Concern has continually been expressed about the Tennessee Valley Authority's (TVA) internal control activities and whether TVA needs an inspector general (IG). Because of that concern, GAO was asked to: (1) assess the TVA Office of Internal Audit and Evaluation, focusing on the organizational location of this group, how it identifies and plans areas for review, whether it has access to all areas, where its reports are submitted, and whether the reports have had any impact; and (2) evaluate whether the Office of Internal Audit and Evaluation or the Audit Review Group is a viable option to an IG at TVA.

The internal audit functions of TVA have not been well planned or prioritized to assure that the right work is being done at the right time. There is no formal system to follow up on reports to ensure that recommendations are implemented. TVA has recently taken actions to improve its internal audit activities, but no actions have been taken to address these specific problems. In addition, the internal audit activities of TVA do not fulfill the role of an IG. First, IG's were established to focus on fraud, waste, and mismanagement as well as improvements in programs. Few of the past audit efforts of TVA have been directed in these areas, and there is no assurance that the efforts of the Office will be directed in these areas since it has yet to become operational. Second, IG's are totally independent and report to the head of the agency with a secondary responsibility to report to Congress. The Office reports to an assistant general manager with the option of reporting to the Board of Directors. Independence is not guaranteed because the General Manager is responsible for the day-to-day operations of TVA.

Status Legend:

Review Pending-GAO has not yet assessed implementation status.

Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.

Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.

Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.

• Review Pending
• Open
• Closed - implemented
• Closed - not implemented

Matter for Congressional Consideration

Matter: Congress should monitor the Office of Internal Audit and Evaluation's actions over the next several months in determining whether an Inspector General is needed at TVA.

Status: Closed - Implemented

Comments: When we determine what steps the Congress has taken, we will provide updated information.

Recommendation for Executive Action

Recommendation: The Chairman of TVA should require the Office of Internal Audit and Evaluation to: (1) develop, within the Office of Management and Budget policies, an annual audit plan which will prioritize planned efforts and which can act as a guide in determining the type and scope of audits to be performed; and (2) establish a formal followup system to ensure that recommendations are acted upon.

Agency Affected: Tennessee Valley Authority

Status: Closed - Implemented

Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.