NCPA - National Center for Policy Analysis

Feds Challenge Tennessee Valley Authority on Accounting

January 30, 2002

Some private companies aren't the only ones in hot water over their accounting practices. The federally-owned Tennessee Valley Authority is being challenged on how it treats certain financial liabilities.

  • In President Bush's budget proposal, the TVA will be listed with about $300 million more in liabilities than originally expected for the 2002 fiscal year.
  • The federal Office of Management and Budget believes that long-term payments the TVA is making under a complex leasing deal are obligations that should be treated as debt -- and counted against the utility's federally-mandated $30 billion debt cap.
  • The upshot for the TVA -- which produces power for a seven-state region in the Southeast -- will be added obstacles to expansion.
  • Under pressure by Congress and the White House to reduce its debt -- hovering around $25.4 billion before the new budget proposal -- the TVA thought such lease arrangements would help it add capacity without being counted against its borrowing authority.

The budget decision signals a desire for tighter federal accounting standards that was in the works even before the energy-trading firm Enron collapsed following questions about its accounting for debt.

Source: Will Pinkston, "TVA Accounting Is in Dispute," Wall Street Journal, January 30, 2002.

 

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