L r 1 .’ 30 / REPORT TO THE CONGRESS Examination Of Financial Statements Of The Tennessee Valley Authority For Fiscal Year 1970,-,,,,,, BY THE COMPTROLLER GENERAL OF THE UNITED STATES 75bfif c *- . REPORT TO THE CONGRESS Examination Of Financial Statements Of The Tennessee Valley Authority For Fiscal Year 1970B-l,,,50 BY THE COMPTROLLER GENERAL OF THE UNITED STATES COMPTROLLER GENERAL OF THE UNITED STATES WASHINGTON. D.C. 20548 B- 114850 To the President of the Senate and the Speaker of the House of Representatives This is our report on the examination of the financial statements of the Tennessee Valley Authority for fiscal year 1970, made pursuant to the Government Corporation Control Act (31 U.S.C. 841). We have included as an appendix to this report a description of TVA’s retirement system together with financial statements and the certified public accounting firm’s opinion thereon. Copies of this report are being sent to the Director, Office of Management and Budget; the Secretary of the Treasury; and the Chairman of the Board of Directors of the Tennessee Valley Authority, z nb Comptroller General of the United States 50TH ANNIVERSARY 1921- 1971 I I COMPTROLLERGENERAL'S EXAMINATION OF FINANCIAL STATEMENTS OF REPORT TO THE CO??GRESS THE TENNESSEE VALLEY AUTHORITY FOR FISCAL YEAR 1970 B-114850 DIGEST _----- . I , VHY THE EXAIUNATION ‘WAS MADE I The Government Corporation Control Act requires the Comptroller Gen- . I I eral to audit the Tennessee Valley Authority annually. I I I I I FINDINGS AiVD CCdCLUSIONS In the opinion of the General Accounting Office, the Authority's fi- nancial statements present fairly its financial position at June 30, 1970, and the results of its operations and the source and disposition of its funds for the year then ended, in conformity with generally ac- cepted accounting principles applied on a basis consistent with that of the preceding year and with applicable Federal laws. (See p. 20.) Net income from power operations for fiscal year 1970 was $74.6 mil- lion, $24 million more than for fiscal year 1969. (See p, 6.) Of the $74.6 million, $57.6 million was paid into the U.S. Treasury as a return on the Government's investment in power facilities (see p. 8) and $15 million was paid into the U.S. Treasury as a partial repayment of the Government's investment (see p. 8) as required by section 15d of the Tennessee Valley Authority Act and the remaining $2 million in- creased proprietary capital. Operating expenses and interest charges increased during fiscal year 1970 over comparable fiscal year 1969 amounts by 13 and 35 percent, respectively. As a result, the Authority increased power rates in August and October 1970. (See p. 7.) On October 14, 1970, Public Law 91-446 was enacted, which increased the amount of bonds, notes, and other evidence of indebtedness which the Authority may have outstanding at any one time from $1.75 billion to $5 billion. (See p. 9.) During fiscal year 1970, power-revenue bond sales of $300 million were made at effective interest rates ranging from 8.3 to 9.3 percent. (See p. 9.) The aggregate net power income for the latest 5 fiscal years was about $2 million less than required under the Basic Bond Resolution to en- able the Authority to increase the amount of bonds outstanding. As Tear Sheet 1 I I a result, the Authority may issue only short-term securities during fiscal year 1971. (See pp. 9 and 10.) The third Paradise steam unit in western Kentucky began commercial op- eration in February 1970. (See p. 12.) The Authority now expects to begin operating its first nuclear power generating unit at Browns Ferry, Alabama, in April 1972, although originally planned for operation in fiscal year 1970. (See pa 12.) Construction was started during the year on a new pumped-storage plant. During off-peak power usage periods, water will be pumped into a moun- taintop reservoir. Electricity generated when the water is released will help meet peak-period loads. (See p. 12.) The quantity of coal available in the Authority's supply area declined to an all-time low and prices reached an all-time high in fiscal year 1970. The Authority's efforts to ensure adequate coal supplies in- cluded visiting coalfields to seek new sources of supply and obtaining advance deliveries of coal. (See pp. 12 to 14.) Pollution control and abatement activities during fiscal year 1970 cost $30.3 million. TVA estimates that these activities will cost $38 mil- lion during fiscal year 1971. This program is concentrated largely on problems caused by the Authority's operations, such as emissions from s%eamplant stacks and warmwater discharges from steam plant cooling systems. (See pp. 1% to 18.) RECOkPlENDATIONSOR SUGGESTIONS None. AGENCY ACTIONS AND UNRESOLVEDISSUES MATT!YRSFOR CONSIDERATION BY THE CONGRESS This report contains no recommendations or suggestions requiring action by the Congress. It is submitted to the Congress, as required by the Government Corporation Control Act, to disclose the results of the an- nual audit of the Authority's financial statements and such other in- formation deemed necessary to keep the Congress informed of the opera- tions and financial conditions of the Authority. 2 Contents Page DIGEST 1 CHAPTER 1 INTRODUCTION 3 2 GENERALCOMMENTS 5 Power operations 5 Fiscal year 1971 rate increases 7 Proprietary capital and payments to the Treasury of the United States 8 Borrowing authority 9 Fiscal year 1971 security sales 9 Construction program 11 Coal procurement 12 Environmental quality activities 15 Air quality 15 Water quality 17 3 SCOPEOF EXAMINATION 19 4 OPINION OF THE FINANCIAL STATEMENTS 20 EXHIBIT I Balance sheets, June 30, 1970, and 1969 25 II Power program, net income and retained earnings for the years ended June 30, 1970, and 1969 27 a III Nonpower programs, net expense and accu- mulated net expense for the years ended June 30, 1970, and 1969 28 IV Source and disposition of funds for the years ended June 30, 1970, and 1969 30 Notes to financial statements 31 SCHEDULE Page A Completed plant, June 30, 1970 37 B Construction and investigations in progress, June 30, 1970 38 C Details of power expense for the year ended June 30, 1970 39 D Details of nonpower net expense for the year ended June 30, 1970 40 E Operating expenses of multiple-use facili- ties for the year ended June 30, 1970 44 F Administrative and general expenses for the year ended June 30, 1970 45 APPENDIX 1 Retirement system of the Tennessee Valley Authority 50 l3.t.u British thermal unit TVA Tennessee Valley Authority COMPTROLLERGENERAL'S EXAMINATION OF FINANCIAL STATEMENTS OF RZPORT TO ?.'HE CONGRESS THE TENNESSEE VALLEY AUTHORITY FOR FISCAL YEAR 1970 B-114850 DIGEST ----we WHY THE EXAMZNATION'WAS MADE The Government Corporation Control Act requires the Comptroller Gen- eral to audit the Tennessee Valley Authority annually. FINDINGS AND C~dCLUSIONS In the opinion of the General Accounting Office, the Authority's fi- nancial statements present fairly its financial position at June 30, 1970, and the results of its operations and the source and disposition of its funds for the year then ended, in conformity with generally ac- cepted accounting principles applied on a basis consistent with that of the preceding year and with applicable Federal laws. (See p. 20.) Net income from power operations for fiscal year 1970 was $74.6 mil- lion, $24 million more than for fiscal year 1969. (See p. 6.) Of the $74.6 million, $57.6 million was' paid into the U.S. Treasury as a return on the Government's investment in power facilities (see p. 8) and $15 million was paid into the U.S. Treasury as a partial repayment of the Government's investment (see p. 8) as required by section 15d of the Tennessee Valley Authority Act and the remaining $2 million in- creased proprietary capital. Operating expenses and interest charges increased during fiscal year 1970 over comparable fiscal year 1969 amounts by 13 and 35 percent, respectively. As a result, the Authority increased power rates in August and October 1970. (See p. 7.) On October 14, 1970, Public Law 91-446 was enacted, which increased the amount of bonds, notes, and other evidence of indebtedness which the Authority may have outstanding at any one time from $1.75 billion to $5 billion. (See p. 9.) During fiscal year 1970, power-revenue bond sales of $300 million were made at effective interest rates ranging from 8.3 to 9.3 percent. (See p. 9.) The aggregate net power income for the latest 5 fiscal years was about $2 million less than required under the Basic Bond Resolution to en- able the Authority to increase the amount of bonds outstanding. As 1 a result, the Authority may issue on1 short-term securities during fiscal year 1971. (See pp. 9 and 10. 3 The third Paradise steam unit in western Kentucky began commercial op- eration in February 1970. (See p. 12.) The Authority now expects to begin operating its first nuclear power generating unit at Browns Ferry, Alabama, in April 1972, although originally planned for operation in fiscal year 1970. (See p. 12.) Construction was started during the year on a new pumped-storage plant. During off-peak power usage periods, water will be pumped into a moun- taintop reservoir. Electricity generated when the water is released will help meet peak-period loads. (See p. 12.) The quantity of coal available in the Authority's supply area declined to an all-time low and prices reached an all-time high in fiscal year 1970. The Authority's efforts to ensure adequate coal supplies in- cluded visiting coalfields to seek new sources of supply and obtaining advance deliveries of coal. (See pp. 12 to 14.) Pollution control and abatement activities during fiscal year 1970 cost $30.3 million. TVA estimates that these activities will cost $38 mil- lion during fiscal year 1971. This program is concentrated largely on problems caused by the Authority's operations, such as emissions from steam plant stacks and warmwater discharges from steam plant cooling systems. (See pp. 15 to 18.) RECOMMi7NDATIONS OR SUGGESTIONS None. AGENCYACTIONSAlVDUNRESOLVED ISSUES None. MATTERSFOR CONSIDERATION BY TEE CONGRESS This report contains no recommendations or suggestions requiring action by the Congress. It is submitted to the Congress, as required by the Government Corporation Control Act, to disclose the results of the an- nual audit of the Authority's financial statements and such other in- formation deemed necessary to keep the Congress informed of the opera- tions and financial conditions of the Authority. 2 CHAPTER1 INTRODUCTION The General Accounting Office has examined the finan- cial statements of the Tennessee Valley Authority (TVA) for the fiscal year ended June 30, 1970. A description of TVA's retirement system, together with related financial statements and the certified public accounting firm's opinion thereon, is included in the ap- pendix. The Tennessee Valley Authority Act of May 18, 1933 (48 Stat. 58; 16 U.S.C. 831) created TVA, a Government cor- poration, to provide for the unified development of the Ten- nessee River system. TVA's functions include both the power program and nonpower.programs, such as flood control, navigation, and fertilizer and munitions development. TVA expects that increasing power demands in the Ten- nessee Valley region will require a doubling of capacity in the next decade. During fiscal year 1970, 19.4 million kilowatts of generating capacity were in service and 10 mil- lion kilowatts of capacity were under construction. In- creasing construction and operating costs, coal shortages, and construction slippages hampered the power program dur- ing the year, and TVA expects these problems to continue. At the end of fiscal year 1970, TVA had about 22,200 employees-- an increase of about 2,700 over the previous year. According to TVA, the increase resulted primarily from the accelerated power construction program. A three-man Board of Directors manages TVA, Members are appointed to g-year terms, which expire at 3-year inter- vals, by the President of the United States with the advice and consent of the Senate, Board members at June 30, 1970, and the expiration dates of their terms are: Aubrey J. Wagner, Chairman May 18, 1978 Frank E. Smith, Director II 81 1972 Don McBride, Director I? 11 1975 CHAPTER2 GENERALCOMMENTS In addition to providing for our examination of the financial statements, the Government Corporation Control Act (31 U.S.C. 841) provides for the Comptroller General to include in his annual report on the audit of each Government corporation such other information and comments as may be appropriate to keep the Congress informed of the financial condition and operations of each such corporation. There- fore we are including in the following sections of this re- port, information and comments on matters which we believe may be of interest to the Congress. POWEROPERATIONS TVA supplies power, at wholesale, to 160 municipal and cooperative electric systems and one small privately owned system, which distribute power to'more than two million customers in parts of seven States. Power is also sold di- rectly to 46 industrial power consumers having large or un- usual power requirements and to several Federal atomic, aerospace, and military installations. Section 14 of the TVA Act requires that power accounts be kept in accordance with the uniform system prescribed for electric utilities by the Federal Power Commission. Operat- ing results of the power program for fiscal year 1970 are shown in exhibit II of the financial statements. The results are summarized and compared with those of fiscal year 1969, as follows: I 5 Percent ' in- 1970 1969 crease Operating revenues: Sales of electric energy $461,477,970 $388,099,883 19 Rents and other revenues 18.137.729 15,181,053 19 Total operating revenues 479,615,699 403,280,936 19 Operating expenses 374.214.625 329,822,456 13 Operating in- come 105,401,074 73,458,480 43 Interest income 15,360a Total income 105,416,434 73,458,480 44 Interest charges 30,799,564 22,768,320 35 Net income 74,616,870 50,690,160 47 Payment of return on appropriation in- vestment 57,648,798 53.082.238 9 Increase or de- crease(-) in retained earn- ings $ 16,968,072 $ -2,392,078 aIncome on temporary investments, Substantially greater revenues were realized in fiscal year 1970 than in fiscal year 1969, because (1) more elec- tricity was sold during 1970 and (2) the average rate charged for electricity was higher during 1970. In March 1969 TVA increased the rates charged to consumers to help meet higher costs. Automatic adjustment provisions to cover increases in TVA's cost of fuel and borrowing money were put into effect in August 1969. 6 Operating and interest costs during 1970, however, were significantly higher than during 1969. TVA informed us that these costs were greater than anticipated. Also TVA bought more electrical power from other power producers than it sold to power producers during the year at a net cost of $9.6 million. FISCAL YEAR 1971 BATE INCREASES The act requires that TVA sell power at rates as low as feasible and yet adequate to maintain the financial soundness of the power program. Operating expenses and interest charges increased during fiscal year 1970 over comparable fiscal year 1969 amounts by 13 and 35 percent, respectively, According to TVA, these cost increases necessitated rate increases in fiscal year 1971. The rate increases, which TVA expects will provide an increase in revenue of about 23 percent, were effective in two increments --on August 1 and October 2, 1970. The Au-' gust increase was based on existing rate schedules which provided that higher rates be effective automatically on August 1, 1970, in response to rises in the cost of fuel and money. Since the automatic, August adjustment failed to provide revenues sufficient to cover the rapid increases in TVA op- erating costs, it had to be supplemented by a substantial increase in power rates on October 1 to obtain the additional revenues needed to meet rising costs, TVA and the distribu- tors agreed at that time to substitute a quarterly review procedure for the automatic annual adjustment. Under the new procedure TVA's prospective power revenues and expenses are reviewed at the end of each 3-month period by a committee representing the distributors. The TVA Board then determines whether a rate adjustment--upward or down- ward--will be needed. PROPRIETARYCAPITAL AND PAYMENTSTO THE TREASURYOF THE UNITED STATES From the inception of TVA in 1933 to June 30, 1970, the United States made available to TVA $2,567 million in propri- etary capital through appropriations, bond purchases, and property transfers. During the same period, TVA repaid $417 million to the U.S. Treasury, retained earnings of $661 million from its power programs and incurred net ex- penses of $454 million on its other programs. At June 30, 1970, the Government's proprietary capital in TVA was $2,358 million, Under section 15d of the TVA Act, as added by Public Law 86-137 on August 6, 1959, TVA is required to repay each year into the Treasury part of the net appropriation invest- ment in power facilities and pay a return on the outstanding investment. Beginning with fiscal year 1961, repayments to the Treasury are required, as follows: $10 million annually for the first 5 years, $15 million annually for the next 5 years, and $20 million annually thereafter until a total of $1 billion has been repaid. Although the Board of Directors may defer the payments for 2 years, this option has not been exercised. TVA had repaid $125 million to the Treasury un- der this provision at June 30, 1970, and about $292 million prior to fiscal year 1961. The required payment to the Treasury of an annual re- turn on the net appropriation investment in power facilities is based on the average interest rate payable by the Treasury on its total marketable public obligations at the beginning of the fiscal year and on the unrepaid appropriation invest- ment as of the same time. The 10 annual payments of the re- turn on the appropriation investment that had been made as of June 30, 1970, amounted to $448.2 million and included a payment of $57.6 million in fiscal year 1970. During fiscal year 1971, TVA will be required to pay into the Treasury from power proceeds $20 million as a re- payment of the appropriation investment and $65.1 million as a return on the investment. Computation of the return was based on the unrepaid appropriation investment of $1,088 million at July 1, 1970, and on the average Treasury interest rate of 5.986 percent at that date. BORROWING AUTHORITY TVA is authorized, under section 15d of the act, to issue and sell bonds, notes, and other evidence of indebt- edness to assist in financing its power program, Prior to the enactment of Public Law 91-446 on October 14, 1970, the amount outstanding at any one time was not to exceed $1.75 billion. Public Law 91-446 increased this limit to $5 billion. Section 15d provides that the time of issuance and max- imum interest rates to be borne by the obligations are sub- ject to approval by the Secretary of the Treasury, who is authorized to purchase TVA interim obligations up to $150 million outstanding at any one time. Debt service on these obligations is payable solely from TVA's net power proceeds and has precedence over repayments of the appropriation in- vestment and payments of a return on investment made to the Treasury. Bond sales, which began in 1960, totaled $675 mil- lion as of June 30, 1970. Of this amount, power-revenue bond sales of $300 million were made in fiscal year 1970 at effective interest rates ranging from 8.3 to 9.3 percent. Short-term power notes , generally maturing in about 4 months, were sold on a competitive-bid basis during the fiscal year to various underwriters at an average interest rate of 8.172 percent. At June 30, 1970, TVA had short-term notes outstanding of $321 million, a decrease of $31.7 mil- lion from the amount outstanding at the beginning of the fiscal year. Advances from the Treasury, under provisions of section 15d of the act, were obtained at an average interest rate of 7.303 percent for the year. TVA had advances outstanding of $100 million from the Treasury at June 30, 1970. FISCAL YEAR 1971 SFCURITY SALES Under section 3.4 of the Basic Tennessee Valley Author- ity Power Bond Resolution, adopted October 6, 1960, TVA's net power income for the latest 5 fiscal years must have ag- gregated at least $200 million before the amount of bonds outstanding might be increased. Moreover,that minimum re- quirement is increased by $15 million for each one quarter 9 of 1 percent (or major fraction thereof) by which the aver- age interest rate that TVA is required to use in calculating the annual return on the net appropriation investment in power has exceeded 3-l/4 percent during those 5 years. TVA failed to meet this requirement for the 5-year period ended June 30, 1970, as shown below, and, as a result may issue only short-term securities during fiscal year 1971. Amount (000 omitted) Required aggregate income: Minimum $200,000 Additional requirement 75,000a . $275,000 Net power income: Fiscal year: 1966 $ 47,889 1967 40,746 1968 59,082 1969 50,690 1970 74,617 $273,024 aThe applicable interest rate was 4.418. Therefore the ad- ditional requirement was 5 times $15 million, or $75 mil- lion. 10 CONSTRUCTION PROGRAM At June 30, 1970, TVA's gross investment in fixed as- sets for all programs-- including construction and investi- gations in progress--was $4,423 million, During fiscal year 1970, additions to construction in progress amounted to $357.5 million and transfers to completed plant amounted to $253.5 million. A summary of additions to construction in progress during the year follows. Direct power: Generating facilities: Nuclear plants: Browns Ferry--3 units $116,183,736 Sequoyah--2 units la,427,474 $134,611,210 Coal-fired steam plants: Paradise--l unit (in commercial operation) 14,277,420 Cumberland--2 units 100,613,282 114,890,702 Pumped-storage plant: Raccoon Mountain--4 units 3,170,247 Transmission lines, substations, and other facilities 76,644,465 Total direct power 329,316,624 Multipurpose facilities: Tellico Dam and Reservoir 6,090,303 Tims Ford Dam and Reservoir 9,591,653 Upper French Broad water control system 45,381 Bear Creek water control system 448,258 Other 609,355 16,784,950 Chemical plant 2,925,078 Land Between the Lakes and other recreation and educational facilities 3,296,427 Navigation facilities 418,733 General plant and equipment 4,827,015 Total additions to construction in progress in fiscal year 1970 357,568,827 Less reduction due to write-off of prior-year costs of flood control facilities -44,542 Net additions to construction in progress in fiscal year 1970 $357,524,285 11 According to TVA's original plans9 one or more of the eight nuclear and coal-fired units were scheduled to go into operation in each of the 5 succeeding years beginning with 1970. In February 1970, the third Paradise steam unit in western Kentucky began commercial operation, The first of the nuclear units at Browns Ferry was scheduled to begin operation in 1970, the second in 1971, and the third in 1972. The units are now scheduled to go into operation in April 1972, January 1973, and October 1973, respectively. According to TVA, construction at the Cumberland steam plant is on schedule and the units are expected to be in op- eration in July 1972 and April 1973. The two Sequoyah nu- clear units are scheduled for operation in April and Decem- ber 1974. Construction continued on the Tims Ford Dam which is scheduled for operation in 1971. In addition to expansion of extra-high-voltage trans- mission lines and substations to facilitate increased power interchange and effect peak-load economies, TVA started con- struction of the Raccoon Mountain pumped-storage plant. During off-peak power usage periods, water will be pumped from the Tennessee River into a mountaintop reservoir, Electricity generated when the water is released will help meet peak-period loads. Also gas turbines to be installed at the Allen steam plant had been ordered, as of the end of fiscal year 1970, for use during periods of peak power demands and emergency conditions. TVA expects these to be operational by the sum- mer of 1971. Because of limited funds, construction on the Tellico Dam and Reservoir was limited primarily to land acquisition and road. and bridge relocation. Modernization of chemical facilities and construction of facilities for the recreation project, Land Between the Lakes, were continued during fis- cal year 1970. COAL PROCUREMENT TVA officials advised us that the quantity of coal available in TVA's supply area declined to an all-time low 12 and prices reached an all-time high in fiscal year 1970. Stockpiles decreased from 4.4 million tons on June 30, 1969, to 2.9 million tons on June 30, 1970. On January 21, 1971, 4.4 million tons of coal were stockpiled. Over 32 million tons of coal were burned during the fiscal year. To provide for its coal needs, TVA makes term, spot, and emergency purchases of coal. Term purchases are made under normal bidding procedures, and contracts for such purchases call for regular deliveries over periods of at least 6 months and usually longer than 1 year. Spot pur- chases are similar to term purchases except that the deliv- ery period may not exceed 4 weeks. For emergency purchases contracts are negotiated, rather than advertised, and usu- ally the delivery period is 6 months or less. TVA consid- ers an emergency to exist when the coal stockpiled at any one steam plant is insufficient for 60 days of continuous operation. Because of the decline in coal stockpiles and because of poor response to invitations to bid on term purchases, TVA negotiated 42 contracts for emergency purchases during fiscal year 1970 compared with six contracts for emergency purchases in fiscal year 1969. The statistics on the method of coal procurement under contracts awarded in fiscal years 1969 and 1970 for power operations are shown below. Tons Method (millions) Percent 1969 Term 158.0 98.9 Emergency 0.9 0.6 spot 0.8 0.5 Total 159.7 100.0 1970 Term 46.1 91.3 Emergency 3.8 7.5 spot 0.6 1.2 Total 50.5 100.0 13 TVA indicates that there is a coal supply shortage caused by such factors as the coal industry's not develop- ing new coal mines to meet increased demands for coal, in- creased competition for the available coal supply, shortage of railroad coal cars and trained miners, wildcat strikes, equipment breakdowns, and adverse mining conditions. Ac- cording to TVA, the coal supply shortage resulted in rap- idly increasing prices. In addition, TVA pointed out that price increases under escalation provisions of existing contracts and increases in transportation costs also con- tributed to higher coal costs. Most of TVA's contracts for term purchases provide for price escalation based on the Bureau of Labor Statistics Index of Wholesale Prices, All Commodities, During fiscal year 1970, the value of the index increased 3.4 percent, Consequently, prices for coal purchased under these con- tracts increased about $56,000. Several of TVA's coal suppliers have made claims for price increase adjustments under the gross inequities clause, the renegotiation clause, or other clauses of their contracts. During fiscal year 1970, TVA reached agreement with several suppliers for price increases ranging from 9 cents to $1.69 a ton. Usually TVA was able to negotiate amendments to contracts and to reschedule excusable delivery deficiencies when otherwise the coal would not have been delivered because of cancellation of the contracts. TVA's efforts to ensure adequate coal supplies included visiting coalfields to seek new sources of supply and ob- taining advance deliveries of coal. In addition, TVA nego- tiated a contract with a coal producer for the mining of about 1.5 million tons of coal from TVA-owned reserves. Also TVA entered into two long-term contracts under which it guaranteed payments on the producers' capital invest- ments. In return for TVA's guarantee of principal and in- terest on notes of $25 million, TVA received liens on the producers' equipment. The contracts call for the delivery of 2.35 million tons of coal a year for 17 years. 14 ENVIRONMENIXLQUALITY ACTIVITIES Research, monitoring, and surveillance of environmental quality of the Tennessee Valley are coordinated with pro- grams of Federal and State pollution control agencies. TVA's program, however, is concentrated largely on problems caused by its own operations, such as emissions from steam plant stacks and warmwater discharges from steam plant cool- ing systems. TVA's pollution control and abatement activities, dur- ing fiscal year 1970, cost $30.3 million. TVA estimates that these activities will cost $38 million during fiscal year 1971. The nature and cost of such activities and the source of funds used during fiscal year 1970 are as follows: Remedial action to control pollution at TVA facilities (largely electrostatic precipitators, see p. 16) $25,676,000 Research, development, and demonstra- tions 3,122,OOO Monitoring and surveillance of pollution sources 1,155,ooo Assistance to State, local, and interstate agencies 316,000 Laboratory equipment and facilities 75,000 Total $30,344,000 Source of funds: Power program $26,158,000 Appropriations 1,855,OOO Reimbursements from others 2,331,OOO Total $30,344,000 Air quality All 11 coal-fired power plants in TVA's power system are equipped either with cyclone furnaces which discharge about 30 percent of the ash produced during combustion as fly ash or with pulverized fuel furnaces which discharge over half of the ash produced as fly ash. The remaining ash stays in the furnaces as bottom slag. 15 TVA plants built in the 1950's had mechanical fly ash collectors capable of removing about two thirds of the fly ash produced. This equipment met prevailing air-quality standards at the time of construction, but the rapid growth of power generation and the advent of more stringent State. air-quality standards required better ash collection methods. In 1960, TVA began adding more efficient electrostatic pre- cipitators at an estimated cost of $100 million. TVA esti- mated that, of 3.2 million tons of fly ash generated at its power plants in 1969, about 0.6 million tons were released into the atmosphere, an ash removal efficiency of 81 percent. TVA estimates that by 1975 only 2 percent of the fly ash gen- erated will be released into the atmosphere, if all equip- ment being installed meets specifications. In addition to producing fly ash, the burning of coal produces significant quantities of gaseous sulfur dioxide. TVA estimates that in 1969 its power plants released 1.8 mil- lion tons of sulfur dioxide into the atmosphere. Pending the development and application of more effective processes, high stacks have been used to disperse the gas and thus limit its concentration at ground level. With few exceptions the use of tall stacks has been ef- fective in preventing significant vegetation damage, but the construction of larger units and the trend toward more strin- gent air-quality standards have led to long-range plans for developing sulfur dioxide removal systems. TVA plans to in- stall a research and demonstration wet limestone scrubber system for sulfur dioxide removal on a unit at the Widows Creek steam plant at a projected cost for the unit of more than $10 million. In addition to its programs, TVA for several years has been carrying out studies and tests of sulfur dioxide re- moval processes under the sponsorship of the National Air Pollution Control Administration. Full-scale tests at the Shawnee steam plant of a dry limestone injection process and additional research are expected to cost $7.3 million over a 3-year period. TVA hopes to incorporate advances in tech- nology resulting from the studies and tests at Shawnee into the wet limestone scrubber unit planned for the Widows Creek plant. 16 Water quality Steam plant electric power production involves the dis- posal of large amounts of waste heat into cool water circu- lating through heat exchangers. For each kilowatt-hour of electrical energy produced in a modern coal-fired plant, about two thirds of the heat from the coal is waste heat, most of which must be dissipated- in cool water. Nuclear plants are expected to produce about 40 percent more waste heat than coal-fired plants. Since 1955 TVA has been studying the distribution of heated-water discharges into streams and reservoirs from its coal-fired plants. The first plants presented few problems since their discharges were relatively small compared with the size of receiving streams. Larger discharges of waste heat evolved with the increased production of electricity and the use of larger generating units. For example, the Watts Bar plant, placed in operation during the 1940's, has a generating capacity of 240,000 kilowatts and uses 280,800 gallons of cooling water a minute to dissipate the 24.7 mil- lion B.t.u.'sl of waste heat a minute. In contrast, the Browns Ferry nuclear plant will have a generating capacity of 3.5 million kilowatts and will use 1.8 million gallons of cooling water a minute to dissipate 370 million B.t.u.'s of waste heat a minute. TVA advised us that the standards for stream tempera- ture for the design of water-cooling equipment at the Browns Ferry nuclear plant and subsequent plants used by TVA are predicated to some extent on the standards which the Federal Water Quality Administration approved for the State of Geor- gia in 1967. In 1969, according to TVA, the Administration approved more stringent standards for two other States--Vir- ginia and North Carolina. TVA has no thermal power plants in these three States where water temperature standards have 1A British thermal unit is the amount of heat required to raise the temperature of 1 pound of water lo F. at or near its point of maximum density. 17 been approved. A TVA official has informed us that TVA will, in every case, do what is required to meet applicable State standards when they are formally established. The Federal Water Quality Administration and TVA are planning a $2.4 million research project at the Browns Ferry nuclear plant to study thermal pollution effects on aquatic life. Eight naturalistic stream channels are planned, each varying in depth from 1 to 4 feet. Two channels will serve as biological controls, and the other six channels will con- tain water at temperatures above that in the control chan- nels. TVA officials stated that results from this project should contribute greatly to the knowledge of actual effects of heated discharges on aquatic life. TVA also conducts projects and sponsors research at various schools on methods of controlling aquatic plants. The luxuriant growth of aquatic plants sometimes forms dense mats of plants in shallow water, which block small boats and swimmers, clog water intakes at steam plants, and create hab- itats for mosquito breeding. TVA began a program on environmental radioactivity mon- itoring at Browns Ferry early in 1968. This program will provide a continuing check on the effectiveness of controls incorporated into the plant's design and operation in con- trolling the levels of radioactivity in the atmosphere, earth, and aquatic environments. 18 CHAPTER3 SCOPEOF EXAMINATION Our examination of TVA's balance sheet as of June 30, 1970, and the related statements of power and nonpower pro- grams and of source and disposition of funds for the year then ended was made in accordance with generally acceIfted auditing standards and included such tests of the account- ing records and such other auditing procedures as we con- sidered necessary in the circumstances. ':i I As provided by section 15d(c) of the TVA Act, TVA em- ploys a firm of certified public accountants to audit its accounts and financial statements for each fiscal year, to facilitate TVA's issuance and sale of revenue bonds, The audit does not take the place of that required of our Office under the Government Corporation Control Act. Cur audit included observations and tests of the firm's audit work. 19 CHAPTER4 OPINION OF THE FINANCIAL STATEMENTS The financial statements (exhibit I through IV and schedules A through F) were prepared by TVA. In our opinion, these financial statements present fairly TVA's financial position at June 30, 1970, and the results of its operations and the sources and disposition of its funds for the year then ended, in conformity with generally accepted account- ing principles applied on a basis consistent with that of the preceding year and with applicable Federal laws, The public accounting firm's opinion on the financial statements follows. 20 LYBRA?VD,ROSSBROS.&MONTGOMERY CERTIFIED PUBLIC ACCOUNTANTS COOPERS r: LYRRAND IN P*INCIP*L AFlEA5 OF THE W09LO To the Board of Directors of Tennessee Valley Authority: We have examined the accompanying financial statements of TENNESSEEVALLEY AUTHORITY at June 30, 1970 and 1969 and for the years then ended. Our examination was made in accordance with gener- ally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, Exhibits I, II, III and IV of the aforemen- tioned financial statements present fairly: (1) the financial position of the Authority at June 30, 1970 and 1969, and the results of operations and source and disposition of funds of its several programs for the years then ended; and (2) the assets and liabilities of the Authority at June 30, 1970 and 1969, relating to the power program, and the results of operations and source and disposition of funds of that program for the years then ended, all in conformity with generally accepted accounting principles applied on a consistent basis. The supplemental information appearing in Schedules A to F, inclusive, which has been subjected to audit procedures applied in the examination of the basic financial statements, is, in our opinion, fairly stated in relation to the basic financial statements taken as a whole. New York, August 28, 1970. 21 -CIAL STATEMENTS 23 TENNESSEE VALLEY AUTHORITY (A CORPORATION WHOLLY OWNED By THE UNITED STATES OF AMERICA) BALANCE SHEETS JUNE 30. 1970 AND 1969 ASSETS Power program All programs 1970 1969 1970 1969 ( Thousands ) PROPERTY,PLANT, AND EQUIPMENT, substantially all at original cost Completed plant; schedule A Multipurpose dams; note 1 $ 478,167 $ 477,324 $ 961,970 $ 955,403 Single-purpose dams 62,891 61,204 62,891 61,204 Steam production plants 1,686,930 1,516,730 l&86,930 1,516,730 Other electric plant 974,870 922,046 gi'4,87o 922) 046 Other plant 161,851 3,202,858 29977,304 3,848,512 -+? 3,610, 62 Less accumulated depreciation; note 2 924,447 855,979 2,278,411 2,121,325 Construction and investigations in progress; schedule B and note 3 481,918 386,354 549,557 445,264 Nuclear fuel in process of fabrication; note 4 24,807 13,230 24,807 13,230 Total property, plant, and equipment 2,785,136 2,520,909 3,378,266 3,097,978 CURRENTASSETS Cash 42,384 23,275 64,210 44,928 U. S. Treasury bills, at cost (approximates market) 15,982 15,982 Total cash and investments 58,366 23,275 80,192 %928 Accounts receivable 45,853 36,519 50,562 41,295 Inventories , principally at average cost; note 4 37,507 44,214 43,044 50,541 ' Total current assets 141,726 104,008 173,798 136,764 ' DEFERREDCR4.RGES Unamortized debt discount and expense 7,078 7,063 7,078 7,063 Total assets $2,933,940 $2,631,980 $3,559,142 $3,241,805 Notes 1 through 8 following the exhibits are an integral part of the financial statements. *Deduct EXHIBIT I LIABILITIES Power program All programs 1970 1969 1970 1969 (Thousands) I PROPRIETARYCAPITAL Appropriation investment; note 5 Total congressional appropriations $19377,545 $1,376,237 &449,944 $2,399,3@' Transfers of property from other Federal agencies Less repayments to General Fund of the U. S. Treasury; note 6 3lO,O59 295,059 351,601 336,593 Appropriation investment 1,088,315 1~01,850 2~50,781 2,113,248 Retained earnings of power program; exhibit II 660,879 643,911 660,879 643',911 Accumulated net expense of nonpower programs; exhibit III 454,026* 418,020* Total proprietary capital 1,749,194 1,745,761 2,357,634 2,339,w LONGTERM DEBT; note 7 675,000 375,000 675,000 375,000 SHORT-TERMNOTES; note 7 421,000 452,655 421,000 452,655 OTHERCURRENTLIABILITIES Accounts payable 69,268 43,980 76,251 52,262 IQnployees' accrued leave 7,641 7,510 15,370 15,015 Payrolls accrued 3,531 2,323 4,581 2,983 Interest accrued 8,244 3,819 8,244 3,819 B . Total other current liabilities 87,684 57,632 104,446 74,079 z. 9 DEZTRREDCREDITS Unamortized debt premium 303 183 303 183 CONTRIBUTIONSIN AID OF CONSTRUCTION 759 749 759 749 COMMILitBWrE; note 3 Total liabilities $2,933,940 $2,631,980 $3,559,142 $33241,805 25 EXHIBIT II TENNESSEE VALLEY AUTHORITY POWER PROGRAM NET INCOME AND RETAINED EARNINGS FOR THE YEARS ENDED JUNE 30. 1070 AND 1969 Kwh Amount Kwh Amount (Thousands) OPERATING REXRNGKS Sales of electric energy Municipalities and cooperatives 53,692,918 $285,483 49,008,196 $222,235 Federal agencies 13,069,614 59,426 14,826,9W 63,570 Industries 22,012,611 105,995 20,568,110 92,239 Electric utilities 1,273,680 1,300,494 Total outside sales 90,048,823 859703,709 Interdivisional Total sales of electric energy Rents Total operating revenues 2% 3,2 1 OPERATING EKPENSES;schedule C Production 246,071 yx$ Transmission 15,085 Customer accounts 335 '304 Demonstration of power use 1,060 1,022 Administrative and general 18,043 15,551 Payments in lieu of taxes 16,098 14,510 Social security taxes 2,456 2,198 Provision for depreciation 75-067 1 672 Total operating expenses 37&5 &%3 A Operating income 105,401 73,458 INTERESTINCOME 15 Total income 105,416 73,458 INTERESTCHARGES Interest on long-term debt 30,721 14,797 Other interest expense 31,559 23,924 Amortization of long-term debt discount, premium, and expense, net 71 83 Interest charged to construction and nuclear fuel; note 4 31,552* 16 036+ Total interest charges 30,799 22,768 Net income 74,617 50,690 Payment of return on appropriation investment; note 6 57,649 53,082 Increase or decrease* in retained earnings 16,968 2,392* Retained earnings at beginning of period 643,911 646,303 Retained earnings at end of period $66~879 - $643,911 Notes 1 through 8 following the exhibits are an integral part of the financial statements. *Deduct 27 EXHlBlT .I11 Page 1 TENNESSEE VALLEY AUTHORITY NONPOWER PROGRAM§ NET EXPENSE AND ACCUMULATED NET EXPENSE FOR THE YEARS ENDED JUNE 30. 1970 AND 1969 1970 1969 (Thousands) WATERRESOURCES DEVELOPMENT Navigation operations Studies and investigations Operation and maintenance of facilities $ 2 2: $ 2 2: Provision for depreciation 2:751 2:723 Total expense of navigation operations 5,745 5,721 Flood control operations Studies and investigations 699 700 Operation and maintenance of facilities 2,198 2,181 Local flood control improvements 906 331 Provision for depreciation 1,264 1.240 Total expense of flood control operations 5,067 k’+%’ Regional water quality management 1,389 u77 Fish and wildlife development 306 287 Surveys and general studies for river development 868 Recreation projects E; 506 Total expense of water resources development 13,937 13,111 FERTILIZER AND MUNITIONSDEVELOPMENT Developmental production Cost of products distributed, including depre- ciation and depletion of $l,843,oOo in 1970, $1,674,000 in 1969 22,912 20,643 General expenses Retirements of manufacturing plant and equipment Other general expenses Total general expenses z!i3 -%5- 2,469 -+d 1 Total production expense s&r5 2&i Less transfers and sales of products Transfers to TVA programs, at market prices Fertilizer industry demonstrations Farm test demonstrations 14fz YE Agricultural projects 453 508 Other 38 0 -8 13,95 Direct sales 1?291 Total transfers and sales 17,22 -3 ii$z Net expense of developmental production 7,291 7,783 Fertilizer introduction Fertilizer industry demonstrations Fertilizers used 14,877 Educational distribution expense 1 14 -5-t Less industry payments for fertilizer f4sz6 -i@3 28 EXHIBIT .I11 Page 2 TENNESSEE VALLEY AUTHORITY NONPOWER PROGRAMS NET EXPENSE AND ACCUMULATED NET EXPENSE FOR THE YEARS ENDED JUNE 30. 1970 AND 1969 1970 1969 (Thousands) FERTILIZER AND MUNITIONSDEVELOPMENT - continued Fertilizer introduction - continued Farm test demonstrations outside the Valley Fertilizers used $ 423 $ 410 Planning and supervision 509 510 932 920 Less farmer payments for fertilizer -+% -+f Net expense of fertilizer introduction 2,497 2,279 Research and development 4,674 4,468 Net expense of fertilizer and munitions development 14,462 14,530 GENERALRESOURCES DEVELOPMENT Agricultural projects Fertilizers used 453 508 Planning and supervision +4 -T-E Less farmer payments for fertilizer '293 A$ Development investigations and general expenses '327 -Tz Net expense of agricultural projects 1,346 1,488 Forestry projects 995 987 Tributary area development 1,362 1,175 Regional development planning 8% 299 Demonstrations in education and manpower development 40 Minerals projects :2 162 Environmental quality projects 215 167 Net expense of general resources development 5,712 4,318 LANDBETWEEN THE LAKESOPERATIONS 1,449 1,272 TOPOGRAPHIC MAPPING 405 374 OTHEREXPENSE,NET 41 22 Net expense; schedule D 36,006 33,627 Accumulated net expense at beginning of period 418,020 3% 393 Accumulated net expense at end of period $454,026 $418,020 Notes 1 through 8 following the exhibits are an integral part of the financial statements. 29 EXHIBIT IV TENNESSEE VALLEY AUTHORlYY SOURCE AND DISPOSITION OF FUND5 FOR THE YEARS ENDED JUNE 30. 1970 AND 1969 Power progrem All programs 1970 -,.- --- 1969 1970 1%9 ( Thousanas ) SOURCE Net power proceeds Power operations; exhibit II Operating revenues $479,616 8403,281 8479,616 $403,281 Interest income m& 403,281 d 403,281 Deduct operating expenses, less noncash charges; note below Sale of power facilities fiz%J F&g Total net power proceeds 180,959 d Gross proceeds from nonpover programs Sales of fertilizer; exhibit III Industry payments 14,206 12,451 Farmer payments 504 596 Direct sales 2,288 Tifg 15,335 Recoveries of operating expense x% -i&i Sale of nonpower facilrties ‘618 Total nonpower proceeds Sale of long-term bonds 299,241 100,227 $2 ia+ Increase in chart-term notes 102,655 l&655 Congressional appropriations 1,308 862 50,250 Property transfers 157 5?$i 230 Contributions in aid of construction 10 ’ 10 0 3 Total source $481,675 $3491548 $550,205 $415,508 DISPOSITION Expended for plant and equipment, excluding capitalized interest; note 4 8311,382 $252,272 $337,809 $281,760 Less salvage from plant transfers, and depreciation charged to construction and clearing accounts Payments to U. S. Treasury; note 6 3tJ-$% i&3 Return on appropriation investment 57,&9 53,082 57,649 Repayment of appropriation investment w -it%% 9 T2, Expensa of nonpower programs, less noncash charges; note below 45,573 Interest 62,28i 38,72; 62,280 Deferred debt expense, net 7930 2,on 793s Decrease in short-term notes 31,655 3,655 Increase or decrease* In current assets lesr other current liabilities; note 4 7,666 8,771* s lo, 674* Total disposition $481,675 $349,548‘ b550,202 #+15,5c$ Power Nonpower Note: Noncash charges consist of: provisions for depreciation $ 7516; $ 71,672 8 6,4;; $ 6,250 Provisions for depletion Retirements of fertilizer manufacturing facilities --- 677 2,di; $ 75,069 b 71,672 $-- 7,150 $ 8,734 Notes 1 through 8 following the exhibits are an integral part ~finan~tements. *Deduct 30 NOTES TO FINANCIAL STATEMENTS 1. Allocation of cost of multipurpose projects--Section 14 of the TVA Act requires TVA's Board of Directors to allocate the cost of completed multipurpose projects, subject to the approval of the President of the United States. The cost of facilities installed exclusively for a single purpose is assigned directly to that purpose; the cost of multiple-use facilities is allocated among the various purposes served. The total investment of $~1,970,000 in ccmpleted multipurpose dams at June 30, 1970, is classified as follows: Investment Direct Multiple-use Total (Thousands) Power $302,683 $175 9484 $478,167 Navigation 150,473 137,309 287,782 Flood control 59,662 128,516 188,178 Tributary area development 19 7,824 7,843 Total $5~ ,837 $449,133 $961,970 2. Depreciation policy--Straight-line depreciation is provided for substantially on a composite basis. Rates of depreciation are derived from engineering studies of useful life and are reviewed each year. 3. Estimates of cost to complete major construction projects, and commitments--The cost to complete the major power projects (including nuclear fuel) under construction or authorized for construction at June 30, 1970, is estimated to be $1,614,210,000, including commitments of $858,686,000 for materials and services contracted for and not delivered. The corresponding estimate for multipurpose snd nonpower projects is $233,140,000, including commitments of $5,204,000. Additional contractual commit- ments of $5,742,000 for multipurpose and nonpower projects had been entered into at June 30, 1970, on which TVA's obligation is limited by the availability of funds from congressional appropriations for succeeding fiscal periods. TVA and the City of Memphis, Tennessee, have entered into agreements under which (1) TVA sells to the City all the power and energy requirements of its electric dis- tribution system, and (2) the City leases to TVA the Thomas H. Allen steam-electric generating plant with an installed capacity of 990,000 kilowatts; each agreement is for a term of 20 years, beginning January 1, 1965. The lease agreement provides for annual rental payments of $~,~OO,OOO and grants TVA an option to buy the plant for $2,000,000 at the end of the lease term. 4. Nuclear fuel-Nuclear fuel has been reclassified from inventories to property, plant, and equipment, and includes interest of $1,944,000 recorded during the year ended June 30, 1970, of which $475,000 relates to the prior year. 31 TENNESSEE VALLEY AUTHORITY NOTES - CONTINUED 5. Appropriation investment --Changes in appropriation investment during ti,e years ended June 30, 1970 and 1969, were as follows: Power program All programs 1970 1969 1970 1969 (Thousands) Congressional appropriations $ 1,308 $ 862 $ 50,600 $ 50,250 Transfers of property from other Federal agencies 5 112 1,941 L $6: 974 52,541 50,:S: Less repayments to General Fund of the U. S. Treasury 15,000 15,000 15,008 15,002 Increase or decrease* for the period 13,535* 14,026* 37,533 35,478 Balance, beginning of period 1,101,850 1~15,876 2,113,248 2,077,770 Balance, end of period $1,088,315 $1,101,850 $2,150,781 $2,113,248 Action on a request for an additional appropriation of $50,080,000 to become available as of July 1, 1970, is pending in the Congress. 6. Payments to the U. S. Treasury--Section 15d of the TVA Act requires the payment from power proceeds of a return on the net appropriation investment in power facilities plus repayments of such investment, beginning with fiscal year 1961. The amount of return payable during each fiscal year is based'on the appropriation investment as of the beginning of that fiscal year and the computed average interest rate payable by the U. S. Treasury on its total marketable public obligations as of the same date. The repayment schedule calls for payment of not less than $10 million for each of the first five fiscal years (1961-19651, $15 million for each of the next five years (1966-1970), and $20 million for each year thereafter until a total of $1 billion shall have been repaid. The payments required by Section 15d may be deferred under certain circumstances for not more than two years. Required payments have been made as follows: Return Repayment Total (Thousands) Total to June 30, 1969 $390,597 $110,000 $500,597 Fiscal year 1970 57,649 15,000 72,649 $448,246_ $125,000 $573,246 For fiscal year 1971 the required payments will be $65,147,000 as a return and $~O,OOO,OOOas a repayment, a total of $85,147,000. 32 TENNESSEE VALLEY AUTHORITY NOTES-CONTINUED In addition to the payments from power proceeds, $8,000 of nonpower proceeds was paid to the U. S. Treasury in fiscal year 1970 under the provisions of Section 26 of the TVA Act. This brought the total payments from nonpower proceeds to $41,542,000. Prior to 1961, under then existing legislation, TVA paid to the Treasury $185,05g,OOO of power proceeds. In addition, $65,072,000 of bonds sold to the Treasury and Recon- struction Finance Corporation in fiscal years 1939-1941 have been fully repaid from power proceeds. Section 26 of the TVA Act provides for annual payments to the Treasury of any power or nonpower proceeds not needed for the operation of dams and reservoirs, the conduct of the power program, and the manufacture and distribution of fertilizers. 7. Borrowing authority--Section 15d of the TVAAct authorizes TVA to issue bonds, notes, and other evidences of indebtedness up to a total of $1,750 million outstanding at any one time to assist in 'financing its power program. Action is pending in the Congress on an increase in this borrowing authority from $1,750 million to $5 billion. Debt service on these obligations, which is payable solely from TVA's net power proceeds, has precedence over the payments to the U. S. Treasury described in note 6. Evidences of indebtedness issued under Section 15d and outstanding on June 30, 1970, consist of the following: (Thousands) Long-term debt 4.40$ Power Bonds 1960 Series A, due November 15, 1985 $ 50,000 4-5/s Power Bonds 1961 Series A, due July 1, 1986 50,000 4-l/2$ Power Bonds 1962 Series A, due February 1, 1987 45,000 5.7@ Power Bonds 1967 Series A, due May 15, 19% 70,000 6-3/&S Power Bonds 1967 Series B, due November 1, 1992 60,000 % Power Bonds 1969 Series A, due June 1, 1974 100,000 8-l/4$ Power Bonds 1969 Series B, due October 15, 1994 100,000 9% Power Bonds 1970 Series A, due March 15, 1995 100,000 g-l/@ Power Bonds 1970 Series B, due June 15, 1995 50,000 8-3/4% Power Bonds 1970 Series C, due June 15, 1975 50,000 Total long-term debt 675,000 Short-term notes Payable to U. S. Treasury 100,000 Payable to public 321,000 Total short-term notes 421,000 $l,og6,ooo 8. Retirement plan--TVA has a contributory retirement plan which covers substantially all of its salaried employees. The cost of currently accruing benefits is funded cur- rently, ana“the unfunded prior service cost is being amortized and funded over a period of 36 years from July 1, 1969. The cost of the plan to TVA for the fiscal years ended June 30, 1970 and 1969, was $l2,355,000 and $10,593,000, respectively. 33 SCHEDULES SCHEDULEA TENNESSEE VALLEY AUTHORITY COMPLETED PLANT JUNE 10. 1070 Depreciation Provision Accumulated year ended balance Assets June 30. 1970 June 30, 1970 Power Multipurpose dams; note a $ 478,167,051 $ “J,‘;,;;; $ U+4,m9,178 Single-purpose dams 62,891,043 23,160,906 Steam production plants 1,686,929,'790 43,%X:106 500;628;515 Other electric plant 974,870,528 23,731,228 256,548,807 Total power 3,202,858,412 751068,351 g24,447,406 Navigation Multipurpose dams; note a 287,781,773 2,751,020 43,985,631 Flood control Multipurpose dams; note a 181,243,572 1,198,m Multipurpose dams; note b 6,934,238 52,433 Bristol flood control plant 2,072,966 13,573 T&al flood control 190,250,776 1,264,521 32,045,249 !lYibutszy erea development Multipurpose dams; note b 7,843,170 48,921 151,209 Recreation and conservation education Land between the lakes 44.241.556 270,991 947,517 Other' - 395.;$2 9,858 9,488 Total recreation aa conservation education 44,637,058 28o,84g 957,005 Chemical 68,057,556 2,094,219 25&5,802 General 47,083,366 2,5&,796 17,158,080 Total $3,848,512,1~ $Ww,67~ $1,044,610,382 Total completed plant Multipurpose dams 8 W,%WW+ $10,626,007 $ 220,225,777 Single-purpose am 62,891,043 795,899 23,160,906 Steam production plants 1,686,929,790 43,966,106 5~,628,515 Other electric plaut 974,87%528 23,731,228 Other plant 161,850,946 4,974,437 Total $3,848,512,1+ $@+,093,677 $1,044,Q0,382 GAONotes: a. Common to power, navigation and flood control. b. Beech River and Bear Creek water control projects. SCHEDULE B TENNESSEE VALLEY AUTHORITY CONSTRUCTION AND INVESTIGATIONS IN PROGRESS JUNE 30. 1970 Power program All programs Construction in progress Generating facilities Browns Ferry Nuclear Plant $245,459,468 $2455459,468 Sequoyah Nuclear Plant 23,349,159 23,349,159 Paradise Steam Plant unit 3 2,508,804 2,508,804 Cumberland Steam Plant 144,379,695 144,379,695 Raccoon Mountain pumped storage project Total generating facilities Ji&$i$$ 41;$%:;;:: Transmission lines, substations, and other additions to power facilities 53,431,807 53,431,807 Navigation facilities 36,471” Flood control facilities 687,756 Multipurpose facilities Tellico Dam and Reservoir 7,534,054 21,679,065 Tims Ford Dam and Reservoir 3: m;,;;o” Upper French Broad water control system Bear Creek water control system 1:998:691 Other 7,:69,3:3 3533 9 63,540,652 560,372 Total multipurpose facilities Chemical plant 2,704,754 Recreation and conservation education facilities Land between the lakes ~196,950 Other 219,819 Total recreation and conservation education facilities 1,416,769 General plant General construction equipment and materials 2,643,207 Other additions to general plant 502,123 Total general plant 3,145,330 Total construction in progress 481,029,780 54’+,819,187 Investigations for future projects Power facilities 888,730 888,730 Navigation facilities 111,051 Flood control facilities 1,057,743 Multipurpose facilities 2,680,252 Total investigations for future projects 888,730 49737,776 Total construction and investigations in progress $4&918,510 $549,556,963 *Deduct 38 SCHEDULEC TENNESSEE VALLEY AUTHORITY DETAILS OF POWER EXPENSE FOR THE YEAR ENDED JUNE SO.. lS70 Provision Total before for depreciation SUMMARY Total depreciation (exhibit II) operation &intenance Other Production Multipurpose dsms Direct 8 2,914,503 $ 2,:;;,g Multiple-use; schedule E Single-purpose dams 2,036,146 1,240,247 4951213 Cumberlsnd Basin projects; note a 5,%l,o95 5r%l,O95 . 5,96l,O95 steam plants Total generation 5,%1,095 Purchased power 1,314,729 Interchange power received u,aa0,895 Interchange power delivered p;:;g System control end load dispatching Other Total production *gig-g 5lr337J.23 190,216,372 5&k%& TIXtlSlSiSSiOIl 22J78.944 082,543 Customer accounts '3351123 335,u3 Demonstration of power use l,O59,446 1,059.446 Payments in lieu of taxes; note b WHW’+ &oya,46i Social security taxes 2,455,9@ 2,455,%2 Administrative and general Direct 19,438,253 17,@37,736 17,884,776 2,960 Multiple-use 155,107 155.107 155,107 Total operating expense $3741214,625 $75,06w34 $299,148,041 $218,633,367 $38,489,728 $42,024,946 Installed Ratio of e.verase Kti generated Production expense capacity at gross generatS& less station use - Juoe 30, 1970 to installed SYS'ICM STATISTTCS (thousands) Total (mills1 (kilowatts) capacity (percent) Generation Multipurpose dams Direct l1,265,995 $ 10,364,470 .920 29869,230 45.08 Multiple-use; schedule E .344 Total multipurpose dams 1;fy399 1.264 2,869,230 45.08 Single-purpose dams 1.944 250.200 47.97 Cumberland Basin projects; note a 214471231 2.436 38.26 Alcoa dams; note c 48.07 Total hydra aeneratfon 44.37 steam plants 257,665,081 3.384 62.45 Total generation; note d 58.30 Purchased power 13314,729 Interchange power received 17330m System control and load dispatching 1~23,830 Other warn Total system input 101,285,32; Delivered under Alcoa agreement 1,847,4W Interchange power delivered Net energy supply Tk%3% Shop and internal uses 6:917* Transmission and transformation losses Total kwh sales and production expense tp7,408,470 w: a. TVA purchases substantially all of the output of seven hydra plants in the Cumberlsnd River Basin. In accordance with memorandums of understanding with the Corps of Engineers, Department of the Army, the Cumberlsnd Basin projects we operated for optimum pro- duction of power in conjunction with TVA’s power system, subJect to flood control, navigation, and other operating requirements of the Army. b. Payments made to states and counties in which power operations are carried out. The basic amount is 5 percent of gross revenues from the sale of power to other than Federal agencies during the preceding year, with the provision of minimum payments under certain circumstances. c. Operation of tvelve hydra plants of the Aluminum Company of America is coordinated with the operation of TVA’s power plants under an arrangement whereby the storage and release of water from the Alcoa plants are carried out by the company under TVA’s direction. d. Installed capacity increased 1,183,200 kilowatts during fiscal year 1970. Additions consisted of 1,150,2OC kilowatts in s new unit at the Paradise Steam Plant, one 28,000 kilowatt unit. at the new J. Percy Priest Dam in the Cumberland Basin, and 5,000 kilowatts from modifications to B generator. *Deduct 39 SCHEDULED Page 1 TENNESSEE VALLEY AUTHORITY DETAILS OF NONPOWER NET EXPENSE FOR THE YEAR ENDED JUNE SO. 1WO Multiple-use Direct (schedule E) Total WATER RESOURCES DEVELOPMENT Navigation operations Studies and investigations Navigation engineering and investigations $ 806,688 $ -- $ 806,688 Administrative end general expenses; schedule F T%%! -7zig Operation and maintenance of facilities Operation 16,843 1,749,589 1,766,432 Maintenance 1’1298 215,864 233,162 Administrative and general expenses 116j330 2,X15,924 Provision for depreciation 2,751,020 Total expense of navigation operations $2,?23,652 $3,02L743 5,745,395 Flood control operations Studies and investigations System studies and investigations $ 282,956 $ - 282,956 Local flood studies and cooperation with other agencies 384,206 384,206 Administrative and general expenses; schedule F +% dk% Operation and maintenance of facilities Operation 23,649 1,822,605 1,846,254 Maintenance 230,750 230,750 Administrative and general expenses 99 120;991 2,%,3$ 2497,995 Local flood control improvements Provision for depreciation 902,91; * Total expense of flood control operations $3,077,261 5,&6,775 Regional water quality management Regional water quality management 1,346,385 Provision for depreciation 8,410 Administrative and general expenses; schedule F 34,447 Total expense of regional water quality menagement 1,389,242 Fish and wildlife development Fish and wildlife development 284,074 Provision for depreciation 6,576 Administrative and general expenses; schedule F 15,310 Total expense of fish and wildlife development 305,960 Surveys and general studies for river development Surveys and general studies for river development Administrative and general expenses; schedule F Total expense of surveys and general studies for river development 784,668 Recreation projects Recreation resources development 612,114 Provision for depreciation 9,858 Administrative and general expenses; schedule F 22,964 TOtal expense of recreation projects 6'+4,936 Total expense of water resources development $13,936,9?6 40 SCHEDULED Page 2 TENNESSEE VALLEY AUTHORITY DETAILS OF NONPOWER NFf’ EXPENSE FOR THE YEAR ENDED JUNE 30. 1970 FRRTILIZRR AND MUNITIONS DRVRLOPMSNT Developmental production Cost of products distributed; note a Materials used $ 4,733,873 Direct manufacturing and shipping expense 13,615,813 Indirect manufacturing and shipping expense 23564,511 Provisions for depreciation and depletion 1,842,528 Recoveries from byproducts and in-process materials 748,420* In-process inventory changes 20,075 Finished inventory changes Total cost of products distributed *22,912,1 i General expenses Retirements of manufacturing plant and equipment 676,879 Other general expenses Administrative and general; schedule F Shipping order expense Provision for depreciation of idle manufacturing plant Other and equipment 166,586 Total general expenses 90s815-$$g Total production Less transfers expense and sales of products t , Transfers to TVA programs, at market prices Fertilizer industry demonstrations 14,877,723 Farm test demonstrations 422,603 Agricultural projects 453,595 Other 37 484 Direct Total transfers sales L5,791,405 Total transfers and sales i+g% Net expense of developmental production 7,291,236 Fertilizer introduction Fertilizer industry demonstrations Fertilizers used 14,877,723 Educational distribution expense ~092,356 Administrative and general expenses; schedule F 54,553 ii$g?g Less industry payments for fertilizer; note b Farm test demonstrations outside the Valley 2$g% Fertilizers used 422,603 Planning and supervision 480,108 Administrative and general expenses; schedule F 28,712 508,820 Less farmer payments for fertilizer 931;rr23 -+@I3 Net expense of fertilizer introduction 2,497,OOl Research and development Research and development of products and processes Applied research 812,523 Process engineering 19131,958 General expenses *Deduct -&sz 41 SCHEDULED Page 3 TENNESSEE VALLEY AUTHORITY OETAILS Of NONPOWER NET EXPENSE FOR THE YEAR ENDED JUNE 30. IS70 FERTILIZER AND MUNITIONS DEVELOPMENT- continued Research and development - continued Research and development of processes for recovery of sulfur $ 185,621 Basic chemical and agronomic research 1,615,618 Provision for depreciation 81,685 Administrative and general expenses; schedule F 198,114 Total expense of research and development 4,673,407 Net expense of fertilizer and munitions development $14,461,644 GENERAL RESOURCESDEVELOPMENT Agricultural projects Fertilizers used In specific tributary areas Outside specific tributary areas Planning and supervision In specific tributary areas 261,769 Outside specific tributary areas 555,359 817,128 1,270,723 Less farmer payments for fertilizer In specific tributary areas 63,728 Outside specific tributary areas 187,651 251,379 13019,344 Agribusiness development 63,471 Preliminary investigations in tributary watersheds 39,710 Program planning and analysis 51,841 Research on forage fertilization and utilization 58,331 Alleviation of rural poverty 29,445 Tenure and land use adjustment 17,291 Tennessee Valley rural life conferences Provision for depreciation ;'E Administrative and general expenses; schedule F 53:596 326,655 Net expense of agricultural projects 1,345,999 Forestry projects Use of Valley forests 410,726 Development of Valley forests 5g;,t;89 Investigation of forest influences Provision for depreciation 131348 Administrative and general expenses; schedule F 36,360 Total expense of forestry projects 994,781 Tributary area development Basic investigations 67,990 Development assistance in specific tributary areas 1,038,078 Development assistance outside specific tributary areas 41,285 Provision for depreciation 194 Multiple-use operating expenses; schedule E Opt Administrative and general expenses; schedule F Total expense of tributary area development 1,362:259 Regional development planning Regional development planning Administrative and general expenses; schedule F Total expense of regional development planning Demonstrations in education and manpower development Demonstrations in education and manpower development 722,090 Administrative and general expenses; schedule F 7,655 Total expense of demonstrations in education and manpower development 729,745 42 SCHEDULED Page 4 TENNESSEE VALLEY AUTHdRlTY DETAILS OF NONPOWER NET EXPENSE FOR THE YE*R ENOED JUNE 30. ,*,o GENERAL RESOURCESDEVELOPMENT- continued Minerals projects Mineral resources Administrative investigations and general expenses; schedule F $ 16:‘% Total expense of minerals projects 167:775 Environmental quality projects Reservoir shoreline cleanup 63,816 Regional air quality management 34,787 Strip mine reclamation 84,292 Research ondisposal of solid wastes Administrative and general expenses; schedule F ‘,x2 Total expense of environmental quality projects 215,284 Net expense of general resources development $ 5,7p,l24 LAID BETWEENTHE LAKES OPERATIONS Land between the lakes operations $ 1,142,750 Provision for depreciation 270,991. Administrative and general expenses; schedule F 35,403 Total expense of land between the lakes operations $ 1,44g,144 TOPCGRAPRICMAPPING Topographic mapping $ 385,853 Provision for depreciation 5,974 Administrative and general expenses; schedule F 13,044 Total expense of topographic mapping $ 404.871 OTHER EXPENSE OR INCOME+' Emergency preparedness $ 7,063 Maintenance of bridges financed by others on TVA dams 55,901 Interest income from receivables 21,592* Other expense, net $ 41,372 Net expense $36,006,131 Notes: a. In the discharge of its obligations under Section 5 of the TVA Act, TVA operates plants for the manufacture of products for agricultural and military purposes; conducts research and pilot plant development of new or improved processes for the production of new or existing fertilizers and muni- tions; and tests the fertilizers produced and demonstrates their effectiveness. Production is carried out on an experimental basis, and costs are consequently affected by the developmental nature of the manufacturing operations. Research on products and processes is not scaled to TVA's production operations. Its scope is deter- mined by opportunities to render service in the public interest; findings are made available to the public through technical publications, answers to correspondence, and discussions with technical visitors to the laboratories and plants. For these reasons, the cost of such research is accounted for under a separate program rather than as a part of production operations. b. Sales of fertilizer materials are not on a commercial basis, but are made to organizations collaboratj ing in an educational program aimed at improving the manufacture, distribution, and use of fertilizers. 43 SCHEDULEE TENNESSEE VALLEY AUTHORITY OPERATING EXPENSES OF MULTIPLE-USE FACILITIES FOR THE YEAR ENDED JUNE 30. 1970 Distributed to Flood Tributary Power Navigation control area Total operations operations operations development Common to power, navigation, and flood control Operation Water dispatching $ 1,130,122 Water control investigations 125,898 Investigations and control of reservoir ecology 1,l53,577 Plant protection and services to visitors 1,364,319 Operation and upkeep of dam reservations 888,492 Reservoir land management 1,083,160 Other expense 86,396 Total operation 5,831,964 $2,332,786 8~749,589 $1,749,589 Administrative and general expenses; schedule F 387,767 155,107 116,330 116,330 Maintenance 752,404 310,708 215,864 225,832 Provision for depreciation 3,044,645 1228,759 939,960 875,926 Total common to power, nav- igation, and flood control 10,016,780 4P7,360 3,021,743 2,967,677 Other projects Beech River water control system Operation 96,580 48,290 Maintenance 4,325 1,081 Provision for depreciation Bear Creek water control system Operation 49,452 24,726 24,726 Maintenance 8,526 4,689 Provision for depreciation 22,165 51,580 Administrative and general expenses; schedule F 9,323 4,661 4,662 Total other projects 243,922 109,584 134,338 Total $10,260,702 $4,027,360 -- $3,021,743 $3,077&l $134 A 338 Total expenses Operation $ 583;8$ $2,;;;~;;; $l,$,;%; $1,822,605 $ 7;g Administrative and general =0,991 Maintenance 765:255 310:708 215;864 230,750 7:933 Depreciation 3~0,361 1228,759 939,960 902,915 48,727 Total $10,260,702 $4@7,360 $3,021,743 $3,077,261 $134,338 44 SCHEDUIJT F TENNESSEE VALLEY AUTHORITY ADMINISTRATIVE AND GENERAL EXPENSES FOR THE YEAR ENDED JUNE SO. IS70 Expenses Board of directors $ 228,905 Office of the general manager 267,482 Budget staff 272,546 Washington office 77,199 Information office, including technical library service 693,102 Division of personnel 2,179,443 Division of finance 2,724,054 Division of law 788,695 Division of property and supply ~375,561 Medical and safety services 1,020,352 Other administrative and general 89,997 Total $9,717,336 Percent Amount of total Distribution Construction $4,pg 42.92 Recovered through services billed to others at cost ¶ 1.51 Expense of programs Power 3,727,894 38.36 Water resources development Navigation 71,763 Flood control :;Z Regional water quality management xc; Fish and wildlife development 15:310 ::2 Surveys and general studies for river development 36,888 .38 Recreation projects 22,964 .24 Multiple-use operations Commonto power, navigation, and flood control 387,767 3.99 Other projects 9,323 .lO Fertilizer and munitions development Developmental production 5.15 Fertilizer industry demonstrations 5;:$$ .56 Farm test demonstrations 28:712 .30 Research and development 198,114 2.04 General resources development Agricultural projects 53,596 .55 Forestry projects 36,360 Tributary area development $,;7," 2; Regional development planning .38 Demonstrations in education and manpower development 7:655 no8 Minerals projects 5,741 .06 Environmental quality projects 11,482 Land between the lakes operations 35,403 :g Topographic mapping 13,044 .u Total $9,717,336 100.00 45 APPENDIX .’ t APPENDIX I Page 1 RETIREMENT SYSTEM OF THE TENNESSEE VALLEY AUTHORITY The TVA retirement system was.established in 1939 to provide a pro- gram of retirement, disability, and death benefits financed jointly by contributions of TVA and of its salaried employees. Administration of the system is vested in its own Board of Directors, and its funds are held and invested by two trustees. Of the seven members of the Board of Directors, three are appointed by TVA, three are elected by the partici- pants, and the seventh is chosen by these six directors. The operation of the retirement system is regarded as a Federal function in general and as a TVA function in particular. As authorized in section 301(b) of the Government Corporation Control Act (31 U.S.C. 866(b)) the General Accounting Office contracted with a firm of certi- fied public accountants to make the audit of the system. Following are the balance sheet of the system at June 30, 1970, and the related state- ments of change in fund balances for the year then ended with respect to the Fixed Benefit, the Variable Annuity, the Supplement to Medicare Pre- mium Reserve, and the Voluntary Retirement Savings and Investment Plan Funds, together with the auditors' opinion. 48 APPENDIX I I Page 2 LYBRAND,ROSSBROS.&MONTGONERY CERTIFIED PUBLIC ACCOUNTANTS COOPERS .%. LYBRAND To the Comptroller General of the United States, Washington, D. C.: We have examined the balance sheet of the RETIREMENT SYSTEM of the TENNESSEE VALLEY AUTHORITY as of June 30, 1970 and the related statement of changes in fund balances'for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included confirmations from the trustees and custodiansof cash and investments held as of June 30, 1970 and such tests of the accounting records and such other auditing proce- dures as we considered necessary in the circumstances. In our opinion, the aforementioned financial statements present fairly the financial position of the Retirement System of the Tennessee Valley Authority at June 30, 1970, and the changes in fund balances for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. New York, October 8, 1970. 49 RETIREMENT SYSTEM of the TENNESSEE VALLEY AUTHORITY BALANCE SHEET, June 30, Fixed ASSETS: Benefit Fund Investments: Securities: Bonds and notes (details annexed): At amortized cost (current redemption values or market quotations, $67,39X,183) $ gl,o16,35o At market (cost, $2,966,000) Real estate mortgages (details annexed) 3,156,411 Preferred stocks (details annexed): $LW,625) 2,198,483 “Ai Etie PTEE k , q~I;ki~%i~~ ’ Common stocks (details annexed : At cost (market quotations, 1 133,765,461) m,oo6,og3 At market (cost, $37,507,559) United States Government obligations, at cost (approximates market) 2X),377,337 Fund shares: 148,212 shares, at market, $18.13 per share (cost, $4,102,953) 61,745 shares, at market, $8.31 per share (cost, $659,859) 220,377,337 Properties acquired under buy and leaseback agreements, at cost, less amortization of $542,044 1,928,1x6 Real property: Land, at cost 627,000 Buildings, at cost, less allowance for depreciation of $168,304 go1,446 223,,833,919 Cash: Treasurer's fund 13,824 Trustee 317,624 Receivables: Contributions Dividends, accrued interest, etc. Securities sold LIABILITIES and FUNDS: Payables: Securities purchased $ 154,500 Other 186,231 Fund balances (statement annexed) 226,054,485 $226,3g5,216 The accompanying note is an integral part Of these financial statements. APPENDIX I Page 3 Voluntary Retirement. Supplement to Savings and Investment Plan Medicare - Variable Fidelity Premium Annuity Fund Trend Fund Puritan Fund Reserve Fund (Note) 8b 2,644,500 485,450 30,811,507 $70,173 33,941,457 70,173 $2,687,082 $513,104 33,941,457 2,687,082 513,104 70,173 333941,457 2,687,082 513,104 70,173 22,942 78 51 178,680 1,210 333,134 5 3 66,176 1,147 $34,542,389 #2,687,165 $513,158 $72,530 $ 270,187 $ 98 $ 100 x4,272,202 2,687,067 513,058 #72,530 $34,542,389 $2,687,165 $513,158 $72,530 51 APPENDIX I Page 4 RETIREMENT SYSTEM of the TENNESSEE VALLEY AUTHORITY INVESTMENTS in SECURITIES June 30, 1970 FIXED BENEFIT FUND (at cost or amortized cost): Bonds and notes: Principal amount: Utility $22,885,000 Industrial 26,130,765 Financial 15,977,421 Foreign 11,556,ooo Railroad 3,531,583 Unamortized (discounts) and premiums, net L63ww) g,445,350 Commercial paper ,571,ooo $ gl,o16,35o Real estate mortgages: Veterans Administration Federal Housing Administration Commingled 195~0,035 Other 9 ,-391 3,156,411 Preferred stocks: Industrial 2,198,483 Common stocks: Industrial 88,408,ogo Utility 16,9@,645 Commingled 13,8Oo,ooo Other 4,828,358 la,oo6,ogj $220,377,337 VARIABLE ANNUITY FUND (at market): Bonds and notes: Industrial 1,078,500 Financial ~L566,ooo # 2,644,500 Preferred stocks: Industrial 485,450 Common stocks: Industrial 29,502,497 Utility 7y735 Other ,. 30,811,507 $ 33,94x,457 53 RETIREMENTSYSTEMof the TENNESSEEVALLEY AUTHORITY STATEMENTof CHANGESin FUND BALANCES for the year ended June 30, 1970 Fixed Benefit Fund AnnuT Savings Total Account Contributions: Members $ 2,978,917 8 2,978,917 Tennessee Valley Authority 129355,380 Premiums retained Investment income: Interest 5,576,002 Dividends 3,464,678 Rents (less depreciation and amortization of $93,651) 178,650 Net realized gains (losses) on sales of investments (19419,599) Capital gains distribution Net unrealized appreciation (depreciation) of investments 23,134,028 2,978,917 Transfers: Interest 1,64i’,o% Accumulations (2.063.693) (4,490,917) # 21,070,335 9b 135,095 Administrative expenses 4b 470,964 Withdrawals 358,022 4b 353,520 Death benefits 1,032,508 186,716 Retirement benefits 6,o29,6f& $a 7,8gl,ug $ 540,236 Net increase (decrease) 9b 13,179,186 (44 405,141) Balances, June 30, 1969 212,875,299 42,396,913 Balances, June 30, 1970 #226,054,4&-j $41,991,772 The accompanying note is an integral part of these financial statements. 54 APPENDIX I Page 5 Voluntary Retirement Savings Fixed Benefit Fund and Investment Plan Supplement to Pension Investment Variable Fidelity Medicare Accumulation Reserve Annuity Trend Puritan Premium Account Account Fund Fund Fund Reserve Fund (Note) $ 4,125,606 $1,103,063 $238,735 8 12,355,380 $71,897 5,576,002 288,239 633 33464,678 658,677 71,784 22,897 178,650 560,523 ($1,98o,lz) (5,932,161) 98,6w 14,302 (7.138;319) 11,039,178) 1125,586) 22,135,233 (1,980,122) (7,997,958) 234,269 150,348 729530 (1,967,o62) 319,967 2,427,224 2,o63,693 (4,995) 4995 $ 229595,395 (?&,660,155) (?I 5,934,265) $ 229,274 $155,343 $72,530 $ 470,964 4,502 $ 370,249 8b 251,383 $ 48,352 845,792 6,029,655 299,092 $ 7,350,913 $ 669,341 8 251,383 $ 48,352 $ 15,244,482 (@,660,155) ($ 69603,606) ($ 22,109) $106,991 $72,530 161,598,284 8,880,102 40,875,8o8 2,7og,176 406,067 $176,842,766 $79219,947 $34,272,202 $2,687,067 8513,058 $72,530 55 APPENDIX I Page 6 NOTE to FINANCIAL STATEMENTS During the year ended June 30, 1970, the Board of Directors approved an amendment, retroactive to July 1, 1966, to the "Supplement to Medicare" contract between the Retirement System of the Tennessee Valley Authority ("Retirement System") and Blue Cross - Blue Shield of Tennessee ("BCBST"). Under this amendment, if there is or will be an excess of funds over that considered necessary by BCBST to maintain adequate reserves under the contract,then monthly premiums (deducted from subscribers) may be retained by the Retirement System until it again becomes necessary to remit premiums to BCBST. Any such premiums retained are to be separately accounted for by Retirement System until the Board of Directors determines how they shall be used for additional benefits for subscribers, to reduce future increases in premium rates, to reduce existing premium rates or any combination thereof. For the year ended June 30, 1970, premiums retained by Retirement System under the contract amounted to $71,897. Subsequent thereto, premiums totaling $12,682 for the month of August, 1970 were not deducted from subscribers and that amount was paid from this fund to BCBST. U.S. GAO Wash., D.C. 56
Examination of Financial Statements of the Tennessee Valley Authority for Fiscal Year 1970
Published by the Government Accountability Office on 1971-03-31.
Below is a raw (and likely hideous) rendition of the original report. (PDF)