TVA audits reveal excessive spending, costs

By Tory Newmyer · Chattanooga Times Free Press

In this mention

A TVA inspector general report released Monday revealed the utility wasted over $30 million in the six-month period ending March 31, 2004, including contractor overbilling, unsupported costs, and employee misconduct. Dr. Stephen Smith of the Southern Alliance for Clean Energy commented that TVA's massive spending and job cuts raise concerns about the agency's financial management. The findings come as TVA works to reduce its $25 billion debt through expense cuts and workforce reductions.

The scary thing about TVA is that they're moving so much money around, sometimes they lose track of the amounts. But these findings should be of concern to them, particularly when they're laying people off.
Stephen A. Smith

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TVA audits reveal excessive spending, costs

BY TORY NEWMYER
STAFF WRITER

The Tennessee Valley Authority wasted more than $30 million over the last six months, according to a new review by the utility's inspector general.

The report, covering Oct. 1 through March 31, was released Monday. It comes as the federal utility cuts expenses, including nearly 1,000 jobs, to reduce its $25 billion debt.

TVA Inspector General Richard Moore declined Monday to comment on his report.

Agency spokesman Gil Francis said the review is "a tool the agency can use to become more efficient."

Mr. Francis said "steps will be taken" on a case-by-case basis to address problems uncovered by the investigator's audits.

"We're looking at each individual case," he said.

Among other findings, the

BY THE NUMBERS

39: audit reports issued over the last six months
162: investigations opened
78: investigations closed
8: criminal actions taken
75: administrative actions taken

The report detailed nearly $12 million in potential savings found by audits of contractors' bids. As a result, the report said, TVA management negotiated $5.8 million in savings during the half-year period the report covers.

The amounts of wasted money the report identifies could cripple smaller companies, according to Dr. Stephen Smith of the Southern Alliance for Clean Energy, an environmental group.

"The scary thing about TVA is that they're moving so much money around, sometimes they lose track of the amounts," he said. "But these findings should be of concern to them, particularly when they're laying people off."

The agency opened 162 investigations in the last six months, according to the report, and is seeking criminal prosecutions in six cases and administrative action in 75 others.

In reviewing 14 contracts, auditors also found about $4.7 million in "ineligible and unsupported costs."

One contractor alone overbilled the agency $3 million for labor, materials, supplies and bonuses, according to the report. An audit further found the contractor, whose name was unavailable Monday, sold certain materials, supplies and equipment to the federal agency for $1.64 million before buying them back for

BY THE NUMBERS

$14.1 million: unreasonable or unsupported costs
$11.9 million: funds put to better use
$11.15 million: funds recovered or disallowed
$4.3 million: funds recovered in fines, restitution and savings

$250,000. TVA is reviewing the audit and determining how to proceed, the report stated.

Miscellaneous billing errors by another contractor cost TVA about $37,000, according to the report.

In another overbilling instance, a right-of-way maintenance contractor charged the agency $638,000 for payroll costs it could not substantiate, the report stated. An audit found that company, and another, had not paid employees as promised in contracts. The report said TVA officials planned to recover the overcharges and "require documentation to support future billings."

Also in the last six months, an Alabama man was convicted of defrauding the agency for a $100,000 loan from its minority business fund by providing false financial statements. After receiving the loan, the company filed for bankruptcy. The man was sentenced to a year and a day in prison on a felony charge and ordered to repay TVA near-

ly $96,000.

During an investigation of a child-pornography charge, federal investigators discovered "substantial misuse" of the agency's computers, including workers installing unauthorized software, chatting online for extended periods, sending sexually related e-mails and downloading sexually explicit material, the report said.

According to the report, agency officials already have responded with oral and written warnings and, in other cases, with suspensions and firings.

Another audit found eight fossil plant employees charged the agency $3,000 for pocket knives bought for personal use, including a collectible knife in a custom gift tin priced at $45.50. Agency officials issued warning letters to the workers involved and conducted training sessions to ensure workers understand TVA's procurement policy, the report said.

Another employee was fired after a federal investigation found he abused his agency-issued gas credit card for a personal windfall that cost TVA about $25,000. The worker used his card to fill up strangers' gas tanks, charging them half price for the fuel he supplied at the agency's expense.

Federal investigators said they have referred that case for possible prosecution.