AUDIT REPORT

Audit of NRC’s Process for Addressing Bankruptcy

of Materials Licensees

OIG-14-A-10 January 16, 2014

 

All publicly available OIG reports (including this report) are accessible through

NRC’s Web site at: 

http:/www.nrc.gov/reading-rm/doc-collections/insp-gen/
UNITED STATES

NUCLEAR REGULATORY COMMISSION

WASHINGTON, D.C. 20555-0001

OFFICE OF THE

INSPECTOR GENERAL

January 16, 2014

MEMORANDUM TO: Mark A. Satorius

Executive Director for Operations

FROM: Stephen D. Dingbaum /RA/

Assistant Inspector General for Audits

SUBJECT: AUDIT OF NRC’S PROCESS FOR ADDRESSING 

BANKRUPTCY OF MATERIALS LICENSEES

(OIG-14-A-10)

Attached is the Office of the Inspector General’s (OIG) audit report titled Audit of NRC’s 

Process for Addressing Bankruptcy of Materials Licensees.

The report presents the results of the subject audit. Following the December 19, 2013, 

exit conference, the agency provided informal comments, which OIG subsequently 

incorporated into the draft report as appropriate. The agency reviewed the changes to 

the report and opted not to provide formal comments. 

Please provide information on actions taken or planned on each of the 

recommendations within 30 days of the date of this memorandum. Actions taken or 

planned are subject to OIG followup as stated in Management Directive 6.1.

We appreciate the cooperation extended to us by members of your staff during the 

audit. If you have any questions or comments about our report, please contact me at 

415-5915 or Sherri Miotla, Team Leader, at 415-5914.

Attachment: As stated 
Audit of NRC’s Process for Addressing Bankruptcy of Materials Licensees

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EXECUTIVE SUMMARY

BACKGROUND

The Nuclear Regulatory Commission (NRC) regulates the civilian use of 

nuclear materials to protect public health and safety and the environment, 

and to promote the common defense and security. NRC’s regulatory 

framework applies to domestic licenses for civilian uses of radioactive 

materials, and these NRC licensees’ financial condition (i.e., bankruptcy) 

could affect the agency’s ability to control licensed nuclear materials. 

Therefore, NRC’s primary interest is ensuring that control of nuclear 

materials is maintained during an NRC licensee’s period of bankruptcy. 

Federal regulations require that NRC materials licensees immediately 

notify NRC of a voluntary or involuntary filing of bankruptcy by or against 

the licensee, or an entity controlling the licensee. Licensees must notify 

NRC when they file for bankruptcy so NRC can have reasonable 

assurance that appropriate measures to protect public health and safety 

have been or will be taken.

Once agency staff become aware of a bankrupt materials licensee, an

NRC Bankruptcy Review Team (BRT) member will take the lead for the 

bankruptcy action. Some NRC staff serve as members of the BRT where 

they review and act on bankruptcy notifications as they occur. The 

member will keep the appropriate staff informed of the bankruptcy status, 

and ensure that licensed nuclear material is controlled while a licensee is 

in bankruptcy status. If appropriate, NRC will conduct a special 

inspection, use enforcement discretion for issuing enforcement actions, 

and/or request emergency assistance from other Federal agencies if there 

is an immediate threat to public health and safety.

OBJECTIVE

The audit objective was to determine if NRC has reasonable assurance 

that appropriate measures to protect the public health and safety have 

been or will be taken during bankruptcies involving materials licensees.
Audit of NRC’s Process for Addressing Bankruptcy of Materials Licensees

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RESULTS IN BRIEF 

NRC’s Methods for Initially Learning of Bankrupt NRC Materials 

Licensees Could Be More Effective and Efficient

Once NRC becomes aware of bankrupt materials licensees, NRC ensures 

that appropriate measures are taken to protect public health and safety. 

However, OIG found that NRC’s methods for initially learning of bankrupt 

materials licensees could be more effective and efficient. 

Although NRC licensees are required to report bankruptcies to the 

agency, most do not and NRC’s alternate ways for discovering bankrupt 

licensees fall short. Therefore, it is incumbent upon NRC to use effective 

and efficient methods to identify its bankrupt licensees. NRC has not (1) 

identified and used comprehensive source/s of bankrupt entities, and (2) 

developed guidance on staff’s role in identifying bankrupt NRC materials 

licensees. Consequently, if NRC does not know about bankrupt materials 

licensees, the risk increases for nuclear materials to become uncontrolled 

and cause harm to the public. Additionally, without formal guidance, NRC 

staff are duplicating efforts, thereby wasting valuable agency resources.

RECOMMENDATIONS

This report makes recommendations to improve the agency’s process for 

addressing bankruptcy of NRC materials licensees.

AGENCY COMMENTS

On December 5, 2013, the Office of the Inspector General (OIG) issued 

the discussion draft of this report to the Executive Director for Operations. 

OIG met with NRC management and staff on December 19, 2013, at an 

exit conference. The agency provided informal comments, which OIG 

subsequently incorporated into the draft report as appropriate. The 

agency reviewed the changes to the report and opted not to provide 

formal comments. 
Audit of NRC’s Process for Addressing Bankruptcy of Materials Licensees

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ABBREVIATIONS AND ACRONYMS

ADAMS Agencywide Documents Access and Management System

BRT Bankruptcy Review Team

CFR Code of Federal Regulations

DOJ Department of Justice

ENRD Environmental and Natural Resources Division

NRC Nuclear Regulatory Commission

OIG Office of the Inspector General

U.S.C. United States Code
Audit of NRC’s Process for Addressing Bankruptcy of Materials Licensees

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TABLE OF CONTENTS

EXECUTIVE SUMMARY ........................................................................... i

ABBREVIATIONS AND ACRONYMS .......................................................iii

I. BACKGROUND ............................................................................. 1

II. OBJECTIVE ................................................................................... 3

III. FINDING ........................................................................................ 4

 NRC’s Methods for Initially Learning of Bankrupt NRC 

 Materials Licensees Could Be More Effective and Efficient .......... 4

 Recommendations ..................................................................... 11

IV. AGENCY COMMENTS ................................................................. 11

APPENDICES

A. OBJECTIVE, SCOPE, AND METHODOLOGY ................................... 12

B. NRC GOOD PRACTICES .................................................................. 14
Audit of NRC’s Process for Addressing Bankruptcy of Materials Licensees

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I. BACKGROUND

The Nuclear Regulatory Commission (NRC) regulates the civilian use of 

nuclear materials for commercial, industrial, academic, and medical uses 

to protect public health and safety and the environment, and to promote 

the common defense and security. NRC’s regulatory framework applies to

domestic licenses for civilian uses of radioactive materials, including 

approximately 4,1001 research, medical, industrial, government, and 

academic materials licensees. There are two types of domestic licenses 

for users of nuclear materials: (1) specific licenses and (2) general 

licenses. A specific license is a document issued by NRC to a named 

person who has filed an application and is subject to routine inspections 

and other NRC requirements. A general license allows persons to receive 

and use a general licensed device containing byproduct or source material, 

if the device has been manufactured and distributed in accordance with a 

specific license issued by NRC. Examples of general licensed devices are

gas chromatograph units, static eliminators, luminous exit signs, and in 

vitro laboratory kits.

Federal Regulations

The Atomic Energy Act of 1954, as amended, and NRC’s regulations in 

Title 10 of the Code of Federal Regulations (10 CFR) are in place to 

assure that appropriate measures to protect public health and safety have 

been or will be taken. These regulations2 require that NRC materials 

licensees—specific and some general licensees3

—immediately notify 

NRC of a voluntary or involuntary filing of bankruptcy by or against the 

licensee, an entity controlling the licensee, or an affiliate of the licensee.

Bankruptcy Types Involving NRC Materials Licensees

Bankruptcy laws of the United States are located in Title 11 of the United 

States Code (11 U.S.C.), more commonly known as the Bankruptcy Code. 

The Bankruptcy Code describes the different types of bankruptcies; see 

Table 1 for the two types (Chapters 7 and 11) that most frequently involve 

 1 The number of materials licenses includes approximately 2,900 specific licenses issued by NRC and 

1,200 general licenses registered by NRC. 2 10 CFR 30.34(h)(1); 10 CFR 40.41(f)(1); and 10 CFR 70.32(a)(9)(i). 3 A general licensee holding devices meeting the criteria of 10 CFR 31.5(c)(13)(i) is subject to the 

bankruptcy notification requirement. 
Audit of NRC’s Process for Addressing Bankruptcy of Materials Licensees

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NRC licensees. Of those NRC materials licensees that file for bankruptcy, 

the majority file for Chapter 11 bankruptcy.

Table 1: Bankruptcy Code

Chapter of Bankruptcy 

Code

Definition

Chapter 7

Provides for "liquidation" (i.e., the sale of a debtor's 

nonexempt property and the distribution of the proceeds to 

creditors). The debtor may enter Chapter 7 bankruptcy 

voluntarily or be forced by creditors to enter it involuntarily.

Chapter 11

Generally used to reorganize a business and allows the 

debtor to continue its business operations by a plan of 

reorganization with the goal of returning it to a viable state. 

 Source: Office of the Inspector General (OIG) generated from 11 U.S.C. and NUREG 1556, Volume 15

NRC Bankruptcy Guidance

NRC uses NUREG 1556, Volume 15,

4 as guidance for reviewing NRC 

materials licensee bankruptcy notifications to ensure that bankruptcies are 

coordinated with appropriate NRC staff and that the necessary measures 

are taken during the time of a bankruptcy to protect public health and 

safety. This NRC guidance document is intended for NRC materials

licensees, license applicants, and staff. It contains guidance for preparing 

a bankruptcy notification to NRC. 

NRC Bankruptcy Process

In addition to headquarters and regional staff’s primary duties, some staff 

serve as members of NRC’s Bankruptcy Review Team (BRT). The BRT

members, which represent various NRC offices, coordinate, review, and 

act on bankruptcy notifications as they occur. NRC’s primary interest is 

ensuring that control of nuclear materials is maintained during the period 

of bankruptcy. Once agency staff become aware of a bankrupt materials 

licensee, a BRT member will take the lead for the bankruptcy action. This 

NRC staff member contacts licensee personnel to verify bankruptcy 

information, and ensures that the licensee submits the required written 

notification. The staff member will continue to keep the 

 4 NUREG 1556, Volume 15, “Consolidated Guidance About Materials Licenses: Guidance About 

Changes of Control and About Bankruptcy Involving Byproduct, Source, or Special Nuclear Materials 

Licenses.”
Audit of NRC’s Process for Addressing Bankruptcy of Materials Licensees

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appropriate staff—usually through the BRT—informed of the bankruptcy 

status.

Control of Materials During Bankruptcy

A licensee’s financial condition could affect its ability to control licensed 

nuclear material. Therefore, licensees must notify NRC when they file for 

bankruptcy so NRC can have reasonable assurance that appropriate 

measures to protect public health and safety have been or will be taken. 

These measures include:

• Maintaining security of licensed material and contaminated 

facilities.

• Assuring that licensed material is transferred only to properly 

authorized NRC or Agreement State5 licensees.

• Assuring that properly trained and experienced personnel are 

retained to implement appropriate radiation safety measures.

NRC’s primary goal for overseeing bankruptcies is to ensure that licensed 

nuclear material is controlled while a licensee is in bankruptcy status. If 

appropriate, NRC will conduct a special inspection, use enforcement 

discretion for issuing enforcement actions, and/or request emergency 

assistance from other Federal agencies if there is an immediate threat to 

public health and safety.

II. OBJECTIVE

The audit objective was to determine if NRC has reasonable assurance 

that appropriate measures to protect the public health and safety have 

been or will be taken during bankruptcies involving materials licensees. 

Appendix A of this report contains information on the audit scope and 

methodology.

 5 An Agreement State is a U.S. State that has signed an agreement with NRC authorizing the State to 

regulate certain uses of radioactive materials within the State. NRC relinquishes to such States portions 

of its regulatory authority to license and regulate radioactive nuclear materials.
Audit of NRC’s Process for Addressing Bankruptcy of Materials Licensees

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III. FINDING

NRC’s Methods for Initially Learning of Bankrupt NRC Materials Licensees 

Could Be More Effective and Efficient

Once NRC becomes aware of bankrupt materials licensees, NRC ensures

that appropriate measures are taken to protect public health and safety. 

OIG auditors observed noteworthy practices performed by headquarters

and regional staff during the course of the audit (see Appendix B for a list 

of these practices). However, OIG found that NRC’s methods for initially 

learning of bankrupt materials licensees could be more effective and 

efficient. 

Although NRC licensees are required to report bankruptcies to the 

agency, most do not and NRC’s alternate ways for discovering bankrupt 

licensees fall short. It is incumbent upon NRC to use effective and 

efficient methods to identify its bankrupt licensees. NRC has not (1) 

identified and used comprehensive source/s of bankrupt entities, and (2) 

developed guidance on staff’s role in identifying bankrupt NRC materials 

licensees. Consequently, if NRC does not know about bankrupt materials

licensees, the risk increases for nuclear materials to become uncontrolled 

and cause harm to the public. Additionally, without formal guidance, NRC 

staff are duplicating efforts, thereby wasting valuable agency resources.

NRC Should Have Effective and Efficient Methods To Identify 

Bankrupt Licensees

NRC should use effective and efficient methods for identifying bankrupt 

materials licensees. Federal regulations put the burden of bankruptcy 

notification on materials licensees; however, the majority of licensees do 

not report their bankruptcy to NRC. OIG reviewed NRC’s documentation

of 41 bankrupt materials licensees the agency was aware of to identify

how NRC learned of those bankruptcies. Of the 41 bankruptcies,6 68 

percent were not self-reported by licensees. Because most licensees do 

not self-report, it is incumbent upon NRC to employ alternate activities to 

identify bankrupt materials licensees.

 6 For the purpose of the audit, the audit team reviewed those NRC materials licensees that filed for 

bankruptcy between March 2008 and July 2013.
Audit of NRC’s Process for Addressing Bankruptcy of Materials Licensees

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NRC’s principles of good regulation require regulatory actions that are 

effective, efficient, and timely. Therefore, to achieve greater effectiveness 

and efficiency, it is necessary for the agency to rely on adequate methods 

for identifying bankrupt materials licensees and communicate those welldefined methods in agency guidance to help staff understand and carry 

out their responsibilities. Further, timely recognition of bankruptcies is 

critical for NRC to ensure early and thorough attention to situations that

could adversely affect the control of nuclear materials.

Methods for Identifying Bankrupt Licensees Could Be More Effective 

and Efficient

NRC’s methods for discovering bankrupt materials licensees are not as 

effective or efficient as they could be. NRC is aware that the majority of 

materials licensees do not self-report their bankruptcies as required. As 

such, NRC relies on other activities it has in place to help identify bankrupt 

licensees. Because these activities were established for reasons other 

than identifying bankrupt licensees, NRC does not obtain all the 

information it needs in a timely manner and there is some confusion 

regarding staff members’ roles, often causing duplication of their efforts.

NRC’s Methods for Identifying Bankruptcies

The methods NRC relies upon to identify bankruptcies do not provide

timely and complete information. NRC primarily discovers bankrupt 

materials licensees through the following methods:

• Fee collection process.

• Materials inspections.

• A listing of bankruptcies from the Department of Justice (DOJ).

Further, and to a lesser extent, NRC staff also review the news or receive

reports from a third party (e.g., other materials licensees) as sources for 

identifying bankrupt NRC licensees.
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Fee Collection

NRC can learn of bankrupt materials licensees through its annual fee7

collection process. Upon becoming an NRC licensee, an entity is 

obligated to pay an annual fee8 for its license. If a licensee does not pay 

its fee on time, that may signal to NRC that the licensee is in bankruptcy. 

While this method is a source for identifying bankrupt NRC materials 

licensees, it could take more than a year before NRC confirms that a 

licensee is in bankruptcy.

When an NRC materials licensee is delinquent in paying its license fee, 

NRC begins the process to collect fees due to the agency. As shown in 

Table 2, if a licensee is more than 30 days delinquent in paying its annual 

fee, NRC mails a dunning notice to the licensee informing the licensee

that its license fee was not paid. If, after 61 days, the licensee still does 

not pay its annual fee, an NRC contractor contacts the licensee by email 

or phone to determine why the licensee has not paid its annual license 

fees. If the agency cannot make contact with the licensee, the appropriate 

NRC regional inspector may visit the licensee’s site. Consequently, 

approximately 476 days can pass before NRC makes its first attempt at 

contacting the licensee in person by a regional inspector. 

 7 10 CFR Part 171, “Annual Fees for Reactor Operating Licenses and Fuel Cycle Licenses and

Materials Licenses, Including Holders of Certificates of Compliance, Registrations, and

Quality Assurance Program Approvals and Government Agencies Licensed by the NRC,” subjects most 

NRC licensees to annual fees. 8 Annual fees for NRC materials licensees that are less than $100,000 should be billed on the anniversary 

date of the license, and annual fees that are $100,000 or more should be billed quarterly.
Audit of NRC’s Process for Addressing Bankruptcy of Materials Licensees

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Table 2: Timeline for NRC’s Billing Process for the Collection of 

Materials Licensees’ Annual Fees

Action

Number of 

Days From 

Initial Action9

(approximate)

Number of 

Days From 

Issuance of 

Invoice

(approximate)

Accrued Number of 

Days (approximate)

Invoice is sent to 

licensee for annual 

license fee collection

365 0 365

First notice - dunning 

letter sent to licensee

30 30 395

Second notice -

phone call and/or 

email to licensee

31 61 426

Regional inspectors 

requested to assist in 

contacting the 

licensee 

50 111 476

Order process begins 

to revoke license

10 121 486

Source: OIG generated

Materials Inspections

NRC also learns of materials licensee bankruptcies through its inspection 

process. When conducting an inspection, an NRC inspector may learn

that a licensee is currently in, or about to file for, bankruptcy. An NRC 

inspector may also learn of a licensee’s bankruptcy by discovering the 

licensee’s facility is shut down and/or abandoned when the inspector 

arrives to conduct the inspection. While learning about bankruptcies 

through the inspection process is useful, it may not always be timely as 

specific licensees are inspected anywhere from every 9 months to 6 

years10 depending on the type of license. In addition, NRC does not 

typically inspect general licensees.

 9 Either issuance of license or previous action. 

10 NRC Inspection Manual Chapter 2800, “Materials Inspection Program,” suggests that the minimum 

frequency for an inspection is 9 months (1 year minus 25 percent). The maximum frequency for an 

inspection is 6 years (5 years plus 1 year).
Audit of NRC’s Process for Addressing Bankruptcy of Materials Licensees

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DOJ Bankruptcy List

DOJ represents the Federal Government in cases involving certain 

bankrupt entities. To determine which cases it needs to represent for the 

Government, DOJ sends a list of bankrupt entities to Federal agencies like 

NRC. The DOJ organization that provides the bankruptcy list to NRC is 

the Environmental and Natural Resources Division (ENRD). As such, its

work focuses on industrial and manufacturing companies because those 

companies have the greatest potential to have an impact on the 

environment. In creating its list, ENRD’s search parameters did not 

include medical or academic organizations. After meeting with OIG in 

June 2013, ENRD proactively began including some hospitals and 

medical facilities that declare bankruptcy on the NRC list based on 

ENRD’s reviews of publications and notices to the Environmental 

Protection Agency. If ENRD officials learn of a bankruptcy that is 

noteworthy to NRC, they will send that information sooner than the

monthly list that is typically emailed to NRC. Even though ENRD now 

includes some hospitals and medical facilities on the list that it sends to 

NRC, the list does not contain all companies that file for bankruptcy. In 

fact, NRC receives information on less than 1 out of 20 bankruptcies 

occurring across the Nation monthly. 

NRC Staff’s Role in Identifying Bankruptcies

NRC’s process for identifying materials licensees is not as efficient as it

could be because staff are performing duplicative tasks. Because the list 

of bankrupt companies from DOJ contains bankrupt organizations from 

across the country and is not inclusive to only NRC materials licensees, 

NRC’s BRT members must review the list to determine which companies, 

if any, are NRC licensees. DOJ emails the list of new bankruptcies to its 

NRC contact each month. The NRC contact, a BRT member, forwards 

the email to the rest of the BRT members to ascertain if NRC has any 

interest. Multiple NRC staff members (in headquarters and Regions11 I, 

III, and IV) conduct Internet and other searches to determine if any of the 

listed companies are NRC licensees. There is no written guidance on the 

type of search to perform when identifying bankrupt materials licensees. 

Instead, it is up to each staff member to determine the sources of 

information to examine and the extent of the review to perform. Multiple

 11 Auditors did not interview staff in Region II because Region I oversees all materials licensees in 

 Region II. 
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staff members are duplicating search efforts using the Internet and agency 

databases, including: 

• Google.

• ADAMS.

12

• General Licensing Tracking System.

13

• Web-Based Licensing.

14

• A 3-year-old list15 known as the “Alpha List.”

Specifically, agency staff across NRC perform the same reviews to 

determine if any of the companies on the DOJ list are NRC licensees. 

Depending on how many companies are on the DOJ list, each staff 

member could take several hours to complete the search for bankrupt 

licensees. 

Improvement Needed in Identifying Bankrupt Licensees

NRC has not (1) identified and used comprehensive source/s of bankrupt 

entities as part of its process for identifying bankrupt NRC licensees, and 

(2) developed guidance on staff’s role for identifying bankrupt materials 

licensees. 

Employing comprehensive source/s of up-to-date and complete 

information that identify bankrupt entities would better position NRC to 

know about bankruptcies that affect the agency as soon as they happen. 

Moreover, the sooner NRC becomes aware of a bankrupt materials 

licensee, the faster the agency can take the appropriate steps to ensure 

that the nuclear materials are properly controlled. Although agency staff 

believe that there are very few bankrupt materials licensees, they have no 

 12 Agencywide Documents Access and Management System (ADAMS) is NRC’s official recordkeeping 

system that contains vast libraries or collections of documents related to the agency’s regulatory 

activities.

13 General Licensing Tracking System is an NRC database that stores information about general licensed 

devices and general licensees.

14 Web-Based Licensing is an NRC database that stores information about specific licensees accessible 

to NRC staff. 

15 In 2010, NRC stopped using a program through the National Institutes of Health that provided an 

alphabetized list of NRC materials licensees due to the development of NRC’s current licensing tracking 

system, Web-Based Licensing System. 
Audit of NRC’s Process for Addressing Bankruptcy of Materials Licensees

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reliable method to confirm that belief. OIG used a free public bankruptcy 

Web site that lists organizations that are currently in bankruptcy. OIG’s

one-time search yielded an NRC licensee currently in bankruptcy of which 

NRC was not aware.

Further, concerning staff’s role in reviewing the DOJ list, staff are 

duplicating efforts because there is no guidance describing what needs to 

be done. For example, NRC’s current bankruptcy-related guidance16 does 

not provide staff with explicit directions on who should review bankruptcy 

information or how the review should be conducted for identifying NRC 

bankrupt materials licensees. Establishing agencywide guidance would 

assist in avoiding unnecessary duplication of effort. 

NRC Risks Not Knowing About Bankrupt Material Licensees and Is 

Not Efficiently Using Its Resources

Given the agency’s current approach to identifying bankrupt licensees, 

NRC risks not knowing about bankrupt materials licensees, which 

increases the risk of materials becoming uncontrolled and causing harm to 

the public. Additionally, without formal guidance, NRC staff are 

duplicating efforts, thereby wasting valuable agency resources.

Uncontrolled materials associated with bankrupt licensees can 

compromise public health and safety. OIG searched NRC’s Nuclear 

Materials Events Database17 and identified five bankruptcy-related events

that occurred over a 13-year period involving NRC materials licensees. 

These events reflected lost or a loss of control of nuclear materials

reported across the United States because of bankruptcy. For example, a 

coal company that went bankrupt lost control of a gauge containing 0.5 

Curies of Cesium-137. In another case, a gauge containing a 0.1 Curies 

Cesium-137 source was found at a licensee's facility during environmental 

cleanup after the licensee went into bankruptcy and abandoned the 

property. The longer it takes for NRC to learn of a bankrupt licensee, the 

greater the risk to public health and safety. Additionally, a person 

exposed to sources such as these can receive a dose that exceeds NRC’s 

regulatory limits and could, in some circumstances, receive a radiation 

injury.

 16 NUREG 1556, Volume 15.

17 The Nuclear Materials Events Database is the system NRC uses to track events and monitor nuclear 

materials trends across the country.
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The way that NRC staff members review the DOJ bankruptcy list is not an 

efficient use of resources. Duplication of effort is costly and prevents staff 

from doing other safety-related work. Senior managers question the 

amount of time and resources staff dedicate to this task, when other staff 

members are performing the same tasks. By not devising a method to 

review the list more efficiently, NRC is missing an opportunity for cost 

savings. 

Recommendations

OIG recommends that the Executive Director for Operations:

1. Identify and use comprehensive source/s of bankrupt entities, as part 

of NRC’s process for identifying bankrupt NRC licensees.

2. Develop guidance on staff’s role for identifying bankrupt NRC materials 

licensees.

IV. AGENCY COMMENTS

On December 5, 2013, the Office of the Inspector General (OIG) issued 

the discussion draft of this report to the Executive Director for Operations. 

OIG met with NRC management and staff on December 19, 2013, at an 

exit conference. The agency provided informal comments, which OIG 

subsequently incorporated into the draft report as appropriate. The 

agency reviewed the changes to the report and opted not to provide 

formal comments. 
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APPENDIX A

OBJECTIVE, SCOPE, AND METHODOLOGY

OBJECTIVE

The audit objective was to determine if NRC has reasonable assurance 

that appropriate measures to protect the public health and safety have 

been or will be taken during bankruptcies involving materials licensees.

SCOPE

We conducted this performance audit at NRC headquarters (Rockville, 

MD) and three NRC regional offices (Region I, King of Prussia, PA; 

Region III, Lisle, IL; and Region IV, Arlington, TX) from March 2013 

through October 2013. OIG also interviewed DOJ personnel in 

Washington, DC. Internal controls related to the audit objective were also 

reviewed and analyzed. Throughout the audit, auditors were aware of the 

possibility or existence of fraud, waste, or misuse in the program.

METHODOLOGY

The audit team reviewed relevant criteria, including the Atomic Energy Act 

of 1954, as amended; NUREG 1556, Volume 15, “Consolidated Guidance 

About Materials Licenses: Guidance About Changes of Control and About 

Bankruptcy Involving Byproduct, Source, or Special Nuclear Materials 

Licenses”; and 10 CFR Part 30, “Rules of General Applicability to 

Domestic Licensing of Byproduct Materials.” OIG also reviewed NRC 

enforcement policies and inspection procedures. 

OIG auditors compiled a universe of bankruptcy notifications. The 

bankruptcy notifications consisted of bankruptcies either identified by OIG 

searches or provided to OIG by agency staff. All of the bankruptcies were 

NRC materials licensees that filed for bankruptcy between March 2008 

and July 2013 and of which NRC became aware.

At NRC headquarters, auditors interviewed BRT members to gain an 

understanding of their roles and responsibilities as they relate to 

bankruptcy of materials licensees. Interviews were conducted with staff 

from the Office of Federal and State Materials and Environmental 

Management Programs, Office of the Chief Financial Officer, Office of 
Audit of NRC’s Process for Addressing Bankruptcy of Materials Licensees

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Nuclear Security and Incident Response, Office of the General Counsel,

and NRC Regions I, III, and IV. Auditors also interviewed DOJ staff to 

gain an understanding of the coordination between DOJ and NRC 

involving the identification of bankrupt NRC materials licensees. 

We conducted this performance audit in accordance with generally 

accepted Government auditing standards. Those standards require that 

we plan and perform the audit to obtain sufficient, appropriate evidence to 

provide a reasonable basis for our findings and conclusions based on our 

audit objective. We believe that the evidence obtained provides a 

reasonable basis for our finding and conclusions based on our audit 

objective. 

The audit work was conducted by Sherri Miotla, Team Leader; Andrea 

Ferkile, Audit Manager; Kevin Nietmann, Senior Technical Advisor; Tony 

Lipuma, Senior Assistant for Audit Operations; Taylor Butch, Management 

Analyst; and Dia Bhatia, Student Management Analyst.
Audit of NRC’s Process for Addressing Bankruptcy of Materials Licensees

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APPENDIX B

NRC GOOD PRACTICES

OIG observed the following tasks, methods, and activities related to 

NRC’s bankruptcy processes during interviews with staff from

headquarters, Regions I, III, and IV: 

1. Coordination with Agreement States: Staff share information regarding 

bankrupt materials licensees within an Agreement States' jurisdiction 

with the responsible Agreement State and vice versa.

2. Reminders to Licensees During Inspections: During routine 

inspections, inspectors remind NRC materials licensees of their 

reporting requirements, including the licensees’ obligation to

immediately report their bankruptcy filing to NRC.

3. ADAMS Bankruptcy Folders: Staff created a technique to track 

bankruptcies in ADAMS by creating folders to hold information. The 

ADAMS tracking method serves as a good timeline, provides 

bankruptcy related information to all agency staff, and is a way to show 

closure to a bankruptcy proceeding. 

4. Consolidated Checklist: Staff created a condensed version of key 

questions from NUREG 1556, Volume 15, regarding the security of 

materials (e.g., quantity and location). After learning about the 

bankruptcy, NRC sends the questions to licensees during its first

contact. The checklist is specific to bankruptcy and the questions on 

the checklist seek to assess the functionality of a licensee’s health and 

safety practices during the time of the bankruptcy.