Office of the Inspector General

Semiannual Report

October 1, 2002 ~ March 31, 2003

2003
The Office of the Inspector General

(OIG) is an independent organization

charged with reporting to the

Tennessee Valley Authority (TVA)

Board of Directors and Congress on

the overall efficiency, effectiveness,

and economy of TVA programs and

operations. The OIG meets this

responsibility by conducting audits,

investigations, and other reviews.

The OIG focuses on the prevention,

identification, and elimination of

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

and (3) inefficiencies in TVA programs

and operations.

If you want to report any matter

involving TVA programs, operations,

or employees, you should call the

OIG Hotline or write the Inspector

General’s office at the address or

number listed on the back cover.
Tennessee Valley Authority, 400 West Summit Hill Drive, Knoxville, Tennessee 37902-1401

G. Donald Hickman

Inspector General (Acting)

April 30, 2003

TO THE TVA BOARD OF DIRECTORS AND THE UNITED STATES CONGRESS

I am pleased to submit this semiannual report on the accomplishments of the OIG for the six month period ending March 31, 2003. 

I have been honored to serve as the Acting Inspector General since January 2002. The OIG staff and I now look

forward to serving with a recent presidentially nominated Inspector General. As we have always done, the management team and I will assist the Inspector General in providing leadership, coordination, and oversight to promote economy, efficiency, and effectiveness in all TVA programs and operations. 

Our products for the six-month period are summarized throughout this report. They have been well received and

have contributed in many ways toward helping TVA achieve its goals. I also want to point out some of the noteworthy OIG accomplishments during the past 15 months of which I am especially proud. 

I remain sensitive of the need for TVA to conduct its business in an open and forthright manner that instills confidence in Congress, the Administration, investors, and TVA customers and ratepayers. Working toward this end, I

assisted the TVA Board in strengthening corporate accountability, enhancing financial disclosure, and increasing

external auditor independence. The OIG agreed to assume technical management of the external financial audit

contract in 2003. Previously, this role was performed by the TVA Chief Financial Officer (CFO). Additionally,

TVA's Board and CFO will certify the financial statements and related information in TVA's Annual Report, as well

as all future financial statements and related information. The Information Statement, which is TVA's disclosure

report to the public financial markets, will be similarly certified. The certification process will include signed certifications by all TVA Officers and Business Managers for the information they provide for these reports.

At the same time, the OIG consolidated its financial audit resources into one department to assure an adequate

number of Certified Public Accountant-certified auditors were available to conduct the annual audit of the work of

TVA’s external auditor (PricewaterhouseCoopers [PWC]). While assuring that PWC’s financial audit work complies

with government auditing standards, this department will also conduct reviews of TVA's financial systems, business decisions, operations, and contracts. 
TO THE TVA BOARD OF DIRECTORS AND THE UNITED STATES CONGRESS

Page 2

April 30, 2003

We will continue to assist TVA in upgrading its computer security infrastructure. Working with TVA's

Information Services organization and an outside consultant, we agreed to establish the Information

Technology Security Assessment Team. To date, the team has identified critical risk and the current

status of information technology security for critical TVA computer systems and the steps necessary

to protect the systems from cyber-attack. 

The Homeland Security Act of 2002 provided law enforcement authority for TVA OIG special agents

under guidelines to be issued by the Department of Justice. Our special agents received comprehensive federal law enforcement skills training at the beginning of their careers. However, in preparation

for this new status, we have undertaken an aggressive law enforcement skills refresher training program. The training included topics such as the rules of search and seizure, federal rules of criminal

procedure, arrest authority and techniques, defensive tactics, firearms training, and the use of nonlethal weapons. I believe this training will ensure that our special agents exercise this authority

responsibly and professionally.

Finally, I have worked to develop a solid framework for excellence and future improvement in OIG

operations. The management team and I created momentum to implement our strategic plan. We

focused on three key areas: (1) maintaining our integrity as an independent watchdog; (2) strengthening working relationships with our stakeholders; and (3) leveraging OIG resources to optimize productivity and results. 

I am pleased with the support I have received from OIG employees, the TVA Board, Congress, and

other stakeholders. I look forward to further serving these constituencies. 

Sincerely,

G. Donald Hickman
SEMIANNUAL REPORT / OCTOBER 1, 2002 ∼ MARCH 31, 2003TABLE OF CONTENTS

Executive Summary 1

TVA Profile 2

Office of the Inspector General 3

Special Features 6

Audits 8

Investigations 13

Legislation and Regulations 18

Appendices 20

Appendix 1 Index of Reporting Requirements Under the Inspector General Act 21

Appendix 2 Audit Reports Issued 22

Appendix 3 Audit Reports Issued With Questioned Costs and Recommendations for Better Use of Funds 25

Appendix 4 Audit Reports With Corrective Actions Pending 27

Appendix 5 Investigative Referrals and Prosecutive Results 29

Highlights 30
TVA / OFFICE OF THE INSPECTOR GENERAL 1 EXECUTIVE SUMMARY

During this reporting period, we 

continued our efforts to support TVA

through quality audits, investigations, and

other projects. 

Our efforts helped TVA management

avoid unnecessary costs, recover funds,

and correct identified weaknesses.

Also, in many instances, our efforts

helped confirm that many programs were

working effectively. In total, we identified

over $37 million in recoveries, fines/

penalties, potential savings, questioned

costs, or funds which could be put to

better use. A large portion of these

funds resulted from our preaward audits,

where we identified potential savings for

management to use in negotiating 

contracts. 

We completed 34 audits and 

11 nonaudit service engagements during

this reporting period. These reviews

included (1) preaward and postaward

contract audits, (2) other financial-related

audits, (3) information technology

reviews, and (4) performance reviews of

TVA operations. Corrective actions in

response to our audits included 

monetary recoveries, process improvements, and security enhancements. 

We closed 75 investigations, including

multi-agency task force projects, which

led to (1) over $1.3 million in recoveries,

projected savings, and fines/penalties;

(2) administrative or disciplinary action

against 16 individuals; and (3) other 

corrective action (counseling and 

management techniques) in 16 cases.

Matters we investigated included

employee misconduct, contract issues,

health care fraud, and environmental

crimes. Our investigative activities led to

six subjects indicted and four convicted.
2 SEMIANNUAL REPORT / OCTOBER 1, 2002 ∼ MARCH 31, 2003T VA P R O F I L E

TVA is a federal corporation established

in 1933 to provide flood control, navigation, and electric power in the Tennessee

Valley region. Today, TVA is the nation’s

largest public power company and a

regional development agency that supplies low-cost reliable power, supports a

thriving river system, and stimulates sustainable economic development in a

service area that covers 80,000 square

miles in the Southeastern United States,

including almost all of Tennessee and

parts of Mississippi, Kentucky, Alabama,

Georgia, North Carolina, and Virginia.

TVA generates power at 11 coal-burning

plants, 3 nuclear plants, 29 hydroelectric

dams, 1 pumped storage plant, and

6 combustion turbine sites. TVA also

produces energy from three renewable

sources––sun, wind, and methane gas

from waste––and is building the first

United States flow battery energy storage system that can store electricity

available during periods of lower power

demand for use during times of peak

demand. TVA provides electric power to

158 local power distributors, 54 large

industries, and 8 federal agencies

through a network of 17,000 miles of

transmission lines. TVA also sells power

to 12 surrounding utilities on the interchange market.

TVA manages the nation’s fifth largest

river system. TVA dams are part of a

totally integrated resource management

system where each dam operates in

relationship to the others for multiple purposes and public benefits. These

include navigation, flood control, power

supply, land use, water quality, and

recreation.

TVA contributes to the Valley economy,

chiefly by keeping power rates competitive, which helps attract and retain industries that provide quality jobs in the

region. TVA also helps communities promote sustainable economic development

by providing assistance in job creation

and retention and productivity improvements via capital investment, support of

business incubators, specialized technical services and advice, and recruitment

for new and existing industries.

The TVA power system pays its own way

by selling electricity and issuing bonds.

The system does not use tax dollars. In

addition, TVA no longer receives congressional appropriations to help fund its

navigation, flood control, environmental

research, and land management activities. These programs are funded by

power revenues.

TVA is governed by a three-member

Board of Directors appointed by the

President and confirmed by the Senate.

Glenn L. McCullough, Jr., is Chairman,

and Skila Harris and Bill Baxter are

Directors.
Office Authority

TVA’s OIG was created by the TVA Board

of Directors in October 1985. It became

statutory under the Inspector General

Act Amendments of 1988. Those

amendments established OIGs at TVA

and 32 other agencies with Inspectors

General appointed by the agency heads.

The authority to appoint the TVA

Inspector General was transferred to the

President in November 2000 by Public

Law 106–422.

The Inspector General is responsible for

conducting audits and investigations

relating to TVA programs and operations,

while keeping the TVA Board and

Congress fully and currently informed

about problems and deficiencies relating

to the administration of TVA programs

and operations. TVA’s Inspector General

is independent and subject only to the

general supervision of the TVA Board of

Directors. The Inspector General’s

authority includes conducting any audits

or investigations the Inspector General

deems necessary or desirable, issuing

subpoenas, administering oaths, and

granting confidentiality to individuals who

provide information to the OIG.

Organization

The OIG consists of two major operational units––Audits and Investigations.

OIG Audits consists of four departments.

One is devoted to both preaward and

postaward contract-related audits. The

other three focus on (1) performance,

(2) financial, and (3) information 

technology-related issues. 

OIG Investigations consists of three

departments. One focuses on identifying

and investigating potential misconduct

and integrity issues. The others focus on

(1) contract fraud and misfeasance and

(2) computer crimes, computer forensic

support during investigations, and health

care fraud.

OFFICE OF THE INSPECTOR GENERAL

TVA / OFFICE OF THE INSPECTOR GENERAL 3
Strategic Plan

We continued our efforts to meet our five

strategic objectives: (1) cultivating and

retaining a highly skilled, innovative, and

motivated workforce; (2) enhancing 

communications with stakeholders and

delivering services that meet their needs;

(3) leveraging OIG resources to optimize

productivity and results; (4) focusing on

areas of high risk to TVA; and (5) envisioning change affecting TVA and identifying effective solutions. We have

concentrated during this period on the

areas of improving stakeholder relations,

developing our staff, and focusing our

resources on areas that contribute to

TVA’s success.

Activities that contributed to accomplishments within these strategic areas

included (1) regularly apprising the TVA

Board of Directors of significant audit

and investigative results; (2) frequent

meetings with TVA managers to discuss

OIG plans and results and to solicit feedback; (3) developing and implementing a

training program for our special agents

that meets the requirements for federal

law enforcement authority; (4) continuing

developmental training of our Level I

auditors as well as offering our more

senior auditors opportunities to maintain

existing skills and develop new ones;

(5) implementing a skills improvement

program for our management assistant

staff; (6) holding the third annual OIG

training symposium to update staff on

various topics; and (7) emphasizing

scoping, planning, and initial analysis

during both audit and investigative 

projects.

In fiscal year 2003, we are again measuring our performance against goals set for

three weighted measures. These 

measures––productivity, timeliness, and

results––were selected to encourage 

better planning, to minimize time spent

on unproductive projects, and to improve

timeliness and resource utilization.

Staffing and Budget

The OIG’s primary offices are in the TVA

headquarters in Knoxville, Tennessee.

The OIG also has a satellite office in

Chattanooga, Tennessee, and completed

plans for opening a satellite office at the

Browns Ferry Nuclear Plant in Alabama

in May 2003.

The OIG’s fiscal year 2003 budget is

$8.5 million with a budgeted headcount

of 90 employees.

OFFICE OF THE INSPECTOR GENERAL

4 SEMIANNUAL REPORT / OCTOBER 1, 2002 ∼ MARCH 31, 2003
OFFICE OF THE INSPECTOR GENERAL

TVA / OFFICE OF THE INSPECTOR GENERAL 5

Inspector General

Legal Counsel

Deputy Assistant

Inspector General

(Audit and Support)

Assistant Inspector

General (Audits)

Human Resource

Manager

Assistant Inspector

General (Investigations)

Contract Audits

Financial Audits

Operational Audits

Information Technology

Audits 

Information Technology

Investigations 

Internal Investigations 

Financial Investigations 

Contacts

Inspector General (Acting)

G. Donald Hickman . . . . . . . . . .(865) 632-4120

Legal Counsel

Richard P. Levi . . . . . . . . . . . . . .(865) 632-6197

Assistant Inspector General (Audits)

Ben R. Wagner . . . . . . . . . . . . . .(865) 632-6309

Human Resource Manager

Kay T. Myers . . . . . . . . . . . . . . . .(865) 632-7718

Assistant Inspector General (Investigations)

G. Donald Hickman . . . . . . . . . .(865) 632-7720

Deputy Assistant Inspector General (Audit

and Support)

Lewis M. Ogles . . . . . . . . . . . . . .(865) 632-6180

OIG Media Relations

Anne B. Ferrell . . . . . . . . . . . . . .(865) 632-3505

Contract Audits Manager

David P. Wheeler . . . . . . . . . . . .(865) 632-3437

Financial Audits Manager

Jill M. Matthews . . . . . . . . . . . . .(865) 632-2272

Information Technology Audits Manager

Deborah M. Thornton . . . . . . . . .(865) 632-6184

Operational Audits Manager

Paul E. Ivie . . . . . . . . . . . . . . . . .(865) 632-2272

Financial Investigations Manager

Ron W. Taylor . . . . . . . . . . . . . . .(865) 632-3979

Information Technology Investigations

Manager

Curtis D. Phillips . . . . . . . . . . . . .(865) 632-2584

Internal Investigations Manager

C. Dale Hamilton . . . . . . . . . . . .(865) 632-3956

Hotline to report fraud, waste, and abuse: 1-800-323-3835

OIG website: http://oig.tva.gov
SPECIAL FEATURES

6 SEMIANNUAL REPORT / OCTOBER 1, 2002 ∼ MARCH 31, 2003

New Investigative Training

Program Implemented

Section 812 of the Homeland Security

Act of 2002 provides for law enforcement authority for TVA OIG special

agents under guidelines to be issued by

the Department of Justice (DOJ). That

Act states the guidelines shall include, at

a minimum, the operational and training

requirements contained in the existing

memoranda of understanding between

DOJ and various Inspectors General

offices which currently govern their 

exercise of law enforcement authority.

Although OIG special agents previously

have received federal law enforcement

training, to ensure a smooth transition,

we developed and initiated an intensive

law enforcement skills refresher training

(LESRT) program during this reporting

period. In addition, we are reviewing

current OIG investigation policies and

procedures and, where necessary, 

developing new policies and procedures

relating to the exercise of full law

enforcement authority. We plan to 

complete the refresher training and the

update of our policies prior to the 

effective date of Section 812 of the

Homeland Security Act.

The LESRT program is part of a more

comprehensive OIG special agent training program being designed to meet all

applicable training requirements, including those set forth in the Quality

Standards for Investigations, issued by the

President's and Executive Councils on

Integrity and Efficiency in the pending

DOJ law enforcement guidelines. The

comprehensive program will ensure

agents meet all defined training requirements throughout their career, starting

with the basic/entry level skills requirements and continuing to the advanced

professional level skills requirements. 

Firearms and defensive tactics instructors under the

LESRT program (from left to right): Mike Duncan and

Joe Boehr.

Team responsible for development of curriculum and teaching the

policies and procedures (from left to right): Sam Allen, Kay Myers,

and James Farr.
SPECIAL FEATURES

TVA / OFFICE OF THE INSPECTOR GENERAL 7

Information Technology

Security Assessment

Project

Information security issues continue to

be of critical importance to TVA, as well

as to other companies and federal 

agencies. Over the past three years,

Congress has passed legislation, such

as the Federal Information Security

Management Act, which requires federal

agencies like TVA to review and improve

security of its information and report

annually on its action plans for improvements. This same legislation also

requires OIGs to independently evaluate

and report on agency compliance with

the legislation.

In response to the legislation, TVA

launched a series of initiatives to upgrade

its security infrastructure. TVA has 

elevated the importance of information

security issues within its business 

executive committee and established the

Information Technology Security

Assessment (ITSA) project team. The

team, utilizing resources from TVA's

Information Services, the OIG, and 

outside consultants, was charged with

identifying (1) critical risks and the current

status of information technology (IT)

security for critical TVA systems and

(2) steps necessary to protect TVA 

systems from cyber-attack. 

Utilizing guidance provided by the

National Institute of Science and

Technology and industry best practices,

the ITSA project team is employing the

following approach to accomplish its

mission. 

 Identify systems critical to TVA core

operations.

 Identify risks and the current status of

IT security for major TVA applications

and general support systems through

self-assessments.

 Identify vulnerabilities on TVA 

networks and critical systems by,

among other things, simulating

attacks on TVA's network.

 Establish action plans and targets for

improvements as vulnerabilities are

identified. 

To date, the ITSA project team has

reported the results of 23 selfassessments and 2 vulnerability assessments to management. The team is 

currently working on internal assessments of the TVA IT security infrastructure through risk and vulnerability

analyses. As critical vulnerabilities are

identified, TVA management is taking

corrective action.

The ITSA project team is working toward

completing its mission by June 30, 2003,

providing TVA management with 

information critical to strengthening

TVA's IT security infrastructure today and

in the future.
AUDITS

8 SEMIANNUAL REPORT / OCTOBER 1, 2002 ∼ MARCH 31, 2003

Summary of

Representative Audits

Audits are initiated from (1) the OIG

annual workplan, (2) additional issues

identified by the OIG subsequent to the

annual workplan, (3) issues identified by

cooperative efforts with TVA management, and (4) concerns raised by TVA

management or other stakeholders.

During this reporting period, we 

completed 34 audits which identified

over $1.1 million in questioned costs and

almost $34.8 million in funds which could

be put to better use (including $850,000

for proposals that were not awarded).

We also identified numerous opportunities for TVA to improve program operations. Our audits included (1) preaward

and postaward contract audits, (2) other

financial-related audits, (3) IT reviews,

and (4) operational audits. 

PREAWARD CONTRACT AUDITS 

To support TVA management in negotiating procurement actions, we completed

seven preaward audits that identified

$34.8 million in potential savings opportunities. During this reporting period,

TVA management successfully 

negotiated $38.4 million in savings as a

result of audits issued during this and

previous reporting periods. Highlights of

the more significant preaward audits 

follow.

 We reviewed a contractor's proposal

for a $1.5 billion, multi-year contract

to provide flue gas desulfurization

equipment and engineering services

and determined (1) the contractor’s

pricing methodology for a fixed price,

baseline project was more favorable

than its proposed pricing for cost

reimbursable work and (2) labor 

burdens included cost allowances

generally not paid by TVA. TVA 

management subsequently 

negotiated reduced labor burdens

and fees that could save TVA about 

$33.4 million.

 We reviewed two contractors’ proposals to provide coal handling facilities and engineering services for

TVA's fossil plants under a planned

$50 million, five-year contract. We

determined one contractor's proposal

was fairly stated, but the second

company's proposal was overstated

by about $850,000 as a result of

administrative costs associated with

handling subcontracts. TVA management subsequently negotiated a 

contract with the first contractor.

 We reviewed the salary burden proposals submitted by two competing

contractors to provide staff augmentation services for the Browns Ferry

Unit 1 recovery. We found the 

burden rates proposed by one 

contractor included overstated taxes,

insurance, and overhead costs.

Based on our suggestions, TVA 

management negotiated reduced

rates that should save TVA up to

$408,000 over the five-year contract
AUDITS

TVA / OFFICE OF THE INSPECTOR GENERAL 9

period. We also found the overall

burden rate proposed by the other

contractor was not materially 

misstated.

 We determined a price increase

requested by a contractor to cover

increased freight costs for providing

ammonia for TVA's selective catalytic

reduction systems was not supported. We estimated TVA would

save $97,000 annually by disallowing

the price increase. We also suggested TVA management determine if

TVA should actively manage its price

risk on this product similar to the

method used for natural gas.

Management has developed a supply

chain strategy and is planning to 

re-compete the ammonia supply.

CONTRACT COMPLIANCE

During this reporting period, we completed eight contract compliance audits

that identified about $1.1 million in 

ineligible and unsupported costs.

Management generally agreed with our

findings and has taken or plans to take

corrective action. Highlights of these

audits follow.

 We determined a contractor had

overbilled TVA an estimated

$215,000 by billing at prices 

(1) different from the contract price

list and (2) higher than the "most

favored customer prices" for nonprice list items. The contractor

agreed with the price list overbilling

and remitted a check to TVA for

$81,175. TVA management and the

contractor are negotiating a settlement of the remaining overbilled

amount.

 We determined a contractor had not

paid TVA $528,494 in royalties that

resulted from the use of Advanced

Static VAR Compensator technology.

During our audit, the contractor paid

$146,874 of the amount due. TVA

management agreed with our finding

and plans to recover the remaining

$381,620.

 We questioned $297,166 of

$597,056 in claims and price adjustments submitted by a contractor for

work being performed at the

Sequoyah Nuclear Plant (SQN)

because the contractor’s accounting

records did not support them. TVA

management agreed with our findings

and authorized the contractor to

invoice only the amounts that could

be supported.

 We reviewed costs billed to TVA by

two contractors for providing 

prescription drug benefit management services for TVA. We found

that costs billed were in accordance

with the contract terms except for

(1) about $40,000 related to sales tax

overbillings under one contract and

(2) about $2,000 related to the application of administrative fees to some

claim adjustments under the other
AUDITS

10 SEMIANNUAL REPORT / OCTOBER 1, 2002 ∼ MARCH 31, 2003

contract. TVA management agreed

with our findings and plans to recover

the overbilled amounts.

 We determined that about 47 percent

of the amount billed by a contractor

for providing solid waste disposal

was for facilities or services not

included in the contract price 

schedule. In addition, the contractor

overbilled about $42,000 in those

instances where billings could be

compared to the contract price

schedule. The contractor reimbursed

TVA for the overbilled amount, and

the contract was revised to incorporate prices for all TVA locations/ 

facilities and services.

FINANCIAL-RELATED REVIEWS

During this reporting period, we 

completed five financial-related audits

and performed Inspector General

agreed-upon procedures on TVA 

financial data submitted for inclusion in

the United States government-wide

financial statements. Highlights of these

audits follow.

 We determined (1) TVA's short-term

debt administration practices 

provided reasonable assurance that

TVA received competitive arrangements, (2) TVA appropriately 

accounted for short-term debt and

the associated interest expense, and

(3) TVA received interest rates comparable to those received by others

with similar credit quality but at a

higher fee. TVA is taking action to

lower the fee.

 We determined that manual transfers

of costs from operations and 

maintenance expense to capital 

projects for one TVA organization

during a 22–month period were 

properly authorized and classified in

accordance with TVA policy.

 We concluded additions to completed plant during a 19-month 

period were properly authorized and

that costs were properly accumulated

and classified in accordance with TVA

policies in all material respects. 

 We determined TVA's tax-equivalent

payments for fiscal year 2002 were

calculated and distributed in accordance with relevant TVA Act requirements in all material respects. In

addition, we found controls were in

place and functioning to ensure data

reliability for the calculations.

 We identified control weaknesses in

TVA's purchasing card program 

related to (1) transactions exceeding

transaction limits, (2) sharing of cards,

(3) record retention, and (4) travel and

travel-related expenses. TVA 

management is taking appropriate

corrective action.
AUDITS

TVA / OFFICE OF THE INSPECTOR GENERAL 11

FISCAL YEAR 2002 FINANCIAL

STATEMENT AUDIT

We reviewed TVA's fiscal year 2002

financial statement audit by (1) assessing

the external auditor's methodology, 

evidence, and documentation; 

(2) performing supplemental tests of

accounting records and comparing the

results to those of the external auditor;

and (3) examining the independence and

qualifications of the external auditor. We

determined the financial statement audit

was performed in accordance with

Government Auditing Standards in all

material respects.

INFORMATION TECHNOLOGY

Power Billing System

TVA's Power Billing System electronically

generates power sales invoices and

related general ledger transactions for

over $6 billion in annual revenue from

sales of electricity. We found (1) existing 

processing controls provide reasonable

assurance that invoices and related 

general ledger transactions are accurate

and (2) vendor software purchase contracts provide for appropriate support

and protection of system assets.

However, we identified control weaknesses pertaining to physical and logical

security, program changes, and contingency planning. TVA is taking appropriate corrective action. 

Nuclear Access Control Systems

As part of our audit plan, we reviewed

nuclear facility access control systems at

the Sequoyah and Watts Bar Nuclear

Plants. Both plants have taken 

numerous proactive steps to enhance

security for these systems, and we found

no noncompliance issues with laws or

Nuclear Regulatory Commission requirements. However, we made recommendations for improving logical and physical

security and contingency plans. TVA is

taking appropriate corrective action.

SURPLUS PROPERTY 

REDEPLOYMENT

We reviewed TVA's participation in the

General Services Administration's (GSA)

surplus property program under which

TVA acquires, at no cost, property surplused by other government agencies.

We found TVA (1) did not add the value

of certain property to its appropriation 

balance as required by the TVA Act,

(2) sometimes used surplus property

inconsistently with program redeployment rules which prohibit acquisition of

property with the intent to sell or trade,

(3) did not adequately track the status of

property GSA agreed to provide or the

final disposition of property received, and

(4) did not have an adequate agreement

with a contractor being used to obtain

GSA surplus property. TVA management

plans to take appropriate corrective

action.
AUDITS

12 SEMIANNUAL REPORT / OCTOBER 1, 2002 ∼ MARCH 31, 2003

ENERGY TRADING DECISION 

SUPPORT MODEL

We assessed the reliability and integrity

of four critical fossil power data elements

used in TVA's energy trading decision

support model––heat rate, equivalent

forced outage rate (EFOR), net dependable capacity, and the outage schedule.

We determined TVA could improve the

model by (1) updating outage schedule

information more frequently and (2) using

more precise or specific data that is

readily available for each unit's heat rate,

EFOR, and capacity. TVA management

agreed with our findings and recommendations and plans to take appropriate

corrective actions.

NUCLEAR SECURITY PERSONNEL

QUALIFICATIONS

We determined that qualification requirements for security personnel provided

under a contract for security services at

TVA nuclear plants were met in all 

material respects, except that TVA 

security officials did not certify the training and qualification records at one plant

in a timely manner. We also identified an

opportunity for TVA to strengthen its

background investigation process. TVA

took appropriate corrective action.

CONCERNS RESOLUTION PROGRAM

We performed three reviews of the TVA

Nuclear (TVAN) Concerns Resolution

Program––an overall assessment of

TVA's program, an assessment of SQN’s

program, and an assessment of the

overall program with respect to nuclear

security personnel. We determined that:

 The fundamental mission of TVA's

Concerns Resolution Program was

being met. We assessed the program's effectiveness by (1) randomly

surveying 275 TVAN and contractor

employees' willingness to report

nuclear safety and quality issues,

(2) reviewing closed case files, and

(3) tracking the number of allegations

recorded by the Nuclear Regulatory

Commission since 1993.

 The SQN workforce (both TVA and

contractor employees) was willing to

report nuclear safety and quality

issues through some avenue and had

confidence in TVA's Concerns

Resolution Program. Our opinion

was based on a survey of 174 SQN

and 75 contractor employees. 

 Virtually all employees of TVA's 

contracted nuclear security workforce

would report a nuclear safety or 

quality problem through some

avenue. Our assessment was based

on a survey of 76 of the 311 

contractor security employees who

had unescorted access to TVA's

nuclear plants as of August 13, 2002.

In some areas, the survey results 

indicated substantive improvement

over the results of a prior survey of

the security workforce. However,

results continued to be less favorable

than the survey results from the overall TVAN assessment.
INVESTIGATIONS

TVA / OFFICE OF THE INSPECTOR GENERAL 13

Summary of

Representative

Investigations

During the last 6 months, we closed 75

investigations, including allegations and

concerns received from ratepayers, TVA

managers and employees, governmental

and congressional staffs, and OIG 

auditors. Our investigations, including

task force projects, resulted in

(1) $1,301,147 in recoveries, projected

savings, and fines/penalties; (2) six subjects indicted; and (3) four subjects convicted. Representative investigations are

highlighted below.

WORKERS’ COMPENSATION FRAUD

We determined that a former TVA

employee receiving workers' compensation benefits failed to disclose pertinent

earnings information about his employment as a construction company 

inspector.

After reviewing information received by

the TVA OIG, the Office of Workers'

Compensation Programs (OWCP) 

re-rated the individual's earnings ability,

reducing his monthly OWCP benefits and

saving TVA a projected total of $365,976

over the course of the individual's lifetime. In addition, based on our findings,

OWCP declared it had previously overpaid the individual $46,699.

INTERNATIONAL CONTRACTORS––

INFORMATION SECURITY ISSUES

We investigated allegations related to

TVA contracting with a Pakistan-based

company, post-September 11, 2001, to

assist in transmission-related system

impact studies. These studies included

information only available to TVA 

employees on a need-to-know basis.

TVA initially declined to contract with the

company; however, the company

opened an office in Canada, and the

contract was issued.

Our investigation revealed another contractor company, based in New York

City, received sensitive documents from

TVA for CAD (computer-aided design)

conversion, then electronically forwarded

the documents to India, where the work

was actually performed.

Although we found no evidence of 

security breaches or misconduct in the

administration of these contracts, 

security concerns remained. Among

these concerns were difficulties in performing background checks on the contractors' employees and the lack of

control over sensitive information sent

abroad.

We apprised TVA management of our

findings in these two cases. As a result,

the Senior Vice President, Procurement,

advised that TVA implemented new contract language to address additional

security requirements for TVA contractor

personnel, and guidelines are being
INVESTIGATIONS

14 SEMIANNUAL REPORT / OCTOBER 1, 2002 ∼ MARCH 31, 2003

developed for contracting with foreign

companies and protecting information.

In addition, TVA Police, which carries the

responsibility for performing most TVA

employment background investigations,

has also been asked to review its 

personnel security policy regarding contractor personnel.

JOINT TERRORISM TASK FORCE

Because of TVA's critical energy-related

infrastructure, the OIG began participating during this reporting period on the

Joint Terrorism Task Force (JTTF) led by

the Federal Bureau of Investigation (FBI)

Knoxville Field Division.

The FBI defines JTTF as "teams of state

and local law enforcement officers, FBI

[a]gents, and other federal agents and

personnel who work shoulder-toshoulder to investigate and prevent acts

of terrorism. These task forces are

important 'force multipliers' in the war on

terror, pooling multi-agency expertise and

ensuring the timely collection and sharing

of intelligence absolutely critical to prevention efforts. Although the first JTTF

came into being in 1980, the total 

number of task forces has nearly 

doubled since September 11, 2001.

Today, there are 66 JTTF, including 1 in

each of the FBI's 56 main field offices

and 10 in smaller offices. More than

2,300 personnel work on these task

forces nationwide."

TOOL MANAGEMENT PROGRAM––

CRIMINAL INVESTIGATION RESULTS

Our investigation of the theft of tools

from TVA's Tool Management Program

has resulted in five convictions and is

now complete. 

The last conviction involved a TVA contractor employee who pled guilty in 

federal court to a charge of making a

false statement to the OIG regarding his

knowledge and participation in the theft

of TVA tools and equipment. The 

individual subsequently was sentenced

to two years' probation, 100 hours' community service, and $5,100 in fines and

assessments.

Additional convictions included two other

contractor managers, a private business

owner, and a brother of one of the contractor managers. They were convicted

in prior reporting periods of various

offenses, including conspiracy, making

false statements, and theft involving

approximately $1 million in stolen TVA

property. TVA has recovered the loss

from the contractor and restitution from

the defendants.

EMPLOYEE ISSUES

Differing Views

We investigated an allegation that a

Fossil Power Group (FPG) manager

harassed an employee because he

believed the employee had raised an

issue to the OIG. We found the manager

(1) made statements to the employee

which, in our opinion, were inappropriate
INVESTIGATIONS

TVA / OFFICE OF THE INSPECTOR GENERAL 15

and intended to discourage the 

employee from raising issues to the OIG

and (2) sent an e-mail which was not

consistent with TVA's policy on the

expression of differing views.

The manager received a verbal warning,

and FPG management (1) discussed

TVA’s differing views policy with the

involved fossil plant's management to

ensure no misunderstanding of requirements or words/actions could create a

chilling effect to employees voicing 

concerns and (2) reinforced TVA's and

the plant's commitment to this policy

through a site-wide communiqué.

Harassing and Inappropriate E-Mail

Our investigation found that a contractor

employee sent harassing e-mails to a

coworker and the coworker's husband.

The employee initially provided false

information regarding her involvement,

but subsequently admitted sending the

e-mails. In addition, we determined the

recipient of the harassing e-mails 

forwarded inappropriate e-mails to others

at the work site in violation of TVA policy,

and we identified a computer security

weakness. Management took corrective

action, including issuing warnings to the

two contractor employees and taking

steps to correct the security weakness.

Falsified Documentation

We provided information that a TVA training instructor falsified students' survey

evaluations. The employee's pay-forperformance was linked to the results of

the evaluations. TVA management subsequently terminated the individual's

employment. In addition, another TVA

employee received a written warning for

collecting personal information regarding

the terminated employee's performance

and leave records.

Ethics Violation

We determined that a TVA employee,

who was personally and substantially

involved in matters related to a purchasing contract, violated ethics regulations

by accepting over 40 meals purchased

by the contractor for himself, or for himself and his wife. In some instances, the

meals were improperly invoiced to TVA

as well. The employee received a warning letter, was required to undergo ethics

training, and was required to reimburse

the contractor and TVA for the 

contractor-provided meals.

HEALTH CARE FRAUD TASK FORCE

We continued to support health care

fraud task forces and working groups

sponsored by United States Attorneys'

offices in Tennessee. The case below

reflects our involvement in the Eastern

District of Tennessee Health Care Fraud

Task Force. Participants on the task

force include investigative arms of 

federal, state, and local agencies, and

Blue Cross/Blue Shield of Tennessee's

(BCBST) Special Investigations Unit.
INVESTIGATIONS

16 SEMIANNUAL REPORT / OCTOBER 1, 2002 ∼ MARCH 31, 2003

Physician's Guilty Plea and

Sentencing

Previously, we reported a Knoxville,

Tennessee, physician and nurse were

named in a 57-count indictment, which

included charges of conspiracy, money

laundering, mail fraud, and health care

fraud.

During this reporting period, the physician pled guilty to five counts of the

indictment, charging him with money

laundering and defrauding Tenncare/

Medicaid, Medicare, TVA, and BCBST

benefits programs. (Charges against the

nurse were dismissed.)

The physician was sentenced to

15 months' imprisonment followed by

3 years' supervised release, and he was

ordered to pay restitution of $247,546 to

the defrauded benefits plans.

ENVIRONMENTAL CRIMES JOINT

TASK FORCE

We continued our participation in the

Environmental Crimes Joint Task Force

(ECJTF), which is comprised of members

from numerous federal and state 

agencies. ECJTF focuses enhanced law

enforcement resources against 

individuals and companies by applying

the most effective federal and state 

criminal and civil statutes. Highlights of

the task force's work reported during this

period include the following.

Illegal Disposal of Hazardous Waste

The ECJTF investigated a Sevierville,

Tennessee, metals treatment company

for mishandling and dumping hazardous

waste into the Little Pigeon River. In

January 2003, the company and its

president pled guilty to violating the

Clean Water Act. The company's president was fined $50,000; the company

was ordered to pay $100,000 restitution

each to the city of Sevierville and TVA

Police. This investigation also resulted in

the company spending an additional

$384,500 to correct deficiencies and

achieve environmental compliance.

INFORMATION TECHNOLOGY ISSUE

During a prior reporting period, we found

that one nuclear plant's "intranet"

(shared drives) contained easily 

accessible documents that displayed

personal employee information, including

performance reviews, development

plans, and social security numbers. We

expanded our review during this reporting period to TVA's other nuclear plants

and found a few instances where records

containing employee social security 

numbers were not being adequately 

protected. Management took 

appropriate corrective action at all three

plants.
INVESTIGATIONS

TVA / OFFICE OF THE INSPECTOR GENERAL 17

Administrative and Disciplinary Actions

April 1, 1998 ~ March 31, 2003*

Total = 305

Oral/Written 

Warnings

20.5% Suspensions/

Demotions/

Transfers

8%

Resignations/

Retirements/ 

Terminations

10.5%

Counseling/

Management 

Techniques

45.5%

Reemployment

Flagged

15.5%

*Prosecutive referrals are shown in Appendix 5.

Closed Cases by Area

October 1, 2002 ~ March 31, 2003

Total = 75 

River System 

Operations &

Environment

16% TVA Nuclear

9.5%

Human 

Resources

8%

Fossil Power

29%

Other

20%

Information

Services

8%

Transmission/

Power

Supply

9.5%

Sources of Hotline Calls Warranting Further OIG Action 

October 1, 2002 ~ March 31, 2003

Total = 32

Contractor

Employees

Anonymous 22%

6%

General Public

38%

Former TVA/

Contractor

Employees

6%

TVA Employees

28%
LEGISLATION AND REGULATIONS

18 SEMIANNUAL REPORT / OCTOBER 1, 2002 ∼ MARCH 31, 2003

We continued to follow issues of interest

to the OIG and TVA. During this reporting period, we reviewed and took steps

to implement provisions of the Homeland

Security Act of 2002, E-Government Act

of 2002, and regulations issued under

the Health Insurance Portability and

Accountability Act (HIPAA) of 1996. We

also worked with the President’s Council

on Integrity and Efficiency (PCIE) in submitting comments on legislative matters

of interest to the Inspector General 

community.

More specifically, our efforts in response

to the Homeland Security Act included

adopting an aggressive law enforcement

skills refresher training program, as 

discussed in this report, and working

with the PCIE to submit community 

suggestions on the DOJ guidance to be

issued on law enforcement authority. We

also have been instrumental in developing a peer review guide for the OIG community in response to the requirement in

the Homeland Security Act that OIGs

establish such an external review

process. We further have amended our

routine use notices under the Privacy Act

to allow the disclosure of investigative

records in connection with peer reviews.

In response to the HIPAA regulations, we

took steps to ensure OIG compliance.

Those steps included analyzing how

HIPAA might affect our operations, 

segregating and securing files containing

medical information, and having 

employees who work with medical information take appropriate HIPAA training.

We also monitored the steps TVA is 

taking to comply with HIPAA.

The Government Information Security

Reform Act was revised under the

E–Government Act of 2002 and renamed

the Federal Information Security

Management Act (FISMA). FISMA

requires federal agencies to (1) review

and improve the security of their information and system assets and (2) report

annually on their security plans and milestones. FISMA also requires OIGs to

independently evaluate agency compliance with FISMA and issue an annual

report. In accordance with that Act, we

have conducted an independent annual

evaluation of TVA's information security

program and practices. 
TVA / OFFICE OF THE INSPECTOR GENERAL 19
20 SEMIANNUAL REPORT / OCTOBER 1, 2002 ∼ MARCH 31, 2003

APPENDICES
APPENDIX 1

TVA / OFFICE OF THE INSPECTOR GENERAL 21

Index of Reporting Requirements Under the Inspector General Act

REPORTING REQUIREMENT PAGE

Section 4(a)(2) Review of Legislation and Regulations 18

Section 5(a)(1) Significant Problems, Abuses, and Deficiencies 6-17

Section 5(a)(2) Recommendations With Respect to Significant Problems, Abuses, and Deficiencies 6-17

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 8-17

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 None

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

Section 5(a)(12) Significant Management Decisions With Which the Inspector General Disagreed None
APPENDIX 2

22 SEMIANNUAL REPORT / OCTOBER 1, 2002 

∼ MARCH 31, 2003

Audit Reports Issued

AUDIT REPORT

NUMBER QUESTIONED UNSUPPORTED FUNDS PUT TO

AND DATE TITLE COSTS COSTS BETTER USE

2002-077V

10/11/02 Advatech - Preaward $33,400,000

2002-091V

10/23/02 Roberts & Schaefer Company - 

Preaward

2003-001C

11/19/02 Quality Technical Services - 

Preaward

2003-005C

11/19/02 Numanco LLC - Labor 408,000

Markup Rates - Preaward

2002-062E

11/19/02 Bowie Resources, Ltd. - 

Contract No. 98P01-238224-000

2002-073V

11/26/02 Waste Management, Inc. - $42,048

Pricing Accuracy - 

Contract No. 00000531

2003-007C

12/11/02 Dearborn Mid-West 850,000

Conveyer Company - Preaward

2003-006C

12/20/02 Jacobs Engineering Group - 

Preaward

2002-004C-02

01/30/03 EPRI Statcom Royalty Payments 528,494 $528,494 

2002-045V

02/07/03 Laroche Industries, Inc. - 97,000

Preaward

2002-070C

02/14/03 Fastenal - Contract 215,804

No. 97X7E-201905 

2002-078V

03/12/03 TVA's Prescription Drug Program 2,157

Administered by Medco Health 

Solutions

2002-071C

03/19/03 Diversified Pharmaceutical 39,757 39,757

Services, Inc.

2000-041C

03/20/03 RAG Cumberland Resources - 

Contract No. 95P05-129504

2002-087V

03/28/03 Holtec International Claim 297,166 297,166

CONTRACT
APPENDIX 2

TVA / OFFICE OF THE INSPECTOR GENERAL 23

Audit Reports Issued

AUDIT REPORT

NUMBER QUESTIONED UNSUPPORTED FUNDS PUT TO

AND DATE TITLE COSTS COSTS BETTER USE

2002-081C

10/02/02 Transfer of Costs Between 

Maintenance Expense and 

Capital Costs

2002-074C

12/19/02 Costs for Property, Plant, 

and Equipment Additions

2002-037V

12/20/02 TVA's Purchasing Card Program

2002-068C

12/30/02 Review of TVA's FY 2002 

Financial Statement Audit

2003-016F

02/06/03 Verification of FY 2002 

Summarized FACTS Data

2003-008F

02/14/03 TVA's Tax Equivalent Payments

2003-018F

03/26/03 TVA's Short-Term Debt

2002-012T-01

10/25/02 Nuclear Facility Access Control Systems

Security - Sequoyah Nuclear Plant

2002-043T-01

01/06/03 Power Billing System Security and 

Application Controls

2002-090T

02/07/03 Transmission and Energy Scheduler System

Change and Continuity Controls

2003-020T

03/17/03 Electronic Funds Transfer System

General Controls

2002-012T-02

03/18/03 Nuclear Facility Access Control Systems

Security - Watts Bar Nuclear Plant

FINANCIAL

INFORMATION TECHNOLOGY
APPENDIX 2

24 SEMIANNUAL REPORT / OCTOBER 1, 2002 

∼ MARCH 31, 2003

Audit Reports Issued

AUDIT REPORT

NUMBER QUESTIONED UNSUPPORTED FUNDS PUT TO

AND DATE TITLE COSTS COSTS BETTER USE

2002-079E

12/04/02 Power Supply Planning 

Process Survey

2002-083V

12/20/02 Concerns Resolution Program - 

TVA Nuclear 2002

2002-084V

12/20/02 Concerns Resolution Program - 

Sequoyah Nuclear Plant 2002 

2002-085V

12/20/02 Concerns Resolution Program - 

Nuclear Security 2002 

2002-048C-02

01/07/03 Pinkerton Government 

Services, Inc. - Qualifications

2002-075E

03/03/03 Integrity of Selected Fossil Power

Data Input Into Model KW3000

2002-051V

03/26/03 Investment Recovery's Program 

for GSA Materials Redeployment

TOTAL 34 $1,125,426 $865,417 $34,755,000*

* This figure includes funds identified in preaward audits of proposals for contracts that may not be awarded.

OPERATIONAL
APPENDIX 3

TVA / OFFICE OF THE INSPECTOR GENERAL 25

Audit Reports Issued With Questioned Costs

QUESTIONED COSTS

NUMBER TOTAL UNSUPPORTED

A. For which no management decision has been

made by the commencement of the reporting period 0 $0 $0

B. Which were issued during the reporting period 6 $1,125,426 $865,417

Subtotals of A and B 6* $1,125,426 $865,417

C. For which a management decision was made during

the reporting period 5 $988,640 $865,417

(i) Dollar value of disallowed costs 5 $988,640 $865,417

(ii) Dollar value of costs not disallowed 0 $0 $0

D. For which no management decision has been made by

the end of the reporting period 2 $136,786 $0

E. For which no management decision was made within

six months of issuance 0 $0 $0

* The total number of reports (A+B) differs from the sum of C and D when the same reports contain recommendations

with and without management decisions.
APPENDIX 3

26 SEMIANNUAL REPORT / OCTOBER 1, 2002 

∼ MARCH 31, 2003

Audit Reports Issued With Recommendations for Better Use of Funds

NUMBER DOLLAR VALUE

A. For which no management decision has been

made by the commencement of the reporting period 2 $8,567,000

B. Which were issued during the reporting period 4 $34,755,000

Subtotals of A and B 6 $43,322,000

C. For which a management decision was made during

the reporting period 6* $43,322,000

(i) Dollar value of disallowed costs 4 $37,969,000

(ii) Dollar value of costs not disallowed 4 $5,353,000

D. For which no management decision has been made by

the end of the reporting period 0 $0

E. For which no management decision was made within

six months of issuance 0 $0

* The total number of reports differs from the sum of C.(i) and C.(ii) when the same reports contain both costs 

disallowed and not disallowed by management.
APPENDIX 4

TVA / OFFICE OF THE INSPECTOR GENERAL 27

Audit Reports With Corrective Actions Pending

Final corrective actions on recommendations in four contract compliance audits, two operational audits, three financialrelated audits, and six information technology audits had not been fully implemented as of March 31, 2003; however, all

are being implemented in accordance with currently established milestones.

AUDIT REPORT

NUMBER

AND DATE DESCRIPTION

2000-012P

01/09/2002 This report included recommendations to clarify several provisions in TVA's Affirmative

Procurement Plan and to ensure documentation is maintained to support waivers from the

revised plan. TVA plans to issue a revised plan to address these issues shortly.

2000-026C-01

04/02/2001 This report contained a recommendation to implement electronic data processing to collect

hours and rates billed for staff augmentation services and evaluate systems to determine how

to best meet these data processing needs. Representatives from several TVA organizations are

formulating a broad initiative to address issues with managing TVA's contract workforce. Plans

for this effort are expected to be complete in June 2003 and will be presented to stakeholders

with recommendations for action.

2000-030P

08/13/2002 This report contained recommendations to pursue recovery of ineligible payments and 

strengthen eligibility-related processing controls. TVA management has initiated, but not 

completed, action addressing these recommendations.

2001-032F

11/07/2001 This report included recommendations to institute an updated land management business

practice and revise, update, and/or integrate processes and systems to facilitate better 

communication among TVA organizations. TVA management has initiated, but not completed,

action addressing these recommendations.

2001-064T

12/21/2001 This report included recommendations to upgrade firewall hardware and software, upgrade

server and operating system security, and develop and implement policies and procedures to

address access authorization, intrusion detection, program change control, and contingency

planning and disaster recovery. All recommendations have been implemented with the 

exception of the change control procedure and that should be completed by June 2003.

2001-074T

01/07/2002 This report contained recommendations regarding facility access control. TVA decided to

replace its system for controlling access to non-nuclear facilities and is now evaluating vendor

proposals.

2001-087C

04/30/2002 This report included recommendations to recover ineligible costs and improve contract 

administration. TVA has taken action to address the contract administration issues and is in the

process of negotiating a settlement of the ineligible costs.

2002-004C-01

07/24/2002 This report included recommendations to strengthen contract terms in several areas and

improve record keeping of costs incurred by the contractor. TVA is addressing the 

recommendations in ongoing negotiations with the contractor.
APPENDIX 4

28 SEMIANNUAL REPORT / OCTOBER 1, 2002 

∼ MARCH 31, 2003

Audit Reports With Corrective Actions Pending

AUDIT REPORT

NUMBER

AND DATE DESCRIPTION

2002-013T

07/24/2002 This report included recommendations to improve user authentication, upgrade server 

authentication controls and operating system security, upgrade firewall software, and develop

methods for regular reviews of firewall security logs. TVA has improved security for this 

application and negotiated a replacement product. Final action is expected by the end of fiscal

year 2003.

2002-017T

06/25/2002 This report included recommendations to protect computer equipment from water damage,

ensure that computers comply with guidelines, document a contingency plan, develop and

implement a formal software change control procedure, and strengthen firewall access 

authorization and administration. All recommendations have been implemented with the 

exception of the change control procedure and that is expected to be completed by June 2003.

2002-020C

07/23/2002 This report contained recommendations to ensure employee safety training needs are assessed

and tracked, compliance inspections are completed, and injury/illness investigation reports are

completed for injuries and illnesses in accordance with TVA policy. TVA management notified us

that final action was completed in April 2003.

2002-025T

08/07/2002 This report contained recommendations to strengthen environmental and logical controls of

TVA's implementation of Windows 2000 and Windows XP. TVA management agreed with and

is implementing recommendations.

2002-034C

07/31/2002 This report included recommendations to amend policies and procedures, improve communication and monitoring controls, and assess the need for additional collection agents. TVA 

management has initiated, but not completed, action addressing these recommendations.

2002-051T

09/27/2002 This report contained recommendations to strengthen IT Store purchase approval controls. TVA

management advises it will draft and publish new standard programs/processes documents to

address the IT Store procurement process by July 31, 2003.

2002-072C

09/27/2002 This report contained a recommendation to clarify the contract language regarding the basis to

be used for price increases. TVA is addressing this recommendation in current negotiations.
APPENDIX 5

TVA / OFFICE OF THE INSPECTOR GENERAL 29

Investigative Referrals and Prosecutive Results

Referrals

Subjects Referred to United States Attorneys* 12

Subjects Referred to Other Agencies for Investigative or Administrative Action 0

Results

Subjects Indicted6

Subjects Convicted 4

Referrals Declined7

OWCP declared an overpayment of $46,699 for an individual, which he is to reimburse. In addition, his 

earning capacity was re-rated, which is projected to save TVA a total of $365,976 over the course of the 

individual’s lifetime.

* Includes referrals made by task forces on which we participate.
HIGHLIGHTS

30 SEMIANNUAL REPORT / OCTOBER 1, 2002 

∼ MARCH 31, 2003

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

2003 2002 2002 2001 2001

ANNUAL BUDGET (In Millions of Dollars) 8.5 8.0 8.0* 8.6 8.6

CURRENT STAFFING 84 87 86 86 74

AUDITS IN PROGRESS

Carried Forward 35** 33 38 45 43

Started 41 44 43 44 52

Canceled (4) (4) (8) (4) (7)

Completed (34) (40) (40) (47) (43)

In Progress at End of Reporting Period 38 33 33 38 45

AUDIT RESULTS (Thousands)

Questioned Costs $1,125 $3,816 $1,780 $3,519 $2,613

Disallowed by TVA 989 911 267 1,236 3,010

Recovered by TVA 221 387 225 1,634 821

Funds to Be Put to Better Use $34,755 $52,037 $31,874 $10,401 $70,422

Agreed to by TVA 37,969 44,944 6,069 10,155 37,450

Realized by TVA 38,172 16,014 6,090 8,277 30,918

NONAUDIT SERVICES

Completed 36 16 12 0 13

Cost Savings Identified/Realized (Thousands) 00000

INVESTIGATION CASELOAD

Opened 87 78 93 94 86

Closed 75 89 114 120 83

In Progress at End of Reporting Period 127 115 126 147 173

INVESTIGATIVE RESULTS (Thousands)

Recoveries $879 $961 $233 $5,862** $214

Savings 366 8 1,175 542 532

Fines/Penalties 56 86 0.1 114** 250

ADMINISTRATIVE AND

DISCIPLINARY ACTIONS

Recommended (# of Cases) 15 18 22 13 14

Actions Taken (# of Subjects) 16 7 6 8 30

Counseling/Management

Techniques Employed (# of Cases) 16 24 15 3 9

PROSECUTIVE ACTIVITIES (# of Subjects)

Referred 12 19 5 13 20**

Indicted 6 9 5 5 19

Convicted 4 4 3 7 14

* Reduction represents the transfer of certain benefit costs to corporate rather than organizational 

expense accounts.

** Adjusted from previous reporting period.

*** The numbers below include task force activities.

AUDITS & SPECIAL PROJECTS

INVESTIGATIONS***
For additional information, see our Web site at oig.tva.gov

Contact the OIG Hotline

1-800-323-3835

Contact the OIG Hotline

1-800-323-3835

To report:

• Contract or computer fraud

• Computer misuse or crimes

• False statements or false 

claims

• Irregularities in financial 

reporting

• Conflicts of interest and other 

ethics violations

• Travel fraud 

• Theft or misuse of TVA 

property

• Management reprisal

• Workers’ compensation fraud

• Bribery, kickbacks, or 

gratuities

• Health care fraud

• Environmental, health, and 

safety violations

For additional information, see our Web site at oig.tva.gov

Contact the OIG Hotline

1-800-323-3835

Contact the OIG Hotline

1-800-323-3835

To report:

• Contract or computer fraud

• Computer misuse or crimes

• False statements or false 

claims

• Irregularities in financial 

reporting

• Conflicts of interest and other 

ethics violations

• Travel fraud 

• Theft or misuse of TVA 

property

• Management reprisal

• Workers’ compensation fraud

• Bribery, kickbacks, or 

gratuities

• Health care fraud

• Environmental, health, and 

safety violations

Tennessee Valley Authority

Office of the Inspector General

Tennessee Valley Authority

Office of the Inspector General

Help Track Down Fraud,

Waste, and Abuse at TVA

Help Track Down Fraud,

Waste, and Abuse at TVA
The OIG Vision:

. . . illuminating today’s challenges 

and tomorrow’s solutions . . .

OFFICE OF THE INSPECTOR GENERAL OF THE TENNESSEE VALLEY AUTHORITY

400 WEST SUMMIT HILL DRIVE

KNOXVILLE, TENNESSEE 37902-1401