June 2013

Nuclear Plant Audit Gone Awry

An audit manager investigating alleged employee wrongdoing begins to suspect that a much larger scheme, involving executive-level impropriety, may be afoot. 

By Michael Marinaccio

 

Big Power is an integrated energy company engaged primarily in electric power production and retail distribution operations. It owns and operates power plants with approximately 9,000 megawatts of nuclear power capacity, making it one of the nation’s leading nuclear generators. Big Power delivers electricity to more than 3 million utility customers in the northeastern United States, boasts annual revenues of more than US $14 billion, and employs approximately 10,000 people. Its largest generating facility, Fermi Point, is a three-unit nuclear power station on the banks of Wide River just south of a large urban area. The plant generates more than 2,600 megawatts of electrical power and features three pressurized water reactors. 

In the past, all three units at Fermi Point have been awarded the top safety rating for annual operations by federal regulators. However, the facility recently has experienced a string of accidents and mishaps, the most serious of which occurred when a small radioactive leak from a steam generator tube forced one of the units to close for 11 months. This event has resulted in greater scrutiny by federal regulators for what they now believe to be a significant erosion of the facility’s safety culture.

Alex is Big Power’s internal audit manager responsible for audits and reviews performed at the company’s generating subsidiaries and nuclear plants. He and his team of three auditors — two seniors and one associate — are very knowledgeable and experienced in this area and are highly regarded by both operating and audit management. Alex was recently assigned to a highly confidential special investigation involving allegations made about a supervisor at one of the Fermi Point nuclear units. Senior operating management contends that the supervisor and two of his direct reports have misused their corporate credit cards and have been observed arriving late and leaving the plant early.

Alex initiated the review under the guise of performing a routine expense audit. As his team delved into the details, however, they found no evidence of credit card improprieties. Moreover, security logs did not appear to support the allegation of late arrivals and early departures.

During a recent status meeting, the plant supervisor confronted Alex and characterized his investigation as a witch hunt. Alex denied this claim but did not reveal that senior management had requested the review. The supervisor inferred that Alex was being less than candid and also naïve. He told Alex that senior management was using the audit to harass and discredit him because he had notified federal regulators of unreported safety violations at the plant. He also contended that despite the evidence, his superiors continually ignored his claims that the plant’s radiological response system and capabilities were not adequate to protect plant personnel and the public from an unacceptable dose of radiation in the event of an accidental release. Because management refused to acknowledge the danger, he felt he had no other choice but to report it as a whistleblower to regulators. 

Alex is caught off guard by the supervisor’s statements. However, after giving it some thought, he begins to wonder if company executives might in fact be trying to cover up safety violations at the unit. He is also concerned that management may be using him as a pawn in a high-stakes game of corporate impropriety and whistleblower harassment.

If you were Alex, how would you proceed? What would be your next steps?

Share your comments below.

 


What I would do about the Nuclear Plant Audit
This is a tricky one. I would complete the audit I was asked to perform and report the results of no issues identified. I would also speak to Audit Management about the allegations made by the Supervisor. I would think this would result in another audit of the alleged violations. I would speak with the Compliance Department to see if the supervisor made any reports prior to reporting to the federal regulators. I would ask what actions were taken by the Compliance Department when the reports were made. Finally, I would speak to the Supervisor and explain the results of my audit. I would let him know that the lack of findings of the audit of his expenses proves that he is following the rules for expenses. If the auditor has been there a while, he should have relationships of trust built up with the supervisory teams and management. I would rely on those relationships to calm the supervisor's fears about a witch hunt. It will only be a problem if inappropriate expenses are found in his expense account.
Posted By: Anonymous
2013-06-11 10:04 AM
Nuclear Plant Audit gone awry
If I were Alex, I will bring the information disclosed to me by the supervisor to the Audit Management and request that scope of my audit assignment at the plant be extended to cover the areas in question. The information should be treated seriously no matter if it has bases or not. Time should be of paramount importance here as accidents can happen anytime and every effort should be made to tighten up any loop holes before they get too loose and cause loss of lives and property.
Posted By: James Onyeneke
2013-06-07 10:14 AM
why the audit is necessary.
Alex is investigating issues that affect the welbeing of the organisation for which its neccesary for him to proceed with audit despite of the suspected involvement of the senior management in federal regulators of unreported safety violations and even subtantiate all allegations in respect of safety which impact the health of employees and eventually that of the company
Posted By: OKURAPA SAMUEL
2013-06-07 9:35 AM
Audit Committee
Alex needs to complete the current audit and go back to the audit committee to regroup from there. No actions should be taken until there is sufficient evidence to open up a seperate audit or investigation. We should be mindful that all information should be carefully verified first. Also internal audit department is not chartered as federal regulatory agencies with equal authority to respond to whistleblowing directly.
Posted By: Michael W
2013-06-06 9:07 PM
Nuclear Plant Audit Gone Awry - Share Your Thoughts
In response to the June 2013 article, it would be appropriate to complete the expense audit and issue the audit report as planned. In addition, it would be appropriate to obtain information from the supervisor as to how he concluded that there was a safety violation, as well as a copy of the report he sent to federal investigators, and provide the supervisor an avenue to report follow-up information to the audit team. If the auditors possess sufficient knowledge in the violation area, investigate the reported violation. Otherwise, obtain additional resources to investigate. If sufficient evidence exists, report results of the investigation and the original audit to appropriate internal and external investigations/regulations entities. Maintain integrity, even at the risk of a job loss.
Posted By: Anonymous
2013-06-06 7:45 AM
What I would do
If I was Alex I would report to higher management the situation and start immediately an investigation on the senior manager who required to investigate the plant supervisor.
Posted By: Alessandro P.
2013-06-06 7:16 AM
Nuclear Plant Audit gone awry
I would complete my audit and come to the conclusion of the objective of the audit. If the audit really resulted into a witch hunt, and I am convinced about what the supervisor is saying, I would convince the Audit Director to convene safety audits to investigate supervisor's claims.
Posted By: Awtar Parmar
2013-06-06 7:13 AM


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