SEMIANNUAL REPORT/OCTOBER 1, 2000 ~ MARCH 31, 2001

Tennessee Valley Authority, Tennessee Valley Authority 400 West Summit Hill Drive, Knoxville, Tennessee 37902-1401

Richard F. Chambers

Inspector General

April 30, 2001

TO THE TVA BOARD OF DIRECTORS AND THE UNITED STATES CONGRESS

I am pleased to submit this semiannual report on the accomplishments of TVA’s OIG for the six-month

period ending March 31, 2001.

This reporting period has continued to reflect significant change for the OIG. Since my appointment as the

Inspector General in August 2000, we have implemented a number of initiatives designed to enhance OIG

performance and to ensure alignment of our goals and objectives with the needs of our stakeholders. We

are currently undertaking development of a comprehensive strategic plan and have articulated an OIG

vision of . . . illuminating today’s challenges and tomorrow’s solutions. We believe this vision will lead

us not only to perform our traditional roles, but to identify emerging trends and challenges with potential

impact on TVA and to offer solutions to our stakeholders.

On November 1, 2000, the President signed Public Law 106-422 designating the position of TVA Inspector General as presidentially appointed. I view this legislation as a strong step designed to ensure the TVA

Inspector General is independent in appearance as well as in fact.

I appreciate the support TVA’s Board of Directors has demonstrated on behalf of the OIG since my arrival.

The Board has repeatedly affirmed its view that the office is independent and plays a vital role in promoting

economy and efficiency within the agency. During the semiannual period, the Board approved an increase

in the TVA OIG budget. This increase will permit me to enhance OIG technology, improve infrastructure,

and increase the OIG staff for the first time in 13 years. This reverses a trend of declining OIG budgets and

marks a near return to staffing levels existing in 1997.

During the next six months, we will continue our strategic planning process and implement changes in the

OIG’s structure and processes as warranted. In addition, I look forward to continuing and enhancing the

relationships I have established with OIG stakeholders during my tenure as the TVA Inspector General.

Sincerely,

Richard F. Chambers
TVA/OFFICE OF THE INSPECTOR GENERAL

Integrated Management

of the Tennessee River

System

Featured on the cover is TVA’s

Hiwassee River in Cherokee County,

North Carolina. The Hiwassee River is

part of the Tennessee River system,

which includes the Tennessee River

and its 12 tributary watersheds. This

system encompasses 41,000 square

miles in seven states and is the fifth

largest river system in the United

States. It not only provides power to

the Tennessee Valley, it is the backbone of a sustainable river-based

economy. TVA manages the system

to carefully balance six related public

benefits—river navigation, flood

control, power supply, water quality,

land use, and recreation.

River Navigation River Navigation — TVA’s system of

dams and locks provides uninterrupted navigation on 652 miles of the

Tennessee River from above Knoxville,

Tennessee, to Paducah, Kentucky,

where it joins the Ohio River. River

freight is handled at 183 public and

private terminals across the region.

Shipping by barge saves more than

$400 million each year over rail or truck

shipping for products such as coal,

grain, iron ore, chemicals, sand, and

■ COVER PHOTO

stone. In addition, the locks provide

passage to more than 20,000 recreational craft each year.

Flood Control Flood Control — TVA’s system of

main channel and tributary dams is

managed to control floods. Such use

prevents an estimated $173 million in

damage each year in the Tennessee

Valley, as well as another $21 million in

potential losses along the Ohio and

Mississippi Rivers.

Power Supply Power Supply — Hydropower, the

most reliable, efficient, and economical

of renewable power resources, is

generated at 29 of TVA’s 49 dams.

The river system also provides water

needed to cool six of TVA’s fossil

plants and three nuclear plants while

maintaining water temperatures in

compliance with state requirements.

Water Quality Water Quality — Stored water is

released from TVA dams to maintain

water levels needed for water quality,

as well as for navigation and recreation. More than four million people

get their drinking water from the

Tennessee River system. Water flow

and dissolved oxygen are monitored,

and public land is managed to protect

water quality for the people, wildlife,

and aquatic life that depend on this

resource.

Land Use Management Land Use Management — TVA

manages almost 11,000 miles of

public shoreline to ensure compatible

development of lakeside property for

residential and commercial use.

Recreation Recreation — Over 293,000 acres of

public lands and 480,000 acres of

recreational lakes are managed to

support wildlife and provide outdoor

recreation, as well as to protect water

quality. TVA also releases water from

system reservoirs for white water

rafting and other special recreational

events. Water-based recreation on

the Tennessee River system generates regional annual revenues of

approximately $2 billion from anglers,

boaters, rafters, and other reservoir

and river users.

TVA’s integrated river management

approach optimizes the river system’s

potential, carefully balancing these

multiple benefits to citizens and the

environment because to maximize one

would be detrimental to the others.

The OIG supports TVA’s river management efforts through various

reviews, including audits of dam safety

and security, contract audits of

commercial ventures on the lakes, and

other reviews related to TVA shoreline

management issues.
SEMIANNUAL REPORT/OCTOBER 1, 2000 ~ MARCH 31, 2001

1 Executive Summary

2 TVA Profile

3 Office of the Inspector General

5 Special Features

Appendices

1. OIG Audit Reports Issued During the Six-Month Period Ending March 31, 2001

2. OIG's Report on Management Decisions for the Six-Month Period Ending March 31, 2001

3. Investigative Referrals and Prosecutive Results

4. Audit Reports With Corrective Actions Pending

5. OIG Reporting Requirements

7 Audits

12 Investigations

20 Special Projects

22 Legislation and Regulations

OFFICE OF THE

INSPECTOR

GENERAL

SEMIANNUAL

REPORT

OCTOBER 1, 2000

THROUGH

MARCH 31, 2001

CONTENTS ■
TVA/OFFICE OF THE INSPECTOR GENERAL

This report

summarizes the

activities and

accomplishments

of TVA's OIG

during the

six-month period

ending

March 31, 2001.

■ EXECUTIVE SUMMARY

We continued our efforts to support TVA

by providing quality audits, investigations,

special projects, and task force assignments. During this reporting period, we

identified almost $74 million in recoveries,

fines/penalties, potential savings,

questioned costs, or funds which could

be put to better use. Management took

numerous actions in response to our

recommendations.

We completed 43 audits and 13 special

project reviews. We identified $2.6 million

in questioned costs and about $70.4 million in funds that could be used more

effectively. Representative audits

included the following: (1) preaward and

postaward contract audits, (2) a congressional advisory review of TVA’s Executive

compensation and benefits, (3) TVA’s

management of the decommissioning

fund, (4) pre-implementation reviews of

several system development projects in

TVA’s supply chain system, (5) an internal

control review of agent officer payments,

(6) review of TVA’s program to meet

1

ground transportation needs, and

(7) review of internal controls over the

revenue collection processes used by

TVA’s watershed teams. Representative

special projects included: (1) a congressional advisory review of TVA’s office

space utilization and vacancy rates and

(2) a program review of the TVA Concerns

Resolution Program resulting in five

assessment reports.

We closed 83 investigations, including

task force projects, which led to

$997,106 in recoveries, projected

savings, and fines/penalties; administrative or disciplinary action taken against 30

individuals; and other corrective action in

9 cases. Matters we investigated

included potential workers’ compensation fraud, environmental crimes, contractors’ fraudulent claims for temporary living

expenses, health care fraud, and employee misconduct. Our investigations

also led to 19 indictments and 14

convictions.
SEMIANNUAL REPORT/OCTOBER 1, 2000 ~ MARCH 31, 2001

TVA's 13,121

employees serve

an 80,000-squaremile region

spanning seven

states.

TVA PROFILE ■

29 hydroelectric dams, 4 combustion

turbine plants, and a pumped storage

plant. These plants provide over

29,469 megawatts of net dependable

generating capacity. TVA’s electric power

business is entirely self-funding.

TVA’s major functions include (1) multiple

purpose management of the Tennessee

River system; (2) generation, sale, and

transmission of electricity to wholesale

and large industrial customers; (3) investment in economic development activities

that generate a higher standard of living

for citizens of the Tennessee Valley;

(4) stewardship of TVA assets and

provision of recreation opportunities on

federal lands entrusted to TVA; and

(5) research and technology development

that addresses environmental problems

related to TVA’s statutory responsibilities

for river and land management and power

generation.

TVA is governed by a three-member

Board of Directors appointed by the

President and confirmed by the Senate.

During this reporting period, Craven

Crowell was the Chairman, and Skila

Harris and Glenn L. McCullough, Jr.,

were Directors.

TVA is a federal corporation, the nation’s

largest wholesale producer of electric

power, a regional economic development

agency, and a national center for environmental research. TVA’s statutory

responsibilities include management of

the nation’s fifth largest river system.

TVA’s mission, as stated in its Annual

Performance Plan, is “to develop and

operate the Tennessee River system to

minimize flood damage and improve

navigation, and to provide energy and

related products and services safely,

reliably, and at the lowest feasible cost to

residents and businesses in the multistate Tennessee Valley Region.”

TVA’s programs fall into two separate but

interrelated activities—the power

program and the resource management

programs. TVA’s power system consists

of 11 coal-fired plants, 3 nuclear plants,

Chattanooga

•

•

•

•

•

•

• •

Knoxville

Columbus

Nashville

Jackson

Memphis

Huntsville

Muscle

Shoals

Bowling Green•

Bristol •

2
3 TVA/OFFICE OF THE INSPECTOR GENERAL

■ OFFICE OF THE INSPECTOR GENERAL

Office Authority

TVA’s OIG was originally created by the

TVA Board of Directors in October 1985.

The TVA OIG became statutory under the

Inspector General Act Amendments of

1988. Those amendments established

OIGs in 33 agencies, including TVA,

where the agency head was to appoint

the Inspector General. The OIG’s duties

and authorities at those agencies are, by

force of law, virtually the same as those

for offices having an Inspector General

appointed by the President. With the

enactment of Public Law 106-422 on

November 1, 2000, the President was

given the authority to appoint the TVA

Inspector General.

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 such 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 audit

or investigation he deems necessary or

desirable, issuing subpoenas, administering oaths, and granting confidentiality.

Organization

The OIG consists of two major operational units—Audit and Investigative.

The OIG’s Audit Operations unit consists

of four departments. One is devoted to

contract-related audits, both preaward

and postaward reviews; the other three

departments focus, respectively, on

(1) performance and special projects,

(2) financial, and (3) ADP-related issues.

The OIG’s Investigative Operations unit

consists of two investigative departments—Financial Investigations and

Internal Investigations. Both departments work a variety of cases. Financial

Investigations focuses on contract and

health care cases, while Internal Investigations focuses on nuclear issues,

employee conduct issues, environmental

cases, and benefits and entitlement

programs. In addition, a hotline analyst

reports to the Assistant Inspector

General for Investigations.
SEMIANNUAL REPORT/OCTOBER 1, 2000 ~ MARCH 31, 2001

OFFICE OF THE INSPECTOR GENERAL

Staffing and Budget

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

OIG also has a satellite office in Chattanooga, Tennessee.

The OIG's fiscal year 2001 budget was

$8.6 million with a budgeted headcount

of 90 employees.

4

OFFICE OF THE INSPECTOR GENERAL

3/31/01

Legal Counsel

■

Richard P. Levi

Manager

(Human Resources)

■

Kay T. Myers

INSPECTOR GENERAL

■

Richard F. Chambers

Financial

Investigations

Ron W. Taylor

Manager

Internal

Investigations

C. Dale Hamilton

Manager

■

Assistant

Inspector General

(Investigations)

■

G. Donald Hickman

Financial Audits

Jill M. Matthews

Manager

Contract

Audits

Paul E. Ivie

Manager

Operational

Audits and

Special Projects

Lewis M. Ogles

Manager

■

■

■

Assistant

Inspector General

(Audits)

■

Ben R. Wagner

■

Information

Technology Audits

Deborah M. Thornton

Manager

■

Project Manager

■

Linda L. Folks
5 TVA/OFFICE OF THE INSPECTOR GENERAL

■ SPECIAL FEATURES

OIG’S NEW VISION

During the first annual OIG training

symposium (see next article), the

Inspector General discussed the strategic planning process currently underway

in the OIG. As part of that process, the

OIG has developed a new vision, which

the Inspector General introduced during

the symposium.

The strategic planning process continues, and we will report the results of that

process in the next semiannual report.

. . . illuminating today’s challenges

and tomorrow’s solutions . . .
SEMIANNUAL REPORT/OCTOBER 1, 2000 ~ MARCH 31, 2001

SPECIAL FEATURES

6

FIRST ANNUAL OIG TRAINING

SYMPOSIUM

During this reporting period, we held our

first training symposium for OIG employees. Our theme focused on creating an

effective team to address future challenges and opportunities facing both TVA

and the OIG:

Opportunity (“a good chance for progress”)

Ingenuity (“cleverness or ability of design”)

Growth (“progressive development”)

Sessions during the three-day symposium included:

■ Informative briefings,

■ Training,

■ Motivational talks, and

■ Hands-on teambuilding exercises.

We were fortunate during this symposium to have as speakers Director

Glenn L. McCullough, Jr., William M.

Outhier (Senate Governmental Affairs

Committee Investigative Counsel), TVA

executives, motivational speakers, an

Assistant United States Attorney, and

representatives from other agencies.

Topics included the following.

■ During general sessions for all OIG

employees, presentations included

(1) competitive challenges facing TVA,

(2) issues facing the Inspector General

community, (3) values in public service,

(4) coping with change, and (5) personal accountability.

■ Numerous breakout sessions also

were offered on issues of interest to

different groups, such as

(1) audits and investigations

in the cyber age, (2) financial

fraud, (3) auditors and

investigators working

together, (4) creativity and

maximum performance,

(5) the audit profession’s

future direction, and

(6) public speaking.

Feedback from OIG employees indicated

the symposium was a rousing success.

Comments about the speakers included

terms such as “informative,”

“thought-provoking,” “dynamic,” and “refreshing.”

Comments about the overall

symposium included “excellent,” “ran like clockwork,”

“great variety,” “morale

booster,” “time well spent,”

and “a great success.” We

plan to make this symposium an annual

event, and we anticipate next year’s

symposium will be even better.

Director Glenn L. McCullough, Jr.

William M. Outhier
TVA/OFFICE OF THE INSPECTOR GENERAL

■ AUDITS

Audits are initiated from (1) the OIG

annual workplan, (2) issues identified by

the OIG subsequent to the annual

workplan, (3) issues identified by

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

management or others. During this

reporting period, we issued 43 audit

reports which identified over $2.6 million

in questioned costs and over $70.4 million in funds which could be put to better

use (see Appendix 1).

Summary of

Representative Audits

Our audits included preaward and

postaward audits of TVA contractors as

well as computer security reviews and

performance reviews of TVA programs.

PREAWARD CONTRACT AUDITS

We completed eight preaward audits to

support TVA management in negotiating

procurement actions. These audits

identified opportunities for TVA management to negotiate savings totaling

$15.1 million. As of the end of this

reporting period, TVA had successfully

negotiated $10.7 million in savings and

was negotiating additional potential

savings totaling over $4 million. The

following were the more significant

preaward audits we issued during this

reporting period.

■ We reviewed proposed non-manual

labor and indirect cost rates of a prime

contractor’s affiliated companies

under a $151 million contract involving

TVA’s clean air initiatives. We estimated TVA could save $10.7 million in

affiliated company costs by using cost

reimbursable contract terms and

eliminating certain indirect cost

markups.

■ We reviewed a contractor’s proposal

to provide engineering studies and

boiler pressure parts for TVA fossil

plants. We estimated TVA could save

up to $3 million by (1) using lower

priced material vendors, (2) negotiating

a lower general and administrative

rate, (3) limiting fabrication cost

reimbursement, and (4) eliminating

duplicate material cost and contingency allowances.

■ We reviewed the various multipliers

(i.e., the percentage of list price billed

to TVA) and engineering labor rates

proposed for an estimated $11 million

contract extension related to control

systems and the Selective Catalytic

Reduction projects at TVA’s fossil

plants. We estimated the contractor’s

proposal to directly bill TVA for

engineering labor rather than include

the costs in its hardware prices could

increase TVA’s total cost by about

$1 million.

7
SEMIANNUAL REPORT/OCTOBER 1, 2000 ~ MARCH 31, 2001

AUDITS

 8

CONTRACT COMPLIANCE AUDITS

During this reporting period, we completed 21 contract compliance audits and

identified (1) $2.5 million in ineligible and

unsupported costs and (2) $3.8 million in

potential future savings. Management

generally agreed with our findings and

has taken or plans to take appropriate

corrective action. Highlights of our more

significant contract compliance audits

follow.

■ A communications contractor

overcharged TVA about $0.6 million

on a $3.7 million contract. The

overbillings pertained to unallowable

administrative fees and labor rate

charges that exceeded the terms for

the contract.

■ A not-for-profit corporation that

provided staff augmentation services

to TVA recovered up to $2.9 million in

administrative costs on several prior

contracts.

■ A hydro modernization services

contractor charged TVA a royalty fee

that exceeded the company’s actual

rate. This resulted in about $0.7 million in excessive charges to TVA from

1993 through 1999. We estimated

TVA could save about $0.5 million on

future projects by negotiating a more

appropriate royalty fee. We also found

TVA paid an additional $0.7 million

because the contract’s pricing

methodology was not followed.

REVIEW OF TVA’S EXECUTIVE

COMPENSATION AND BENEFITS

At the request of Congressman Zach

Wamp, we (1) identified the compensation and benefits provided to TVA’s

higher paid employees for calendar years

1997 through 2000 and (2) compared

the cash-related compensation for some

TVA executive positions to the compensation for similar positions at other

utilities and federal/state agencies. In

summary, we found the average cashrelated compensation for TVA’s five

highest paid employees was lower than

the average for the highest paid employees of the 24 utilities we surveyed. In

comparison to six federal/state agencies

we surveyed, TVA’s cash-related compensation for five selected executive

positions was higher than the average

compensation paid to incumbents with

similar position titles.

REVIEW OF TVA’S

DECOMMISSIONING FUND

TVA established a nuclear decommissioning fund in the early 1980s to meet

future nuclear plant decommissioning

obligations. We assessed the reasonableness of TVA’s internal controls and
TVA/OFFICE OF THE INSPECTOR GENERAL

AUDITS

9

the investment strategy being used to

manage the fund. In summary, we found

TVA’s internal controls were adequate,

and the investment strategy was sufficient

to meet future decommissioning needs.

We also found, however, that TVA’s active

investment strategy of using investment

managers had actually resulted in a lower

return for the fund over the four-year

period covered by the audit than TVA

would have received using a passive

investment strategy. Assuming the same

return for both investment strategies, we

estimated the present value of converting

to a passive strategy would save TVA up

to $49.9 million over the expected life of

the fund through reduced management

fees. TVA management has taken action

to allocate more assets to passive

investments.

PRE-IMPLEMENTATION REVIEWS

TVA has invested over $20 million in two

systems to process its purchases of

materials, services, and fuels. To support

this effort, the OIG developed a preimplementation review plan to ensure key

areas such as internal controls, security,

testing, and system and data conversion

were properly handled prior to

implementation.

TVA management decided to postpone

implementation of its Supply Chain

System because of unresolved software

and interface problems. We issued three

reports conveying our findings to

management. Specifically, we found the

security and testing plans and procedures were adequate. In addition, we

reported the majority of key controls

were successfully tested. As implementation proceeds, we will continue our

reviews and report to management on

the adequacy of the designed internal

controls and testing results.

On March 5, 2001, TVA implemented a

new fuels management system (FMS).

Our reviews of FMS security and testing

found the security and testing plans,

procedures, and results were adequate.

CONTROLS OVER AGENT

OFFICER PAYMENTS

TVA uses agent officer checks as a

mechanism for making quick, one-time

or unique payments as an alternative to

using purchasing cards or TVA’s

accounts payable system. We reviewed

agent officer payments totaling

$21.5 million over a 21⁄2 year period and

identified several internal control weaknesses related to computerized data,

documentation, and management
SEMIANNUAL REPORT/OCTOBER 1, 2000 ~ MARCH 31, 2001 10

oversight. TVA management agreed with

our findings and is taking action to

improve its internal controls.

REVIEW OF TVA COAL QUALITY

ADJUSTMENT REPORT (CQAR)

PAYMENTS

TVA generates CQARs to calculate price

adjustments for differences between

contract specifications and actual

delivered coal. During fiscal year 1999,

TVA processed 511 CQAR transactions

which resulted in price adjustments

totaling about $20 million.

We assessed the accuracy of a sample of

48 CQAR adjustments totaling $8.5 million and identified about $0.13 million in

net overpayments to coal vendors.

Based on these sample results, we

estimated the total vendor overpayments

for fiscal year 1999 to be about $0.7 million. TVA management agreed with our

findings and initiated action to recover the

overpayments and institute automated

controls to minimize the likelihood for

future overpayments. TVA management

subsequently collected $85,652 from

coal vendors.

REVIEW OF TVA’S CURRENT

ARRANGEMENT FOR MEETING

PERSONNEL GROUND

TRANSPORTATION

Prior to fiscal year 1997, TVA’s ground

passenger transportation needs were

predominantly met through a TVA-owned

motor pool and assigned vehicle operation. In fiscal year 1997, TVA eliminated

the motor pool and many assigned

vehicles and moved to use of rental and

leased vehicles.

We assessed the cost effectiveness of

the current arrangement for meeting

personnel ground transportation needs.

We estimated the current arrangement

cost about $1.6 million more to own and

operate annually than would a reestablished motor pool and assigned vehicle

operation, provided an infrastructure

similar to the operation in fiscal year 1996

could be achieved. We recommended

TVA management take action to reduce

costs by (1) negotiating lower rates with

current or alternative vehicle suppliers or

(2) reestablishing a motor pool operation

with an infrastructure analogous to the

fiscal year 1996 arrangement. TVA

management disagreed with our findings.

However, TVA management provided

information about action items and

initiatives currently underway which were

consistent with the intent of our

recommendation.

AUDITS
TVA/OFFICE OF THE INSPECTOR GENERAL

AUDITS

REVIEW OF REVENUE

COLLECTION PROCESSES AT

TVA’S WATERSHED TEAMS

TVA Resource Stewardship consists of

watershed teams that manage a wide

range of products and services, including

the use of recreation areas, permits to

construct various projects and facilities

along TVA’s river system, and utilization

of TVA land for commercial or personal

use. The watershed teams collected over

$3.3 million for these products and

services in fiscal year 2000.

We assessed the adequacy of the

internal controls for collecting revenue

and identified several weaknesses. TVA

management agreed with our findings

and is taking appropriate corrective

action.

11

UNRESOLVED AUDIT REPORTS WHICH WERE

ISSUED PRIOR TO OCTOBER 1, 2000

Listed below is one audit report which we issued before this reporting period began and

for which no management decisions were made by March 31, 2001. We expect to report

the management decision in our next semiannual report.

DATE WHY MANAGEMENT DECISION

ISSUED REPORT TITLE HAS NOT BEEN MADE

06/16/00 Valmont Industries TVA management is negotiating the

audit findings and plans to report the

result of the negotiations in April 2001.
SEMIANNUAL REPORT/OCTOBER 1, 2000 ~ MARCH 31, 2001

INVESTIGATIONS ■

During the last six months, we substantiated allegations in 23 of the 83 investigations we closed—over 27 percent. Our

investigations, including task force

projects, resulted in $997,106 in recoveries, projected savings, and fines/penalties; 19 indictments; and 14 convictions.

Representative investigations are

highlighted below.

Summary of

Representative

Investigations

FALSE CLAIMS—OFFICE OF

WORKERS’ COMPENSATION

PROGRAMS (OWCP)

During this reporting period, our investigations of Federal Employees’ Compensation Act (FECA) cases led to recoveries

and projected long-term savings totaling

over $500,000. We investigated a variety

of cases, and our results included

evidence showing two recipients were

not entitled to receive wage-replacement

benefits since they were incarcerated

felons, and others receiving wagereplacement benefits did not report their

employment activities to OWCP as

required.

Benefits Suspended—Incarceration

Under FECA, benefits cannot be provided

to any individual confined to a correctional facility following a felony conviction.

Our investigations revealed two former

TVA employees were incarcerated, and as

a result, their benefits were suspended as

follows.

■ A former TVA construction laborer

was incarcerated upon being convicted of (1) trafficking in a controlled

substance (second degree) while in

possession of a firearm and (2) possession of marijuana while in possession of a firearm. The former laborer

was sentenced to 12 years’ incarceration on the two charges. As a result of

our investigation, OWCP benefits have

been suspended during the

individual’s confinement, saving TVA a

projected $205,920.

■ A former TVA boilermaker pled guilty to

felony drug trafficking charges during

June 2000 and was sentenced to

seven years in prison. (He had been

incarcerated since his December 1999

arrest.) Additionally, investigation

revealed he was imprisoned approximately 91⁄2 months during 1995 and

1996 on other felony drug convictions. OWCP declared an overpayment of $12,269 to be deducted from

the individual’s future benefits. The

overpayment, combined with projected long-term savings (based on

his minimum date of prison release),

totals at least $66,071.

12
TVA/OFFICE OF THE INSPECTOR GENERAL

INVESTIGATIONS

13

Loss of Benefits—False Statements

To receive benefits through the FECA, a

recipient must periodically submit forms

to OWCP reporting all employment

activities (including self-employment).

OWCP bases the recipient’s continuing

eligibility for FECA benefits on these

forms. Failure to disclose employment

information to OWCP can bring about

administrative, civil, or criminal penalties.

Highlights of these investigations follow.

■ A former TVA property maintenance

worker was actively self-employed as a

handyman and did not report those

activities or earnings to OWCP. As a

result of our investigation, OWCP

reevaluated the individual’s capacity to

work and reduced his compensation

accordingly, resulting in a projected

long-term savings to TVA of

$261,183.

■ A former TVA boilermaker was the

operator and primary employee of a

boat repair business and did not

report his activities or earnings to

OWCP. As a result of our investigation, OWCP declared the individual

was overpaid $29,102, to be deducted from his future benefits.

(The United States Attorney, Eastern

District of Tennessee, declined

prosecution in these two cases in

favor of administrative remedies.)

FALSE CLAIMS—TEMPORARY

LIVING EXPENSES (TLE)

During this reporting period, we continued our efforts to reduce TVA contract

costs by identifying fraudulent and

ineligible TLE paid to TVA contractor

employees.

One of our TLE investigations resulted in

a financial settlement and improved

processes for avoiding overpayments.

We investigated TLE paid to employees of

a contractor company working at TVA

fossil plants. We found several employees received TLE to which they were not

entitled. The company responded to our

findings by contending, in part, that its

employees’ interpretation of the agreement with TVA resulted in some of the

TLE overpayments, and the contract did

not require the company to check the

veracity of all its employees’ TLE claims.

As a result of our investigation, TVA

Procurement:

■ Identified deficiencies within TLE

policies and procedures in partnering

agreements and will incorporate

clarifications to help eliminate varying

interpretations of the policies;

■ Will closely monitor the eligibilitycertification process of TVA’s contractors and request further investigation

by contractors for TLE certifications

that appear questionable; and
SEMIANNUAL REPORT/OCTOBER 1, 2000 ~ MARCH 31, 2001 14

■ Negotiated a $71,033 settlement with

the contractor company for overpayments related to our findings.

TVA COMPUTER-NETWORK

SECURITY

Our investigation revealed that 16

employees and 1 contractor in 4 TVA

organizations violated TVA policy by

participating in a University of California at

Berkeley project which involved installing

a screensaver program called “SETI

[Search for Extraterrestrial Intelligence]

@home” on their TVA computers. Fifteen

of these individuals were members of

TVA’s Information Services (IS)

organization.

The University of California at Berkeley is

engaged in analyzing radio-telescope

data from space in a search for signals

transmitted by extraterrestrial intelligence.

As the task of analyzing this data

consumes an extraordinary amount of

computer memory, the SETI@home

project solicits internet users to download its screensaver program, which

analyzes SETI data while the users’

computers are idle. (It is estimated that

thousands of internet users are participating in SETI@home.)

Although we found no evidence the

program caused damage to TVA’s

computer network, the network’s link

with the SETI@home web site opened a

channel of communication through

TVA’s computer security firewall, which

could have resulted in TVA’s network

being exploited by hackers. Furthermore,

any virus or corruption incurred by the

University of California at Berkeley system

could possibly have been introduced into

TVA’s network.

Seventeen employees were given oral

warnings as a result of our investigation

of the SETI downloads. Additionally,

TVA’s IS organization instituted an action

plan to heighten computer security

awareness. The plan included declaring

November 2000 “Computer Security

Awareness Month” TVA-wide. During

November, IS sponsored a computer

security awareness poster contest, a

computer security quiz, and an “IT

Security Tip of the Day” published to TVA

employees in our daily e-mail “TVA

Today.”

FOSSIL PLANT MANAGEMENT

ISSUES

Approximately 100 Kingston Fossil Plant

(KIF) Production Units employees signed

letters to the TVA Chairman, the Government Accounting Office, and the United

States Secretary of Labor raising various

issues at KIF. In addition, the OIG

received a similar list of concerns. The

concerns primarily involved alleged

INVESTIGATIONS
TVA/OFFICE OF THE INSPECTOR GENERAL

INVESTIGATIONS

15

management misconduct surrounding

leave issues, such as alleged harassment

of employees who took sick leave.

We interviewed 24 KIF employees and

supervisors and reviewed relevant

documentation, policies, and laws.

Although evidence did not show management misconduct, it indicated the

allegations regarding leave issues were

symptomatic of different underlying

concerns such as resource constraints,

communication problems, and poor

morale.

As a result of our investigation, management notified us they were taking action

related to our recommendations as

follows:

■ Providing guidance and clarification on

leave policies to supervisors and

employees, including distributing sick

leave guidelines and holding meetings

to communicate expectations.

■ Taking directed action to improve

communications and morale, including holding quarterly “all hands”

meetings and having regular plant

visits by the Fossil Power Group’s

executive and senior vice presidents.

■ Determining if further management

action is warranted to address

concerns raised by employees we

interviewed during our investigation.

ENVIRONMENTAL CRIMES JOINT

TASK FORCE (ECJTF)

We continued our participation in the

ECJTF, which is comprised of members

from numerous state and federal agencies, including the Federal Bureau of

Investigation (FBI), Environmental

Protection Agency, Department of

Justice, and TVA’s OIG.

ECJTF focuses enhanced law enforcement resources against individuals and

companies involved in environmental

crimes and prosecutes those individuals

and companies by applying the most

effective federal and state criminal and

civil statutes. Highlights of the task

force’s work include the following.

Company Hired Unauthorized and

Inadequately Trained Immigrants to

Remove Asbestos—Guilty Pleas

Investigation revealed that from 1997 to

February 2000, a Chattanooga-based

company, with offices in Denver and

Baton Rouge, hired unauthorized

immigrants from Mexico and Central and

South America to remove asbestos in

locations across the United States. Many

of the unauthorized workers were not

properly trained in asbestos removal, and

many received false training and health

certifications.
SEMIANNUAL REPORT/OCTOBER 1, 2000 ~ MARCH 31, 2001 16

At the company’s Denver office, asbestos

abatement classes were taught in

Spanish. These classes, required by

federal and state law to prepare workers

to handle asbestos, were actually used to

recruit workers known to be in the

country illegally. During the classes, the

instructor told workers to cooperate with

the circumvention of safety procedures

and to throw asbestos in immigration

agents’ faces before running away from

them.

As a result of the ECJTF investigation,

■ In federal courts located in Tennessee,

Colorado, and Louisiana, the company pled guilty to a total of 18

criminal counts charging various

offenses, including conspiracy, wire

fraud, money laundering, making a

false statement and a false claim, and

encouraging and inducing unauthorized aliens.

■ The company president and vice

president pled guilty to conspiracy,

wire fraud, and encouraging and

inducing unauthorized aliens.

■ A managerial employee in the Denver

office pled guilty to encouraging and

inducing unauthorized aliens, wire

fraud, false statements, and false

claims.

■ The Denver and Baton Rouge office

managers and the Chattanooga

payroll clerk each pled guilty to a

misdemeanor count of engaging in a

pattern and practice of knowing

employment of unauthorized aliens.

Fish Kill—Guilty Plea

During the previous reporting period, a

Kentucky coal company and one of its

officers pled guilty (one count each) to

violating the Clean Water Act.

The company violated the terms of a

permit covering a mining and reclamation

operation in Campbell County, Tennessee. Investigation revealed the company

improperly pumped mine wastewater into

a nearby creek, adversely altering its pH

levels and reducing the oxygen in the

creek. A significant number of dead and

dying fish were found 200-300 feet

downstream from the discharge point.

(The mining company officer admitted

responsibility for the discharge, and the

pumping was immediately stopped.)

During this reporting period, the company and its officer were sentenced in

federal court. They were ordered to pay a

total of $20,000 in fines. In addition, the

company voluntarily agreed to contribute

$230,000 to state and federal agencies

for cost recoveries, contributions to

various environmental projects, and

funding for continued enforcement of

environmental laws.

INVESTIGATIONS
17 TVA/OFFICE OF THE INSPECTOR GENERAL

INVESTIGATIONS

SIX TVA OIG EMPLOYEES

RECOGNIZED BY FBI DIRECTOR

LOUIS J. FREEH

Special Assignment

An OIG special agent was recognized for

a special assignment in conjunction with

an FBI investigation.

For the OIG special agent’s significant

contribution to the investigation, he

received a certificate from Director Freeh

in recognition of his commendable

performance.

Environmental Crimes—Guilty Pleas

Five TVA OIG employees participated in

an extensive ECJTF investigation

resulting in a Bradley County, Tennessee,

construction company, its owner, and a

company foreman each pleading guilty to

various environmental crimes. Upon

sentencing, the company could be

ordered to pay over $800,000 in fines

and reparations.

TVA OIG employees were presented

certificates of recognition from Director

Freeh for their contributions to the

investigation as follows.

■ TVA OIG Senior Special Agent

Joseph P. Boehr was recognized for

his contribution as co-case agent in

this matter, bringing together the

many facets of the investigation,

including lengthy surveillance and

undercover activities.

■ Senior Special Agents Andrew R.

Derryberry and Michael G. Duncan,

and former department Manager

James M. Reed were recognized for

the many hours worked on the

physical surveillance of the company

both before and during the undercover operation and for their assistance in the complex search warrant.

■ Assistant Inspector General for

Investigations G. Donald Hickman

was recognized for providing management oversight and direction on the

case.

The investigated company specialized in

bridge construction and bid on local,

state, and federal government construction projects. The company performed

maintenance on its own heavy equipment, e.g., cranes, barges, and cement

mixers. Maintaining the equipment

included repairing and repainting, which

was done at the construction company’s

site.

Evidence showed that, at the direction of

company management, paint shop

employees cleaned paint guns and hoses

with solvent which was ultimately poured

into a 55-gallon drum. When the drum

became partially full, it was taken to a
SEMIANNUAL REPORT/OCTOBER 1, 2000 ~ MARCH 31, 2001

burn pit at the construction company’s

site and poured onto wood and other

refuse for burning. After the solvent was

poured onto the pit’s contents, it was

allowed to sit for several days before

being ignited because it was highly

flammable. Varying quantities of paintgun solvent and paint waste were

disposed into the pit periodically and

burned approximately every other week

for many years.

The company pled guilty to one count of

knowingly treating, storing, or disposing

of a hazardous waste without a permit in

violation of the Resource Conservation

and Recovery Act. The owner pled guilty

to one count relative to the improper

disposal of a hazardous waste committed

by his company. The foreman pled guilty

to being an accessory after the fact

relative to failing to complete the appropriate documentation for disposal of the

material.

The subjects are awaiting sentencing.

18

INVESTIGATIONS
19 TVA/OFFICE OF THE INSPECTOR GENERAL

TVA/Contractor

Employees

General

Public

Former TVA/

Contractor

Employees

2.5%

21% 44%

Sources of Referrals for OIG

Investigations or Audit Action

Total = 43

17%

Chief Administrative Officer/

TVA-Wide Corporate

Services

17%

9.5%

Fossil

Power TVA Nuclear

19%

37.5%

Other

River System

Operations &

Environment

The breakdown of the 83 closed investigations involving

TVA organizations are shown below.

*Prosecutive referrals are shown at Appendix 3.

12.5%

20%

Resignations/

Terminations

Suspensions/

Demotions/Transfers

Administrative and Disciplinary Actions Since

April 1, 1996*

Total = 258

Oral/Written

Warnings

Reemployment

Flagged

9% 33%

25.5%

Counseling/

Management Techniques

32.5%

Anonymous

INVESTIGATIONS
SEMIANNUAL REPORT/OCTOBER 1, 2000 ~ MARCH 31, 2001

In addition to conducting audits and

investigations, our office continues to

perform special projects upon request by

our stakeholders, primarily the Board of

Directors, TVA management, and

Congress. During this reporting period,

we conducted 13 special projects.

Representative projects are highlighted

below.

TVA OFFICE SPACE UTILIZATION

AND VACANCY RATES

At the request of Senator Jeff Sessions,

we reviewed the status of TVA’s office

space and vacancy rates, including the

recently occupied space in the Highland

Ridge Tower (HRT) in Nashville, Tennessee. Our report addressed (1) the status

of TVA office space in Knoxville, Chattanooga, and Nashville, Tennessee, and

Huntsville and Muscle Shoals, Alabama;

(2) TVA’s role in constructing the HRT

office space; (3) the cost of the HRT office

space as compared to the space

previously occupied by TVA in Nashville;

and (4) the status of the previously

occupied Nashville office space.

CONCERNS RESOLUTION

PROGRAM

TVA’s Concerns Resolution Program is

designed to help ensure all TVA and

contractor employees supporting TVA’s

nuclear facilities “are free to express

safety issues, concerns, or opinions to

management and that such expressed

issues, concerns, or opinions are timely

and adequately considered and resolved.” In support of this effort, we

periodically survey TVA and contractor

employees and review closed case files to

assess the effectiveness of the program.

As discussed below, we completed five

reviews of the Concerns Resolution

Program during this reporting period.

■ We assessed the overall effectiveness

of TVA’s Concerns Resolution

Program by (1) interviewing 249 TVA

and contractor employees concerning

their 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

involving TVA’s nuclear program.

Based on our findings, we concluded

the fundamental mission of the

Concerns Resolution Program was

being met.

■ We assessed the willingness of TVA

and contractor employees at TVA’s

Browns Ferry Nuclear Plant to report

nuclear safety and quality issues by

randomly surveying 228 of the 1,312

TVA and contractor employees who

had plant access. The responses we

received were generally positive and

SPECIAL PROJECTS ■

20
21 TVA/OFFICE OF THE INSPECTOR GENERAL

SPECIAL PROJECTS

compared favorably to the responses

we received from the overall

assessment.

■ We assessed the willingness of the

security employees provided by a TVA

contractor to report nuclear safety and

quality issues by randomly surveying

82 of the 215 employees in this group.

Although these employees said they

would report nuclear safety or quality

issues through some avenue, the

responses to other survey questions

varied significantly from the responses

we received in our overall assessment.

In summary, we concluded the

nuclear security workforce was less

comfortable raising nuclear safety or

quality issues than employees and

contractors included in the overall

assessment.

■ We assessed the willingness of TVA’s

Sequoyah Nuclear Plant Radiological

Control employees to report nuclear

safety and quality issues by randomly

surveying 25 of the 56 employees in

this group. The responses we

received were generally positive and

compared favorably to the responses

we received from the overall

assessment.

■ We assessed the willingness of TVA’s

Watts Bar Nuclear Plant instrument

maintenance employees to report

nuclear safety and quality issues by

randomly surveying 23 of the 53

employees in this group. The responses we received from this group

were generally not as positive on key

questions as those we received from

the overall assessment.
SEMIANNUAL REPORT/OCTOBER 1, 2000 ~ MARCH 31, 2001

L E G I S L A T I O N A N D R E G U L A T I O N S ■

During this reporting period, Congress

enacted S. 1707 which, among other

things, made the TVA Inspector General

a Presidential appointment. That bill

became Public Law 106-422, which was

effective November 1, 2000. This

legislation makes the appointment of

TVA’s Inspector General consistent with

the appointment of Inspectors General at

other large agencies. Until a Presidential

appointment is made, the TVA Inspector

General continues to operate as an

agency-appointed Inspector General.

We also continued to follow other issues

of interest to the OIG and TVA, including

the Government Information Security Act,

legislation to amend the Inspector

General Act, various proposals to

deregulate the electric industry, and

medical privacy regulations.

22
SEMIANNUAL REPORT/OCTOBER 1, 2000 ~ MARCH 31, 2001

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

OIG AUDIT REPORTS ISSUED DURING

THE SIX-MONTH PERIOD ENDING MARCH 31, 2001

The following table summarizes final audit reports issued by the OIG from October 1, 2000 through March 31, 2001.

FUNDS

DATE REPORT QUESTIONED UNSUPPORTED TO BE PUT TO

ISSUED NUMBER REPORT TITLE COSTS COSTS BETTER USE

10/17/2000 2000-083C Bodine, Inc.

10/19/2000 2000-027C Voith Hydro, Inc. -

Contract 93PBL-79099E $1,418,000 $505,000

10/31/2000 2000-063F-02 Agent Officer Payments for

Gift Certificates

11/02/2000 2000-029C-06 Hydrochem Industrial

Services, Inc.

11/02/2000 2000-070C Alstom Power, Inc. - Affiliated

Companies - SCR Alliance

Project 10,653,385

11/06/2000 2000-080C Roberts & Schaefer Contract

95P6G-79124H,

7th Supplement

11/06/2000 2000-081C Valmont Steel Poles 305,000

11/15/2000 2000-078C CDI Information Services 20,072

11/27/2000 2001-002C C2 Creative - Contracts

98BKX-234018-00 and

99BPQ-246817-00

11/28/2000 2000-091C Foster Wheeler Energy

Corporation - Proposal 3,029,400

11/28/2000 2001-003C Marconi Communications

(formerly Fore Systems, Inc.)

12/14/2000 2000-089C Shook & Fletcher Insulation Co. 1,999

12/14/2000 2001-017C Waste Management

12/18/2000 2001-016C Trans-Cycle Industries

01/02/2001 2000-088F Independent Contractor

Versus Employee Review

01/05/2001 2000-084C Zycron Computer Services

01/19/2001 2000-059C Media South, LLC 583,973

01/25/2001 2000-076C National Systems and Research 15,591

01/25/2001 2000-082C Kinder Morgan - Contracts

97P02-204503, 97P03-221681,

and 00P03-260045

Appendix 1

Page 1 of 3
SEMIANNUAL REPORT/OCTOBER 1, 2000 ~ MARCH 31, 2001

Appendix 1

Page 2 of 3

FUNDS

DATE REPORT QUESTIONED UNSUPPORTED TO BE PUT TO

ISSUED NUMBER REPORT TITLE COSTS COSTS BETTER USE

01/26/2001 2001-024C Performance Bond Payment for

Contract 00NNQ-258310-000

With Holtec International $97,831 $97,831

01/30/2001 1999-025P Review of TVA’s Current

Arrangement for Meeting

Personnel Ground Transportation

Needs $1,600,000

02/01/2001 2000-039F Pre-Implementation Review of

Supply Chain System Internal

Controls

02/05/2001 2000-049C ABB Automation, Inc. (formerly

Bailey Controls Company) 1,056,000

02/07/2001 2000-031C Scientific Sales, Inc. 319,447 263,241

02/13/2001 2001-005F Pre-Implementation Review of

Security for TVA’s New Supply

Chain System

02/15/2001 2000-058F Review of TVA’s Decommissioning

Fund 49,900,000

02/15/2001 2000-066C Bicentennial Volunteers, Inc. 2,996,797

02/23/2001 2000-016P Review of TVA Coal Quality

Adjustment Report Payments 134,415

02/26/2001 2001-011P Review of TVA’s Executive

Compensation and Benefits

02/27/2001 2001-027C Computer Horizon’s Corp. -

Preaward Audit 247,000

03/06/2001 2000-054F Pre-Implementation Review of

System Testing for Supply

Chain System

03/06/2001 2000-074F Review of Revenue Collection

Processes at TVA’s

Watershed Teams

03/07/2001 2000-063F Controls Over Agent Officer

Payments

03/07/2001 2001-013C University of Colorado -

Contract TV-96003V

03/07/2001 2001-030C Preaward Audit of CDI Information

Technology Services Response to

TVA RFP4P-267604 109,000
TVA/OFFICE OF THE INSPECTOR GENERAL

FUNDS

DATE REPORT QUESTIONED UNSUPPORTED TO BE PUT TO

ISSUED NUMBER REPORT TITLE COSTS COSTS BETTER USE

03/12/2001 2000-079C Review of Motion Industries, Inc.

Contract 98XA1-208664 $21,223 $21,223

03/12/2001 2001-031C Zycron Computer Services

03/13/2001 2001-041F Verification of Summarized

Federal Agencies’ Centralized

Trial-Balance System (Facts) Data

03/14/2001 2001-009F Pre-Implementation Review of

Fuels Management System

Security

03/21/2001 2001-038C Chemical Waste

Management, Inc.

03/28/2001 2000-068C Review of Revised Craft Labor

Rates As Per the PMMA Schedule

Effective May 22, 2000

03/28/2001 2001-029C Science Applications International

Corporation $20,182

03/30/2001 2001-008F Pre-Implementation Review of

Fuels Management System

Testing

TOTAL 43 $2,612,551 $382,295 $70,421,764

Appendix 1

Page 3 of 3
SEMIANNUAL REPORT/OCTOBER 1, 2000 ~ MARCH 31, 2001

OIG’S REPORT ON MANAGEMENT DECISIONS FOR THE

SIX-MONTH PERIOD ENDING MARCH 31, 2001

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

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

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

TABLE I

TOTAL QUESTIONED AND UNSUPPORTED COSTS

NUMBER QUESTIONED UNSUPPORTED

AUDIT REPORTS OF REPORTS COSTS COSTS

A. For which no management

decision has been made by

the commencement of the period 2 $1,409,712 $480,712

B. Which were issued during

the reporting period 9 2,612,551 382,295

Subtotal (A + B) 11 $4,022,263 $863,007

C. For which a management

decision was made during

the reporting period 10 3,093,263 863,007

1. Dollar value of

disallowed costs 9 3,009,826 843,167

2. Dollar value of

costs not disallowed 3 83,437 19,840

D. For which no management

decision has been made by

the end of the reporting

period 1 929,000 0

E. For which no management

decision was made within

six months of issuance 1 929,000 0

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

disallowed and not disallowed by management.

Appendix 2

Page 1 of 2

*
TVA/OFFICE OF THE INSPECTOR GENERAL

TABLE II

FUNDS TO BE PUT TO BETTER USE

NUMBER FUNDS TO BE PUT

AUDIT REPORTS OF REPORTS TO BETTER USE

A. For which no management

decision has been made by

the commencement of the period 0 $0

B. Which were issued during

the reporting period 11 70,421,764

Subtotal (A + B) 11 $70,421,764

C. For which a management

decision was made during

the reporting period 7 67,409,764

1. Dollar value of

disallowed costs 6 37,449,582

2. Dollar value of

costs not disallowed 2 29,960,182

D. For which no management

decision has been made by

the end of the reporting

period 4 3,012,000

E. For which no management

decision was made within

six months of issuance 0 0

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

disallowed and not disallowed by management.

*

Appendix 2

Page 2 of 2
SEMIANNUAL REPORT/OCTOBER 1, 2000 ~ MARCH 31, 2001

INVESTIGATIVE REFERRALS AND PROSECUTIVE RESULTS

INVESTIGATIVE REFERRALS SUBJECTS RESULTS THIS PERIOD

Subjects referred to U.S. Attorneys 20 19 Indictments

14 Convictions

7 Referrals Declined

Subjects referred to other agencies 2 OWCP reduced or suspended

for investigative or administrative action benefits of, and/or claimed

overpayment for, four individuals,

TOTAL 22 creating recoveries and projected

savings totaling $562,276.

Appendix 3

Page 1 of 1
TVA/OFFICE OF THE INSPECTOR GENERAL

AUDIT REPORTS WITH CORRECTIVE ACTIONS PENDING

Final corrective actions in two contract compliance reports and three operational audits have not yet

been fully implemented.

Report 1996-037C-01 issued August 11, 1998

The report contained one recommendation regarding the contractor’s ability to produce adequate

documentation for billed costs. TVA has not reached final settlement with contractor.

Report 1996-037C-02 issued September 03, 1998

The report contained two recommendations—one regarding overpayments and one regarding the

contractor providing supporting documentation for billed costs. TVA has not reached final settlement

with contractor.

Report 1999-028P issued January 28, 2000

The report contained two recommendations regarding TVA’s Environmental Executive authorizing

Environmental Auditing to (1) perform environmental management system reviews and (2) follow up

on corrective actions and assess closure decisions. TVA is currently implementing their planned

actions.

Report 2000-021F issued March 17, 2000

The report contained two recommendations regarding the internal controls associated with Material

Safety Data Sheets. TVA has resolved one of the recommendations and is implementing their

planned actions for the other recommendation.

Report 2000-073P issued September 11, 2000

The report contained five recommendations regarding the internal control over physical inventories.

TVA is currently implementing their planned actions.

Appendix 4

Page 1 of 1
SEMIANNUAL REPORT/OCTOBER 1, 2000 ~ MARCH 31, 2001

OIG REPORTING REQUIREMENTS

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

indicated below.

Section 4(a)(2) Review of Legislation and Regulations Page 22

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

Deficiencies

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

Significant Problems, Abuses, and

Deficiencies

Section 5(a)(3) Recommendations Described in Previous Appendix 4

Semiannual Reports on Which Corrective

Action Has Not Been Completed

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

Authorities and the Prosecutions

and Convictions That Have Resulted

Sections 5(a)(5) Summary of Instances Where Information None

and 6(b)(2) Was Refused

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

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

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

Audit Reports Containing Questioned Costs

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

Audit Reports Containing Recommendations

That Funds Be Put to Better Use

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

Issued Prior to the Beginning of the

Reporting Period

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

Section 5(a)(12) Significant Management Decisions With None

Which the Inspector General Disagreed

Appendix 5

Page 1 of 1
TVA/OFFICE OF THE INSPECTOR GENERAL

FOR SEMIANNUAL REPORTING PERIODS

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

2001 2000 2000 1999 1999

ANNUAL BUDGET (In Millions of Dollars) 8.6 7.2 7.2 7.3 7.3

CURRENT STAFFING 74 77 79 78 81

AUDITS & SPECIAL PROJECTS

AUDITS IN PROGRESS

Carried Forward 43 48 36 34 40

Started 52 38 59 41 42

Canceled (7) (8) (2) (3) (11)

Completed (43) (35) (45) (36) (38)

In Progress at End of Reporting Period 45 43 48 36 33

AUDIT RESULTS (Thousands)

Questioned Costs $2,613 $1,800 $952 $1,678 $1,137

Disallowed by TVA 3,010 379 820 673 946

Recovered by TVA 821 390 1,333 580 607

Funds to Be Put to Better Use $70,422 $12,862 $5,296 $9,861 $1,402

Agreed to by TVA 37,450 12,499 5,509 7,612 980

Realized by TVA 30,918 17,340 5,775 1,834 389

SPECIAL PROJECT RESULTS (Thousands)

Completed 13 8 12 11 18

Cost Savings Identified/Realized 0 $233 $345 0 0

INVESTIGATIONS

INVESTIGATION CASELOAD

Opened 86 132 107 88 59

Closed 83 99 111 81 66

In Progress at End of Reporting Period 173 170 137 140 133

INVESTIGATIVE RESULTS (Thousands)

Recoveries $214 $179 $3,758 $1,772 $1,145

Savings 532 521 988 1,422 1,912

Fines/Penalties 250 11 25 5 27

ADMINISTRATIVE AND

DISCIPLINARY ACTIONS

Recommended (# of Cases) 14 13 21 21 19

Actions Taken (# of Subjects) 30 11 13 17 11

Counseling/Management

 Techniques (# of Cases) 9 6 5 3 4

PROSECUTIVE ACTIVITIES (# of Subjects)

Referrals 7 32 7 8 4

Indictments 19 5 6 7 6

Convictions 14 5 9 5 9

* Adjusted from previous semiannual reports.

** Category added to Highlights during reporting period indicated.

H I G H L I G H T S

**

*

*