Performance and 

Accountability Highlights

Fiscal Year 2007
MISSION 

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.

VISION 

Excellence in regulating the safe and secure use and management of 

radioactive materials for the public good.

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Th e information collections contained in this document are subject to the Paperwork Reduction Act of 1995 

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numbers 3150-0002, 3150-0003, 3150-0004, 3150-0009, 3150-0011, 3150-0012, 3150-0014, 3150-0058, 

3150-0104, 3150-0123, 3150-0139, and 3150-0197.

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or an information collection requirement unless the requesting document displays a currently valid OMB 

control number.
TABLE OF CONTENTS 

A MESSAGE FROM THE CHAIRMAN ...................................................................3


INTRODUCTION .....................................................................................................4


ABOUT THE NRC .....................................................................................................4


PROGRAM PERFORMANCE OVERVIEW ...........................................................8


PROGRAM PERFORMANCE RESULTS .................................................................9


FUTURE CHALLENGES .........................................................................................13


A MESSAGE FROM THE CHIEF FINANCIAL OFFICER ....................................15


FINANCIAL PERFORMANCE OVERVIEW .........................................................16


CONDENSED FINANCIAL STATEMENTS ..........................................................21


SYSTEMS, CONTROLS, AND LEGAL COMPLIANCE ........................................23


INSPECTOR GENERAL’S TRANSMITTAL LETTER ...........................................27


INDEPENDENT AUDITORS’ REPORT ON THE CONDENSED 


FINANCIAL STATEMENTS ...................................................................................28


Performance and Accountability Highlights • FY 2007 • www.nrc.gov 1 
2 

Commissioner Gregory B. Jaczko, Chairman Dale E. Klein, and Commissioner Peter B. Lyons 

Performance and Accountability Highlights • FY 2007 • www.nrc.gov 
A MESSAGE FROM THE CHAIRMAN 

I am pleased to present the U.S. Nuclear Regulatory Commission’s (NRC) 

Performance and Accountability Highlights for FY 2007. The NRC has 

again achieved its safety and security performance goals, and continues to 

position its resources and infrastructure to maintain its strong oversight of 

existing facilities and to review applications for new nuclear power reactors, 

license renewals for existing facilities, and a potential high-level waste 

depository. 

The NRC is committed to ensuring that our resources are well managed. This report provides 

information that demonstrates that NRC’s financial and performance data are reliable and complete 

and the prudent management of the funds entrusted to it by the American public. Continuing our 

history of financial management excellence, the auditors have rendered an unqualified opinion on 

the agency’s FY 2007 financial statements. This year, the NRC implemented a number of internal 

control improvements, eliminated a long-standing material weakness relating to the fee billing 

process, and evaluated its internal controls, including those relating to financial reporting, and the 

agency’s financial management systems as required by the Federal Managers’ Financial Integrity Act 

of 1982 (Integrity Act). There is reasonable assurance that the NRC is in compliance with the FMFIA, 

with the exception of one material weakness related to implementation of the Federal Information 

Management Security Act associated with the agency’s overall information technology (IT) security. 

The NRC has developed a corrective action plan and will continue to work to eliminate the material 

control weakness associated with IT security. In support of the President’s Management Agenda, the 

NRC is currently cross servicing its Human Resources, Payroll, e-Travel, and Accounting systems. Th e 

agency is also in the process of integrating and modernizing its financial systems to enhance further 

controls, reporting, and decisionmaking. 

The NRC conducts 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, and promotes the security of the Nation. The Commission is proud of this 

year’s performance in achieving the agency’s safety and security goals and looks forward to continuing 

its high-quality service to the American public in FY 2008 and beyond. 

3 

Dale E. Klein 

November 15, 2007 

Performance and Accountability Highlights • FY 2007 • www.nrc.gov 
4 

INTRODUCTION 

This Performance and Accountability Highlights report summarizes the information contained in the 

U.S. Nuclear Regulatory Commission’s (NRC) Fiscal Year 2007 Performance and Accountability Report. 

This report contains information about the agency’s mission, organizational structure, and regulatory 

responsibil ity. It also contains summarized in formation 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 de scribed. This report was prepared according to the requirements of 

Office of Management and Budget (OMB) Circular A-136, “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 Highlights, the full Performance and Accountability 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 regulating 

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 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. Th ese 

regulatory functions relate to civilian nuclear power plants, other nuclear facilities, and uses of nuclear 

materials. These include 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 of the United States to serve as Chairman. The President appoints each member, with the 

advice and consent of the U.S. Senate, to serve a 5-year term. The Chairman is the principal executive 

offi cer 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, MD. Four regional offices are located in King of 

Prussia, PA; Atlanta, GA; Lisle, IL; and Arlington, TX. The NRC’s technical training center is located 

in Chattanooga, TN. 

The NRC also has at least two resident inspectors at each of the Nation’s nuclear power reactor sites. 

The NRC’s Operations Center which is located in the headquarters building in Rockville, MD, 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 offi cers 

staff the Operations Center 24 hours a day. 

Performance and Accountability Highlights • FY 2007 • www.nrc.gov 
NRC BUDGETARY AUTHORITY, FY 7 

(In Millions) 

$558.6 

FY 2002 

$584.6 

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 

$625.6 

$741.5 

$824.9 

Figure 1 

NRC PERSONNEL CEILING, FY 

(Staff) 

2,850 

FY 2002 

2,906 

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 

3,040 

3,108 

3,434 

Figure 2 

The NRC’s budget for fiscal year (FY) 2007 was $824.9 million with 3,434 full-time equivalent staff . 

The NRC recovers most of its appropriations from fees paid by NRC licensees. 

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 104 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. Since 1994, nuclear electric generation has increased by 

approximately 22 percent. 

The NRC oversees 4,369 licenses for medical, academic, industrial, and general uses of nuclear 

materials. The agency conducts approximately 1,500 health and safety inspections of its nuclear 

materials licensees annually. In addition, the 34 Agreement States oversee 17,807 licenses. Th ese 

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 into fuel pellets (each about 

Performance and Accountability Highlights • FY 2007 • www.nrc.gov 5 

$669.3 3,270 
6 

the size of a fingertip), are loaded into metal fuel rods about 12-feet long, and bundled into reactor 

fuel assemblies at a fuel fabrication facility. Assemblies are then transported to nuclear power plants, 

non-power research reactor facilities, and naval propulsion reactors for use as fuel. Eight major fuel 

fabrication and production facilities and two enrichment facilities are licensed to operate in the United 

States. Because they handle extremely hazardous material, these facilities take special precautions to 

prevent theft, diversion by terrorists, and dangerous exposures to workers and the public from this 

nuclear material. 

Reactors 

Power plants change one form of energy into another. Electrical generating plants convert heat, the 

energy of wind, falling water, or the sun, into electricity. A nuclear power plant converts heat into 

electricity. Other types of heat-conversion plants burn coal, oil, or gas for a heat source that is used 

to produce electricity. Nuclear energy as it is used in a nuclear power plant cannot be seen. Th ere is 

no burning of fuel in the usual sense. Rather, energy is given off by the nuclear fuel as certain types of 

atoms split into pieces. This energy is in the form of fast-moving particles and invisible 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 can be 

hazardous and requires special precautions to protect people and the environment. 

Because the fission reaction produces radioactive materials, which can be hazardous, nuclear 

power plants are equipped with safety systems to protect workers, the public, and the environment. 

Radioactive materials require careful use because they produce radiation, a form of energy that can 

damage human cells, and depending on the amount and duration of the exposure, can potentially 

cause cancer. In a nuclear reactor, most hazardous radioactive substances, called fi ssion byproducts, 

are trapped in the fuel pellets themselves or in the sealed metal tubes holding the fuel. However, small 

amounts of these radioactive fission byproducts, principally gases, become mixed with the water 

passing through the reactor. Other impurities 

Figure 3 in the water are also made radioactive as 

SCHEMATIC OF A NUCLEAR POWER REACTOR they pass through the reactor. Th e 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 fi elds. 

For example, about one-third of all patients 

admitted to U.S. hospitals are diagnosed 

or treated using radioisotopes. Most 

major hospitals have specifi c departments 

dedicated to radiation medicine. In all, about 

112 million nuclear medicine or radiation 

therapy procedures are performed annually, 

with the vast majority used in diagnoses. 

Radioactive material is a diagnostic tool 

that can identify the status of a disease 

Performance and Accountability Highlights • FY 2007 • www.nrc.gov 
and minimize the need for surgery, reducing the risks from postoperative infection. Radioisotopes 

give doctors the ability to look inside the body and observe soft tissues and organs, similar to the 

way X-rays provide images of bones. Radioisotopes carried in the blood also allow doctors to detect 

clogged arteries or check circulatory system function. 

The same property that makes radiation hazardous can also help the body heal. When living tissue is 

exposed to high levels of radiation, cells can be destroyed or damaged so they can neither reproduce 

nor continue their normal functions. For this reason, radioisotopes are used in the treatment of cancer, 

a form of uncontrolled cell division. Although some healthy tissue surrounding a tumor may be 

damaged during the treatment, cancerous tissue can be targeted for destruction. 

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

quality of manufactured products often rely on radiation generated by 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 fi nd fl aws 

in critical 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, among other uses. 

Radioisotopes can also eliminate dust from film and compact discs as well as static electricity (which 

may create a fire hazard) from can labels. In manufacturing, radiation can change the characteristics 

of materials, often giving them features that are highly desirable. For example, wood and plastic 

composites treated with gamma radiation are used for flooring in high-traffic areas of department 

stores, airports, hotels, and churches, because they resist abrasion and are low maintenance. 

Waste Disposal 

During normal operations, a nuclear power plant generates two types of radioactive waste: 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 

Scott Atwater, Region IV DNMS inspector, checking 

dry fuel storage casks at Arkansas Nuclear One in 

Russellville, AR 

generate low-level waste. 

Each type of waste is handled diff erently. Typically, 

the spent fuel from nuclear power plants is stored 

in water-filled pools at each reactor site or at one 

storage facility in Illinois. However, several utilities 

have begun using dry cask storage pending fi nal 

disposal. In dry cask storage, spent fuel is stored 

in heavy metal or concrete containers placed 

on concrete pads adjacent to the reactor facility. 

High-level waste or spent fuel is highly radioactive 

because it contains the fission byproducts that were 

created while the reactor was operating. 

Special procedures are needed in the handling of 

the spent fuel, since the radiation levels can be very 

dangerous without proper shielding. The water in 

Performance and Accountability Highlights • FY 2007 • www.nrc.gov 7 
8 Performance and Accountability Highlights • FY 2007 • www.nrc.gov 

the spent fuel storage pool provides cooling and shields workers from radiation. Concrete and steel, 

used in dry casks, also provide protection. 

Currently most of the spent fuel remains stored at individual plants. Permanent disposal of spent fuel 

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

for thousands of years. The U.S. Department of Energy (DOE) is developing plans for a permanent 

disposal facility at Yucca Mountain, NV, for spent fuel from nuclear power plants. 

PROGRAM PERFORMANCE OVERVIEW 

The NRC is developing a new Strategic Plan for FY 2008–FY 2013 that determines the agency’s longterm strategic direction. The Commission has approved the framework for the draft Strategic Plan. 

The Performance and Accountability Report 

reflects the new goal structure proposed in 

the agency’s draft Strategic Plan and reports 

performance in support of the Safety and 

Security Strategic goals, as well as Openness, 

Effectiveness, and Management which are 

referred to as operational goals in this report. 

To achieve its goals, the agency 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. Th e Nuclear 

Reactor Safety Program accounted for 

74 percent of the agency’s costs in FY 2007. 

Nuclear Materials and Waste Safety Program 

The Nuclear Materials and Waste Safety Program focuses on the safe and secure use of remaining 

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. Th e 

Nuclear Materials and Waste Safety Program accounted for the remaining 26 percent of the agency’s 

costs in FY 2007. 

STRATEGIC GOALS 

Safety Security 

ACTIVITIES 

Nuclear Reactor Licensing 

Nuclear Reactor Inspection 

Fuel Facilities 

High-Level Waste 

Repository 

Nuclear Materials Users 

Decommissioning and 

Low-Level Waste 

Spent Fuel Storage and 

Transportation 

MAJOR PROGRAMS 

Nuclear Reactor Safety 

Nuclear Materials and 

Waste Security 

NRC GOALS AND PROGRAMS 

Figure 4 
PROGRAM PERFORMANCE RESULTS 

Strategic Goal 

• Safety: Ensure protection of public health and safety and the environment 

Safety is the primary goal of the NRC. The agency achieves its Safety goal by ensuring that the 

performance of licensees is at or above acceptable safety levels. NRC programs work in conjunction 

with our licensees in a partnership to achieve the Safety goal. The NRC licensees are responsible 

for designing, constructing, and operating nuclear facilities safely, while regulatory oversight of the 

licensees is the responsibility of the NRC. The strategic outcomes, below, are specific hazards that NRC 

activities are designed to mitigate against. 

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 signifi cant radiation exposures. 

• No releases of radioactive materials that cause significant adverse environmental impacts. 

FY 2007 Results 

The NRC achieved all five of its Safety goal strategic outcomes shown above in FY 2007. The NRC also 

uses six performance measures, to determine whether it has met its Safety goal. All six performance 

measure targets were met in FY 2007. 

Three of the six performance measures focus on performance at individual nuclear power plants. 

Inspection results show that all of the nuclear power plants are operating safely. However, one 

measure, Number of operating reactors with integrated performance that entered the Manual Chapter 

0350 process, or the multiple/repetitive degraded cornerstone column or the unacceptable performance 

column of the Reactor Oversight Program Action Matrix, with no performance exceeding Abnormal 

Occurrence Criterion I.D.4, shows an increase from 0 to 1 during FY 2007. One reactor met the 

conditions in this measure during FY 2007. The Palo Verde Nuclear Generating Station Unit 3 entered 

the multiple/repetitive degraded cornerstone column because of safety system equipment problems 

and the licensee was not effective at addressing and fixing them. NRC inspections identifi ed the issue 

and brought it to the attention of licensee management for correction. Palo Verde is scheduled for a 

significant site review in FY 2008. In addition, another measure that uses risk analysis to determine 

safe operations shows that none of the plants experienced a significant precursor, defined as an event 

which has a 1 in 1,000 probability of leading to substantial damage to the reactor fuel. Th is measure 

indicates that not only were the plants operated safely, but the events that did occur were of relatively 

minor signifi cance. 

The fourth measure tracks the trends of several key indicators of nuclear power plant safety. Th is 

measure is the broadest measure of the safety of nuclear power plants, incorporating the performance 

results from all plants to determine industry average results. The measure results show that there were 

no statistically significant adverse trends in any of the indicators in FY 2007. 

The last two safety measures track 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 2007. 

Performance and Accountability Highlights • FY 2007 • www.nrc.gov 9 
Strategic Goal 

• 	 Security: Ensure the secure use and management of radioactive materials 

The NRC must remain vigilant in ensuring


the security of nuclear facilities and 


materials in an elevated threat environment. 


The agency achieves its common defense


and Security goal using licensing and 


oversight programs similar to those 


employed in achieving its Safety goal.


Strategic Outcome: 

• 	 No instances where licensed radioactive


materials are used domestically in a 


manner hostile to the security of the 


United States.


FY 2007 Results 

Yucca Mountain Tunnel Entrance, Eureka County, NV 

The NRC achieved its one Security goal strategic outcome shown above in FY 2007. The NRC also 

uses five Security goal performance measures, in addition to the Security goal strategic outcomes to 

determine whether we have met our Security goal. All five performance measure targets were met in 

FY 2007. Th e first performance measure is whether there were any unrecovered losses or theft s of risksignificant 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. Th e 

ability to account for these sources is necessary to secure the critical infrastructure of the nation from 

“dirty bomb” attacks, or other means of radiation dispersal. 

The second, third, and fourth performance measures evaluate the number of signifi cant security 

events and incidents that occur at NRC-licensed facilities. These measures determine whether nuclear 

facilities are maintaining adequate protective forces to prevent theft or diversion of nuclear material 

or sabotage. The measures also determine whether systems in place at licensee plants are accurately 

accounting for the type and amount of materials which are processed, utilized, or stored. And fi nally, 

these measures determine whether the facilities are accounting for special nuclear material at all times 

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

measure in FY 2007. 

The last security measure is whether there were any significant unauthorized disclosures of classifi ed 

or safeguard information that may cause damage to national security or public safety. Th is measure 

determines whether classified information or safeguards information is stored and utilized in such 

a way as to prevent its disclosure to the public, terrorist organizations, other nations, or personnel 

without a need to know. Unauthorized disclosures can harm national security and 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) that the agency and its licensees use to 

store, transmit, and utilize this information. There were no documented disclosures of this type of 

information during FY 2007. 

10 Performance and Accountability Highlights • FY 2007 • www.nrc.gov 
Operational Goals: Openness, Effectiveness, and Management 

Openness 

Under Openness, the agency achieved one of two performance measures. Surveys show that 

94 percent of stakeholders perceive the agency to be open in its processes. However, it missed the 

performance measure target of 88 percent for selected openness output measures that achieve their 

output targets. The agency achieved a score on this measure of 66 percent because it missed three 

output measure targets. 

Th e first missed output measure under the performance measure, the NRC achieves a 72 percent user 

satisfaction score for the agency’s public Web site greater than or equal to the Federal agency Mean score 

based on results of the yearly American Customer Satisfaction Index for Federal Web sites, missed its 

target by one percentage point with a score of 71 percent. The agency will continue to work on the 

Web site to meet the target. 

The second output measure that missed its target, 90 percent of non-sensitive, unclassifi ed regulatory 

documents generated by the NRC and sent to the agency’s Document Processing Center that are released 

to the public by the 6th working day after the date of the document, showed signifi cant improvement 

over the 2006 result increasing from 63 percent to 75 percent yet still fell below the 90 percent target. 

The agency will continue to review its internal review processes to reduce the time needed to release a 

document. 

The third output measure that missed its target, 90 percent of non-sensitive, unclassifi ed regulatory 

documents received by the NRC that are released to the public by the 6th working day after the document 

is added to the ADAMS main library, also showed significant improvement from 77 percent to 

87 percent. However, it was still 3 percent below the 90 percent target. The agency will continue its 

staff training efforts to close the gap on this measure. 

Effectiveness 

Under Effectiveness, the agency achieved one of two performance measures. The agency missed 

two of five targets associated with the fi rst measure, 70 percent of selected processes deliver effi ciency 

improvement. Th e first output under the measure that was missed called for a 10 percent reduction in 

the average enforcement processing time for handling discrimination allegations. Two discrimination 

cases were processed during FY 2007. They took an average of 236 days to process. 

The agency was not able to meet the 10 percent reduction in processing time due to the complexity 

of utilizing alternative dispute resolution in the case. The agency has improved effi ciency in the 

alternative dispute resolution process which should allow it to reduce the processing time for these 

cases. The second missed output under the measure was to eliminate the requirement for license 

renewal and approve a living license for the two Category III facilities which have been renewed in 

FY 2006 and FY 2007. The agency has not approved a living license for these facilities. 

The agency met its second effectiveness performance measure regarding the number of instances per 

program where licensing or regulatory activities unnecessarily impede the safe and beneficial uses of 

radioactive materials. 

Performance and Accountability Highlights • FY 2007 • www.nrc.gov 11 
Management 

Under Management, the agency achieved one of two performance measures. Th e management 

performance measure met assessed the agency’s performance in delivering outcomes in four 

management programs: infrastructure management, financial management, IT management, and 

human capital management. These programs were able to meet their intended outcomes based on 

successfully meeting the sub-measures within each program. 

The management performance measure not met assessed the agency’s performance in delivering 

efficiency improvements for selected support processes. Both targets under the measure were missed. 

Th e first target that was missed was to issue an offer letter to new employees within 45 work days of 

the closing date of the employment announcement 80 percent of the time. In fact, offer letters were 

issued within 45 days only 31 percent of the time in FY 2007. The NRC undertook a Lean Six Sigma 

study during the second quarter of FY 2007 to evaluate the hiring process from the closing date of 

the announcement to the offer date and develop recommendations to help streamline that process. 

The agency is currently implementing the recommendations made by the Lean Six Sigma study 

workgroup. 

The second target that was missed was a 5 percent reduction of agency Full Time Equivalents (FTE) used 

to develop and submit the FY 2008 and FY 2009 performance budgets. The agency has experienced a 

large growth in FTEs within the last year due to the expansion of New Reactor Program. Additional 

budget staff was hired to manage the program resulting in the agency exceeding the target for this 

measure. 

Th e Office of the Chief Financial Officer is currently developing a new budget process as directed by 

the Commission and it is anticipated that there should be a reduction in FTEs to develop the FY 2010 

Performance Budget. 

Program Assessment Rating Tool Results 

Another important measure of the effectiveness of the agency’s programs are Program Assessment 

Rating Tool (PART) reviews of the agency’s program activities conducted by the Offi ce of Management 

and Budget. 

Brief discussions of the PART analyses completed in FY 2007 are presented below. 

Decommissioning and Low-Level Waste 

This program was rated effective in FY 2007. The program earned high scores for program purpose 

and design and for program management. The PART noted that the purpose was clear and that 

the program uses regular independent assessments to become more results focused. Th e program 

achieves its long-term safety and security goals with respect to the safe management and cleanup of an 

increasing number of NRC licensed sites that use radioactive material. 

The improvement plan for the program includes developing better linkage of budget requests to the 

program’s success in accomplishing agency annual and long-term goals. This would help make clear 

how funding affects program accomplishment. Another follow-up action is to improve quantitative 

12 Performance and Accountability Highlights • FY 2007 • www.nrc.gov 
measurements of effi ciency, including 

baselines and annual targets, to better Figure 5 

demonstrate year-to-year performance PROGRAM YEAR SCORE RATING 

trends. 

High-Level Waste Repository	

Program Year Score Rating 

Reactor Inspection and 2003 89 Eff ective Performance Assessment 

This program was rated eff ective in Fuel Facilities Licensing FY 2007. The program earned high and Inspection 2003 89 Eff ective 

scores for program purpose and design Nuclear Materials Users 

and for program management. Th e 	 2004 93 Eff ective Licensing and Inspection 

PART noted that the purpose was 

clear and the program used regular, Reactor Licensing 2005 74 Moderately 

Eff ective independent assessments to help the 

program become more results focused Spent Fuel Storage and 

and satisfy NRC’s Nuclear Waste Policy Transportation Licensing 2005 89 Eff ective 

Act responsibilities and pre-licensing and Inspection 

functions. The PART also indicated Decommissioning and 2007 91 Eff ective 

that the program has made signifi cant Low-Level Waste 

progress toward meeting the goal of High-Level Waste 2007 87 Eff ective 

establishing a regulatory system to Repository 

ensure the repository achieves longterm safety and security goals. 

The improvement plan for the program includes developing better linkage of budget requests to 

the program’s success in accomplishing annual and agency long-term goals to make clear how 

funding affects program accomplishment. Another follow-up action is to improve quantitative 

measurements of efficiency, including baselines and annual targets, to better demonstrate year-to-year 

performance trends. 

FUTURE CHALLENGES 

The industry has experienced a substantial improvement in safety at nuclear power plants over the 

past 20 years as both the nuclear industry and the NRC have gained substantial experience in the 

operation and maintenance of nuclear power facilities. Improvements in safety have occurred at a time 

when nuclear power generation has increased significantly, from 610,000 gigawatt hours in calendar 

year (CY) 1993 to approximately 787,000 gigawatt hours in CY 2006. However, despite the excellent 

safety and security record in the industry, the agency cannot rest on its achievements. Th e primary 

challenges faced by the agency are the large number of new nuclear plants expected to apply for 

licenses, the safe disposal of high-level nuclear waste, materials degradation, and security at nuclear 

facilities. 

New Nuclear Power Plants 

With increased concerns about the continued availability and cost of oil as well as environmental 

damage caused by coal-burning electrical plants, the amount of electricity supplied by nuclear power is 

likely to increase substantially in the future. The agency expects a large number of applications for the 

Performance and Accountability Highlights • FY 2007 • www.nrc.gov 13 
construction of new power plants over the next few years. The last nuclear power plant construction 

permit was issued in 1977. The agency’s primary challenge is to license the next generation of nuclear 

reactors to ensure that they will operate safely while providing electricity required by the Nation 

for economic growth. These new reactor designs require detailed analysis of their vulnerability to 

accidents and security compromises, as well as development of inspection procedures, tests, analysis, 

and acceptable criteria for their construction. The NRC is also evaluating commercial gas centrifuge 

facilities that utilize new methods of enriching nuclear fuel to supply fuel for the reactors. 

Safe Disposal of High-Level Waste 

The NRC also faces a major challenge as the DOE prepares an application to establish the Nation’s 

first repository for high-level radioactive waste at Yucca Mountain, NV. Safely disposing of the waste 

from nuclear power plants is vital to protecting public health and the environment. Lack of storage 

options would become a major roadblock for the continued growth of the industry. DOE has indicated 

that a license application may not be filed until mid-2008. The NRC’s review of this application will 

require the evaluation of a wide-range of technical and scientific issues and resolution of many diffi cult 

regulatory concerns. Safe and secure interim storage capacity must be ensured until a repository is 

licensed and ready to receive high-level nuclear waste. In addition to the storage of nuclear waste, 

safely transporting spent nuclear fuel is a significant issue for the public and the agency. Most nuclear 

waste is now safely and securely stored at the reactor sites. More than 1,300 spent fuel shipments 

regulated by the NRC have been safely transported in the United States in the past 25 years. Th e bulk 

of the nuclear waste now stored at the reactor sites will eventually be moved to a permanent storage 

site. Therefore, the agency must be able to assure the public that all movements of nuclear waste, 

including those to a permanent storage site, will be safe and secure. 

Security at Nuclear Facilities 

In addition to the safety issues, the security of nuclear materials is of paramount importance to the 

Nation. The agency continues to 

improve the requirements which better 

ensure the security of nuclear materials 

and facilities. The threat faced by the 

Nation from those seeking to steal 

classified information has become more 

urgent in recent years. Nuclear facilities 

have implemented increased security 

measures, including force-on-force 

exercises, to help ensure protection 

of this vital national infrastructure. 

Nuclear facilities are among the most 

secure facilities in the nation. Th e NRC 

constantly monitors the level of threat 

Tour at Davis-Besse Nuclear Power Station near Oak Harbor, OH faced by nuclear facilities. 

14 Performance and Accountability Highlights • FY 2007 • www.nrc.gov 
A MESSAGE FROM THE CHIEF FINANCIAL OFFICER 

I am pleased to present the Nuclear Regulatory Commission’s (NRC) 

Performance and Accountability Highlights for Fiscal Year 2007. Our 

independent auditors have once again rendered an unqualifi ed (“clean”) 

opinion for our financial statements, which demonstrates a continued 

commitment to being good stewards of taxpayers’ dollars and ensuring 

resources are appropriately applied in support of the agency’s mission. 

As of September 30, 2007, 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. As the Chief Financial Officer of the NRC, I take my 

responsibility for the financial health of the agency very seriously and I am 

committed to continuous improvement in our fi nancial management. 

Fiscal Year 2007 was a year of great progress for two major initiatives that strengthened fi nancial 

management. First and foremost, the auditors removed the material weakness finding for the legacy 

License Fee Billing System. This is primarily due to the extensive effort the agency has made to put 

in place compensating controls over the past two years that mitigate the risks inherent in the current 

system. Second, the NRC continued to execute OMB’s revised Circular A-123, Appendix A, “Internal 

Control Over Financial Reporting.” NRC’s FY 2007 assessment of Appendix A compliance, while 

conducted in greater depth with more testing than in FY 2006, again did not identify any material 

weaknesses. A discussion of the assessment results is included in this report. 

Looking to the future, we will continue to be engaged in additional initiatives designed to improve dayto-day operations and achieve long-term strategic planning goals in financial management. Th e most 

signifi cant effort entails the replacement of several legacy systems with an integrated, Web-enabled 

financial management system based on commercial off-the-shelf (COTS) soft ware. The new system will 

integrate the functionality of a number of current systems including: core accounting, billing, time and 

labor, cost accounting, and capitalized property systems into a single enterprise-wide system. NRC is 

currently evaluating and streamlining agency business processes to support a smooth transition to the 

COTS soft ware. The process changes and replacement systems will improve efficiency and eff ectiveness 

while providing agency managers with substantially greater access to timely financial information on 

which to base their decisions. 

To ensure that the NRC’s financial assets are adequately protected and reported, the agency’s goals for 

improved financial management include providing reliable, transparent, useful, and timely information 

to stakeholders and for management decision making; maintaining adequate controls; and implementing 

integrated and flexible systems to meet the agency’s reporting needs. I look forward to the upcoming 

year to further improve financial management at the NRC, as we make progress in achieving our goals. 

William M. McCabe 

Chief Financial Officer 

November 15, 2007 

Performance and Accountability Highlights • FY 2007 • www.nrc.gov 15 
16 

FINANCIAL PERFORMANCE OVERVIEW 

As of September 30, 2007 and 2006, 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 OMB Circular A-136, “Financial Reporting Requirements.” 

Sources of Funds 

The NRC has two appropriations, Salaries and 

Figure 6 Expenses and Office of the Inspector General, and SOURCES OF FUNDS
 funds for both appropriations are available until 


expended. The NRC’s total new FY 2007 budget (In Millions) 


authority was $824.9 million. Of this amount, 
 FY 2006 FY 2007

$816.5 million was appropriated for Salaries and $550.3 

$109.8

$45.7 $45.8 $74.7 $60.5 $70.8 

$0.0 $0.5

$608.3 

Expenses and $8.4 million was appropriated 

for the Office of the Inspector General. Th is 

represents an increase in new budget authority 

of $83.4 million over FY 2006 ($83.3 million for 

the Salaries and Expenses and $0.1 million for the 

Office of the Inspector General appropriation). 

In addition, $74.8 million from prior-year 

appropriations, $3.5 million from prior-year 

reimbursable work, and $7.7 million for new Reactor Material Nuclear General Other 

reimbursable work to be performed for others 

Fees Fees Waste Fund Fund Fund 

was available to obligate in FY 2007. The sum of 

all funds available to obligate for FY 2007 was 

$910.9 million, which is a $101.9 million increase over the FY 2006 amount of $809.0 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 amounts appropriated for waste incidental to reprocessing 

and generic homeland security for FY 2007. The NRC collected $668.8 million in reactor and material 

fees in FY 2007 (see Figure 6). For FY 2006, OBRA-90 also required NRC to collect approximately 

90 percent of its new budget authority, excluding appropriations from the Nuclear Waste Fund and 

amounts appropriated for waste incidental to reprocessing. 

Uses of Funds by Function 

The NRC incurred obligations of $838.8 million in FY 2007, which was an increase of $104.0 million 

over FY 2006. Approximately 56 percent of obligations were used for salaries and benefi ts. Th e 

remaining 44 percent was used to obtain technical assistance for the NRC’s principal regulatory 

programs, to conduct confirmatory safety research, and to cover operating expenses, (e.g., building 

rentals, transportation, printing, security services, supplies, office automation, training), staff travel, 

and reimbursable work (see Figure 7). The unobligated budget authority available at the end of 

Performance and Accountability Highlights • FY 2007 • www.nrc.gov 
FY 2007 was $72.2 million, a decrease compared 

to the FY 2006 amount of $74.3 million. Of this 

$72.2 million, $6.6 million is for reimbursable 

work, and $65.6 million is available to fund 

critical NRC needs in FY 2008. 

Audit Results 

The NRC received an unqualifi ed audit opinion 

on its FY 2007 financial statements. In FY 2007, 

the auditors identified a continuing material 

weakness in the agency’s information systemwide security controls related to an independent 

evaluation of the NRC’s implementation of 

the Federal Information Security Management 

Act (FISMA). The FISMA report identifi ed 

two signifi cant 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. Th ese deficiencies were also identified as a material weakness in the agency’s 

Federal Managers’ Financial Integrity Act (Integrity Act) assurance statement. The NRC plans to 

have contingency plan testing completed during FY 2008 and one-half of the systems certifi ed 

and accredited by September 2008, with the remaining systems being certified and accredited by 

September 2009. 

USES OF FUNDS BY FUNCTION 

(In Millions) 

Salaries and 

Expenses 

Travel Reimbursable Contract 

Work Support 

$467.5 

Figure 7 

In FY 2004, FY 2005, and FY 2006, the auditors identified a material weakness concerning the Fee 

Billing System and the quality assurance process over fee billing. In FY 2007, the auditors downgraded 

this to a signifi cant deficiency. NRC management has classified the fee billing process as a control 

deficiency in the annual Integrity Act assurance statement based on the corrective actions to 

implement compensating controls during the current and prior fiscal years. In FY 2006, the Fee Billing 

System was also identified as a substantial non-compliance with the Federal Financial Management 

Improvement Act (Improvement Act). 

In FY 2007, the Fee Billing System and Human Resources Management System are substantially 

non-compliant with the Improvement Act due to a lack of current certification and accreditation. 

In addition, a general support system, which all financial management systems reside on or rely on, 

does not have a current certification and accreditation and did not have the annual contingency plan 

tested. Although there may be a potential risk with security controls, there are a number of existing 

mitigating controls that provide NRC management reasonable assurance that the fi nancial data 

resulting from financial management systems is accurate. NRC will continue to improve internal 

controls by implementing and monitoring corrective actions during the agency’s internal control 

assessment. 

The auditors closed the remaining prior-year reportable condition concerning hourly rates for license 

fees as stipulated by Title 10 of the Code of Federal Regulations, Part 170, “Fees for Facilities, Materials, 

Import and Export Licenses, and Other Regulatory Services under the Atomic Energy Act of 1954,” as 

Amended. 

Performance and Accountability Highlights • FY 2007 • www.nrc.gov 

FY 2006 FY 2007 

$19.0 $20.8 

$3.8 $4.6 

$419.8 

$292.2 

$345.9 

17 
$93.9 

Fund Balance 

with Treasury, $356.4 

Financial Statement Highlights 

Th e NRC’s financial statements summarize the financial activity and financial position of the agency. 

Analysis of the Balance Sheet 

The NRC’s assets were approximately $485.4 million as of September 30, 2007. This is an increase of 

$99.3 million from the end of FY 2006. The assets reported in NRC’s balance sheet are summarized 

in the Condensed Balance Sheet on page 21. 

The Fund Balance with Treasury represents 

Figure 8 the NRC’s largest asset of $356.4 million as of 

ASSETS SUMMARY FY 2007 September 30, 2007, an increase of $74.7 million (In Millions) from the FY 2006 year-end balance. Th is 

balance accounts for approximately 73 percent Accounts 

Receivable, Net, of total assets and represents appropriated 

funds, collected license fees, and other funds 

Property and maintained at the U.S. Treasury to pay current 

Equipment, liabilities (see Figure 8). The increase in Fund 

Net, $31.8 Balance with the U.S. Treasury is primarily 

Other,	 due to an $83.4 million increase in new budget 

$3.3	 authority offset by a $77.8 million increase in 

expenditures, a $58.1 million increase in fees 

collected, and a $16.9 million increase in the 

fund balance carryover from the prior year. 

Accounts Receivable, Net, as of 

September 30, 2007, was $93.9 million which 

includes an offsetting allowance for doubtful accounts of $4.7 million. This is a 25 percent increase 

from the FY 2006 year-end Accounts Receivable, Net, balance of $75.2 million. Th e increase was 

primarily due to an increase in annual fees for reactor licensing and an increase in the hourly rates 

for materials and facilities inspection fees. The value of Property, Plant, and Equipment, Net, was 

$31.8 million, representing 7 percent of total assets. The majority of this balance represents IT 

software and leasehold improvements. 

The NRC’s liabilities were $204.2 million as of September 30, 2007. The increase in Total Liabilities 

of $30.7 million from the FY 2006 year-end balance of $173.5 million is primarily due to the 

increase in the liability that relates to future collections, which will be paid to the U.S. Treasury. 

Other Liabilities of $169.7 million include $93.4 million for recoveries from accounts receivable, 

$38.3 million for accrued annual leave, and $16.0 million for accrued salaries to employees 

(see Figure 9). Of the agency’s liabilities, $46.8 million were not covered by budgetary resources, 

which is a slight increase over the balance as of September 30, 2006. The liabilities not covered by 

budgetary resources include unfunded accrued annual leave and future workers’ compensation. Th e 

liabilities reported in NRC’s Balance Sheet are summarized in the Condensed Balance Sheet 

on page 21. 

Th e difference between Total Assets and Total Liabilities, Net Position, was $281.2 million as 

of September 30, 2007. This is an increase of $68.6 million from the FY 2006 year-end balance. 

18 Performance and Accountability Highlights • FY 2007 • www.nrc.gov 
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 

$60.3 million for FY 2007 is primarily due to 

funding for the expected added volume of new 

reactor licensing activities. 

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 the 

cost of programs. The NRC’s net cost of operations 

for the year ended September 30, 2007, was $93.4 

LIABILITIES SUMMARY FY 2007 

(In Millions) 

Figure 9 

Other Liabilities, $169.7 

Federal 

Employee 

Benefits, 

$6.8 

Accounts 

Payable, 

$27.7 

million, which is an increase of $12.8 million over the FY 2006 net cost of $80.6 million. Net costs by 

program are shown in the Statement of Net Cost on page 21. Gross costs increased primarily due to 

an increase in Nuclear Reactor Safety in the areas of new reactor and existing licensing programs (see 

Figure 10). Earned Revenue increased primarily because of the increase in appropriations for NRC 

activities, of which the NRC is required to collect 90 percent through fee billing. 

Total earned revenue for the year ended September 30, 2007, was $693.3 million, which is an increase 

of $53.3 million from the earned revenue of $640.0 million for the year ended September 30, 2006. 

Earned revenue is derived from fees for reactor and materials licensing and inspections in accordance 

with 10 CFR Parts 170 and 171 (see Figure 11). 

GROSS COSTS 

Figure 10 

Nuclear Reactor 

Safety, 74% 

Nuclear Materials 

and Waste Safety, 26% 

EARNED REVENUE 

Figure 11 

Nuclear Reactor 

Safety, 88% 

Nuclear Materials 

and Waste Safety, 12% 

Performance and Accountability Highlights • FY 2007 • www.nrc.gov
 19 
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 $68.6 million from FY 2006 to 

FY 2007 is due primarily from an increase in the net change in Unexpended Appropriations of 

$60.3 million. This increase is primarily due to the increase in the appropriation for FY 2007 for the 

expected added volume of new reactor licensing activities. 

20 Performance and Accountability Highlights • FY 2007 • www.nrc.gov 
CONDENSED FINANCIAL STATEMENTS 

CONDENSED BALANCE SHEET* 

(IN THOUSANDS) 

As of September 30, 2007 2006 

Assets 

Fund balances with Treasury $ 356,399 $ 281,715 

Accounts receivable, net 93,894 75,191 

Property and equipment, net 31,832 26,915 

Other 3,283 2,266 

Total Assets $ 485,408 $ 386,087 

Liabilities 

Accounts payable 27,710 31,165 

Federal employee benefi ts 6,833 7,434 

Other 169,674 134,895 

Total Liabilities 204,217 173,494 

Net Position 

Unexpended appropriations 254,027 193,694 

Cumulative results of operations 27,164 18,899 

21 

Total Net Position 281,191 212,593


Total Liabilities and Net Position $ 485,408 $ 386,087


STATEMENT OF NET COST* 

(IN THOUSANDS) 

For the years ended September 30, 2007 2006


Nuclear Reactor Safety


Gross costs $ 582,212 $ 515,374 


Less: Earned revenue (612,769) (562,502)


Total Net Cost of Nuclear Reactor Safety (30,557) (47,128) 

Nuclear Materials and Waste Safety


Gross costs 204,495 205,221 


Less: Earned revenue (80,490) (77,539)


Total Net Cost of Nuclear Materials and Waste Safety 124,005 127,682 

Net Cost of Operations $ 93,448 $ 80,554 

*For a complete set of financial statements and notes see Chapter 3, “Financial Statements and Auditors’ Report,” in the FY 2007 Performance 

and Accountability Report. This report can be accessed at http://www.nrc.gov. 

Performance and Accountability Highlights • FY 2007 • www.nrc.gov 
STATEMENT OF CHANGES IN NET POSITION* 

(IN THOUSANDS) 

22 

For the years ended September 30, 2007 2006 

Cumulative Results of Operations 

Beginning Balance $ 18,899 $ (13,353) 

Budgetary Financing Sources


Appropriations used 46,646 50,542 


Non-exchange revenue - 590 


Transfers-in/out without reimbursement 45,826 45,067 


Other Financing Sources


Imputed financing from costs absorbed by others 27,627 28,022 


Other - Revenue from excess collections (18,386) (11,415)


Total Financing Sources 101,713 112,806 

Net Cost of Operations (93,448) (80,554) 

Net Change 8,265 32,252 


Cumulative Results of Operations $ 27,164 $ 18,899 


Unexpended Appropriations 

Beginning Balance $ 193,694 $ 170,836 

Adjustment: 

Change in accounting principle (2,838) -


Beginning Balance, as adjusted 190,856 170,836 


Budgetary Financing Sources


Appropriations received 109,817 72,532 


Appropriations transferred-in/out - 1,587 


Appropriations used (46,646) (50,542)


Other adjustments - (719)


Total Budgetary Financing Sources 63,171 22,858 

Total Unexpended Appropriations 254,027 193,694 

Net Position $ 281,191 $ 212,593 

*For a complete set of financial statements and notes see Chapter 3, “Financial Statements and Auditors’ Report,” in the FY 2007 Performance 

and Accountability Report. This report can be accessed at http://www.nrc.gov. 

Performance and Accountability Highlights • FY 2007 • www.nrc.gov 
SYSTEMS, CONTROLS, AND LEGAL COMPLIANCE


U.S. NUCLEAR REGULATORY COMMISSION 

FEDERAL MANAGERS’ FINANCIAL 

INTEGRITY ACT STATEMENT FOR FY 2007 

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). Th e NRC 

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

management systems meet the objectives of FMFIA, with the exception of one material 

weakness 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 one material 

weakness in its internal control over the effectiveness and efficiency of operations and 

compliance with applicable laws and regulations as of September 30, 2007. Other than this 

exception, 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 fi nancial 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 the evaluation, the NRC can provide reasonable assurance that its internal control 

over financial reporting as of June 30, 2007, was operating effectively, and no material 

weaknesses were found in the design or operation of the internal control over fi nancial 

reporting. 

Dale E. Klein 

Chairman 

U.S. Nuclear Regulatory Commission 

November 15, 2007 

Performance and Accountability Highlights • FY 2007 • www.nrc.gov
 23
Federal Managers’ Financial Integrity Act 

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

controls that reasonably ensure that (1) obligations and costs comply with applicable law; (2) assets 

are safeguarded against waste, loss, unauthorized use, or misappropriation; and (3) revenues and 

expenditures are properly recorded and accounted 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 2007 Integrity Act Results 

The NRC evaluated its internal control systems for the fiscal year ending September 30, 2007. Th is 

evaluation provided reasonable assurance that the agency’s internal controls achieved their intended 

objectives in accordance with the Integrity Act. The NRC is able to provide a qualified statement of 

assurance that the internal controls and financial management systems meet the objectives of the 

Integrity Act, with the exception of one material weakness. 

Material Weakness 

Th e Office of the Inspector General performed an independent evaluation of the NRC’s 

implementation of the Federal Information Security Management Act for FY 2007. Th e following 

two findings were identifi ed as signifi cant deficiencies in NRC’s information technology (IT) security 

program: 

•	 Only 2 of 30 operational NRC information systems have a current certifi cation and accreditation, 

and only 4 out of the 11 systems used or operated by a contractor or other organization on behalf of 

the agency have a current certifi cation and accreditation. 

•	 Annual contingency plan testing is still not being performed for all of the NRC’s operational 

information systems. As a result of this evaluation, the NRC identified these two findings as one 

material weakness associated with the agency’s overall IT security program under the provisions of 

the Integrity Act. 

The NRC will implement the following corrective actions to resolve this material weakness: 

•	 The NRC’s FY 2008 budget includes additional resources and the agency has developed a milestone 

plan to ensure that one-half of the systems will be certified and accredited by September 2008, with 

the remaining systems being certified and accredited by September 2009. 

•	 All system contingency plan testing will be completed during FY 2008. 

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

Including Appendix A, Internal Control over Financial Reporting 

In FY 2007, the NRC continued its assessment of internal control over financial reporting. Th e 

scope of financial reports, materiality values, risk assessments, key processes and key controls were 

re-evaluated. A three-year rotational testing plan was developed, and three of the original nine key 

processes from FY 2006 were determined to be significant enough to be included in the testing each 

year of the 3-year cycle. Based on the results of this evaluation, the NRC can provide reasonable 

24 Performance and Accountability Highlights • FY 2007 • www.nrc.gov 
assurance that its internal control over financial reporting was operating effectively as of June 30, 2007, 

and that no material weaknesses were found in the design or operation of the internal controls over 

fi nancial reporting. 

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 (1) Federal fi nancial management 

system requirements, (2) applicable Federal accounting standards, and (3) 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. 

As of September 30, 2007, the agency’s financial management systems are in substantial compliance 

with the Improvement Act, except for two systems which are in substantial noncompliance because of 

FISMA signifi cant deficiencies related to lack of current certification and accreditation. In addition, a 

general support system, which all financial management systems either reside on or rely on, does not 

have a current certification and accreditation and did not have the annual contingency plan tested. 

Although there may be a potential risk with security controls, there are a number of existing 

mitigating controls that provide NRC management reasonable assurance that the fi nancial data 

resulting from financial management systems is accurate. 

Prompt Payment 

The Prompt Payment Act requires Federal Figure 12 

agencies to make timely payments to vendors for 

PROMPT PAYMENT 

(Percentage of On-Time Payments) supplies and services, to pay interest penalties 

when payments are made after the due date, 

and to take cash discounts when they are 94% 94% 96% 95% 95% 

economically justified. In FY 2007, the NRC paid 

8,966 invoices that were subject to the Prompt 

Payment Act. The NRC percentage of on-time 

payments subject to the Prompt Payment Act for 

FY 2007 is 95 percent (see Figure 12). Th e amount 

of interest penalties incurred during FY 2007 was 

$11,160. 

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 payments consist of commercial vendor, 

interagency, and travel reimbursements. The Department of the Interior - National Business Center’s 

(DOI-NBC) Federal Personnel/Payroll System, as the system of record for payroll disbursements, 

is responsible for monitoring and reporting on any improper payroll-related payments. Th e NRC 

continues to perform annual risk assessments for each of these areas. Based on the FY 2007 risk 

Performance and Accountability Highlights • FY 2007 • www.nrc.gov 

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 

25 
assessments, the number of and amount of improper payments fall below external reporting 

requirement established by OMB guidance on what is considered to be a significant risk. NRC awards 

less than $500 million in annual contracts, and therefore is not subject to annual reporting under the 

Recovery Auditing Act. 

Debt Collection 

The Debt Collection Improvement Act enhances 


the ability of the Federal Government to Figure 13


service and collect debts. The agency’s goal is to DELINQUENT DEBT


maintain the delinquent debt owed to the NRC, (In Millions)


at year end, to less than 1 percent of its annual 


billings. The NRC continues to meet this goal. 


At the end of FY 2007, delinquent debt was $2.0


$1.4 million (see Figure 13). The NRC continues 


to pursue the collection of delinquent debt and 


$0.45 $0.5 

$1.4 

refers all eligible delinquent debt over 180 days 


to the U.S. Treasury for collection.
 $0.9 

Biennial Review of User Fees 

The Chief Financial Offi cers Act requires FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 

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 (72 FR 31401, June 6, 2007). The NRC also 

revised the fees and charges for the Criminal History Program to more appropriately recognize actual 

costs. Reviews of other types of fees concluded that revisions were not warranted 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. Section 5(b) of the Inspector General Act requires agencies to report on final actions taken 

on audit recommendations. Appendix C of the Fiscal Year 2007 Performance and Accountability Report 

includes this information, as well as data concerning disallowed costs determined through contract 

audits conducted by the Defense Contract Audit agency. 

26 Performance and Accountability Highlights • FY 2007 • www.nrc.gov 
INSPECTOR GENERAL’S TRANSMITTAL LETTER


UNITED STATES 

NUCLEAR REGULATORY COMMISSION 

Washington, D.C. 20555-0001 

December 12, 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 2007 

AND 2006 (OIG-08-A-04) 

Office of Management and Budget Circular No. A-136, Revised, July 29, 2007, 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, 2007. Th e 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 fi nancial 

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 . 

Performance and Accountability Highlights • FY 2007 • www.nrc.gov
 27
INDEPENDENT AUDITORS’ REPORT ON THE CONDENSED FINANCIAL 

STATEMENTS 

28 

Chairman Dale E. Klein 

U.S. Nuclear Regulatory Commission 

Rockville, Maryland 

We have audited, in accordance with auditing standards generally accepted in the United States of 

America, the standards applicable to financial audits contained in Government Auditing Standards, 

issued by the Comptroller General of the United States, and OMB Bulletin No. 07-04, Audit 

Requirements for Federal Financial Statements, the balance sheets of the U.S. Nuclear Regulatory 

Commission (NRC) as of September 30, 2007, and 2006, and the related statements of net cost, 

statements of changes in net position and statements of budgetary resources for the fiscal years then 

ended. In our report dated November 7, 2007, we expressed an unqualified opinion on those fi nancial 

statements. 

As discussed in Note 14 to the financial statements referred to above, NRC changed its presentation of 

allocation transfers as required by OMB Circular A-136, “Financial Reporting Requirements.” 

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

stated in all material respects in relation to the financial statements referred to above from which it has 

been derived. 

In accordance with Government Auditing Standards, our report on the financial statements referred to 

above includes a report on the effectiveness of internal control over financial reporting and a report on 

compliance with laws and regulations for the fiscal year ended September 30, 2007. In those reports, 

we identified a material weakness related to information systems security controls, a signifi cant 

deficiency related to the fee billing system and a substantial noncompliance with the Federal fi nancial 

management system requirements under the Federal Financial Management Improvement Act related 

to information systems security controls. Those reports are integral parts of a fi nancial statement audit 

performed in accordance with Government Auditing Standards and should be considered in assessing 

the results of our audit. 

November 7, 2007 

Performance and Accountability Highlights • FY 2007 • www.nrc.gov 
NRC FORM 335 U.S. NUCLEAR REGULATORY COMMISSION

(2-89)

NRCM 1102, BIBLIOGRAPHIC DATA SHEET 3201, 3202 

(See instructions on the reverse) 

2. TITLE AND SUBTITLE 

U.S. Nuclear Regulatory Commission

Performance and Accountability Highlights

FY 2007

5. AUTHOR(S) 

Richard Rough, et. al

1. REPORT NUMBER 

(Assigned by NRC, Add Vol., Supp., Rev., 

and Addendum Numbers, if any.) 

NUREG-1542, Vol. 13, Supp. 1

3. DATE REPORT PUBLISHED 

MONTH YEAR 

February 2008

4. FIN OR GRANT NUMBER 

n/a

6. TYPE OF REPORT 

Annual

7. PERIOD COVERED (Inclusive Dates) 

FY 2007

8. PERFORMING ORGANIZATION - NAME AND ADDRESS (If NRC, provide Division, Office or Region, U.S. Nuclear Regulatory Commission, and mailing address; if contractor, 

provide name and mailing address.) 

Resource Management and Support Staff

Office of the Chief Financial Officer

U.S. Nuclear Regulatory Commission

Washington, DC 20555-0001

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and mailing address.) 

Same as 8, above

10. SUPPLEMENTARY NOTES 

11. ABSTRACT (200 words or less) 

The FY 2007 Performance and Accountability Highlights provide performance results and audited financial statements that

enable Congress, the President, and the public to assess the performance of the agency in achieving its mission and

stewardship of its resources. The report contains a concise overview, Management's Discussion and Analysis, as well as

performance and financial sections. Additional details of performance results and program evaluations can be found in the

appendices.

12. KEY WORDS/DESCRIPTORS (List words or phrases that will assist researchers in locating the report.) 

Performance and Accountability Highlights

FY 2007

PAR

13. AVAILABILITY STATEMENT 

unlimited 

14. SECURITY CLASSIFICATION 

(This Page) 

unclassified 

(This Report) 

unclassified 

15. NUMBER OF PAGES 

16. PRICE 

NRC FORM 335 (2-89) 

Performance and Accountability Highlights • FY 2007 • www.nrc.gov 29 

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Performance and Accountability Highlights • FY 2007 • www.nrc.gov 31 


U. S. Nuclear Regulatory Commission

Washington, DC 20555-0001

www.nrc.gov

NUREG-1542, Vol. 13, Supp. 1

February 2008