) approval for applicable 

subcontracts and change orders on future work, (2) contract language is revised to specify when TVA TCM approval is 

not required, and (3) URS cannot circumvent subcontract change order approval requirements. TVA intends to pursue 

(1) collection of URS’ markup of $168,623 and (2) an amendment to the contract language which will clarify that any 

future services and equipment TVA provides will be a direct pass through with no markups/fee. Management expects 

to complete final action by November 15, 2014.

2013-15314 

12/12/2013

Proposal for Construction/Modification Services for Transmission/Power Supply Program

TVA management stated (1) they had rejected the vendor’s noncraft labor rates, and noncraft labor will be included 

in the agreed-upon overhead and general and administrative (G&A) markup rates; and (2) the draft contract will be 

conformed into a final document that accurately defines how TVA intends to compensate the vendor. Management 

expects to complete final action by December 12, 2014.

2013-14948 

12/18/2013

AirWatch Pre-implementation Audit 

TVA Information Technology management agreed to (1) complete initial setup of AirWatch as part of the Mobile 

Enablement project; (2) address business case, strategy, requirements, and perform a risk assessment as part of the 

Mobile Enablement project; (3) review mobile device policies and procedures; and (4) address wireless, iTunes backup, 

and Bluetooth issues in a separate project. Management expects to complete final action by December 5, 2014.

2013-15252 

01/08/2014

Proposal for Construction/Modification Services for Transmission/Power Supply Program 

TVA (1) agreed to negotiate the lowest allowable rates for G&A costs, insurance, and equipment; (2) rejected the 

vendor’s noncraft labor rates and stated noncraft labor will be included in the agreed-upon overhead and G&A 

markup rates; and (3) TVA will conform the draft contract into a final document that accurately defines how TVA 

intends to compensate the vendor. Management expects to complete final action by January 8, 2015.

2012-14912 

01/21/2014

AMEC Environment and Infrastructure, Inc. 

TVA agreed to pursue recovery of $100,441 in overbilled costs. Management expects to complete final action by 

January 21, 2015.

2013-15190 

02/03/2014

Proposal for Hydro Modernization and Rehabilitation 

TVA agreed to (1) negotiate the recommended markups for fixed-price work, (2) negotiate the recommended 

overhead and G&A rates, (3) include contract language to ensure the vendor cannot bill more than 40 hours per week 

for nonmanual employees, (4) obtain a comprehensive list of equipment rates prior to completing negotiations and 

specify the cost components of the equipment rates in the contract, and (5) consider expanding the performancebased fee language to the vendor’s fixed price and time and materials pricing. Management expects to complete 

final action by February 3, 2015.

2013-15330 

02/10/2014

Proposal for Construction/Modification Services for Transmission/Power Supply Program 

TVA (1) agreed to negotiate to remove small tools and workers' compensation from the vendor's markup rates, 

(2) stated no separate overtime burden rate will be allowed, (3) is negotiating an equipment rate list that reflects the 

lower of TVA's equipment support services or the lowest rate submitted by all bidders, and (4) will conform the draft 

contract into a final document that accurately defines how TVA intends to compensate the vendor. Management 

expects to complete final action by February 10, 2015.

2013-15104 

02/12/2014

PowerWAN Security and Architecture 

TVA agreed to (1) modify system configuration policies and practices to better harden systems, (2) modify password 

policies to comply with TVA policies, (3) develop policies and practices to ensure legitimate traffic is traversing the 

PowerWAN network, and (4) limit clear-text protocols and restrict traffic to specific hosts/destinations and protocols/

ports. Management expects to complete final action by May 1, 2015.

2013-15350 

02/13/2014

Proposal for Construction/Modification Services for Transmission/Power Supply Program 

TVA management stated (1) they had rejected the vendor’s noncraft labor rates, and noncraft labor will be included in 

the agreed-upon overhead and G&A markup rates; and (2) the draft contract will be conformed into a final document 

that accurately defines how TVA intends to compensate the vendor. Management expects to complete final action by 

February 13, 2015.

AUDIT AND EVALUATION REPORTS WITH CORRECTIVE ACTIONS PENDING (CONTINUED)

Appendix 5 
TVA OIG Semiannual Report 57

Appendix 5

Audit Report 

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

2011-14477-01 

03/28/2014

Follow-Up Audit of TVA’s Financial Trading Program

AUDIT AND EVALUATION REPORTS WITH CORRECTIVE ACTIONS PENDING (CONTINUED)

TVA agreed to take action on each of the nine recommendations made in our report. At the end of this 

reporting period, actions were not complete for five of the following recommendations: (1) TVA agreed with 

the recommendation to improve and consolidate performance reports for monitoring fuel costs and associated 

risks and will examine the effectiveness of the risk measures currently reported and streamline the front- and 

middle-office reporting so that there is one official version of reporting metrics. TVA disagreed with the 

recommendation to develop a metric specific to natural gas exposure risk. (2) TVA agreed that VaR should not be 

the primary risk metric and should be replaced with “at risk” measures such as fuel cost at risk, liquidity at risk, and 

individual counterparty maximum potential exposure limits (credit risk). TVA is in the process of implementing a 

programmatic solution for risk measurement and reporting which will be able to calculate fuel cost at risk. TVA will 

also investigate whether or not the credit system currently being implemented can calculate liquidity at risk and 

individual counterparty maximum potential exposure. If an automated solution is not available, TVA will develop a 

manual approach for monitoring these risks. (3) TVA agreed to perform routine stress testing after implementation 

of its risk analytics solution for risk measurement and reporting. (4) TVA put new Fossil Fuel and Power Commodity 

Risk Guidelines into effect on November 1, 2013, that superseded the Commodity Risk Management Policy whose 

language addressed stress tests. In addition, TVA has initiated the process to retire the Financial Trading Program 

SPP. (5) TVA agreed to evaluate its physical and financial positions to effectively manage portfolio risks. In addition, 

TVA agreed to focus on TVA’s total energy commodity portfolio as it implements Mercatus’ recommendations and 

updates its governance documents. Management expects to complete final action by November 30, 2014.

Paradise Fossil Plant
58 TVA OIG Semiannual Report

Appendix 5 

AUDIT AND EVALUATION REPORTS WITH CORRECTIVE ACTIONS PENDING (CONTINUED)

Evaluation Report 

Number and Date Report Title and Recommendations on which Final Action is Not Complete

2008-11829 

06/02/2010

TVA Records Retention 

TVA agreed to continue current plans to replace the Electronic Data Management System. Management expects to 

complete final action by May 29, 2015.

2012-14535 

03/21/2013

Master Key Program Management – Energy Delivery 

TVA agreed to secure facilities protected by master keys to minimize the risk posed by keys outside TVA's control and 

develop specifications for the purchase of a new system. Management expects to complete final action by September 30, 

2016.

2012-14636 

08/28/2013

Master Key Program Management – Property & Natural Resources 

TVA agreed to develop standard policies and procedures and secure facilities protected by master keys to minimize the risk 

posed by master keys outside TVA's control. Management expects to complete final action by September 30, 2015.

2013-14950 

09/19/2013

TVA’s Succession Planning 

TVA provided a corrective-action plan for five of the seven recommendations made in the report. Until corrective action 

planned for the remaining two recommendations is provided, a target date for final action is not determinable. See also 

Appendix 4.

2012-14845 

09/24/2013

TVA’s Nuclear Power Group Preventive Maintenance 

TVA agreed to address the issue with the "Counts as Deferral" flag used in preventive maintenance tracking and expedite 

preventive maintenance organization efforts. Management expects to complete final action by June 1, 2015.

2012-14789 

09/27/2013

TVA’s Capital Projects Approval Process 

TVA agreed to design and implement a forecasting and project prioritization process that will capture budget and 

forecasting information at a project level in a timely, accurate manner. Management expects to complete final action 

by October 30, 2014.

2012-14587 

10/17/2013

Nuclear Power Group and Coal and Gas Operations Critical Spare Parts Program 

TVA agreed to (1) develop the appropriate procedures to define the roles, responsibilities, and accountabilities of 

key persons, and define the decision and approval process in regard to the procurement of critical spares; (2) define 

maintenance program accountabilities for inventory including critical spares; (3) take steps to follow up on actions 

recommended by the management consulting firm; (4) develop processes and procedures required to manage critical 

spare information; and (5) define the decision and approval process for the removal of the critical spare designation 

from spare parts in inventory. Management expects to complete final action by October 17, 2014.
TVA OIG Semiannual Report 59

Appendix 6

INVESTIGATIVE REFERRALS AND PROSECUTIVE RESULTS1

Referrals

Subjects Referred to U.S. Attorneys 16

Subjects Referred to State/Local Authorities 0

Results

Subject Indicted 0

Subjects Convicted 0

Pretrial Diversion 0

Referrals Declined 14

1

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

Wilbur Dam
60 TVA OIG Semiannual Report

HIGHLIGHTS – STATISTICS

SEPT 30, 

2014 

MAR 31, 

2014

SEPT 30, 

2013

MAR 31, 

2013

SEPT 30, 

2012

AUDITS

AUDIT STATISTICS

Carried Forward 24 28 38 32 35

Started 20 17 21 23 28

Canceled (1) (1) (1) (1) (6)

Completed (15) (20) (30) (16) (25)

In Progress at End of Reporting Period 28 24 28 38 32

AUDIT RESULTS (Thousands)

Questioned Costs $2,612 $635 $2,916 $1,262 $11,708

Disallowed by TVA $2,612 $308 $647 $2,039 $9,153

Recovered by TVA $484 $164 $2,447 $559 $4,168

Funds to Be Put to Better Use $512 $9,584 $36,522 $0 $10,204

Agreed to by TVA $414 $20,938 $23,100 $0 $1,235

Realized by TVA $13,114 $375 $2,479 $145 $1,235

OTHER AUDIT-RELATED PROJECTS

Completed 10 5 5 7 10

Cost Savings Identified/Realized (Thousands) $0 $0 $0 $0 $0

EVALUATIONS

Completed 10 3 6 6 6

Cost Savings Identified/Realized (Thousands) $0 $0 $0 $0 $0

INVESTIGATIONS2

INVESTIGATION CASELOAD

Opened 134 112 173 134 148

Closed 123 148 158 105 157

In Progress at End of Reporting Period 163 150 179 160 128

INVESTIGATIVE RESULTS (Thousands)

Recoveries $89.1 $10,874.7 $899.9 $0 $4,416.4

Savings $125 $0 $550.4 $770.2 $1,454.7

Fines/Penalties $0.8 $1 $603.8 $0 $0.3

Other Monetary Loss $0 $0 $519.3 $0 $83.4

MANAGEMENT ACTIONS

Disciplinary Actions Taken (# of Subjects) 14 22 18 16 11

Counseling/Management Techniques Employed (# of Cases) 12 14 20 14 20

Debarment 0 0 0 0 0

PROSECUTIVE ACTIVITIES (No. of Subjects)

Referred to U.S. Attorneys 16 14 18 13 12

Referred to State/Local Authorities 0 2 0 0 7

Indicted 0 5 0 2 1

Convicted 0 1 2 4 1

Pretrial Diversion 0 1 0 0 0

1

 Includes $109,054 recovered in excess of amounts decided by management.

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

3 $12,573 of this amount is restitution ordered to be paid to a non-governmental financial institution as the result of a criminal 

 investigation.

4 $10,794,728 of this total is restitution ordered in a TVA-OIG led federal criminal case. The defendant was ordered to repay victims 

 of a Ponzi scheme, the largest portion of which was comprised of his fraudulent collection of money from Valley-wide investors 

 under the pretense that they were helping fund the Kingston ash spill remediation.

Appendix 7

3 4

1
TVA OIG Semiannual Report 61

Appendix 8

Government Contractor Audit Findings

The National Defense Authorization Act for Fiscal Year 2008, P.L. 110-181, requires each Inspector General 

appointed under the Inspector General 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, OIG issued no contract review reports 

under this requirement.

Sequoyah Nuclear Plant
62 TVA OIG Semiannual Report

Peer Reviews of the TVA OIG

Audits Peer Review

IG audit organizations are required to undergo 

an external peer review of their system of quality 

control at least once every three years, based 

on requirements in the Government Auditing 

Standards. Federal audit organizations can receive 

a rating of pass, pass with deficiencies, or fail. 

TVA OIG underwent its most recent peer review 

of its audit organization for the period ended 

September 30, 2013. The review was performed 

by the Special Inspector General for the Troubled 

Asset Relief Program (SIGTARP). The SIGTARP 

issued the report, dated March 31, 2014, in which 

it concluded the TVA OIG audit organization’s 

system of quality control for the fiscal year ended 

September 30, 2013, was suitably designed and 

complied with to provide the OIG with reasonable 

assurance of performing and reporting in conformity 

with applicable professional auditing 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://www.oig.tva.gov/

PDF/PeerReviewReport03312014.

Investigations Peer Review

Investigative operations undergo an external 

peer review, Quality Assessment Review (QAR), at 

least once every three years. The United States 

Department of Commerce OIG conducted a QAR 

of the TVA OIG Investigative Operations. The 

Commerce OIG found the “...system of internal 

safeguards and management procedures for the 

investigative function of the Office of Inspector 

General for the Tennessee Valley Authority in effect 

for the year ended April 30, 2013, is in compliance 

with the quality standards established by CIGIE and 

the applicable Attorney General guidelines. These 

safeguards and procedures provide reasonable 

assurance of conforming with professional 

standards in the planning, execution and reporting 

of its investigations.” The QAR report can be 

found on our Web site at http://oig.tva.gov/

PDF/22NOV2013-tvaoig-inv-peer-review.pdf.

Appendix 9
TVA OIG Semiannual Report 63

Appendix 10

Peer Review of the Audit Organization of the Board of Governors of the Federal 

Reserve System and the Consumer Financial Protection Bureau Office of Inspector 

General

The TVA OIG completed a peer review of the audit operations of the Board of Governors of the Federal 

Reserve System and the Consumer Financial Protection Bureau (FRB/CFPB) OIG. We issued our final report 

to the FRB/CFPB Inspector General on September 4, 2014, in which we reported that in our opinion, the 

system of quality control for the audit organization of the FRB/CFPB OIG, in effect for the 12-month period 

ended March 31, 2014, had been suitably designed and complied with to provide the FRB/CFPB OIG with 

reasonable assurance of performing and reporting in conformity with applicable professional standards in all 

material respects. Accordingly, the FRB/CFPB OIG received a peer review rating of pass. FRB/CFPB OIG 

has posted its peer review report on its Web site at http://oig.federalreserve.gov/reports/peer-reviews.htm.
64 TVA OIG Semiannual Report

GLOSSARY
TVA OIG Semiannual Report 65

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.

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.

Management Decision – 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.

Glossary
66 TVA OIG Semiannual Report

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

AIG .............................................................................................................. Assistant Inspector General

BU .................................................................................................................................... Business Units

CCP ................................................................................................................Coal Combustion Product

CRS.......................................................................................................... Center for Resource Solutions

DBA ...................................................................................................................Database Administrator

EMS ............................................................................................... Environmental Management System

ERM...........................................................................................................Enterprise Risk Management

ESCO............................................................................................................. Energy Services Company

FESP ...................................................................................................Federal Energy Services Program

FPG...........................................................................................................................Fossil Power Group

FRA.................................................................................................................... Fraud Risk Assessments

FRB/CFPB...............................................................Board of Governors of Federal Reserve System and 

the Consumer Financial Protection Bureau

FY ...........................................................................................................................................Fiscal Year

GAO ................................................................................................. Government Accountability Office

GWPP................................................................................................ Groundwater Protection Program

IG ...............................................................................................................................Inspector General

IT ..................................................................................................................... Information Technology

LPC ....................................................................................................................Local Power Companies

MBO.....................................................................................................Maintenance Basis Optimization

NPG...................................................................................................................... Nuclear Power Group

OEI .............................................................................................. Organizational Effectiveness Initiative

OIG........................................................................................................ Office of the Inspector General

PERs............................................................................................................ Problem Evaluation Reports

PM .....................................................................................................................Preventive Maintenance

QAR............................................................................................................. Quality Assessment Review

REP .............................................................................................Radiological Emergency Preparedness

RO ................................................................................................................................ River Operations

SBU....................................................................................................................Strategic Business Units

SIGTARP .............................................Special Inpector General for the Troubled Asset Relief Program

STAR....................................................................................Strategic Teamwork for Action and Results

TCM............................................................................................................ Technical Contract Manager

TQ .......................................................................................................................................Total Quality

TVA............................................................................................................... Tennessee Valley Authority

TVA BOARD ....................................................................................................... TVA Board of Directors

U.S. .................................................................................................................United States of America

Abbreviations & Acronyms
TVA OIG Semiannual Report 67

Office of the Inspector General

400 West Summit Hill Drive

Knoxville, Tennessee 37902

The OIG is an independent organization 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. 

The OIG focuses on (1) making TVA’s programs and operations 

more effective and efficient; (2) preventing, identifying, and 

eliminating waste, fraud, and abuse and violations of laws, rules, 

or regulations; and (3) promoting integrity in financial reporting.

If you would like to report to the OIG any concerns about fraud, 

waste, or abuse involving TVA programs or violations of TVA’s 

Code of Conduct, 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. 

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.

Leadership OIG

PHILOSOPHY

BE A HERO

REPORT FRAUD

Contact the OIG EmPowerline® at 855-882-8585

or online at www.OIGempowerline.com

YOU CAN MAKE A DIFFERENCE

If you see or suspect wrongdoing, say something. TVA may be able to recover money and you could receive a cash reward from the 

TVA Office of the Inspector General. Visit our EmPowerline® Web site at www.oigempowerline.com or call toll-free at 855-882-8585. 
68 TVA OIG Semiannu

al Report

Office of the Inspector General

Tennessee Valley Authority

Semiannual Report

April 1, 2014 - September 30, 2014