Cost Impacts of Reorganizations at the Tennessee Valley Authority

EMD-81-54: Published: Feb 25, 1981. Publicly Released: Feb 25, 1981.

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GAO was asked to review the operating costs of some organizational units within the Tennessee Valley Authority (TVA) and to determine whether the current reorganizations are resulting in higher administrative costs and higher electric power rates. GAO reviewed the organizational changes made by TVA in fiscal years 1979 and 1980; identified and selectively evaluated increases in administrative and general expenses and other operating costs for three offices; and assessed the effect of the increases in administrative and general expenses on power production costs.

In its review, GAO found that several significant organizational changes occurred within TVA in fiscal years 1979 and 1980, including a change from 16 to 9 major offices. Additionally, administrative and general expenses of about $8 million in 1978, $11 million in fiscal year 1979, and $17 million in fiscal year 1980 were capitalized by TVA for allocation to production costs in future periods. Although some of the increases were related to the organizational changes, they were primarily attributable to higher personnel and related costs resulting from workload growth and from new and expanded functions and programs. GAO also found that administrative and general expenses, as well as overall operating costs of the three offices tested, had a negligible effect on power production costs because of their relative insignificance in comparison with other production costs.

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