AUDIT REPORT 

Audit NRC’s Material Control and 

Accounting Security Measures 

for Special Nuclear Materials 

 at Fuel Cycle Facilities 

OIG-09-A-19 September 30, 2009 

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

NRC’s Web site at: 

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

NUCLEAR REGULATORY COMMISSION 

WASHINGTON, D.C. 20555-0001 

OFFICE OF THE 

INSPECTOR GENERAL 

 September 30, 2009 

MEMORANDUM TO: R. William Borchardt 

 Executive Director for Operations 

FROM: Stephen D. Dingbaum /RA/ 

 Assistant Inspector General for Audits 

SUBJECT: AUDIT OF NRC’S MATERIAL CONTROL AND 

ACCOUNTING SECURITY MEASURES FOR SPECIAL 

NUCLEAR MATERIALS AT FUEL CYCLE FACILITIES 

 (OIG-09-A-19) 

Attached is the Office of the Inspector General’s (OIG) report, Audit of NRC’s Material 

Control and Accounting Security Measures for Special Nuclear Materials at Fuel Cycle 

Facilities. 

The report presents the results of the subject audit. Agency comments provided during 

and subsequent to an August 26, 2009, exit conference have been incorporated, as 

appropriate, into this report. 

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

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

planned are subject to OIG follow-up as stated in Management Directive 6.1. 

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

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

415-5915 or Beth Serepca, Team Leader, Security and Information Management Audit 

Team, at 415-5912. 

Attachment: As stated 

 
Electronic Distribution

Edwin M. Hackett, Executive Director, Advisory Committee on Reactor 

 Safeguards 

E. Roy Hawkens, Chief Administrative Judge, Atomic Safety and 

 Licensing Board Panel 

Stephen G. Burns, General Counsel 

Brooke D. Poole, Jr., Director, Office of Commission Appellate Adjudication 

James E. Dyer, Chief Financial Officer 

Margaret M. Doane, Director, Office of International Programs 

Rebecca L. Schmidt, Director, Office of Congressional Affairs 

Eliot B. Brenner, Director, Office of Public Affairs 

Annette Vietti-Cook, Secretary of the Commission 

R. William Borchardt, Executive Director for Operations 

Bruce S. Mallett, Deputy Executive Director for Reactor 

 and Preparedness Programs, OEDO 

Martin J. Virgilio, Deputy Executive Director for Materials, Waste, Research, 

 State, Tribal, and Compliance Programs, OEDO 

Darren B. Ash, Deputy Executive Director for Corporate Management 

 and Chief Information Officer, OEDO 

Vonna L. Ordaz, Assistant for Operations, OEDO 

Kathryn O. Greene, Director, Office of Administration 

Patrick D. Howard, Director, Computer Security Officer 

Cynthia A. Carpenter, Director, Office of Enforcement 

Charles L. Miller, Director, Office of Federal and State Materials 

 and Environmental Management Programs 

Guy P. Caputo, Director, Office of Investigations 

Thomas M. Boyce, Director, Office of Information Services 

James F. McDermott, Director, Office of Human Resources 

Michael R. Johnson, Director, Office of New Reactors 

Michael F. Weber, Director, Office of Nuclear Material Safety and Safeguards 

Eric J. Leeds, Director, Office of Nuclear Reactor Regulation 

Brian W. Sheron, Director, Office of Nuclear Regulatory Research 

Corenthis B. Kelley, Director, Office of Small Business and Civil Rights 

Roy P. Zimmerman, Director, Office of Nuclear Security and Incident Response 

Samuel J. Collins, Regional Administrator, Region I 

Luis A. Reyes, Regional Administrator, Region II 

Mark A. Satorius, Regional Administrator, Region III 

Elmo E. Collins, Jr., Regional Administrator, Region IV 
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for Special Nuclear Materials at Fuel Cycle Facilities 

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EXECUTIVE SUMMARY 

BACKGROUND

The U.S. Nuclear Regulatory Commission (NRC) is authorized to grant 

licenses for the possession and use of special nuclear material (SNM) and 

establish regulations to govern the possession and use of those materials. 

SNM is used for such purposes as (1) fuel for nuclear reactors; (2) 

industrial, academic, and medical applications; and (3) the manufacture of 

industrial gauging devices. 

NRC’s regulations require that SNM license holders have material control 

and accounting (MC&A) systems to protect against the loss or misuse of 

SNM. Licensees must allow NRC to inspect the materials, controls, and 

premises where SNM is used or stored. The primary goal of the NRC 

MC&A inspection program at fuel cycle facilities is to ensure that licensee 

systems adequately detect and protect against the loss, theft, or diversion 

of SNM in the licensee’s possession. 

The Office of Nuclear Material Safety and Safeguards (NMSS) is currently 

responsible for the MC&A Inspection Program. The inspection program 

staff is composed of one fully qualified inspector and three inspectors who 

are at various stages in their 2-year training and qualification program. 

This current staff is split between NRC headquarters in Rockville, 

Maryland, and NRC’s Region II office in Atlanta, Georgia. 

NRC requires MC&A inspections at Category I fuel cycle facilities twice 

per calendar year, and these inspections require approximately 128 hours 

per site. Upon completion of an inspection, staff return to their assigned 

offices and write an inspection report. The NMSS MC&A Branch Chief 

reviews and approves the report. 

PURPOSE

The purpose of this audit was to assess the effectiveness of NRC’s MC&A 

 inspection program over the accounting and control of SNM at Category I 

 fuel cycle facilities. 

RESULTS IN BRIEF

The primary goal of NRC’s MC&A inspection program is to ensure that 

licensee MC&A systems adequately detect the loss, theft, or diversion of 

SNM. However, the Office of the Inspector General (OIG) found that the 

MC&A Inspection Program is at risk from the following conditions: 
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 Procedures lack prioritized direction and detailed sampling 

instruction. 

 Qualified staff are limited. 

 Specialized training that could enhance management knowledge 

has not been taken. 

 Procedures Lack Prioritized Direction and Detailed Sampling 

 Instruction 

NRC requires up-to-date, detailed procedures that provide guidance on 

setting inspection priorities. Currently, inspectors must choose their 

MC&A inspection activities without the benefit of prioritized procedures 

containing detailed sampling instruction. Management stated that they 

had not been made aware of any need for procedure revisions by the 

inspectors. The result is that there is no assurance that MC&A 

inspections are conducted in a consistent, thorough manner. 

Qualified Staff Are Limited

Management is responsible for ensuring that NRC’s workforce has the 

skills necessary to achieve the agency’s goals. The MC&A inspection 

program is currently operating with only one fully qualified inspector. In 

addition to conducting inspections and writing inspection reports, this 

inspector provides on-the-job training to three inspectors-in-training. 

Limited availability of required Department of Energy MC&A classes 

restricts the ability of NRC MC&A inspectors-in-training to complete their 

qualifications within the required 2-year timeframe. The result of these 

training delays is an inspection program that does not have a sufficient 

number of qualified inspectors to assure that inspections are conducted in 

a consistent, thorough manner. However, no deficiencies were observed. 

Specialized Training That Could Enhance Management Knowledge 

Has Not Been Taken 

NRC branch chiefs play an important role in overseeing inspection 

activities and should have a level of MC&A understanding that enables 

them to ensure effective performance of their branch. However, the 

branch chief responsible for approving MC&A fuel cycle facility inspection 

reports lacks specialized classroom training in this area. Specialized 

MC&A training is not required as a prerequisite to meet the qualifications 

to become an NMSS MC&A branch chief. However, without specialized 
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classroom training, NRC lacks assurance that its branch chief has 

expertise for thorough and independent assessment of inspectors’ work, 

increasing the risk that inspector errors will go undetected. 

RECOMMENDATIONS 

This report makes three recommendations to improve the agency’s MC&A 

inspection program at Category I fuel cycle facilities. A consolidated list of 

these recommendations appears in Section V of this report. 

AGENCY COMMENTS 

At an August 26, 2009, exit conference, agency senior executives agreed 

to provide suggested revisions to the discussion draft report for OIG’s 

consideration. On September 3, 2009, NRC provided suggested report 

revisions, which served as a basis for further discussions between the 

agency and OIG. This final report incorporates revisions made, where 

appropriate, as a result the agency’s suggestions. 

On September 25, 2009, the Executive Director for Operations provided a 

formal response to this report (Appendix B). No changes were made to 

the report based on the agency’s formal response. OIG’s response to the 

agency’s formal comments is presented as Appendix C. 

 
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ABBREVIATIONS AND ACRONYMS 

DOE Department of Energy 

 MC&A Material Control and Accounting 

 NMSS The Office of Nuclear Material Safety and Safeguards 

 NRC Nuclear Regulatory Commission 

 NSIR The Office of Nuclear Security and Incident Response 

OIG Office of the Inspector General 

 SNM special nuclear material 
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TABLE OF CONTENTS

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

ABBREVIATIONS AND ACRONYMS ......................................................... v 

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

II. PURPOSE...........................................................................................3 

III. FINDINGS...........................................................................................4 

A. PROCEDURES LACK PRIORITIZED DIRECTION AND DETAILED 

SAMPLING INSTRUCTION.................................................................4 

B. QUALIFIED STAFF ARE LIMITED .......................................................8 

C. SPECIALIZED TRAINING THAT COULD ENHANCE MANAGEMENT 

 KNOWLEDGE HAS NOT BEEN TAKEN .............................................11 

IV. AGENCY COMMENTS .....................................................................14 

V. CONSOLIDATED LIST OF RECOMMENDATIONS .........................15 

APPENDICES 

A. SCOPE AND METHODOLOGY .....................................................17 

B. FORMAL AGENCY COMMENTS...................................................19 

C. OIG RESPONSE TO FORMAL AGENCY COMMENTS ................21 
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I. BACKGROUND 

The U.S. Nuclear Regulatory Commission (NRC) is authorized 

to grant licenses for the possession and use of special nuclear 

material (SNM)1

 and establish regulations to govern the 

possession and use of those materials. SNM is used for such 

purposes as (1) fuel for nuclear reactors; (2) industrial, 

academic, and medical applications; and (3) the manufacture of 

industrial gauging devices. 

NRC’s regulations require that SNM license holders have 

material control and accounting (MC&A) systems to protect 

against the loss or misuse of SNM. Licensees, such as fuel 

cycle facilities,2 have the primary responsibility to maintain the 

security and accountability of the radioactive material in their 

possession. Licensees must allow NRC to inspect the 

materials, controls, and premises where SNM is used or stored. 

These inspections are required to occur cyclically as prescribed 

by NRC procedures. 

Today’s threat environment differs from the pre-September 11, 

2001, environment. In the current threat environment, 

safeguards programs should be designed to better ensure 

protection against the diversion or theft of material that could be 

used malevolently. 

The MC&A Inspection Program

The primary goal of the NRC MC&A inspection program at fuel 

cycle facilities is to ensure that licensee systems adequately 

detect and protect against the loss, theft, or diversion of SNM in 

the licensee’s possession. A secondary goal, if loss, theft, or 

diversion does occur, is to ensure that the licensee systems 

trigger timely detection response and recovery operations. 

 

1

 Special nuclear material is mildly radioactive, but includes uranium-233, uranium-235, and 

plutonium-239 -- which, in concentrated form, can be the primary ingredients of nuclear 

explosives. These materials, in amounts greater than formula quantities, are defined as 

"strategic special nuclear material.” The uranium-235 content of low-enriched uranium can 

be concentrated (i.e., enriched) to make highly enriched uranium, the primary ingredient of an 

atomic bomb. 

2

 A fuel cycle facility is a facility involved in the processing and fabrication of uranium ore into 

reactor fuel. 
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NRC’s inspection program distinguishes different categories of 

fuel facilities for inspection. NRC conducts MC&A inspections 

at Category I facilities and Category III facilities.3 Categorization 

of facilities is based on type and enrichment of material.4

The Office of Nuclear Material Safety and Safeguards (NMSS) 

is currently responsible for the MC&A inspection program, 

although responsibility has moved from NMSS to the Office of 

Nuclear Security and Incident Response (NSIR) and back to 

NMSS in recent years. A recent office history of the MC&A Fuel 

Cycle Facility inspection program is depicted below: 

The inspection program staff is composed of one fully qualified 

inspector5 and three inspectors who are at various stages in 

their 2-year training and qualification program. Previously the 

inspection program staff was supplemented by other fully 

qualified inspectors from within NMSS and NSIR. This current 

staff is split between NRC headquarters in Rockville, Maryland, 

and NRC’s Region II office in Atlanta, Georgia. The NMSS 

MC&A Branch Chief supervises the one fully qualified inspector 

and one of the inspectors-in-training out of headquarters. The 

two other inspectors-in-training operate out of Region II and are 

supervised by a Branch Chief in Region II’s Division of Fuel 

Facility Inspection. 

 

3

 There are no Category II fuel cycle facilities currently operating in the United States. 

4

 Category I fuel cycle facilities are authorized to possess highly enriched uranium, and 

Category III fuel cycle facilities are authorized to possess low enriched uranium. Highly 

enriched uranium is fuel in which the weight percent of U-235 in the uranium is 20 percent or 

greater. Low enriched uranium is fuel in which the weight percent of U-235 in the uranium is 

less than 20 percent. 

5

 Full Inspector Qualification indicates that the individual has completed all Basic-Level and 

Proficiency-Level inspector training and qualification activities. Achieving Full Inspector 

Qualification allows an individual to be assigned the full scope of inspection-related activities 

to be independently performed with routine oversight and supervision. 
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MC&A Inspections 

NRC requires MC&A inspections at Category I fuel cycle 

facilities twice per calendar year, and these inspections require 

approximately 128 hours per site. MC&A inspections typically 

require 1 week of planning and pre-work, 1 week of onsite 

inspection time, and 1 week of report writing and post-inspection 

work. Prior to each inspection, inspectors prepare an inspection 

plan detailing which procedures and activities within the 

procedures are to be accomplished during the inspection. 

Inspectors typically review and test the licensee’s performance 

in areas such as: 

 Accounting and Internal Controls. 

 Item Monitoring. 

 Management Structure and Personnel Training and 

Qualification. 

 Measurement Systems and Control. 

 Physical Inventory. 

 Process Monitoring. 

Inspectors also set aside time to follow up on issues noted 

during previous inspections. Upon completion of an inspection, 

staff return to their assigned offices and write an inspection 

report. The NMSS MC&A Branch Chief reviews and approves 

the report. 

II. PURPOSE 

The purpose of this audit was to assess the effectiveness of 

NRC’s MC&A inspection program over the accounting and 

control of SNM at Category I fuel cycle facilities. 

See Appendix A for a description of the audit scope and 

methodology. 

 
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for Special Nuclear Materials at Fuel Cycle Facilities 

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III. FINDINGS 

The primary goal of NRC’s MC&A inspection program is to 

ensure that licensee MC&A systems adequately detect the loss, 

theft, or diversion of SNM. However, the Office of the Inspector 

General (OIG) found that the MC&A Inspection Program is at 

risk from the following conditions: 

 Procedures lack prioritized direction and detailed 

sampling instruction. 

 Qualified staff are limited. 

 Specialized training that could enhance management 

knowledge has not been taken. 

A. Procedures Lack Prioritized Direction and Detailed Sampling 

Instruction 

NRC requires up-to-date, detailed procedures that provide 

guidance on setting inspection priorities. Currently, inspectors 

must choose their MC&A inspection activities without the benefit 

of prioritized procedures containing detailed sampling 

instruction. Management stated that they had not been made 

aware of any need for procedure revisions by the inspectors. 

The result is that there is no assurance that MC&A inspections 

are conducted in a consistent, thorough manner. 

 Figure 1. Fuel cycle facility processing uranium. 

Source: Babcock and Wilcox Nuclear Operations Group 
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for Special Nuclear Materials at Fuel Cycle Facilities 

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MC&A Inspection Program Requirements

NRC requires MC&A inspection program procedures to be 

current and detailed. The inspection program inspects and tests 

licensee MC&A system capabilities for detecting and triggering 

timely response to any unauthorized use or significant loss of 

SNM. The selection of a sample of records for verification is 

required as part of the testing. A brief explanation of relevant 

inspection program and sampling requirements follows. 

 Program Performance 

NRC Inspection Manual Chapter 2683, MC&A Inspection of 

Fuel Cycle Facilities, establishes the inspection requirements for 

MC&A systems for fuel cycle licensees. It states that an 

objective of the MC&A inspection program is to provide 

guidance on setting inspection priorities, commensurate with 

relative risk, for efficient and effective inspections. 

NMSS Policy and Procedures Letter 1-76, Procedures for 

Processing Inspection Manual Chapters and Inspection 

Procedures, requires that all inspection manual chapters and 

inspection procedures under NMSS purview will be reviewed at 

least once every 3 years and revised as necessary. 

 Sampling Requirements 

The book, Statistical Methods for Nuclear Material 

Management, sponsored by NRC’s Office of Nuclear Regulatory 

Research, maintains that for sampling to be effective, the 

universe to be sampled must be known and all items in the 

universe must have a chance of being selected. Agreeing with 

the above statement, an agency statistician added that it is 

important to at least consider all items because of the risk of 

"trickle loss."6

Procedures Lack Prioritized Direction and Detailed 

Sampling Instruction 

NRC’s MC&A inspection procedures lack both prioritized 

direction and detailed sampling instruction. Professional 

judgment by the MC&A inspection staff is typically used to 

determine which inspection activities are conducted, despite 

concerns from three of the four current MC&A inspectors that 

 

6

 Trickle loss is when numerous small items are diverted (stolen) with the hope that the theft 

will not be detected because small items are not under as much scrutiny. 
Audit of NRC’s Material Control and Accounting Security Measures 

for Special Nuclear Materials at Fuel Cycle Facilities 

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procedures are not detailed enough to determine what activities 

are to be completed. Additionally, the staff has established an 

"unwritten procedure" or practice of limiting sample selection 

size in favor of expediency, regardless of the size of the 

universe to be reviewed. 

 

 Activity Selection 

NRC's MC&A Inspection Program for Category I fuel cycle 

facilities is composed of 11 inspection procedures. Nine of the 

procedures (approximately 82 percent) were issued prior to 

1992 (see Figure 2, below). Each of the MC&A inspection 

procedures contain numerous activities. A review by OIG staff 

confirmed that these procedures lack prioritized direction, 

instead relying primarily on the professional judgment of the 

inspection staff to determine which activities within the 

procedures are to be completed. 

Figure 2.

MC&A Category I Fuel Cycle Facility Inspection 

Procedure Issuance

82%

18%

Prior to 1992 Post 1992

During interviews with management and staff, OIG asked how 

staff determine which activities are to be conducted, and were 

told that inspectors base decisions on individual professional 

judgment. One inspector relayed struggling all the time to 

decide which activities to complete while another inspector 

conveyed feeling uneasy about prioritizing what actually needs 

to be done without detailed instructions in the inspection 

procedures. 
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 Sampling Selection 

Staff have established an "unwritten procedure" or practice of 

limiting sample selection size in favor of expediency, regardless 

of the size of the universe to be reviewed. MC&A inspection 

procedures state that a random sample of SNM items should be 

examined by the inspector to confirm that they are in their 

designated locations and that they are properly identified. To 

accomplish this, the inspector selects a sample (typically 30 

items) from categories based on the inspector’s vulnerability 

assessment. The 30 items, along with a selection of adjacent 

items, are then verified back to a listing provided by the 

licensee.7

 This method does not ensure that the entire SNM 

universe is at least considered in the sample, whereas a true 

random sample would. 

Management Not Aware of Inspector Concerns 

Management was unaware of MC&A inspector’s concerns 

regarding lack of detailed direction. However, the branch chief 

did confirm that the selection of 30 items for verification is based 

on limited time to conduct the work. 

No Assurance MC&A Inspections Are Consistent and 

Thorough

No assurance can be made that MC&A inspections are 

consistent and thorough because the program currently 

functions with inspection procedures that lack both prioritized 

direction and detailed sampling instruction. NRC’s relatively 

inexperienced inspection staff struggles to prioritize which 

inspection activities to complete. This creates a risk that staff 

may overlook an inspection activity or rush through an 

inspection to meet scheduling demands, although no 

deficiencies were observed. 

Recommendations

OIG recommends that the Executive Director for Operations: 

1. Review and revise MC&A procedures as required by 

NMSS Policy and Procedures Letter 1-76. 

 

7

 A minimum of 30 and a maximum of 57 initial sample items for verification have been 

selected over the past 2 years of MC&A inspections at Category I fuel cycle facilities, while a 

minimum of 17 and a maximum of 34 adjacent items have also been selected. 
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for Special Nuclear Materials at Fuel Cycle Facilities 

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B. Qualified Staff Are Limited 

Management is responsible for ensuring that NRC’s workforce 

has the skills necessary to achieve the agency’s goals. The 

MC&A inspection program is currently operating with only one 

fully qualified inspector. In addition to conducting inspections 

and writing inspection reports, this inspector provides on-the-job 

training to three inspectors-in-training. Limited availability of 

required Department of Energy (DOE) MC&A classes restricts 

the ability of NRC MC&A inspectors-in-training to complete their 

qualifications within the required 2-year timeframe. The result of 

these training delays is an inspection program that does not 

have a sufficient number of qualified inspectors to assure that 

inspections are conducted in a consistent, thorough manner. 

However, no deficiencies were observed. 

Human Capital and Training Requirements

Management is responsible for effective human capital 

management of an organization’s workforce. Management 

should ensure that skill needs are continually assessed and that 

the organization is able to obtain a workforce that has the 

required skills that match those necessary to achieve 

organizational goals. 

To qualify as an MC&A inspector, employees must successfully 

complete three qualification journals and a qualification board.8 

Seven DOE classes (169 hours) and eight on-the-job training 

activities (168 hours) are part of this required training. NRC 

procedures require that on-the-job training activities are to be 

performed concurrent with an inspection at an operational fuel 

facility under the direction of a qualified inspector. Staff 

assigned to independently perform inspections must 

successfully complete all training activities and qualification 

requirements prior to becoming inspector qualified.9

 

 

8

 The three qualification journals are Basic-Level, General Proficiency-Level, and Technical 

Proficiency-Level. Basic-Level activities are designed to develop an inspector’s awareness of 

their role as an inspector and the technology they will be inspecting. General Proficiency 

activities are designed to develop an inspector’s interpersonal and inspection skills, while 

Technical Proficiency activities are designed to develop technical expertise. A Qualification 

Board is given to ensure that inspectors have a sufficiently integrated understanding of the 

role of the agency, the inspection program, and their role as an inspector to act independently 

in the field. 

9

 The Division Director has the authority to accept previous experience and training as an 

alternate method for meeting the training and qualification requirements. 
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for Special Nuclear Materials at Fuel Cycle Facilities 

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Qualified Staff Are Limited

NRC is currently conducting onsite MC&A inspections using one 

fully qualified inspector for 32 hours, supplemented by 

inspectors-in-training. NRC Core Inspection Requirements 

estimate that 64 hours are required to complete an MC&A 

inspection at a Category I fuel cycle facility. 

There are currently three inspectors in various stages of the 

2-year MC&A inspector training program. Management 

explained that additional inspectors may be needed as new 

enrichment facilities become operational. Two of the three 

inspectors-in-training are “Basic Inspector Certified.”10 The 

three inspectors-in-training accompany the program’s one fully 

qualified inspector on fuel cycle facility inspections to complete 

the on-the-job training tasks that are required as part of the 

technical proficiency-level qualification.11 In addition to 

conducting inspections, the fully qualified inspector also 

provides on-the-job training to the inspectors-in-training during 

these inspections. 

 

10 Basic Inspector Certification is a certification made by the individual’s supervisor that 

signifies that the individual has successfully completed all basic level inspector training and 

qualification activities. Achieving Basic Inspector Certification allows an individual to perform 

limited scope inspection activities. In this case, inspection activities will be specifically 

assigned and are to be performed with an appropriate degree of detailed supervision. 

11 Technical Proficiency-Level training consists of training courses, study guides, and on-thejob training activities. 

Figure 3. Fuel cycle facility personnel with a research test 

reactor fuel assembly. 

Source: Babcock and Wilcox Nuclear Operations Group 
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for Special Nuclear Materials at Fuel Cycle Facilities 

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Training Delays Limit Qualified Staff

Delays in DOE-provided MC&A training has limited the number 

of qualified MC&A inspectors. As part of the MC&A training 

program, NRC relies heavily on DOE-sponsored training. 

Management explained that it would not be financially prudent 

to develop in-house MC&A training classes for such a small 

group of people when specialized training is already offered by 

DOE. 

NRC management and all three inspectors-in-training 

expressed difficulty scheduling the required seven DOE MC&A 

classes. OIG confirmed that none of the required instructor-led 

DOE classes were/will be held more than once during 2008 and 

2009. Additionally, OIG confirmed that two of the required 

instructor-led classes were not/will not be held during 2008 and 

2009. DOE requires a minimum number of students to hold a 

class.12 

No Assurance MC&A Inspections Are Consistent and 

Thorough

With the MC&A inspection program currently operating with one 

fully qualified inspector, there can be no assurance that 

inspections are conducted in a consistent, thorough manner, 

although no deficiencies were observed. In addition to 

conducting inspections, this inspector provides on-the-job 

training to three inspectors-in-training while conducting fuel 

cycle facility MC&A inspections. This additional responsibility 

encumbers the only fully qualified inspector, preventing the 

inspector from focusing solely on conducting inspections. 

Recommendation

OIG recommends that the Executive Director for Operations: 

2. Establish an alternative to DOE-sponsored MC&A 

inspector training to be used as needed. 

 

12 OIG obtained documentation showing that an inspector-in-training had been registered for 

two DOE classes that were cancelled because not enough students registered. 
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C. Specialized Training That Could Enhance Management 

Knowledge Has Not Been Taken 

NRC branch chiefs play an important role in overseeing 

inspection activities and should have a level of MC&A 

understanding that enables them to ensure effective 

performance of their branch. However, the branch chief 

responsible for approving MC&A fuel cycle facility inspection 

reports lacks specialized classroom training in this area. 

Specialized MC&A training is not required as a prerequisite to 

meet the qualifications to become an NMSS MC&A branch 

chief. However, without specialized classroom or equivalent 

training, NRC lacks assurance that its branch chief has 

expertise for thorough and independent assessment of 

inspectors’ work, increasing the risk that inspector errors will go 

undetected. 

Internal Control and Training Requirements

As a best practice, branch chiefs should have a level of MC&A 

understanding that enables them to ensure effective 

performance of their branch. This includes a thorough 

understanding of item monitoring, process monitoring, 

measurement systems and control, and accounting and internal 

control as it relates to MC&A at Category I fuel cycle facilities. 

Understanding these issues is essential for inspectors as well 

as their branch chief supervisors to uphold NRC’s MC&A 

oversight role. 

Figure 4. Fuel 

cycle facility 

employee 

processing 

uranium. 

Source: Babcock 

and Wilcox Nuclear 

Operations Group
Audit of NRC’s Material Control and Accounting Security Measures 

for Special Nuclear Materials at Fuel Cycle Facilities 

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Specialized Training That Could Enhance Management 

Knowledge Has Not Been Taken 

OIG found that the branch chief who is responsible for 

approving MC&A inspection reports and supervising inspection 

staff has not taken any specialized classroom MC&A training 

and is not inspector qualified. 

The branch chief is responsible for a range of tasks, including 

assessing employee performance, training new inspectors, and 

reviewing and approving work products. In addition, the branch 

chief is expected to manage technical staff who perform reviews 

of MC&A plans submitted by licensees to ensure SNM 

possession poses no undue risk to national security, direct 

development and implementation of MC&A inspection guidance, 

and recommend enforcement action for violation(s) of agency 

regulatory requirements. 

While 2 years of specialized training is required to become a 

fully qualified MC&A inspector, the branch chief asserts that 

graduate coursework, coupled with experience, self study, and 

attendance at technical conferences is adequate training to 

oversee MC&A inspection activities.13 When asked how branch 

chiefs with no specialized MC&A training are able to assess that 

the inspection reports they are approving are correct, the 

Deputy Director responsible for the MC&A inspection program 

stated that the branch chief must rely on the technical expertise 

of the staff. 

Specialized Training Not Required

NMSS does not require specialized MC&A training as a 

prerequisite to meet the qualifications to become a Branch Chief 

of the NMSS MC&A Branch. NRC seeks candidates for branch 

chief positions who exhibit leadership and supervisory skills, as 

well as programmatic and regulatory knowledge. However, OIG 

asserts that this training is essential because it involves the 

MC&A of SNM as it goes through manufacturing processes at 

fuel cycle facilities. MC&A inspections at fuel cycle facilities 

vary greatly from MC&A inspections at commercial power 

reactors, which focus on the control and accounting of discrete 

items. 

 

13 The branch chief does not, on a regular basis, accompany MC&A inspectors on fuel cycle 

facility inspections. Although the branch chief does have considerable NRC experience, very 

little of the experience specifically focuses on MC&A fuel cycle facility inspections. 
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Specialized Training Would Enhance Internal Controls

Although classes and experience provide the branch chief with 

a solid foundation, OIG concludes that specialized classroom 

MC&A training, focused on real world scenarios, is vital to 

gaining a thorough understanding of the MC&A program. 

MC&A fuel cycle facility inspection reports are currently 

approved by a branch chief who has not received any 

specialized classroom MC&A training, is not inspector qualified, 

and has not been on any recent MC&A inspections. This brings 

into question the branch chief’s ability to perform an 

independent assessment of inspectors’ work, when the branch 

chief must rely on staff for technical expertise. Because of this, 

NRC lacks assurance that its branch chief has an appropriate 

level of MC&A inspection expertise, increasing the risk that 

inspector errors or inadequate reviews will go undetected. 

Recommendation

OIG recommends that the Executive Director for Operations: 

3. Provide appropriate MC&A training for managers without 

MC&A backgrounds responsible for MC&A inspections at 

fuel cycle facilities. 
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IV. AGENCY COMMENTS 

At an August 26, 2009, exit conference, agency senior 

executives agreed to provide suggested revisions to the 

discussion draft report for OIG’s consideration. On 

September 3, 2009, NRC provided suggested report revisions, 

which served as a basis for further discussions between the 

agency and OIG. This final report incorporates revisions made, 

where appropriate, as a result the agency’s suggestions. 

On September 25, 2009, the Executive Director for Operations 

provided a formal response to this report (Appendix B). No 

changes were made to the report, based on the agency’s formal 

response. OIG’s response to the agency’s formal comments is 

presented as Appendix C. 
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V. CONSOLIDATED LIST OF RECOMMENDATIONS 

OIG recommends that the Executive Director for Operations: 

1. Review and revise MC&A procedures as required by 

NMSS Policy and Procedures Letter 1-76. 

2. Establish an alternative to DOE-sponsored MC&A 

inspector training to be used as needed. 

3. Provide appropriate MC&A training for managers without 

MC&A backgrounds responsible for MC&A inspections at 

fuel cycle facilities. 
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Appendix A 

SCOPE AND METHODOLOGY 

The objective of this audit was to assess the effectiveness of 

NRC’s MC&A inspection program over the accounting and 

control of SNM at Category I fuel cycle facilities. 

In order to accomplish the objective of this audit, OIG obtained 

and analyzed pertinent laws, regulations, authoritative guidance, 

NRC policies and procedures, and prior relevant NRC OIG 

reports to identify Federal and agency requirements relevant to 

MC&A operations. 

Additionally, OIG reviewed inspection reports, training and 

human resource documents, and internal communications and 

conducted interviews with current and former staff to: 

 Gain an understanding of NRC’s MC&A inspection program. 

 Determine current issues, problems, and known deficiencies. 

 Assess internal controls. 

OIG also observed two MC&A inspections at Category I fuel 

cycle facilities in Region II. 

Internal controls related to the audit objective were reviewed 

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

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

program. 

The work was conducted from January to June 2009 in 

accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform 

the audit to obtain sufficient, appropriate evidence to provide a 

reasonable basis for our findings and conclusions based on our 

audit objectives. We believe that the evidence obtained 

provides a reasonable basis for our findings and conclusions 

based on our audit objectives. 

The work was conducted by Beth Serepca, Team Leader; Terri 

Cooper, Audit Manager; Robert Woodward, Senior Auditor; and 

James McGaughey, Senior Analyst. We performed the audit 

work at NRC Headquarters in Rockville, Maryland; Region II 

offices in Atlanta, Georgia; and at Category I fuel cycle facilities 

in Region II. 
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Appendix B 

FORMAL AGENCY COMMENTS 
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Appendix C 

OIG RESPONSE TO FORMAL AGENCY COMMENTS 

OIG does not deny the importance of management skills in 

selecting management candidates, nor does the report 

recommend that managers be selected solely on the basis of 

technical skills. Rather, OIG asserts that it is reasonable to 

expect managers to have a working knowledge of job-specific 

subject matter, and that NRC should provide appropriate 

training to managers who enter a field without prior professional 

experience or formal training in that field.