Tennessee Valley Authority

The Tennessee Valley Authority (TVA) established the Center for Rural Studies in 1994 to conduct studies and programs on the needs of rural communities. TVA endowed the center with $30 million. An investigation by TVA's Office of Inspector General led to the revocation of the Center's trust agreement in 1995, and the endowment money was returned to TVA. The trust agreement initially included provisions to ensure the Center's accountability to TVA. At the direction of TVA Chairman Craven Crowell, however, these safeguards were stricken, and Crowell named himself as the Chair of the Center's Management Committee for an unlimited term. After a result of press criticism, Crowell later had the trust agreement amended. The U.S. Attorney's Office for the Eastern District of Tennessee opened an investigation but excluded TVA's Office of Inspector General because of concerns about its ability to be independent in investigating senior TVA managers. Officials at the U.S. Attorney's Office concluded that there was a prima facie case that Crowell violated the conflict-of-interest statute and that further investigation was warranted. Because the U.S. Attorney was a personal friend of Crowell, however, the matter was referred to the Justice Department. The Justice Department ultimately concluded that Crowell should not be prosecuted because he had relied upon a good faith opinion from the agency's ethics official. In Justice's view, this opinion was incorrect. The problems GAO found with the creation and operation of the Center raise concerns about the need for better oversight of TVA. For example, the Board allowed the creation of an irrevocable trust with a $30-million endowment that had little accountability to TVA. Also, TVA's Inspector General can be fired by the Board, thus limiting the Inspector General's independence. GAO has reviewed the adequacy of TVA's oversight in the past, concluded that it needed more attention, and identified ways to improve oversight and accountability. Also, proposals have come before Congress that would have created a larger Board of part-time directors responsible for policymaking and oversight of TVA management.

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.