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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