2

03 A quick look at the office of the inspector general

04 message from the inspector general

06 Executive Summary

08 Office of the Inspector General

14 Special Feature – 20th Anniversary

•	 Former TVA IGs Join with OIG to Celebrate 20 Years of Statutory Independence

•	 A Former TVA Executive’s Perspective on the Formation of the OIG

•	 Statutory Independence Made A Difference

•	 Promoting Positive Change in TVA for 20 Years

•	 Promoting Operational Excellence

•	 Promoting Integrity in Financial Reporting

•	 Responding to Key Stakeholders

•	 Promoting Cost Reduction

•	 IT Reviews Grow in Importance

•	 Preventing and Detecting Fraud, Waste, and Abuse

•	 20-Year Cumulative Audit and Related Project Highlights

•	An Award Winning IG’s Office

40 summary of representative audits

45 summary of representative inspections

48 summary of representative investigations

52 Congressional request and summary of legislation and Regulations

54 Appendices

•	 Appendix 1: Index of Reporting Requirements Under the IG Act

•	 Appendix 2: Audit Reports Issued

•	 Appendix 3: Audit Reports Issued With Questioned Costs 

 and Recommendations That Funds be Put to Better Use

•	 Appendix 4: Audit Reports With Corrective Actions Pending

•	 Appendix 5: Investigative Referrals and Prosecutive Results

•	 Appendix 6: Highlights This Semiannual Period

•	 Appendix 7: Glossary, Abbreviations, and Acronyms

•	 Appendix 8: Tennessee Valley Region Map

Table of Contents
3

A Quick Look at the Office of the Inspector General

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 

(1-877-866-7840) or over the Web 

(www.oigempowerline.com). You may 

report your concerns anonymously or 

you may request confidentiality. 

OIG LEADERSHIP PHILOSOPHY

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.

The Office of the Inspector General (OIG) is an independent 

organization charged with conducting audits, inspections, 

and investigations relating to Tennessee Valley Authority 

(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.
4

Message from the Inspector General

This semiannual report is unique for us. For the first time in our relatively short history as an 

organization, we are taking the opportunity to reflect back over the last 20 years. 
5

In 1988, Congress established by law 

the Office of Inspector General at TVA. 

A fair question is, to what end? If we 

were judged on the same basis as 

private sector business units, how 

would we stack up? Did we pay our 

way? And perhaps the most important 

consideration, have we helped make 

TVA better? 

Some might say there is a natural 

tendency in government to dismiss 

prior administrations as ineffective and 

to discount their achievements, that 

each administration strives to make its 

distinctive mark and to laud its own 

achievements. We owe the American 

public more. We owe them our best 

efforts to learn from the past as we 

move to the future.

Looking at the TVA OIG, I see more 

than any one particular administration. 

Compartmentalization by Inspector 

General, Board members, or who 

was sitting in the White House does 

a disservice to the work of the many 

fine auditors and investigators who 

managed to transcend any such 

limitation. The exemplary work done 

by our people today was made 

possible in large part by those 

who went before us. This edition 

of our semiannual report honors 

their contributions to helping make 

TVA better and clearly answers the 

questions I pose above.

In March of this year, the TVA OIG 

brought together four of our former 

Inspectors General to reflect on their 

years as IG. Bill Willis, the former 

general manger of TVA, gave us a 

Board level view of the creation of 

the TVA OIG, including the attendant 

concerns. The combined recollections 

of the former IGs and Bill Willis put 

into context the historical relationship 

between the TVA Board and the OIG. 

Most of the current employees of our 

office had never heard these accounts.

Our office has gone from agency 

created to statutorily mandated to 

presidentially appointed. The four 

former Inspectors General who came 

together helped us understand the 

context of our evolution and the many 

lessons learned over the past 20 years. 

They also helped us see different 

viewpoints and approaches for 

handling issues that have faced the IG 

community from day one, such as how 

to balance independence and working 

with management. By learning from 

the past, we are in a better position to 

deal with whatever may happen.

In conclusion, this semiannual report 

illustrates results today and over the 

last 20 years that show we have paid 

our way and we have helped make 

TVA better. But I would be remiss if I 

did not emphasize that much of our 

success has been due to the steadfast 

support of the TVA Board and TVA 

management who understand our 

role and share our beliefs. Particularly, 

I extend my heartfelt gratitude to 

the TVA Board and President and 

CEO Tom Kilgore for their continued 

efforts to make the relationship 

between TVA and the OIG work. Their 

commitment to make TVA a worldclass organization is evident with each 

passing year. 

Richard W. Moore 

Inspector General
6

•	This issue includes as a special

feature the celebration of the 20th 

anniversary of the TVA OIG gaining 

statutory independence under the 

Inspector General Act (IG Act) as 

amended in 1988.

•	Our preaward audits identified

$101 million in potential savings 

to TVA through negotiation of 

submitted contract cost proposals.

•	We completed five contract

compliance audits that identified 

$774,477 in questioned costs, 

including $657,540 we determined a 

contractor owed TVA for provisional 

billing adjustments for calendar 

years (CYs) 2005 and 2006.

•	We found total hospitality

expenditures, including employee 

recognition expenses, for the period 

October 1, 2005, through June 30, 

2007, were 64 percent lower than 

our last audit covering hospitality 

expenses in 2003.

•	We reviewed reportable

environmental events (REE) at 

TVA facilities for the two years 

ended September 30, 2006. We 

identified (1) noncompliance with 

reporting requirements; (2) different 

interpretations on how some 

environmental occurrences should be 

classified; (3) environmental issues 

not documented and managed 

through TVA’s corrective action 

program; (4) lack of a corporate 

REE procedure; (5) inaccurate 

environmental data in the Electronic 

Corrective Action Program (eCAP), 

Environmental Event Reporting (EER) 

system, and REE registry; and 

(6) two instances where TVA did not 

externally report events because of 

uncertainty about requirements. 

•	We performed two organizational

effectiveness reviews of TVA’s 

Information Services (IS) 

organization and Information 

Technology (IT) Security function. In 

these reviews, we found:

The recent restructuring of 

the IS operations area mirrors 

leading practices. In addition, 

IS’ methodologies and tools for 

conducting IT projects are above 

those of its peers. However, our 

review showed some areas need 

improvement, such as: TVA needs 

to (1) better integrate IS governance 

with TVA business strategy; 

(2) improve focus on strategic 

business partnering and 

communication with customers; 

(3) target organization and policy 

changes, performance measures, 

and service management toward 

aiding customers to achieve business 

goals; (4) consolidate procedures to 

increase usability; and (5) develop 

a strategy for handling the risk of 

the aging workforce and ensuring 

knowledge transfer.

While IT Security has made strides 

in establishing the technology 

infrastructure, we found: (1) IT 

Security lacks a business-level 

mechanism to provide cross-agency 

oversight, a strategic TVA-wide 

approach, and grounding in risk 

management; (2) coordination and 

communication with business units 

were not well defined and could 

be more effective with increased 

training, communication, and 

business unit involvement in security 

planning; (3) procedures were 

outdated and did not address issues 

for all business segments; and 

(4) performance management was 

substantially undefined. 

•	We reviewed the external contractual

services’ component of River System 

Operations and Environment 

(RSO&E) Internal/External 

Contractual Services’ program. 

The program is operated by 

Resource Management (RM). In 

summary, we found:

The work being performed is not 

a TVA core business and does not 

appear to align directly with TVA’s 

Strategic Plan. Specifically, the work 

does not (1) involve the generation or 

transmission of electricity, (2) relate 

Executive Summary

The results of our audits, inspections, and investigations from the past six months are 

summarized throughout this report. Highlights include the following:
7

to environmental stewardship in the 

Tennessee Valley, or (3) help bring 

jobs to the Tennessee Valley through 

capital investment. We concurred in 

TVA’s decision to eliminate chemical 

agent work once current contractual 

commitments expire.

•	The largest civil False Claims Act

settlement in the history of the TVA 

OIG occurred during this period. 

The United States (U.S.) Attorney’s 

Office for the Southern District of 

Illinois negotiated the settlement in 

a case we worked jointly with the 

Federal Bureau of Investigation 

(FBI). We investigated whether TVA 

was defrauded by three Kinder 

Morgan limited partnerships 

(collectively “Kinder Morgan”) that 

provided coal and other energy 

transportation and distribution 

services at two coal terminals. 

TVA incurred losses of more than 

$6.5 million. The company agreed 

to pay back three times this 

amount for a total of more than 

$19.5 million. The company also 

agreed to reimburse other private 

customers approximately $5 million. 

TVA recovered its actual losses plus 

the cost of the investigation from the 

settlement amount, less a standard 

administrative fee collected by the 

U.S. Department of Justice (DOJ), 

for a total monetary recovery of 

nearly $8 million.

STATISTICAL HIGHLIGHTS | October 1, 2007 ~ March 31, 2008

Audit Reports Issued 38

Questioned Costs $774,477

Disallowed Costs $370,085

Funds Recovered $3,338,626

Funds to be Put to Better Use $100,990,000

Funds Realized by TVA $53,986,500

Investigations Opened 155

Investigations Closed 121

Fines/Recoveries/Restitution/Savings $29,604,937

Indictments/Convictions 7

Disciplinary Actions (No. of Subjects) 9

Inspections Completed 8
8

Office of the Inspector General | Overview

OFFICE RESPONSIBILITIES 

AND AUTHORITY

Created by the TVA Board of Directors 

(Board) in 1985, the TVA OIG became 

statutory under the IG Act as amended 

in 1988. The authority to appoint 

the TVA Inspector General (IG) was 

transferred to the President 

in November 2000 by 

Public Law No. 106-422.

OIG RESPONSIBILITIES

•	Promote economy and efficiency

while preventing and detecting 

fraud, waste, and abuse.

•	Conduct and supervise audits,

inspections, and investigations 

relating to TVA programs 

and operations.

•	Keep the TVA Board and Congress

fully and currently informed 

concerning fraud and other serious 

problems, abuses, and deficiencies 

relating to TVA programs 

and operations.

•	Recommend corrective actions

concerning problems, abuses, and 

deficiencies, and report on the 

progress made in implementing 

such actions.

•	Assure work performed by

nonfederal auditors complies with 

Government Auditing Standards.

•	Issue semiannual reports to TVA

Board and Congress.

OIG AUTHORITY

•	Conduct any audit, inspection,

or investigation the IG deems 

necessary or desirable.

•	Access all TVA records or

other material.

•	Issue subpoenas and

administer oaths.

•	Receive complaints

and grant confidentiality.

•	Have direct and prompt access

to the TVA Board.

•	Hire employees and contract

for services as necessary.
9

Office of the Inspector General | Strategic Plan

MISSION Promote excellence in TVA’s operations through the conduct of investigations, 

audits, inspections, and advisory services designed to promote economy, 

efficiency, and effectiveness and prevent and detect fraud, waste, and abuse.

VISION To be a highly effective organization that promotes positive change by identifying 

opportunities for improvements in the performance and efficiency of TVA’s 

programs and operations.

GOALS & OBJECTIVES

Performance... Perform timely reviews that address stakeholder concerns and areas of 

highest risk

•	Focus efforts on areas of highest impact and risk

•	Ensure processes are efficient and effective

•	Stay abreast of emerging issues and industry trends

•	Stay abreast of stakeholder concerns

•	Produce work that is timely, relevant, and high quality

Workforce... Cultivate and retain a highly skilled, productive, and fully 

engaged workforce

•	Hire and retain a well qualified workforce

•	Maintain competitive pay and award programs that allow for

rewarding team and individual contributors

•	Develop leadership, team and technical skills of each employee

•	 Ensure accountability in individual performance

•	 Promote effective communications within OIG

Stakeholder... Communicate effectively with stakeholders and deliver services that meet 

their needs

•	Improve stakeholder awareness of OIG

•	Ensure stakeholders are kept informed

•	Ensure stakeholders have an opportunity to provide input in the annual

audit planning process and each individual review, as appropriate

CORE VALUES • Independence • Quality • Leadership • Communication

• Integrity • Initiative • Teamwork • Respect for Individual

• Innovation • Results 
10

The OIG’s primary location 

is adjacent to the TVA 

headquarters in Knoxville, 

Tennessee. To obtain 

broader coverage throughout 

the Valley, the OIG also 

has Investigations offices 

in Mayfield, Kentucky; in 

Chattanooga, Tennessee; 

and near the Browns Ferry 

Nuclear Plant outside 

Athens, Alabama; as well 

as an Inspections group 

located in Chattanooga. 

The OIG consists of three 

primary components: 

(1) Administration and 

Government Relations, 

(2) Audits and Inspections, 

and (3) Investigations.

ADMINISTRATION AND

GOVERNMENT RELATIONS

The administrative section works 

closely with the IG, Deputy IG, and 

managers to address the day-today operations of the OIG and to 

develop policies and procedures. 

Responsibilities include personnel 

administration, budget and financial 

management, purchasing and 

contract services, facilities, 

communications, conferences, 

and government relations.

AUDITS AND INSPECTIONS

The Audits and Inspections 

groups perform a wide variety of 

engagements designed to promote 

positive change and provide assurance 

to TVA stakeholders. Based upon 

the results of the engagements, 

the Audits and Inspections groups 

make recommendations to enhance 

the effectiveness and efficiency of 

TVA’s programs and operations. 

The groups use an impact- and 

risk-based approach to developing 

an annual work plan. The groups’ 

plans consider TVA’s strategic plans, 

major management challenges, 

TVA’s enterprise risk management 

process, and other input from 

TVA management. The 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/or congressional 

interest), and likelihood it will result 

in recommendations for cost savings 

or process improvements. The result 

of the OIG audit and inspections 

planning process is a focus on those 

issues of highest impact and risk of 

fraud, waste, and abuse, and IT issues, 

including malicious and other system 

intrusions.

The AUDITS group, based in 

Knoxville, conducts and/or supervises 

comprehensive financial and 

performance audits of TVA programs 

and operations.

It consists of three departments—

Contract Audits, Financial/Operational 

Audits, and IT Audits.

•	Contract Audits has lead 

responsibility for contract compliance 

and preaward audits. In addition, 

this group performs reviews of 

TVA contracting processes and 

provides claims assistance and 

litigation support.

•	Financial/Operational Audits has 

lead responsibility for (1) oversight 

of TVA’s financial statement audit 

and related services performed by 

TVA’s external auditor; (2) reviews 

of TVA’s internal controls related 

to financial reporting, operational 

efficiency, and compliance with laws 

Office of the Inspector General | Organization
11

and regulations; and (3) operational 

reviews to assess the results and 

economy and efficiency of TVA 

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 group also 

performs operational reviews of the 

effectiveness of IT-related functions. 

In addition to its audit mission, IT 

Audits is responsible for developing 

and supporting an independent OIG 

computer network.

The INSPECTIONS group, based in 

Chattanooga, provides assurance 

on the effective and efficient 

achievement of program objectives 

and operational functions. It performs 

both comprehensive reviews and 

more limited scope policy and 

program reviews. In accordance with 

the Quality Standards for Inspections, 

the objectives of the Inspections 

group include providing a source of 

factual and analytical information, 

monitoring compliance, measuring 

performance, assessing the efficiency 

and effectiveness of operations, 

and/or conducting inquiries into 

allegations of fraud, waste, abuse, 

and mismanagement.

Audit and inspection findings vary 

depending on the objectives of the 

audit. Issues can be generalized into 

specific categories depending on the 

type of engagement performed. 

The graphic below shows some 

representative examples of audit and 

inspection issues commonly reported.

INVESTIGATIONS

Investigations conducts and coordinates 

investigative activity related to fraud, 

waste, and abuse in TVA programs and 

operations. The activities investigated 

include possible wrongdoing by 

contractors, employees, economic 

development loan recipients, and 

others who commit crimes against 

TVA. Investigations maintains liaisons 

with federal and state prosecutors 

and reports to the DOJ whenever 

the OIG has reason to believe there 

has been a violation of federal 

criminal law. Investigations works 

with other investigative agencies and 

organizations on special projects and 

assignments, including interagency law 

enforcement task forces on terrorism, 

the environment, and health care.

•	Inflated Proposals

•	Contract Overpayments

•	Inferior Performance

•	Fraud

Contract

Audits

•	Internal Control Deficiencies

•	Material Misstatements

•	Legal Noncompliance

•	Fraud

financial

Audits

•	Operational Inefficiency

•	Not Achieving Intended Results

•	Inferior Performance

•	Legal/Regulatory 

Noncompliance

•	Fraud

operational

Audits

•	Unauthorized Access

•	Inadequate Controls

•	Lack of Data Integrity

•	Fraud

Information

Technology

Audits

•	Internal Control Deficiencies

•	Operational Inefficiency

•	Policy Noncompliance

•	Fraud

inspections

Types of Audit and Inspection Issues
12

Office of the Inspector General | 2008 Team
13

Office of the Inspector General | Organization Chart

Richard W. Moore

Inspector General

Richard P. Levi 

Legal Counsel

Ben R. Wagner

Deputy Inspector General

Administration and Government Relations

Ronald Wise 

Assistant Inspector General

Administration and Government Relations

Kay Myers 

Manager

Human Resources

Stefanie Hoglund 

Communications Specialist

Investigations

John E. (Jack) Brennan 

Assistant Inspector General 

Investigations

audits and inspections

Robert E. Martin 

Assistant Inspector General 

Audits and Inspections

David P. Wheeler 

Director

Contract Audits

Gregory C. Jaynes 

Deputy Assistant Inspector General 

Inspections

John H. Barrow 

Acting Director 

Financial and Operational Audits

Louise B. Beck 

Audit Quality Manager

Jill M. Matthews 

Director

Information Technology Audits
14

Special Feature – 20th Anniversary
15

When four of the five previous IGs met 

on stage Wednesday, March 5, at The 

University of Tennessee Conference 

Center in downtown Knoxville, it was 

“truly a historic moment,” said current 

TVA IG Richard W. Moore. 

Moore, who hosted the 

event, said at no time in 

history had five of the 

six IGs been together 

in the same room at the same time. 

The event was noticeably missing 

former IG Richard Chambers who was 

in Germany on business but sent his 

regards through Moore.

The celebration took place to recognize 

the 20th anniversary of the TVA OIG 

gaining statutory independence under 

the amendments passed in 1988 to 

the IG Act. 

Norm Zigrossi was the first IG at TVA, 

serving from 1985 to 1992. Zigrossi 

explained how the office was formed 

when he became the first TVA Board 

appointed IG in 1985.

“People were waiting outside the door 

to talk to me,” he said, noting that in 

the first two months he received 4,000 

concerns regarding TVA that people 

wanted the IG to address.

Zigrossi also noted that he faced 

significant opposition as the first IG. 

George Prosser added, “Norm Zigrossi 

was the right guy to put this together. 

He lived this thing 24 hours a day, 

seven days a week, and he was fighting 

a lot of people who didn’t want an IG.”

According to earlier reports, opinions 

about establishing an OIG were mixed 

with some saying they thought it was an 

unnecessary expense and others stating 

an IG was the only fair and impartial 

way to ensure TVA was operating in an 

ethical and efficient manner.

“We needed people to know that we 

were for real,” Zigrossi said. “We knew 

what we were doing, and we were there 

to help TVA become a better place. 

We had to have credibility and high 

standards. We had to be fair and to 

provide a service in a timely manner. 

Old facts, old news will never get you 

there.” 

William Hinshaw, the second IG, 

who served from 1992 to 1994, 

complimented Zigrossi in saying, 

“I inherited something that Norm’s 

personal success created. It was his 

success that created a sense 

of expectation.”

Former TVA IGs Join with OIG to Celebrate 

20 Years of Statutory Independence

truly a historic moment

Twenty 

Years 

of an 

Light

Independent
16

Hinshaw’s period wasn’t without 

controversy though. Hinshaw 

explained that there were several 

Board chairmen in six months and one 

of them fired him, he quipped.

One of Hinshaw’s biggest 

accomplishments he believed was 

investigating TVA’s medical plan 

administrator which led to an 

$8.73 million recovery.

Hinshaw’s tenure was followed by 

George Prosser, who served as the IG 

from 1994 to 2000. Prosser noted of 

his time as the IG, “I came along at a 

time when reinvented government was 

getting some legs. Like many of the 

group here,” he added motioning to 

his colleagues, “it’s tough to be an IG 

and be part of the organization.”

When asked what he was most proud 

of, Prosser replied, “I never promoted 

from anywhere but within, because 

we had good people who could do 

the job, and that’s the thing I’m most 

proud of.” Prosser introduced Don 

Hickman, who was acting IG following 

Chambers’ tenure. “Don was the 

perfect guy for the job,” he said. “Don 

could’ve been an IG several different 

places. He just didn’t want to leave.”

Hickman confirmed he did receive 

several job inquiries regarding IG 

positions in Washington, D.C., but 

he didn’t want them. He credited his 

staff at the time for receiving those 

invitations saying that they made him 

“look good.”

Hickman encouraged the TVA OIG 

current staff by saying to them, “You 

all work in a world of dichotomies. 

They tell you to be firm but flexible. 

This can be an easy job if you develop 

the right kind of relationship with 

the agency. You have to develop an 

atmosphere of mutual respect.”

Hickman added, “Too often you’re 

known by your reputation, and it’s not 

always accurate.” He also pointed out 

that the TVA OIG should be working 

with TVA to prevent waste, fraud, and 

abuse. “If you wear your prevention 

hat, your caseload will be down 

instead of up, and that’s a 

good thing.”

Zigrossi’s parting advice was to, “Let 

the facts speak to the results and you’ll 

never go awry.”

Hinshaw followed with, “This is a good 

place to be. I mean if you’re going to 

be an IG, this is the best place in the 

country to do that.”

Norm Zigrossi, Bill Hinshaw, George Prosser, Don Hickman
17

Bill Willis was TVA’s General Manager 

in the 1980s, then became Chief 

Operating Officer, and finally Senior 

Executive Officer, before he retired 

from TVA in 1993. Though the titles 

changed with different TVA boards, 

the overall function of Willis’ position 

did not.

As general manager, Willis was in 

charge of the day-to-day operations of 

TVA and was the person to whom all 

TVA employees ultimately reported.

In the mid 1980s, when the IG’s office 

was formed, TVA faced unrelenting 

scrutiny about its struggling nuclear 

program, which had come under 

fire because of a prolific number of 

employee complaints. At that time, 

the nuclear program started reporting 

directly to the TVA Board.

Willis remembers those days and 

recalls the climate TVA’s first IG faced 

when filling the unprecedented role. 

“The problems the nuclear program 

was having is what brought on the 

discussion by Congress that TVA 

needed added outside oversight,” 

Willis said. “We had to shut down our 

nuclear program because of several 

issues we were having with it. A lot 

of employees were filing reports to 

the Nuclear Regulatory Commission 

(NRC), the Department of Labor 

(DOL), and everywhere else they 

could file them. So, there was a lot of 

discontent. A lot of TVA complaints, 

both internally and externally, were not 

getting resolved.”

Willis said eventually Congress 

commanded the then three-member 

TVA Board to create an IG position. 

The Board tasked Willis with carrying 

out the machinations to both create the 

position and find the right person for 

the job.

Willis said he enlisted the help of his 

assistant at the time, John Stewart, and 

they hired a consultant to assist in the 

search for TVA’s first IG. That search 

led them to Norm Zigrossi, who was 

Special Agent in Charge of the FBI’s 

Washington, D.C., field office.

“We did a lot of research and 

investigating and we felt confident that 

Norm was the right man to start the 

Inspector General’s office,” Willis said. 

“We knew with Norm’s background 

he wasn’t a quitter, and we needed 

someone who would stay the course 

in creating the office in light of all the 

opposition he would face.”

As it turned out, Zigrossi did just that. 

Willis explained that because TVA was 

an organization that for more than 50 

years had limited outside oversight, 

naturally there were some deep-rooted 

concerns about establishing an IG’s 

office, but that even Willis’ fears were 

alleviated after Zigrossi took office. 

“There was a real fear of the IG 

coming in and the concern that some 

of the managers had revolved around 

the idea that we had always pushed 

the organization to do new things, to 

take some risks, and to be innovative. 

We were afraid of people pulling back 

and playing it safe all the time, but 

after the IG’s office was in place and 

was working and operating, I think 

the fear of that fear went away. I think 

people went back to doing what they 

had always done and got back to 

proactive business practices.”

Wills continued, “I stayed in touch with 

Norm and kept him informed of issues 

and there were no surprises. I had 

no problems.”

Willis noted that TVA’s nuclear 

program got turned around, as well, 

during his tenure. He believes the 

problems with the program started 

because many of TVA’s experienced 

nuclear managers left the organization 

for higher-paying jobs. It wasn’t until 

former TVA Board Chairman Marvin 

Runyon made a plea to Congress 

to restructure salary ranges for key 

TVA positions that the organization 

was able to employ the best nuclear 

talent needed to rebuild the nuclear 

program. Willis added, “TVA was able 

to get it turned around and to make 

it one of the best nuclear programs 

in the country, and I am extremely 

pleased that the program is still 

strong to this day.”

A Former TVA Executive’s Perspective 

on the Formation of the OIG

Before there was Tom Kilgore, current President and Chief 

Executive Officer of TVA, there was Bill Willis.

TVA was able to get 

it turned around and 

to make it one of the 

best nuclear programs 

in the country...

 Bill

Willis
18

“The OIG is a catalyst

 for change within TVA” 

 – April 1988

The year was 1985. TVA’s nuclear 

program was receiving an abundance 

of attention, but not the kind of 

attention anybody would want. 

Then, TVA General Manager Bill Willis 

recalls, TVA had lost a lot of its talent 

in the nuclear program to higherpaying jobs in the mid 80s. It would 

be at least three years before this 

trend would start to turn around. In the 

meantime, TVA’s nuclear program was 

in obvious decline and reports were 

being filed with the NRC, the DOL, 

and the U.S. Congress, alerting them 

to the concerns employees had over 

the flailing program. 

Because of the number of concerns 

that were raised to Congress, TVA, 

which had only limited oversight for 

more than 50 years, was tasked with 

hiring an IG for the first time ever. 

After an extensive search, FBI veteran 

Norm Zigrossi was named as the first 

TVA IG. 

During Zigrossi’s tenure on October 

18, 1988, President Reagan signed 

into legislation Public Law No. 

100-504, establishing the TVA OIG 

and 32 others as statutory IG offices. 

This law made the OIG responsible for 

virtually TVA’s entire internal audit and 

investigative activities.

Murder and drugs aren’t usually 

part of a normal day’s work, but 

these were issues that Zigrossi would 

have to address under the new 

statutory authority.

Tragedy struck the OIG in May 1990 

with the murder of an OIG special 

agent in his home. The OIG devoted 

substantial resources to investigating 

the murder and eventually obtained a 

confession from the agent’s wife.

Also in the early years of Zigrossi’s 

tenure, the U.S. Court of Appeals 

for the Sixth Circuit affirmed a 

district court ruling that OIG agents 

conducted themselves lawfully and 

appropriately while investigating 

alleged drug use by Sequoyah Nuclear 

Plant employees.

In a significant win for 17 TVA 

employees retiring during this time 

period, an OIG investigation into the 

disclosure of confidential information 

about upcoming changes in retirement 

eligibility and pension computation 

rules that benefitted a senior TVA 

manager resulted in the changes 

being made retroactively to include the 

17 recently retired TVA employees.

A review of the TVA OIG’s operations 

determined that the OIG’s operations 

compared “favorably with other 

Federal OIGs of long standing.”

Within the OIG, automation became a 

major event, with every staff member 

provided either a personal computer 

or access to a departmental computer. 

An office automation plan is prepared 

to meet both short-term and long-term 

automation goals.

TVA’s First IG

1985 - 1992

Norman A.

Zigrossi
19

During this time, a $92 million rate 

increase was avoided because of an 

OIG finding concerning a change in a 

TVA accounting policy. 

Beginning in June 1989, the OIG 

commenced performing preaward 

audits, a program that still continues. 

These audits assist contract administrators in evaluating proposed TVA 

contracts. They aid TVA in negotiating 

a lower price for goods or services. 

They help to ensure contract language 

and/or terms and conditions are clear 

so that the possibility of costly misinterpretation is lessened or avoided.

In 1990, the value of this effort was 

demonstrated early on when a single 

preaward audit for the nuclear arm of 

TVA identified $42.5 million that could 

be put to better use.

In October 1989, the OIG provided 

TVA with a cost analysis of its 

arrangement with the U.S. Treasury 

Department (USTD) for short-term 

borrowing and checking account 

services, demonstrating that TVA 

could enhance its internal controls and 

reduce its costs by using a commercial 

bank. TVA subsequently obtained 

USTD approval to use a commercial 

bank for checking account services, 

reducing its costs annually by more 

than $4 million.

Most significantly, 1989 was the year 

that TVA’s Chief Financial Officer 

(CFO) recognized the OIG’s role as 

TVA’s internal auditor.

In 1991, the OIG first implemented 

an employee recognition program. 

With various refinements and 

improvements, this program, which 

recognizes the skill, dedication, 

and value of OIG employees, is an 

important part of the OIG today.

In April 1992, IG Zigrossi ended his 

term as IG, resigning to become a 

senior TVA manager. Succeeding him, 

William L. Hinshaw, II, took office as 

TVA IG on May 1, 1992. 

Statutory Independence Made A Difference

1986 1988 1990 1992

TVA Office of the 

Inspector General 

becomes operational in 

1986 amid controversy 

surrounding TVA’s 

nuclear program.

Norm Zigrossi, the first 

TVA Inspector General, 

is the IG when the office 

gains statutory status 

in 1988.

In 1990, the TVA 

OIG identifies a TVA 

accounting finding that 

avoids a $92 million 

rate increase.

In 1992, Zigrossi resigns 

as TVA’s first Inspector 

General and William 

Hinshaw is named as 

the next IG.

Employee Recognition Program Award Winners
20

TVA’s Second IG

1992 - 1994

 William T.

Hinshaw, II

“I have repeatedly 

been impressed by 

the dedication and skill 

of the men and women 

of this office whose 

efforts are directed 

toward making TVA 

the best utility 

in North America” 

– April 1993

IG Hinshaw immediately saw the 

need for a greater OIG presence 

in the Valley as TVA operations and 

personnel were scattered throughout 

the region. So in 1992, he directed 

the opening of satellite offices, first 

in Chattanooga, Tennessee, and 

Huntsville, Alabama, and then in 

Memphis, Tennessee, because of 

the amount of OIG activity in or 

near these cities. And because of 

an increasing number of sexual 

harassment complaints, IG Hinshaw 

directed an undertaking by the OIG 

to identify and help eliminate sexual 

harassment in the TVA workplace.

It could be said that IG Hinshaw made 

the OIG more mobile. In July 1992, 

a team was formed to evaluate the 

OIG’s automated data processing 

equipment, software, and processes. 

Phase one of this process came to 

fruition in March 1993 with major 

upgrades and/or replacement of 

the OIG’s computer equipment. All 

traveling OIG employees received 

laptop or notebook computers that 

could be inserted into docking stations 

and used with regular sized monitors 

and keyboards while in the office, or 

easily transported alone for work in the 

field, and the nontraveling employees 

received desktop computers. 

Hinshaw was obviously interested in 

contributing to the community and 

on June 9, 1992, the OIG joined 

TVA’s Adopt-A-School program by 

entering a partnership with Gresham 

Middle School in Knoxville. The 

OIG’s activities in the Adopt-ASchool program included constructing 

an outdoor classroom at the 

Environmental Center on Gresham’s 

campus, hosting an annual chili 

cook-off to raise money, tutoring, 

planning and implementing an 

incentives achievement program, and 

coordinating donations of surplus TVA 

equipment, furniture, and computers.

Some of the major audits and 

investigations conducted by the OIG 

during Mr. Hinshaw’s tenure included 

the following. A combined audit and 

investigative review in 1992-1993 of 

TVA’s medical plan administrator led 

to an $8.37 million dollar recovery. 

The OIG review showed the 

administrator improperly retained 

more than $10 million in discounts it 

received from medical providers over 

a 10-year period. This review provided 

a direct benefit to TVA employees 

both through improved administration 

of TVA’s medical insurance plan, 

thus helping reduce future costs, and 

through creation of a trust fund to 

offset future increases in medical costs 

established from the $8.37 million the 

administrator refunded to TVA.

In 1993, the OIG benchmarked TVA’s 

contractor performance evaluation 

process to that of other utilities and 

found TVA’s process to be one of the 

“best in class.” Also in 1993, at the 

request of the Vice President of Fossil 

Fuels, the OIG audited $13.7 million 

of price adjustment claims totaling 

$37.2 million by a company that 

supplied coal to TVA during the period 

1977 through 1991. 
21

This audit questioned a total of 

$10.2 million. TVA effectively 

implemented our recommendations 

and settled all outstanding claims by 

paying the company $4 million.

IG Hinshaw testified before the 

Subcommittee on Oversight of 

Government Management, Committee 

on Governmental Affairs, concerning 

the Technology Brokering Program 

(TBP). IG Hinshaw testified regarding 

the OIG findings that the Department 

of Defense (DOD) contract officer 

had not properly authorized the vast 

majority of orders TVA processed, 

TVA accepted interagency orders which 

did not meet the stated objectives of 

the TBP, and TVA inappropriately used 

cooperative agreements to procure 

goods and services for DOD.

On March 31, 1994, IG Hinshaw 

resigned as the IG. Succeeding him, 

George T. Prosser, became IG on 

April 1, 1994.

1992 1993 1994

In 1992, IG 

Hinshaw 

expands the 

OIG by opening 

satellite offices in 

Huntsville, AL, 

and in both 

Memphis and 

Chattanooga, TN.

Hinshaw opens 

an Inspections unit 

in Chattanooga 

to conduct quick 

turn-around audits.

Hinshaw starts a 

partnership with 

Gresham Middle 

School in Knoxville 

as part of TVA’s 

Adopt-A-School 

program.

In 1993, an audit 

is completed that 

leads to TVA’s 

recovery of $8.37 

million from its 

medical plan 

administrator.

In 1994, Hinshaw 

retires as the IG 

and George T. 

Prosser, who had 

been with the IG’s 

office since its 

inception, is named 

as the next IG.

TVA’s Medical Plan 

Administrator Review Team
22

TVA’s Third IG

1994 - 2000

 George T.

Prosser

“I am proud 

to be associated 

with so many 

qualified and 

dedicated 

employees”

– April 2000

IG George T. Prosser had been with 

the OIG since its inception. During 

his tenure, where he served for the 

two preceding years as Assistant IG 

for Investigation, Mr. Prosser received 

the Paul R. Boucher Public Service 

Award from the President’s Council on 

Integrity and Efficiency (PCIE) for his 

efforts in detecting abuse in the federal 

workers’ compensation program.

In late summer 1994, the OIG completed a joint audit and investigation 

of a software contract. The audit was 

commenced at the behest of TVA management because of possible conflicts 

of interest concerns. OIG auditors 

determined that during May 1990, TVA 

paid the contractor $15.6 million in 

advance for software products to be 

ordered over a five-year period ending 

May 1995. Contractually, TVA would 

forfeit the unused portion of the 

$15.6 million prepayment when the 

contract expired. The OIG’s work led 

to TVA and the contractor resolving 

several issues by the contractor refunding over $8 million to TVA. Without 

this agreement TVA would have 

forfeited the unused portion of the 

software agreement.

Also, in 1994, the OIG completed a 

comprehensive Concerns Resolution 

Staff (CRS) program review. The review 

involved over 1,750 interviews. The 

OIG’s findings were generally positive 

for TVA. Then, in 1995, TVA Nuclear 

management asked the OIG to review 

the CRS program at the Watts Bar 

Nuclear plant due to the NRC’s interest 

in the program. The OIG interviewed 

another 400 randomly selected TVA 

and contractor employees, as well as 

reviewed over 100 related and recently 

closed files. Again, our findings were 

generally positive. That September, 

our special project team journeyed to 

Washington, D.C., to brief senior NRC 

officials on the results of the review. 

Then, in 1996, the OIG performed 

a review of the Sequoyah Nuclear 

Plant’s employee concerns program, 

interviewing more than 340 employees 

and contractors. Yet again, our 

findings were generally positive. These 

reviews have continued through the 

ensuing years.

During 1993 and 1994, the 

OIG participated in the “Federal 

Employees’ Compensation Act (FECA) 

Fraud Deterrence Group,” which 

was selected to receive the Secretary 

of Labor’s Exceptional Achievement 

Award for 1995. The group played 

a significant role in the enactment 

of Public Law 103-329, which bans 

payment of FECA benefits to claimants 

who are convicted of defrauding 

the program, suspends payment of 

benefits to incarcerated felons, and 

changes the FECA fraud statute from a 

misdemeanor to a felony.

In 1997, special agents from the OIG 

became part of a newly formed federal 

and state Environmental Crimes 

Joint Task Force (ECJTF). This joining 

of forces soon bore fruit with three 

convictions in 1998. Two convictions 

fell under the federal Clean Water Act: 

(1) a conviction of a waste disposal 

company for dumping grease waste 
23

into a manhole; and (2) a conviction of 

a company that transports hazardous 

waste and used oil for discharging 

waste into U.S. waters. The third 

conviction was of a wastewater plant 

operator for violating Tennessee 

law by submitting false operating 

reports to the Tennessee Department 

of Environment and Conservation. 

The work of the ECJTF has continued 

through the years resulting in many 

more convictions.

With Y2K approaching, 1997 was the 

year the OIG began to review TVA’s 

Year 2000 computer rollover activities, 

the success of which was critical to 

prevent disruption in the delivery of 

electric power. Any type of system 

failure could have resulted in anything 

from small customer inconvenience to 

electric power plant shutdown affecting 

millions of customers. Our reviews 

helped to assure the smooth transition 

to the 21st century.

IG Prosser left his position as IG on 

August 14, 2000. On September 14, 

2000, the Executive Council on 

Integrity and Efficiency (ECIE) honored 

Mr. Prosser for his outstanding 

contribution to the IG community. 

1994 1996 1997 2000

In late summer 1994, the 

OIG completes a joint 

audit and investigation of 

a software contract that 

leads to TVA recovering 

more than $8 million.

In 1996, OIG 

investigators become 

deputized by the U.S. 

Marshal.

With Y2K approaching, 

the OIG prepares 

for computer rollover 

activities for the 

year 2000. 

IG Prosser leaves his 

position in 2000 and 

is honored by the ECIE 

for his outstanding 

contribution to the 

IG community.

Former IG George Prosser 

in Discussion
24

TVA’s Fourth IG

2000 - 2002

 Richard F.

Chambers

“We stand ready 

to assist fellow 

law enforcement 

agencies in any 

way possible 

during this time 

[September 11, 2001] 

of national crisis” 

– October 2001

On August 14, 2000, Richard F. 

Chambers became the fourth 

IG of TVA.

One of IG Chambers first actions was 

to create an IT group. By establishing 

this group, IG Chambers ensured 

the independence of OIG computer 

systems. An increase in staff levels 

occurred for the first time in 13 years.

IG Chambers then went about implementing a number of management 

initiatives. He implemented an officewide strategic planning process, which 

led to development of a new strategic 

plan and vision. The new vision was 

“to illuminate today’s challenges and 

tomorrow’s solutions.” The five strategic objectives were to (1) cultivate 

and retain a highly skilled, innovative, 

and motivated workforce; (2) enhance 

communications with stakeholders and 

deliver services that meet their needs; 

(3) leverage OIG resources to optimize 

productivity and results; (4) focus on 

areas of high risk to TVA; and (5) envision change affecting TVA and identify 

effective solutions.

IG Chambers also instituted an annual 

officewide training symposium and 

established a number of process improvements, including: (1) updating the 

employee recognition program, 

(2) implementing automated workpaper software, and (3) revising audit 

scoping, background investigation, 

and audit report development processes. Mr. Chambers further expanded alternative work schedules and flex time. 

He also adopted an auditor career 

tract program for entry-level auditors 

and created competitive higher-level 

positions in Audits and Investigations.

During IG Chambers tenure, the 

OIG received seven team awards for 

outstanding achievements from the 

ECIE. In addition, two task forces on 

which the OIG participated received 

PCIE/ECIE Awards for Excellence. Two 

investigations also resulted in six TVA 

special agents being recognized by FBI 

Director Freeh for their contributions to 

these investigations.

On November 1, 2000, President 

Clinton signed Public Law 106-422, 

designating the position of TVA 

IG as presidentially appointed. IG 

Chambers retired from federal service 

in January 2002, and pursuant to the 

Federal Vacancies Reform Act, the 

First Assistant to the IG, G. Donald 

Hickman, assumed the role of 

Acting IG.

2000 2001

Richard Chambers 

takes office as the 

next IG in August 

of 2000. One of 

his first actions 

is to create an 

Information 

Technology team.

Chambers implements 

a strategic planning 

process that results in 

a strategic plan and a 

new vision for the 

office — “to illuminate 

today’s challenges 

and tomorrow’s 

solutions.”

Chambers initiates 

an all-employees 

training symposium 

that is still in effect 

today.

In November 

2000, President 

Clinton signs 

into law a bill 

making TVA’s 

Inspector General 

a presidentiallyappointed position.

Following the tragedy of September 11,

2001, the OIG 

initiates a number of 

reviews to validate 

the effectiveness of 

TVA’s procedures 

and controls.

Illuminating today’s challenges 

and tomorrow’s solutions
25

TVA’s Acting IG

2002 - 2003

 G. Donald

Hickman

“I am extremely 

pleased by the 

support I have 

received as Acting 

Inspector General

from Congress, 

OIG employees,

the TVA Board, 

and our other 

stakeholders”

– October 2002

Subsequent to the tragic events of 

September 11, 2001, a major effort of 

the OIG was the initiation of a number 

of reviews to validate the effectiveness 

of TVA’s security procedures and 

controls. These efforts were concluded 

under the direction of Acting IG 

Hickman. 

The initial effort was a preliminary 

survey to assess the adequacy of 

TVA’s security plans and actions taken 

in response to the terrorist attacks 

and related threats. The OIG found 

that TVA was taking or had taken 

appropriate measures to mitigate 

the risks associated with the security 

of TVA’s nuclear and nonnuclear 

facilities. The OIG also made a major 

commitment to assist TVA management 

in developing a cost-effective plan 

to evaluate TVA computer security 

procedures and controls.

On October 1, 2001, the OIG became 

a member of the PCIE. It did not take 

long for the OIG to win its first PCIE 

award. In 2002, an OIG audit team 

was awarded an Award of Excellence 

by the PCIE for the team’s work in the 

area of TVA Long-Term Bulk Power 

trading. The team produced two highly 

complex reviews of TVA’s weekly, 

monthly, seasonal, annual, and multiyear trading in the wholesale electricity 

market. The reviews were especially 

timely, as several power marketers had 

either filed for or were on the brink 

of bankruptcy. In addition, Enron and 

other utilities were facing scrutiny due 

to questionable energy trading and 

accounting practices.

The year 2002 saw the passage of the 

Homeland Security Act. Section 812 of 

the Act provided for law enforcement 

authority for TVA special agents under 

guidelines to be issued by the DOJ. To 

ensure a smooth transition, the OIG 

initiated and developed an intensive 

law enforcement skills refresher 

training program. In addition, the 

OIG began participating on the Joint 

Terrorism Task Force (JTTF) led by the 

FBI’s Knoxville Field Division.

A considerable amount of legislation 

had been passed in the preceding 

three years, requiring federal agencies 

to review and improve security of its 

information, e.g., Federal Information 

Security Management Act (FISMA), 

and to report annually on its action 

plans for improvements. The same 

legislation also requires OIGs to 

independently evaluate and report on 

agency compliance. Members of the 

TVA OIG became part of an IT Security 

Assessment (ITSA) project team. 

By March 31, 2003, the team had 

conducted 23 self-assessments and 

2 vulnerability assessments.

On April 22, 2003, President Bush 

announced his intention to nominate 

Richard W. Moore, an Assistant U.S. 

Attorney in the Southern District of 

Alabama, to be the IG of TVA. 

Mr. Moore subsequently was confirmed 

as the first presidentially appointed IG 

at TVA, effective May 9, 2003, and 

Mr. Hickman returned to his position 

as the Assistant Inspector General 

of Investigations.

2002

In October 2001, the 

OIG becomes a member 

of the PCIE and wins its 

first PCIE award in 2002.

IG Chambers retires 

in 2002 and Donald 

Hickman is named as the 

Acting Inspector General.

The Homeland Security 

Act is passed in 2002 and 

gives law enforcement 

authority to TVA OIG 

special agents.

IG Hickman establishes 

performance measures 

of productivity, timeliness 

and results for TVA 

OIG staff. A computer 

forensics lab is also 

established.
26

TVA’s Fifth IG

2003 - present

 Richard W.

Moore

“TVA has many 

stakeholders, 

but ultimately 

it belongs to 

the people” 

– October 2005

One of IG Moore’s first acts was to 

recreate the Inspections group and 

place it in Chattanooga so it was 

near a number of TVA operational 

and operations support units. The 

Inspections group provides flexibility 

to conduct limited scope policy and 

program evaluations to promote 

economy and efficiency in the 

management and administration of 

TVA programs and to conduct inquiries 

into allegations of fraud, waste, 

and abuse.

TVA OIG special agents received 

full law enforcement authority in a 

commissioning ceremony on 

January 23, 2004. That ceremony 

recognized two milestones in the TVA 

OIG: (1) the receipt of full statutory 

law enforcement authority and (2) a 

new investigative initiative to identify 

and eradicate fraud against and within 

TVA. Our efforts in this area include 

opening additional satellite offices 

and assigning investigators as “road 

agents” to serve as key contacts at 

specific TVA facilities in order to more 

effectively identify cases, become more 

familiar with TVA operations, and 

establish key business contacts.

Unit 1 at Browns Ferry Nuclear Plant 

had been shut down since 1985. 

Because of the significance of the work 

being undertaken to restart Unit 1, 

estimated at the time to cost 

$1.8 billion, the OIG in 2004 

redirected resources to Browns Ferry 

Nuclear Plant to conduct reviews to 

promote cost control and to detect 

and correct instances of waste, fraud, 

and abuse. Our efforts had immediate 

results, both audit and investigative. 

Shortly after we began our reviews, 

we determined a contractor providing 

engineering services at Browns 

Ferry Nuclear Plant had overbilled 

TVA $602,611 and we found the 

Consignment Inventory Payment 

controls could be strengthened. 

IG Moore during plant visit

2003 2004 2006

In April 2003, Richard 

Moore is nominated as 

the first presidentiallyappointed TVA IG.

IG Moore assigns 

investigators as “road 

agents” to serve as 

key contacts at specific 

TVA facilities.

In an effort to support 

TVA management in 

identifying potential 

risks and mitigation 

strategies, the first fraud 

risk assessment training 

classes begin in 2004.

IG Moore launches 

an outreach program 

to educate TVA plant 

employees about the OIG 

and its mission.
27

Our investigators, working with the 

U.S. Postal Service, found a Browns 

Ferry Nuclear Plant employee 

accepting kickbacks in the purchase 

of overpriced janitorial supplies. In 

another case, a contract employee 

made about $10,000 of personal 

charges on a TVA credit card. 

Two investigative initiatives in 2004 

were: (1) the hiring of a forensic 

analyst along with the development of 

a data mining program; and 

(2) conducting throughout TVA fraud 

risk assessments, i.e., a process for 

business process owners to identify 

and analyze fraud risk factors that 

may be common to general business 

practices and also specific to the 

organization and its operations. 

With the strong support of TVA 

management, the initiation of the fraud 

risk assessment process was instantly 

successful in identifying potential 

risk areas and mitigation strategies 

for a number of TVA organizations. 

Working collaboratively with TVA 

management, we were able to identify 

a number of areas where controls 

could be improved. TVA management 

subsequently developed remediation 

plans for those areas.

Recognizing the obligation of TVA to 

be accountable to the public, as well 

as the need for a greater amount of 

transparency, the OIG in 2005 began 

placing some audit and inspection 

reports on the OIG Web site either in 

full or in summary form.

In January 2006, the OIG renamed 

and contracted out the hotline, 

renamed Empowerline, to provide: tollfree 24-hour 

coverage, 

seven days 

a week to 

those calling; 

anonymity, if 

desired; and 

trending data 

to identify 

potential 

problem areas 

based on the number and type of calls 

received. This outsourced system offers 

a convenient way, i.e., by a toll-free 

telephone call or over the Web, for 

individuals to report concerns about 

activities adversely impacting TVA.

In conjunction with the establishment 

of Empowerline, the OIG instituted a 

reward program. Under the reward 

program, the disclosure to the OIG of 

information about criminal or unlawful 

activities leading to a felony charge, 

or a substantial monetary recovery for 

TVA, may result in a cash reward for 

the individual making the disclosure.

Demonstrating his personal 

commitment to the OIG’s outreach 

efforts, IG Moore personally kicked 

off an initiative to open a dialogue 

with TVA 

employees. 

He 

attended 

all-hands 

meetings 

at the 

Kingston, 

John 

Sevier, and 

Johnsonville TVA fossil plants. The 

all hands meetings provided an 

opportunity to discuss the OIG’s role 

and responsibilities and encourage 

employees to call Empowerline.

2007

An effort is led to revamp 

the OIG hotline to make 

it operational 24 hours 

a day, seven days a 

week. It is renamed the 

Empowerline.

IG Moore launches a 

“Best Practices” initiative 

that receives a PCIE 

award in 2007.

IG Moore initiates the 

Higher Performing 

Organization model in 

the OIG and establishes 

telework as a long-term 

initiative designed to drive 

up performance.

Largest False Claims 

Act civil settlement in OIG 

history – $25 million.

A confidential connection for reporting fraud, 

waste or abuse affecting TVA.

www.OIGempowerline.com

1-877-866-7840

EmPowerlineTM is sponsored by the Office of the Inspector General 

and operates independently of TVA. 
28

Other aspects of the outreach program 

were: (1) designation of Knoxvillebased special agents for each TVA 

plant; (2) assigning agents to Mayfield, 

Kentucky; northern Alabama; and 

Chattanooga, Tennessee; and 

(3) introducing new TVA employees 

to the OIG through TVA’s orientation 

program and a personal letter from 

the IG. 

Also in January 2006, we initiated 

our newsletter, the OIG Connection. 

The purpose of the OIG Connection 

is to help engender effective 

communication about the functions, 

findings, actions, and role of the OIG. 

Eight issues of the OIG Connection 

have gone to press and the response 

has been positive.

Both the PCIE and the ECIE promote 

sharing of best practices through 

monthly meetings, journal articles, 

and conferences. However, IG Moore’s 

discussions with individual IGs 

revealed an interest in supplementing 

the natural exchanges of best practices 

that occur by formalizing a process 

that focuses specifically on this 

area. This office took the initiative 

to establish a protocol for OIGs 

who wished to participate in a “best 

practices” exchange with other OIGs to 

share information, promote innovative 

thinking, and encourage improved 

practices within the OIG community.

So far, the TVA OIG has participated 

in five such exchanges. The result has 

been an enthusiastic endorsement by 

the offices that have participated.

This program has resulted in improved 

processes and increased office morale, 

but more importantly, it has enabled 

the participating offices to better serve 

their agencies and add greater value 

as a part of the IG community.

In 2007, the OIG joined the world of 

media production. Because so many 

people are now media oriented, a 

decision was made that the best way to 

communicate with TVA employees was 

to use the medium from which most 

were used to receiving information. 

The TVA OIG produced two videos. 

A video about the OIG was added 

to the TVA program introducing new 

employees to TVA. A second video was 

developed as a fraud education tool. 

It shows real-life examples of fraud 

cases involving TVA employees and 

contractors. This video was placed 

on our Web page and advertised 

throughout TVA by way of the 

OIG Connection.

Best Practice Session with U.S. Postal Service

Fraud Video 

Visit our Web site at www.oig.tva.gov for link to video

OIG Connection – March 2008 Issue 
29

This year, we are celebrating our 

20th anniversary since becoming 

statutory. In 1988, S. 908 passed 

the Senate by a vote of 85 to 0 and 

became Public Law No. 100-504, 

establishing the TVA OIG and 32 

others as statutory IG offices where 

the IG is appointed by the agency 

head. Although the TVA OIG 

previously had been operating 

generally in conformance with 

the IG Act, it now was authorized 

and required by statute to do so.

During 2003, in connection with the 

25th anniversary of passage of the 

original IG Act, President Bush in 

meeting with the IGs said they were 

“agents of positive change.” TVA OIG 

accomplishments over the past 20 

years reinforce that message. The 

OIG has conducted independent and 

objective reviews of TVA programs 

and operations across the board. TVA 

management has used our findings to 

help them achieve significant financial 

savings and recoveries and to develop 

and implement process improvements.

Promoting Positive Change 

in TVA for 20 Years

The TVA OIG has gone from (1) an office created by the 

TVA Board in 1985 to (2) a statutory office where the IG 

is appointed by the agency head to (3) a presidentially 

appointed IG office. 
30

Promoting Operational Excellence

The great Northeast-Midwest 

blackout of August 2003 and 

the South Florida blackout 

of 2008 are reminders that 

electricity is a key component 

of our daily lives. While 

utilities across the U.S. 

face increased competition 

and grapple with strategic 

direction decisions regarding 

cost, reliability, and service, 

TVA’s mission is much 

broader and includes: 

(1) “providing affordable, 

reliable power that helps 

businesses and families 

prosper”; (2) environmental 

stewardship; and (3) economic 

development. The electric 

utility marketplace has 

experienced significant 

changes in 20 years, thus 

prompting TVA to periodically 

assess and adjust its strategic 

plans, organizational 

objectives, organizational 

structures, and workforce 

composition. 

New Yorkers on the Brooklyn Bridge exiting 

New York City during the Blackout of 2003
31

OIG Audits was also reorganized 

several times throughout the 20-year 

history to better align with TVA, meet 

customer needs, and identify and 

prioritize audits/inspections of activities 

essential to TVA’s mission and goals. 

While the organizational structure and 

many of the auditors have changed, 

operational/performance reviews 

completed by the OIG have continued 

to impact both corporate and 

operational business units throughout 

TVA. Operational/performance 

reviews have contributed to TVA’s 

efforts to (1) reduce the cost of power, 

(2) improve operational performance, 

(3) fulfill its environmental stewardship 

mission, and (4) achieve economic 

development. To ensure that 

operational/performance audit 

resources were directed to key audit 

areas, the OIG assessed TVA’s 

challenges, considered management’s 

audit/inspection requests, and 

developed a yearly, risk-based, 

operational audit plan. These reviews 

during the past 20 years have included 

activities and programs such as:

•	Nuclear Power Employee

Qualifications – Identified 

employees working in the Nuclear 

Power Program with questionable 

qualifications or who provided false 

information;

•	TVA’s Technology Brokering

Program – Identified serious 

program issues that resulted in 

Congressional hearings; 

•	TVA’s Medical Plan – Identified 

over $16 million in overcharges and 

interest incurred by TVA that resulted 

in a settlement of over $8 million; 

•	TVA’s Polychlorinated Biphenyls

(PCBs) Elimination Strategy – 

Highlighted the need for a more 

concentrated effort to reduce the 

amount of equipment containing 

PCBs which poses a risk to human 

health and the environment; 

•	TVA Risk Management –

Recommended TVA develop a 

more robust enterprise-wide risk 

program with other suggested risk 

management improvements;

• TVA’s Role as a Regulator – 

Highlighted the inherent conflict 

in TVA serving as a regulator 

while working to ensure good 

customer relations; 

•	TVA Nuclear Concerns

Resolution Program – Assessed 

in numerous reviews Nuclear Power 

employees willingness to raise safety 

or quality concerns;

•	TVA’s Economic Development

Program – Assessed in numerous 

reviews compliance and efficiency 

issues in TVA’s economic 

development programs;

•	TVA’s Ethics and Compliance

Program – Recommended a 

more comprehensive ethics and 

compliance program that would 

result in a more organized corporate 

approach to ethics and compliance 

and tone at the top issues;

•	Hospitality and

Credit Card Use – Tested in 

numerous reviews policy compliance 

and reasonableness of TVA’s 

credit card usage and hospitality 

expenditures; and

•	Coal Procurement and

Inventory Management – Tested 

in numerous reviews coal vendor 

compliance with contract billing 

and delivery terms, in addition 

to reviews of the overall coal 

management programs.
32

OIG’s financial-related audits 

over the years have had 

significant impact on TVA. 

The single most significant 

financial audit was of TVA’s 

Fiscal Year (FY) 1987 energy 

sales that resulted in a 

$92 million increase in TVA’s 

revenue and recognition 

of unbilled electricity sales. 

Other financial audits with a 

large dollar impact included:

•	FY 1989 audit of payroll costs,

which led to savings of more 

than $3 million.

•	FY 1991 audit of air travel costs,

which saved approximately 

$1 million.

•	FY 1992 audit of TVA’s accounting

for pension costs, which resulted 

in a $42 million reduction in costs.

•	FY 2001 audit of TVA’s nuclear

decommissioning fund, which 

prompted a change in the 

investment strategy estimated to 

improve future fund performance 

by approximately $20 million, 

and another audit conducted in 

that year, which resulted in TVA 

cancelling plans for $8 million 

in charitable contributions.

The OIG has also performed 

numerous other financial-related 

audits of TVA’s accounting systems 

and business processes over the 

years that have helped TVA 

management make improvements 

to those systems, processes, and 

related controls. In many cases, the 

OIG’s recommendations from these 

audits resulted in monetary savings, 

and in many other cases, the audits 

affirmed that TVA’s systems, 

processes, and related controls 

were functioning properly.

TVA’s Financial Statements – The 

IG’s role in TVA’s annual financial 

statement audit has increased 

dramatically over the past 20 years. 

In its early years, the OIG typically 

audited certain elements of TVA’s 

balance sheet and income statement 

to facilitate the audit of TVA’s financial 

statements by an external auditor. In 

later years, however, the OIG became 

more involved in assuring the external 

audit complied with applicable 

standards. In 2003, the OIG 

began providing technical contract 

management and funding for the 

financial statement audit to assure the 

external auditor remained independent 

of TVA operations and management, 

both in fact and appearance. In 2005, 

with the restructure of the TVA Board 

and the establishment of the Audit 

and Ethics Committee, the role of 

the OIG in TVA financial reporting 

further expanded as it began holding 

quarterly meetings with this committee 

and providing additional assurance to 

members regarding the independence 

of the external auditor and the quality 

of the auditor’s work. 

Internal Control Over Financial 

Reporting – In 2005, the OIG’s 

role in TVA financial reporting again 

expanded through its support of TVA’s 

initiatives to comply with Section 404 

of the Sarbanes-Oxley Act of 2002 

(SOX). The OIG has provided support 

for TVA’s SOX initiatives since 2005, 

and in that time, has performed about 

150 reviews and provided objective 

feedback on TVA financial reporting 

control design and documentation, as 

well as control operation effectiveness. 

In addition, the OIG has facilitated 

fraud risk assessments with TVA 

management covering a broad range 

of financial reporting processes. The 

OIG continues to coordinate with TVA 

management to support its compliance 

with SOX.

Promoting Integrity in Financial Reporting

Financial and Operational Audits Team
33

Congressional requests from 

members of the Valley Congressional 

delegation during the past 20 years 

have focused on accountability for 

costs and rates and justifications for 

certain TVA business decisions. Billing 

rate programs, agency management 

practices, and certain significant 

expenditures as shown below are 

illustrative of the work we have 

performed at the request or suggestion 

of Congress.

•	Economy Surplus Power 

Program – Congressman Bob 

Clement requested an assessment of 

whether certain industrial customers 

were properly billed during the 

summer of 1998 when a volatile 

power supply situation existed;

•	Selected Power Rate and Cost

Issues – Senator Mitch McConnell 

requested an audit of TVA’s rates 

and charges to determine how TVA’s 

programs and expenses were passed 

on to distributors and direct-served 

customers;

•	TVA’s Office Space and Vacancy

Rates and the Highland Ridge 

Tower – Senator Jeff Sessions 

requested a review of TVA’s decision 

to lease the Highland Ridge towers 

in Nashville and questioned some of 

the expenditures; and

•	Agency Management Practices –

Congressman Zach Wamp requested numerous reviews of TVA management practices including: (1) executive compensation, (2) spending 

on special events, (3) TVA advertisement programs, (4) use of consulting 

contracts, (5) property leases and 

purchases, (6) use of TVA airplane, 

and (7) decisions to relocate personnel to Nashville.

Over the last 20 years, the OIG 

has performed over 800 preaward, 

compliance, and contract claim audits 

that collectively identified almost 

$880 million of questioned costs and 

funds to be put to better use.

•	Preaward audits are based on TVA

management requests for audit 

assistance either prior to award of 

a contract or prior to extension of 

a contract. Our audit objectives 

are generally to determine if a 

contractor’s cost proposal is fairly 

stated. TVA management is able 

to use the information obtained 

in our audits to have a better 

understanding of the contractor’s 

cost structure and to negotiate 

cost provisions that are more fairly 

stated. Since April 1988, we have 

performed over 330 preaward 

audits that collectively identified 

savings opportunities of about 

$659 million. Although TVA did 

not eventually award contracts 

to some of the companies whose 

proposals we reviewed, for those 

contracts which were awarded, TVA 

management was able to use our 

audit results to negotiate contract 

terms that helped it avoid 

$404 million in costs.

•	Compliance audits are reviews of

costs billed to TVA by contractors 

or subcontractors to determine 

if the costs were in accordance 

with contractual provisions. We 

select contracts for audit that have 

high potential for waste, fraud, 

and abuse due to issues such as 

contract size and complexity, past 

history of problems with particular 

contractors, recurring issues within a 

particular contract type, and limited 

management oversight. Over the 

past 20 years, we performed 

450 compliance audits that identified 

$158 million of questioned costs 

and $32 million of funds to be put to 

better use. Although management 

action is outstanding on some of the 

audits, TVA has been able to thus 

far successfully recover or avoid over 

$75 million in costs. 

•	Claims and Litigation Support –

Over the past 20 years, we 

supported TVA management’s 

assessment of claims and litigation 

filed by contractors. We performed 

over 35 audits and provided 

litigation support on various 

occasions to TVA’s Office of the 

General Counsel. Our audits 

identified $28 million of ineligible 

and unsupported costs which TVA 

management was able to use to 

negotiate better settlements 

with the contractors.

Responding to Key Stakeholders

Promoting Cost Reduction
34

The OIG now devotes an entire 

audit department to IT-related 

reviews and strongly supports 

training needed to stay current on 

where the risks lie. To address risks 

across federal agencies, several 

pieces of legislation have been 

passed in recent years, requiring 

federal agencies to review and 

improve security of its information 

and report annually on its action 

plans for improvements. One 

example is FISMA which also 

requires OIGs to independently 

evaluate and report on agency 

compliance.

About six years ago, TVA launched 

a series of initiatives to upgrade 

its security infrastructure. The OIG 

participated on this project with TVA 

IS and outside consultants to identify 

(1) critical risks and the current status 

of IT security for critical TVA systems 

and (2) steps necessary to protect TVA 

systems from cyber-attack. This project 

encompassed over 20 self-assessments 

and 10 security vulnerability reviews, 

including penetration tests for a cross 

section of TVA assets and facilities 

(e.g., nuclear, transmission, fossil, 

hydro, data centers). As a result of 

this project, TVA initiated actions 

to strengthen its security practices. 

Since this project, the OIG has 

continued to perform security reviews, 

program reviews, penetration tests, 

pre-implementation reviews of new 

systems, and legislatively mandated 

reviews.

IT Reviews Grow in Importance

The evolution of IT uses within the agency, as well as other 

companies, over the past 20 years has been significant. 

This evolution has brought considerable efficiencies as well 

as risk to TVA. As technology has evolved, so has the demand 

for resources and the skill sets required to audit IT.

IT Audits Team
35

The major focus of investigations has 

shifted significantly over the past 

20 years. During the early years, the 

OIG devoted substantial investigative 

resources to administrative 

investigations. For example, during 

FY 1990, we issued 212 investigative 

reports to TVA management. Our 

investigations included employee 

misconduct, personnel matters, vehicle 

operations, and harassment. While 

we also pursued criminal cases and 

obtained 13 convictions that year, TVA 

needed our independent investigative 

arm to look into misconduct cases.

As time has progressed, however, we 

have shifted away from misconduct 

to focus more on major fraud. We 

now have significantly fewer agents 

than in our early years, and we focus 

those resources on cases that we think 

likely will bring a bigger return to TVA. 

Examples of major impacts over the 

past 20 years include the following.

•	We have obtained numerous

convictions of loan recipients for 

either providing false information 

to TVA to obtain a loan or diverting 

the funds for personal use. One 

recent economic development case 

involving a $500,000 loan 

is awaiting trial.

•	Our workers’ compensation

investigations have helped TVA 

control the costs of that program. 

We investigate both false claims of 

a work-related injury and instances 

where individuals who are working 

while receiving benefits falsely report 

they are unemployed. Our savings 

to TVA have totaled over $75 million 

during the past 20 years in this area. 

•	Numerous investigations related to

the procurement of coal have led 

to both convictions and substantial 

monetary recoveries for TVA. 

These investigations have included 

overstated weights, theft, and 

product substitution. A $25 million 

recovery in a coal case is featured in 

this semiannual.

•	Investigations of contracts in other

areas also have produced 

significant results. They include 

an $8 million recovery from the 

administrator of a TVA benefit plan; 

an $8 million credit from a company 

that received an improper advanced 

payment from TVA; conviction of a 

contractor’s Chief Operating Officer 

and payment of $1.6 million for 

submitting false claims for labor 

hours and per diem; and several 

convictions of contractor employees 

for falsely claiming entitlement to 

per diem and the recovery of over 

$3.5 million. 

•	Our theft and credit card

investigations also have contributed 

to the bottom line at TVA. For 

example, our investigation of 

the theft of tools by contractor 

employees resulted in five 

convictions and the recovery of over 

$1 million. Another investigation 

resulted in a conviction and 

recovery of over $.5 million where 

a contractor employee used a TVA 

VISA card to obtain supplies, falsified 

records to show TVA received the 

supplies, and stored the supplies in 

private warehouses.

Preventing and Detecting Fraud, Waste, and Abuse

CASELOAD

Cases Closed 6,024

INVESTIGATIVE RESULTS

Recoveries $ 82,412,820

Fines/Penalties $ 1,770,988

Savings $88,335,232

MANAGEMENT ACTIONS

Disciplinary Actions (# Subjects) 1,012

PROSECUTIVE ACTIVITIES

Convictions 278

Investigations has produced major results for TVA over the past 20 years 

as shown by the following numbers.
36

Over the 20-year period ended March 31, 2008, the OIG completed 1,832 audits and related 

projects and made 3,321 recommendations to TVA management. We questioned approximately 

$319 million in costs and recommended approximately $982 million be put to better use. As a 

result of this work, TVA recovered over $113 million and put over $642 million to better use. 

20-Year Cumulative Audit 

and Related Project Highlights

AUDITS & OTHER PROJECTS | April 1, 1988 – March 31, 2008

AUDITS COMPLETED 1,394

AUDIT RESULTS (Millions)

Questioned Costs $319

Disallowed by TVA 135

Recovered by TVA 114

Funds to be Put to Better Use $982

Agreed to by TVA 707

Realized by TVA 643

OTHER AUDIT-RELATED PROJECTS1

Completed 438

Cost Savings Identified/Realized (Millions) $ 69

1 Includes the number of Inspections completed during the period and any associated cost savings identified or realized. 

April 1, 1988 to March 31, 2008

Questioned Costs

(millions)

CUMULATIVE QUESTIONED COSTS 

$ 0

$100

$150

$200

$250

$300

$350

1993

$220,517, 082

$258,908,795

$279,327,362

$318,977,981

1998 2003 2008

2008

2003

1998

1993

April 1, 1988 to March 31, 2008

Funds for Better Use

(millions)

CUMULATIVE FUNDS FOR BETTER USE 

$ 0

$ 200

$ 400

$ 600

$ 800

$1,000

$1,200

1993

$508,027,437

$582,077,247

$822,909,176

$981,886,251

1998 2003 2008

2008

2003

1998

1993
37

2000 ECIE AWARDS

George T. Prosser, IG

for outstanding contributions 

to the IG community. 

G. Donald Hickman,

Assistant Inspector General,

Investigations 

for his leadership and sustained 

contributions to the law 

enforcement community. 

Special Agent James F. Farr

and Senior Auditor Jerry D. Stover

for outstanding teamwork and efforts 

in a complex audit/investigation 

of fraud related to TVA’s Tool 

Management Program.

Senior Special Agent 

Michael G. Duncan

and Senior Auditor Harriet A. Miller

for their work in resolving a complex 

product substitution case.

The OIG’s Workers’ Compensation

Team, composed of Special Agents 

James E. Hunter and Craig A. Yates,

and Financial Investigations

Manager James M. Reed

for their achievements in identifying 

and eliminating fraud in TVA’s 

workers’ compensation program.

Environmental Crimes 

Joint Task Force

for outstanding work in fighting 

environmental crimes from July 1, 

1999, to June 30, 2000.

An Award Winning IG’s Office

Each year, the PCIE and the ECIE present awards for 

outstanding achievements within the IG community. 

These awards are a testament to a job well done.

The PCIE consists of presidentially appointed IGs, while the 

ECIE is comprised of IGs appointed by the agency head. 

The TVA OIG was an ECIE member until October 1, 2001, 

when the IG position became a presidential appointment and 

the OIG, accordingly, became a member of the PCIE. PCIE/

ECIE awards received by OIG employees over the past several 

years are as follows.

Award for Excellence – Investigating Environmental Crime Award recipient Joe Boehr standing 

between former IGs Prosser and Chambers
38

2001 ECIE AWARDS

Clean Air Compliance Program Team 

for their contribution to TVA’s Clean Air 

Compliance Program.

Significant Review and Analysis 

Conducted at the Request of Congress 

Team for their work in conducting a 

congressionally-requested review and 

analysis of power rate and cost issues.

Office Space Team for their 

outstanding contributions toward 

improving TVA’s decision-making 

processes related to property and 

office facilities.

Investigation Regarding a Senior 

Manager’s Misconduct Team

for working together to develop, 

analyze, and report complex findings 

regarding significant misconduct by a 

senior manager.

The East Tennessee Health Care

Fraud Team for outstanding teamwork 

in a multi-agency effort to investigate 

and prosecute health care fraud by 

a medical provider in the Federal 

Judicial District of Eastern Tennessee.

2002 PCIE AWARDS

Long-Term Bulk Power Trading Team 

for producing two highly complex 

reviews of TVA’s weekly, monthly, 

seasonal, annual, and multi-year 

trading in the wholesale 

electricity market. 

Award for Excellence – Investigations Award recipients Elizabeth Sherrod 

and Bill McBee with former IG Chambers
39

2005 PCIE Award

SOX Review Team for performing 

process-control reviews to assist 

TVA management in evaluating the 

design and operating effectiveness of 

financial reporting controls.

2006 PCIE AWARDS

Fraud Risk Assessment Team for 

developing and implementing an 

action plan to perform fraud risk 

assessments, an innovative and 

valuable tool to prevent and detect 

waste, fraud, and abuse.

Contract Audits Team for using 

proactive and innovative best practices 

to consistently identify significant 

cost savings, recoveries, and process 

improvements for TVA.

2007 PCIE AWARD

Ron Wise, Assistant IG for

Administration and Government

Relations, for the initiation of best 

practices sharing sessions with 

other OIG’s.

2005 PCIE AWARD: SOX Review Team

2006 PCIE AWARD: Fraud Risk Assessment Team 2006 PCIE AWARD: Contract Audits Team
40

During this reporting period, 

we completed 38 audits which 

identified over $774 thousand 

in questioned costs and 

approximately $101 million in 

funds which could be put to 

better use. We also identified 

several opportunities for TVA 

to improve program operations. Our audits included 

(1) pre- and post-award 

contract audits, (2) financialrelated audits, (3) operational 

audits, and (4) IT audits. We 

also completed six other auditrelated projects.

Contract Audits

PREAWARD CONTRACT AUDITS

IDENTIFY $101 MILLION

OF POTENTIAL SAVINGS

OPPORTUNITIES

To support TVA management in 

negotiating procurement actions, we 

completed six preaward audits of cost 

proposals submitted by companies 

proposing to provide (1) engineering, 

procurement, and construction (EPC) 

services for the completion of Watts 

Bar Nuclear Unit 2, and (2) EPC 

services for gas-fired generating 

facilities. Our audits identified 

$101 million in potential savings 

opportunities for TVA to negotiate. 

Some of our more significant findings 

included (1) overstated indirect cost 

recovery rates, (2) unsupported 

insurance recovery rates, (3) excessive 

craft labor cost markups, (4) excessive 

markups of direct equipment costs, 

(5) potentially duplicate fee payments, 

and (6) unsupported cost escalations. 

TVA management used the results 

of our findings to negotiate better 

contract terms.

CONTRACT COMPLIANCE AUDITS

IDENTIFY OVER $774 THOUSAND

IN QUESTIONED COSTS

During this semiannual period, we 

completed five contract compliance 

audits that identified $774,477 in 

questioned costs. In addition, we 

provided (1) assistance on various 

contractor-related OIG investigations, 

(2) support to TVA’s Office of the 

General Counsel for pending litigation 

with a TVA contractor, and (3) advice 

to TVA Procurement regarding various 

planned contracts. Highlights of our 

completed compliance audits follow.

•	We audited $5.2 million in costs

billed to TVA by a contractor for 

subcontract services provided on 

the Browns Ferry Nuclear Unit 1 

recovery project. Under its 

agreement with the prime contractor, 

the subcontractor provided (1) field 

engineers for the Browns Ferry 

Nuclear Unit 1 project and (2) the 

services of a senior modifications 

and maintenance manager. In 

summary, our audit found:

1.The subcontractor miscalculated 

provisional billing adjustments 

for payroll taxes and insurance 

resulting in a $25,331 overbilling 

to TVA.

2.TVA paid $192,039 in additional 

costs by moving the field 

engineering services from the 

subcontractor’s existing direct 

contract with TVA to a subcontract. 

Although Procurement stated 

TVA had made the right business 

decision to move the field 

engineering work to a subcontract, 

we suggested TVA, in the future, 

consider the impact on TVA’s final 

costs before shifting work being 

performed by contractors to a 

subcontract.

3.The contractor billed TVA 

$225,676 for payments made 

to the subcontractor for the 

services of a senior modifications 

and maintenance manager. 

Although Procurement stated the 

subcontractor’s executive was hired 

because the contractor had been 

unable to provide an appropriate 

senior manager to address craft 

productivity issues, we advised 

Procurement the subcontractor’s 

executive essentially provided 

augmentation for the contractor’s 

senior management, a cost 

normally covered by the 

contractor’s overhead.

•	We audited $324,000 of costs

billed to TVA by a contractor for 

volunteer services using TVA retirees 

and found TVA was overbilled 

$63,755, including (1) $44,855 

Summary of 

A

38

udits Representative Audits
41

for unsupported costs, and (2) an 

estimated $18,900 for ineligible 

travel expenses. TVA management 

subsequently took action to recover 

these costs.

•	We determined a contractor owed

TVA $657,540 for provisional billing 

adjustments for CYs 2005 and 

2006. The contractor understated 

the amount it owed TVA by 

$267,040 due to various errors in its 

reconciliations of previously billed 

and incurred costs. The contractor 

agreed with our findings and 

subsequently provided credits to 

TVA for the overbilled amount.

•	Our audit of $5.9 million of costs

billed to TVA by a contractor that 

conducted various projects and 

programs from April 1999 through 

September 2007 found the costs 

were fairly stated and in agreement with the terms of the contract. 

However, about 20 percent of the 

payments TVA made to the contractor were related to a specific project 

where TVA was the administrator of 

funds collected from various federal 

agencies then disbursed to the contractor. Since the benefits received 

by TVA were negligible, given the 

costs of administering the funds for 

the project, we recommended TVA 

transfer the administrative function 

of the project to the contractor. TVA 

management and the contractor 

agreed with the recommendation.

TVA’S CONTRACT AWARD PROCESS

HAS OPPORTUNITIES FOR

IMPROVEMENT

Our review of TVA’s contract award 

process found opportunities for TVA 

to improve its award process by 

ensuring adequate competition is 

received and reinforcing compliance 

with Procurement policies. Specifically, 

our review of 40 contracts awarded by 

Procurement during FY 2006 found:

•	Insufficient competition existed in

the award of seven of the contracts, 

because only one bid had been 

received and evaluated;

•	Technical Contract Managers

contacted vendors and received 

pricing quotes prior to Procurement’s 

involvement in five of the contract 

awards; and

•	With some exceptions, Procurement’s

contract managers and purchasing 

agents retained appropriate 

documentation in the contract files. 

To help TVA ensure it is receiving 

adequate competition, we 

recommended TVA Procurement 

(1) require management approval for 

all contracts greater than $25,000 

in which only one bid is received, 

(2) reinforce compliance with TVA’s 

requirement that only Procurement 

personnel are authorized to obtain 

proposals from potential suppliers, 

and (3) provide clear guidance as 

to the contract file documentation 

requirements. In addition, we 

suggested Procurement consider 

the benefits of creating a position 

of Competition Advocate, a position 

specifically required for other federal 

agencies.

TVA Management is reviewing our 

recommendations to decide what 

actions should be taken to improve 

the contract award process.

“I am proud of the work performed by our 

auditors in contract audits. As a result of the

work of the contract audit staff, TVA was able 

to save millions of dollars under contracts it 

awarded during this semiannual period.”

–David P. Wheeler, Director, Contract Audits
42

financial and 

operational Audits

During this semiannual 

period, we completed 

17 audits, including one 

financial-related audit, four 

operational audits, and testing 

of financial reporting controls 

for 12 business processes 

to assist with TVA’s initiative 

to comply with Section 404 

of SOX. Highlights of these 

projects follow.

FY 2007 FINANCIAL STATEMENT

AUDIT COMPLIED WITH

STANDARDS

TVA contracted with the independent 

certified public accounting firm of 

PricewaterhouseCoopers LLP (PwC) 

to audit TVA’s balance sheets as of 

September 30, 2007, and 2006 and 

the related statements of income, 

changes in proprietary capital, and 

cash flows for each of the three years 

in the period ended September 30, 

2007. The contract required the audit 

be done in accordance with generally 

accepted government auditing 

standards. Our review disclosed no 

instances where PwC did not comply, 

in all material respects, with generally 

accepted government auditing 

standards.

TVA’S HOSPITALITY EXPENSES

REDUCED BY 64 PERCENT

We reviewed hospitality expenses 

incurred by TVA for the period 

October 1, 2005, through 

June 30, 2007, to (1) determine 

the type and level of expenditures; 

(2) assess compliance with policies 

and procedures; and (3) identify 

changes in hospitality policies since 

our last hospitality audit. We found 

total hospitality expenditures, including 

employee recognition expenses, 

averaged about $2.3 million per year 

during the period, representing a 

64 percent reduction from FY 2003 

spending. For the period reviewed, 

TVA generally complied with policies 

and procedures, except as related to 

obtaining preapproval of hospitality 

expenditures. In response to our 

report, management took corrective 

action regarding preapproval of 

hospitality expenditures. 

OIG REVIEWS 2007 WINNING

PERFORMANCE PAYOUTS

We performed agreed-upon 

procedures, requested solely to assist 

management in determining the 

validity of the Winning Performance 

payout awards for the FY ending 

September 30, 2007. In summary, 

we found: 

•	The FY 2007 Winning Performance

goals were properly approved. 

•	Actual year-to-date inputs for the

sampled metrics agreed with the 

respective basis worksheet. 

•	Actual inputs for the nine TVA-wide

metrics agreed with the underlying 

support provided by the Strategic 

Business Units, except for the 

calculation of the Delivered Cost 

of Power (DCOP) metric, which 

was inconsistent with the Boardapproved formula. This resulted 

in a one cent overstatement of the 

calculated DCOP, further resulting 

in a .25 percent increase in the TVA 

Scorecard percentage. Management 

agreed and made the appropriate 

correction during the engagement.

•	Also, in applying the procedures,

we noted the Fuel Cost Adjustment 

(FCA) metric improperly included 

Browns Ferry Nuclear precommercial 

costs. The FCA metric approved 

by the Board did not include 

these costs. Including these costs 

in the FCA metric resulted in an 

8.25 percent overstatement in the 

TVA Scorecard percentage. After 

discussion with management, these 

costs were removed from the FCA 

metric and subsequently included in 

the DCOP metric. A revised payout 

report was provided for retesting. 

We noted during retesting, the 

precommercial costs were properly 

excluded from the FCA metric and 

included in the DCOP metric. We 

further noted Allowance for Funds 

Used During Construction was 

added to the DCOP metric. 

The payout percentages were 

recalculated by management and 

verified by the OIG, based on 

the changes to the DCOP metric 

noted above.

NEW EXECUTIVE ORIENTATION

PROGRAM IMPROVED

We assessed the effectiveness of TVA’s 

orientation for executives hired since 

our last review in 2005. In summary, 

“Daily engagement in analytical decisionmaking with highly trained professionals is 

more intellectually stimulating than I had 

expected; there is nothing mundane about 

directing OIG resources.”

–John H. Barrow, Acting Director, Financial and Operational Audits
43

we found TVA’s Human Resources 

personnel had:

•	Developed a guide for executives to

address issues unique to TVA.

•	Provided guidance to newlyhired executives on areas of high 

sensitivity.

•	Provided periodic guidance as

needed in various areas.

•	Provided orientation itineraries to

four of the 15 new executives we 

interviewed.

In addition, we found according to 

TVA training records, 91 percent of 

newly hired executives attended TVA’s 

standardized orientation process 

called the New Employee Experience, 

as opposed to 67 percent during our 

last review. 

We also provided the Chief 

Administrative Officer with the 

suggestions by the 15 executives we 

interviewed as to how to improve the 

orientation program.

CONTROLS OVER REPORTABLE

ENVIRONMENTAL EVENTS AT TVA 

FACILITIES NEED IMPROVEMENT

We reviewed REE2 at TVA facilities 

for the two years ended September 30, 

2006. The purpose of our review was 

to determine whether controls provide 

reasonable assurance that REE are 

identified, reported, and resolved in 

accordance with applicable laws, 

regulations, and TVA policies. We 

identified (1) noncompliance with 

reporting requirements; (2) different 

interpretations on how some environmental occurrences should be 

classified; (3) environmental issues not 

documented and managed through 

TVA’s corrective action program; 

(4) lack of a corporate REE procedure; 

(5) inaccurate environmental data in 

the Electronic Corrective Action Program (eCAP), Environmental Event Reporting (EER) system, and REE registry; 

and (6) two instances where TVA did 

not externally report events because of 

uncertainty about requirements. 

We recommended TVA Environmental 

Stewardship and Policy (1) clarify the 

environmental occurrences required to 

be classified as environmental events, 

(2) develop a corporate REE procedure, 

(3) clarify the environmental 

occurrences required to be managed 

through the corrective action process, 

and (4) review environmental data 

in the eCAP, EER system, and REE 

registry for accuracy, correct identified 

errors, and identify a method to 

prevent future environmental database 

errors. We further recommended 

TVA’s Environmental Executive work 

with other TVA executives to promote 

a culture of transparent reporting 

throughout TVA organizations. This 

could include a periodic briefing 

of management or executives on 

the status of REEs, environmental 

events, Notices of Violation, and 

Environmental Management 

System findings.

Management agreed with our 

recommendations and opened 

three Problem Evaluation Reports 

(PERs) to address the findings. The 

PERs will address (1) identified 

problems regarding classification 

of environmental occurrences, 

documentation of occurrences, 

decision-making with regard to 

classification, use of eCAP to manage 

environmental occurrences, and a 

lack of procedural guidance for REEs; 

(2) identified errors in the database(s) 

used to capture information on 

environmental occurrences; and 

(3) the lack of suitable mechanisms 

for transparent reporting and 

periodic briefing of management 

and executives on the status of 

environmental occurrences and 

environmental audits.

SOX TESTING IDENTIFIES

IMPROVEMENT AREAS

In support of TVA initiatives to comply 

with SOX, we completed 12 projects 

to test or retest financial reporting 

controls in 12 of about 68 key 

business processes determined to be 

in scope for SOX compliance. These 

projects were designed to provide 

the Vice President and Controller 

with information for TVA to assess 

its internal control over financial 

reporting as of September 30, 

2008. Our findings included needed 

improvements in control design, 

inadequate documentation retained to 

demonstrate the control operated in 

the period tested, and other necessary 

documentation-related improvements.

2 A reportable environmental event is an occurrence that violates regulatory requirements and triggers a notification to, or enforcement action by, 

a regulatory agency.

Windmills at TVA’s wind power generating site 

on Buffalo Mountain near Oak Ridge
44

IT Audits

During this semiannual 

period, we completed five 

audits in the IT environment 

and performed four reviews 

in support of TVA’s efforts 

to comply with certain 

provisions of Section 404 

of SOX. Highlights of these 

audits follow. 

IT SOX TESTING IDENTIFIES

OPPORTUNITIES FOR

IMPROVEMENT

During the first half of the semiannual 

period, we completed readiness testing 

of controls for three applications and 

one IT general control area, which 

were initiated at the end of FY 2007. 

Overall, we noted opportunities 

to improve SOX documentation, 

operating effectiveness of controls, and 

areas where control gaps existed. TVA 

management has taken or is in the 

process of taking action to remediate 

issues noted in these reviews.

IMPROVEMENTS NEEDED TO

INCREASE EFFECTIVENESS OF IS

ORGANIZATION AND IT SECURITY

FUNCTION

We performed two organizational 

effectiveness reviews of TVA’s 

IS organization and IT Security 

function. Both IS and IT Security have 

undertaken restructuring efforts. In 

these reviews, we found:

•	The recent restructuring of

the IS operations area mirrors 

leading practices. In addition, 

IS’ methodologies and tools for 

conducting IT projects are above 

those of its peers. However, our 

review showed some areas need 

improvement, such as: TVA needs 

to (1) better integrate IS governance 

with TVA business strategy; 

(2) improve focus on strategic 

business partnering and 

communication with customers; 

(3) target organization and policy 

changes, performance measures, 

and service management toward 

aiding customers to achieve business 

goals; (4) consolidate procedures to 

increase usability; and (5) develop 

a strategy for handling the risk of 

the aging workforce and ensuring 

knowledge transfer.

•	While IT Security has made strides

in establishing the technology 

infrastructure, we found: (1) IT 

Security lacks a business-level 

mechanism to provide cross-agency 

oversight, a strategic TVA-wide 

approach, and grounding in risk 

management; (2) coordination and 

communication with business units 

were not well defined and could 

be more effective with increased 

training, communication, and 

business unit involvement in security 

planning; (3) procedures were 

outdated and did not address issues 

for all business segments; and 

(4) performance management was 

substantially undefined. 

TVA management generally agreed 

with our findings and is in the process 

of implementing corrective actions.

OTHER IT-RELATED REVIEWS

We performed three other reviews 

pertaining to (1) security controls 

for a critical system, (2) risk 

assessment performed on personally 

identifiable information, and (3) preimplementation of a new system. In 

these reviews, we noted:

•	A critical system contained

weaknesses in control 

documentation; participation 

agreement language; logical and 

physical controls designed to prevent 

unauthorized access to system 

programs, data, and facilities; 

and general controls designed to 

ensure ongoing operations. TVA 

management generally agreed with 

the recommendations and is in the 

process of implementing corrective 

actions.

•	The risk assessment methodology

used by TVA was consistent with 

National Institute of Standards and 

Technology and the U.S. Office of 

Management and Budget guidance, 

and corresponding conclusions 

reached regarding risk to personally 

identifiable information were 

reasonable.

•	TVA security plans and procedures

and plans for application testing and 

data loading are expected to provide 

adequate control over security, 

testing, and data reliability for the 

new system.

“Technology and the associated risks are 

continually changing. To be successful in this

environment requires strong skills, commitment 

to continuous learning, and a passion for the 

work...that’s what the IT Audits group brings to

each project.”

– Jill M. Matthews, Director, IT Audits
45

Inspections may be initiated 

from various sources including 

(1) annual project planning, 

(2) management requests, 

(3) audit/investigative 

referrals, and (4) spin-off 

reviews resulting from an 

ongoing inspection. During 

this semiannual period, we 

completed eight inspections. 

We also identified various 

opportunities for TVA to improve 

program operations. Highlights 

of our inspections follow.

RESOURCE MANAGEMENT

EXTERNAL CONTRACTUAL SERVICES

River System Operations and 

Environment (RSO&E) Internal/External 

Contractual Services’ program, 

operated by Resource Management 

(RM), provides services/technologies 

to TVA and external customers. 

RM is responsible for (1) business 

development, including bid and 

proposal preparation; (2) product 

development activities; and 

(3) business coordination of external 

projects and operations. Our 

inspection covered the external 

contractual services work being 

conducted by RM. Our objectives were 

to determine if (1) work performed by 

RM was in accordance with applicable 

policies and procedures and 

(2) costs associated with TVA 

employees working for outside entities/

agencies were adequately recovered. 

In summary, we found:

• The majority of FY 2006 RM External 

Contractual Services’ revenue was 

generated from work for other 

federal agencies, and the projects 

we selected for review appeared 

to be in compliance with the 

Economy Act of 1932, as amended 

(31 USC 1535). In addition, direct 

costs and approved overheads are 

captured on a project-specific basis 

and automatically billed to ensure 

cost recovery.

•	The work being performed is not

a TVA core business and does not 

appear to align directly with TVA’s 

Strategic Plan. Specifically, the work 

does not (1) involve the generation or 

transmission of electricity, (2) relate 

to environmental stewardship in the 

Tennessee Valley, or (3) help bring 

jobs to the Tennessee Valley through 

capital investment. RM stated the 

work is consistent with the spirit and 

historical enablement of the TVA 

Act and is implicitly included in and 

serves as an enabler for many parts 

of TVA’s new Strategic Plan. 

•	The work being performed increases

TVA’s monetary, reputational, and 

environmental risks. RM stated, 

however, that they continue to 

improve the risk profile for the 

RM External Contractual Services’ 

efforts through completion of 

high-risk projects, through their 

strategy on the nature of future 

work, and through actions and 

processes to mitigate financial risks, 

including purchasing insurance and 

incorporating written indemnity 

clauses in certain contracts. 

•	For five of the 14 projects reviewed,

a contract could not be provided. 

In addition, key decisions required 

by RM policies and procedures were 

not documented, or documentation 

was incomplete.

We agreed with management’s 

planned actions to: (1) eliminate 

chemical agent work once current 

contractual commitments expire and 

(2) direct RM officials to maintain 

adequate supporting documentation 

of projects and decisions made in 

regard to RSO&E policy, including 

maintaining contracts and proof of 

funding or Military Interdepartmental 

Purchase Requests. 

Summary of 

Representative Inspections

“I am thankful to have the opportunity to work 

with my Inspections co-workers who are both 

talented and committed to helping TVA achieve 

its performance and financial goals.”

– Gregory C. Jaynes, Deputy Assistant Inspector General, Inspections

8

Inspections
46

TVA CONTRACTOR PURCHASING

CARD USAGE

We performed an inspection to 

determine whether TVA purchasing 

cards issued to contractors were used 

for a valid business purpose and in 

compliance with TVA VISA Purchasing 

Card Procedures. Purchasing cards 

are provided to TVA organizations for 

purchases of small-dollar materials 

and services when it is determined to 

be the best procurement vehicle for 

purchases, as a general rule, up to 

$5,000. In addition to issuing purchasing cards to TVA employees, TVA has 

also issued purchasing cards in the 

names of TVA contractor employees.

We reviewed the use of TVA contractor 

purchasing cards from March 28, 

2004, to March 28, 2007. For this 

period, we identified 21 contractors 

who incurred 35,605 TVA purchasing 

card transactions totaling about 

$16.7 million. This included six 

contractors whose purchases each 

totaled more than $1 million for the 

period. A review of documentation 

supporting selected transactions found 

instances of noncompliance with 

TVA’s policy and procedures. 

Specifically, we found:

•	Purchases that were, by policy,

disallowed (e.g., computer 

equipment, computer software, fuel, 

rental of heavy equipment, and 

rental of vehicles).

•	Transactions where it appeared the

total charge was split to stay below 

the $5,000 transaction limit and 

avoid obtaining additional approval.

•	Transactions with no detailed receipt

showing the description and quantity 

of items purchased.

•	Transactions with no receipt.

•	Transactions with illegible receipts.

We also noted areas where controls 

over the use of TVA contractor 

purchasing cards could be improved. 

TVA management generally 

agreed with our findings and 

recommendations and has taken or 

plans to take corrective action.

TVA’S DAM SAFETY PROGRAM

We performed an inspection to 

determine whether the TVA dam 

safety inspection process met federal 

guidelines, was followed by Dam 

Safety inspection personnel, and 

was adequately supported by an 

information database. Under the 

TVA Act of 1933, as amended, TVA 

is authorized to construct, operate, 

and maintain dams in the Tennessee 

River basin. According to the National 

Inventory of Dams, TVA’s dam 

inventory in 2007 included 49 main 

dams and 33 dikes and saddle dams. 

In keeping with its responsibility, TVA 

has maintained a dam safety program 

since its inception. In summary, our 

review determined:

•	The inspection process met the

Federal Emergency Management 

Agency (FEMA) guidelines for 

periodic dam safety inspection 

programs.

•	Dam Safety inspection personnel

appeared to adhere to the process 

for identifying, monitoring, and 

correcting inspection deficiencies 

based on the five dams we reviewed.

•	Information databases provided

adequate support to manage the 

inspection process. 

While we found the dam inspection 

process met FEMA guidelines and dam 

safety personnel corrected inspection 

deficiencies for the five dams we 

reviewed, we identified a control 

improvement opportunity. Specifically, 

(1) 57 out of 81 work orders/requests 

related to maintenance and repair 

(M&R) items identified by the dam 

safety inspections for the five dams 

we reviewed were not completed by 

the estimated due date stated on the 

inspection report, and (2) there is 

a historical trend of not completing 

M&R items by the estimated due date. 

TVA management stated that findings 

affecting personnel safety and items 

considered dam safety emergency 

repairs are corrected immediately. 

M&R items are routine activities 

required to keep the dam safety 

equipment in acceptable condition 

and are identified during dam safety 

inspections. TVA management agreed 

with our finding and recommendation 

and has implemented a prioritization 

and scheduling procedure to enhance 

timely completion of M&R items.
47

TVA COAL SUPPLIER CONTRACTS

We conducted three inspections to 

determine whether selected coal 

suppliers were in compliance with 

weighing, sampling, and shipping 

provisions of each respective contract. 

We performed tests to verify that 

shipment weight and coal test 

results documentation maintained at 

each mine supported the amounts 

used to (1) invoice TVA for tonnage 

shipped and (2) calculate coalquality adjustments. We also used 

a consultant to assist in compliance 

testing of weighing, sampling, and 

shipping contract provisions and/or 

applicable standards.

In summary, our reviews found 

documentation maintained at the 

respective mine for ten randomly 

selected shipments agreed with the 

information provided to TVA regarding 

tons shipped and coal-quality test 

results. Each supplier was also found 

to be in general compliance with the 

weighing, sampling, and shipping 

provisions in the contract and/or 

applicable standards. However, we 

also identified control improvement 

opportunities related to TVA’s 

weighing and sampling of coal. TVA 

management generally agreed with 

our findings and recommendations 

and has taken or plans to take 

corrective action.

TVA PRESCRIPTION DRUG

PROGRAM

TVA entered into a contract with a 

vendor to provide a fully integrated 

prescription drug program that 

included both retail and mail order 

prescription drug services. The 

contractor was required to (1) maintain 

a Participating Pharmacy Network to 

provide retail pharmacy services, (2) 

provide base administrative services 

including processing and adjudicating 

TVA’s prescription drug claims in 

accordance with TVA’s plan design, 

(3) issue checks to participating 

pharmacies and/or claimants on 

TVA’s behalf, and (4) implement 

and administer health management 

programs. As part of our annual 

inspection plan, we reviewed the costs 

billed and formulary rebates credited 

to TVA by the contractor. Specifically, 

our inspection covered:

•	Claims payments by TVA to

the contractor for the period 

December 22, 2001, through 

December 30, 2005.

•	Base administrative fee payments

made by TVA to the contractor for 

the period January 5, 2002, through 

December 5, 2003. There were no 

base administrative fee payments for 

CYs 2004 and 2005.

•	Formulary rebates credited to TVA

for claims adjudicated and billed 

from January 1, 2002, through 

December 31, 2005.

We found the contractor had generally 

billed costs in accordance with the 

contract terms and TVA plan provisions 

with the exception of certain Consumer 

Directed Health Plan (CDHP) claims. In 

addition, formulary rebates allocated 

to TVA exceeded the minimum 

guaranteed rebate amounts, when 

applicable, and nothing came to our 

attention during the limited testing of 

formulary rebates that would indicate 

TVA rebates were not determined in 

accordance with contract terms. TVA 

management generally agreed with 

our findings and recommendations 

and has taken or plans to take 

corrective action to resolve the issues 

Audits and identified regarding CDHP claims. Inspections
48

During the past six months, 

we closed 121 investigations. 

These investigations were 

based on allegations 

received from a wide 

variety of sources, including 

TVA employees, former 

employees, ratepayers, 

concerned citizens, other 

agencies, and OIG Audits. 

Highlights, as summarized below, 

include: the largest civil False 

Claims Act settlement in this office’s 

history; the first payment under our 

Reward Program; sentencing of a 

TVA employee who failed to report 

receipt of over $50,000 at the 

direction of a TVA contractor; two 

cases where individuals filed false 

workers’ compensation claims; and 

environmental convictions in task 

force cases. In addition, we have 

programs underway to identify and 

prevent misuse of TVA credit cards, 

including data mining and joint 

investigations with the TVA Police on 

theft investigations. We also conducted 

several investigations of alleged 

employee misconduct and kept track 

of management’s response to matters 

that came through the hotline as well 

as other referrals.

LARGEST CIVIL SETTLEMENT IN OIG

HISTORY - $25 MILLION

The U.S. Attorney’s Office for the 

Southern District of Illinois negotiated 

the largest civil False Claims Act case 

settlement in the OIG’s history in a 

case we worked jointly with the FBI. 

We investigated whether TVA was 

defrauded by three Kinder Morgan 

limited partnerships (collectively 

“Kinder Morgan”) that provided coal 

and other energy transportation 

and distribution services at two coal 

terminals. Kinder Morgan contracted 

with TVA and other private companies 

to handle and transport coal at the 

Cora and Grand River Terminals in, 

respectively, Illinois and Kentucky. 

TVA ordered large quantities of coal 

produced in the western U.S. The coal 

was shipped by rail to the terminals 

where it was offloaded, stored, and 

eventually loaded onto barges for 

delivery to TVA. On occasion, the 

coal was directly transferred from 

rail to barge, but more often the coal 

was placed in customer stockpiles 

to be later shipped out by barge. 

Our investigation showed Kinder 

Morgan took coal from TVA and other 

customer stockpiles and sold it under 

the name “Red Lightning” from 

1997 through 2001.

Our investigation found coal was 

weighed by certified scales when it was 

loaded onto a train to be shipped to 

the terminals. However, that same coal 

when shipped from the Cora Terminal 

to the customer was weighed by barge 

draft. The barge draft method usually 

weighed two to three percent heavier 

than the certified scales, resulting 

in less coal being shipped from the 

terminal than received. The company 

exploited this weighing differential 

to show that it shipped out the same 

amount of coal as it had received. It 

claimed the “excess” coal, therefore, 

belonged to it and it had the right 

to sell the coal and keep the profit. 

The company took the differential 

(unshipped customer coal or excess 

coal) and sold it as “Red Lightning” 

coal. At the Grand Rivers Terminal – 

where certified scales were used for 

both incoming and outgoing coal – 

our investigation showed Kinder 

Morgan simply took coal from the 

customer stockpiles.

Using this scheme, Kinder Morgan 

took and sold approximately 258,725 

tons of coal attributable to TVA, which 

amounted to a loss for TVA of over 

$6.5 million. The company agreed 

to pay back three times this amount 

for a total of over $19.5 million. The 

company also agreed to reimburse 

other private customers in the amount 

of about $5 million. TVA recovered 

its actual losses plus the cost of the 

investigation from the settlement 

amount, less a standard administrative 

fee collected by the DOJ, for a total 

of nearly $8 million. This is the largest 

civil False Claims Act settlement in the 

history of the TVA OIG. 

FIRST REWARD GIVEN TO TIPSTER

A tip led to the investigation of two 

coal terminals used by TVA, which in 

turn led to the largest settlement in 

a civil False Claims Act case in this 

office’s history, as discussed above. 

The complainant reported a concern 

based on his/her belief that something 

was “not right.” Although the specific 

allegation was not substantiated, 

the tip led to an investigation that 

Summary of 121 Representative Investigations Investigations
49

uncovered the practice that led to 

the civil settlement. In recognition of 

the complainant’s efforts, the OIG 

presented that person – who chose to 

keep their identity confidential – with a 

cash reward. 

CONTRACT INVESTIGATIONS

PRODUCE RESULTS

We continued our focus on contract 

fraud during this reporting period. In 

addition to the False Claims Act case 

discussed above, our investigative 

results included sentencing of a TVA 

employee who accepted over $50,000 

at the direction of a TVA contractor 

and a process improvement by which 

TVA would recover abandoned coal.

TVA Employee Sentenced—As we 

previously reported, a former manager 

at the Browns Ferry Nuclear Plant, 

John L. Symonds, pled guilty on 

August 3, 2007, to a felony charge 

of making a false statement on his 

2002 financial disclosure report. Mr. 

Symonds failed to disclose that he had 

received over $54,000 at the direction 

of a TVA contractor. On December 18, 

2007, Mr. Symonds was fined $5,000 

and sentenced to 2 years’ probation 

and 150 hours of community service. 

Abandoned-Coal Investigation— 

We investigated the amount of coal 

being left in barges after it was 

“unloaded” at a TVA fossil plant. 

Information provided by the barge 

company showed that from 

August 1, 2006, through July 31, 2007, 

TVA abandoned over 10,000 tons of 

coal per month. Based on the average 

cost per ton, including transportation 

costs, we estimated TVA lost over 

$6 million annually. Management 

advised they would review the cost 

effectiveness of using a contractor to 

clean out barges at the fossil plant 

and they would issue an early request 

for proposals to attempt to negotiate 

language to provide for dedicated 

barges or clean out services. 

During this reporting period, we 

closed two investigations that 

showed individuals submitted false 

workers’ compensation claims. 

In both cases, TVA suspected the 

claims were false, referred them 

to the OIG for investigation, and 

successfully controverted the claims. 

TVA’s long-term avoided costs due to 

management successfully contesting 

these claims are projected to exceed 

$1.78 million; our investigations 

confirmed the workers’ claims 

were false. 

Pursuant to the FECA, TVA and 

other civilian federal employees 

receive compensation benefits for 

work-related injuries. TVA pays all 

the workers’ compensation charges 

for TVA employees. While the vast 

majority of people who receive 

workers’ compensation are entitled 

to those benefits, there is a significant 

minority who are not. 

The Office of Workers’ Compensation 

Programs (OWCP) administers 

FECA. Because FECA is intended to 

provide wage-replacement benefits 

to employees who cannot physically 

continue working, OWCP requires 

recipients to submit reports of earnings 

from employment or self-employment. 

OWCP uses those reports to assist in 

determining whether an individual has 

a continuing entitlement. While our 

workers’ compensation investigations 

generally focus on an individual’s lying 

about employment, we also look at 

other areas, such as claiming an injury 

occurred on the job when in fact it 

occurred elsewhere.

At the end of FY 2007, there were 

about 1,757 individuals on TVA’s 

long-term rolls, and TVA paid about 

$58 million in claims for that year 

alone. Individuals on the longterm roll who have one or more 

dependents receive 75 percent of 

their salary while those who have 

no dependents receive 67 percent. 

They receive these benefits, plus 

cost-of-living increases, tax-free for 

life; there is no reduction once an 

individual reaches retirement age. 

For example, a married 40-year-old 

employee with a $50,000 salary 

who is injured on the job would 

receive $37,500 tax-free annually, 

or an estimated $1.5 million over 

his/her lifetime, plus cost-of-living 

adjustments.

The chart above illustrates the longterm cost savings to TVA from our 

workers’ compensation investigations 

over the past three years.

Fiscal Investigations

 Year Completed Convictions Recoveries Avoided Cost Total

2005 12 1 $168,779 $1,090,528 $1,259,307

2006 13 2 544,265 1,801,426 2,345,691

2007 14 1 69,763 627,359 697,122

 TOTALS: 39 4 $782,807 $3,519,313 $4,302,120

POTENTIAL COSTS OF WORKERS’ COMPENSATION PROGRAM FRAUD

WORKERS’ COMPENSATION INVESTIGATIONS HELP TVA SAVE MONEY
50

RESULTS DURING THIS 

REPORTING PERIOD

We concluded two investigations where 

the evidence showed the employees 

submitted a false claim for workers’ 

compensation benefits, as follows.

•	On February 14, 2008, in federal

court, a former laborer at a TVA 

fossil plant pled guilty to making a 

false statement in connection with 

a claim for workers’ compensation 

benefits. TVA had challenged the 

claim, which OWCP denied, resulting 

in a projected cost savings of roughly 

$847,957. TVA also terminated the 

employee. During our investigation, 

that individual acknowledged that 

in fact he had hurt himself while 

changing a tire off-duty, not at work.

•	A truck driver in Transportation

Services submitted a claim for 

workers’ compensation based 

on an alleged work-related back 

injury. TVA also challenged that 

claim, and OWCP denied it. Our 

investigation found the employee 

submitted a false claim, and TVA 

accepted the employee’s resignation 

in lieu of termination. Although the 

U.S. Attorney declined prosecution, 

management’s actions resulted in a 

projected total cost avoidance 

of $933,175.

ACTIVE INVOLVEMENT IN MULTIAGENCY TASK FORCES LEADS 

TO RESULTS

We recognize the importance of 

sharing investigative resources 

and information with other federal 

agencies and task forces to focus 

enhanced law enforcement resources 

by applying the most effective criminal 

and civil statutes against individuals 

and companies who violate the law. 

During this reporting period, we 

provided investigative resources to the 

ECJTF, the JTTF, the Health Care Fraud 

Task Force, and the Tennessee Drug 

Diversion Task Force. Results from 

the ECJTF -- which includes the TVA 

OIG, Environmental Protection Agency 

(EPA) OIG, EPA Criminal Investigations 

Division, U.S. Fish and Wildlife 

Service, Tennessee Department of 

Environment and Conservation, 

Tennessee Attorney General’s Office, 

DOJ – Environmental Crimes Section, 

and the U.S. Attorney’s Office for the 

Eastern District of Tennessee -- include 

the following.

Company Pleads Guilty to Clean 

Water Act Violations—Archer 

Daniels Midland Company (ADM) 

pled guilty in federal court to charges 

it negligently violated the Clean 

Water Act at its Southern Cellulose 

Plant in Chattanooga, Tennessee. 

ADM pled guilty to allowing 

contaminated process water to enter 

the Chattanooga Creek, a tributary of 

the Tennessee River, on four occasions 

between October 16, 2003, and 

September 25, 2004. Under the terms 

of the Plea Agreement, ADM will pay 

a $100,000 fine and $50,000 to the 

Tennessee Department of Environment 

and Conservation, $25,000 to 

Chattanooga, and $25,000 to the 

Southern Environmental Enforcement 

Network. ADM also made changes 

to plant management and spent 

more than $350,000 to upgrade the 

Southern Cellulose Plant to avoid 

future violations. 

Individual Pleads Guilty to 

Falsifying Reports—Paul William 

Perkins pled guilty to one count of 

violating the Clean Water Act by 

falsifying monthly operating and 

discharge monitoring reports at a 

Rockwood Sewage Treatment Plant. 

Those reports showed the wastewater 

being dumped into Black Creek had 

been tested for E. coli and other 

bacteria, although the discharge was 

not tested because the analyzing 

mechanism was inoperable. (Later 

testing did not reveal the presence of 

E. coli in the plant’s wastewater.) 

Mr. Perkins was sentenced to 

community service and two years’ 

probation. 

TVA Acts to Fix Duct Leaks But 

Does Not Report Them—In a joint 

investigation with the EPA Criminal 

Investigations Division, we found 

that installation of a Selective 

Catalytic Reduction system led to 

deterioration in the flue gas ductwork 

at a fossil plant. The deterioration 

caused extensive leaks that became 

progressively worse. In spite of the 

extent of the leaks, it appeared 

TVA gave little, if any, consideration 

to reporting them to regulatory 

authorities. While TVA patched 

the leaks as they occurred and 

eventually replaced large sections 

of the ductwork, we recommended 

management consult with the TVA 

Ethics and Compliance Officer to 

incorporate ethics and compliance 

considerations into daily operations at 

the fossil plants.

REVIEW OF CREDIT CARD

EXPENDITURES PROTECTS TVA 

RESOURCES

We use data mining to review 

expenditures on Wright Express fuel 

cards, Visa Gold cards, purchasing 

cards, convenience checks, and Travel 

cards. We have identified numerous 

red flags we look for, and we then 

follow up with the employee and, 

as appropriate, his/her manager 

to verify the expenditure. We have 

identified several instances of misuse 

of the Travel cards and are reviewing 

numerous other expenditures.

Also during this period, two contractor 

employees at a TVA nuclear plant were 

indicted in state court for theft of TVA 

property. They allegedly used a TVA 

purchasing card to obtain property for 

their personal use.
51

MANAGEMENT RESPONDS

TO EMPLOYEE MISCONDUCT

FINDINGS

We also issued several reports during 

this reporting period on employee 

misconduct. Below we summarize our 

findings and management’s response.

Manager Violates Ethics Rules 

and Makes False Statements to 

OIG—An interim report was issued 

to management that concluded the 

evidence developed to-date showed a 

TVA manager made false statements 

during an OIG interview and their 

explanations for those false statements 

in the manager’s comments on a draft 

of the report were not credible. The 

evidence further showed the individual 

violated ethics regulations and raised 

serious questions about their treatment 

of a TVA contractor. We provided 

management an interim report 

because of the manager’s position 

and the serious questions about their 

integrity. The TVA manager resigned. 

In addition, management instituted 

additional controls over the contractor 

and took steps to improve ethics 

training in these particular areas.

Leave Abuse Leads to Suspension—

Investigation of allegations concerning 

leave abuse in a department at a 

TVA nuclear plant found only one 

issue that management had not 

already identified and corrected. 

One employee was absent from work 

for numerous days in 2006 without 

approved leave. The employee was 

suspended for 30 days and their days 

off were converted to unpaid leave. 

TVA Employee Suspended for 

Four Weeks—Our investigation 

substantiated that a TVA employee 

made a hangman’s noose and 

gave it to an African American 

TVA employee, who made statements 

to the OIG about being upset by 

the incident. The employee who 

made the noose, however, did not 

know why the noose would offend 

anyone. Management suspended the 

employee for four weeks. 

Allegation of Leave Abuse Leads 

to Control Improvements—We 

investigated an allegation of leave 

abuse in an organization at a TVA 

nuclear plant. While we did not find 

misconduct, we did find a lack of 

controls over the overtime reporting 

process. In response to our findings, 

management implemented a new 

overtime policy. 

TVA Employees Accept Gratuities 

in Violation of Ethics Regulations—

We investigated various allegations 

concerning a TVA contractor. While 

we found no criminal conduct, we 

found the contractor provided gifts 

and gratuities that several TVA 

employees accepted in violation of 

ethics regulations. The main recipient 

admitted accepting golf greens fees, 

meals, and Tennessee Titans tickets 

from a contractor representative. In 

response to our findings, management 

advised the contractor not to provide 

gratuities to TVA employees in the 

future and suggested additional TVA 

employees take ethics training.

Management Makes Control 

Improvements—We investigated an 

allegation that the supervisors on a 

team at a nuclear site were paying 

overtime for less than full days. Our 

investigation did not find wrongdoing, 

but did identify 

control weaknesses. 

Management 

implemented a new 

overtime policy that 

ended flex time and 

stopped employees from 

leaving early without 

taking leave. In addition, 

the new policy includes 

an overtime timesheet to 

be filled out and signed 

by each employee and 

then entered by administrative or 

supervisory staff.

MANAGEMENT RESPONDS TO OIG

REFERRALS

Many of the concerns the OIG 

received through e-mails, phone 

calls, letters, and the OIG-sponsored 

Empowerline reporting system 

(www.oigempowerline.com), in our 

view, fell within management’s 

responsibility to initially review 

and take any appropriate action. 

Accordingly, we referred issues to 

the TVA Ombudsman, TVA Human 

Resources officials, supervisory and 

operations managers, and TVA Police 

administrators. In order to comply with 

best practices established for corporate 

ethics and compliance programs, we 

asked management to provide us with 

their disposition of the concerns we 

referred to them. TVA management 

continued to be responsive to our 

referrals of matters which ranged from 

workplace issues to citizen complaints 

about TVA activities affecting the 

public. Their responses indicated they 

reviewed appropriate documents, 

interviewed individuals, and took 

actions such as counseling, improving 

communications, and providing 

training. We also interacted with the 

TVA Ethics and Compliance Office 

in monitoring the types of concerns 

received TVA-wide and management’s 

actions in response to them.

Investigations
52

In a December 2007 

letter addressed to the 

63 federal Inspectors 

General, Congressman 

Henry Waxman asked 

them to summarize 

each unimplemented 

recommendation to their 

agency, estimate the 

cost savings and other 

benefits, and describe the 

investigation that prompted 

the recommendation.

CONGRESSIONAL REQUEST

“We want to see whether the IGs 

are doing their job and whether 

the agencies are doing theirs,” 

Congressman Waxman said.

Our response indicates that of 1,7343

recommendations the TVA OIG has 

made, only 15 are past due, which 

is less than one percent of the total 

recommendations. Nearly 92 percent 

of the recommendations to TVA have 

been implemented since 2001 and 

about 7 percent are currently open.

A prominent example of a response 

that is still outstanding is the one to the 

June 2006 inspection entitled ”Review 

of TVA’s Role as a Rate Regulator.” TVA 

has informed TVA OIG that they will 

provide a response to this report by 

August of this year. 

•	Require Congressional notification

of the removal of any IG and the 

reasons for the removal.

•	Expand the reporting requirements

for IG budgets.

•	Require all IGs to have their own

legal counsel.

•	Establish an IG council on integrity

and efficiency.

•	Clarify that the subpoena authority

of IGs extends to electronic 

documents, and require additional 

reports by IGs and the Government 

Accountability Office.

•	Raise the annual salary level of

31 specified presidentially appointed 

IGs from Level IV to Level III of 

the executive schedule, plus an 

additional 3 percent; other IGs must 

receive compensation comparable to 

other senior level executives 

in the department.

•	Prohibit payment of cash awards and

bonuses to IGs. 

•	Broaden the requirement for

the IG semiannual reports by 

making inspection and evaluation 

reports part of the semiannual 

reporting process. 

•	Require (1) all IG Web sites to be

directly accessible from the home 

page of agency Web sites; and 

(2) all IG reports be posted on 

agency Web sites within three 

working days of their public release.

Congressional Request and Summary 

of Legislation and Regulations

LEGISLATION AND REGULATIONS

The OIG in fulfilling its responsibilities under the IG Act of 1978, as amended, 

reviews existing and proposed legislation and regulations that relate to the 

programs and operations of TVA. Although TVA’s Office of the General 

Counsel reviews proposed or enacted legislation that could affect TVA activities, 

the OIG independently follows and reviews proposed legislation that affects the 

OIG and/or relates to economy and efficiency or waste, fraud, and abuse in 

TVA programs or operations.

Major pieces of legislation being followed by the TVA OIG include the 

“Inspector General Reform Act of 2008,” S. 2324. The purpose of the bill is to 

strengthen the independence of federal Inspectors General.

Senate Bill 2324 would:

3 This includes inspection data which is excluded from audit data shown in Appendix 4.
53

Similar legislation, the Improving 

Government Accountability Act, H.R. 

928, introduced in the House of 

Representatives by Congressman Jim 

Cooper (D-TN), passed the House of 

Representatives on October 3, 2007, 

received overwhelming bipartisan 

approval with a vote of 404-11.

We are in general support of this 

bipartisan legislation which we believe 

will enhance IG independence and 

improve OIG operations. IG Moore 

is a member of the PCIE Legislation 

Committee.

The OIG is also following 

Whistleblower legislation in the U.S. 

Senate and House of Representatives. 

In December 2007, the U.S. Senate 

passed the Federal Employee 

Protection of Disclosures Act (S. 

274). Earlier in the year, the House 

passed its version of the law, i.e., the 

Whistleblower Protection Enhancement 

Act (H.R. 985). The House bill is 

more encompassing, as it includes 

protections for contractor employees 

and provides for federal jury trials, but 

each bill provides additional protection 

to federal employees who expose 

fraud, waste, and abuse. H.R. 985 

passed the House by a vote 

of 331-94. S. 274 passed the Senate 

by unanimous consent. Whistleblower 

protection is important to the work 

of IGs.

Another piece of legislation the OIG is 

following is the Telework Enhancement 

Act of 2007 (S. 1000) and its 

counterpart in the House, the Telework 

Improvements Act of 2007 (H.R. 

4106). The Senate version would make 

federal employees eligible for telework 

unless employers specifically show 

why they should not participate in the 

program. The House version would 

allow federal employees, with certain 

specified exceptions, to telework at 

least 20 percent of the hours worked 

in every two administrative workweeks. 

Both the Senate and House versions 

of the Bill require each federal 

agency to designate one full-time 

employee as a Telework Managing 

Officer to coordinate and promote 

teleworking in the agency. The Senate 

bill was approved by the U.S. Senate 

Homeland Security and Government 

Affairs Committee on November 14, 

2007. The legislation went through 

markup in the House on 

March 13, 2008.

The Office of Personnel Management 

reports that a survey it conducted 

shows that about 44 percent of federal 

agencies provide telework training to 

employees. The TVA OIG provides 

such training.

A fourth piece of legislation the OIG 

is following is the Moratorium on 

Uncontrolled Power Plants Act of 

2008. The bill places a moratorium on 

the issuance of permits, by either the 

EPA or the states, for new coal-fired 

electric generating units unless the 

permit requires the unit to use state-ofthe-art control technology to capture 

and permanently sequester carbon 

dioxide emissions.
54

appendix 1

INDEX OF REPORTING REQUIREMENTS UNDER THE IG ACT

REPORTING REQUIREMENT PAGE

Section 4(a)(2) Review of Legislation and Regulations 52-53

Section 5(a)(1) Significant Problems, Abuses, and Deficiencies 40-51

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

Abuses, and Deficiencies 40-51

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

on Which Corrective Action Has Not Been Completed Appendix 4

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

and Convictions That Have Resulted Appendix 5

Section 5(a)(5) Summary of Instances Where Information Was Refused None 

and 6(b)(2)

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

Section 5(a)(7) Summary of Particularly Significant Reports 40-51

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

Containing Questioned Costs Appendix 3

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

Containing Recommendations That Funds Be Put to Better Use Appendix 3

Section 5(a)(10) Summary of Unresolved Audit Reports Issued Prior to the 

Beginning of the Reporting Period For Which No Management 

Decision Had Been Made By the End of the Reporting Period None

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 None

Appendices
55

appendix 2

AUDIT REPORTS ISSUED

AUDIT REPORT FUNDS TO

NUMBER QUESTIONED UNSUPPORTED BE PUT TO

AND DATE TITLE COSTS COSTS BETTER USE

CONTRACT

2007-11166 Preaward Audit – 

10/02/2007 Request for Proposal (RFP) 51507 $28,700,000

2007-11182 Bicentennial Volunteers, Inc. $ 63,755 $ 44,855 

10/19/2007 

2007-11165-01 Preaward Audit – RFP 51507 9,747,000 

11/01/2007

2007-11165-02 Preaward Audit – RFP 51507 74,000 

11/15/2007

2007-11165 Preaward Audit – RFP 51507 11,669,000 

11/27/2007

2007-11165-03 Preaward Audit – RFP 51507 3,050,000 

12/13/2007

2007-11027 Pinkerton Government Services 267,676

01/17/2008 

2007-11189 Bechtel Power Corporation – 25,331

01/28/2008 Subcontract with Stone & Webster

2007-11340 Preaward Audit – RFP 00002007 47,750,000 

01/28/2008

2007-11189-01 Bechtel Power Corporation – 

02/15/2008 Subcontract with Stone & Webster 417,715

2007-11169 University of Tennessee 

03/12/2008 

2007-024C Review of TVA’s Contract Award Process 

03/31/2008
56

appendix 2 (continued)

AUDIT REPORTS ISSUED

AUDIT REPORT FUNDS TO

NUMBER QUESTIONED UNSUPPORTED BE PUT TO

AND DATE TITLE COSTS COSTS BETTER USE

FINANCIAL

2007-11203 Asset Retirement Obligation-Non-Nuclear – 

10/15/2007 SOX 404 Readiness Testing

2007-11161 Gas-Physical – 

11/02/2007 SOX 404 Readiness Testing

2007-11133 Review of FY 2007 Financial Statement Audit 

12/12/2007 

2007-11234 Financial Trading Program – 

12/14/2007 SOX 404 Readiness Testing

2007-11294 Perform Overhead//Benefits Allocation – 

12/20/2007 SOX 404 Readiness Testing

2007-11380 Maintain Rate Structure – 

01/28/2008 SOX 404 Readiness Testing

2008-11503 Lease/Leaseback Transactions – 

02/05/2008 SOX 404 Testing

2008-11507 Costing Inventory – 

02/26/2008 SOX 404 Testing

2008-11499 Commitments and Contingencies – 

02/28/2008 SOX 404 Testing

2008-11527 Manage Taxes – 

02/29/2008 SOX 404 Testing

2008-11535 Emissions Allowance-Transaction Execution – 

03/05/2008 SOX 404 Testing

2008-11534 Managing Debt – 

03/19/2008 SOX 404 Testing

2008-11570 U.S. Treasury Note-Issue and Redeem – 

03/19/2008 SOX 404 Testing
57

appendix 2 (continued)

AUDIT REPORTS ISSUED

AUDIT REPORT FUNDS TO

NUMBER QUESTIONED UNSUPPORTED BE PUT TO

AND DATE TITLE COSTS COSTS BETTER USE

INFORMATION TECHNOLOGY

2007-11191 Power Billing System – 

10/24/2007 SOX 404 Readiness Testing

2007-11275 Payroll Application – 

10/24/2007 SOX 404 Readiness Testing

2006-009T TVA Security Controls Related 

11/08/2007 to the Personnel Access 

Data System (PADS)

2007-11198 Review of Risk Assessment Performed 

11/20/2007 on Personally Identifiable Information

2007-11276 eWorkplace Application – 

12/03/2007 SOX 404 Readiness Testing

2007-11192 Backup and Restore – 

12/10/2007 SOX 404 Readiness Testing

2007-11348-01 IT Security Organizational Effectiveness 

03/26/2008 

2007-11348 Information Services 

03/27/2008 Organizational Effectiveness

2007-007T Pre-implementation Review 

03/31/2008 of TVA’s New Electronic Access System

OPERATIONAL 

2007-11330 Agreed-Upon Procedures10/26/2007 TVA FY 2007 Performance Measures

2007-030F Review of TVA Hospitality Expense 

11/06/2007 

2007-019F-01 Review of Reportable Environmental 

12/17/2007 Events at TVA Facilities

2007-11229

02/29/2008 New Executive Orientation

TOTAL: 38 $774,4771 $44,855 $100,990,0002

Note: On the OIG Web site, a summary or a full report can be found for some of the audits listed (http://www.oig.tva.gov).

1 Questioned costs include $417,715 for unreasonable or unnecessary expenditures not recoverable. 2 Funds to be put to better use include $28,700,000 identified in preaward audits of proposals for contracts that were not subsequently awarded.
58

appendix 3

TABLE I: AUDIT REPORTS ISSUED WITH QUESTIONED COSTS

 NUMBER OF QUESTIONED UNSUPPORTED

AUDIT REPORTS REPORTS COSTS COSTS

A. For which no management decision 1 $42,704 $0 

has been made by the commencement of the period

B. Which were issued during the reporting period 4 $774,477 $44,855

Subtotal (A+B) 5 $817,181 $44,855

C. For which a management decision was made 51 $817,181 $44,855 

during the reporting period

1. Dollar value of recommendations 4 $370,085 $19,855 

 agreed to by management

2. Dollar value of recommendations 2 $447,096 $25,000 

 not agreed to by management

D. For which no management decision 0 $0 $0 

has been made by the end of the reporting period

E. For which no management decision 

was made within six months of issuance 0 $0 $0

TABLE II: AUDIT REPORTS ISSUED WITH RECOMMENDATIONS THAT FUNDS BE PUT TO BETTER USE

 NUMBER OF FUNDS TO BE PUT

AUDIT REPORTS REPORTS TO BETTER USE

A. For which no management decision has been made 0 $0 

by the commencement of the period

B. Which were issued during the reporting period 6 $100,990,000

Subtotal (A+B) 6 $100,990,000

C. For which a management decision was made 

during the reporting period 62 $100,990,000

1. Dollar value of disallowed costs 5 $53,986,500

2. Dollar value of costs not disallowed 5 $47,003,500

D. For which no management decision has been 

made by the end of the reporting period 0 $0

E. For which no management decision was made 

within six months of issuance 0 $0

1.The total number of reports differs from the sum of C(1) and C(2) when the same report(s) contain both recommendations agreed to and others 

not agreed to by management.

2.The total number of reports differs from the sum of C(1) and C(2) when the same report(s) contain both costs disallowed and others not disallowed 

by management.
59

appendix 4

AUDIT REPORTS WITH CORRECTIVE ACTIONS PENDING

Final corrective actions stemming from two information technology audits are not complete; however, corrective action is 

underway and scheduled for completion in accordance with the current, revised milestones.

AUDIT REPORT 

NUMBER 

AND DATE DESCRIPTION

2005-039T eWorkplace Application, Access, and General Controls

01/30/2006 This report included recommendations to strengthen controls over the time reporting system. 

Weaknesses were identified in the areas of processing controls, direct data changes, logical 

access controls, change management, and backup and contingency planning. TVA management 

has completed action for all but two recommendations. TVA management is targeting 

September 30, 2008 for completion of remaining actions.

2006-035T Assessing TVA’s Efforts to Protect Sensitive Information

09/21/2006 We identified four areas for improvement. Management agreed and is taking corrective action. 

The target completion date is September 30, 2008.

appendix 5

INVESTIGATIVE REFERRALS AND PROSECUTIVE RESULTS1

REFERRALS

Subjects Referred to U.S. Attorneys 19

Subjects Referred to State/Local Authorities 5

RESULTS2

Subject Indicted 4

Subjects Convicted 3

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

2.Results include referrals from prior periods. 
60

appendix 6

HIGHLIGHTS THIS SEMIANNUAL REPORT

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

2008 2007 2007 2006 2006

AUDITS

AUDITS IN PROGRESS

Carried Forward 35 36 16 201 24

Started 52 72 42 23 22 

Canceled (2) (7) (4) (1) (3) 

Completed (38) (66) (18) (26) (22) 

In Progress at End of Reporting Period 47 35 36 16 21

AUDIT RESULTS (Thousands) 

Questioned Costs $774 $4,635 $1,252 $1,411 $774 

Disallowed by TVA 370 3,324 1,429 782 1,122 

Recovered by TVA 3,339 1,274 695 793 1,641

Funds to Be Put to Better Use $100,990 $19 $8,913 $10,839 $700 

Agreed to by TVA 53,987 8,529 4,534 2,790 633 

Realized by TVA 53,987 948 3,603 2,287 740

OTHER AUDIT-RELATED PROJECTS 

Completed 6 17 12 11 11 

Cost Savings Identified/Realized (Thousands) $0 $0 $103 $0 $36

INVESTIGATIONS2

INVESTIGATION CASELOAD 

Opened 155 113 73 70 80

Closed 121 121 50 105 71

In Progress at End of Reporting Period 174 1401 1481 113 1481

INVESTIGATIVE RESULTS (Thousands) 

Recoveries $25,262 $27 $332 $643 $2,966 

Savings 4,137 575 88 1,039 1,625 

Fines/Penalties 206 1 10 .5 6

MANAGEMENT ACTIONS 

Disciplinary Actions Taken (# of Subjects) 9 8 4 6 9 

Counseling/Management Techniques Employed (# of Cases) 16 3 7 14 14

PROSECUTIVE ACTIVITIES (# of Subjects) 

Referred to U.S. Attorneys 19 5 6 3 5 

Indicted 4 6 2 1 3 

Convicted 3 2 2 1 3

INSPECTIONS

Completed 8 16 7 20 14 

Cost Savings Identified/Realized (Thousands) $0 $15 $15 $0 $0

1 Adjusted from previous semiannual report.

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

62

appendix 8

Upper Bear Creek

Little Bear Creek

Cedar Creek

Browns Ferry

Nuclear Plant

Tims Ford Dam

Widows Creek

Fossil Plant

Sequoyah Nuclear Plant

Chickamauga Dam & Lock

Raccoon

Mountain

Pumped

Storage

Ocoee #1

Watts Bar

Dam & Lock

Ocoee #2

Ocoee #3 Nottely

Chatuge

Blue Ridge

Apalachia Hiwassee

Fontana

Tellico

Ft. Loudoun Dam & Lock

Watts Bar Nuclear Plant

Kingston

Fossil 

Plant

Melton

Hill Lock

& Dam

Norris

Doakes

Creek

Cherokee

Douglas Bull Run Nolichucky

Fossil Plant

Normandy

Great Falls

Johnsonville

Fossil Plant & 

Combustion Turbine

Pickwick Landing Dam & Lock

Wilson

Dam

& Lock

Wheeler Dam

& Lock

Guntersville

Dam & Lock

Ft. Patrick Henry

Boone

Clear Creek

Beaver Creek

Wilbur

Watauga

South 

Holston

John Sevier Fossil Plant

& Dam

Bear Creek

Paradise

Fossil Plant

Lagoon Creek Combustion Turbine

Allen Fossil Plant, 

Combustion Turbines, & Methane Facility

Gallatin Fossil Plant

&Combustion Turbine

Cumberland

Fossil Plant

Shawnee Fossil Plant

Kentucky

Dam & Lock

Sycamore

Beech

Lost Creek Pine

Dogwood

Pin Oak

Cedar

Redbud

Nickajack Dam & Lock

Kemper Combustion Turbine

Colbert Fossil Plant & Combustion Turbine

Caledonia Combustion Turbine

Marshall Combustion Turbine

Gleason Combustion Turbine

NORTH

CAROLINA

TENNESSEE

MISSISSIPPI

ALABAMA

GEORGIA

KENTUCKY

VIRGINIA

AR.

MISSOURI

IL.

SOUTH

CAROLINA

W . V .

TVA Watershed

Water

State Line

Power Service Area

TVA Hydroelectric Dam

TVA Non-Power Dam

TVA Coal-Fired Plant

June 2006

mi.

N 0 20 40 60

LEGEND

Green Power Switch® Solar Site

Green Power Switch® Methane Site

TVA Nuclear Plant 

TVA Combustion Turbine Plant 

Green Power Switch® Wind Site

TVA Economic Development Office 

TVA Customer Service Office

TVA Pumped-Storage Plant 

TENNESSEE VALLEY REGION MAP
63

TENNESSEE VALLEY AUTHORITY 

OFFICE OF THE INSPECTOR GENERAL

400 West Summit Hill Drive 

Knoxville, Tennessee 37902 

oig.tva.gov

We invite you to take a tour of our newly updated Web site at oig.tva.gov. 

Our new video sheds light on fraud. A relatively new addition to the site is 

an automatic notification system for our audits and inspections, and other 

information placed on our Web page. You’ll also find a news release section 

with the latest information released to the media.

Also, check out the latest edition of the OIG Connection, our e-publication 

to TVA employees filled with interesting information about our staff, tidbits 

on fraud, and an insightful look into how the work we do every day impacts 

TVA stakeholders.

Check us out at oig.tva.gov
TENNESSEE VALLEY AUTHORITY 

OFFICE OF THE INSPECTOR GENERAL

400 West Summit Hill Drive 

Knoxville, Tennessee 37902 

oig.tva.gov