TABLE OF CONTENTS www.nrc.gov

Fiscal Year 2006

Performance and Accountability Highlights

Protecting People and the Environment

UNITED STATES NUCLEAR REGULATORY COMMISSION
License and regulate the Nation’s civilian use of byproduct, 

source, and special nuclear materials to ensure adequate 

protection of public health and safety, promote the common 

defense and security, and protect the environment.

Mission

Vision

Excellence in regulating the safe and secure use and 

management of radioactive materials for the public good.

Refueling a Nuclear Reactor


Protecting People and the Environment www.nrc.gov

TABLE OF CONTENTS

A Message from the Chairman ............................................................................................3

Introduction ...........................................................................................................................4

About the NRC.......................................................................................................................4

Program Performance Overview..........................................................................................9

Future Challenges................................................................................................................14

A Message from the Chief Financial Officer ....................................................................15

Financial Performance Overview ......................................................................................17

Condensed Financial Statements.......................................................................................22

Systems, Controls, and Legal Compliance ........................................................................24

Inspector General’s Transmittal Letter.............................................................................28

Independent Auditors’ Report on the Condensed Financial Statements......................29

For a full version of the FY 2006 Performance & Accountability Report go to www.nrc.gov

Inside a nuclear reactor containment building


FY 2006 PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS

(From left to right) Commissioner Gregory B. Jaczko, Commissioner Edward McGaffigan, Jr., Chairman Dale E. Klein, 

Commissioner Jeffrey S. Merrifield, and Commissioner Peter B. Lyons


Protecting People and the Environment www.nrc.gov

A MESSAGE FROM THE CHAIRMAN

I am pleased to present the Nuclear Regulatory Commission’s 

Performance and Accountability Highlights for FY 2006. Ensuring the protection of public health and safety and the environment has always been and will continue to be the NRC’s 

primary goal. I am proud to report that the NRC has again 

achieved its safety and security performance goals. While 

we did not meet some of our openness, effectiveness, and 

management performance measures, we have developed 

approaches to improve results in the coming year. 

The Agency is continuing its successful regulatory oversight 

programs, including comprehensive safety inspections as well as 

force-on-force exercises to confirm licensees’ capabilities to provide adequate security. The NRC 

will also continue its program to renew the licenses of existing nuclear reactors following the necessary safety reviews. Projected new reactor licensing and other activities present significant challenges for the NRC, including the need to obtain additional resources to meet the increased workload, to hire and train several hundred new staff, to update the Agency’s regulatory review and 

construction inspection guidelines, and to expand the Agency’s infrastructure, including obtaining the necessary work space and implementing more innovative use of information technology, to 

accommodate this growth. I believe the Agency is on the right course to meet these challenges.

This report provides information that demonstrates that NRC’s financial and performance data 

are reliable and complete and that the funds entrusted to us by the American public are well 

managed. The auditors have rendered an unqualified opinion on the Agency’s FY 2006 financial 

statements. The NRC has evaluated its internal controls, including those relating to financial reporting and its financial management systems as required by the Federal Managers Financial Integrity Act. There is reasonable assurance that the NRC is in compliance with the Act, with the 

exception of two material weaknesses related to implementation of the Federal Information Management Security Act: the lack of contingency plan testing for information systems and the lack 

of certification and accreditation of information systems. The Agency has also identified its Fee 

Billing System as being in substantial noncompliance with government wide financial system requirements and with the Federal Financial Management Improvement Act. The financial statement auditors identified a third material internal control weakness associated with quality assurance for the fee billing process. I have declared this to be a reportable condition based on the 

results of the Agency’s internal control assessment. We have developed corrective action plans 

and will continue to work to eliminate the material internal control weaknesses and the Federal 

Financial Management Improvement Act substantial noncompliance. 

The NRC is committed to conducting its regulatory responsibilities to enable the use and 

management of radioactive materials and nuclear fuel for beneficial civilian purposes in a manner 

that protects public health and safety and the environment, promotes the security of our nation, 

and provides for regulatory actions that are open, effective, efficient, realistic and timely. The NRC 

looks forward to continuing its high-quality service to the American public in FY 2007 and beyond.

Dale E. Klein

November 15, 2006


FY 2006 PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS

INTRODUCTION

This Performance and Accountability Highlights report summarizes the information contained in the Nuclear Regulatory Commission’s (NRC) Fiscal Year 2006 

Performance and Accountability Report. This report contains information about 

the Agency’s mission, organizational 

structure, and regulatory responsibility. It also contains summarized information about the Agency’s success 

in achieving its strategic goals and 

highlights the NRC’s financial position 

and audit results. Other key legal and 

regulatory requirements are also described. This report was prepared pursuant to the requirements of Office of 

Management and Budget Circular A136 “Financial Reporting Requirements”. 

The NRC places a high importance on 

keeping the public informed of its activities. Visit our Web site at http://www.nrc.gov 

to access this report and to learn more about who we are and what we do to serve the 

American public. 

ABOUT THE NRC

The NRC was established on January 19, 1975, as an independent Federal agency to 

regulate various commercial and institutional uses of nuclear materials. The Atomic 

Energy Act, as amended, and the Energy Reorganization Act, as amended, define the 

NRC’s purpose. These acts provide the foundation for the NRC’s mission to regulate 

the Nation’s civilian use of byproduct, source, and special nuclear materials to ensure 

adequate protection of public health and safety, to promote the common defense and 

security, and to protect the environment. 

To fulfill its responsibility to protect the public health and safety, the NRC performs 

three principal regulatory functions. The Agency (1) establishes standards and regulations, (2) issues licenses for nuclear facilities and users of nuclear materials, and (3) 

inspects facilities and users of nuclear materials to ensure compliance with regulatory 

requirements. These regulatory functions relate to civilian nuclear power plants, other 

nuclear facilities, and uses of nuclear materials, such as nuclear medicine programs 

at hospitals; academic activities at educational institutions; research work; industrial 

applications, such as gauges and testing equipment; and the transport, storage, and 

disposal of nuclear materials and wastes. 

Organization

The NRC is headed by a Commission composed of five members, with one member designated by the President to serve as Chairman. The President appoints each member, 

with the advice and consent of the Senate, to serve a 5 year term. The Chairman is the 

Tour at Davis Besse Nuclear Power Plant


Protecting People and the Environment www.nrc.gov

principal executive officer and official spokesman for the Commission. The Executive 

Director for Operations carries out program policies and decisions made by the Commission. 

The NRC’s headquarters is located in Rockville, Maryland. Four 

regional offices are located in King 

of Prussia, Pennsylvania; Atlanta, 

Georgia; Lisle, Illinois; and Arlington, Texas. The NRC’s technical 

training center is located in Chattanooga, Tennessee. The NRC also 

has at least two resident inspectors at each of the Nation’s nuclear 

power reactor sites. The NRC’s 

Operations Center is the focal 

point for the Agency’s communications with its licensees, State 

agencies, and other Federal agencies concerning operating events in the commercial 

nuclear sector. The NRC operations officers staff the Operations Center 24 hours a day.

The NRC’s budget for fiscal year (FY) 2006 was $741.5 million (see Figure 1) and 3,270 

full-time equivalent staff (see Figure 2). The Agency’s FY 2005 budget was $669.3 million and 3,108 full-time equivalent staff. The NRC recovers most of its appropriations 

from fees paid by NRC licensees. Approximately 72 percent of the NRC’s budget and 

71 percent of its staff are associated with nuclear reactor safety, security, and emergency 

response.

NRC BUDGETARY AUTHORITY, FY 2002-2006 

(Dollars in Millions)

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006

$741.5

$558.6 $584.6

$625.6

$669.3

NRC PERSONNEL CEILING, FY 2002-2006 

(Sta)

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006

3,270

2,850 2,906

3,040 3,108

Figure 1 Figure 2

NRC Headquarters in Rockville, MD


FY 2006 PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS

The Nuclear Industry

The NRC regulates all activities involved in the commercial use of radioactive materials. From nuclear fuel facilities, which produce the radioactive fuel used in the Nation’s 

nuclear power plants and other users of nuclear materials, through the safe transportation and disposal of nuclear waste, the NRC’s regulatory programs ensure that radioactive materials are used safely and securely throughout this nuclear material cycle. 

Approximately 20 percent of the Nation’s electricity is generated by the 104 NRC licensed commercial nuclear reactors operating in 31 States (see Figure 3). Since 1994, 

nuclear electric generation has increased by approximately 20 percent. The NRC expends over 368,500 hours annually inspecting operating reactors and licenses approximately 4,700 reactor operators. 

The NRC oversees over 4,500 licenses for medical, academic, industrial, and general 

uses of nuclear materials (see Figure 4). The Agency conducts approximately 1,500 

health and safety inspections of its nuclear materials licensees annually. In addition, 

the 34 Agreement States oversee over 17,600 licenses. These Agreement States have 

assumed the majority of regulatory responsibilities for overseeing the activities of industrial, medical, and other small users of nuclear material within their borders. The 

NRC, Agreement States, and their licensees share a common responsibility to protect 

public health and safety. 

Fuel Facilities

Nuclear fuel is derived from milled uranium ore extracted from the earth at uranium 

mines to produce uranium concentrate called “yellow cake.” The yellow cake is converted into uranium hexafluoride gas at a special facility and loaded into cylinders. 

The cylinders are sent to a gaseous diffusion plant, where uranium is enriched for use 

as reactor fuel. The enriched uranium is then converted into oxide powder, fabricated 

U.S. COMMERCIAL NUCLEAR POWER REACTORS

AK

HI

MA

CT RI

ME NH VT

NY

PA

NJ OH

MD

DE

VA WV

MI

IN

KY NC

TN

IL

GA SC

AL

FL

MS

MO

AR

TX

OK

KS

LA

IA NE

WI

MN ND

SD

WY

MT

CO

NM

AZ

CA

NV

UT

ID

OR

WA

Licensed to Operate (104)

Figure 3

U.S. MATERIALS LICENSEES

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006

4,528

4,922 4,797 4,492 4,511

17,604

16,253 16,625 17,109 17,298

Agreement States NRC

Figure 4


Protecting People and the Environment www.nrc.gov

into fuel pellets (each about the size of a fingertip), which are then loaded into metal 

fuel rods about 12 feet long and bundled into reactor fuel assemblies at a fuel fabrication facility. Assemblies are transported to nuclear power plants for use as fuel. The 

NRC licenses seven major fuel fabrication and production facilities and two uranium 

enrichment facilities licensed to operate in eight states. Because they handle hazardous material, these facilities take special precautions to prevent theft, diversion by terrorists, and dangerous exposures to workers and the public from the nuclear material 

they handle.

Reactors

Power plants change one form of energy into another. Electrical generating plants 

convert heat, the energy of wind or falling water, or solar energy into electricity. A 

nuclear power plant converts heat into electricity. The nuclear reactor’s fuel gives off 

energy as certain types of atoms split into pieces. This energy is in the form of fastmoving particles and radiation. As the particles and radiation move through the fuel 

and surrounding water, the energy is converted into heat. The heat is the useful energy 

resulting from the splitting of atoms. The 

radiation energy itself can be hazardous 

and requires special precautions to protect 

people and the environment. 

Because the fission reaction produces radioactive materials, nuclear power plants 

are equipped with numerous safety systems to protect workers, the public, and 

the environment. In a nuclear reactor, 

most radioactive substances, called fission 

byproducts, are trapped in the fuel pellets 

themselves or in the sealed metal tubes 

holding the fuel. Small amounts of these 

radioactive fission byproducts, principally 

gases, become mixed with the water passing through the reactor (see Figure 5). The 

water is processed and filtered to remove 

these radioactive impurities and then returned to the reactor cooling system. 

Materials Users

Nuclear materials are used extensively in the medical, academic, and industrial fields. 

For example, approximately 112 million nuclear medicine or radiation therapy procedures are performed annually, with the vast majority used in diagnoses. Used as a tool, 

radioisotopes give doctors the ability to “look” inside the body and observe soft tissues 

and organs in a manner similar to the way that x-rays provide images of bones. Radioisotopes carried in the blood help detect clogged arteries or check the functioning of the 

circulatory system. Radioisotopes are also used in the treatment of cancerous tissue.

Figure 5 - Schematic of a nuclear power reactor


FY 2006 PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS

Many of today’s industrial processes also use nuclear materials. High-tech methods that 

ensure the quality of manufactured products often rely on radioisotopes. To determine 

whether a well drilled deep into the ground has the potential for producing oil, geologists 

use nuclear well-logging, a technique that employs radiation from a radioisotope inside 

the well to detect the presence of different materials. Radioisotopes are also used to sterilize instruments, to find flaws in steel parts and welds that go into automobiles and modern buildings, to authenticate valuable works of art, and to solve crimes by spotting trace 

elements of poison. Radioisotopes can also eliminate dust from film and compact discs 

and static electricity from can labels. 

Waste Disposal

During normal operations, a nuclear power 

plant generates two types of radioactive 

wastes—high-level waste, which consists 

of used fuel (usually called spent fuel), and 

low-level waste, which includes contaminated equipment, filters, maintenance materials, and resins used in purifying water 

for the reactor cooling system. Other users of radioactive materials, such as those 

discussed above, also generate low-level 

waste. 

Each type of waste is handled differently. 

Typically, the spent fuel from nuclear power plants is stored in water-filled pools and 

dry casks at each reactor site pending final 

disposal. In dry cask storage, spent fuel is 

stored in heavy metal or concrete containers placed on concrete pads. Spent fuel is highly radioactive because it contains the 

fission byproducts that were created while the reactor was operating. The handling of 

spent fuel requires special procedures because the radiation levels can be dangerous 

without proper shielding. The water in the spent fuel storage pool provides cooling and 

adequate shielding from the radiation to protect workers in a nuclear plant. Concrete 

and steel in dry casks also provide adequate protection. 

Most spent fuel remains stored at individual plants. Permanent disposal of spent fuel 

requires a facility that can provide reasonable assurance that the waste will remain 

isolated for thousands of years. The U.S. Department of Energy is developing plans for 

a permanent disposal facility at Yucca Mountain, Nevada, for spent fuel from nuclear 

power plants, as well as for the high-level waste produced by the Nation’s nuclear weapons production activities.

Dry Storage of Spent Nuclear Fuel


Protecting People and the Environment www.nrc.gov

PROGRAM PERFORMANCE 

OVERVIEW

The NRC has five strategic goals—safety, 

security, openness, effectiveness, and management (see Figure 6). The Agency considers safety and security to be its highest priorities and the goals most closely aligned to the 

NRC’s strategic objective. The NRC’s ability 

to meet specific strategic outcomes defines 

the Agency’s success in achieving each goal. 

To this end, the NRC is organized into two 

major programs, Nuclear Reactor Safety and 

Nuclear Materials and Waste Safety. 

Nuclear Reactor Safety Program

The Nuclear Reactor Safety Program encompasses all NRC efforts to ensure that civilian 

nuclear power reactor facilities and research 

and test reactors are licensed and operated in a manner that adequately protects the 

public health and safety and the environment and protects against radiological sabotage 

and theft or diversion of special nuclear materials. The Nuclear Reactor Safety Program 

accounted for 72 percent of the Agency’s costs in FY 2006.

Nuclear Materials and Waste Safety Program

The Nuclear Materials and Waste Safety Program focuses on the safety and security of 

the remaining users of radioactive materials. The Nuclear Materials and Waste Safety 

Program regulates fuel facilities, medical and industrial nuclear materials users, the 

disposal of both high-level and low-level waste, the decommissioning of power plants, 

and the storage and transportation of spent nuclear fuel. The Nuclear Materials and 

Waste Safety Program accounted for the remaining 28 percent of the Agency’s costs.

The Agency’s Five Strategic Goals 

(1) Safety: Ensure protection of public health and safety and the environment.

(2) Security: Ensure the secure use and management of radioactive materials.

(3) Openness: Ensure openness in our regulatory process.

(4) Effectiveness: Ensure that our actions are effective, efficient, realistic, and timely.

(5) Management: Ensure excellence in Agency management to carry out the NRC’s 

strategic objective. 

NRC GOALS AND PROGRAMS

Major Programs

Nuclear Materials

and Waste Safety

Nuclear Reactor

Safety

Safety Security Openness Eectiveness Management

Goals

Activities

Fuel Facilities Licensing and Inspection

High-Level Waste Repository

Nuclear Materials Users 

Licensing & Inspection

Decommissioning and Low-Level Waste

Spent Fuel Storage & Transportation 

Licensing & Inspection

Activities

Nuclear Reactor Licensing

Nuclear Reactor Inspection

Figure 6
10

FY 2006 PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS

Goal 1: Ensure protection of public health and safety and the environment.

The NRC’s primary goal is safety. The Agency achieves this goal by ensuring that the 

performance of licensees is at or above acceptable safety levels. The individual NRC 

programs partner with licensees for this purpose. The NRC’s licensees are responsible 

for designing, constructing, and operating nuclear facilities safely, while the NRC is responsible for the regulatory oversight of the licensees. The strategic outcomes discussed 

below reflect specific hazards which NRC activities mitigate. 

Strategic Outcomes:

• No nuclear reactor accidents. 

• No inadvertent criticality events. 

• No acute radiation exposures resulting in fatalities.

• No releases of radioactive materials that result in significant radiation exposures. 

• No releases of radioactive materials that cause significant adverse environmental 

impacts. 

FY 2006 Results

The NRC met all of its safety strategic outcomes in FY 2006. The NRC also uses six performance measures, in addition to the five strategic outcomes, to determine whether 

the Agency has met its safety goal. The Agency met its six performance measures in FY 

2006. The first measure analyzes plant performance based on a large number of performance indicators and inspection findings. The second measure tracks significant 

precursor events determined by the likelihood of an event adversely impacting safety. 

The conditions in the third performance measure indicate whether the NRC identifies 

significant issues in a plant during inspections conducted under the reactor oversight 

program. The measures indicated that not only were the plants safely operated, but the 

events that did occur were of relatively minor significance. 

Another measure tracks the trends of several key indicators of nuclear power plant 

safety. This measure is the broadest measure of the safety of nuclear power plants, 

incorporating the performance results from all plants to determine industry average 

results. Results show no statistically significant adverse trends in any of the indicators 

in FY 2006. 

The last two safety measures address harmful radiation exposures to the public and occupational workers and radiation exposures that harm the environment. None of these 

measures exceeded their targets in FY 2006. Ensuring that nuclear materials cause no 

harm to human health or the environment is the basis for the NRC’s safety mission.

Goal 2: Ensure the secure use and management of radioactive materials.

The NRC’s Security goal responsibilities include regulating licensees’ (a) accounting 

systems for special nuclear and source materials and (b) security programs and contingency plans for dealing with threats, thefts, and sabotage relating to special nuclear 

material, high-level radioactive wastes, nuclear facilities, and other radioactive materials and activities that the NRC regulates.
11

Protecting People and the Environment www.nrc.gov

Strategic Outcome:

• No instances of licensed radioactive materials being used domestically in a manner 

hostile to the security of the United States. 

FY 2006 Results

The NRC uses three performance measures, in addition to the strategic outcome, to 

determine whether the Agency has met its security goal. The Agency met all three performance measure targets in FY 2006. The first performance measure addresses unrecovered losses or thefts of risk-significant radioactive sources. The measure ensures 

that those radioactive sources that the Agency has determined to be risk-significant to 

the public health and safety are accounted for at all times. The ability to account for 

these sources is essential to securing the Nation’s critical infrastructure from “dirty 

bomb” attacks or other means of radiation dispersal. 

The second performance measure evaluates the number of significant security events 

and incidents that occur at NRC-licensed facilities. The measure determines whether 

nuclear facilities are maintaining adequate protective forces to prevent theft or diversion of nuclear material or sabotage; whether systems at licensee plants are accurately accounting for the type and amount of materials which are processed, utilized, or 

stored, and whether the facilities are accounting for special nuclear material at all times 

and that no losses of this material has occurred. No events met the conditions for this 

measure in FY 2006.

The last performance measure tracks whether any significant unauthorized disclosure of 

classified and/or safeguard information that could cause damage to national security or 

public safety has occurred. This measure determines whether this type of information 

is stored and used in such a way as to prevent its disclosure from the public, terrorists, 

other nations, or personnel without a need to know. Unauthorized disclosure can harm 

national security or compromise public health and safety. The measure also determines 

whether controls are in place to maintain and secure the various devices and systems 

(electronic or paper based) which the Agency and its licensees use to store and transmit 

this information. No documented disclosures of this type of information occurred during FY 2006. 

Goal 3: Ensure openness in our regulatory process.

The Agency’s openness goal recognizes the importance of informing the public about the 

NRC’s regulatory processes. The Agency is committed to providing the public with an 

opportunity to participate in these processes. The NRC views nuclear regulation as the 

public’s business and, as such, believes that it should be transacted openly and candidly 

in order to maintain the public’s confidence. The Agency is committed to keeping the 

public informed and believes that a responsible and effective regulatory process includes an involved public.

Strategic Outcome

• Stakeholders are informed and involved in NRC processes as appropriate.
12

FY 2006 PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS

FY 2006 Results

The NRC uses two performance measures, in addition to the strategic outcome, to determine whether the Agency has met its openness goal. One performance measure target was not undertaken in FY 2006. That measure, the percentage of surveyed stakeholders that perceive the NRC to be open about its process, was not undertaken because 

cost considerations precluded conducting the survey.

The second performance measure consists of nine supporting output measures. The 

Agency met six of the nine output measures, but did not achieve the overall target for 

this performance measure. The output measures primarily focus on the Agency’s responsiveness to the public through stakeholder requests for information, the release of 

regulatory documents, and Freedom of Information Act (FOIA) requests. In addition, 

a survey of the user satisfaction score for the Agency’s public Web site was conducted. 

The Agency did not meet the target for this performance measure. To improve results 

in FY 2007, the Agency will take steps to ensure that documents are released within 

required time frames. In addition, the Agency web site will be upgraded to improve the 

current search engine. 

Goal 4: Ensure that our actions are effective, efficient, realistic, and timely.

Over the next several years, the NRC anticipates a significant increase in Agency workload. 

In particular, the future workload is likely to include licensing requests of unprecedented 

technical complexity, including the U.S. Department of Energy’s application to license 

the Yucca Mountain high-level radioactive waste repository and requests to license the 

next generation of nuclear reactors. In addition, security demands are becoming more 

complex, requiring diverse professional expertise and close coordination with other 

Federal, State, and local agencies. This goal focuses the NRC on continuously improving 

regulatory processes to ensure achievement of its goals in the midst of these new 

requirements.

Strategic Outcome:

• No significant licensing or regulatory impediments to the safe and beneficial uses 

of radioactive materials.

Many factors could contribute to licensing and regulatory impediments, such as an inadequate regulatory framework, an ineffective program, or an inefficient process that 

leads to an untimely regulatory decision. The NRC is committed to addressing such 

issues through initiatives related to this goal, and it will also monitor the regulated 

community for instances in which Agency actions may have unnecessarily impeded 

licensees and applicants. In conducting this monitoring, the NRC may consider the 

results of self and external assessments, feedback from stakeholders, Congressional 

direction, and other sources. 

FY 2006 Results

The NRC uses three performance measures, in addition to the strategic outcome, to 

determine whether the Agency has met its efficiency goal. One performance measure 
13

Protecting People and the Environment www.nrc.gov

was to limit to one the instances per program in which licensing or regulatory activities unnecessarily impeded the safe and beneficial uses of radioactive materials. This 

performance measure is designed to capture instances in which NRC programs may 

have unnecessarily impeded the use of radioactive materials, but which did not meet 

the requirements of the strategic outcome for a “significant” impediment. Examples 

include missing a key timeliness measure or not adjusting the regulatory framework to 

support new technologies or otherwise respond to significant changes in the regulatory 

environment. To date, the NRC regulatory processes have been shown not to be an unnecessary impediment to the safe and beneficial uses of radioactive materials. 

Another measure is to achieve a score of 85 percent on the Agency’s Performance Assessment Rating Tool conducted by the Office of Management and Budget. The Office 

of Management and Budget postponed this review and therefore no results are presented for this measure. For the final measure, the Agency chose to improve efficiency 

for five processes. The results of this effort were disappointing. The Agency did not 

meet its target for this measure as it only showed improvements for one process. Of 

the remaining four processes, one had no activity, so it could not demonstrate progress, 

and three processes failed to show efficiency improvements for FY 2006. The Agency 

expects to reevaluate the process improvement plans to determine why gains were not 

achieved this year and how gains may be achieved in the future.

Goal 5: Ensure excellence in Agency management to carry out the NRC’s strategic 

objective.

The NRC strives for management excellence in carrying out its regulatory responsibilities. The Agency believes that management excellence should be achieved while 

fostering the successful conduct of priority activities. In setting this goal, the NRC 

considered the management and support needed to achieve the Agency’s mission, preexisting management challenges, and other initiatives identified by central organizations such as the Government Accountability Office, the Office of Management and 

Budget, and the Office of Personnel Management. This goal includes strategies for the 

management of human capital and infrastructure, improved financial performance, 

expanded electronic government, budget and performance integration, and internal 

communications.

Strategic Outcomes

• Continuous improvement in the NRC’s leadership and management effectiveness 

in delivering the mission. 

• A diverse, skilled workforce and an infrastructure that fully support the Agency’s 

mission and goals. 

FY 2006 Results

The NRC uses two performance measures, in addition to the strategic outcomes, to 

determine whether the Agency has met its management excellence goal. 

The Agency met the first performance measure to determine whether selected NRC

management programs deliver their intended outcomes. Those programs include infra-
14

FY 2006 PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS

structure management, financial management integration, budget and performance integration, expanded electronic government, human capital management, and internal 

communications. Several of these areas draw directly from the President’s Management 

Agenda. These activities provide for a safe work environment for the Agency’s employees 

and guests, manage the Agency’s funds responsibly, use technology to its fullest extent, 

attract and retain the Agency’s highly skilled workforce, and provide that workforce with 

the information it needs to be successful.

The Agency did not meet the second performance measure to address whether selected 

support processes deliver efficiency improvements. The processes include drug testing, 

budget formulation, contracting for wireless communications, and hiring. The Agency 

will be reviewing these support process efficiency improvement plans to determine 

why gains were not achieved this year and how gains may be achieved in the future.

FUTURE CHALLENGES 

Primary future challenges for the NRC involve the expected receipt of applications to 

construct and operate new nuclear plants and dispose of high-level nuclear waste. The 

nuclear industry has indicated that it expects to submit at least 20 combined license 

applications to the NRC to construct and operate almost 29 new nuclear power reactors over the next few years. The NRC needs to obtain additional resources to meet 

this increased workload, hire and train several hundred new technical staff, update 

the Agency’s regulatory review and construction inspection guidelines, and expand its 

infrastructure to accommodate this growth.

The NRC also faces a major challenge as the U.S. Department of Energy prepares to submit 

an application to construct the Nation’s first repository for high-level radioactive waste 

at Yucca Mountain, Nevada. Safe disposal of the waste from nuclear power plants is vital 

to protect public health and the environment. The U.S. Department of Energy has indicated that it may file a license application for the Yucca Mountain repository in FY 2008. 

The NRC must be adequately prepared to review that application. The NRC’s review will 

require the evaluation and resolution of 

a wide range of technical and scientific 

issues, site inspections, and conduct of 

an adjudicatory hearing. Until a repository is licensed and ready to receive 

high-level nuclear waste, spent nuclear 

fuel will be safely and securely stored 

primarily at reactor sites.

While addressing these challenges, 

the safety and security of the existing 

fleet of reactor, fuel facility, and nuclear 

materials licenses will remain the Commission’s highest priority. McGuire Nuclear Station, North Carolina
15

Protecting People and the Environment www.nrc.gov

A MESSAGE FROM 

THE CHIEF FINANCIAL OFFICER

I am pleased to present the U.S. Nuclear Regulatory 

Commission’s (NRC) condensed financial statements for 

FY 2006 as an integral part of the Agency’s FY 2006 

Performance and Accountability Highlights. Our independent auditors have rendered an unqualified opinion 

on our financial statements, attesting to the fact that 

NRC’s financial statements are fairly presented and demonstrate discipline and accountability in the execution of 

our responsibilities as stewards of the American taxpayers’ dollars.

As of September 30, 2006, the financial condition of the NRC is sound with respect to 

having sufficient funds to meet its mission and having adequate control of these funds 

to ensure our budget authority is not exceeded. We successfully completed the assessment of the Agency’s key financial controls as required by Circular A-123, Appendix 

A: Internal Control Over Financial Reporting, identifying no material internal control 

weaknesses. Additionally, we successfully collected 100 percent of the Agency’s budget that is subject to fee recovery from NRC licensees and maintained delinquent debt 

to less than one-half of one percent of collections. Ninety-five percent of payments 

subject to the Prompt Payment Act were made on-time, with less than one-half of one 

percent made erroneously. We have also received excellent ratings for our timely and 

accurate reporting to Treasury and the Office of Management and Budget.

In FY 2006, we continued our efforts to eliminate the auditor-identified material weakness related to the Fee Billing System. We made significant improvements to the quality assurance procedures to address this weakness and plan to further strengthen our 

internal controls. Further, the auditors identified a material weakness related to the 

Agency’s information system-wide security controls, which have not undergone contingency tests and do not have certifications and accreditations to operate. The Agency 

plans to complete contingency plan testing in FY 2007 and have all major information 

systems certified and accredited by FY 2008. 

We have resolved two reportable conditions and are working to address the remaining 

one. We have also worked with our shared service provider to resolve two substantial 

noncompliances with Federal financial management system requirements. The Agency’s Fee Billing System remains in substantial noncompliance with Federal financial 

management system requirements. Our remediation plan involves replacement of the 

Fee Billing System by FY 2009. 

We are in the process of replacing the Agency core accounting system. We plan to incorporate the functional requirements for core accounting, cost accounting, capitalized 

property, and fee billing to achieve a more integrated financial management system. 

This will improve the efficiency and effectiveness of the NRC’s business processes.
16

FY 2006 PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS

The NRC is committed to effective and efficient management of its resources. Our 

goals and strategies for improving financial management are centered on maintaining unqualified audit opinions, eliminating internal control weaknesses, upgrading 

financial systems to conform to Federal requirements, and meeting financial reporting requirements. I work collaboratively and continuously interact with my program 

counterparts to ensure the Agency’s financial data is accurate and provided timely. I 

look forward to and anticipate another productive year in FY 2007 to continue the same 

high level of financial services that resulted in our past successes. 

Jesse L. Funches

November 15, 2006

 certificate of 

 excellence in 

accountability

 reporting®

presented to the

in recognition of your outstanding efforts 

preparing nrc’s performance and 

Accountability Report for the fiscal 

year ended September 30, 2005.

A Certificate of Excellence in Accountability Reporting is presented

by AGA to federal government agencies whose annual 

Performance and Accountability Reports achieve the 

highest standards demonstrating accountability 

and communicating results.

Nuclear 

Regulatory 

Commission

Relmond P. Van Daniker, DBA, CPA

Executive Director, AGA

John H. Hummel, CGFM

Chair, Certificate of Excellence 

in Accountability Reporting Board

53.5#,%!22%'5,!4/29#/--)33)/.

&90%2&/2-!.#%!.$!##/5.4!"),)492%0/24

Certificate of Excellence in Accountability Reporting

Award Ceremony
17

Protecting People and the Environment www.nrc.gov

FINANCIAL PERFORMANCE OVERVIEW

As of September 30, 2006, and 2005, the financial condition of the NRC was sound 

with respect to having sufficient funds to meet program needs and adequate control of 

these funds in place to ensure obligations did not exceed budget authority. The NRC 

prepared its financial statements in accordance with the accounting standards codified 

in the Statements of Federal Financial Accounting Standards (SFFAS) and Office of 

Management and Budget Circular A-136, Financial Reporting Requirements. 

Sources of Funds

The NRC has two appropriations, Salaries and Expenses and Office of the Inspector 

General, and funds for both appropriations are available until expended. The NRC’s 

total new FY 2006 budget authority was $741.5 million. Of this amount, $733.2 million was for the Salaries and Expenses appropriation and $8.3 million was for the Office of the Inspector General appropriation. This represents an increase in new budget 

authority of $72.2 million over FY 2005 ($71.4 million for the Salaries and Expenses 

appropriation and $0.8 million for the Office of the Inspector General appropriation). 

In addition, $58.3 million from prior-year appropriations, $4.9 million from prior-year 

reimbursable work, and $4.3 million for new reimbursable work to be performed for others was available to obligate in FY 2006. 

The sum of all funds available to obligate 

for FY 2006 was $809.0 million, which is 

a $86.1 million increase over the FY 2005 

amount of $722.9 million. 

The Omnibus Budget Reconciliation Act 

of 1990 (OBRA-90), as amended, required 

the NRC to collect fees to offset approximately 90 percent of its new budget authority, less the amount appropriated to 

the NRC from the Nuclear Waste Fund 

and Waste Incidental to Reprocessing 

for FY 2006. The NRC collected $625.0 

million in reactor and material fees in FY 

2006 (see Figure 7). This is 100 percent 

of the fee recovery requirement. For FY 

2005, OBRA-90 required NRC to collect 

approximately 90 percent of its new budget authority, excluding appropriations 

from the Nuclear Waste Fund.

Uses of Funds by Function

The NRC incurred obligations of $734.7 million in FY 2006, which was an increase of 

$69.2 million over FY 2005. Approximately 57 percent of obligations were used for 

salaries and benefits. The remaining 43 percent was used to obtain technical assistance for the NRC’s principal regulatory programs, to conduct confirmatory safety reSOURCES OF FUNDS 

(In Millions)

Other*

Fund

FY 2005 FY 2006

$2.7

General

Fund

$68.5 $45.7

Nuclear

Waste Fund

$60.1$70.8

Material

Fees

$95.5 $74.7

Reactor

Fees

$442.5

$550.3

*No Other Fund for FY 2006

Figure 7
18

FY 2006 PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS

search, to cover operating expenses, (e.g., 

building rentals, transportation, printing, security services, supplies, office 

automation, training), staff travel, and 

reimbursable work (see Figure 8). The 

unobligated budget authority available at 

the end of FY 2006 of $74.3 million increased compared to the FY 2005 amount 

of $57.3 million. Of this $74.3 million, 

$5.4 million is for reimbursable work and 

$68.9 million is available to fund critical 

NRC needs in FY 2007.

Audit Results

The NRC received an unqualified audit 

opinion on its FY 2006 financial statements. In FY 2006, the auditors identified 

a new material weakness in the Agency’s 

information system-wide security controls related to an independent evaluation 

of the NRC’s implementation of the Federal Information Security Management Act 

(FISMA). The FISMA report identified two significant deficiencies related to a lack of 

contingency plan testing for information security systems, and a lack of certification 

and accreditation for most of the Agency’s major information systems. These deficiencies were also identified as material weaknesses in the Agency’s Federal Managers’ 

Financial Integrity Act (Integrity Act) assurance statement. The NRC plans to have 

contingency plan testing completed during FY 2007 and all systems certified and accredited by FY 2008. For FY 2005, the auditors identified the weakness in information 

system-wide security controls as a reportable condition. 

In FY 2004 and FY 2005, the auditors identified a material internal control weakness 

concerning the Fee Billing System and the quality assurance process over fee billing. In 

FY 2006, the auditors continued to classify this as a material weakness. NRC management has classified fee billing as a reportable condition in the annual Integrity Act assurance statement based on the corrective actions to implement compensating controls 

during the fiscal year. The Fee Billing System was also identified as a substantial noncompliance with the Federal Financial Management Improvement Act (Improvement 

Act). NRC will continue to improve internal controls by implementing and monitoring 

corrective actions during the agency’s internal control assessment. 

The auditors closed two of the remaining three prior-year reportable conditions concerning the accounting for internal use software and financial controls over disbursements. The remaining reportable condition concerns the development of the hourly 

rate for license fees. In FY 2006, the Agency implemented several corrective actions for 

the hourly rate development process for license fees and closure of this finding is pending the Agency fully implementing the corrective action plan. 

USE OF FUNDS BY FUNCTION 

(In Millions)

Salaries and

Benets

$396.6

Travel Reimbursable

Work

Contract

Support

FY 2005 FY 2006

$419.7

$16.7 $19.0 $6.0 $3.8

$246.2

$292.2

Figure 8
19

Protecting People and the Environment www.nrc.gov

Financial Statement Highlights

The NRC’s financial statements summarize the financial activity and financial position of the Agency. Analysis of the principal statements follows. 

Analysis of the Balance Sheet 

The NRC’s assets were approximately 

$386.1 million as of September 30, 2006. 

This is an increase of $72.4 million from 

the end of FY 2005. The assets reported 

in NRC’s Balance Sheet are summarized in 

the condensed Balance Sheet on Page 22. 

The Fund Balances with Treasury represents the NRC’s largest asset of $281.7 

million as of September 30, 2006, an increase of $61.0 million from the FY 2005 

year-end balance. This balance accounts 

for approximately 73 percent of total assets and represents appropriated funds, 

collected license fees, and other funds 

maintained at the U.S. Treasury to pay 

current liabilities (see Figure 9). The increase in Fund Balances with Treasury is 

primarily due to an increase in new reactor licensing activities and homeland security 

related activities, and the impact of a $72.2 million increase in new budget authority 

offset by a $35.2 million increase in expenditures.

Account Receivable, Net, as of September 30, 2006, was $75.2 million and includes an 

offsetting allowance for doubtful accounts of $3.0 million. This is a 19 percent increase 

from the FY 2005 year-end Accounts Receivable, Net, balance of $64.0 million. This 

increase was primarily due to the increase in the hourly rates for materials and facilities inspection fees. Accounts Receivable Due from the Public was $71.3 million, representing 18 percent of total assets. The value of Property, Plant, and Equipment, Net, 

was $26.9 million, representing 7 percent of total assets. The majority of this balance 

represents information technology software and leasehold improvements. 

The NRC’s liabilities were $173.5 million as of September 30, 2006. This was an increase in Total Liabilities of $17.3 million from the FY 2005 year-end balance of $156.2 

million. This increase is primarily due to the liability that relates to future collections, 

which will be paid to the U.S. Treasury. Other Liabilities represent 78 percent of total 

liabilities and include $75.0 million for recoveries from unbilled accounts receivable, 

$36.0 million for accrued annual leave, and $13.8 million for accrued salaries to employees (see Figure 10 on the following page). Of the Agency’s liabilities, $45.3 million 

were not covered by budgetary resources, which is a slight increase over the balance as of 

September 30, 2005. These liabilities not covered by budgetary resources include unfunded pension expenses, accrued annual leave, and future workers’ compensation. It 

ASSETS

Fund Balances 

with Treasury - 73%

Property,

Plant, and

Equipment, 

Net - 7%

Other - 1%

Accounts

Receivable,

Net - 19%

Figure 9
20

FY 2006 PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS

should be noted that the Federal budget 

process does not recognize the cost of future benefits for today’s employees until 

they are actually paid.

The difference between Total Assets and 

Total Liabilities, Net Position, was $212.6 

million as of September 30, 2006. This is 

an increase of $55.1 million from the FY 

2005 year-end balance. Net Position is 

comprised of two sections: Unexpended 

Appropriations and Cumulative Results 

of Operations. Unexpended Appropriations is the amount of authority granted 

by Congress that has not been expended. 

The increase of Unexpended Appropriations of $22.9 million is primarily due to 

the increase in Fund Balance with Treasury as a result of new reactor licensing 

activities and homeland security activities. The increase is also due to the change in the accounting treatment for the Nuclear 

Waste Fund (NWF) transfer in FY 2006 that is now classified to Cumulative Results 

of Operations. In FY 2005, the NWF transfer was reported as Unexpended Appropriations. Cumulative Results of Operations represent net results of operations since the 

NRC’s inception. The increase of $32.3 million is mainly due to the change in the 

accounting treatment of the NWF transfer. 

Analysis of the Statement of Net Cost

The Statement of Net Cost presents the net cost of NRC’s two programs as identified 

in the NRC Annual Performance Plan. The purpose of this statement is to link program 

performance to program cost. The NRC’s net cost of operations for the year ended 

September 30, 2006, was $80.6 million, which is a decrease of $52.4 million over the 

FY 2005 net cost of $133.0 million. Gross costs increased primarily due to new reactor licensing and homeland security activities (see Figure 11 on the following page). 

Earned Revenue increased primarily due to the increase in appropriations for NRC activities, of which the NRC is required to collect 90 percent through fee billing.

Total exchange revenue for the year ended September 30, 2006, was $640.1 million, 

which is an increase of $90.1 million from the exchange revenue of $550.0 million for 

the year ended September 30, 2005. Exchange revenue is derived from fees for reactor 

and materials licensing, inspections, and other services assessed in accordance with 

10 CFR Parts 170 and 171 (see Figure 12 on the following page). 

LIABILITIES

Other Liabilities -

78%

Federal 

Employee

Benets - 4%

Accounts

Payable - 18%

Figure 10
21

Protecting People and the Environment www.nrc.gov

Analysis of Statement of Changes in Net Position

The Statement of Changes in Net Position reports the change in net position during the 

reporting period. Net position is affected by changes in its two components—Cumulative Results of Operations and Unexpended Appropriations. The increase in Net Position of $55.1 million from FY 2005 to FY 2006 is due primarily from the net change in 

Cumulative Results of Operations. This increase of $32.3 million is primarily due to 

higher fees collected for FY 2006. When fees are collected they are transferred to the 

U.S. Treasury offsetting Appropriations Used, resulting in a higher Cumulative Results 

of Operations. During FY 2006, NRC changed the accounting treatment of the Nuclear 

Waste Fund transfer. The Nuclear Waste Fund transfer is now classified in Cumulative 

Results of Operations under Transfers-in/out without reimbursement and in FY 2005 

it was classified to Unexpended Appropriations. 

GROSS COSTS

Nuclear Reactor 

Safety - 72%

Nuclear Materials

and Waste 

Safety - 28%

Figure 11

EARNED REVENUE

Nuclear Reactor 

Safety - 88%

Nuclear Materials

and Waste 

Safety - 12%

Figure 12
22

FY 2006 PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS

CONDENSED FINANCIAL STATEMENTS

CONDENSED BALANCE SHEET*

(In Thousands)

As of September 30, 2006 2005

Assets

Fund balances with Treasury $ 281,715 $ 220,695

Accounts receivable, net 75,191 63,984

Property and equipment, net 26,915 26,983

Other 2,266 2,027

	 Total Assets $ 386,087 $ 313,689

Liabilities

Accounts payable $ 31,165 $ 29,026

Federal employee benefits 7,434 8,417

Other 134,895 118,763

	 Total Liabilities 173,494 156,206

Net Position

Unexpended appropriations 193,694 170,836

Cumulative results of operations 18,899 (13,353)

	 Total Net Position 212,593 157,483

Total Liabilities and Net Position	 $ 386,087 $ 313,689

STATEMENT OF NET COST*

(In Thousands)

For the years ended September 30, 2006 2005

Nuclear Reactor Safety

Gross costs $ 515,374 $ 476,481

Less: Earned revenue (565,782) (476,020)

	 Total Net Cost of Nuclear Reactor Safety (50,408) 461

Nuclear Materials and Waste Safety

Gross costs 205,221 206,518

Less: Earned revenue (74,259) (73,972)

	 Total Net Cost of Nuclear Materials and Waste Safety 130,962 132,546

Net Cost of Operations	 $ 80,554 $ 133,007

*For a full set of financial statements and notes see Chapter 3 of the 

FY 2006 Performance & Accountability Report at www.nrc.gov
23

Protecting People and the Environment www.nrc.gov

STATEMENT OF CHANGES IN NET POSITION*

(In Thousands)

For the years ended September 30, 2006 2005

Cumulative Results of Operations

Beginning Balance $ (13,353) $ (12,425)

Budgetary Financing Sources

Appropriations used 50,542 116,100

Non-exchange revenue 590 7,344

Transfers-in/out without reimbursement 45,067 (7,344)

Other Financing Sources

Imputed financing from costs absorbed by others 28,022 25,904

Other (11,415) (9,925)

	 Total Financing Sources 112,806 132,079

Net Cost of Operations	 (80,554) (133,007)

Net Change 32,252 (928)

Cumulative Results of Operations $ 18,899 $ (13,353)

Unexpended Appropriations

Beginning Balance	 $ 170,836 $ 149,901

Budgetary Financing Sources

Appropriations received 72,532 601,245

Appropriations transferred-in/out 1,587 (463,729)

Other adjustments (719) (481)

Appropriations used (50,542) (116,100)

	 Total Budgetary Financing Sources 22,858 20,935

Total Unexpended Appropriations 193,694 170,836

Net Position $ 212,593 $ 157,483

*For a full set of financial statements and notes see Chapter 3 of the 

FY 2006 Performance & Accountability Report at www.nrc.gov
24

FY 2006 PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS

SYSTEMS, CONTROLS, AND LEGAL COMPLIANCE

INTEGRITY ACT STATEMENT FOR FY 2006

The U.S. Nuclear Regulatory Commission’s (NRC) management is responsible for establishing and maintaining effective internal controls and financial management systems 

that meet the objectives of the Federal Managers’ Financial Integrity Act (FMFIA). The 

NRC is able to provide a qualified statement of assurance that the internal controls and 

financial management systems meet the objectives of FMFIA, with the exception of two 

material weaknesses and one non-conformance noted herein.

The NRC conducted its assessment of the effectiveness of internal control over the 

effectiveness and efficiency of operations and compliance with applicable laws and 

regulations in accordance with OMB Circular A-123, Management’s Responsibility for 

Internal Control. Based on the results of this evaluation, the NRC identified two material weaknesses and one non-conformance in its internal control over the effectiveness 

and efficiency of operations and compliance with applicable laws and regulations as of 

September 30, 2006. Other than these exceptions, the internal controls were operating 

effectively, and no other material weaknesses were found in the design or operation of 

the internal controls.

In addition, the NRC conducted its assessment of the effectiveness of internal control 

over financial reporting, which includes safeguarding of assets and compliance with applicable laws and regulations, in accordance with the requirements of Appendix A of 

OMB Circular A-123. Based on the results of this evaluation, the NRC can provide reasonable assurance that its internal control over financial reporting as of June 30, 2006, 

was operating effectively, and no material weaknesses were found in the design or operation of the internal control over financial reporting.

Dale E. Klein

Chairman

U.S. Nuclear Regulatory Commission

November 15, 2006

Management Assurances

Federal Managers’ Financial Integrity Act

The Federal Managers’ Financial Integrity Act (Integrity Act) mandates that agencies 

establish controls that reasonably ensure that (i) obligations and costs comply with 

applicable law; (ii) assets are safeguarded against waste, loss, unauthorized use, or misappropriation; and (iii) revenues and expenditures are properly recorded and accounted 
25

Protecting People and the Environment www.nrc.gov

for. This Act encompasses program, operational, and administrative areas, as well as 

accounting and financial management. It also requires the Chairman to provide an assurance statement on the adequacy of internal controls and conformance of financial 

systems with governmentwide standards.

FY 2006 Integrity Act Results

The Office of the Inspector General (IG) performed an independent evaluation of the 

NRC’s implementation of the Federal Information Security Management Act (FISMA) 

for FY 2006. The following two significant deficiencies were identified in the NRC’s 

information system security program:

• Only 1 of 30 operational NRC information systems has a current certification and 

accreditation, and only 4 out of the 12 systems used or operated by a contractor or 

organization on behalf of the Agency have been certified and accredited.

• Annual contingency plan testing is not being performed for most of the NRC’s operational information systems. 

As a result of this evaluation, the NRC identified these two findings as material weaknesses under the provisions of the Integrity Act. The NRC will implement the following corrective actions to resolve these material weaknesses:

• For the certification and accreditation effort, the NRC’s FY 2007 and FY 2008 

budgets include additional resources and the Agency has developed a milestone 

plan to ensure that one-half of the listed systems will be certified and accredited 

by September 2007, with the remaining systems being certified and accredited by 

September 2008. In addition, the Agency is evaluating its current certification and 

accreditation process to determine what can be streamlined. 

• All system contingency plan testing will be completed by July 2007.

OMB Circular A-123, Management’s Responsibility for Internal Control, 

Including Appendix A, Internal Control over Financial Reporting

The Office of Management and Budget revised Circular A-123 which defines and 

strengthens management’s responsibility for internal control in Federal agencies. 

The revised Circular includes updated internal control standards and a new section, 

Appendix A, which requires Federal agencies to implement procedures for assessing 

the effectiveness of internal control over financial reporting. NRC fully implemented 

the new requirements in FY 2006 and based on the results of the assessment, there 

is reasonable assurance that internal control over financial reporting was operating 

effectively as of June 30, 2006, and that no material weaknesses were found in the 

design or operation of the internal controls over financial reporting. 

Nonconformance

The NRC’s financial management systems substantially conform to Governmentwide requirements, except for the Fee Billing System. The issues related to the Fee Billing System 

include intensive manual processes and the lack of comprehensive quality assurance procedures. During FY 2006, the NRC implemented a remediation plan for the Fee Billing 

System. The Fee Systems Replacement Project is scheduled to be completed by FY 2009.
26

FY 2006 PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS

Federal Financial Management Improvement Act

The Federal Financial Management Improvement Act (Improvement Act) requires each 

Agency to implement and maintain systems that comply substantially with (i) Federal 

financial management system requirements, (ii) applicable Federal accounting standards, and (iii) the standard general ledger at the transaction level. The Improvement 

Act requires the Chairman to determine whether the Agency’s financial management 

systems comply with the Improvement Act and to develop remediation plans for systems that do not comply. 

FY 2006 Improvement Act Results

The Chairman determined that, as of September 30, 2006, the NRC financial management systems were in substantial compliance with the Improvement Act, except 

for the Fee Billing System, which is in substantial noncompliance because it does not 

meet Governmentwide standards as defined by the Financial System Integration Office (FSIO), formerly known as the Joint Financial Management Improvement Program (JFMIP). 

Prompt Payment Act

The Prompt Payment Act requires Federal 

agencies to make timely payments to vendors for supplies and services, to pay interest penalties when payments are made 

after the due date, and to take cash discounts when they are economically justified. From FY 2005 to FY 2006, the NRC 

paid 8,860 invoices that were subject to the 

Prompt Payment Act. The NRC percentage 

of on-time payments subject to the Prompt 

Payment Act for FY 2006 is 95 percent (see 

Figure 13). The amount of interest penalties incurred during FY 2006 was $4,874 

which is a decrease from FY 2005’s amount 

of $8,850.

Improper Payments

Improper payments continue to be at low risk for the Agency. The NRC continues to 

evaluate its internal controls to guard against improper payments and monitors and 

reports on improper payments within its programs. At the present time, NRC’s inventory of functional payment areas consists of commercial vendor, interagency, and travel 

payments. The DOI-NBC is responsible for monitoring and reporting on any improper 

payroll-related payments since they are the system of record for payroll disbursements. 

The NRC will continue to perform annual risk assessments for each of these areas. Based 

on the FY 2006 risk assessments, the number and amount of improper payments fall 

below external reporting requirement established by Office of Management and Budget 

guidance on what is considered to be a significant risk.

PROMPT PAYMENT

(Percent of On-Time Payments)

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006

95%

87%

94% 94% 96%

Figure 13
27

Protecting People and the Environment www.nrc.gov

Debt Collection 

Improvement Act

The Debt Collection Improvement Act 

enhances the ability of the Federal Government to service and collect debts. 

The Agency’s goal is to maintain the delinquent debt owed to the NRC, at year 

end, to less than one percent of its annual 

billings. The NRC continues to meet this 

goal and at the end of FY 2006 delinquent 

debt was $0.5 million (see Figure 14). The 

NRC continues to pursue the collection 

of delinquent debt and refers all eligible 

delinquent debt over 180 days to the U.S. 

Treasury for collection.

Biennial Review of User Fees

The Chief Financial Officers Act requires

agencies to conduct a biennial review of 

fees, royalties, rents, and other charges imposed by agencies and make revisions to cover program and administrative costs incurred. Each year, the NRC revises the hourly 

rates for license and inspection fees and adjusts the annual fees to meet the fee collection requirements of the Omnibus Budget Reconciliation Act of 1990, as amended. 

The most recent changes to the license, inspection, and annual fees are described in 

the Federal Register (71 FR 30722, May 30, 2006). 

The NRC also revised the fees and charges for the Materials Access Authorization Program and Information Access Authorization Program to more appropriately recognize 

actual costs. The Agency concluded that other types of fees did not warrant revisions 

at this time.

Inspector General Act

The Agency has established and continues to maintain an excellent record in resolving 

and implementing open audit recommendations presented in reports from the Office 

of the Inspector General. Appendix B of the FY 2006 Performance and Accountability 

Report includes this information, as well as data concerning the $5,114 of disallowed 

costs determined through contract audits conducted by the Defense Contract Audit 

Agency.

DELINQUENT DEBT 

(In Millions)

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006

$0.50

$2.10

$2.00

$0.90

$0.45

Figure 14
28

FY 2006 PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS

INSPECTOR GENERAL’S TRANSMITTAL LETTER

January 10, 2007

MEMORANDUM TO: Chairman Klein

FROM: Hubert T. Bell

Inspector General

SUBJECT: TRANSMITTAL OF THE INDEPENDENT

AUDITORS’ REPORT ON THE CONDENSED

FINANCIAL STATEMENTS OF THE UNITED 

STATES NUCLEAR REGULATORY COMMISSION

FOR FISCAL YEARS 2006 AND 2005 (OIG-07-A-08)

Office of Management and Budget Circular No. A-136, Revised, July 24, 2006, Financial Reporting Requirements, encourages all entities that produce a Performance and 

Accountability Report (PAR) to prepare a PAR Highlights Document (the Document). 

The objective of the Document is to highlight some of the more important aspects of 

the PAR, and to make available to interested parties a condensed document that is more 

“user-friendly” than the detailed full-scope PAR. The purpose of this memorandum is 

to transmit R. Navarro & Associates, Inc. (RNA) Auditors’ Report on the Condensed 

Financial Statements included in the Document.

RNA is responsible for the attached unqualified auditors’ opinion, dated November 7, 

2006. The Office of the Inspector General (OIG) is responsible for technical and administrative oversight regarding the firm’s performance under the terms of the contract. 

Our oversight of RNA’s work, as differentiated from an audit in conformance with 

Government Auditing Standards, was not intended to enable us to express, and accordingly 

we do not express, an opinion on the condensed financial statements included in the 

Document. However, OIG’s oversight of RNA’s work disclosed no instances where RNA 

did not comply with applicable auditing standards.

We appreciate the cooperation provided by NRC staff.

UNITED STATES

NUCLEAR REGULATORY COMMISSION

WASHINGTON, D.C. 20555-0001

OFFICE OF THE

INSPECTOR GENERAL
29

Protecting People and the Environment www.nrc.gov

INDEPENDENT AUDITORS’ REPORT ON 

THE CONDENSED FINANCIAL STATEMENTS

Chairman Dale E. Klein

U.S. Nuclear Regulatory Commission

Washington, DC

We audited the U.S. Nuclear Regulatory Commission’s (NRC) balance sheets as of 

September 30, 2006 and 2005 and the related statements of net cost, changes in net 

position, budgetary resources and financing for the years then ended. In our report 

dated November 7, 2006, we expressed an unqualified opinion on those statements.

In that report, we stated the following:

• The balance sheets of NRC as of September 30, 2006, and 2005, and the related statements of net cost, changes in net position, budgetary resources, and financing for the 

fiscal years then ended are presented fairly, in all material respects, in conformity 

with accounting principles generally accepted in the United States of America;

• Except for the effect of the material weaknesses related to the Fee Billing System 

and Information System-wide Security Controls, the effectiveness of internal control 

over financial reporting was fairly stated as of September 30, 2006, in compliance 

with the internal control objectives in the Office of Management and Budget (OMB) 

Bulletin No. 06-03, Audit Requirements for Federal Financial Statements; and 

• NRC continues to be non-compliant with the provisions of OMB Circular A-25, User 

Charges, for Part 170 hourly rates. Additionally, NRC continues to have an FFMIA 

substantial non-compliance related to the Fee Billing System.

In addition, we referred the reader to Notes 15 and 16 to the financial statements that 

discuss the NRC’s change in its method for recording transactions of the Nuclear Waste 

Fund and the process for recording transfers of license fee collections.

In our opinion, the information set forth in the accompanying condensed financial 

statements is presented fairly, in all material respects, in relation to the financial statements from which it was derived.

We performed our work in accordance with standards established by the American Institute of Certified Public Accountants and Government Auditing Standards, promulgated 

by the Government Accountability Office.

November 7, 2006
30

FY 2006 PERFORMANCE AND ACCOUNTABILITY HIGHLIGHTS

AVAILABILITY OF REFERENCE MATERIALS

IN NRC PUBLICATIONS

NRC Reference Material

As of November 1999, you may electronically access

NUREG-series publications and other NRC records at

NRC’s Public Electronic Reading Room at

http://www.nrc.gov/reading-rm.html.

Publicly released records include, to name a few,

NUREG-series publications; Federal Register notices;

applicant, licensee, and vendor documents and

correspondence; NRC correspondence and internal

memoranda; bulletins and information notices;

inspection and investigative reports; licensee event

reports; and Commission papers and their attachments.

NRC publications in the NUREG series, NRC

regulations, and Title 10, Energy, in the Code of

Federal Regulations may also be purchased from one

of these two sources.

1. The Superintendent of Documents

 U.S. Government Printing Office

 Mail Stop SSOP

 Washington, DC 20402–0001

 Internet: bookstore.gpo.gov

 Telephone: 202-512-1800

 Fax: 202-512-2250

2. The National Technical Information Service

 Springfield, VA 22161–0002

 www.ntis.gov 

 1–800–553–6847 or, locally, 703–605–6000

A single copy of each NRC draft report for comment is

available free, to the extent of supply, upon written

request as follows:

Address: Office of Administration,

Printing and Mail Services Branch

 U.S. Nuclear Regulatory Commission

 Washington, DC 20555-0001

E-mail: DISTRIBUTION@nrc.gov 

Facsimile: 301–415–2289 

Some publications in the NUREG series that are 

posted at NRC’s Web site address

http://www.nrc.gov/reading-rm/doc-collections/nuregs

are updated periodically and may differ from the last

printed version. Although references to material found

on a Web site bear the date the material was accessed,

the material available on the date cited may

subsequently be removed from the site.

Non-NRC Reference Material

Documents available from public and special technical

libraries include all open literature items, such as

books, journal articles, and transactions, Federal

Register notices, Federal and State legislation, and

congressional reports. Such documents as theses,

dissertations, foreign reports and translations, and

non-NRC conference proceedings may be purchased

from their sponsoring organization.

Copies of industry codes and standards used in a

substantive manner in the NRC regulatory process are

maintained at—

The NRC Technical Library 

Two White Flint North

11545 Rockville Pike

Rockville, MD 20852–2738

These standards are available in the library for

reference use by the public. Codes and standards are

usually copyrighted and may be purchased from the

originating organization or, if they are American

National Standards, from—

American National Standards Institute

11 West 42nd Street

New York, NY 10036–8002

www.ansi.org 

212–642–4900

Legally binding regulatory requirements are stated

only in laws; NRC regulations; licenses, including

technical specifications; or orders, not in 

NUREG-series publications. The views expressed

in contractor-prepared publications in this series are

not necessarily those of the NRC.

The NUREG series comprises (1) technical and

administrative reports and books prepared by the

staff (NUREG–XXXX) or agency contractors

(NUREG/CR–XXXX), (2) proceedings of

conferences (NUREG/CP–XXXX), (3) reports

resulting from international agreements

(NUREG/IA–XXXX), (4) brochures

(NUREG/BR–XXXX), and (5) compilations of legal

decisions and orders of the Commission and Atomic

and Safety Licensing Boards and of Directors’

decisions under Section 2.206 of NRC’s regulations

(NUREG–0750).
31

Protecting People and the Environment www.nrc.gov

For a full version of the FY 2006 Performance & Accountability Report go to www.nrc.gov
U.S. NUCLEAR REGULATORY COMMISSION

Washington, D.C. 20555–0001

www.nrc.gov NUREG–1542, Vol. 12, Supp. 1

January 2007