Tennessee Valley Authority:

Problems With Irrevocable Trust Raise Need for Additional Oversight

OSI-00-6: Published: Feb 29, 2000. Publicly Released: Mar 30, 2000.

Additional Materials:


Robert H. Hast
(202) 512-3000


Office of Public Affairs
(202) 512-4800

Pursuant to a congressional request, GAO provided information on the Tennessee Valley Authority's (TVA) creation of the Center for Rural Studies (CRS) Trust, focusing on: (1) the significant events pertaining to the creation, funding, and operation of CRS as well as any investigations of CRS; (2) how TVA accounted for the funds returned to TVA; and (3) the oversight of TVA activities.

GAO noted that: (1) the trust agreement drafted to create CRS included safeguard provisions to ensure CRS was accountable to TVA; (2) at Chairman Craven Crowell's direction, the structure of the trust was changed and all the safeguard provisions eliminated in a revised trust agreement; (3) Chairman Crowell named himself the Chair of CRS' Management Committee for an unlimited term; (4) the TVA Office of the Inspector General (OIG) initiated an audit of CRS after receiving an allegation concerning Chairman Crowell's role in creating CRS; (5) three days after the Inspector General (IG) notified CRS Management Committee that the audit revealed possible criminal violations, CRS was terminated; (6) the U.S. Attorney's Office (USAO) for the Eastern District of Tennessee opened an investigation and decided the IG could not be independent in investigating senior TVA managers and excluded the OIG from the investigation; (7) after an 8-month investigation, USAO officials determined that there was a prima facie case that Chairman Crowell violated the conflict-of-interest statute and further investigation was warranted; (8) USAO officials felt that USAO should not continue its investigation because the U.S. Attorney was a personal friend of Chairman Crowell, and referred the matter to the Department of Justice's (DOJ) Public Integrity Section; (9) after reviewing the evidence and holding 1 day of grand jury testimony, DOJ concluded Chairman Crowell's actions as a TVA official benefited CRS and demonstrated that he had committed a technical violation of the statute, but should not be prosecuted because he had relied upon a good faith opinion from the designated agency ethics official; (10) according to DOJ, the opinion of this official was incorrect; (11) finally, DOJ reviewed information concerning double billing by CRS' President/Chief Executive Officer (CEO); (12) it declined to prosecute this matter after it concluded there was no evidence that the President/CEO had personally profited; (13) GAO determined that CRS funds were transferred to TVA after CRS was terminated, including the $30 million endowment, which was deposited into TVA's operating account and commingled with other TVA funds; (14) the problems GAO found with CRS creation and operation raise concern about the need for better oversight of TVA's activities; (15) TVA's IG can be fired by the Board, thus limiting the IG's independence; and (16) earlier GAO reviews of TVA oversight had concluded it needed greater attention, and identified options for improving oversight and accountability.

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