Audit of NRC’s Internal 

Controls Over Fee Revenue 

OIG-15-A-12

March 19, 2015

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

March 19, 2015

MEMORANDUM TO: Maureen E. Wylie

Chief Financial Officer

Mark A. Satorius

Executive Director for Operations

FROM: Stephen D. Dingbaum /RA/

Assistant Inspector General for Audits

SUBJECT: AUDIT OF NRC’S INTERNAL CONTROLS OVER FEE 

REVENUE (OIG-15-A-12)

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

Internal Controls Over Fee Revenue.

The report presents the results of the subject audit. Following the February 23, 2015, exit 

conference, agency staff indicated that they had no formal comments for inclusion in this 

report.

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 (301) 415-5915 

or Eric Rivera, Team Leader, at (301) 415-7032.

Attachment: As stated
Office of the Inspector General

U.S. Nuclear Regulatory Commission

Defense Nuclear Facilities Safety Board

Results in Brief

Audit of NRC’s Internal Controls Over Fee Revenue

What We Found

The agency needs to establish more effective internal 

controls over the recordation of fee revenue. The 

procedures to identify and capture fee billable staff time 

and reimbursable contractor costs are ineffective and 

inefficient. Also the process for validating the accuracy of 

the charges is labor intensive, difficult, and challenging. 

Controls for setting up timekeeping codes and their 

definitions are inconsistent and not standardized making it 

difficult for staff to identify the correct code for charging

time. In addition, controls to prevent errors in selecting 

timekeeping codes for charging staff time can be 

improved.

Similarly, the overhead cost allocation process also needs 

improvement. The allocation calculation uses data that is 

unreliable and could produce inaccurate invoices to NRC 

licensees and applicants.

In addition, NRC validation reports and invoices sent to 

licensees and license applicants do not have adequate 

contractor details regarding services provided and related 

reimbursable costs. Lack of contractor detail in NRC 

validation reports and invoices sent to licensees and 

applicants increases the risk of billing errors.

What We Recommend

This report makes recommendations to improve internal 

controls over the recordation of fee revenue.

Why We Did This Review

The U.S. Nuclear Regulatory 

Commission (NRC) is required by 

law to offset a substantial percent 

of its budget authority through fees 

billed to licensees and license 

applicants. 

NRC provides licensing services to 

agency licensees and license 

applicants. The agency recovers 

the costs to provide licensing 

services by invoicing licensees and 

applicants for staff time and 

contractor costs.

Each fiscal year, NRC publishes a 

schedule of fees in 10 Code of 

Federal Regulations (CFR) Part 

170 for licensing services directly 

provided to NRC licensees and 

applicants, and in 10 CFR Part 171 

for annual fees billed to identifiable 

NRC license holders for generic 

regulatory costs not otherwise 

recovered through 10 CFR Part 

170 fees.

The audit objective was to 

determine whether NRC has 

established and implemented an 

effective system of internal 

controls over the recordation and 

reconciliation of fee revenue. 

OIG-15-A-12

March 19, 2015
Audit of NRC’s Internal Controls Over Fee Revenue

ABBREVIATIONS AND ACRONYNMS........................................................ i

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

II. OBJECTIVE......................................................................................5

III. FINDINGS.........................................................................................5

A. TAC Internal Controls Need Improvement ............................6

B. Overhead Cost Allocation Process Needs Improvement ....10

C. Reimbursable Contract Details Are Inadequate ..................12

IV. CONSOLIDATED LIST OF RECOMMENDATIONS.......................15

V. AGENCY COMMENTS...................................................................16

APPENDIX 

A. OBJECTIVE, SCOPE, AND METHODOLOGY...............................17

TO REPORT FRAUD, WASTE, OR ABUSE .............................................19

COMMENTS AND SUGGESTIONS..........................................................19

 TABLE OF CONTENTS
Audit of NRC’s Internal Controls Over Fee Revenue

i

10 CFR Title 10 of the Code of Federal Regulations

COR Contracting Officer Representative

FAIMIS Financial Accounting and Integrated Management 

Information System

FY Fiscal Year

HRMS Human Resource Management System

MD Management Directive

OCFO Office of the Chief Financial Officer

OIG Office of the Inspector General

PART 170 10 CFR Part 170

PART 171 10 CFR Part 171

RPS Reactor Program System

TAC Technical Assignment Control

 ABBREVIATIONS AND ACRONYMS
Audit of NRC’s Internal Controls Over Fee Revenue

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The U.S. Nuclear Regulatory Commission (NRC) is an independent agency 

created by Congress. Its mission is to license and regulate the Nation’s civilian 

use of radioactive materials to protect public health and safety, promote the 

common defense and security, and protect the environment. NRC regulates 

commercial nuclear power plants; research, test, and training reactors; nuclear 

fuel cycle facilities; and the use of radioactive materials in medical, academic, 

and industrial settings. The agency also regulates the transport, storage, and 

disposal of radioactive materials and waste, and licenses the export and import 

of radioactive materials. NRC’s FY 2014 Congressional Budget Justification 

provides the necessary resources for the Nuclear Reactor Safety and Nuclear 

Materials and Waste Safety Programs to carry out the agency’s mission. NRC is 

required by law to offset a substantial percent of its budget authority through fees 

billed to licensees and license applicants.

The Omnibus Budget Reconciliation Act of 1990, as amended, requires NRC to 

annually assess and collect fees totaling approximately 90 percent of its annual 

budget authority less certain exclusions defined in the act. NRC’s budget 

authority for FYs 2013 and 2014 was $985.6 million and $1,055.9 million, 

respectively. NRC estimated that $859.6 million for FY 2013 and $916.7 million 

for FY 2014 should be recovered from invoiced fees. Approximately 10 percent 

of the budget authority is not subject to fee recovery. NRC is required to 

establish a schedule of charges that fairly and equitably assess the fees to 

license holders and license applicants (licensees and applicants).

1

 

Each fiscal year, NRC publishes a schedule of charges in two different parts of 

Title 10, “Energy,” of the Code of Federal Regulations (10 CFR). 10 CFR Part 

1702(Part 170) sets out fees for licensing services directly provided to NRC 

licensees and applicants. 10 CFR Part 1713(Part 171) sets out annual fees 

 

1

Licensee – one who holds a license issued and regulated by the NRC.

Applicant – one who has applied for a license that is issued and regulated by the NRC.

2

Part 170 is titled Fees for Facilities, Materials, Import and Export Licenses, and Other Regulatory 

Services Under the Atomic Energy Act Of 1954, as amended.

3

Part 171 is titled Annual Fees for Reactor 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.

 I. BACKGROUND
Audit of NRC’s Internal Controls Over Fee Revenue

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billed to identifiable NRC license holders for generic regulatory costs not 

otherwise recovered through Part 170 fees (see Table 1). 

Table 1. Estimated Fee Recovery for FYs 2013 and 2014

Source: Prepared by the Office of the Inspector General (OIG) based on 10 CFR Parts 

170 and 171, Revision of Fee Schedules; Fee Recovery for Fiscal Year 2014; Final Rule.

Part 170 Fee Invoicing

Part 170 fees recover NRC’s costs for providing special benefits to identifiable 

licensees and applicants such as the costs of inspections and application reviews

for new licenses and license renewals. For example, these costs include 

professional staff time for specific inspections and plant- and licensee-specific 

performance reviews, project manager and resident inspector overhead cost,4

and reimbursable contractor costs5(see Figure 1). Each quarter, the agency’s 

Office of the Chief Financial Officer (OCFO) invoices for Part 170 services to 

licensees and applicants. 

 

4 Overhead costs – indirect costs associated with providing services to NRC licensees or applicants. 

5 Reimbursable contractor costs – fee billable costs incurred by NRC to have a contractor perform 

appropriate contractual support services for a licensee or applicant.

FY 2013 FY 2014

Part 171 $511.6 $584.2

Part 170 $348.0 $332.5

Totals $859.6 $916.7

$348.0 $332.5

$511.6 $584.2

$0.0

$100.0

$200.0

$300.0

$400.0

$500.0

$600.0

$700.0

$800.0

$900.0

$1,000.0

Millions of Dollars ($)
Audit of NRC’s Internal Controls Over Fee Revenue

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Figure 1. Part 170 Fees Cost Components Data Flow6

Source: Prepared by OIG with data provided by OCFO.

NRC staff use technical assignment control (TAC) numbers to identify and track 

employee time including Part 170 billable activities. TACs are set up in the 

agency’s TAC System, a module of the Reactor Program System (RPS),7defined 

as billable or non-billable, and linked to a specific docket number8for invoicing. 

TACs created in RPS interface with the agency’s Human Resource Management 

System (HRMS)9and Financial Accounting and Integrated Management 

 

6

Abbreviation explanations for Figure 1: PM/RI = Project Manager/Resident Inspector; TAC = Technical 

Assignment Control; HRMS = Human Resource Management System; FAIMIS = Financial Accounting 

and Integrated Management Information System; COR = Contracting Officer Representative.

7 RPS is managed by the Office of Nuclear Reactor Regulation.

8Docket numbers identify a specific site. 

9 HRMS is the agency’s system for recording employee time and labor data.
Audit of NRC’s Internal Controls Over Fee Revenue

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Information System (FAIMIS)10 (see Figure 2). Staff charge direct time to billable 

TACs when they complete their biweekly timesheets in HRMS. Each quarter, 

OCFO accumulates the direct staff time charged to billable TACs and prepares 

invoices using the current hourly rate.

11

 For FYs 2013 and 2014, the hourly rates 

were $272 and $279, respectively.

Figure 2. Invoicing Process

Source: Prepared by OIG with data from NRC.

Licensing and inspection fees include the full cost of project manager and 

resident inspector overhead costs with certain exclusions specified in Part 170.

Project managers are NRC employees responsible for overseeing projects for 

licensees and applicants. Resident inspectors are NRC employees assigned to 

a specific facility and provide major onsite NRC presence for inspection and 

assessment of licensee performance. Project manager and resident inspector 

overhead cost is allocated to their assigned dockets through a partly automated 

and partly manual calculation. 

 

10 FAIMIS is the agency’s core financial system and official system of record. 

11 Part 170 states that the full cost fees for professional staff time will be determined at the professional 

hourly rate in effect at the time the service was provided. NRC calculates the rate annually and publishes 

it in the Federal Register.
Audit of NRC’s Internal Controls Over Fee Revenue

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NRC also hires contractors to perform services for licensees and applicants. 

Contractors submit their invoices to NRC for payment. A COR must approve 

invoices before payment. NRC pays the contractor invoices and then bills the 

licensees and applicants for reimbursement of the amount NRC paid to the 

contractor (see Figure 1).

FAIMIS accumulates charges for each licensee and applicant. OCFO creates a 

quarterly validation report12 from FAIMIS of the charges to be invoiced. OCFO 

sends the report to program and regional offices for validation and certification 

before invoicing licensees and applicants (see Figure 2).

The audit objective was to determine whether NRC has established and 

implemented an effective system of internal controls over the recordation and 

reconciliation of fee revenue. 

The audit focused on Part 170 fee revenue. Appendix A contains information on 

the audit scope and methodology. 

While NRC generally meets its fee recovery percentages,13 more effective 

internal controls would increase efficiency, effectiveness, and transparency of the 

agency’s fee revenue process. Specifically,

A. TAC internal controls need improvement.

B. Overhead cost allocation process needs improvement.

C. Reimbursable contract details are inadequate.

Additionally, OIG observed that reconciliations of revenues are not 

consistently performed. In the previous report, Audit of NRC’s Process for 

 

12 Validation report - a report for each program and regional office of the accumulated billable hours and 

contract costs for the past quarter. 

13 NRC is required to recover approximately 90 percent of its budget authority by collecting fees from 

licensees and applicants.

 II. OBJECTIVE

 III. FINDINGS
Audit of NRC’s Internal Controls Over Fee Revenue

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What Is Required

Calculating License Fees (OIG-13-A-02), dated October 24, 2012, OIG 

recommended that these reconciliations be performed. As noted in an 

audit followup memorandum dated October 23, 2014, the 

recommendation has not yet been closed. OCFO estimated that 

implementation of the recommendation would be complete by September 

2015 when OCFO staff finish documenting the new process for annual 

validation. 

A. TAC Internal Controls Need Improvement

Internal controls regarding TAC setup, standardization, HRMS access, and 

validation need improvement. Federal laws and standards require agencies to 

maintain internal controls over all aspects of financial management. However, 

ineffective and inefficient procedures in the TAC process exist because agency 

management has not centralized control of TACs. Moreover, quarterly validation 

reports are ineffective. This results in an increased risk for the agency to overbill

or underbill NRC licensees and applicants.

Federal laws and standards require agencies to maintain internal controls over all 

aspects of financial management. The Federal Managers Financial Integrity Act 

of 1982 requires that revenues and expenditures applicable to agency operations 

are properly accounted for and recorded. Also, the Government Accountability 

Office’s Standards for Internal Control in the Federal Government14 states that 

internal controls should provide reasonable assurance that operations are 

effective and efficient and financial reporting is reliable. 

NRC’s Management Directive (MD) 4.6, License Fee Management Program, has 

multiple objectives related to internal controls over fees. These objectives 

include

 To capture and produce financial information to support assessing fees.

 To ensure that the basis for the fees is complete, accurate, and verifiable.

 To ensure adherence to appropriate management controls over feebillable costs.

 

14 OIG used the November 1999 version. The Government Accountability Office recently released a 

newer version of these standards September 2013. However, it was not effective during the audit period.
Audit of NRC’s Internal Controls Over Fee Revenue

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What Was Found

Internal controls regarding TAC setup, TAC standardization, HRMS access, and 

validation need improvement.

TAC Setup Is Inconsistent

There is no consistency in the setup and usage of TACs. TACs are set up 

by program office staff from different NRC offices. According to agency 

staff interviewed, each program office follows its own policies and 

procedures regarding the setup and usage of TACs. Additionally, an 

agency manager stated that there is no consistency for TAC assignment 

between program offices or individual projects. Further, as of June 2014, 

there were 8,246 open TACs accessible to all agency staff. An OCFO 

senior manager agreed that the setup of TACs is an ongoing problem and

OCFO has taken steps to reduce the number of open TACs. 

TAC Standardization Is Limited

TACs have limited standardization or significance. TACs are six 

characters long but only the first character is standardized, indicating the 

office where it was created. The other five characters are not 

standardized and have no significance. These characters are assigned in 

numeric sequence without regard to the task referenced. Table 2 provides 

examples of different TACs with identical task titles.

Table 2. TAC Numbers and Titles

Row TAC Docket TAC Title Requesting Office

1 L24870 07106613 Amend COC NO. 6613 For The 

Model No. 702 Container

Office of Nuclear 

Material Safety and 

Safeguards

2 L24927 07106613 Amend COC NO. 6613 For The 

Model No. 702 Container

Office of Nuclear 

Material Safety and 

Safeguards

3 RX0141 05200020 AREVA EPR DC - Review 

Containment and Ventilation Systems Office of New Reactors

4 RX0142 05200020 AREVA EPR DC - Review 

Containment and Ventilation Systems Office of New Reactors

5 RX0143 05200020 AREVA EPR DC - Review 

Containment and Ventilation Systems Office of New Reactors

 

Source: Prepared by OIG based on information provided by OCFO.
Audit of NRC’s Internal Controls Over Fee Revenue

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TACs, as shown in Table 2, are not often specific enough to allow staff to 

readily determine the correct choice. Rows 1 and 2 show two different 

TACs with the same docket number and the same title. Rows 3 through 5 

show consecutive TACs with the same docket number and identical titles.

TAC HRMS Access Not Controlled

NRC staff can charge time to any TAC. All agency staff must enter time in 

HRMS as part of the biweekly payroll process. OIG reviewed the time and 

labor data entry process and confirmed that time could be charged to any 

TAC by selecting the specific TAC in HRMS. OCFO staff also identified 

this as an issue. 

Quarterly Validation Reports Are Voluminous and Ineffective

OCFO provides a quarterly validation report to program and regional 

offices for review to validate charges and certify their accuracy. OIG 

analyzed the report for the third quarter of fiscal year 2013 and found a 

high volume of transactions for offices to validate. The report contained 

4,715 pages with 38,383 lines of data. Additional information about the 

report is shown in Table 3.

Table 3. Third Quarter FY 13 Validation Report Statistics

Lines Hours Dollars

Direct Labor 35,350 305,722 $83,782,761

PM/RI Overhead 2,495 21,814 $5,976,970

Contract 538 N/A $4,283,668

Totals 38,383 $94,043,399

Source: OIG summary of OCFO data.

Moreover, the quarterly validation process is difficult and challenging. 

Agency staff time is approved in HRMS by an approving official, often the 

employee’s supervisor, as part of the biweekly payroll process. However, 

billable staff time on validation reports must be reviewed and certified by

program and regional offices on a quarterly basis. An agency study 

completed in FY 2014 concluded that the validation report verification 

process is labor intensive, difficult, and challenging.
Audit of NRC’s Internal Controls Over Fee Revenue

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Why This Occurred

Why This Is Important

TAC procedures are ineffective and inefficient because NRC management has 

not established procedures to centralize control of TACs or provide an effective 

validation process. Individual NRC offices have their own established 

procedures for creating TACs. OCFO has ownership of TAC system data but 

does not have ownership of TAC creation. OCFO management is taking steps to 

assume ownership of TAC management, including the TAC setup process and 

TAC standardization. Further, the agency policy of allowing all staff access to all 

TACs combined with the large number of TACs available makes it difficult to 

prevent TAC errors.

The agency completed a study in FY 2014 that includes multiple 

recommendations to streamline and improve the validation process. While 

agency management recognizes the need to improve the quarterly validation

process, none of the recommendations have been implemented. 

Ineffective and inefficient TAC procedures increase the risk that overbilling and 

underbilling errors will occur on licensee and applicant invoices. For example, 

during the 2012 financial statement audit, auditors found an error of 

approximately $25 million. The error occurred because some billable project 

manager and resident inspector hours were not billed due to account setup 

issues. Standardizing TAC definition and use will increase reliability of invoice 

information and thus improve the quality of cost data to support effective 

decisionmaking.

Recommendations

OIG recommends that the Chief Financial Officer together with the Executive 

Director for Operations

1. Establish policies and procedures to centralize the control of TAC setup.

2. Design and implement internal controls that would allow user access in 

HRMS to TACs related only to their job functions. 
Audit of NRC’s Internal Controls Over Fee Revenue

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What Is Required

3. Standardize and link TACs to specific tasks. 

4. Design and implement a plan to improve the TAC validation process.

B. Overhead Cost Allocation Process Needs Improvement

The agency’s project manager and resident inspector overhead cost 

allocation is based on dockets assigned and not on activity or work effort. 

Additionally, a recent agency study reported that the current process is 

subject to a high error rate. Federal standards and NRC regulations 

recommend that cost allocations be based on activity or work effort and 

require the agency to maintain internal controls over the allocation 

process. Management has not developed an adequate overhead 

allocation process related to activity or work effort and the assignment

table15 is not always up-to-date. As a result, the current overhead cost 

allocation methodology and the unreliable assignment table could produce 

inaccurate invoices to NRC licensees and applicants.

Federal standards and NRC-specific regulations require the agency to maintain 

internal controls over the overhead cost allocation process. According to the 

Government Accountability Office’s Standards for Internal Control in the Federal 

Government, controls are designed to help ensure completeness and accuracy. 

In addition, Statement of Federal Financial Accounting Standards 4: Managerial 

Cost Accounting Standards and Concepts, requires that cost information 

supplied to internal and external users should be reliable and useful in making 

evaluations or decisions. These standards also prefer that overhead costs be 

allocated on an activity-based approach. Further, Part 170 requires that NRC 

recoverable costs include the full cost for project managers and resident 

inspectors assigned to a specific plant or facility, excluding leave time and time 

spent on generic activities. 

 

15 Assignment table – listing of the names of project managers and resident inspectors assigned to each 

docket. 
Audit of NRC’s Internal Controls Over Fee Revenue

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What Was Found 

Why This Occurred

The agency’s project manager and resident inspector overhead cost 

allocation is not activity based and the current process is subject to a high 

error rate. An agency study completed in 2014 identified project manager 

and resident inspector transactions as the area of greatest risk. The 

overhead allocation process begins when project managers and resident 

inspectors enter and assign their hours to TACs within HRMS. Time 

charged to a TAC with no docket assigned is considered overhead time. 

Time entered into HRMS is automatically interfaced with FAIMIS and used 

to calculate project manager and resident inspector overhead costs. 

The allocation of overhead costs is calculated by dividing the total 

overhead hours for each project manager and resident inspector by the 

number of dockets assigned to that person as reflected in the assignment

table. The resulting allocation relies on the accuracy of the assignment 

table rather than the work effort provided to each docket. 

Furthermore, the assignment table listing the project manager and 

resident inspector’s assigned dockets used in the allocation process is 

unreliable. OIG auditors noted that the assignment table is manually 

updated and is not always current. OIG auditors saw an example of 

project manager overhead costs charged to a docket after the project 

manager had been transferred. The project manager was transferred, but 

the assignment table was not updated. Thus, the individual’s charges 

were not allocated to the new docket to which the person was assigned. 

Agency management’s internal controls related to updating the 

assignment table need improvement. Agency management has not 

developed a fully automated process to update the assignment table and 

keep it current prior to calculating the project manager and resident 

inspector overhead cost allocation. 
Audit of NRC’s Internal Controls Over Fee Revenue

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Why This Is Important

What Is Required

The current allocation charges do not represent the activity or work effort 

that a project manager or resident inspector provides to assigned dockets. 

Moreover, an assignment table with dependencies on outdated 

information results in a high error rate for project manager and resident 

inspector overhead cost allocations. In a recent study, the agency noted 

that the overhead cost allocation process accounted for approximately

two-thirds of all the billing errors. Keeping the assignment table current 

will provide the licensee and applicant with more accurate invoices. 

Recommendation

OIG recommends that the Chief Financial Officer together with the Executive 

Director for Operations

5. Develop and implement a project manager and resident inspector overhead 

allocation methodology that will produce accurate, timely, and reliable 

overhead cost data for invoicing. 

C. Reimbursable Contract Details Are Inadequate

NRC validation reports for project managers and resident inspectors as well as 

agency invoices do not have adequate contractor details regarding services 

provided to licensees and applicants and related reimbursable costs. Federal 

standards and agency guidance provide direction on maintaining adequate 

information related to reimbursable contractor details. However, the agency has 

not established a comprehensive process for providing reimbursable contractor 

details on validation reports for project managers and resident inspectors and on 

invoices for licensees and applicants. As a result, lack of reimbursable 

contractor detail in NRC validation reports and agency invoices increases the risk 

of billing errors. 

Federal standards and agency guidance provide direction on maintaining 

adequate information related to cost information, including reimbursable contract 

costs. According to Statements of Federal Financial Accounting Standards 4:

Managerial Cost Accounting Standards and Concepts, program managers and 
Audit of NRC’s Internal Controls Over Fee Revenue

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What Was Found

resident inspectors should have relevant and reliable information to respond to 

inquiries relating costs to activities. Additionally, the agency’s MD 4.6, License 

Fee Management Program, directs agency office directors and regional 

administrators to ensure that data supporting quarterly certification of contract 

costs is complete and accurate.

NRC validation reports for project managers and resident inspectors and agency 

invoices sent to licensees and applicants do not have adequate contractor details 

regarding services provided and related reimbursable costs.

 

Validation Reports

NRC validation reports sent to agency project managers and resident inspectors 

for certification do not have adequate details regarding reimbursable contractor 

costs (see Figure 1 for contract cost data flow). OIG reviewed the third quarter 

FY 2013 validation report and noted that contract cost information on the report 

does not provide sufficient details to determine specific work performed by the 

contractor. For example, a line for contract costs in the validation report has one 

TAC but no contract number, no description of the work performed, and no COR

contact information. One project manager interviewed by OIG stated that 

contract costs are approved by the COR and not the project manager. The 

project manager also stated that the validation report is the first opportunity to 

see all the contract charges for his project. In addition, another project manager 

interviewed by OIG provided email documentation showing the difficulty he had 

certifying contract information in the validation reports without adequate 

supporting documentation.

Agency Invoices

Agency invoices sent to licensees and applicants also lack adequate contractor 

details regarding services provided and related reimbursable costs. OIG 

reviewed four licensee or applicant invoices and observed that they did not 

include contractor names, hours billed, or description of the work performed. 

OIG inquired of industry representatives about NRC invoices and some 

commented that NRC invoices lacked contractor details. 
Audit of NRC’s Internal Controls Over Fee Revenue

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Why This Is Important

Why This Occurred

NRC validation reports and licensee and applicant invoices lack adequate 

contractor details because the agency does not provide the information. 

Ownership of the contract detail, validation process, and licensee and 

applicant invoicing process is split among offices. Specifically, NRC’s 

Office of Administration is responsible for initial contract processing,

program offices are responsible for completing contract validation, and 

OCFO is responsible for licensee and applicant invoicing. During a 

briefing with OIG staff, OCFO management agreed that the use of TACs

throughout the acquisition and financial systems would make contractor 

invoice identification and verification easier. Agency management 

acknowledged the need to work together to improve the flow of contractor 

invoice details to the validation reports and licensee and applicant 

invoices.

Lack of contractor detail in NRC validation reports and invoices sent to 

licensees and applicants increases the risk of billing errors. Without 

contractor details, it is difficult for project managers and resident 

inspectors and licensees and applicants to verify the accuracy of 

contractor costs. A more comprehensive process for providing fee billable 

contractor details will enhance the controls over the contract billable cost 

component.

Recommendations

OIG recommends that the Chief Financial Officer together with the Executive 

Director for Operations

6. Design and implement procedures and processes that provide 

sufficient contractor information on the validation reports for NRC 

project managers and resident inspectors to identify and validate the 

specific tasks performed and related reimbursable contractor costs.

7. Design and implement procedures and processes that provide 

sufficient contractor information on invoices for licensees and 
Audit of NRC’s Internal Controls Over Fee Revenue

15

 IV. CONSOLIDATED LIST OF RECOMMENDATIONS

applicants to identify the specific tasks performed and related 

reimbursable contractor costs.

OIG recommends that the Chief Financial Officer together with the Executive 

Director for Operations

1. Establish policies and procedures to centralize the control of TAC setup.

2. Design and implement internal controls that would allow user access in 

HRMS to TACs related only to their job functions. 

3. Standardize and link TACs to specific tasks. 

4. Design and implement a plan to improve the TAC validation process.

5. Develop and implement a project manager and resident inspector overhead 

allocation methodology that will produce accurate, timely, and reliable 

overhead cost data for invoicing. 

6. Design and implement procedures and processes that provide 

sufficient contractor information on the validation reports for NRC 

project managers and resident inspectors to identify and validate the 

specific tasks performed and related reimbursable contractor costs.

7. Design and implement procedures and processes that provide 

sufficient contractor information on invoices for licensees and 

applicants to identify the specific tasks performed and related 

reimbursable contactor costs.
Audit of NRC’s Internal Controls Over Fee Revenue

16

 V. AGENCY COMMENTS

An exit conference was held with the agency on February 23, 2015. Prior to this 

meeting, agency management reviewed a discussion draft and provided 

technical comments at the exit conference that have been incorporated into this 

report as appropriate. As a result, agency management opted not to provide 

formal comments for inclusion in this report.
Audit of NRC’s Internal Controls Over Fee Revenue

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Appendix A

Objective

The audit objective was to determine whether NRC has established and 

implemented an effective system of internal controls over the recordation and 

reconciliation of fee revenue.

Scope

This audit focused on reviewing internal controls over NRC procedures related to 

the capture of reimbursable costs and invoicing of revenue. OIG analyzed 

information and developed audit procedures to address specific areas of internal 

control over fee revenue based on document reviews and interviews with staff 

knowledgeable about revenue procedures. OIG initially considered all revenue 

streams including Part 171 and other administrative revenue. OIG determined 

that the areas of greatest risk related to direct labor costs, project manager and 

resident inspector overhead, and reimbursable contract costs.

We conducted this performance audit at NRC headquarters in Rockville, 

Maryland, from December 2013 through January 2015. OIG reviewed and 

analyzed internal controls related to the audit objectives. Throughout the audit, 

auditors were aware of the possibility of fraud, waste, and abuse in the program. 

Methodology

To accomplish the audit objectives, OIG reviewed relevant laws, regulations, and 

guidance, including 

 Part 170, Fees for Facilities, Materials, Import and Export Licenses, and 

Other Regulatory Services Under the Atomic Energy Act of 1954, as 

amended.

 Part 171, Annual Fees for Reactor 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.

 OBJECTIVE, SCOPE, AND METHODOLOGY
Audit of NRC’s Internal Controls Over Fee Revenue

18

 31 United States Code 9701, Title V of the Independent Offices 

Appropriations Act of 1952.

 42 United States Code 2214, Pertinent Provisions of the Omnibus Budget 

Reconciliation Act of 1990, as amended. 

 Office of Management and Budget Circular A-123, Management’s 

Responsibility for Internal Control.

 Government Accountability Office’s Standards for Internal Control in the 

Federal Government. 

OIG also reviewed agency guidance and documents, including Management 

Directive 4.6, License Fee Management Program. OIG reviewed Statement of 

Federal Financial Accounting Standards 4: Managerial Cost Accounting 

Standards and Concepts, for guidance on cost accounting requirements.

In addition to reviews of standards and guidance, OIG interviewed NRC 

headquarters staff to obtain insights on the agency’s process for internal controls 

over fee revenue. These interviews included agency management, staff 

responsible for TACs, project managers, and OCFO staff responsible for licensee

and applicant invoicing. OIG observed the process for creating invoices. OIG 

reviewed and analyzed the data contained in the validation report. OIG surveyed 

NRC staff involved in the validation process to gain their insights into the 

process. 

In addition to obtaining the views of internal stakeholders, OIG reached out to 

industry representatives through the Nuclear Energy Institute and the National 

Mining Association to gain an understanding of licensee and applicant views on 

NRC invoicing.

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 objectives. 

We believe that the evidence obtained provides a reasonable basis for our 

findings and conclusions based on our audit objectives.

This audit work was conducted by Eric Rivera, Team Leader; Mary Meier, Audit 

Manager; Larry Vaught, Senior Auditor; Lindsey Heeszel, Auditor; and Jimmy 

Wong, Auditor.
Audit of NRC’s Internal Controls Over Fee Revenue

19

 TO REPORT FRAUD, WASTE, OR ABUSE

 COMMENTS AND SUGGESTIONS

Please Contact:

Email: Online Form

Telephone: 1-800-233-3497

TDD 1-800-270-2787

Address: U.S. Nuclear Regulatory Commission

Office of the Inspector General

Hotline Program

Mail Stop O5-E13

11555 Rockville Pike

Rockville, MD 20852

If you wish to provide comments on this report, please email OIG using this link.

In addition, if you have suggestions for future OIG audits, please provide them using 

this link.