All Reports

We reviewed $148.9 million billed to TVA by a contractor for providing uranium hexafluoride and enrichment services. We determined (1) TVA would need to revise the contract if it intended to pay the contractors actual market price for enrichment services and (2) the contractor could not comply with a contract requirement for determining a final price for enrichment services within 30 days after the end of TVA's fiscal year. TVA subsequently decided a contract revision would not be needed to ensure payment of the contractor's actual market price for enrichment services.

We determined controls related to the identification and reduction of inventory and financial reporting could be improved. Specifically, we determined (1) policy and procedure documentation were not complete, (2) business unit reviews for surplus/obsolete inventory were not effective, (3) signatory authorization of approval by the business units for inventory write-offs was not obtained, (4) inventory purchases were made for items held as surplus, and (5) inventory reserve calculations were incorrect, however, corrections were made for quarterly reporting accuracy).

We determined (1) current inventory cycle count controls may not ensure inventory on-hand is accurately counted and entered into PassPort; (2) in some warehouses, access to plant inventories is not restricted to Material Management Services (MMS) personnel or MMS-escorted personnel during non-standard work hours as required by policy; and (3) TVA's Risk Control Tracking System could be updated to more accurately reflect key financial controls of the manage site materials process. TVA management agreed with our findings and is implementing planned actions.

We determined a wireless carrier issued credits to TVA employees due to an internal system error. The credits pertained to inactive accounts and therefore had no impact on TVA's master account. The carrier was unable to validate (1) who the checks were issued to, (2) how many checks were issued, and (3) the total amount of the credits. Summary Only

We determined TVA's depreciation policy and procedures do not accurately reflect (1) control activities described in TVA's Risk Control Tracking System and (2) current management practice. TVA management is assessing our recommendations.

We reviewed $104.4 million in costs paid by TVA to a contractor for providing construction services for the restart of BFN Unit 1. We found the contractor overbilled TVA $1.5 million due to (1) the use of a craft labor category, incentive fee, and safety awards not provided for by the contract, (2) wrong indirect cost markups and unsupported labor costs, and (3) other miscellaneous overbillings. Additionally, we estimated TVA would save $995,000 by disallowing the use of an unauthorized labor classification.

We determined TVA's inventory receiving and inspecting (R&I) process controls were designed to prevent or detect material misstatements in significant accounts and the related inventory disclosures on a timely basis. However, TVA's Risk Control Tracking System could be updated to more accurately reflect key financial controls of the R&I process. TVA management agreed with our findings and has completed final action.<br><br>

We found no evidence of fraud in connection with different vendors sharing the same bank account. Most vendors were related and there was no evidence that non-related vendors bid on contracts under different names, double billed TVA, or appeared to be shell companies. We noted, however, that some vendor records in Passport appeared to be inactive, and we suggested Procurement periodically purge inactive vendor records.<br><br>

At the Chief Financial Officer organization's request, we assessed the cost effectiveness of the actual travel expense reimbursement program and the Chief Operating Officer (COO) flat rate reimbursement program. We determined that the COO flat rate method of travel expense reimbursement cost about $115,000 more than the actual expense reimbursement method during a 3-month period that we reviewed.

We found no instance where TVA's external auditors' reviews of TVA interim financial information for the second quarter of FY 2005 did not comply with Government Auditing Standards in all material respects, including required communications to appropriate parties.<br><br>