U .

N.

S. NUCLEAR REGULATORY COMMISSION 

ACCOUNTABILITY AND 

PERFORMANCE 

REPORT 

Fiscal Year 199 9 

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Availability Notice 

Availability of Reference Materials Cited in NRC Publications 

Most documents cited in NRC publications will be available from one of the following sources: 

1. The NRC Public Document Room, 2120 L Street, NW., Lower Level, Washington, DC 20555-0001 

2. The Superintendent of Documents, U.S. Government Printing Office, P. 0. Box 37082, Washington, 

DC 20402-9328 

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Although the listing that follows represents the majority of documents cited in NRC publications, it is 

not intended to be exhaustive. 

Referenced documents available for inspection and copying for a fee from the NRC Public Document 

Room include NRC correspondence and internal NRC memoranda; NRC bulletins, circulars, information 

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The following documents in the NUREG series are available for purchase from the Government Printing Office: formal NRC staff and contractor reports, NRC-sponsored conference proceedings, international 

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For sale by the U.S. Government Printing Office 

Superintendent of Documents, Mail Stop: SSOP, Washington, DC 20402-9328 

ISBN 0-16-050334-5
NUREG - 1542 

Vol. 5 

U.S. NUCLEAR REGULATORY COMMISSION 

ACCOUNTABILITY AND 

PERFORMANCE 

REPORT 

Fiscal Year 1999 

U.S. Nuclear Regulatory Commission 

Office of the Chief Financial Officer ,la 

A,=
NRC Principles of Good Financial Management 

T hose who handle public resources have a special responsibility to safeguard the resources entrusted to 

them and to use them properly. Poor financial management by NRC can undermine the confidence that 

we are effectively accomplishing our health and safety mission. NRC managers must ensure that public 

funds are used for authorized purposes only and that they are used economically, efficiently, and within 

established limits. Toward these ends, the NRC uses the following Principles of Good Financial Manage

ment. 

PLANNING. Good financial management begins with good planning. NRC's strategic planning 

should be based on sound assumptions and accurate information and should provide the foundation 

for the entire fiscal process. Resource requests must be consistent with program goals, guidance, and 

planning assumptions, and must consider current financial status. Plans should be developed for 

commitment and obligation of funds based on program needs, procurement lead times, and the need 

for continuity of funding. 

CONTROL. Good financial management requires good financial control. Appropriate effective cost 

controls throughout the financial management process ensure adequate accounting of funds expended, 

prevent over-obligation of funds and inappropriate expenditures, identify early instances where funds 

should be reallocated, and produce valuable information for the planning process. 

COMMUNICATION. Good financial management requires good communication among those 

involved in the financial management process. Complete, accurate, and timely financial information must 

be readily available, and financial implications must be considered in decision making. Financial systems 

should be integrated and meet both agency and office data needs. New information and ideas must be 

shared throughout the organization. 

COST EFFECTIVENESS. Good financial management balances expenditures and results. Managers 

at all levels must ensure that NRC gets what it pays for and that the results are what NRC needs to accom

plish its mission. Ongoing projects should be evaluated to ensure results justify continued funding. Appro

priate precautions ensure that waste is avoided. To ensure maximum utility of available resources, funds 

should be obligated as early as practicable during the fiscal year, and excess funds should be deobligated as 

soon as practical after project completion. 

EVALUATION. Good financial management requires periodic evaluation of performance against 

meaningful financial and program performance measures. Such performance assessment should evaluate 

planned versus actual program results as well as the comparison of program costs with program accom

plishments. 

PERSONNEL. Good financial management is the product of competent and motivated people. Those 

who are given financial management responsibility must have integrity, dedication, and be well trained and 

qualified. They must have authority commensurate with their responsibility, and they must be recognized 

when they achieve superior performance. 

5 U.S. NUCLEAR REGULATORY COMMISSION
Table of Contents 

Forew ord ................................................................................................................ vii 

The NRC's M ission .............................................................................................. viii 

M essage From the Chairm an .............................................................................. ix 

M essage From the Chief Financial Officer ........................................................ xi 

M anagem ent Sum m ary ......................................................................................... xiii 

About the U .S. Nuclear Regulatory Com m ission .................................................... 1 

Organization ....................................................................................................... 1 

Regulatory Responsibility .................................................................................. 1 

Sources of Funds ........................................................................................... 2 

U ses of Funds by Function ............................................................................ 4 

Financial Condition of NRC .......................................................................... 4 

Program Perform ance ......................................................................................... 5 

Strategic Arenas .............................................................................................. 6 

M anagem ent Controls ..................................................................................... 7 

Nuclear Reactor Safety ................................................................................... 7 

Nuclear M aterials Safety ................................................................................ 7 

Nuclear W aste Safety ..................................................................................... 9 

International Nuclear Safety Support ............................................................ 12 

V erification and V alidation of D ata ............................................................... 14 

(continued on page iv) 

9ii R 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT (;T
Table of Contents (continued) 

M anagement Accountability ............................................................................... 15 

The NRC's M anagement Control Program ................................................... 15 

Status of Management Controls and Report on Material Weaknesses 

and Non-Conform ances ...................................................................... 15 

Financial Statement Audit ........................................................................ 16 

Financial M anagement System s ................................................................... 16 

Biennial Review of User Fees ..................................................................... 16 

Management Decisions and Final Actions on OIG Audit Recommendations.. 17 

Management Decisions Not Implemented Within One Year .................. 18 

Debt Collection ............................................................................................ 19 

Prompt Payment ............................................................................................ 19 

Civil Penalties ............................................................................................... 19 

FY 1999 Audited Financial Statement ............................................................... 23 

Appendix 

A NRC Organization Chart .......................................................................... 83 

B NRC Annual Report ................................................................................. 85 

C Program Evaluations/Self Assessments ................................................... 93 

D Crosscutting Functions W ith Other Agencies .......................................... 99 

Figures 

1 Sources of NRC Funds .............................................................................. 3 

2 Uses of Funds by Function ........................................................................ 3 

3 M anaging to Outcomes ............................................................................... 5 

4 U.S. Comm ercial Reactors ....................................................................... 6 

5 Delinquent Debt ...................................................................................... 20 

6 Prompt Payment ..................................................................................... 20 

? U.S. NUCLEAR REGULATORY COMMISSION
Tables 

1 Nuclear Reactor Safety Performance Goals and Metrics .......................... 8 

2 Nuclear Materials Safety Performance Goals and Metrics ...................... 10 

3 Nuclear Waste Safety Performance Goals and Metrics ........................... 12 

4 International Nuclear Safety Support Performance Goals and Metrics ....... 13 

5 Management Report on Office of the Inspector General Audits with 

D isallow ed C osts ................................................................................ 17 

6 Management Report on Office of the Inspector General Audits with 

Recommendations That Funds Be Put to Better Use .......................... 18 

7 Fiscal Year Civil Penalties Collected Versus Fiscal Year 

Penalty Dollars A ssessed ................................................................... 21 

8 Crosscutting Functions With Other Agencies ........................................... 100 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT
Foreword 

T his is the fifth year that the U.S. Nuclear Regulatory Commission (NRC) has participated in 

a pilot project, along with other Federal agencies, to streamline financial management 

reporting. The goal of this project is to consolidate performance-related reporting into a single 

accountability and performance report. The project, which is being carried out under the guid

ance of the Chief Financial Officers Council, was undertaken in accordance with the Govern

ment Management Reform Act of 1994 (GMRA). The GMRA permits the streamlining of 

financial management reports in consultation with the appropriate congressional committees 

through a liaison in the U.S. Office of Management and Budget. 

This report consolidates the information previously reported in the following documents: 

" The NRC's annual financial statement, required by the Chief Financial Officers Act of 

1990 (CFO Act); 

"* The Chairman's annual report to the President and the Congress, required by the Federal 

Managers' Financial Integrity Act of 1982; 

" The Chairman's semiannual report to the Congress on management decisions and final 

actions on Office of the Inspector General audit recommendations, required by the Inspec

tor General Act of 1978, as amended; and 

"• The NRC's Annual Report that highlights significant accomplishments, as required by 

Section 307(c) of the Energy Reorganization Act of 1974. 

This report also contains the agency's performance report required by the Government 

Performance and Results Act of 1993, and the Chairman's statement on the compliance of the 

agency's financial management systems with the Federal Financial Management Improvement 

Act of 1996. 

Comments on the content and presentation of this report are welcome and may be sent to: 

Office of the Chief Financial Officer 

Mail Stop 0-17 F3 

U.S. Nuclear Regulatory Commission 

Washington, DC 20555-0001 

or 

Internet Address: cfd@inrc.gov 

(continued on page viii) 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT
The NRC's Mission 

The U.S. Nuclear Regulatory Commission regulates the Nation's 

civilian use of byproduct, source, and special nuclear materials to 

ensure adequate protection of the public health and safety, to promote 

the common defense and security, and to protect the environment.
Message From the Chairman 

am pleased to present the U.S. Nuclear Regulatory Commission's 

I(NRC) Accountability and Performance Report for fiscal year (FY) 

1999. This report reflects the NRC's continued commitment to employ 

sound management strategies for regulating the nation's use of nuclear 

materials. 

An integrated planning, budgeting, and performance management 

process remains the NRC's primary tool for advancing the implementa

tion of performance management in the agency and also for meeting the 

requirements of the Government Performance and Results Act. This 

process provides a discipline whereby managers determine program 

direction based on previously established goals and measures of perfor

mance. NRC's triennial update of its strategic plan, which will describe the context for our 

regulatory responsibilities, reflects this effort. The plan is near completion and will be submitted 

to Congress in September 2000. 

Consistent with our efforts to streamline reporting, we have included the FY 1999 Perfor

mance Report in this Accountability Report. This is the first annual performance report required 

for Federal agencies by the Government Performance and Results Act. The Performance Report 

allows comparison of the NRC's FY 1999 actual performance with the FY 1999 performance 

goals. These performance goals were provided in the revised Performance Plan for FY 1999, 

which was published in the NRC's Budget Estimates and Performance Plan for Fiscal Year 2000. 

In FY 1999, we again achieved our performance goals for protecting public health and safety, 

and the environment. 

I am also pleased to announce that the agency obtained its sixth consecutive unqualified 

financial statement audit opinion. This opinion was possible because of the hard work and 

cooperation among the auditors, financial staff, and agency personnel. However, much work 

still must be completed in order to comply fully with Federal accounting and reporting stan

dards. The staff is working to meet these challenges. 

The NRC also evaluated its management control and financial management systems for FY 

1999 as required by the Federal Managers' Financial Integrity Act of 1982. The results of this 

evaluation provided reasonable assurance that the NRC achieved the objectives of this Act. No 

material non-conformances with government-wide requirements in the NRC's existing financial 

management systems were identified. The NRC also evaluated its financial management sys

tems for compliance with applicable Federal requirements and accounting standards as required 

by the Federal Financial Management Improvement Act of 1996. This evaluation disclosed that 

the NRC's major financial management systems were in overall compliance with this Act except 

for (1) the failure to achieve full implementation of the Statement of Federal Financial Account

ing Standard Number 4, Managerial Cost Accounting Concepts and Standards for the Federal 

(continued on page x) 

AiP 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT ;ýr
Message from the Chairman (continued)

Government, (2) the inability of the agency's financial systems to aggregate payroll transactions 

to the strategic arena level, and (3) the inability of the Treasury's Financial Management Service 

(FMS) to test business continuity plans for the NRC core accounting system, which is provided 

to the NRC through a Memorandum of Understanding with the FMS. The current payroll system 

has been modified to address the second weakness for FY 2000. The audit report on the agency's 

financial statements and response, provided at the end of this report, contains a discussion of the other 

weaknesses and NRC's corrective action plans to gain full compliance with the Act. 

Although some work remains, the NRC continues to demonstrate success in accomplishment 

of its mission through sound program and fiscal management. The issuance of this fifth annual 

Accountability and Performance Report confirms our commitment to provide accountability for 

agency programs and financial management. 

Richard A. Meserve 

Chairman 

U.S. Nuclear Regulatory Commission

? U.S. NUCLEAR REGULATORY COMMISSION
Message From the Chief Financial Officer 

am pleased to report that the U.S Nuclear Regulatory Commission 

(NRC) has completed another productive and successful year in 

performance of its financial management responsibilities. The NRC has 

made progress to improve its financial management systems and inte

grate program performance with resource management. The NRC 

issued its first audited financial statement in FY 1992 and has received 

an unqualified opinion for each fiscal year since FY 1994. 

Last year I reported that we had made major progress developing the 

agency's strategic direction and performance expectations through the 

implementation of an integrated planning, budgeting, and performance 

management process. During FY 1999, we used this process to develop 

the goals, performance measures, and strategies for the agency's draft FY 2000-2005 Strategic 

Plan. As a result, NRC is evolving into an organization that manages more to outcomes. 

Our financial performance also reflects notable accomplishments in other areas. NRC made 

99 percent of its salary and award payments and 98 percent of its commercial payments elec

tronically. In the travel area, almost 100 percent of all travel payments were made electronically. 

Delinquent debt was held to less than 1 percent of the total amount that was billed. We met the 

requirements of the Omnibus Budget Reconciliation Act of 1990, by collecting and offsetting 

approximately 99 percent of our new FY 1999 budget authority which was required to be offset, 

by assessing fees. 

During FY 1999, significant progress was made in implementing an agencywide resource 

management system. The first four modules; payroll, human resources, time and labor, and cost 

accounting will be fully implemented and operational for FY 2001. Training and parallel testing 

is currently taking place for the payroll, human resources, and time and labor modules. At the 

beginning of FY 2000, the agency reached its first milestone towards a managerial cost account

ing system by modifying its current payroll system to capture staff hours by strategic arena. 

While we have had successes, much work lies ahead of us as the NRC continues to strive for 

excellence in financial management. In concert with meeting these challenges, we anticipate 

another productive year in FY 2000. Our strength lies in unified, coordinated action, and this 

report is an important indicator in the process of achieving this outcome. Our goals are to 

continue to maintain the standards we have achieved and to continually seek improved methods 

to carry out our financial responsibilities. 

Jesse L. Funches 

Chief Financial Officer 

U.S. Nuclear Regulatory Commission 

1xi 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT 35
Management Summary 

Program Performance 

Beginning in Fiscal Year 1999, the Government Performance and Results Act (GPRA) 

requires each agency to provide an annual performance plan to Congress that sets goals with 

measurable target levels of performance. Within six months of the end of that fiscal year, each 

agency must submit data for its actual program performance to the Congress. In response to this 

requirement, the information in this report compares NRC performance against its FY 1999 

performance goals. These performance goals were originally established in our FY 1999 Perfor

mance Plan and subsequently modified in our FY 2000 Budget Estimates and Performance Plan 

that was provided to Congress in February 1999. 

Nuclear Reactor Safety 

The strategic goal is to prevent radiation-related deaths and illnesses and protect the environ

ment in the use of civilian nuclear reactors. In FY 1999, the NRC met the associated perfor

mance goals and had

(1) No civilian nuclear reactor accidents; 

(2) No events that could lead to a nuclear reactor accident; 

(3) No deaths resulting from radiation or radioactivity releases from civilian nuclear reactors; 

(4) No significant radiation exposures resulting from civilian nuclear reactors; 

(5) No substantiated breakdown of physical protection that significantly weakens protection 

against radiological sabotage, or theft or diversion of special nuclear materials; 

(6) No offsite releases of radioactive material from civilian nuclear reactors that have the 

potential to cause a serious adverse impact on the environment; 

(7) No increase in the number of offsite releases of radioactive material from civilian nuclear 

reactors that exceed 10 CFR Part 20 limits; and 

(8) No environmental impacts considered through the National Environmental Policy Act 

(NEPA) process before regulatory action was taken. 

Nuclear Materials Safety 

The strategic goal for the nuclear materials safety arena is to prevent radiation-related deaths 

and illnesses, protect the environment, and safeguard special nuclear material and facilities in the 

civilian use of source, byproduct, and special nuclear materials. In FY 1999, with one exception 

(goal 2), the NRC met the associated performance goals and had

(1) No radiation-related deaths resulting from civilian use of source, byproduct, and special 

nuclear materials; 

(continued on page xiv) 

1TiiR 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT (97
Management Summary (continued) 

(2) A slight increase in the number of significant radiation exposures resulting from loss or use 

of source, byproduct, and special nuclear materials; 

(3) No increase in the number of losses of licensed material as reported to Congress annually; 

(4) No occurrences of accidental criticality involving licensed material; 

(5) No increase in the number of misadministration events that cause significant radiation 

exposures; 

(6) No offsite releases of radioactive material from operating facilities that have the potential to 

cause an adverse impact on the environment; 

(7) No increase in the number of offsite releases of radioactive material from operating facili

ties that exceeds the limits specified in 10 CFR Part 20; 

(8) No significant accidental releases of radioactive material from the storage or transportation 

of nuclear material or nuclear waste; 

(9) No loss, theft, or diversion of formula quantities of strategic special nuclear materials or 

unauthorized enrichment of special nuclear material regulated by the NRC 

(10) No substantiated case of actual or attempted theft or diversion of formula quantities of 

strategic special nuclear material; 

(11) No substantiated breakdown of physical protection or material control and accounting 

systems (i.e., detection, assessment, access control, containment, or accounting systems) 

that significantly weakens protection against theft or diversion of formula quantities of 

strategic special nuclear material; 

(12) No substantiated case of unauthorized enrichment of special nuclear material; 

(13) No substantiated case of unauthorized disclosure or compromise of classified information 

concerning security measures for protection of special nuclear material or plant equipment 

vital to the safety of production or utilization facilities which causes damage to the national 

security; and 

(14) No environmental impacts considered through the NEPA process before regulatory action 

was taken. 

Nuclear Waste Safety 

The strategic goal for the nuclear waste safety arena is to prevent adverse impacts to the 

current and future public health and safety and the environment as a result of uranium recovery, 

facilities decommissioning, cleanup of contaminated sites, and disposal of radioactive wastes. 

In FY 1999, the NRC met the associated performance goals and had

(1) No radiation exposures or offsite releases that exceeded the regulatory requirements for 

operational activities; 

(2) No post-operational offsite releases that exceeded regulatory requirements; 

(3) No environmental impacts considered through the NEPA process before regulatory 

action was taken; 

(4) Established regulatory framework for high-level waste disposal consistent with current 

national policy; 

(5) Developed guidance to address key technical issues most important to the performance of a 

high-level waste repository during the pre-licensing period; and 

(6) Participated in developing a high-level waste radiation safety standard and implemented the 

standard through a site-specific, performance-based regulation and Yucca Mountain review plan. 

U.S. NUCLEAR REGULATORY COMMISSION
International Nuclear Safety Support 

The strategic goal for the international nuclear safety support arena is to support U.S. national 

interests in the safe and secure use of nuclear materials and in nuclear nonproliferation. In FY 

1999, the NRC met all the components of the associated performance goal with one exception 

(bilateral exchange agreements). The NRC (1) negotiated 4 out of 5 estimated bilateral exchange 

agreements between the NRC and appropriate foreign counterparts; (2) completed 103 staff 

reviews for import/export authorization; and (3) completed 23 staff reviews of Executive Branch 

proposals. 

Management Accountability 

Management Controls 

The NRC conducted its annual evaluation of management controls and financial systems 

required by FMFIA and identified no material weaknesses in NRC programs or administrative 

activities and no material non-conformances with governmentwide requirements in the NRC's 

financial systems. However, through our evaluation we identified that additional work needs to 

be done to fully comply with Statement of Federal Financial Accounting Standards Number 4, 

"Managerial Cost Accounting Concepts and Standards for the Federal Government" (SFFAS 4), 

which includes, for FY 1999, the inability of the agency's payroll system to aggregate pay 

transactions at the strategic arena level. The implementation of a new integrated resource man

agement system (STARFIRE) will include cost accounting and labor distribution modules, which 

will provide the necessary capability to report costs at the appropriate level and fully comply 

with SFFAS 4. 

The NRC's evaluation of its financial management systems disclosed that, overall, NRC's major 

financial management systems were in compliance with applicable Federal requirements and account

ing standards, except for full implementation of SFFAS 4, the aggregagation of payroll transactions, 

and business continuity plans that were found to be in substantial noncompliance. 

Audits 

At the end of FY 1999, the NRC had two audits with outstanding actions over one year old. 

The status of these actions are discussed on page 18 in the section titled "Management Decisions 

Not Implemented Within One Year." 

FY 1999 Audited Financial Statements 

For the sixth successive year, the NRC received an unqualified opinion on its principal 

statements. Seven reportable conditions were carried over from FY 1998. Three of the report

able conditions concerning alignment of budget, performance plan, and strategic plan; adminis

trative control of funds over the Comprehensive Information System and Support contract; and 

accounts receivable classifications were closed by the auditors. In addition, part of another 

reportable condition on business continuity plans for license fee billing systems was also closed 

by the auditors. The four reportable conditions that remain open concern implementation of 

managerial cost accounting, revenue recognition for reimbursable work, 10 CFR Part 170 hourly 

(continued on page xvi) 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT
Management Summary (continued) 

rates, and business continuity plans for the agency's core accounting system that is cross-ser

viced by the Department of the Treasury. 

The auditors identified seven new reportable conditions that are described on page 15 under 

Management Accountability. 

( r U.S. NUCLEAR REGULATORY COMMISSION
About the U.S. Nuclear Regulatory Commission

,* *T* 1 he Commission U.S. Nuclear Regulatory (NRC) is an 

~ independent regulatory agency 

of the Federal Government that 

was created by the U.S. Con

years gress to regulate the Nation's 

civilian use of byproduct, source, and special 

nuclear materials to ensure adequate protection of 

the public health and safety, to promote the 

common defense and security, and to protect the 

environment. Its purposes are defined by the Energy 

Reorganization Act of 1974, as amended, along with 

the Atomic Energy Act of 1954, as amended, and 

these Acts provide the foundation for regulating the 

Nation's civilian uses of nuclear materials. 

Organization 

The NRC is headed by a Chairman and four 

Commissioners appointed by the President and 

confirmed by the Senate for 5-year terms. The

Chairman serves as the principal executive officer 

and official spokesman for the Commission. 

Regulatory Responsibility 

The NRC regulates civilian nuclear reactors; 

fuel cycle facilities; medical, academic, and 

industrial uses of nuclear materials; and the 

transport, storage, and disposal of nuclear materi

als and wastes. The NRC carries out its mission 

through a licensing and regulatory system com

prising the following activities: 

" licensing the design, construction, operation, 

and decommissioning of nuclear reactors and 

other nuclear facilities (such as nuclear fuel 

cycle facilities, uranium enrichment facilities, 

and test and research reactors) 

"• licensing the possession, use, processing, 

handling, and exporting of nuclear materials 

(continued on page 2) 

The Nuclrear Regulatory 

Commission Headquarters 

in Rockville, Maryland

1999 ACCOUNTABILITY AND PERFORMANCE REPORT 0
About the U.S. Nuclear Regulatory Commission (continued)

" licensing the siting, design, 

construction, operation, 

and closure of low-level 

radioactive waste disposal 

sites under NRC jurisdic

tion and the construction, 

operation, and closure of 

geologic repositories for 

high-level radioactive 

waste 

"* licensing the operators of 

civilian nuclear reactors 

"* inspecting licensed facili

ties and activities 

" conducting the principal 

U.S. Government research 

program on light-water 

reactor safety

" conducting research to gain independent 

expertise and information for making 

timely regulatory judgments and for antici

pating problems of potential safety signifi

cance 

" developing and implementing rules and 

regulations that govern licensed nuclear 

activities 

" investigating nuclear incidents and alle

gations concerning any matter regulated by 

the NRC 

" enforcing NRC regulations and the con

ditions of NRC licenses 

" conducting public hearings on matters of 

nuclear and radiological safety, environ

mental concern, common defense and 

security, and antitrust matters 

" developing effective working relationships 

with the States regarding reactor operations 

and the regulation of nuclear material 

" maintaining the NRC Incident Response 

Program, including the NRC Operations 

Center

collecting, analyzing, and disseminating 

information about the operational safety of 

commercial nuclear power reactors and 

certain nonreactor activities 

Sources of Funds 

The NRC has two appropriations, and funds 

for both are available until expended. One appro

priation is for agency salaries and expenses, and 

the other is for the Office of the Inspector General 

(OIG). The NRC's total new Fiscal Year (FY) 

1999 budget authority was $468.8 million, includ

ing $464 million for the Salaries and Expenses 

appropriation and $4.8 million for the OIG appro

priation. Additionally, available to obligate in FY 

1999 were $33.7 million from prior-year appro

priations, $4.1 million from prior-year reimburs

able work, $9 million from current and prior-year 

transfer of funds from other Federal agencies, and 

new reimbursable work to be performed for 

others totaling $4.6 million. The sum of all funds 

available to obligate for FY 1999 was $520.2 

million. (See Figure 1.) 

(continued on page 4)

W U.S. NUCLEAR REGULATORY COMMISSION

Haddam Neck Nuclear Power Plant
Figure 1 

Sources of NRC Funds 

Total Funds Available $520.2M

New Budget Authority 

$468.8M A

Reimbursable Work 

and Direct Transfers 

$17.7M 

Budget Authority from 

Prior Years $33.7M

Figure 2 

Uses of Funds by Function 

Total Obligations $486.3M

Reimbursable Work 

and Direct Transfers 

$10.6M 

Travel $11.2M V

Salaries and Benefits $275.9M 

Contract Support 

$188.6M 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT
About the U.S. Nuclear Regulatory Commission (continued)

Uses of Funds by Function 

As previously stated, the total budgetary 

resources available for use by the NRC in FY 

1999 was $520.2 million. Of that amount, the 

NRC incurred obligations of $486.3 million, 

using approximately 57 percent of this amount for 

salaries and benefits. The remaining 43 percent 

was used to obtain technical assistance for the 

NRC's principal regulatory programs, to conduct 

confirmatory safety research, to cover operating 

expenses, (e.g., building rentals, transportation, 

printing, security services, supplies, office auto

mation, and training), staff travel, and reimburs

able work. (See Figure 2.) Of the remaining 

$33.9 million in budget authority that was not 

obligated in FY 1999, $0.4 million of transferred 

funds expired at the end of the fiscal year leaving 

$33.5 million in budget authority available to 

fund critical needs in FY 2000. The remaining 

$33.5 million was further reduced in accordance 

with Public Law 106-60 that rescinded $4 million 

in FY 2000 that had been appropriated from the 

Nuclear Waste Fund. 

Financial Condition of NRC 

As of September 30, 1999, the financial 

condition of the NRC is sound with respect to

having sufficient funds to meet program needs 

and sufficient control of these funds to ensure that 

NRC obligations do not exceed budget authority. 

The Balance Sheet shows a net position (assets 

minus liabilities) of $116.5 million. Consistent 

with the requirements of the Omnibus Budget 

Reconciliation Act of 1990, the NRC collected 

and offset approximately 99 percent of its new 

budget authority, excluding amounts derived from 

the Nuclear Waste Fund and for certain activities 

performed in support of the Department of Energy 

and other offsetting receipts. 

Over the past few years, the NRC has made a 

concerted effort to increase the effectiveness and 

efficiency of program financing by eliminating 

unnecessary financial reserves pending contract 

closeout, recovering funds on dormant contracts, 

exercising closer scrutiny of the need for planned 

projects, and more closely monitoring obligation and 

expenditure rates. This prudent approach to finan

cial management over the past several years has 

resulted in a 53-percent decrease in unobligated 

appropriated funds in FY 1999 compared to FY 

1994. NRC will continue to closely monitor its 

financial condition and planning policies to ensure 

that its unobligated balance does not reach undesir

able levels in future years.

5 U.S. NUCLEAR REGULATORY COMMISSION
Program Performance

T he Act Government (GPRA) of Performance 1993 requires and agencies Results to 

develop and institutionalize processes to plan for 

and measure mission performance. Consequently, 

the NRC has made progress in becoming a more 

performance-based organization, beginning with 

the agency's strategic rebaselining and continuing 

with subsequent implementation of the GPRA. 

The agency established a framework for imple

menting the performance approach throughout the 

agency referred to as the Planning, Budgeting, 

and Performance Management (PBPM) process. 

This PBPM process consists of setting the strate

gic direction, budgeting resources, and monitor

ing and assessing performance.

The GPRA requires an agency to provide an 

annual report on its annual performance and 

progress in achieving the goals and objectives laid 

out in the agency's five-year strategic plan and 

annual performance plan. Actual performance is 

compared to the planned performance and an 

explanation is given for any deviation from the plan. 

The performance indicators reported within the 

FY 1999 performance report are based on NRC's 

FY 1997 - FY 2000 Strategic Plan that sets the 

framework for the development of the performance 

indicators. These outcome-based performance 

indicators provided the first critical link to the 

NRC's long-term strategic objectives. In addition, 

(continued on page 6)

Figure 3

MANAGING

A5 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT
Program Performance (continued)

Figure 4 

U.S. Commercial Reactors

these outcome performance indicators were 

published in the FY 2000 Budget Estimates and 

Performance Plan, which provided revisions to 

the original FY 1999 Performance Plan. 

The FY 1999 Accountability and Performance 

Report contains actual performance data for FY 

1997 - FY 1999, where available. Some FY 1999 

data were not available at the time of this publication 

and will be reported in the FY 2000 Accountability 

and Performance Report. In addition, some FY 

1997 data are not available because reporting 

mechanisms were not in place until FY 1998. 

The agency has been working on the triennial 

update of the strategic plan, therefore the perfor

mance goals presented in this report may change 

in future years. The NRC is continuing to 

progress from a primarily output-based environ

ment to a more outcome-based environment in 

which the agency and its programs and operations 

are managed to performance goals, thereby 

focusing NRC resources on the most significant 

safety issues while providing flexibility in how 

licensees meet NRC requirements.

Strategic Arenas

The NRC's Strategic and Performance Plans are 

organized into strategic arenas. This section is 

organized into the same four strategic arenas: 

" Nuclear Reactor Safety 

"* Nuclear Materials Safety 

"* Nuclear Waste Safety 

"* International Nuclear Safety Support 

For each strategic arena, we state the strategic 

goal from the Strategic Plan, provide a brief intro

duction to the arena, delineate the performance 

goals, compare estimated metrics to actual perfor

mance, and provide an explanation for any metrics 

that were not met. In reviewing the following 

performance goals, one must be aware that the safe 

and secure use of nuclear materials for civilian 

purposes is the responsibility of NRC licensees and 

Agreement State licensees and that the regulatory 

oversight of licensees is the responsibility of the

? U.S. NUCLEAR REGULATORY COMMISSION
NRC and the Agreement States. Thus, achieving 

these goals requires the collective efforts of the 

NRC, the Agreement States, and their licensees. 

Management Controls 

The NRC identified no programmatic manage

ment control weaknesses in any of its strategic 

arenas. (See page 15 for a discussion of NRC's 

Management Control Program.) 

Nuclear Reactor Safety 

STRATEGIC GOAL: Prevent radiation-related 

deaths and illnesses and protect the environment 

in the use of civilian nuclear reactors. 

A major part of the NRC's mission is to 

ensure that its licensees' safely design, construct, 

and operate civilian nuclear reactor facilities. The 

NRC currently regulates 103 civilian nuclear 

power reactors that are licensed to operate and 

another 19 that are undergoing decommissioning. 

(See Figure 4.) The Atomic Energy Act of 1954, as 

amended, and the Energy Reorganization Act of 

1974, as amended, are the foundation for regulating 

the Nation's civilian nuclear power industry. 

The Nuclear Reactor Safety strategic arena 

encompasses all NRC activities to 

ensure that civilian nuclear power 

reactor facilities, as well as non

power reactors, are operated in a 

manner that adequately protects 

public health and safety and the 

environment, and protects against 

radiological sabotage and theft or 

"Licensees" as used in this report, 

include persons required to be licensed 

(as defined in Section Il(s) of the 

Atomic Energy Act) as well as, where 

appropriate, applicants for licenses; 

certificate holders and applicants for 

certificates; contractors (including 

suppliers and consultants), subcontrac

tors, and vendors of licensees or 

certificate holders; and all other persons 

subject to the NRC's jurisdiction. Control Room

diversion of special nuclear materials. These activi

ties include reactor licensing; reactor license re

newal; operator licensing; financial assurance; 

inspection; performance assessment; identification 

and resolution of safety issues; reactor regulatory 

research; regulation development; operating experi

ence evaluation; incident investigation; threat 

assessment; emergency response; investigation of 

alleged wrongdoing by licensees, applicants, con

tractors, or vendors; imposition of enforcement 

sanctions for violations of NRC requirements; and 

reactor technical and regulatory training. See Table 

1 for nuclear reactor safety performance goals and 

related FY 1997 - 1999 performance data. 

Nuclear Materials Safety 

STRATEGIC GOAL: Prevent radiation-related 

deaths and illnesses, protect the environment, 

and safeguard special nuclear material and 

facilities in the civilian use of source, byproduct, 

and special nuclear materials. 

The Nuclear Materials Safety strategic arena 

encompasses NRC activities to ensure that 

nuclear materials and nuclear fuel cycle facilities 

are handled in a manner that adequately protects 

(continued on page 8)

at a Nuclear Reactor

1999 ACCOUNTABILITY AND PERFORMANCE REPORT 4
Program Performance (continued) 

Table 1: Nuclear Reactor Safety Performance 

Goals and Metrics 

GOAL METRICS PERFORMANCE 

Zero civilian nuclear reactor accidents. Zero accidents. FY 1999: Zero 

FY 1998: Zero 

FY 1997: Zero 

Maintain a low frequency of events that No more than one event per year. FY 1999: Zer& 

could lead to a nuclear reactor accident. FY 1998: Zero 

FY 1997: Zero 

Zero deaths resulting from radiation or Zero deaths. FY 1999: Zero2 

radioactivity releases from civilian FY 1998: Zero 

nuclear reactors. FY 1997: Zero 

Zero significant radiation exposures Zero significant radiation exposures. FY 1999: Zer& 

resulting from civilian nuclear reactors. FY 1998: Zero 

FY 1997: Zero 

No substantiated breakdown of physical Zero substantiated breakdowns. FY 1999: Zero 

protection that significantly weakens FY 1998: Zero 

protection against radiological sabotage, or FY 1997: Zero 

theft or diversion of special nuclear materials 

Zero offsite releases of radioactive material Zero offsite releases with a potential to cause FY 1999: Zero2 

from civilian nuclear reactors that have the serious adverse impact on the environment. FY 1998: Zero 

potential to cause a serious adverse impact FY 1997: Zero 

on the environment. 

No increase in the number of offsite releases The five-year average is less than three FY 1999: Five year average per year of 

of radioactive material from civilian nuclear per year. 0.8 (FY 1995-1999) 

reactors that exceed the limits specified in FY 1998: Five year average per year of 

10 CFR Part 20.2203. 0.8 (FY 1994-1998) 

FY 1997: Five year average per year of 

0.6 (FY 1993-1997) 

Environmental impacts are considered Zero environmental impacts identified and FY 1999: Zero 

through the National Environmental Policy substantiated each year by external sources FY 1998: Zero 

Act (NEPA) process before regulatory which were not identified as part of the FY 1997: Data not available 

action is taken. NRC's NEPA process.

public health and safety. The Nuclear Materials 

Safety arena encompasses more than 20,000 

specific and 100,000 general licensees that are 

regulated by the NRC and its 31 Agreement 

States 3. This diverse regulated community in

2 Preliminary data. 

3 Under Section 274 of the Atomic Energy Act of 1954, as 

amended, a State may assume, and the NRC discontinue, 

regulatory jurisdiction for certain uses of byproduct, 

source, and limited quantities of special nuclear materials 

within the State. The assumption in authority is accom

plished through an agreement with the State upon an 

NRC finding that the State's program is adequate to 

protect public health and safety, and is compatible with 

the NRC regulatory program.

cludes: uranium conversion; uranium enrich

ment; nuclear fuel fabrication; fuel research and 

pilot facilities; and large and small users of 

nuclear material for industrial, medical, or aca

demic purposes. The latter group includes: 

radiographers, hospitals, private physicians, 

nuclear gauge users, large and small universities, 

and others. This arena also includes all regula

tory activities carried out by the NRC and the 

Agreement States to ensure that nuclear materials 

and facilities are used in a manner that protects 

public health and safety and the environment, and 

protects against radiological sabotage and theft or 

diversion of special nuclear materials. The Atomic

LAS- U.S. NUCLEAR REGULATORY COMMISSION
Energy Act of 1954, as amended, and the 

Energy Reorganization Act of 1974, as 

amended, provide the foundation for 

regulating the Nation's civilian uses of 

nuclear materials. 

The scope of regulatory activities 

carried out for this arena includes regula

tion and guidance development; nuclear 

materials research; licensing and certifi

cation, inspection, and enforcement; 

identification and resolution of safety and .. I 

safeguards issues; evaluation of operating . 

experience; incident investigation; threat 

assessment; emergency response; technical training; and investigation of alleged Independent Spent Fuel Storage Casks 

wrongdoing by licensees, applicants, certificate 

holders, and contractors. See Table 2 for nuclear 

materials safety performance goals and related FY 

1997 - 1999 performance data. 

Nuclear Waste Safety 

STRATEGIC GOAL: Prevent adverse impacts 

to the current and future public health and 

safety and the environment, as a result of 

uranium recovery5, facilities decommissioning, 

cleanup of contaminated sites, and disposal of 

radioactive wastes. 

The Nuclear Waste Safety strategic arena 

p encompasses the NRC's regulatory activities 

associated with uranium recovery, decommission

ing, storage of spent nuclear fuel, transportation 

of radioactive materials, and disposal of radioac

tive wastes. Nuclear waste is a byproduct of the 

use of radioactive materials. Such waste is 

produced by nuclear reactors that generate electric 

power, as well as fuel processing plants, uranium 

recovery operations, and institutions such as 

hospitals and research facilities. The waste also 

results from decommissioning nuclear facilities 

(continued on page 10) 

Medical Procedure Using Radioactive Material 5 "Uranium recovery" means the removal of uranium from 

ore and the stabilization of tailings from this process. 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT
Program Performance (continued) 

Table 2: Nuclear Materials Safety Performance 

Goals and Metrics 

'GOAL .* .. PERFORMANCE 

Zero radiation-related deaths resulting from Zero radiation-related deaths. FY 1999: Zero 

civilian use of source, byproduct, and special FY 1998: Zero 

nuclear materials. FY 1997: Zero 

No increase in the number of significant The combined five-year average for the FY 1999: Five year average was 

radiation exposures resulting from loss or NRC and Agreement States will not exceed 2.2 per year (FY 1995-1999)1 

use of source, byproduct, and special two per year. FY 1998: Five year average was 

nuclear materials. 1.6 per year (FY 1994-1998) 

FY 1997: Five year average was 

1.8 per year (FY 1993-1997) 

No increase in the number of losses of The combined five-year average for the NRC FY 1999: Five year average was licensed material as reported to and Agreement States will not exceed two 0.4 per year (FY 1995-1999) 

Congress annually, per year. FY 1998: Five year average was 

0.6 per year (FY 1994-1998) 

FY 1997: Five year average was 

1.2 per year (FY 1993-1997) 

No accidental criticality (an inadvertent self- Zero occurrences of accidental criticality. FY 1999: Zero 

sustaining nuclear chain reaction) involving FY 1998: Zero 

FY 1997: Zero 

No increase in the number of mis- The combined five-year average for the NRC FY 1999: Five year average was 

administration events which cause and Agreement States will not exceed six 3.6 per year (FY 1995-1999) 

significant radiation exposures. per year. FY 1998: Five year average was 

3.4 per year (FY 1994-1998) 

FY 1997: Five year average was 

3.8 per year (FY 1993-1997) 

Zero offsite releases of radioactive material Zero offsite releases annually. FY 1999: Zero 

from operating facilities that have the FY 1998: Zero 

potential to cause an adverse impact on FY 1997: Zero 

the environment. 

No increase in the number of offsite releases The combined five-year average for the NRC FY 1999: Five year average was 

of radioactive material from operating and Agreement States will not exceed one 0.4 per year (FY 1995-1999) 

facilities that exceeds the limits specified per year. FY 1998: Five year average was 

in 10 CFR 20.2203. 0.6 per year (FY 1994-1998) 

FY 1997: Five year average was 

0.6 per year (FY 1993-1997) 

No significant accidental releases of radioactive Zero accidental releases. FY 1999: Zero 

material from the storage or transportation FY 1998: Zero 

of nuclear material or nuclear waste. Zero accidental releases. FY 1997: Zero 

Zero loss, theft, or diversion of formula Zero loss, theft, or diversion of formula FY 1999: Zero 

quantities of strategic special nuclear material, quantities of strategic special nuclear material. FY 1998: Zero 

or unauthorized enrichment of special nuclear FY 1997: Zero 

material regulated by the NRC. 

No substantiated case of actual or attempted Zero substantiated cases. FY 1999: Zero 

theft or diversion of formula quantities of FY 1998: Zero 

strategic special nuclear material. FY 1997: Zero

The performance goal established an approximate metric, and the deviation from that level is slight. There was no effect on 

overall program or activity performance.

l) U.S. NUCLEAR REGULATORY COMMISSION
Table 2: Nuclear Materials Safety Performance 

Goals and Metrics (continued)

No substantiated breakdown of physical 

protection or material control and accounting 

systems (i.e., detection, assessment, access 

control, containment, or accounting systems) 

that significantly weakens protection against 

theft or diversion of formula quantities of 

strategic special nuclear material.

Zero substantiated breakdowns. FY 1999: Zero 

FY 1998: Zero 

FY 1997: Zero

No substantiated case of unauthorized Zero substantiated cases. FY 1999: Zero 

enrichment of special nuclear material. FY 1998: Data not available 

FY 1997: Data not available 

No substantiated case of unauthorized Zero substantiated cases. FY 1999: Zero 

disclosure or compromise of classified FY 1998: Zero 

information concerning security measures FY 1997: Zero 

for protection of special nuclear material or 

plant equipment vital to the safety of 

production or utilization facilities which 

causes damage to the national security.

Environmental impacts are considered 

through the National Environmental Policy 

Act (NEPA) process before regulatory 

action is taken.

Zero environmental impacts identified and 

substantiated each year by external sources 

which were not identified as part of the 

NRC's NEPA process.

FY 1999: Zero 

FY 1998: Zero 

FY 1997: Data not available

that are permanently shut down. High-level 

radioactive waste results primarily from the fuel 

used by reactors to produce energy. Low-level 

radioactive waste results from reactor operations, 

and from medical, academic, industrial, and other 

commercial uses. It generally contains relatively 

limited concentrations of radioactivity. Wastes 

resulting from the extraction of uranium from ore 

are also addressed in this strategic arena. 

The NRC has regulatory oversight for the 

transportation and long-term storage and disposal 

of high-level waste including certifying spent fuel 

storage casks and transportation packages. Our 

high-level waste regulatory activities are man

dated by the Atomic Energy Act of 1954, as 

amended, and by the Energy Reorganization Act 

of 1974, as amended, and are further set out in the 

Nuclear Waste Policy Act of 1982, as amended, 

and the Energy Policy Act of 1992.

NRC regulatory and oversight activities also 

address decommissioning, which involves safely 

removing a facility from service and reducing 

residual radioactivity to a level that permits the 

property to be released. A licensee must decom

mission its facility before the NRC will terminate 

its license. In addition, this strategic arena in

cludes NRC's regulation of uranium recovery and 

low-level waste management. The Uranium Mill 

Tailings Radiation Control Act of 1978, as 

amended, directs the NRC to amend its regula

tions to conform to the Environmental Protec

tion Agency standards for uranium mill tailings 

reclamation and groundwater cleanup, and to 

regulate the reclamation of tailings and ground

water cleanup from licensed uranium mills. 

See Table 3 for nuclear waste safety perfor

mance goals and related FY 1997 - 1999 perfor

mance data. 

(continued on page 11)

1999 ACCOUNTABILITY AND PERFORMANCE REPORT
Program Performance (continued) 

Table 3: Nuclear Waste Safety Performance 

Goals and Metrics 

Minimize the number of radiation exposures The combined five-year average for the NRC FY 1999: Zero (FY 1995-1999) 

or offsite releases that exceed the regulatory and Agreement States will not exceed two FY 1998: Data not available 

requirements for operational activities, per year. FY 1997: Data not available 

Estimated post-operational offsite releases Zero post-operational offsite releases. FY 1999: Zero 

will not exceed regulatory requirements. FY 1998: Zero 

FY 1997: Data not available 

Potential environmental impacts will be Zero environmental impacts identified and FY 1999: Zero 

considered in accordance with the National substantiated each year by external sources FY 1998: Zero 

Environmental Policy Act (NEPA) before which were not identified as part of the FY 1997: Data not available 

regulatory action is taken. NRC's NEPA process. 

The regulatory framework for high-level Publish a proposed site-specific, performance- FY 1999: The proposed regulation 

waste disposal will be established consistent based, regulation applicable to the proposed published on 2/22/99. 

with current national policy. repository at Yucca Mountain. FY 1998: Not applicable 

FY 1997: Not applicable 

Develop guidance to address key technical Resolution of five subissues that make up FY 1999: Staff resolved 5 subissues. 

issues most important to the performance of key technical issues. FY 1998: Not applicable 

a high-level waste repository during the pre- FY 1997: Not applicable 

licensing period.

Participate in developing a high-level waste 

radiation safety standard and implement the 

standard through a site-specific, perfornance

based regulation and Yucca Mountain review plan.

Develop an initial Yucca Mountain Review 

Plan format and content.

FY 1999: The initial Yucca Mountain

Review Plan format and content 

guidance was completed on 5/26/99. 

FY 1998: Not applicable 

FY 1997: Not applicable

INTERNATIONAL NUCLEAR 

SAFETY SUPPORT

Chairman Miroslav Gregoric and Commissioner Merrifield signing renewal 

arrangement in Slovenia, April 1999. Slovenian Nuclear Safety Administration.

STRATEGIC GOAL: Support U.S. 

interests in the safe and secure use 

of nuclear materials and in nuclear 

nonproliferation. 

The NRC maintains a program of 

international cooperation to help 

ensure the safe, secure, and environ

mentally acceptable uses of nuclear 

energy. As the regulator of the 

world's largest civilian nuclear 

program, the NRC has extensive 

regulatory experience to contribute to 

international programs in areas such 

as nuclear reactor safety, radiation 

protection, nuclear materials safety

LAYn~j U.S. NUCLEAR REGULATORY COMMISSION
Table 4: International Nuclear Safety Support Performance 

Goals and Metrics

and safeguards, 6 waste management, and decom

missioning of nuclear facilities. 

The International Nuclear Safety Support 

strategic arena encompasses international nuclear 

policy formulation, export-import licensing for 

nuclear materials and equipment, treaty implementa

tion, international information exchange, interna

tional safety and safeguards assistance, and deterring 

nuclear proliferation. NRC international activities 

support broad U.S. national interests, as well as the 

NRC's domestic mission. The primary foundation 

for these activities is the Atomic Energy Act of 

1954, as amended, the Energy Reorganization Act of 

1974, as amended, the Nuclear Non-Proliferation 

(continued on page 14) 

6 The performance goal established an approximate metric, 

and the deviation from that level is slight. There was no 

effect on overall program or activity performance. 

Safeguards include physical protection as well as 

material control and accounting.

Proposed High-Level Waste Disposal Site at 

Yucca Mountain, Nevada

A13 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT ;5

GOAL METRICS PERFORMANCE 

Strengthen international nuclear safety and Complete significant program outputs related FY 1999: 

safeguards through leadership and participation to international nuclear safety and safeguards, - Negotiated/reviewed 4 out of 57 estimated 

in international nuclear policy formulation international agreements, export/import bilateral exchange agreements between the 

and exchange activities by providing assistance licensing, and other activities. NRC and appropriate foreign counterparts. 

through international agreements. Support - Completed 103 staff reviews for import/ 

U.S. nuclear nonproliferation interests through export authorization 

export/import licensing and other activities. - Completed 23 staff reviews of Executive 

Branch proposals. 

FY 1998: 

- Negotiated/reviewed 7 bilateral exchange 

agreements between the NRC and 

appropriate foreign counterparts. 

- Completed 90 staff reviews for import/ 

export authorization. 

- Completed 34 staff reviews of Executive 

Branch proposals. 

FY 1997: 

- Negotiated/reviewed 3 bilateral exchange 

agreements between the NRC and 

appropriate foreign counterparts. 

- Completed 94 staff reviews for import/ 

export authorization. - Data not available on staff reviews of 

Executive Branch proposals.
Program Performance (continued)

Act of 1978, executive orders, and treaties and 

conventions. See Table 4 for the international safety 

support performance goal and related FY 1997 

1999 performance data. 

Verification and Validation 

of Data 

Most of the data used to measure performance 

goals come from the NRC's abnormal occurrence 

data, and from reports submitted by licensees. 

The decision to classify an event or incident as an 

abnormal occurrence is based on review and 

analysis from several internal processes. Such 

processes include inspections, daily events re

views, and event data contained in several infor

mation systems. The systems that support this 

process include the Sequence Coding and Search 

System, the Accident Sequence Precursor Data

base, the Nuclear Materials Events Database, and 

the Radiation Exposure Information Report 

System. The abnormal occurrence criteria were 

developed by NRC to comply with Section 208 of 

the Energy Reorganization Act of 1974, as 

amended. The Act requires the NRC to inform 

Congress of unscheduled incidents or events that 

the Commission determines to be significant from 

the standpoint of public health and safety. Events 

that meet the abnormal occurrence criteria are 

included in an annual "Report to Congress on 

Abnormal Occurrences" (NUREG-0090). The

Abnormal Occurrence reporting criteria can be 

found in Appendix A to NUREG-0090, Vol. 22, 

which can be viewed on NRC's home page at 

http://www.nrc.gov/NRC/COMMISSION/ 

SECYS/secy2000-0003/2000-0003scy.html. In 

addition, in 1997, the Commission determined 

that events occurring at Agreement State licensed 

facilities that meet the abnormal occurrence 

criteria should be reported in the annual abnormal 

occurrence report to Congress. Therefore, the 

abnormal occurrence criteria developed by the 

NRC are applied uniformly to events that occur at 

facilities licensed or otherwise regulated by the 

NRC and the Agreement States. 

Data for the abnormal occurrences originate 

from external sources, such as Agreement States 

and NRC licensees. The NRC has a high degree 

of confidence about the reliability of these data 

because (1) the information needed from external 

sources is required to be reported to the NRC by 

regulations, (2) the NRC maintains an aggressive 

inspection program that, among other activities, 

audits licensees and evaluates Agreement State 

programs to determine that information is being 

reported as required by the regulations, and (3) 

there are Agency procedures for reviewing and 

evaluating licensees. 

Additional information concerning program 

evaluations/self-assessments and crosscutting 

issues can be found in Appendices C and D 

respectively.

,-4 

(ý U.S. NUCLEAR REGULATORY COMMISSION
Management Accountability

The NRC's Management 

Control Program 

A committee of senior agency executives 

reviewed individual assurance statements from 

each NRC office director and regional administra

tor that served as a primary basis for the 

Chairman's FY 1999 statement of assurance on 

management controls. These individual state

ments were based on the managers' knowledge of 

day-to-day operations and existing controls, 

management reviews of these controls, program 

reviews and other management evaluations, OIG 

reports, and reviews of financial management 

systems. 

For FY 1999, the NRC streamlined its ap

proach for determining the status of its manage

ment controls. Management control plans that 

were previously submitted to the Chief Financial 

Officer as standalone documents were eliminated. 

Instead, offices and regions identified manage

ment control deficiencies in their operating plans. 

The NRC's operating plan is periodically updated 

and reviewed by an executive committee made up 

of the agency's senior managers. The management 

control information in these plans, combined with 

the individual assurance statements discussed in the 

previous paragraph, provide the framework for 

monitoring and improving the agency's manage

ment controls on an ongoing basis. 

Status of Management Controls and 

Report on Material Weaknesses and 

Non-Conformances 

Federal Managers' Financial Integrity Act 

The NRC evaluated its management control 

and financial management systems for the fiscal

year ending September 30, 1999. This evaluation 

provided reasonable assurance that the objectives 

of the Federal Managers' Financial Integrity Act 

(FMFIA) were achieved in FY 1999. The NRC 

identified no material weaknesses in its programs 

or administrative activities as defined in the 

FMFIA. For FY 1999, the auditors identified the 

incomplete implementation of managerial cost 

accounting and inadequate management controls 

over fee development as material weaknesses in 

their annual FMFIA report and audit of the 

FY 1999 financial statements. 

The agency continues to have a significant 

weakness with respect to incomplete implementa

tion of Statement of Federal Financial Accounting 

Standards Number 4 (SFFAS 4), Managerial Cost 

Accounting Concepts and Standards for the 

Federal Government, which includes for FY 1999 

the inability of the agency's payroll system to 

aggregate payroll transactions at the agency's 

strategic arena level. 

SFFAS 4 requires Federal agencies to accu

mulate and report the cost of its activities on a 

regular basis for management decision purposes. 

Since NRC cannot meet this requirement, this 

represents an instance of substantial noncompli

ance with the Federal Financial Management 

Improvement Act of 1996 (FFMIA). The current 

payroll system has been modified to address the 

payroll system deficiency for FY 2000. Work 

continues to implement a new integrated resource 

management system, which will include cost 

accounting and labor-cost distribution modules. 

This system will provide added capability to 

report costs at the appropriate level and fully 

comply with SFFAS 4. In the interim, we will 

assess what informational needs can be met by 

(continued on page 16) 

A15 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT ;5
Management Accountability (continued)

existing systems and, if possible, begin to provide 

cost information. A remediation plan was devel

oped during FY 1999 and amended in FY 2000, to 

implement a managerial cost accounting system at 

the NRC by FY 2001. 

The NRC has also initiated actions to 

strengthen management controls over fee devel

opment. We plan to document the license fee rule 

development process and establish general proce

dures for calculating fees and conducting quality 

control. To strengthen these controls, the NRC is 

also (1) performing an analysis of the fee model 

and developing improvements to that process, and 

(2) streamlining the data entry process to the fee 

model to reduce the potential for error and elimi

nate duplicate data entry. 

FY 1999 Financial Statement Audit 

For the audit of the FY 1999 financial state

ments, the auditors identified seven new report

able conditions. The incomplete implementation 

of managerial cost accounting, inability to aggre

gate labor costs by program, and ineffective 

management controls over fee development were 

reported as material internal control weaknesses. 

Additional reportable conditions noted in the 

auditor's report included weaknesses with the 

financial statement preparation process, controls 

over the verification of small entity status for fee 

assessment, controls over segregation of duties 

and controls over authorized users for the 

agency's Payroll/Personnel system, and controls 

over payments. The agency has already begun to 

take corrective action on the audit findings. 

Except for managerial cost accounting, the 

agency expects to implement corrective action 

during FY 2000. (See the OIG audit of the FY 

1999 Financial Statement on page 23.) 

Financial Management Systems 

The NRC evaluated its financial management 

systems for compliance with applicable Federal 

requirements and accounting standards as re

quired by FFMIA. This evaluation disclosed that, 

overall, the NRC's major financial systems are in

compliance with this Act, except for full imple

mentation of SFFAS 4, which includes for FY 

1999, the inability of the agency's payroll system 

to aggregate pay transactions at the strategic arena 

level, and a business continuity plan for the core 

accounting system that were found to be in 

substantial noncompliance. The NRC has six 

financial systems: the Federal Financial System 

(FFS), Payroll/Personnel System, Personal Prop

erty PC System, License Fee Bill Generator 

System, Allotment Financial Plan System, and 

Budget Formulation System. 

The FFS is a system that the NRC uses 

through an interagency agreement with the De

partment of the Treasury (Treasury). This system 

is reviewed annually by Treasury's Financial 

Management Service (FMS) for its client agencies 

that utilize the system. FMS performed a vulner

ability assessment that disclosed no material or 

nonmaterial weaknesses. Their limited review of 

FFS provided reasonable assurance that FFS, as 

operated by FMS for NRC, is efficient and effec

tive; contains necessary controls; and conforms 

with the principles, standards, and related require

ments prescribed by the Comptroller General with 

one exception. FMS has not demonstrated FFS' 

ability to perform data recovery and backup in the 

event of a disaster, and this inability is considered 

a material non-conformance. The necessary disk 

storage capacity was acquired to perform a simu

lated disaster recovery data test, but testing has 

been delayed because of higher priorities imposed 

on the data center by FMS. FMS currently plans 

to test the FFS application during FY 2001. 

Biennial Review of User Fees 

During FY 1998 to FY 1999, the NRC re

viewed each type of fee subject to the biennial 

review of fees requirement of the CFO Act of 

1990. Licensing, inspection, and annual fees 

charged to applicants and licensees are revised 

annually; the hourly rate for licensing and inspec

tion fees are revised and the annual fees are 

adjusted to recover the agency's current fiscal 

year budget authority less the amount to be

16 

U.S. NUCLEAR REGULATORY COMMISSION
Table 5: Management Report on Office of the Inspector General Audits with Disallowed Costs 

For the Period October 1, 1998-September 30, 1999 

Number of Questioned Unsupported 

Category. Audit Reports Costs Costs ___...........___________ ($) ($) 

A. Audit reports with management decisions 1 $3,500* $0 

on which final action had not been taken at 

the beginning of this reporting period. 

B. Audit reports on which management 4 $485,853 $0 

d•ecisions were made during this period. 

C. Audit reports on which final action was 5 $489,353 $0 

taken during this report period. 

(i) Disallowed costs that were 5 $489,353 $0 

recovered by management 

through collection, offset, 

property in lieu of cash, or otherwise 

(ii) Disallowed costs that were 0 $0 $0 

written off by management. 

D. Reports for which no final action had 0 $0 $0 

been taken by the end of the reporting 

period. 

*Additional costs of $118,420 were disallowed after receipt of clarification from DCAA and the contractor.

collected through licensing and inspection fees. 

The most recent changes to the licensing, inspec

tion, and annual fees are described in NRC regu

lations in the Federal Register (64 FR 31448, 

June 10, 1999). The following were revised to 

more appropriately recognize actual costs: fees 

under the Material Access Authorization Program 

(10 CFR Part 11), the Information Access Autho

rization Program for Licensee Personnel (10 CFR 

Part 25), administrative charges imposed on 

delinquent debt (10 CFR Part 15.37(f)), and fees 

for search and review time to respond to Freedom 

of Information Act and Privacy Act requests. 

Reviews of other types of fees concluded that fee 

revisions were not warranted at this time.

Management Decisions and 

Final Actions on 0IG Audit 

Recommendations 

The agency has established and continues to 

maintain an excellent record in resolving and 

implementing open audit recommendations 

presented in OIG reports. Section 5(b) of the 

Inspector General Act of 1978, as amended, 

requires the Chairman to report on management 

decisions and final actions taken on OIG audit 

recommendations. Table 5 gives the dollar value 

of disallowed costs determined through contract 

audits conducted by the Defense Contract Audit 

Agency (DCAA). "Questioned Costs" are those 

(continued on page 18) 

17

1999 ACCOUNTABILITY AND PERFORMANCE REPORT I,;;"-
Management Accountability (continued) 

Table 6: Management Report on Office of the Inspector General Audits 

with Recommendations That Funds Be Put to Better Use 

For the Period October 1, 1998-September 30, 1999 

Recommendations that 

funds be put to better 

use by management agreed 

Number of to in a management decision 

Category Audit Reports ($) 

A. Audit reports for which final action has not 0 $0 

been taken by the commencement of the 

reporting period. 

B. Audit reports on which management 1 $0 

decisions were made during this 

reporting period. 

C. Audit reports for which final action was 1 $0 

taken during this reporting period. 

(i) Recommendations that were actually 1 $0 

completed. 

(ii) Recommendations that management 0 $0 

had subsequently concluded should 

not or could not be implemented 

or completed. 

D. Audit reports for which no final action has 0 $0 

been taken by the end of the period.

costs that are questioned as to whether they are 

allowable. "Unsupported Costs" represent costs 

challenged because of a lack of adequate support

ing data. Because of the sensitivity of contractual 

negotiations, details of these contract audits are 

not furnished as part of this report. 

Table 6 gives the dollar value of funds that 

audits showed could be put to better use. As of 

September 30, 1999, no outstanding audits recom

mended that funds be put to better use. 

Two reports containing two recommendations 

are more than a year old and are described in the 

next section titled "Management Decisions Not 

Implemented Within One Year."

Management Decisions Not 

Implemented Within One Year 

Management decisions were made before 

September 1999 for the OIG audit reports dis

cussed in the following paragraphs, but as of 

September 30, 1999, NRC had not taken final 

action on some of the issues in the reports. The 

OIG did not recommend that funds be put to 

better use for any of these reports. 

Review of NRC's Implementation of 

Inspection Manual Chapter 1245, "Training 

Requirements," November 4,1994 

The Office of the Inspector General (OIG) 

recommended that the Executive Director for 

Operations (EDO) ensure that the agency's new

U.S. NUCLEAR REGULATORY COMMISSION
training tracking system meets management needs 

for producing reliable information for overseeing 

and tracking inspector training. The NRC has 

determined that its current system does not meet the 

needs of the agency and that the system needs to be 

totally redesigned. The NRC is in the process of 

implementing the PeopleSoft Human Resources 

Information System (HRIS). PeopleSoft is an 

enterprise system that is designed so that each 

module of the system fully integrates with the core 

HRIS. The Training Administration Module associ

ated with the PeopleSoft HRIS is being imple

mented in several phases. The Training 

Administration Module implementation started in 

Phase II of the overall PeopleSoft MRIS project. 

This phase will combine the training administration 

functions of the Agency Training System, Profes

sional Development Center, and the Technical 

Training Center to provide a single system that will 

be the official training registration and training 

record system of the agency. The next implementa

tion phase, phase I, will provide desktop access to 

all staff members enabling them to review their 

individual training records. Because of limited 

resources and competing agency priorities, the new 

system will not be operational until FY 2002. In the 

meantime, training requirements are tracked manu

ally by relying on the direct involvement of indi

viduals and their supervisors. 

Opportunities for Savings Available in 

Information Management Activities, 

January 29, 1998 

The OIG recommended that the Office of the 

Chief Information Officer (OCIO) take immediate 

steps to reduce operating costs of its Public 

Document Room (PDR) while continuing to 

provide efficient and effective public accessibility 

to NRC information. 

By moving the PDR to the White Flint head

quarters complex an analysis showed that a 

significant savings in averted building lease costs 

could be realized. The Commission approved the 

move of the PDR to our White Flint headquarters 

in the FY 2000 Budget. 

We informed the public of our intent to move 

the PDR to headquarters during the first quarter of

calendar year 2000, and the move is scheduled to 

take place before the end of FY 2000. An admin

istrative rule change will be made in NRC regula

tions to note the change of address for the PDR at 

the time of its move to our White Flint headquar

ters complex. 

Debt Collection 

The agency's objective is to maintain its delin

quent debt at year-end to less than one percent of its 

billings for that year. The NRC has met its goal and 

kept delinquent debt at less than one percent for the 

past 4 years. (See Figure 5). Control over delin

quent debt is accomplished through a concerted debt 

management strategy. The strategy includes activi

ties such as license revocations, referral to the 

Department of the Treasury's Debt Management 

Services through a cross-servicing arrangement, 

credit reporting, and referral to the Department of 

Justice for enforced collection. 

Prompt Payment 

The percentage of on-time payments subject 

to the Prompt Payment Act remained at 96 per

cent for FY 1999 as shown in Figure 6. The 

amount of interest penalties incurred decreased 

from $17,000 in FY 1995 to under $4,100 in FY 

1999. In addition, the agency made 98 percent of 

its vendor payments electronically. 

Civil Penalties 

The NRC imposes enforcement sanctions to 

encourage prompt identification and comprehen

sive correction of violations to deter violations, 

and to emphasize the importance of compliance 

with requirements. One enforcement sanction is 

the imposition of a civil penalty. Table 7 shows 

the amount of the civil penalties assessed and the 

amount collected in FYs 1995-1999, distributed 

according to the year in which the civil penalty 

was collected. The amount of each civil penalty 

assessed reflects the amount that the NRC ulti

mately decides is appropriate in each case through 

its enforcement or hearing process. 

(continued on page 20) 

A19 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT ;T
Management Accountability (continued) 

Figure 5 

Delinquent Debt

15

10 • ------

5 .-------

FY 1995 

$9.7 M

FY 1996 

$3.8 M

FY 1997 

$2.1 M 

scal Year

FY 1998 FY 1999 

$2.1 M $2.5 M

Figure 6 

Prompt Payment

FY 1995 FY 1996 FY 1997 FY 1998 FY 1999 

89% 93% 95% 96% 96% 

Fiscal Year

U.S. NUCLEAR REGULATORY COMMISSION

0

O,

U) 

E 

CO 

0

(I

0 

a) 

CD Cz 

(D 

(D 

a100 

80 

60 

40 

20 

0

---------------------------------------------------------------------------------------
Table 7: Fiscal Year Civil Penalties Collected 

Versus Fiscal Year Penalty Dollars Assessed1 

Fiscal 

Year Assessed Collected 

1995 $2,289,285 $2,289,285 

1996 $3,106,000 $3,014,000 2 

1997 $6,343,550 $5,957,736 

1998 $5,206,600 3 $6,493,573 

1999 $1,062,600 $1,075,917

No direct correlation exists between the amounts assessed and collected in a particular fiscal year because civil penalties may 

be assessed in one fiscal year and collected in another for a variety of reasons, such as an assessment made in tft last nimonth*f 

the fiscal year that is not due for 30 days, or until the next fiscal year. 

2 This amount reflects payments in two cases for which installment payments were made. 

3 This amount reflects $145,000 in penalties that were withdrawn. 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT
FY 1999 Audited Financial Statements

Limitations of Principal Statements 

The principal statements have been prepared to report the financial position and results of opera

tions of the NRC, in accordance with the requirements of the Chief Financial Officers Act of 

1990, as amended by the Government Management Reform Act of 1994. These statements have 

been prepared from the books and records of NRC in accordance with the formats prescribed by 

the Office of Management and Budget (OMB). However, these statements differ from the 

financial reports used to monitor and control budgetary resources that are prepared from the 

same books and records. The principal statements should be read with the realization that they 

are for a sovereign entity, that liabilities not covered by budgetary resources cannot be liquidated 

without the enactment of an appropriation, and that the payment of all liabilities other than for 

contracts can be abrogated by the sovereign entity. Other limitations are included in the foot

notes to the principal statements. 

The NRC's FY 1999 financial statements were audited by R. Navarro and Associates under 

contract to the Office of the Inspector General. This section contains the results of the audit, the 

financial statements, related footnotes, required supplementary information, and management's 

comments on the auditor's report. 

A23 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT (ýr
INDEPENDENT AUDITORS REPORT AND 

PRINCIPAL STATEMENTS FOR THE 

YEAR ENDED SEPTEMBER 30, 1999 

OIG/99A-12 February 28, 2000

ERFORMANCE REPORT
OFFICE OF 

THE INSPECTOR GENERAL 

U.S. NUCLEAR 

REGULATORY COMMISSION

INDEPENDENT AUDITOR'S REPORT AND 

PRINCIPAL STATEMENTS FOR THE 

YEAR ENDED SEPTEMBER 30,1999 

OIG/99A-12 FEBRUARY 28, 2000

AUDIT REPORT

4/ 

mmI 

I

c.

A27 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT (ýr
'-PA UNITED STATES 

U- • NUCLEAR REGULATORY COMMISSION 

Z ,WASHINGTON, DC 20555-0001 

February 28, 2000 

MEMORANDUM TO: Chairman Meserve 

FROM: ,,, ubert T. Bell 

YlInspector General 

SUBJECT: RESULTS OF THE AUDIT OF U.S. NUCLEAR 

REGULATORY COMMISSION'S FISCAL YEAR 1999 

FINANCIAL STATEMENTS 

Attached is the independent auditors' report on the U.S. Nuclear Regulatory Commission's 

(NRC) Fiscal Year 1999 financial statements. The Chief Financial Officers Act requires the 

Office of the Inspector General (OIG) to annually audit NRC's Principal Financial Statements. 

The report contains: (1) the principal statements and the auditors' opinion on those statements; 

(2) the auditors' opinion on management's assertion about the effectiveness of internal controls; 

and (3) a report on NRC's compliance with laws and regulations. Written comments were 

obtained from the Chief Financial Officer (CFO) and are included as an appendix to the indepen

dent auditors' report. 

Audit Results 

The independent auditors issued an unqualified opinion on the balance sheet, the statements of 

changes in net position, net cost, budgetary resources, and financing. 

In the opinion on management's assertion about the effectiveness of internal controls, the audi

tors concluded that management's assertion is not fairly stated. The auditors reached this con

clusion because management did not identify the lack of the following: (1) managerial cost 

accounting; (2) a program cost accounting system; and (3) management controls for license fee 

development as material weaknesses.1 

The auditors identified seven new reportable conditions and closed one prior-year reportable 

condition. The new conditions concern: (1) the lack of program cost accounting; (2) the lack of 

management controls over fee development; (3) an inadequate financial statement preparation 

(continued on page 30) 

't OIG's annual assessment of NRC's implementation of the Federal Managers Financial Integrity Act will 

also report the same issues as material weaknesses. 

A29 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT (-~
Audit of FY 1999 Financial Statement (continued) 

process; (4) inadequate segregation of duties for NRC's integrated payroll and personnel system 

(PAY/PERS); (5) inadequate controls over PAY/PERS authorized users; (6) inadequate controls 

over small entity certifications; and (7) inadequate controls over General Services Administra

tion credits. 

The report on NRC's compliance with laws and regulations disclosed three noncompliances. 

The first is that NRC's 10 CFR Part 170 license fee rates are not based on full cost. The second 

is that managerial cost accounting was not implemented, as required, and the third is that pro

gram cost accounting was not supported by the general ledger. Issues one and two are 

carryovers from FY 1998. Issues two and three are considered substantial noncompliances with 

the Federal Financial Management Improvement Act of 1996 (FFMIA). 

The prior year's reportable condition relating to business continuity plans for the general ledger 

system remains in substantial noncompliance with FFMIA. However, NRC is dependent on the 

Department of the Treasury to resolve this condition. Tests of compliance with selected provi

sions of other laws and regulations disclosed no other instances of noncompliance. 

Performance Reporting 

Office of Management and Budget Bulletin No. 98-08, Audit Requirements for Federal Finan

cial Statements, requires OIG to "obtain an understanding of the components of internal control 

relating to the existence and completeness of assertions relevant to the performance measures 

included in the Overview of the Reporting Entity." The Bulletin states that the objective of this 

work is to report deficiencies in the design of internal control, rather than plan the financial 

statement audit. With this requirement and objective in mind, OIG examined the control process 

for several performance measures. Our examination concluded that there were no deficiencies 

to report. 

Comments of the Chief Financial Officer 

The CFO generally agreed with the auditors' recommendations and stated that corrective action 

has been taken or is underway. The CFO had concerns with the recommendation concerning 

small entity certifications, but agreed to study the issue further. We will follow-up on the CFO's 

corrective action during the FY 2000 financial statement audit. 

We appreciate NRC staff's cooperation and continued interest in improving financial manage

ment within NRC. 

Attachment: As stated 

U.S. NUCLEAR REGULATORY COMMISSION
CONTENTS 

REPORT OF INDEPENDENT AUDITORS ....................................................................... 33 

Independent Auditors' Report on the Principal Statements ............................................ 33 

Report on Management's Assertion About the Effectiveness of Internal Control ....... 34 

Independent Auditors' Report on Compliance with Laws and Regulations ................... 49 

PRINCIPAL STATEMENTS ................................................................................................ 55 

B alance Sheet ...................................................................................................................... 57 

Statement of Net Cost ..................................................................................................... 58 

Statement of Changes in Net Position ............................................................................ 59 

Statement of Budgetary Resources ................................................................................... 60 

Statement of Financing ................................................................................................... 61 

Notes to Principal Statements .......................................................................................... 62 

REQUIRED SUPPLEMENTARY INFORMATION .......................................................... 75 

Schedule of Intragovemmental Balances ....................................................................... 76 

A P P E N D IX ................................................................................................................................. 77 

Comments of the Chief Financial Officer ....................................................................... 79 

A31 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT ;5
R. Navarro & Associates, Inc.

Chairman Richard A. Meserve 

U.S. NUCLEAR REGULATORY COMMISSION 

Washington, DC 

INDEPENDENT AUDITORS" REPORT ON THE PRINCIPAL STATEMENTS 

We have audited the U.S. Nuclear Regulatory Commission's (NRC) balance sheet, statements of 

net cost, changes in net position, budgetary resources, and financing as of and for the year ended 

September 30, 1999, herein referred to as the principal statements. The principal statements are 

the responsibility of NRC's management. Our responsibility is to express an opinion on the 

principal statements based on our audit. 

SCOPE 

We conducted our audit in accordance with generally accepted auditing standards; Government 

Auditing Standards, issued by the Comptroller General of the United States; and, Office of 

Management and Budget (OMB) Bulletin No. 98-08, Audit Requirements for Federal Financial 

Statements. Those standards require that we plan and perform the audit to obtain reasonable 

assurance about whether the financial statements are free of material misstatement. An audit 

includes examining, on a test basis, evidence supporting the amounts and disclosures in the 

financial statements. An audit also includes assessing the accounting principles used and signifi

cant estimates made by management, as well as evaluating the overall financial statement presen

tation. We believe that our audit provides a reasonable basis for our opinion. 

MATTERS FOR EMPHASIS 

Classification of Costs 

OMB Bulletin No. 97-01, Form and Content ofAgency Financial Statements, provides guidance to 

federal agencies for presenting program costs classified by intragovemmental and public components. 

The basis for classification relies on the concept of who received the benefit of the costs incurred (e.g. 

private sector licensees versus federal licensees) rather than who was paid. However, following the 

advice of OMB, NRC classified the costs on the Statement of Net Cost using an underlying concept 

of who was paid. This presentation does not entirely incorporate the guidance in the Bulletin, how

ever, it enables the Agency to transition to the required presentation. 

U.S. Department of Energy Expenses 

NRC's principal statements include reimbursable expenses of the U.S. Department of Energy 

(DOE) National Laboratories. The NRC's Statement of Net Cost includes approximately $54.5 

million of reimbursed expenses, which represent approximately 11% of total expenses. Our 

audit included testing these expenses for compliance with laws and regulations within NRC. The 

(continued on page 34) 

133J6 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT ;T
Audit of FY 1999 Financial Statement (continued) 

R. Navarro & Associates, Inc. 

work placed with DOE is under the auspices of a Memorandum of Understanding between NRC 

and DOE. The examination of DOE National Laboratories for compliance with laws and regula

tions is DOE's responsibility. This responsibility was further clarified by a memorandum of the 

General Accounting Office's (GAO) Assistant General Counsel, dated March 6, 1995, where he 

opined that "...DOE's inability to assure that its contractors' costs [National Laboratories] are 

legal and proper.. .does not compel a conclusion that NRC has failed to comply with laws and 

regulations." DOE also has the cognizant responsibility to assure audit resolution and should 

provide the results of its audits to NRC. 

OPINION 

In our opinion, the principal statements identified on the previous page present fairly, in all 

material respects, the financial position of the NRC as of September 30, 1999, and its net cost of 

programs, changes in net position, budgetary resources, and financing for the year then ended in 

conformity with generally accepted accounting principles. 

SUPPLEMENTARY INFORMATION 

The Schedule of Intergovernmental Balances included in Section III of this report is not a re

quired part of the principal statements of the U. S. Nuclear Regulatory Commission, but is 

required supplementary information by the Technical Amendments to OMB Bulletin 97-01, Form 

and Content ofAgency Financial Statements. We have applied certain limited procedures, which 

consist of management inquiries regarding the methods for measurement and presentation of the 

supplementary information. However, we did not audit the information and we express no 

opinion on it. 

INDEPENDENT AUDITORS' REPORT ON MANAGEMENT'S ASSERTION ABOUT 

THE EFFECTIVENESS OF INTERNAL CONTROL 

We have examined management's assertion that the U.S. Nuclear Regulatory Commission's 

(NRC) systems of accounting and internal control in place as of September 30, 1999 are in 

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

Bulletin No. 98-08, Audit Requirements for Federal Financial Statements. The Bulletin requires 

that transactions be properly recorded, processed, and summarized to enable the preparation of 

the principal statements in accordance with Federal accounting standards, and safeguarding of 

assets against loss from unauthorized acquisition, use or disposal. 

Our examination was made in accordance with the standards established by the American Insti

tute of Certified Public Accountants; standards applicable to financial audits contained in Gov

ernment Auditing Standards issued by the Comptroller General of the United States; and, OMB 

Bulletin No. 98-08. Accordingly, we considered NRC's internal control over financial reporting 

by obtaining an understanding of the Agency's internal controls, determined whether these 

internal controls had been placed in operation, assessed control risk, and performed tests of 

controls and other procedures as we considered necessary in the circumstances. We believe that 

U.S. NUCLEAR REGULATORY COMMISSION
R. Navarro & Associates, Inc.

our examination provides a reasonable basis for our opinion. Our examination was of the inter

nal control in place as of September 30, 1999. 

Because of inherent limitations in internal control, errors or fraud may occur and not be detected. 

Also, projections of any evaluation of the internal control over financial reporting to future 

periods are subject to the risk that the internal control may become inadequate because of 

changes in conditions, or that the degree of compliance with the policies and procedures may 

deteriorate. 

In our opinion, management's assertion that NRC's systems of accounting and the internal 

control in place as of September 30, 1999 is in compliance with the internal control objectives in 

OMB Bulletin No. 98-08 requiring that transactions be properly recorded, processed, and sum

marized to enable the preparation of the principal statements in accordance with Federal account

ing standards, and safeguarding of assets against loss from unauthorized acquisition, use or 

disposal, is not fairly stated, because management did not identify the lack of managerial cost 

accounting, the lack of a program cost accounting system, and the lack of management controls 

for fee development as material weaknesses. 

Our consideration of management's assertion on internal control over financial reporting would 

not necessarily disclose all matters in the internal control over financial reporting that might be 

reportable conditions. Under standards issued by the American Institute of Certified Public 

Accountants, reportable conditions are matters coming to our attention relating to significant 

deficiencies in the design or operation of the internal control that, in our judgment, could ad

versely affect the Agency's ability to record, process, summarize, and report financial data 

consistent with the assertions by management in the financial statements. Material weaknesses 

are reportable conditions in which the design or operation of one or more 

of the internal control components do not reduce to a relatively low level the risk that misstate

ments in amounts that would be material in relation to the financial statements being audited may 

occur and not be detected within a timely period by employees in the normal course of perform

ing their assigned functions. 

We noted certain matters, discussed in the following paragraphs, involving the internal control 

and its operation that we consider to be reportable conditions. Comments A - Managerial Cost 

Accounting; B - Program Cost Accounting; and C - Management Controls Over Fee Develop

ment are considered material weaknesses. Comments A and B are considered substantial 

noncompliances with the Federal Financial Management Improvement Act (FFMIA), as well. 

Current Year Comments 

A. Managerial Cost Accounting 

As reported for fiscal year (FY) 1998 (Report No. OIG/98A-09) and continuing in 

FY1999, the NRC has not implemented Statement of Federal Financial Accounting 

Standards (SFFAS) No. 4, Managerial Cost Accounting Concepts and Standards, to 

(continued on page 36) 

1 &35 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT ;jT
Audit of FY 1999 Financial Statement (continued) 

R. Navarro & Associates, Inc. 

assure that, "Managerial cost accounting ... be a fundamental part of the financial 

management system and, to the extent practicable, ... [to] be integrated with other 

parts of the system. [Implementation of the standards would provide].., the costs of 

... activities on a regular basis for management information purposes." 

Agency management responded to the FY1998 condition by preparing a remediation 

plan and outlining the milestones for an integrated resource management system. 

Recently, management also created a Cost Management Steering Committee "...to 

provide visible leadership.. .for cost management and cost accounting." However, 

management did not make progress in developing interim techniques or processes to 

provide routine and reliable cost information for managers during FY1999. Although 

the Federal financial management community has been addressing implementation of 

managerial cost accounting concepts and standards since FY1997 (initial imple

mentation date for FY1997 was subsequently delayed to FY1998), the NRC projects 

implementation of cost management by FY2001. 

The strategy adopted by management places significant emphasis on changing the 

culture and practices of the Agency. This strategy overlooks the immediate benefits 

of providing managerial cost accounting information to Agency managers in order to 

support their responsibilities for planning, controlling costs, decision making and 

evaluating performance. Implementation of cost accounting techniques and practices 

is essential to the Agency managers' ability in supporting compliance with the Gov

ernment Performance and Results Act (GPRA). 

The Joint Financial Management Improvement Program (JFMIP), Managerial Cost 

Accounting System Requirements (FFMSR-8), states, "Some agencies may find they 

have existing software, such as the core financial systems software and reporting and 

data analysis tools, that can support many of their needs for cost accounting capabili

ties, especially when cost accounting is first being introduced. Not until an agency 

has some experience with cost accounting and has determined that they truly have a 

need for more sophisticated capabilities and what those specific capabilities are, 

should an agency pursue additional software. Since agencies may use cost finding 

techniques and cost studies as long as they comply with cost accounting standards ... 

implementation of a cost accounting 'system' is not necessarily a prerequisite with 

SFFAS Number 4." 

This condition continues to be reported as a material weakness and a FFMIA substan

tial noncompliance. 

Recommendation 

The Chief Financial Officer (CFO) should develop interim cost management infor

mation to support Agency managers' evaluation of the cost of outputs and outcomes 

realized by the Agency. Development of interim cost management techniques may 

also enhance the success of the system being contemplated by identifying the needs 

of managers. 

The CFO should continue to be supportive of the Agency's Cost Management Steer

ing Committee. 

( U.S. NUCLEAR REGULATORY COMMISSION
R. Navarro & Associates, Inc.

CFO's Comments 

"We agree there are potential benefits of developing interim cost management infor

mation for managers prior to the agency's plan to fully implement managerial cost 

accounting. We will work with the Cost Management Steering Committee and 

offices to assess what informational needs can be met with existing systems and, if 

possible, begin to provide interim cost management information. We will initiate this 

effort during March 2000. 

We will continue to support the agency's Cost Management Steering Committee. We 

view this [as] an important element in the agency's implementation of information 

cost accounting. Part of the charter of the Cost Management Steering Committee is 

to coordinate the identification of management's cost information needs with the CFO 

and CIO and support the cost accounting system implementation effort. We believe 

that the Committee's involvement will help make the cost accounting system a suc

cess." 

Auditors' Position 

The CFO statement, "... there are potential benefits of developing interim cost man

agement information..." appears to indicate some doubt whether cost information can 

and will be provided as we recommend. It seems appropriate and timely for Agency 

managers to receive basic cost management information in order to begin the change 

process to manage the cost of NRC activities. We recognize that developing fully 

refined and reliable cost management data is an iterative process that will occur over 

time, however, managers should be afforded the opportunity to move toward using 

cost as a tool for decision making. 

For example, interim cost management information could provide greater stewardship 

of federal resources. Thus enabling Agency managers to use cost information to 

support decision making and their assessment, evaluation, and measurement of the 

cost effectiveness of regulatory, inspection, support, research, and rulemaking activi

ties. Additionally, cost management information could further support managers' 

efforts to analyze the activities being managed through the Agency's planned accom

plishment and strategic arena structure. We continue to recommend that the CFO 

evaluate what can be done presently to lay the foundation for cost management within 

the Agency. 

During a subsequent audit, we will assess progress made in providing interim cost 

management information. Additionally, we will continue to assess the progress made 

by the CFO in implementing the milestones outlined in the remediation plan. 

B. Program Cost Accounting 

OMB Bulletin 97-01, Form and Content Bulletin ofAgency Financial Statements, 

requires the preparation of a Statement of Net Cost as part of the principal statements. 

(continued on page 38) 

A37 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT _A5
Audit of FY 1999 Financial Statement (continued) 

R. Navarro & Associates, Inc. 

This statement is designed to provide an accounting for the net cost of programs as 

defined by the Agency in its budget, strategic, and annual plans. 

In the current year, the NRC did not have a general ledger process that supported the 

preparation of the Statement of Net Cost. The Agency's financial management processes 

are in transition from a budgetary to a strategic arena basis. The Agency's programs are 

referred to as strategic arenas. The transaction level coding structure that ordinarily 

would be included in a JFMIP compliant general ledger system to identify cost by strate

gic arena, was not in place for labor costs. Approximately, $290 million (58%) of the 

Agency costs included in the Statement of Net Cost represents salaries and benefits which 

were not coded at the transaction level by strategic arena. 

To prepare the Statement of Net Cost, a process was developed at year-end to infer 

the costs to be included. The process included a variety of techniques including data 

iterations, special ad hoc report design, and cost finding techniques. This used an 

intense concentration of resources. The information was developed and alternative 

audit procedures were employed to verify the information gathered. (The lack of data 

quality at the transaction level also indicates a substantial noncompliance with 

FFMIA. Refer to Program Cost Accounting Not Supported By the General Ledger 

for an additional discussion of this condition.) 

OMB Circular A-127, Section 5, Definitions, states, "...'financial system' means an 

information system, comprised of one or more applications, ...used for any of the 

following: 

collecting, processing, maintaining, transmitting, and reporting data about 

financial events; 

* supporting financial planning or budgeting activities; 

* accumulating and reporting cost information; or 

* supporting the preparation of financial statements." 

JFMIP SR-99-4, Core Financial System Requirements, states, "The financial manage

ment systems in the Federal government must be designed to support the vision 

articulated by the government's financial management community... .This includes the 

ability to... 

" facilitate the preparation of financial statements, and other financial reports 

in accordance with Federal accounting and reporting standards; ... [and] 

"* provide a complete audit trail to facilitate audits." 

During FY2000, the NRC implemented a labor cost distribution application that is 

designed to identify costs by strategic arena. 

Recommendation 

The CFO should review and assess whether labor cost distribution systems being 

implemented in FY2000 fully comply with accounting and reporting standards. 

U.S. NUCLEAR REGULATORY COMMISSION
R. Navarro & Associates, Inc.

Those systems should be designed to improve the timeliness and reliability of finan

cial reporting in future years. 

CFO's Comments 

"We have already initiated actions to assess PAY/PERS Labor System to ensure 

compliance with accounting and reporting standards and to validate the data for use in 

preparing the FY 2000 financial statements. In addition, we will examine the internal 

controls for the PAY/PERS Labor system including an assessment of the offices' 

compliance with the applicable policy and procedures. We plan to complete these 

assessments by July 1, 2000. 

We will also ensure that the new Peoplesoft Payroll and Time and Labor Systems, 

being implemented in FY 2001, will also comply with accounting and reporting 

standards. 

Beginning in March 2000, we will begin providing offices with labor-cost distribution 

reports for management purposes. We believe the system we have implemented for 

FY 2000 will improve the timeliness and reliability of financial reporting. 

As required by the Federal Financial Management Improvement Act, a remediation 

plan will be prepared by May 1, 2000." 

Auditors' Position 

We commend the CFO for taking steps in FY2000 to provide a process for the accu

mulation of personnel related costs. During a subsequent audit we will assess the 

internal controls, verify the reliability of the information produced by the system, and 

verify the adequacy of the system documentation. Furthermore, we will look to the 

remediation plan to provide the framework and related resources and milestones for 

the solution described by the CFO. 

C. Management Controls Over Fee Development 

During FY1999, an audit was conducted by the Office of the Inspector General (OIG) 

that identified issues that management should address relating to the development of 

fees. The audit was performed as an expanded review of issues raised during the 

FY1998 financial statement audit. The issues described below continued to exist 

during FY1999. 

Management controls, in the broadest sense, include the organization, methods, and 

procedures adopted by management to ensure that its goals are met. OIG found that 

weak management controls resulted in fee calculation errors, inconsistent processes, 

and an absence of adequate information. 

OMB Circular A-123, Management Accountability and Control, states, "...manage

ment controls are the organization, policies, and procedures used by agencies to 

reasonably ensure that: (i) programs achieve their intended results; (ii) resources are 

used consistent with Agency mission; (iii) programs and resources are protected from 

(continued on page 40) 

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1999 ACCOUNTABILITY AND PERFORMANCE REPORT (1,
Audit of FY 1999 Financial Statement (continued) 

R. Navarro & Associates, Inc. 

waste, fraud, and mismanagement; (iv) laws and regulations are followed; and (v) 

reliable and timely information is obtained, maintained, reported, and used for deci

sion making." 

The OIG identified several management control weaknesses, including: (1) lack of 

formal procedures and (2) the lack of quality control over the fee calculations. 

The report states that there are no formally documented procedures for calculating 

fees and preparing the fee rule. A few informal procedures, accumulated over the 

years in a piecemeal fashion, do exist. However, most of the methodologies for fee 

calculation were passed verbally from individual to individual. 

The report also identified the lack of a quality control process or procedures for the 

fee calculations. NRC does not perform an objective review of the calculations to 

detect errors and ensure they were prepared correctly. 

As further evidence that management controls over fee development are inadequate, 

the CFO recently included a reference to a completed internal study on generic costs 

in the FY2000 proposed fee rule. OIG received the report after the FY2000 proposed 

fee rule was issued for Agency comment and it was labeled "DRAFT GENERIC 

STUDY." The CFO subsequently issued an errata sheet to the proposed fee rule 

indicating that the study had not been issued in final and that the preliminary results 

of the subject study did not identify any costs classified as 'generic' that should be 

included in the computation of the Part 170 hourly rates. 

The lack of management controls is considered a material weakness. 

Recommendation 

The CFO should address the immediate need for documented policy and a quality 

control process over fee development. It is essential to the integrity of the fee devel

opment process that greater discipline and structure be implemented. 

CFO's Comments 

"We agree with the need for adding more structure to the fee development process. 

We plan to document the license fee rule development process, and establish general 

procedures for calculating fees and conducting quality control. The CFO has selected 

a contractor, familiar with the fee rule development process, to document that process 

by October 2000. We are also taking actions to strengthen management controls: 

1) we have a contractor on board to look at the fee model and recommend improve

ments to that process; 2) we are streamlining the data-entry process to the fee model 

to reduce the potential for error and eliminate some of the duplicate entry; and 3) we 

are hiring a fee policy analyst to assist in development of the fee rule which will 

enhance quality control." 

Auditors' Position 

The steps described by the CFO move toward improving the management control and 

quality assurance process over fee development. The CFO indicates that the model 

will be assessed, data input will be streamlined, and personnel will be hired. How

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ever, no mention is made of the management control elements that will be put in 

place by the contractor. In the development and implementation of management 

controls and the related management directive, we encourage the CFO to include a 

clear and concise discussion of the following: 

* control environment, 

* risk assessment processes, 

* control activities, 

* information system(s) and communications processes, and 

* monitoring and quality assurance techniques. 

These five elements represent the internal control standards prescribed by the GAO 

for federal agencies. 

During a subsequent audit, we will evaluate the progress made on this condition. 

Currently, the CFO plans corrective action by October 2000. 

D. Financial Statement Preparation 

The FY1998 management letter included an observation on the Financial Statement 

Preparation Process. The observation stated, in part, "Instead of NRC initiating 

actions to assess financial reporting requirements and develop solutions, the Agency 

relied on the audit process to identify the problem and outline the solution." The 

comment further states, "... the financial reporting process would benefit by (1) 

improving communication between policy review and implementation functions, (2) 

preparing and documenting the analysis of policy decisions, (3) producing interim 

financial statements ... to identify reporting issues early, and (4) ensuring the accuracy 

of data that supports the financial statement by improving the internal review and 

assessment of systems, reports and data that support the principal statements." 

In the current year, the Agency did not have adequate financial statement compilation 

practices. The practices in place did not provide for the following: 

" an assessment of the internal controls over the non-financial (Regulatory 

Information Tracking System - RITS) data for the Statement of Net Cost; 

" a communication process to Agency staff that a non-financial system would 

be used to support financial statement preparation, therefore making it 

essential to comply with Agency guidance on the accumulation of informa

tion for the system; 

" an interim assessment of the nature or reliability of the information that was 

being collected from the non-financial system; and 

" an assessment of what information would be used, how it would be used, 

and the operational relevance the non-financial information had to the 

operations of the Agency. (continued on page 42) 

A41 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT (?r
Audit of FY 1999 Financial Statement (continued) 

R. Navarro & Associates, Inc. 

Management's practices continue to overlook the benefit of planning and evaluating 

the year-end compilation process in order to provide timely, complete and reliable 

financial statements for audit. 

The General Accounting Office in its Performance and Accountability and High-Risk 

Series entitled, Major Management Challenges and Risks, dated February 1999 

stated, "Audited financial statements are essential to providing an annual public 

scorecard on accountability. However, an unqualified opinion, while certainly impor

tant, is not an end in itself. For some agencies, the preparation of financial state

ments requires considerable reliance on ad hoc programming and analysis of data 

produced by inadequate systems that are not integrated or reconciled, and often 

require significant audit adjustments. Efforts to obtain reliable year-end data that are 

not backed up by fundamental improvements in underlying financial management 

systems and operations to support ongoing program management and accountability 

will not achieve the intended results of the CFO Act over the long term." 

Recommendation 

The CFO should assess current financial statement compilation practices for respond

ing to the requirements of the CFO Act principal statements. The Agency should 

develop and implement a financial statement preparation process that provides timely 

preparation of statements, supporting reports, and analysis during the fiscal year and 

at year's end. 

CFO's Comments 

"During the past few years, the agency has been in transition in developing and 

integrating its strategic plan, performance report, and performance plan and budget. 

This evolutionary development phase has impacted financial reporting as the agency 

has moved to develop the underlying financial systems needed to support the new 

reporting requirements. This condition was further compounded by significant 

revisions the Office of Management and Budget made to the form and content of 

financial statements effective for FY 1998. 

As part of our annual assessment, we will examine the process used to produce the 

financial statements to determine where improvements can be made. In particular, 

we have recognized our lack of systems and a well disciplined compilation process 

for presenting labor-cost data by strategic arena and the effect on preparing financial 

statements in a timely and comprehensive manner over the past 2 years. As a result, 

we implemented corrective action for FY 2000 to capture labor-cost data by strategic 

arena and will be able to make more use of electronic means to assemble, summarize, 

and analyze data. We expect these actions will improve and streamline the financial 

statement preparation process." 

Auditors' Position 

The CFO should consider addressing other areas of the compilation process. For 

example, the implementation of routine interim statements and footnote preparation 

could identify: 

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"* accounting and reporting issues that should be addressed prior to year end, 

"* the need for a documented compilation process, 

"• techniques for expediting the preparation of the financial statements and 

footnotes, and 

"* processes to analyze the information compiled in order to refine accruals at 

year end. 

The CFO should adopt an efficient and effective compilation process to replace the ad 

hoc process presently used. 

E. Segregation of Duties - PAY/PERS 

The Standards for Internal Controls in the Federal Government issued by the Comp

troller General state "...key duties and responsibilities in authorizing, processing, 

recording, and reviewing transactions should be separated among individuals." 

NRC uses a system referred to as PAY/PERS to maintain personnel information and 

to process payroll. The Division of Accounting and Finance (DAF), is responsible for 

maintaining the payroll functions of PAY/PERS and controlling system access. The 

system relies on hierarchical access profiles consisting of three levels as follows: 

* Level 1 - Payroll Inquiry, 

"* Level 2 - Payroll Processing, and 

"* Level 3 - Systems Administrator. 

The Level 3 profile allows unrestricted access to the system including the security 

tables. Thus, holders of the Level 3 access profile can assign user IDs and enable new 

users. Holders of Level 3 profiles are not only granted complete access to the system, 

but also have the ability to create fictitious user IDs. 

Our review of user access identified three DAF employees, including the team leader 

in charge of payroll operations, who held a Level 3 profile. Thus, the payroll opera

tions team leader had incompatible functions. The team leader's functions were not 

properly segregated because the individual could both commit errors and irregulari

ties and conceal them in the course of discharging the normal duties of the position. 

Recommendation 

The CFO should ensure that effective segregation of duties is maintained prior to 

assigning access profiles to PAY/PERS personnel. The CFO should also ensure that 

consideration is given to segregation of duties during the design and evaluation phase 

of newly designed systems. 

Additionally, periodic review and assessment should be made of systems during the 

implementation and operations stages to assure that conditions or circumstances have 

not changed causing incompatible functions. 

(continued on page 44) 

1439R 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT ;5
Audit of FY 1999 Financial Statement (continued) 

R. Navarro & Associates, Inc. 

CFO's Comments 

"The OCFO changed the Payroll Operations Team Leader's profile to access level II 

data as soon as this was identified during the audit of the financial statement. The 

PAY/PERS system administrator will ensure adequate segregation of duties. 

The Peoplesoft payroll implementation team leader/system administrator will ensure 

that proper segregation of duties is incorporated into the new payroll system through 

the system's security profiles and will administrator [sic] annual reviews to ensure 

that there are adequate segregation of duties." 

Auditors' Position 

During a subsequent audit we will review the practice described by the CFO. 

F. Controls Over Authorized Users - PAY/PERS 

OMB Circular A-123, Management Accountability and Control, Part II states "Spe

cific management control standards are: ... access to resources and records should be 

limited to authorized individuals, and accountability for the custody and use of 

resources should be assigned and maintained." 

NRC uses PAY/PERS to maintain personnel information and to process payroll. 

The system operates on a host computer maintained by the National Institutes of 

Health (NIH). 

As discussed previously, system access is granted based on three profiles. The 

system, because of its integrated payroll and personnel functions, has two designated 

lead system administrators: a DAF system administrator who is responsible for 

maintaining and controlling access to the payroll functions; and an Office of Human 

Resources individual who is responsible for maintaining and controlling access to the 

personnel functions. 

Although there were 70 authorized users of personnel functions and 9 authorized 

users of payroll functions, there was no systematic process implemented for system 

administrators to perform periodic reviews for authorized user access. Thus, there 

was no assurance that any unauthorized users would be identified on a timely basis. 

The NIH provides a monthly Detail Utilization Report that identifies user access 

sessions in PAY/PERS. The report is considered part of the payment approval pro

cess and was not used as a means to review or identify unusual activity or unautho

rized users. 

Recommendation 

The CFO should direct the DAF system administrator to begin using the Detail 

Utilization Report to perform periodic reviews of authorized users. The review 

should include techniques to identify user sessions for investigating unusual utiliza

tion sessions or usage patterns. 

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CFO's Comments 

"The OCFO will develop a management report, based on the Detail Utilization 

Report, that will be used to identify unusual activity and unauthorized user access. 

This report will be reviewed biweekly by the system administrator who will report 

any unusual findings to management. Corrective action will be initiated in 

March 2000." 

Auditors' Position 

During a subsequent audit, we will review the report and the review process described 

by the CFO. 

G. Management Controls Over Small Entity Certifications 

Under 10 CFR 171.16, materials licensees can qualify as small entities and pay 

reduced annual fees of either $400 or $1,800, depending on their size. Businesses, 

nonprofit agencies, educational institutions or local governments may qualify as small 

entities depending on either average annual gross receipts, number of employees, or 

population jurisdiction. Size standards are based on guidelines prescribed by the 

Small Business Administration. Licensees qualify for reduced fees by completing 

and submitting a Certification of Small Entity Status For The Purposes of Annual 

Fees Imposed Under 10 CFR Part 171 (NRC Form 526) with the applicable fee. 

Licensees self-certify as small entities and corroborating evidence is not required. The 

CFO performs a cursory review of NRC Forms 526 received, primarily for complete

ness. A few certifications are denied each year, based on information available to 

license fee analysts. During FY1999, the Agency granted 1,180 fee reductions total

ing $6.4 million or 83%, from the originally billed materials fees of $7.7 million. 

In FY1998, the OIG reviewed the small entity certifications filed by 244 licensees. 

The review consisted of verifying the size standard claimed with information con

tained in a business database. This process identified 15 licensees with reported 

revenues exceeding the size standards. As an additional validation, the review in

cluded contacting licensees and obtaining additional information such as income tax 

returns or audited financial statements. OIG determined that six licensees had filed 

false small entity certifications. 

OMB Circular A-123, Management Accountability and Control "...provides guidance 

to Federal managers on ... establishing, assessing, correcting and reporting on man

agement controls. Management controls are the organization, policies and procedures 

used to reasonably ensure that (i) programs achieve their intended results; (ii) re

sources are used consistent with Agency mission; (iii) programs and resources are 

protected from waste, fraud, and mismanagement; (iv) laws and regulations are 

followed; and (v) reliable and timely information is obtained, maintained, reported 

and used for decision making." 

(continued on page 46) 

14T5P 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT (5
Audit of FY 1999 Financial Statement (continued) 

R. Navarro & Associates, Inc. 

The Agency indicated that existing procedures for cursory review of the small entity 

certifications are sufficient and they do not perceive the need for verifying the claims 

made by licensees. Also, the CFO believes resources are not available for verifying 

certifications. 

The results of the OIG review, however, indicate that the existing controls over small 

entity certification are not adequate. Existing procedures for reviewing small entity 

certifications do not provide sufficient assurance that fee reductions are being granted 

only to those intended by the regulations and the Commission. 

Certain licensees may not be entitled to the small entity fee reductions, thereby 

increasing fees charged to other licensees. 

Recommendation 

The CFO should, at least quarterly, select a statistically valid sample of small entity 

certifications filed and request evidence, such as income tax returns or financial 

statements, to support the size standards claimed by the licensees. 

CFO's Comments 

"We share your concern of licensees filing false small entity certifications. We have 

reservations with implementing the corrective actions you have recommended. 

Under the Paperwork Reduction Act, requesting income tax returns or financial 

statements from licensees would require approval from the Office of Management 

and Budget. We also have concerns regarding the costs of validating the small entity 

status of a sample of licensees each quarter. 

The OCFO plans to explore your recommendation along with other corrective ac

tions. We will advise you of the results by June 1, 2000." 

Auditors' Position 

We commend the CFO for considering other options to address the condition. The 

primary concern is that the CFO design and implement a process that provides the 

assurance that licensees who benefit from the small entity program are in fact quali

fied to do so. We look forward to the results of the CFO's efforts by June 1, 2000. 

H. Management Controls Over General Services Administration (GSA) Credits 

The CFO controls the payments made through drawdown on the On-Line Payment 

and Collection System (OPAC). NRC has a process for the approval of invoices 

which is identified in the Agency's desk procedures. The process provides for project 

managers to receive Approval Form For Interagency Billing - Non-DOE (Form 441) 

listing OPAC charges for review and approval. When the project manager does not 

approve the charges, or partially approves the charges, a chargeback is requested 

from the vendor. 

DAF's Desk Procedures, Financial Reports and Analysis Section, Chapter 7, for 

OPAC transactions provides guidance that when an invoice amount is not approved, 

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and while the other agency is initiating the credit, a note should be placed in a pend

ing file awaiting the subsequent month's OPAC listing with the related credit. 

Our testing disclosed instances where GSA rental charge credits were requested by 

the project manager and not received by the Agency. The normal practice for transac

tions of this nature was not followed for GSA rental credits. GSA precludes the 

Agency from initiating a chargeback. Adjustments to GSA rental charges come to the 

Agency in the form of credits. The Financial Operations Branch (FOB), DAF does 

not verify or track that credits are received. Accounting personnel indicated that the 

GSA rental payments were the only disbursements handled this way. Other 

chargebacks were reviewed and the credits were verified through to the general 

ledger. 

Recommendation 

The CFO should direct: 

" The FOB to track and verify that GSA credits are received by holding a copy 

of the Form 441 and invoice in a pending file until the credit is received. 

" FOB to follow up with the project manager routinely to discuss any credits 

that have not been received in a timely manner. 

CFO's Comments 

"The DAF Financial Operations Branch has established a process to track and moni

tor GSA credits effective with the February 2000 billings. The procedure includes 

routine follow-ups with the project manager regarding untimely credits. Written 

procedures will be completed in March 2000." 

Auditors' Position 

During a subsequent audit, we will review the practice described by the CFO and the 

adequacy of the written procedures. 

Status of Prior Years' Comments 

A. Managerial Cost Accounting 

The CFO developed a remediation plan dated July 19, 1999 outlining the strategy to 

implement the requirements in SFFAS No. 4. The Agency anticipates implementing 

an integrated resource management system over a three year period and to implement 

cost management practices through the guidance of a newly established Cost Man

agement Steering Committee. 

As indicated in the current year findings section of this report (Refer to Comment A), 

this condition remains open and unresolved during FY1999. The remediation plan 

actions are pending implementation. (See the recommendation offered for Comment 

A - Managerial Cost Accounting, in the current year.) 

(continued on page 48) 

147J6 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT (;5
Audit of FY 1999 Financial Statement (continued) 

R. Navarro & Associates, Inc. 

B. Financial Reporting 

During FY1998, NRC did not have fully aligned strategic, budget and performance 

plans. OMB Bulletin No. 97-01, states on page 26, Instructions for the Preparation 

of the Statement of Net Cost, "Preparers ...should decide the exact classification of 

... major programs based on the missions and outputs described in its GPRA strategic 

and annual plans, the entity's budget structure ....." 

NRC management understood that the requirement for having the three plans fully 

aligned would come into effect for FY1999, in accordance with the GPRA. The 

current Statement of Net Cost properly reflects the alignment envisioned by the 

OMB. This comment is resolved and closed. 

C. CISSCO Obligations 

NRC did not follow, during FY1998, established fund control policy and issued 

obligations to GSA without recording them in the NRC's general ledger system. 

Additionally, fund controls which were in place were set at the job code level, 

thereby precluding effective management control at the lowest functional level. 

The actions recommended during FY1998 were taken by the CFO, therefore, this 

condition is resolved and closed. 

D. Revenue from Reimbursable Agreements 

In the prior year, the revenue from reimbursable agreements was not consistently 

recorded using accrual based revenue recognition principles. In some cases, revenue 

was recorded as contract support expenses were paid, on the cash basis. In other 

cases, such as agreements with Department of Energy (DOE), revenue was recorded 

as NRC employees performed services on the related projects, which is appropriate. 

Additionally, revenue from foreign cooperative research programs was recorded as 

research expenses were paid. Generally, revenue was recognized at the time when 

the related expenses were paid, on the cash basis of accounting. 

During the current year, the CFO implemented procedures to ensure that revenue 

from reimbursable agreements was properly reflected on the principal statements. 

The Agency also is in the process of drafting policy guidance on this issue. 

While the CFO took corrective action, this condition will remain open until the 

policy guidance is issued in final form. 

CFO's Comments 

"The final accounting policy guidance concerning the recording of revenue from 

reimbursable agreements will be issued by April 1, 2000." 

Auditors' Position 

During a subsequent audit, we will review the propriety and issuance of the policy 

being drafted. 

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Assurance on Performance Measures 

With respect to internal controls related to performance measures, the Office of the Inspector 

General performed those procedures and will report on them separately. Our procedures were 

not designed to provide assurance over reported performance measures, and, accordingly, we do 

not provide an opinion on such information. 

INDEPENDENT AUDITORS'REPORT ON COMPLIANCE WITH LAWS AND 

REGULATIONS 

We conducted our audit in accordance with generally accepted auditing standards; the standards 

applicable to financial audits contained in Government Auditing Standards, issued by the Comp

troller General of the United States; and Office of Management and Budget (OMB) Bulletin No. 

98-08, Audit Requirements for Federal Financial Statements. 

The U.S. Nuclear Regulatory Commission (NRC) management is responsible for complying 

with laws and regulations applicable to the Agency. As part of obtaining reasonable assurance 

about whether the Agency's financial statements are free of material misstatement, we performed 

tests of its compliance with certain provisions of laws and regulations. Noncompliance with 

these provisions could have a direct and material effect on the determination of financial state

ment amounts and certain other laws and regulations specified in OMB Bulletin No. 98-08, and 

the Federal Financial Management Improvement Act (FFMIA) of 1996. Providing an opinion on 

compliance with certain provisions of laws and regulations was not an objective of our audit and, 

accordingly, we do not express such an opinion. 

The results of our tests of compliance with the laws and regulations described in the preceding 

paragraph exclusive of FFMIA, disclosed an instance of noncompliance with the following laws 

and regulations that are required to be reported under Government Auditing Standards and OMB 

Bulletin No. 98-08, that is described below. 

Status of Prior Year Comment - Non-FFMIA 

Part 170 Hourly Rates 

As previously reported in FY1998, the Omnibus Budget Reconciliation Act (OBRA) of 1990 

requires the NRC to recover approximately 100% of its budget authority by assessing fees. 

Accordingly, NRC assesses two types of fees to its licensees and applicants. One type, specified 

in 10 CFR Part 171, consists of annual fees assessed to power reactors, materials and other 

licensees. The other type, specified in 10 CFR Part 170 and authorized by the Independent 

Offices Appropriation Act (IOAA) of 1952, is assessed to specific licensing actions, inspections 

and other services provided to licensees and applicants. 

Each year, the Office of the Chief Financial Officer (OCFO) computes the hourly rates used to 

charge for the time incurred by NRC personnel in providing Part 170 services. The rates are 

based on budgetary data and are used to price individually identifiable Part 170 services. 

(continued on page 50) 

A49 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT (ý
Audit of FY 1999 Financial Statement (continued) 

R. Navarro & Associates, Inc. 

The FY1998 rates were not developed in accordance with applicable laws and regulations 

because they were not based on the full cost of providing Part 170 services. For example, the 

calculations did not include certain contract support costs of approximately $70 million, net of 

contract support costs directly billable to licensees and applicants. The excluded contract support 

costs, $70 million, primarily consisted of research projects. The $70 million represents approxi

mately 15% of the FY1998 NRC appropriation of $472.8 million. 

The contract support costs were excluded because, based on the OBRA conference agreement, 

the Chief Financial Officer (CFO) classified these costs as "generic activities" that benefit 

licensees generally. Thus, NRC recovered these costs through the Part 171 annual fees. 

In response to the condition reported in the prior year, the Office of the Inspector General (OIG) 

performed an audit and issued report (OIG/99A-01) NRC's License Fee Development Process 

Needs Improvement. "... [T]he scope of audit [was limited] to the fee development process, 

including the calculations used to prepare the rates and fees under the Code of Federal Regula

tions, Title 10 Parts 170 and 171 for fiscal years ... 1995 through 1999." 

The audit found that the conditions reported in the prior year continue to exist. The current year 

follow-up procedures disclosed that, although the CFO assembled a multi-office team to study 

generic costs within the Agency, at the end of field work no final report was available for our 

review. Thus, the condition remains unresolved. 

CFO's Comments 

"The final report of generic costs study will be issued by April 1, 2000." 

Auditors' Position 

During a subsequent audit, we will consider the final report mentioned by the CFO in order to 

assess whether an objective study was performed, and the report properly describes the study's 

scope and methodology in order to support the conclusion(s) reached by the multi-office team. 

Current Year Comments - FFMIA 

Under FFMIA, we are required to report whether the Agency's financial management systems 

substantially comply with the Federal financial management systems requirements, Federal 

accounting standards, and the United States Government Standard General Ledger at the transac

tion level. To meet this requirement, we performed tests of compliance using the implementa

tion guidance for FFMIA included in Appendix D of OMB Bulletin No. 98-08. The results of 

our tests disclosed instances, described below, where the Agency's financial management sys

tems did not substantially comply with the three requirements discussed above. 

Program Cost Accounting Not Supported By the General Ledger 

The GAO identifies FFMIA compliant federal financial management systems as having six 

elements as follows: 

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"* The scope of functions supported -- processes in program execution 

"• How data quality will be assured -- data stewardship 

"• The information to be processed -- management information 

"• How systems fit together to support the functions -- system architecture 

"• Safeguards needed to ensure integrity of operations and data -- internal control 

"* Implementing the model for financial management systems -- implementation and system 

maintenance 

During the current year we assessed the financial management system of the Agency to assure 

that the system provided the framework to meet FFMIA requirements. We found that the finan

cial management system supporting the recording, accumulation and reporting of labor costs by 

program was not in place due to the lack of transaction level data stewardship and management 

information. 

The Agency relies on a Budget and Reporting (B&R) code to identify costs to the budget fiscal 

year, allowance, fund type, strategic arena, program and planned accomplishment for all costs 

except labor. The labor costs of the Agency represent approximately 58% of the expenses 

included in the Statement of Net Cost. While the Agency recognized the need to transition from 

budget based accounting to program accounting, they did not provide in their financial manage

ment system or in an interim application, the tools necessary to maintain a reliable audit trail for 

labor cost by program. Instead, a process was developed at year-end to infer the costs included 

on the Statement of Net Cost. The process included a variety of techniques including data 

iterations, special ad hoc report design, and cost finding techniques. This used an intense con

centration of resources. The information was developed and alternative audit procedures were 

employed to verify the information gathered. 

The lack of data quality at the transaction level indicates a substantial noncompliance with 

FFMIA. (Refer to the Report on Management's Assertion About the Effectiveness of Internal 

Control, Comment B - Program Cost Accounting, for an additional discussion of this condition 

as a material weakness. Also included in Comment B are the CFO's Comments and Auditors' 

Position.) 

Status of Prior Year Comments - FFMIA 

A. Managerial Cost Accounting 

Refer to the Report on Management's Assertion About the Effectiveness of Internal 

Control, Comment A - Managerial Cost Accounting, for a detailed discussion of the 

condition and recommendation. For FY1999 this condition continues to be consid

ered a material weakness and a FFMIA substantial noncompliance. 

(continued on page 52) 

9 N51 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT 1ýv
Audit of FY 1999 Financial Statement (continued) 

R. Navarro & Associates, Inc. 

B. Accounts Receivable Classifications 

We reported in the prior year, that CFO personnel performed an assessment of trans

action level classifications and found a technical error in the interface's "file transfer 

protocols." Apparently when data interfaced with the general ledger, the program 

protocol which triggers the system to set the correct classification from the data files 

was inoperable. The amounts on the balance sheet, however, had been adjusted to 

reflect the proper financial line item classifications. 

The review of the classifications in the current year disclosed the technical en

hancement made by the Agency in March 1999 corrected the condition previously 

described. This condition is resolved and closed. 

C. Business Continuity 

In prior years, we reported conditions resulting from our assessment of NRC's man

agement control program relating to the Agency's business continuity practices for 

major financial management systems. The major systems identified included (1) the 

core general ledger - Federal Financial System (FFS) operated by Treasury's Finan

cial Management Service (FMS) and (2) fee systems. 

The remediation plan, dated June 1, 1998, prepared by the CFO described the strat

egy to design a solution and provided a timetable for resolving the substantial non

compliance with FFMIA. The plan was reviewed and accepted by the Office of the 

Inspector General and has been acted upon by NRC management as follows: 

1. General Ledger - FFS: NRC contacted FMS expressing concern about the lack 

of a plan that is fully tested and restated that the responsibility for maintaining 

and testing the plan rests with FMS and not NRC. FMS replied that action was 

being taken, however, the reasonable assurance letter issued to NRC by FMS as 

of September 30, 1999, indicated that little to no progress has been made on this 

issue. The substantial noncompliance remains unresolved. NRC is dependent 

on FMS to resolve this condition. 

CFO's Comments 

"As you know, NRC is dependent on Treasury's Financial Management Service 

to resolve this condition. In its FY 1999 Annual Statement of Assurance, the 

Financial Management Service indicated that they will not resolve the lack of a 

tested back-up recovery capability until May 31, 2001. In my February 8, 2000 

letter to the Commissioner, Financial Management Service, I requested his 

assistance in resolving this issue during FY 2000. We will continue to follow-up 

with the Financial Management Service on this issue until it is resolved." 

Auditors' Position 

We commend the CFO's continuing efforts to resolve this condition in coordina

tion with FMS. 

U.S. NUCLEAR REGULATORY COMMISSION
R. Navarro & Associates, Inc.

2. Fee Systems: The strategy developed in the remediation plan for this system has 

been implemented. In December 1998, NRC accepted a technical proposal from 

a contractor to develop and test a continuity plan for the fee systems. On January 

29, 1999, the contractor delivered a work plan that described the work to be 

performed, the milestones and the deliverables. As of the end of field work, the 

Agency's contractor has satisfactorily addressed this condition. This condition is 

resolved and closed. 

Consistency of Other Information 

NRC's overview of program performance goals and results, and other supplemental financial and 

management information contain a wide range of data, some of which is not directly related to 

the principal statements. We do not express an opinion on this information. We have, however, 

compared this information for consistency with the principal statements and discussed the mea

surement and presentation methods with NRC management. Based on this limited effort, we 

found no material inconsistencies with the principal statements or noncompliance with OMB 

guidance. 

Objectives, Scope and Methodology 

NRC management is responsible for (1) preparing the principal statements in conformity with 

the basis of accounting described in Note 1 to the Notes to Principal Statements, (2) establishing, 

maintaining, and assessing internal controls to provide reasonable assurance that FMFIA's broad 

control objectives are met, and (3) complying with applicable laws and regulations including the 

requirements referred to in FFMIA. 

We are responsible for expressing an opinion on whether (1) the principal statements are free of 

material misstatement and presented fairly, in all material respects, in conformity with the basis 

of accounting described in Note 1 to the principal statements, and (2) for obtaining reasonable 

assurance about whether management's assertion about the effectiveness of internal control is 

fairly stated, in all material respects, based upon criteria established by FMFIA and OMB Circu

lar A-123, Management Accountability and Control. As of the date of our report, NRC manage

ment had completed its evaluation of financial controls. 

We are also responsible for testing compliance with selected provisions of laws and regulations, 

and for performing limited procedures with respect to certain other information in the principal 

statements. In order to fulfill these responsibilities, we: 

" examined, on a test basis, evidence supporting the amounts and disclosures made in the 

principal statements; 

"* assessed the accounting principles used and significant estimates made by management; 

"• evaluated the overall presentation of the principal statements; 

"• obtained an understanding of internal controls related to safeguarding of assets, compli

ance with laws and regulations including execution of transactions in accordance with 

budget authority and financial reporting in the principal statements; 

(continued on page 54) 

A53 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT
Audit of FY 1999 Financial Statement (continued) 

R. Navarro & Associates, Inc. 

" assessed control risk and tested relevant internal controls over safeguarding of assets, 

compliance, and financial reporting, and evaluated management's assertion about the 

effectiveness of internal control; 

" tested compliance with selected provisions of the following laws and regulations: Anti

Deficiency Act (Title 31 U.S.C.), National Defense Appropriation Act (PL 101-5 10), 

Omnibus Budget Reconciliation Act of 1990 (PL 101-508), Debt Collection Act of 1982 

(PL 97-365), Prompt Payment Act (PL 97-177), Civil Service Retirement Act of 1930, 

Civil Service Reform Act (PL 97-454), Federal Managers' Financial Integrity Act (PL 

97-255), Chief Financial Officers' Act (PL 101-576), Budget and Accounting Procedures 

Act, Federal Financial Management Improvement Act (PL 104-208); and 

" reviewed compliance and reported in accordance with FFMIA whether the Agency's 

financial management systems substantially comply with the Federal financial manage

ment system requirements, applicable accounting standards, and the U.S. Standard 

General Ledger at the transaction level. 

We did not evaluate all internal controls relevant to operating objectives as broadly as defined in 

FMFIA, such as those controls for preparing statistical reports and those for ensuring efficient 

and effective operations. We limited our internal control tests to those controls necessary to 

achieve the objectives described in our opinion on management's assertion about the effective

ness of internal controls. We performed our work in accordance with generally accepted audit

ing standards, Government Auditing Standards and OMB Bulletin No. 98-08, Audit 

Requirements for Federal Financial Statements. 

Agency Comments 

On February 15, 2000, the CFO responded to the Inspector General on our draft report and 

addressed the recommendations noted in the report. However, the CFO did not provide specific 

remedial actions for the FFMIA exception Comment B, Program Cost Accounting, noted in the 

current year. The CFO indicated that a remediation plan will be prepared by May 1, 2000. 

Based on our review of the CFO's comments, we are satisfied that the actions described meet the 

intent of our recommendations and FFMIA guidelines. The CFO's comments are appended to 

this report in their entirety. 

Under separate cover, comments will be provided to NRC management outlining opportunities 

for strengthening internal control and operating efficiency. We appreciate NRC staff cooperation 

and continued interest in improving financial management within the agency. 

This report is intended for the management of the U.S. Nuclear Regulatory Commission, OMB, 

Congress and the NRC Office of the Inspector General. This restriction is not intended to limit 

the distribution of this report, which upon acceptance by the OIG, is a matter of public record. 

February 3, 2000 

4 U.S, NUCLEAR REGULATORY COMMISSION
PRINCIPAL STATEMENTS 

FOR FISCAL YEAR 1999 

U. S. NUCLEAR REGULATORY COMMISSION 

1 55A 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT ; u
BALANCE SHEET 

As of September 30, 1999 

(in dollars)

Assets: 

Intragovernmental assets: 

Fund balances with Treasury (Note 2) 

Accounts receivable (Note 3) 

Other 

Total intragovernmental assets 

Cash and other monetary assets 

Accounts receivable, net (Notes 3 and 4) 

Property and equipment, net (Note 5) 

Other

$151,809,570 

1,680,208 

1,207,283 

154,697,061 

50,000 

34,554,794 

40,471,198 

48,038 

Total Assets $229,821,091

Liabilities: 

Intragovernmental liabilities: 

Accounts payable 

Other (Notes 6 and 7) 

Total intragovemmental liabilities

Accounts payable 

Federal employees benefits 

Other (Notes 6 and 7)

Total Liabilities

$ 8,764,798 

39,389,538 

48,154,336 

18,837,930 

3,885,000 

42,390,533 

113,267,799 

103,250,102 

13,303,190 

116,553,292 

$229,821,091

Net Position: 

Unexpended appropriations (Note 9) 

Cumulative results of operations (Note 10)

Total Net Position

Total Liabilities and Net Position

(continued on page 58) 

The accompanying notes to the principal statements 

are an integral part of this statement. 

A57 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT 9U
Principal Statements (continued)

STATEMENT OF NET COST 

For the year ended September 30, 1999 

(in dollars)

Nuclear Reactor Safety 

Intragovernmental 

With the public 

Total 

Less earned revenue (Note 11) 

Net cost of Nuclear Reactor Safety 

Nuclear Materials Safety 

Intragovernmental 

With the public 

Total 

Less earned revenue (Note 11) 

Net cost of Nuclear Materials Safety 

Nuclear Waste Safety 

Intragovernmental 

With the public 

Total 

Less earned revenue (Note 11) 

Net cost of Nuclear Waste Safety 

International Nuclear Safety Support 

Intragovernmental 

With the public 

Total 

Less earned revenue (Note 11)

$120,529,643 

215,778,952 

336,308,595 

378,373,141

$(42,064,546)

$ 26,687,043 

61,160,656 

87,847,699 

51,819,780

36,027,919

$ 15,093,015 

47,967,399 

63,060,414 

11,645,979

51,414,435

$ 6,105,603 

10,017,068 

16,122,671 

3,187,425

Net cost of International Nuclear 

Safety Support

The accompanying notes to the principal statements 

are an integral part of this statement. 

U.S. NUCLEAR REGULATORY COMMISSION

Net Cost of Operations

12,935,246 

$ 58,313,054
STATEMENT OF CHANGES IN NET POSITION 

For the year ended September 30, 1999 

(in dollars)

Net Cost of Operations $ (58,313,054)

Financing sources (other than exchange revenue): 

Appropriations used (Note 12) 

Non-exchange revenue (Note 12) 

Imputed financing (Note 12) 

Transfer-in (Note 12) 

Transfers-out (Note 12)

45,093,029 

1,315,694 

16,781,147 

442,254,845 

(443,570,539)

Total financing sources 61,874,176

Net results of operations 3,561,122

Decrease in unexpended appropriations

Change in Net Position

Net Position - Beginning of Period 

Net Position - End of Period

(12,772,851) 

(9,211,729) 

125,765,021 

$116,553,292

(continued on page 60) 

The accompanying notes to the principal statements 

are an integral part of this statement. 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT -
Principal Statements (continued)

STATEMENT OF BUDGETARY RESOURCES 

For the year ended September 30, 1999 

(in dollars) 

Budgetary Resources (Note 13):

Budget authority 

Unobligated balances - beginning of period 

Spending authority from offsetting collections 

Adjustments 

Total Budgetary Resources 

Status of Budgetary Resources: 

Obligations incurred 

Unobligated balances - available 

Unobligated balances - not available

$472,776,847 

35,180,599 

4,405,095 

7,839,918 

$520,202,459

$486,308,618 

33,508,969 

384,872 

Total Status of Budgetary Resources $520,202,459

Outlays:

Obligations incurred 

$486,308,618 

Less: Spending authority from offsetting 

collections and adjustments

Subtotal

Obligated balances, net - beginning of period 

Less: obligated balance, net - end of period

(12,245,013) 

474,063,605 

124,763,659 

(116,582,904) 

Total Outlays $482,244,360

The accompanying notes to the principal statements 

are an integral part of this statement. 

U.S. NUCLEAR REGULATORY COMMISSION
STATEMENT OF FINANCING 

For the year ended September 30, 1999 

(in dollars) 

Obligations and Nonbudgetary Resources 

Obligations incurred 

Less: Spending authority for offsetting 

collections and adjustments 

Imputed financing (Note 12) 

Transfer-in (Note 12) 

Transfer-out (Note 12) 

Exchange revenues not in the budget (Note 11) 

Total Obligations and Nonbudgetary Resources 

Resources Not Funding Net Cost of Operations 

Change in undelivered orders 

Capitalized costs 

Financing sources that fund costs of prior periods 

Other 

Total Resources Not Funding Net Cost of Operations

Costs Not Requiring Resources 

Depreciation and amortization

Total Costs Not Requiring Resources

Net Cost of Operations

$486,308,618 

(12,245,013) 

16,781,147 

442,254,845 

(442,254,845) 

(440,456,670) 

$ 50,388,082

11,486,094 

(7,437,988) 

(2,241,464) 

(4,578) 

1,802,064

6,122,908 

6,122,908 

$ 58,313,054

(continued on page 62) 

The accompanying notes to the principal statements 

are an integral part of this statement. 

A61 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT (?5
Principal Statements (continued) 

NOTES TO PRINCIPAL STATEMENTS 

September 30, 1998 

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

A. Reporting Entity 

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

agency of the Federal Government that was created by the U. S. Congress to regulate 

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

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

and security, and to protect the environment. Its purposes are defined by the Energy 

Reorganization Act of 1974, as amended, along with the Atomic Energy Act of 1954, 

as amended, which provide the foundation for regulating the Nation's civilian uses of 

nuclear materials. 

The NRC appropriations for salaries and expenses and the Inspector General include 

approximately $17 million of funds derived from the Nuclear Waste Fund and $3.2 

million from the General Fund for assistance provided to the U. S. Department of 

Energy (DOE). In addition, $4 million was available for obligation from appropria

tions provided by the U. S. Agency for International Development for the develop

ment of nuclear safety and regulatory authorities in Russia, Armenia, Kazakhstan, 

and the Ukraine for the independent oversight of nuclear reactors in these countries. 

The accompanying financial statements of NRC include the accounts of all funds 

under NRC control. The NRC is under budget functional classification 276 - Energy 

information, Policy, and Regulation and departmental code 31. The transfer appro

priations from 1) the Agency for International Development are under budget func

tional classification 150 - International Affairs and departmental code 72 and 2) the 

General Services Administration is under budget functional classification 800 

General Government and departmental code 47. 

B. Basis of Presentation 

These principal statements were prepared to report the financial position and results 

of operations of the NRC as required by the Chief Financial Officers Act of 1990 and 

the Government Management Reform Act of 1994. These financial statements were 

prepared from the books and records of the NRC in conformity with generally ac

cepted accounting principles, the requirements of Office of Management and Budget 

(OMB) Bulletin No. 97-01, Form and Content ofAgency Financial Statements, 

technical amendments, and NRC accounting policies. These statements are, there

fore, different from the financial reports, also prepared by the NRC pursuant to OMB 

directives, which are used to monitor and control NRC's use of budgetary resources. 

In accordance with technical amendments to OMB Bulletin No. 97-01, NRC made 

several changes to its principal financial statements and footnotes. On the balance 

sheet, entity and non-entity assets as well as liabilities covered and not covered by 

budgetary resources have been combined. The NRC has not prepared a Statement of 

U.S. NUCLEAR REGULATORY COMMISSION
NOTES TO PRINCIPAL STATEMENTS 

September 30, 1999 

Custodial Activity because the amounts involved are immaterial and are incidental to 

its operations and mission. 

The strategic arenas as presented on the Statement of Net Cost are based on the 

strategic plan and the FY 1999 budget structure. The budget line items for Manage

ment and Support and the Office of the Inspector General were allocated to strategic 

arenas using cost-finding techniques consistent with Statement of Federal Financial 

Accounting Standards Number 4, Managerial Cost Accounting Concepts and Stan

dards for the Federal Government. The NRC's four programmatic strategic arenas 

are described as follows: 

Nuclear Reactor Safety encompasses all NRC efforts to ensure that civilian nuclear 

power reactor facilities, as well as nonpower reactors, are operated in a manner that 

adequately protects public health and safety and the environment, and protects against 

radiological sabotage and theft or diversion of special nuclear materials. 

Nuclear Materials Safety encompasses NRC efforts to ensure that NRC-regulation 

aspects of nuclear fuel cycle facilities and nuclear materials activities are handled in a 

manner that provides adequate protection of public health and safety. This arena 

encompasses more than 20,000 specific and 100,000 general licensees that are regu

lated by the NRC and 30 Agreement States. 

Nuclear Waste Safety encompasses NRC's high-level waste regulatory activities 

associated with high-level waste storage and high-level waste disposal at Yucca 

Mountain, low-level radioactive waste activities associated with the disposal of waste, 

decommissioning activities which involve safely removing a facility from service and 

reducing residual radioactivity to a level that permits the property to be released, and 

regulation of uranium recovery. 

International Nuclear Safety Support encompasses international nuclear policy 

formulation, export-import licensing for nuclear materials and equipment, treaty 

implementation, international information exchange, international safety and safe

guards assistance, and deterring nuclear proliferation. NRC's international activities 

support broad U.S. national interests, as well as the NRC's domestic mission. 

C. Budgets and Budgetary Accounting 

For the past 25 years, Congress has enacted no-year appropriations which are avail

able for obligation by NRC until expended. The Omnibus Budget Reconciliation Act 

(OBRA) of 1990, as amended, requires the NRC to recover approximately 100 per

cent of its new budget authority of $469.8 million by assessing fees less the amounts 

derived from the Nuclear Waste Fund of $17 million and $3.2 million from the Gen

eral Fund for assistance provided to DOE which is excluded from license fee rev

enues. At the end of the fiscal year, NRC's appropriations were reduced by $ 976,000 

through a recission of funding in accordance with Public Law 106-51. 

(continued on page 64) 

A63 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT (~
Principal Statements (continued) 

NOTES TO PRINCIPAL STATEMENTS 

September 30, 1998 

D. Basis of Accounting 

Transactions are recorded on both an accrual accounting basis and on a budgetary 

basis. Under the accrual method, revenues are recognized when earned and expenses 

are recognized when a liability is incurred, without regard to receipt or payment of 

cash. Budgetary accounting facilitates compliance with legal constraints and control 

over the use of Federal funds. Interest on borrowings of the U. S. Treasury is not 

included as a cost to NRC's programs and is not included in the accompanying 

financial statements 

E. Revenues and Other Financing Sources 

The NRC is required to offset its appropriations by the amount of revenues received 

during the fiscal year by assessing fees. The NRC assesses two types of fees to 

recover its budget authority: (1) fees assessed under 10 CFR Part 170 for licensing, 

inspection, and other services under the authority of the Independent Offices Appro

priation Act of 1952 to recover the NRC's costs of providing individually identifiable 

services to specific applicants and licensees; and (2) annual fees assessed for nuclear 

facilities and materials licensees under 10 CFR Part 171. All fees, with the exception 

of civil penalties, are exchange revenues in accordance with Statement of Federal 

Financial Accounting Standards Number 7, Accounting for Revenue and Other 

Financing Sources and Concepts for Reconciling Budgetary and Financial Account

ing. 

Licensing fees and fees for inspections and other services, assessed in accordance 

with 10 CFR Parts 170 and 171, are recognized as revenue when earned. In accor

dance with Federal Government accounting guidance, the NRC classifies revenues as 

either exchange revenue or non-exchange revenue. Exchange revenues are those that 

are derived from transactions in which both the Government and the public receive 

value. These revenues are presented on the Statement of Net Cost and serve to reduce 

the reported cost of NRC's programs. 

Non-exchange revenues are derived from the Government's sovereign right to de

mand payment, including fines for violation of laws or regulations. These financing 

sources do not reduce the cost of NRC's programs and are reported on the Statement 

of Changes in Net Position. Miscellaneous receipts collected by NRC, including 

interest on delinquent debt, late payment penalties, Freedom of Information Act fees, 

and indemnity fees, are not available to NRC for obligation or expenditure. These 

receipts must be transferred to the U. S. Treasury when collected. 

For accounting purposes, appropriations are recognized as financing sources (appro

priations used) at the time expenses are accrued. At the end of the fiscal year, appro

priations recognized are reduced by the amount of assessed fees collected during the 

fiscal year to the extent of new budget authority for the year. Collections which 

exceed the new budget authority are held to offset subsequent years' appropriations. 

(5 U.S. NUCLEAR REGULATORY COMMISSION
NOTES TO PRINCIPAL STATEMENTS 

September 30, 1999 

Appropriations expended for property and equipment are recognized as expenses 

when the asset is consumed in operations (depreciation and amortization). Appropria

tions used do not include (a) expenses incurred but not yet funded by Congress, such 

as workers' compensation benefits and annual leave expenses; and (b) expenses which 

are paid by other Federal agencies, such as retirement benefits. 

F. Fund Balances with Treasury and Cash and Other Monetary Assets 

The NRC's cash receipts and disbursements are processed by the U.S. Treasury. The 

fund balances with the Treasury and cash are primarily appropriated funds that are 

available to pay current liabilities and to finance authorized purchase commitments. 

Funds with Treasury represent NRC's right to draw on the U. S. Treasury for allow

able expenditures. All amounts are available to NRC for current use. Cash balances 

held outside the U.S. Treasury are not material. 

G. Accounts Receivable 

The amounts due for receivables, except those due from Federal agencies, are stated 

net of an allowance for uncollectible accounts. Since receivables from Federal agen

cies are expected to be collected, there is no allowance for uncollectible accounts. 

The estimate of the allowance is based on an analysis of the outstanding balances and 

the application of estimated uncollectible percentages to categories of aged receivable 

balances. 

H. Property and Equipment 

Property and equipment consists primarily of typical office furnishings, nuclear 

reactor simulators, and computer hardware and software. The agency has no real 

property. The land and buildings in which NRC operates are provided by the U.S. 

General Services Administration (GSA), which charges NRC rent that approximates 

the commercial rental rates for similar properties. 

Property with a cost of $50,000 or more per unit and a useful life of 2 years or more is 

capitalized at cost and depreciated. Other property items are expensed when pur

chased. Normal repairs and maintenance are charged to expense as incurred. 

L Accounts Payable 

Accounts payable represent vendor invoices for services received by NRC that will be 

paid (liquidated) in the next fiscal year. Also included in these amounts are contract 

holdbacks on contracts which have not been fully closed and advances which repre

sent collections received in advance of performing services under a variety of reim

bursable agreements. The services will be provided and the revenue earned in a 

subsequent fiscal year. 

(continued on page 66) 

165'P O 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT (ýr
Principal Statements (continued) 

NOTES TO PRINCIPAL STATEMENTS 

September 30, 1998 

J. Liabilities Not Covered by Budgetary Resources 

Liabilities represent the amount of monies or other resources that are likely to be paid 

by NRC as the result of a transaction or event that has already occurred. No liability 

can be paid by NRC absent an appropriation. Liabilities for which an appropriation 

has not been enacted and for which there is no certainty that an appropriation will be 

enacted are classified as Liabilities Not Covered by Budgetary Resources. Also, NRC 

liabilities arising from sources other than contracts can be abrogated by the Govern

ment acting in its sovereign capacity. 

K. Contingencies 

The NRC is a party to various administrative proceedings, legal actions, environmen

tal suits, and claims brought by or against it. Based on the advice of legal counsel 

concerning contingencies, it is the opinion of management that the ultimate resolution 

of these proceedings, actions, suits, and claims will not materially affect the agency's 

financial position or results of operations. 

L. Annual, Sick, and Other Leave 

Annual leave is accrued as it is earned and the accrual is reduced as leave is taken. Each 

year, the balance in the accrued annual leave liability account is adjusted to reflect current 

pay rates. Sick leave and other types of nonvested leave are expensed as taken. 

M. Retirement Plans 

Approximately 48 percent of NRC employees belong to the Civil Service Retirement 

System (CSRS) and 52 percent belong to the Federal Employees' Retirement System 

(FERS). In FY 1999, for employees in FERS, the NRC withheld 1.05 percent of base 

pay earnings in addition to Federal Insurance Contribution Act (FICA) withholdings 

and matched the withholding with a 10.7 percent contribution. The sum was trans

ferred to the Federal Employees Retirement Fund. For employees covered by CSRS, 

NRC withheld 7.25 percent of base pay earnings. This withholding was matched by 

NRC with an 8.51 percent contribution, and the sum of the withholding and the match 

was transferred to the CSRS. 

The Thrift Savings Plan (TSP) is a retirement savings and investment plan for employees 

covered by either FERS or CSRS. For employees covered by FERS, NRC automatically 

contributes one percent of base pay to their account and matches contributions up to an 

additional four percent. The maximum percentage that an employee participating in 

FERS may contribute is 10 percent of base pay. Employees covered by CSRS may 

contribute up to five percent of their base pay, but there is no NRC matching of the 

contribution. The maximum amount that either FERS or CSRS employees may contrib

ute to the plan in a calendar year is $10,000. The sum of the employees' and NRC's 

contributions is transferred to the Federal Retirement Thrift Investment Board. 

U.S. NUCLEAR REGULATORY COMMISSION
NOTES TO PRINCIPAL STATEMENTS 

September 30, 1999 

The NRC does not report on its financial statements FERS and CSRS assets, accumu

lated plan benefits, or unfunded liabilities, if any, applicable to its employees. Re

porting such amounts is the responsibility of the U. S. Office of Personnel 

Management. The portion of the current and estimated future outlays for CSRS not 

paid by NRC is, in accordance with Statement of Federal Financial Accounting 

Standards Number 5, Accounting for Liabilities of the Federal Government, included 

in NRC's financial statements as an imputed financing source. 

N. U. S. Department of Energy Charges 

Financial transactions between the DOE and NRC are fully automated through the U. 

S. Treasury's On-Line Payment and Collection (OPAC) System. The OPAC System 

allows DOE to collect amounts due from NRC directly from NRC's account at the U. 

S. Treasury for goods and/or services rendered. Project manager verification of goods 

and/or services received is subsequently accomplished through a system-generated 

voucher approval system. The vouchers are returned to the Office of the Chief Finan

cial Officer documenting that the charges have been accepted. For the year ended 

September 30, 1999, NRC had expenses of approximately $54.5 million for research 

conducted by the DOE National Laboratories. 

0. Pricing Policy 

The NRC provides goods and services to the public and other Government entities. 

In accordance with OMB Circular No. A-25, User Charges, and the Independent 

Offices Appropriation Act of 1952, NRC assesses fees under 10 CFR Part 170 for 

licensing and inspection activities to recover the full cost of providing individually 

identifiable services. In accordance with the Omnibus Budget Reconciliation Act of 

1990, fees are assessed annually to licensees under 10 CFR Part 171 to recover 

approximately 100 percent of new budget authority, less amounts excluded from fee 

recovery and those recovered under 10 CFR Part 170. 

The NRC's policy is to recover the full cost of goods and services provided to other 

Government entities where (1) the services performed are not part of its statutory 

mission and (2) NRC has not received appropriations for those services. Fees for 

reimbursable work are assessed at the 10 CFR Part 170 rate with minor exceptions for 

programs that are nominal activities of the NRC. 

P. Use of Management Estimates 

The preparation of the accompanying financial statements requires management to make 

certain estimates and assumptions that directly affect the results of reported assets, liabili

ties, revenue, and expenses. Actual results may differ from these estimates. 

(continued on page 68) 

167 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT ;7
NOTES TO PRINCIPAL STATEMENTS 

September 30, 1998 

NOTE 2. FUND BALANCES WITH TREASURY 

Fund balances with Treasury consist of the following amounts as of September 30, 1999: 

Appropriated funds: 

Obligated $128,447,55 

Unobligated 19,948,72

Other fund types

148,396,284 

3,413,286 

$151,809,570

The obligated and unobligated balances exclude amounts related to unfilled customer orders. 

NOTE 3. ACCOUNTS RECEIVABLE 

Accounts receivable is composed of the following as of September 30, 1999: 

Intragovernmental accounts receivable consists primarily of receivables and reimbursements due 

from other Federal agencies which were $1,680,208 at September 30, 1999. 

The non-Federal accounts receivable, net, is comprised of the following amounts as of Septem

ber 30, 1999:

Materials and facilities fees - billed 

Materials and facilities fees - unbilled 

Other 

Total accounts receivable 

Less: Allowance for uncollectible accounts 

Accounts receivable, net

$ 4,122,072 

34,020,962 

222,790 

38,365,824 

(3,811,030) 

$34,554,794

Other accounts receivable represent amounts due for fees assessed for licensing and inspections 

of nuclear facilities, the handling of nuclear materials, and other services. In the year collected, 

the amounts will be used to offset NRC's appropriations. 

NOTE 4. NON-ENTITY ASSETS 

Included in the accounts receivable balance is $43,762 consisting of miscellaneous penalties and 

interest due from the public, which, when collected, must be transferred to the U.S. Treasury. 

U.S. NUCLEAR REGULATORY COMMISSION

Principal Statements (continued)

58 -6
NOTES TO PRINCIPAL STATEMENTS 

September 30, 1999 

NOTE 5. PROPERTY AND EQUIPMENT, NET 

Property and equipment, net, consists of the following as of September 30, 1999:

Fixed Assets Class 

Equipment 

ADP software 

ADP software under development 

Leasehold improvements 

Leasehold improvements in progress

Service 

Years 

5-8 

5 

20

Acquisition 

Value 

$ 19,326,119 

47,460,179 

13,871,530 

19,612,274 

101,862 

$100,371,964

Accumulated 

Depreciation 

and 

Amortization 

$(16,833,677) 

(37,114,177) 

(5,952,912) 

$(59,900,766)

Net Book 

Value 

$ 2,492,442 

10,346,002 

13,871,530 

13,659,362 

101,862 

$40,471,198

NOTE 6. OTHER LIABILITIES 

Other intragovernmental liabilities as of September 30, 1999, include:

Liability to offset net accounts receivable 

for fees assessed 

Liability to offset miscellaneous accounts receivable 

Accrued worker's compensation 

Accrued benefits

$35,521 ,035 

40,878 

1,398,694 

2,428,931 

$39,389,538

The liability to offset the net accounts receivable for fees assessed represents amounts which, 

when collected, will be transferred to the U. S. Treasury to offset NRC's appropriations in the 

year collected. The liability to offset miscellaneous accounts receivable represents amounts 

which will be reverted to the U. S. Treasury when collected. The liability for deposit funds 

consists primarily of liabilities arising from payroll deductions and tax withholdings. 

Other liabilities as of September 30, 1999, include:

Accrued annual leave 

Accrued salaries 

Contract holdbacks, advances, and other

$24,929,291 

13,258,360 

4,202,882 

$42,390,533

All other liabilities, except accrued annual leave, contract holdbacks, and advances from others, 

are current. Current liabilities represent amounts which are expected to be paid within the fiscal 

year following the reporting date. Accrued annual leave, contract holdbacks, and advances from 

others may not be liquidated in the fiscal year following the reporting date. 

(continued on page 70) 

69 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT
Principal Statements (continued) 

NOTES TO PRINCIPAL STATEMENTS 

September 30, 1998 

NOTE 7. LIABILITIES NOT COVERED BY BUDGETARY RESOURCES 

Liabilities not covered by budgetary resources are not funded by current or prior years' appro

priations and assessments. Funding will be provided from future years' appropriations. As of 

September 30, 1999, liabilities not covered by budgetary resources included: 

Intragovernmental 

Included in the $39,389,538 of other intragovernmental liabilities is $1,398,694 related to Fed

eral Employees Compensation Act (FECA) benefits paid by the U.S. Department of Labor 

(DOL) on NRC's behalf which had not been billed or paid by NRC as of September 30, 1999. 

Federal Employees Benefits 

Federal employees benefits of $3,885,000 represent the actuarial liability for estimated future 

FECA disability benefits. The future workers' compensation estimate was generated by DOL 

from an application of actuarial procedures developed to estimate the liability for FECA, which 

includes the expected liability for death, disability, medical, and miscellaneous costs for ap

proved compensation cases. The liability was calculated using historical benefit payment pat

terns related to a specific incurred period to predict the ultimate payments related to that period. 

These projected annual benefit payments were discounted to present value. 

Other 

Included in the $42,390,533 of other liabilities is $24,929,291 of accrued annual leave and 

$241,312 for capital lease liability. Accrued annual leave represents the amount of annual leave 

earned by NRC employees but not yet taken. 

NOTE 8. LEASES 

A description of lease agreements as of September 30, 1999, follows: 

Capital Leases 

Future payments due: 

Fiscal Year Lease Payments 

2000 $ 70,378 

2001 70,378 

2002 70,378 

2003 52,784 

2004 and thereafter _ 

Total future lease payments 263,918 

Less: imputed interest (221606) 

Net capital lease liability $241,312 

The total capital lease liability is funded on an annual basis and included in NRC's annual 

budget. The NRC's capital leases are for personal property consisting of reproduction equip

7 U.S. NUCLEAR REGULATORY COMMISSION
NOTES TO PRINCIPAL STATEMENTS 

September 30, 1999 

ment, which is installed in various NRC facilities. The leases are for 5 years and the interest rate 

paid was 4.75 percent. The reproduction equipment is depreciated over 5 years using the 

straight-line method with no salvage value. 

Operating Leases 

Future payments due:

Fiscal Year 

2000 

2001 

2002 

2003 

2004 

2005 and thereafter

Total future lease payments

Lease Payments 

$ 20,033,846 

20,093,333 

19,406,694 

19,364,621 

19,402,297 

158,245,241 

$256,546,032

Operating leases consist of real property leases with GSA. The leases are for NRC's headquar

ters offices, regional offices, and the Washington, DC, reading room. The GSA charges NRC 

lease rates which approximate commercial rates for comparable space. 

NOTE 9. UNEXPENDED APPROPRIATIONS 

The unexpended appropriations consist of the following as of September 30, 1999:

Unexpended appropriations: 

Unobligated 

Undelivered orders

$ 22,478,213 

80,771,889 

$103,250,102

Unexpended appropriations include (a) unobligated appropriation balances and (b) undelivered 

orders, which are amounts which have been obligated but not yet expended. The unobligated 

appropriations balance does not include $3,575,711 in unfilled customer orders - unobligated as 

of September 30, 1999. The undelivered orders balance does not include $2,529,486 in unfilled 

customer orders - obligated as of September 30, 1999. 

NOTE 10. CUMULATIVE RESULTS OF OPERATIONS 

The cumulative results of operations as of September 30, 1999, consist of the following:

Future funding requirements 

Investment in property and equipment, net 

Contributions from foreign cooperative research agreements 

Other

$(30,212,985) 

40,471,197 

2,979,384 

65,594 

$ 13,303,190

(continued on page 72) 

A71 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT (;7
Principal Statements (continued) 

NOTES TO PRINCIPAL STATEMENTS 

September 30, 1998 

Future funding requirements represent the amount of future funding needed to pay the accrued 

unfunded expenses as of September 30, 1999. These accruals are not funded from current or 

prior-year appropriations and assessments, but rather should be funded from future appropria

tions and assessments. Accordingly, future funding requirements have been recognized for the 

expenses that will be paid from future appropriations. 

NOTE 11. EXCHANGE REVENUES 

Exchange revenues for the year ended September 30, 1999, were: 

Fees for licensing, inspection, and other services $440,456,670 

Revenue from reimbursable work 4,569,655 

$445,026,325 

NOTE 12. FINANCING SOURCES OTHER THAN EXCHANGE REVENUE 

Appropriations Used 

Appropriations used, a financing source, is recognized to the extent that appropriated funds have 

been consumed less the amount collected from fees assessed for licensing, inspections, and other 

services. During the year ended September 30, 1999, $438,071,824 was collected from fees 

assessed for licensing, inspections, and other services. At the end of the fiscal year, appropria

tions recognized are reduced by the amount of assessed fees collected during the fiscal year to 

the extent of new budget authority for the year. Collections which exceed the new budget au

thority are held to offset subsequent years' appropriations. 

For the year ended September 30, 1999, $438,071,824 of FY 1999 collections and $4,183,021 of 

FY 1998 collections were used to reduce the fiscal year's appropriations recognized: 

Appropriated funds consumed $485,549,699 

Less: Collection from fees assessed (442,254,845) 

43,294,854 

Prior-year collections used to offset 

current year's appropriations 1,798,175 

$ 45,093,029 

Appropriations used includes $35,180,599 of available funds from prior years. 

Non-Exchange Revenue 

Non-exchange revenue of $1,315,694 consisted of $1,048,250 received from civil penalties and 

$267,444 of miscellaneous receipts, which included interest on delinquent debt, late penalties, 

Freedom of Information Act fees, and indemnity fees. 

(5 U.S. NUCLEAR REGULATORY COMMISSION
NOTES TO PRINCIPAL STATEMENTS 

September 30, 1999 

Imputed Financing 

The imputed financing source of $16,781,147 represents the service costs related to NRC em

ployees' post-employment benefits which are paid by the U. S. Office of Personnel Manage

ment, as follows:

Civil Service Retirement System 

Federal Employee Health Benefit 

Federal Employee Group Life Insurance 

Transfers

$ 9,746,846 

6,990,677 

43,624 

$16,781. 147

For FY1999 NRC transferred-out to the U.S. Treasury $443,570,539 consisting of license fee 

collections of $442,254,845 and non-exchange revenue of $1,315,694 and received back as a 

transfer-in $442,254,845. 

NOTE 13. SUMMARY OF BUDGETARY RESOURCES 

The budgetary resources by major fund follows:

Budgetary Resources: X0200 X0300

All 

Other Total

Budget authority 

Unobligated balances 

beginning of period 

Spending authority from 

offsetting collections 

Adjustments 

Total Budgetary Resources 

Status of Budgetary Resources: 

Obligations incurred 

Unobligated balances - available 

Unobligated balances - not available 

Total Status of Budgetary Resources

$464,024,000 

28,619,351 

4,404,469 

7,694,970 

$504,742,790

$475,517,812 

29,224,978 

$504,742,790

$4,800,000 $3,952,847 $472,776,847

1,201,884 5,359,364

126 

102,579 

$6, 104,589

$4,913,512 

1,191,077 

$6,104,589

500 

42,369 

$9,355,080

$5,877,294 

3,092,914 

384,872 

$9,355,080

35,180,599 

4,405,095 

7,839,918 

$520,202,459

$486,308,618 

33,508,969 

384,872 

$520,202,459

(continued on page 74) 

A73 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT (11
Principal Statements (continued)

NOTES TO PRINCIPAL STATEMENTS 

September 30, 1998 

NOTE 13. SUMMARY OF BUDGETARY RESOURCES (Continued)

Budgetary Resources: X0200 X0300

All 

Other

Outlays:

Obligations incurred 

Less: Spending authority from 

offsetting collections 

and adjustments 

Obligated balance, net beginning 

of period 

Obligated balance transferred, net 

Less: Obligated balance, net 

end of period 

Total Outlays

$475,517,812 $4,913,512 $5,877,294 $486,308,618

(12,099,439) (102,704) 

121,578,684 1,385,321

(111,072,928) 

$473,924,129

(1,190,652) 

$5,005,477

(42,870) (12,245,013) 

1,799,654 124,763,659 

(4,319,324) (116,582,904) 

$3,314,754 $482,244,360

The adjustments of $7,839,918 to budgetary resources above consist of recoveries to prior-year 

obligations. 

K U.S. NUCLEAR REGULATORY COMMISSION

Total
SUPPLEMENTARY INFORMATION 

FOR FISCAL YEAR 1999 

U. S. NUCLEAR REGULATORY COMMISSION 

1 A751C 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT ;T
Supplemental Information (continued) 

Required Supplementary Information: Schedule of Intragovernmental Balances 

INTRAGOVERNMENTAL ASSETS

Fund Balances Accounts 

Trading Partner with Treasury Receivable Other 

Department of the Treasury $151,809,570 

Department of Commerce $ 351,648 

Department of the Interior 92,003 

Department of Labor 257,811 

Department of the Navy 348,764 

Department of the Army $ 110,290 

Department of Veteran Affairs 162,350 

General Services Administration 98,287 

Tennessee Valley Authority 747,987 

Agency for International Development 394,027 

Department of Energy 117,506 

Other 148,048 58,770 

Total $151,809,570 $1,680,208 $1,207,283 

INTRAGOVERNMENTAL LIABILITIES 

Trading Partner Accounts Payable Other 

Department of Agriculture $ 270,333 

Department of Labor 1,398,694 

Department of the Treasury 35,561,913 

Office of Personnel Management 1,631,742 

Social Security Administration 526,856 

General Services Administration $2,761,788 

Department of Energy 5,559,839 

Other 443,171 

Total $8,764,798 $39,389,538

76.

(7 U.S. NUCLEAR REGULATORY COMMISSION
APPENDIX 

COMMENTS OF 

THE CHIEF FINANCIAL OFFICER 

A77 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT ;5
1 UNITED STATES 

- NUCLEAR REGULATORY COMMISSION 

WASHINGTON, DC 20555-0001 

February 15, 2000 

MEMORANDUM TO: Thomas J. Barchi 

Assistant Inspector General for Audits 

FROM: Jesse L. Funches 

Chief Financial Officer 

SUBJECT: DRAFT AUDIT REPORT - AUDIT OF THE NUCLEAR 

REGULATORY COMMISSION'S FISCAL YEAR 1999 

FINANCIAL STATEMENTS 

We have reviewed the draft audit report of the Nuclear Regulatory Commission's FY 1999 

financial statements dated February 10, 2000. Our comments on the recommendations con

tained in the draft audit report are as follows: 

MANAGERIAL COST ACCOUNTING 

Recommendation: The Chief Financial Officer (CFO) should develop interim cost manage

ment information to enhance agency managers' ability to evaluate the cost of outputs and out

comes realized by the agency. Development of interim cost management techniques may also 

enhance the success of the system being contemplated by identifying the needs of managers. 

The CFO should continue to be supportive of the agency's Cost Management Steering Committee. 

Response: We agree there are potential benefits of developing interim cost management infor

mation for managers prior to the agency's plan to fully implement managerial cost accounting. 

We will work with the Cost Management Steering Committee and offices to assess what infor

mational needs can be met with existing systems and, if possible, begin to provide interim cost 

management information. We will initiate this effort during March 2000. 

We will continue to support the agency's Cost Management Steering Committee. We view this 

an important element in the agency's implementation of managerial cost accounting. Part of the 

charter of the Cost Management Steering Committee is to coordinate the identification of 

management's cost information needs with the CFO and CIO and support the cost accounting 

system implementation effort. We believe that the Committee's involvement will help make the 

cost accounting system a success. 

(continued on page 80) 

17'9k 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT ;7
Comments of the Chief Financial Officer (continued) 

CONTACT: Barbara K. Gusack, OCFO/DAF/GAB 

415-6054 

PROGRAM COST ACCOUNTING 

Recommendation: The CFO should review and assess whether labor cost distribution systems 

being implemented in FY2000 fully comply with accounting and reporting standards. Those 

systems should be designed to improve the timeliness and reliability of financial reporting in 

future years. 

Response: We have already initiated actions to assess PAY/PERS Labor System to ensure 

compliance with accounting and reporting standards and to validate the data for use in preparing 

the FY 2000 financial statements. In addition, we will examine the internal controls for the 

PAY/PERS Labor system including an assessment of the offices' compliance with the applicable 

policy and procedures. We plan to complete these assessments by July 1, 2000. 

We will also ensure that the new Peoplesoft Payroll and Time and Labor Systems, being imple

mented in FY 2001, will also comply with accounting and reporting standards. 

Beginning in March 2000, we will begin providing offices with labor-cost distribution reports 

for management purposes. We believe the system we have implemented for FY 2000 will 

improve the timeliness and reliability of financial reporting. 

As required by the Federal Financial Management Improvement Act, a remediation plan will be 

prepared by May 1, 2000. 

MANAGEMENT CONTROLS OVER FEE DEVELOPMENT 12 

Recommendation: The CFO should address the immediate need for documented policy and a 

quality control process over fee development. It is essential to the integrity of the fee develop

ment process that greater discipline and structure be implemented. 

Response: We agree with the need for adding more structure to the fee development process. 

We plan to document the license fee rule development process, and establish general procedures 

for calculating fees and conducting quality control. The CFO has selected a contractor, familiar 

with the fee rule development process, to document that process by October 2000. We are also 

taking actions to strengthen management controls: 1) we have a contractor on board to look at 

the fee model and recommend improvements to that process; 2) we are streamlining the data

entry process to the fee model to reduce the potential for error and eliminate some of the dupli

cate entry; and 3) we are hiring a fee policy analyst to assist in development of the fee rule 

which will enhance quality control. 

12 On page 5, fifth paragraph, the draft report states that, "As further evidence that management controls 

over fee development are inadequate, the CFO recently included a reference to a completed internal 

study on generic costs in the FY 2000 proposed fee rule, which would have become a public docu

ment." While I do not agree that this error is further evidence of inadequate management controls, I 

would note that the document referenced in your draft report (i.e., SECY-00-0012) is the FY 2000 

proposed fee rule Commission paper and is limited to the NRC unless the Commission determines 

otherwise and may not become a public document. 

U.S. NUCLEAR REGULATORY COMMISSION
FINANCIAL STATEMENT PREPARATION

Recommendation: The CFO should assess current financial statement compilation practices 

for responding to the requirements of the CFO Act principal statements. The agency should 

develop and implement a financial statement preparation process that provides timely prepara

tion of statements, supporting reports, and analysis during the fiscal year and at year's end. 

Response: During the past few years, the agency has been in transition in developing and 

integrating its strategic plan, performance report, and performance plan and budget. This evolu

tionary development phase has impacted financial reporting as the agency has moved to develop 

the underlying financial systems needed to support the new reporting requirements. This condi

tion was further compounded by significant revisions the Office of Management and Budget 

made to the form and content of financial statements effective for FY 1998. 

As part of our annual assessment, we will examine the process used to produce the financial 

statements to determine where improvements can be made. In particular, we have recognized 

our lack of systems and a well disciplined compilation process for presenting labor-cost data by 

strategic arena and the effect on preparing financial statements in a timely and comprehensive 

manner over the past 2 years. As a result, we implemented corrective action for FY 2000 to 

capture labor-cost data by strategic arena and will be able to make more use of electronic means 

to assemble, summarize, and analyze data. We expect these actions will improve and streamline 

the financial statement preparation process. 

SEGREGATION OF DUTIES - PAY/PERS 

Recommendation: The CFO should ensure that effective segregation of duties is maintained 

prior to assigning access profiles to PAY/PERS personnel. The CFO should also assure that 

consideration is given to segregation of duties during the design and evaluation phase of newly 

designed systems. 

Additionally, periodic review and assessment should be made of systems during the implementa

tion and operations stages to assure that conditions or circumstances have not changed causing 

incompatible functions. 

Response: The OCFO changed the Payroll Operations Team Leader's profile to access level II 

data as soon as this was identified during the audit of the financial statement. The PAY/PERS 

system administrator will ensure adequate segregation of duties. 

The Peoplesoft payroll implementation team leader/system administrator will ensure that proper 

segregation of duties is incorporated into the new payroll system through the system's security 

profiles and will administrator annual reviews to ensure that there are adequate segregation of duties. 

CONTROLS OVER AUTHORIZED USERS - PAY/PERS 

Recommendation: The CFO should direct the DAF system administrator to begin using the Detail 

Utilization Report to perform periodic reviews of authorized users. The review should include 

techniques to identify user sessions for investigating unusual utilization sessions or usage patterns. 

Response: The OCFO will develop a management report, based on the Detail Utilization 

Report, that will be used to identify unusual activity and unauthorized user access. This report 

(continued on page 82) 

1 81A 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT (ýr
Comments of the Chief Financial Officer (continued) 

will be reviewed biweekly by the system administrator who will report any unusual findings to 

management. Corrective action will be initiated in March 2000. 

MANAGEMENT CONTROLS OVER SMALL ENTITY CERTIFICATIONS 

Recommendation: The CFO should, at least quarterly, select a statistically valid sample of 

small entity certifications filed and request evidence, such as income tax returns or financial 

statements, to support the size standards claimed by the licensees. 

Response: We share your concern of licensees filing false small entity certifications. We have 

reservations with implementing the corrective actions you have recommended. Under the 

Paperwork Reduction Act, requesting income tax returns or financial statements from licensees 

would require approval from the Office of Management and Budget. We also have concerns 

regarding the costs of validating the small entity status of a sample of licensees each quarter. 

The OCFO plans to explore your recommendation along with other corrective actions. We will 

advise you of the results by June 1, 2000. 

MANAGEMENT CONTROLS OVER GENERAL SERVICES ADMINISTRATION 

(GSA) CREDITS 

Recommendation: The CFO should direct: 

* The FOB to track and verify that GSA credits are received by holding a copy of the Form 441 

and invoice in a pending file until the credit is received. 

* FOB to follow up with the project manager routinely to discuss any credits that have not been 

received in a timely manner. 

Response: The DAF Financial Operations Branch has established a process to track and moni

tor GSA credits effective with the February 2000 billings. The procedure includes routine 

follow-ups with the project manager regarding untimely credits. Written procedures will be 

completed in March 2000. 

STATUS OF PRIOR-YEAR RECOMMENDATIONS 

Revenue from Reimbursable Agreements: The final accounting policy guidance concerning the 

recording of revenue from reimbursable agreements will be issued by April 1, 2000. 

Part 170 Hourly Rates: The final report of generic costs study will be issued by April 1, 2000. 

Business Continuity - FFS: As you know, NRC is dependent on Treasury's Financial Manage

ment Service to resolve this condition. In its FY 1999 Annual Statement of Assurance, the 

Financial Management Service indicated that they will not resolve the lack of a tested back-up 

recovery capability until May 31, 2001. In my February 8, 2000 letter to the Commissioner, 

Financial Management Service, I requested his assistance in resolving this issue during 

FY 2000. We will continue to follow-up with the Financial Management Service on this issue 

until it is resolved. 

We appreciate the opportunity to respond to the draft audit report and are available to discuss our comments. 

We will work closely with your staff and keep them apprised of the status of corrective actions. 

U.S. NUCLEAR REGULATORY COMMISSION
U.S. Nuclear Regulatory Commission Organization Chart

1 1 ne kx 

Commissioner Commissioner Ch, 

Edward McGaffigan Jr. Greta Joy Dicus Richard 

Advisory Committee Office of the Congressional 

I on Nuclear Waste Inspector General Affars I Affairs 

II• Advisory 

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Reactor Safeguards Officer

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Office of Nuciear Office of 

Reactor Enforcement 

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OffIce of Office of Office of 

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Office of Incident Reponseoe 

Investigations Operations

Last updated: 2/22/00

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Appendix B

FISCAL YEAR 1999 ANNUAL 

REPORT (NUREG-1145, Vol. 16) 

This 2 5 1 annual report of the U.S. Nuclear 

Regulatory Commission (NRC) for Fiscal Year 

(FY) 1999--October 1, 1998, through September 

30, 1999-presents significant activities and 

accomplishments supporting NRC's strategic and 

performance goals.1 It also illustrates the 

agency's progress toward moving to a more risk

informed regulation of nuclear reactor and materi

als licensees. 

In addition to our paramount regulatory 

responsibility of ensuring public health and 

safety, in FY 1999 we also concentrated on 

increasing public confidence in the NRC as a 

regulator of nuclear safety, becoming a more 

effective and efficient regulator, and reducing 

unnecessary regulatory burden. 

In seeking to become a more effective regula

tor, we continued our efforts to assess our activi

ties for their contribution to our performance 

goals associated with the four strategic arenas: 

(1) Nuclear Reactor Safety, (2) Nuclear Materials 

Safety, (3) Nuclear Waste Safety, and (4) Interna

tional Nuclear Safety Support. In each of these 

strategic arenas, a brief description of noteworthy 

program achievements is discussed followed by a 

listing of significant accomplishments and activi

ties that contributed to the NRC's goals for FY 

1999. Additional information about our perfor

mance is published in NRC's "Accountability and 

Performance Report" (NUREG--1542) to which 

this annual report is appended. 

This report is based on the format and content of the 

NRC's monthly report to Congress on the status of its 

licensing and regulatory duties, as directed in the Fiscal 

Year 1999 Energy and Water Development Appropria

tions Act, Senate Report 105-206.

NUCLEAR REACTOR SAFETY 

The NRC regulates the operation of the 103 

nuclear power plants by establishing regulatory 

requirements for design, construction, and opera

tion of plants; conducting a thorough process in 

licensing plants to operate; licensing plant opera

tors; and providing oversight of plant activities to 

verify that they are being operated in accordance 

with the regulations. In FY 1999, the NRC 

continued to make major changes in its nuclear 

reactor safety program, as discussed below. 

Revised Reactor Oversight Process 

In FY 1999, the NRC revamped its reactor 

oversight process to make it more objective, 

predictable, understandable, and focused on areas 

of greatest safety significance. The revised reactor 

oversight process takes into account improve

ments in the performance of the nuclear industry 

over the past 25 years and improved approaches 

of inspecting and evaluating the safety perfor

mance of NRC licensed plants. The revised 

reactor oversight process is consistent with the 

agency's objectives of maintaining safety, enhanc

ing public confidence, improving the effective

ness and efficiency of our processes, and reducing 

unnecessary regulatory burden. While we are 

changing the oversight process, the regulatory 

structure that provides the foundation upon which 

safe operation is based remains unchanged. 

The Commission considers the new oversight 

process to be a major improvement over the 

previous oversight process, including the system

atic assessment of licensee performance program 

(SALP). The impetus behind this came both from 

the NRC's own fundamental reviews of its regula

tory program as part of the "reinventing govern

ment" process and from concerns expressed by 

(continued on page 86) 

A85 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT (15
Appendix B (continued)

the nuclear industry, Congressional committees, 

and public interest groups. 

Pilot implementation of the revised reactor 

oversight process was conducted at nine reactor 

sites across all four regions from May 30 through 

November 27, 1999. The participating pilot 

plants included FitzPatrick, Salem, and Hope 

Creek from Region I; Harris and Sequoyah from 

Region II; Prairie Island and Quad Cities from 

Region III; and Cooper and Fort Calhoun from 

Region IV. The pilot program was designed to test 

how effectively the revised reactor oversight 

process worked and to identify possible problems. 

After incorporating lessons learned from the 

pilot program and pending Commission approval, 

the NRC plans to implement the revised reactor 

oversight process for all plants in April 2000. 

Once implemented industry-wide, all operating 

reactor performance indicator (PI) data, the 

associated graphs, and any comments submitted 

by the licensees will be publicly available through 

the plant performance summary page for each 

plant on NRC's Web site. 

License Renewal 

In FY 1999, the NRC staff continued to meet 

the established schedules for reviewing the 

Calvert Cliffs and Oconee license renewal appli

cations. The NRC drew extensively on staff 

expertise and past research results to meet the 

aggressive review schedule. The decision for 

Calvert Cliffs is expected in April 2000, and the 

decision for Oconee is expected in July 2000. 

Risk-Informed Regulation 

In FY 1999, we continued to improve our 

understanding of the underlying phenomena 

governing reactor safety, the analytical tools to 

evaluate those phenomena, and the regulatory 

framework to implement risk-informed regula

tion. To broaden our understanding, we worked 

with national standards organizations to develop 

consensus standards on probabilistic risk assess

ment quality and performed the following activi

ties, to mention a few.

Power Reactor Security Regulations 

In FY 1999, the NRC staff initiated work on a 

rulemaking plan to amend physical security 

requirements for evaluating power reactor licens

ees' capabilities to respond to safeguards contin

gency events. The rulemaking plan was 

submitted to the Commission on October 5, 1999, 

and proposes to modify 10 CFR 73.55, "Require

ments for Physical Protection of Licensed Activi

ties in Nuclear Power Reactors Against 

Radiological Sabotage" and associated power 

reactor security regulations to be more risk

informed. 

A final rule is scheduled for completion 

within 3 years. Initial emphasis will be on resolv

ing issues associated with exercises, including the 

definition of radiological sabotage. 

Reactor Enforcement 

The staff began, in July 1998, to revise its 

policy pertaining to violations of lesser signifi

cance with the objectives of maintaining safety 

and reducing unnecessary regulatory burden. 

This guidance immediately resulted in fewer 

violations requiring formal responses from licens

ees and increased the utilization of non-cited 

violations. This change was made after having 

confirmed through meetings with stakeholders 

that licensee corrective action programs can be 

relied upon for disposition and correction of 

violations of lesser significance. 

A major revision to the enforcement policy 

was written in FY 1999 and published on Novem

ber 11, 1999. This revision removed the concept 

of "regulatory significance" and clarified that 

severity level of violations and corresponding 

sanctions would be based on (1) actual conse

quences, (2) potential consequences, (3) impact of 

the regulatory process, and (4) any willful aspects 

of the violation. 

As a result of these policy and guidance 

changes, the number of escalated enforcement 

actions in the reactor program dropped from 87, 

112, and 81 in Fiscal Years 1996, 1997, 1998, 

respectively, to 33 in FY 1999.

U.S. NUCLEAR REGULATORY COMMISSION
As the agency readies itself for full deploy

ment of the new reactor oversight program in 

April 2000, the enforcement policy will again be 

modified to better align it with the revised reactor 

oversight process. 

Research Contributions 

Specific examples of research, continued in 

FY 1999, that have allowed NRC to revise regula

tory requirements to maintain safety but reduce 

unnecessary regulatory burden include (1) work 

associated with allowing new repair methods for 

degraded steam generator tubes, (2) revised 

pressure-temperature limits for reactor pressure 

vessels during plant startup and shutdown, (3) 

development of the technical basis for allowing 

an increase in the number of fuel assemblies that 

can be safely stored in spent fuel and transporta

tion casks, and (4) improved knowledge of severe 

accident source terms to allow license amend

ments that reduce unnecessary requirements. 

Nuclear Reactor Safety Arena FY 1999 

Significant Accomplishments and Activities 

"Issued a proposed rule to amend 10 CFR Part 

50, Appendix K, to facilitate small, but cost

beneficial, power uprates without compro

mising the margin of safety at the facility. 

The decision on the final rule is expected in 

April 2000. While all plants could conceiv

ably benefit from this risk-informed 

rulemaking, if only 50 plant licensees pursue 

this marginal power uprate, they could share 

in an annual benefit ranging from $50 million 

to $135 million. 

" Issued, in October 1999, the final rule for 

Sections 50.59 and 72.48 of Title 10 of the 

Code of Federal Regulations (CFR), 

"Changes, Tests, and Experiments," which, 

when implemented, will allow 10 CFR Part 

50 licensees and Part 72 licensees and Cer

tificate of Compliance holders to make 

changes to their facilities that have minimal 

impact on the facility licensing basis without 

prior NRC approval.

" Issued a regulatory guide endorsing an 

industry initiative on updating of Final Safety 

Analysis Reports (FSARs) that clarifies the 

level of detail required in an FSAR and 

allows licensees to remove obsolete, redun

dant, or unnecessarily detailed information. 

" Completed evaluation and approval of a first

of-a-kind sales and concomitant license 

transfer for the Three Mile Island, Unit 1, 

and the Pilgrim nuclear plants. 

" Approved approximately 20 other requests 

for license transfers involving (1) corporate 

restructuring; (2) formation of holding 

companies; and (3) other activities to accom

modate the deregulation and realignment of 

the electric power industry, including consid

eration of foreign ownership issues. 

" Completed 11 conversions to improved 

Standard Technical Specifications, which 

will maintain safety and increase effective

ness and efficiency. 

" Worked effectively with the nuclear power 

industry and other NRC licensees to ensure 

that their safety and physical security would 

not be adversely affected by potential Year 

2000 (Y2K) problems, including develop

ment of a comprehensive Y2K contingency 

plan. 

" Issued, in September 1999, the final rule 

amendment to 10 CFR 50.55a, "Code and 

Standards," in which the NRC (1) incorpo

rated by reference the 1995 Edition up to and 

including the 1996 Addenda of the ASME 

Boiler and Pressure Vessel Code, Sections III 

and XI, and the ASME Code for Operation 

and Maintenance of Nuclear Power Plants 

and (2) imposed an expedited implementa

tion of performance demonstration methods 

for ultrasonic examination systems. 

" Developed and initiated a plan to make the 

requirements in 10 CFR Part 50 risk-in

formed, which, when complete, will provide 

(continued on page 88) 

A87 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT
Appendix B (continued)

opportunities for both increased safety and 

reduced licensee burden. 

" Developed a comprehensive revision to the 

generic communications program and issued 

guidance on the revisions to increase the 

program's effectiveness. 

" Issued a final rule, in April 1999, to allow 

nuclear power reactor licensees with NRC 

oversight to prepare the written examinations 

and operating tests that the NRC uses to 

evaluate the competence of operator license 

applicants at those facilities. This rule 

change will maintain nuclear reactor safety, 

while allowing for an increase in staff effec

tiveness and efficiency. 

" Revised requirements for monitoring the 

effectiveness of maintenance at nuclear 

power plants to require that before perform

ing maintenance, the power plant licensees 

assess and manage the increases in risk that 

may result from the maintenance activities. 

" Included a risk-informed fire protection 

baseline inspection element in the new 

reactor inspection and oversight program. 

" Using improved knowledge of accident 

source term, completed a new rule (10 CFR 

50.67) that allows operating reactor licensees 

the option of using an alternative source term 

for the analyses of design basis accidents that 

can reduce the licensee burden while main

taining safe margins. 

" Significantly improved the timeliness of 

processing licensing actions while simulta

neously reducing the inventory backlog of 

licensing actions. 

" Approved a licensing action for the Callaway 

nuclear plant that allowed the licensee to 

utilize a new and innovative electro-sleeving 

technology to repair degraded steam genera

tor tubes.

NUCLEAR MATERIALS SAFETY 

In FY 1999, materials licensees and fuel cycle 

facilities continued to operate in a safe fashion. 

We began revising portions of nuclear materials 

regulations to make them risk-informed, as 

appropriate. We have formed a new group fo

cused on risk assessment and risk management to 

ensure a more consistent decision-making process 

and a consistent underlying risk bases for nuclear 

materials regulations, regulatory guides, and staff 

review guidance, and we completed, among 

others, the following specific activities. 

Agreement States. The NRC expanded its 

efforts to address the future of the materials 

program on a national basis by establishing an 

NRC/Agreement State Working Group. This 

Group will, among other things, delineate the 

respective roles of NRC and the Agreement 

States, the Organization of Agreement States, and 

the Conference of Radiation Control Program 

Directors in order to ensure the most consistent, 

effective, and efficient regulation of nuclear 

materials nationally. This group will be increas

ingly significant as additional States take author

ity for materials program regulation. In that 

regard, the NRC effectively transferred authority 

for 600 materials licenses to the State of Ohio, the 

newest Agreement State. 

Fuel Cycle Facilities. In FY 1999, the staff 

conducted several public workshops to obtain 

stakeholder agreement on a more risk-informed, 

performance-based safety and safeguards over

sight process for fuel cycle facilities. Licensee 

performance and risks will be factored into the 

revised process. In upcoming years, the staff will 

continue to work with stakeholders to formulate 

the final process and conduct a pilot program, 

using the process. 

Nuclear Materials Safety Arena FY 1999 

Significant Accomplishments and Activities 

Worked effectively with the nuclear materials 

community to ensure that their safety and 

physical security would not be adversely 

affected by potential Y2K problems, includA88 

U.S. NUCLEAR REGULATORY COMMISSION
ing development of a comprehensive Y2K 

contingency plan. 

" Initiated a process that will eventually 

result in the registration of generally 

licensed devices. 

" Published issues paper on control of solid 

materials and held the first of four facilitated 

public meetings to solicit public comment. 

" Reduced the inventory of materials licensing 

cases to the lowest levels in over a decade. 

" Published proposed revisions to our fuel 

cycle regulations in 10 CFR Part 70 and to 

our medical regulations in 10 CFR Part 35 to 

make these regulations more risk-informed 

and performance-based and to ensure that the 

regulatory burden of these regulations is 

commensurate with their health and safety 

benefits. 

" Provided regulatory and technical assistance 

to the Department of Energy (DOE) on their 

Waste Remediation System Privatization 

Program for the Hanford Tank in the State of 

Washington. 

NUCLEAR WASTE SAFETY 

In FY 1999, the NRC received more than 500 

public comments on its proposed regulation (10 

CFR Part 63) related to its development of a risk

informed, performance-based regulatory structure 

for the high-level waste program. In FY 2000, the 

staff will continue to consider the comments and 

plans to issue a final regulation. The staff con

ducted public meetings in Nevada on the proposal 

to ensure that the public had the opportunity to 

ask questions and express concerns on the high

level waste repository. This also allowed the staff 

an opportunity to explain the regulatory pro

cesses, the agencies involved in the processes, 

and specific safety features for the repository. In 

FY 1999, the staff increased use of risk-informed 

approaches in prelicensing interactions with DOE 

to focus efforts on resolving key technical issues 

most relevant to performance of a potential

repository. The staff successfully used these risk

informed approaches in commenting on the 

DOE's Viability Assessment. Additionally, the 

staff attended meetings held by the DOE on the 

draft environmental impact statement for Yucca 

Mountain. 

The NRC began to review the application for 

the Private Fuel Storage facility to be located on 

the reservation of the Skull Valley Band of 

Goshute Indians. 

Spent Nuclear Fuel Casks. The staff initi

ated several rulemakings to improve the efficiency 

of the spent nuclear fuel storage and transportation 

cask certification process. The staff also revised its 

internal procedures, issued standard review plans, 

and made review process and rulemaking improve

ments resulting in efficiencies in NRC's licensing, 

certification, and amendment processes. During FY 

1999, the staff reviewed applications for dual- and 

single- purpose casks, independent spent fuel 

storage installations for commercial power reactors 

and the Department of Energy, and transportation 

certificates. 

Decommissioning. The staff conducted a 

decommissioning pilot program for materials 

licensees to evaluate a performance-oriented 

approach to decommissioning that would allow 

licensees to safely decontaminate sites without 

waiting for intermediate approvals from the NRC. 

Associated was guidance the NRC published on 

the "Radiological Criteria for License Termina

tion," 10 CFR Part 20, Subpart E, to enable the 

staff (1) to evaluate information the licensees 

submit for decommissioning in a timely, efficient, 

and consistent manner and (2) to determine if the 

decommissioning can be conducted in such a way 

that the public health and safety is protected. 

Compliance with this guidance and Subpart E 

would permit NRC to release the facility in 

accordance with NRC's requirements. 

With respect to decommissioning nuclear 

reactors, we initiated the development of an 

integrated, risk-informed rulemaking that ad

(continued on page 90) 

A89 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT )r
Appendix B (continued)

dresses emergency planning, insurance, safe

guards, operator staffing and training, and other 

potential areas. 

Nuclear Waste Safety Arena FY 1999 Signifi

cant Accomplishments and Activities 

" Provided comments to DOE on their Viabil

ity Assessment for the high-level waste 

repository. 

" Published for public comment draft regula

tory guides implementing the License Termi

nation Rule and conducted public workshops 

to solicit input prior to finalizing the guides 

in FY 2000. 

"* Issued for reactor decommissioning the Final 

Standard Format and Content Regulatory 

Guide for License Termination Plans. 

" Achieved established milestones for reviews 

of several spent fuel storage and transporta

tion cases, which included issuing (1) a final 

Safety Evaluation Report and a final Certifi

cate of Compliance for one dual-purpose 

(storage and transportation) cask design, (2) 

draft Safety Evaluation Reports and draft 

Certificates of Compliance for two other 

dual-purpose cask designs, (3) draft Safety 

Evaluation Reports and draft Certificates of 

Compliance for two spent fuel storage cask 

designs, and (4) three licenses for interim 

spent fuel storage installations. 

" Completed a rulemaking for 10 CFR Part 51 

on the environmental impacts of the transpor

tation of high-level waste for license renewal. 

" Published a proposed site-specific, perfor

mance-based regulation for a high-level 

waste repository in 10 CFR Part 63. Held 

public meetings in Nevada to solicit public 

comments on this proposed regulation. 

" Published final rule on Radiological Criteria 

for Uranium Recovery License Termination.

INTERNATIONAL NUCLEAR 

SAFETY SUPPORT 

In terms of international support, the NRC's 

nuclear materials staff is continuing its review of 

the Japan Tokai nuclear criticality accident. They 

have not identified any similar problems at U.S. 

facilities regulated by NRC. 

NRC completed its seventh year of bilateral 

assistance in nuclear safety and safeguards to 

Russia and Ukraine, and its fourth year of provid

ing similar assistance to Armenia and Kazakhstan. 

These efforts are focused on helping regulatory 

agencies develop their basic nuclear legislation, 

enhancing emergency response and emergency 

preparedness capabilities, and developing inspec

tion procedures. 

NRC developed the Y2K Early Warning 

System (YEWS) in cooperation with the interna

tional nuclear community as a means for nuclear 

facility operators to report on a voluntary and 

prompt basis any observed date-changed effects at 

their nuclear facilities. In the United States, 

nuclear power plant staff monitored YEWS for 

potential problems overseas. 

Senior NRC staff served on advisory bodies 

and technical committees of the International 

Atomic Energy Agency (IAEA) and the 

(OECDNEA) to help coordinate and steer multi

lateral safety and security programs to serve the 

mutual interests and needs of the United States 

and its cooperation partners. In October 1998, the 

NRC Chairman addressed the OECD/NEA Steer

ing Committee to outline areas of common policy 

interest between the OECD/NEA and the Interna

tional Nuclear Regulators Association. 

International Nuclear Safety Arena Support 

FY 1999 Significant Accomplishments and 

Activities 

Conducted a public meeting in June 1999 on 

an application for a five-year NRC export 

license to supply U.S. highly enriched ura

nium targets for medical isotope production 

in the new MAPLE reactors and processing 

facility at Chalk River, Ontario, Canada. The

1 90 U.S. NUCLEAR REGULATORY COMMISSION
Commission approved the requested license 

with special conditions, including annual 

reviews to determine progress being made to 

develop, test, and use alternative low en

riched uranium targets. 

Following Senate ratification of the Conven

tion on Nuclear Safety (CNS), submitted the 

first U.S. National Report under the Convention 

and participated in the first Review Meeting of 

Parties. The Convention provides a means for 

the United States and the international commu

nity to help ensure that all countries producing 

nuclear power are striving to meet high stan

dards of operational safety. 

CORPORATE MANAGEMENT 

" Received three Hammer Awards from the 

National Partnership for Reinventing Gov

ernment for our procurement reform initia

tives and development of guidance on site 

surveys. 

" Achieved Year 2000 compliance for NRC's 

internal systems on time and within budget; 

the first Federal agency to do so. 

" Conducted (1) staff training to provide the 

required knowledge and skills necessary to 

support implementation of new NRC regula

tory and business processes, including the 

Revised Reactor Oversight Process, the 

Agency-wide Documents Access and Man

agement System, and the agency Financial 

and Human Resources Management System 

and (2) conducted change management 

training to help our managers and staff adapt 

to the dynamic environment resulting from 

the simultaneous implementation of these 

new regulatory and business processes. 

" Completed, a year ahead of schedule and 

within planned budget, the Resident Inspec

tor Site Expansion program that significantly 

upgraded the computing capabilities of our 

inspectors co-located at nuclear facilities so 

that inspectors now have reliable high speed 

access to NRC computing facilities similar

to those available at headquarters and 

regional offices. 

" Continued to move toward managing out

comes by using NRC's integrated planning, 

budgeting, and performance management 

process to facilitate the triennial update of the 

strategic plan. This plan, which will describe 

the context of our regulatory responsibilities, 

is near completion and will be submitted to 

Congress in September 2000. 

" Received, for the sixth successive year, an 

unqualified opinion on the Chief Financial 

Officer's financial statements. 

" Met the requirements of the Omnibus Budget 

Reconciliation Act of 1990, by collecting 

fees to offset approximately 99 percent of 

NRC's new budget authority that was re

quired to be offset by fees. 

" Supported the government-wide electronic 

commerce initiative by making 99 percent 

of NRC's salary and award payments and 

98 percent of commercial payments elec

tronically. 

" Met the goal to maintain delinquent debt at 

year-end to less than 1 percent of NRC's 

billings for FY 1999. 

OTHER AVAILABLE INFORMATION 

In addition to this annual report, the NRC 

publishes annually a "Report to Congress on 

Abnormal Occurrences" (NUREG-0090), "A 

Prioritization of Generic Safety Issues" (NUREG

0933 and its supplements), and the "Information 

Digest" (NUREG-1350). In October 1998, the 

first month of FY 1999, the NRC published "The 

Price-Anderson Act: Crossing the Bridge to the 

Next Century: A Report to Congress" (NUREG/ 

CR-6617). Finally, NRC published its "Budget 

Estimates and Performance Plan for FY 2001," in 

February 1999, and released the draft FY 2000

2005 NRC Strategic Plan for stakeholder/public 

comment on March 3, 2000. You may access 

(continued on page 92) 

A91 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT ; j
Appendix B (continued)

some of the publications mentioned in this report 

on NRC's Web site at <http://www.nrc.gov/NRC/ 

NUREGS/indexnum.html>. 

In FY 1999, the NRC initiated a redesign of 

its external Web site to better serve NRC Stake

holders and plans to involve NRC Stakeholders in 

its plan for redesign. This Web redesign is one of 

many ways the NRC is working toward providing

its Stakeholders-the general public, Congress, 

NRC licensees, other Federal agencies, States, 

Indian Tribes, local governments, industry, indus

try workers, and the international community

with clear and accurate information about our 

regulatory program and facilitating a means for 

them to have a meaningful role in NRC's regula

tory process.

A92 

(9 UU.S. NUCLEAR REGULATORY COMMISSION
Appendix C

Program Evaluations/ 

Self-Assessments 

Office of Nuclear Reactor Regulation 

Top-Down Assessment 

In FY 1999, the Office of Nuclear Reactor 

Regulation (NRR) completed a top-down assess

ment of its programs and activities. NRR con

ducted this assessment to assist them in 

identifying the programs and activities it needs to 

support the NRC's Strategic Plan. By identifying 

outcome goals and success criteria for achieving 

those goals, the assessment provided the basis for 

determining which of its programs and activities 

to continue, modify, or sunset; which major 

business processes to redesign; and what new 

initiatives to undertake. The top-down assessment 

can be found in the February 1999 Arthur 

Andersen Report: "Assessment Methodology - A 

Case Study and Results to Date for NRR" and its 

Appendices. You can access this report on the 

Planning and Financial Management section of 

the NRC website at http://www.nrc.gov/OPA/ 

reports/nrrfinal.pdf. 

The NRR assessment was designed to focus 

separately on two components - effectiveness and 

efficiency. 

The effectiveness assessment (doing the 

right work) began in July 1998. The results 

were used to develop NRR's FY 2001 Perfor

mance Plan and Budget Estimates. NRR's new 

outcome-based approach is intended to serve as 

a key component of NRR's continuing effort to 

move toward performance-based operations. In 

addition, tools that were developed during the 

assessment are also serving as templates for use 

by other NRC offices in conducting similar 

effectiveness assessments.

The efficiency assessment (doing the work 

right), which also began in July 1998, encom

passed reviews of two NRR business areas 

licensing actions and workload management 

practices. The methodology included five spe

cific considerations for each review: process, 

tools, skills, expectations and accountabilities, 

and organizational culture. Draft recommenda

tions for improving the efficiency of licensing 

actions were presented to NRR's Executive Team 

in September 1998 and can be found in Appendix 

E to the February 1999 Arthur Andersen Report. 

The results of the study on licensing actions 

indicated a need to focus on current practices for 

prioritizing workload, distribution of workload, 

and workload tracking and completion, (i.e., 

workload management). Draft recommendations 

for improving the focus on current practices were 

presented to NRR's Executive Team in January 

1999 and can be found in Appendix F (Vision 

Criteria) to the February 1999 Arthur Andersen 

Report. 

Reactor Oversight Pilot Program 

During FY 1999, the NRC staff worked on 

improving the NRC's reactor oversight processes, 

including inspection, assessment, and enforce

ment. The NRC is developing changes to these 

processes to improve their objectivity, make them 

more understandable and predictable, and provide 

increased focus on aspects of performance that 

have the greatest impact on safe plant operation. 

These improvements will lead to increased public 

confidence and improved staff effectiveness and 

efficiency. 

Beginning in June 1999 and continuing over 

the next six months, the NRC conducted a pilot 

program of the revised reactor oversight process 

at nine reactor sites. The pilot program was 

(continued on page 94) 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT
Appendix C (continued)

evaluated by the Pilot Program Evaluation Panel 

(PPEP), which functioned as a management-level 

oversight group and consisted of NRC, the 

Nuclear Energy Institute, the industry, the public, 

and State representatives. The PPEP met periodi

cally during the pilot program to review the 

implementation of the revised oversight process 

and the results generated by performance indica

tor reporting, baseline inspections, assessment, 

and enforcement activities. At the end of the pilot 

program in December 1999, the PPEP evaluated 

the pilot program results, using quantifiable 

performance measures and expert judgment. 

Their report, titled "Final Report of the Pilot 

Program Evaluation Panel," is available on the 

NRC website at http://www.nrc.gov/NRR/OVER

SIGHT/ppepfinalreport.pdf. 

Office of Nuclear Materials Safety 

and Safeguards 

Integrated Materials Performance Evaluation 

Program Review 

Using common performance indicators, the 

Integrated Materials Performance Evaluation 

Program (IMPEP) was designed to evaluate the 

NRC regional materials programs and Agreement 

State radiation control programs in an integrated 

manner to ensure that the public health and safety 

is being adequately protected. 

IMPEP reviews follow a methodology de

scribed in NRC Management Directive 5.6, 

"Integrated Materials Performance Evaluation 

Program." The reviews use qualified team mem

bers from other parts of NRC and the Agreement 

States to evaluate the adequacy of program 

performance versus a set of common and non

common performance indicators. The team 

presents its findings in a draft report for comment 

to the region or to an Agreement State. A pro

posed final report is sent to a Management Re

view Board (MRB), which is comprised of senior 

NRC officials, and a manager from an Agreement 

State. The MRB meets to decide on revisions to 

the final report.

IMPEP Review of Region III 

The NRC contacted the onsite portion of the 

Region III (RIII) IMPEP review from March 

15-19, 1999. The MRB met on May 24, 

1999, and issued the final report on June 9, 

1999. The IMPEP review covered program 

activities of the RIII's Division of Nuclear 

Materials Safety. This included: nuclear 

materials licensing and inspection, response 

to incidents and allegations, technical staff

ing and training, performance against the 

region's commitments, its resource utiliza

tion, fuel cycle inspection program, and its 

Site Decommissioning Management Pro

gram. 

The RIII materials program was found to be 

adequate to protect health and safety, and the 

review team found that the RIII program 

showed consistently sound, steady and strong 

performance in all areas reviewed. The 

review team did identify some areas for 

improvement in the RIII program, including 

the need for modifying some aspects of 

handling and filing of allegation materials, 

improving staff training related to documen

tation of allegations, and ensuring complete 

and full documentation of license termination 

reviews, and NRC's Management Review 

Board approved the team's recommenda

tions. The June 9, 1999 final report, "Final 

1999 Region III Integrated Materials Perfor

mance Evaluation Program Report," is 

available in the Public Document Room. 

IMPEP Review of Region IV 

The NRC conducted the onsite portion of the 

Region IV (RIV) IMPEP review from April 

5-9, 1999. The MRB met on June 8, 1999 

and issued the final report on June 30, 1999. 

The IMPEP review covered program activi

ties of RIV's Division of Nuclear Materials 

Safety and included nuclear materials licens

ing and inspection, response to incidents and 

allegations, technical staffing and training, 

performance against the region's commit

ments, its resource utilization, fuel cycle

A94 

(?u U.S. NUCLEAR REGULATORY COMMISSION
inspection program, its Site Decommission

ing Management Program, and its uranium 

recovery program. 

Overall, the Region IV nuclear materials 

program was found to be adequate for pro

tecting public health and safety. The review 

team did not make any recommendations for 

improvement for Region IV. The review 

team did have several recommendations, that 

were approved by the Management Review 

Board, for improvement in the guidance 

provided by the Office of Nuclear Materials 

Safety and Safeguards (NMSS) to the re

gional offices, including changes in proce

dures for licensing medical facilities, review 

of the need for both field notes and inspec

tion reports for decommissioning sites, 

guidance on financial assurance, and the use 

of Licensee Event Reports and Nuclear 

Material Events Database when reporting 

materials events. The June 30, 1999 final 

report, "Final 1999 Region IV Integrated 

Materials Performance Evaluation Program 

Report," is available in the Public Document 

Room. 

IMPEP Review of the Sealed Source and 

Device Program 

The NRC conducted the onsite portion of the 

Sealed Source and Device Program (SS&D) 

IMPEP review from April 26-30, 1999. The 

MRB met on July 22, 1999 and issued the 

final report on August 11, 1999. The IMPEP 

review covered the safety evaluation of 

devices and sealed sources that contain 

radioactive material. This program is con

ducted by NMSS through the Materials 

Safety Branch of the Division of Industrial 

and Medical Nuclear Safety. 

The SS&D program was found adequate to 

protect public health and safety. The August 

11, 1999 final report, "Final Integrated 

Materials Performance Evaluation Program 

Review of NRC Sealed Source and Device 

Evaluation Program" is available in the 

Public Document Room.

Streamlining Licensing Reviews for the High

Level Waste, Decommissioning, and Uranium 

Recovery Programs 

From November 1998 to January 1999, the 

NRC conducted a program evaluation to prepare 

plans for streamlining the licensing review pro

cess for the High-Level Waste, Decommissioning, 

and Uranium Recovery Programs. The general 

methodology used was to (1) assemble a team 

with members from each program area; (2) follow 

the NMSS goals for streamlining (safety, effi

ciency, dependability, control of questions, de

fined rules of engagement, and early meetings 

with applicants); and (3) solicit input from all 

staff involved with these programs. Once the 

information was collected, a streamlining plan for 

the uranium recovery program was prepared as a 

strawman and was eventually used as a template 

for the other two programs. 

Scope of Streamlining Plans 

The scope of the licensing review streamlin

ing plans provides information on (1) the subject 

program; (2) insight into the NRC's regulatory 

philosophy and its application in streamlining; (3) 

the approach to streamlining reviews; (4) a format 

and content guide for documents; and (5) a 

generic licensing schedule. The streamlining 

plans will help ensure that NRC conducts all 

reviews in an efficient and effective manner. For 

example, reviewers are empowered to control the 

conduct of the reviews, resolve technical issues, 

and make decisions without undue delay. In 

addition, staff should be able to perform more 

focused reviews consistent with agency policy 

and needs. Furthermore, reviewers should focus 

any needs for additional information and limit the 

request for additional information to one round. 

Meetings will be conducted early in the process 

so that licensees and applicants understand NRC's 

position and can resolve any issues. Although the 

staff currently has no licensing work in the high

level waste program, the fundamentals outlined in 

the streamlining guidance document are equally 

applicable during this prelicensing consultation 

phase of the program. The final January 15, 1999 

(continued on page 96) 

A95 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT (;?,
Appendix C (continued)

report, "Streamlining Plans for Division of Waste 

Management Programs," is available in the Public 

Document Room. 

Office of Nuclear Regulatory 

Research 

Generic Issue Program Self-Assessment 

The Office of Nuclear Regulatory Research 

(RES) conducted an initial self-assessment of the 

Generic Issue Program (GIP) from June through 

August 1998. Several recommendations came 

from this initial review that indicated the need for 

an agency-wide controlling document, better 

tracking and closure of issues, and expansion to 

include burden reduction issues. These initial 

recommendations, along with others, were used to 

develop restructuring goals such as improving focus, 

clarity, and timeliness; reflecting changes in NRC 

office responsibilities; and improving coordination 

among offices. Work to restructure the GIP contin

ued throughout the first two quarters of FY 1999. 

Implementation 

On April 9, 1999, RES issued for peer review 

a partially completed Draft Management Direc

tive (MD) 6.4 and Handbook, "Generic Issue 

Program." Office comments were used to fully 

develop the MD, and on July 21, 1999, the Draft 

MD 6.4 was sent to other NRC offices and the 

public for pilot use that began in August 1999, 

after which lessons learned will be assessed, 

implemented, and a final MD will be issued. 

NRC will use the processes described in the 

GIP (1) to determine whether a candidate generic 

issue represents adequate protection, substantial 

safety enhancement, or a burden reduction issue; 

(2) to identify a cost-effective solution to generic 

issues that need to be addressed; and then (3) to 

implement and verify the solution or set of solu

tions for that generic issue, as appropriate. Ad

ministration of the GIP will be accomplished 

using an eight-stage process: 

1. Identification, 

2. Initial Screening,

3. Technical Screening, 

4. Technical Assessment, 

5. Regulations and Guidance Development, 

6. Regulation and Guidance Issuance, 

7. Implementation, and 

8. Verification 

The October 21, 1999 draft Management 

Directive, Subject: Revision 1 to Draft Manage

ment Directive 6.4, "Generic Issue Program," is 

available on the NRC website at htap:// 

www.nrc.gov/NRC/REFERENCE/STANDARDS/ 

index.html. 

Operational Safety Data Review Processes 

Self Assessment 

The agency conducted an interoffice self

assessment from April 1998 to January 1999 and 

reported the results in a commission paper 

(SECY-99-005): "A Self-Assessment of the 

Operational Safety Data Review Processes," 

dated January 6, 1999. 

The self-assessment involved detailed model

ing of the operational safety assessment process 

to identify contributions and resources of the 

various program offices. Four factors were 

considered in a critical examination: (1) the 

relative contribution of each product, service, or 

process to meeting NRC strategic goals; (2) if the 

product, service, or process was useful to indus

try; (3) whether the effectiveness of the product, 

service or process could be improved; and (4) 

whether the efficiency of the product, service, or 

process could be improved. 

Based on this assessment, the RES staff 

recommended eliminating duplication and redun

dancy, and deleting certain activities. Their report 

recommended eliminating the Office for Analysis 

and Evaluation of Operational Data (AEOD) 

Senior Management Meeting analyses, systematic 

review of all licensee event reports, and related 

AEOD functions. The report also recommended 

eliminating duplication of effort in generic com

munications preparation, regional morning re-

(5 U.S. NUCLEAR REGULATORY COMMISSION
ports, review of foreign reactor events and the 

Institute of Nuclear Power Operations operational 

safety data, and events screening. All the recom

mendations were implemented in FY 1999. The 

October 21, 1999 draft Management Directive, 

Subject: Revision 1 to Draft Management Direc

tive 6.4, "Generic Issue Program," is available on 

the NRC website at http://www.nrc.gov/NRC/ 

REFERENCE/STANDARDS/index.html. 

RES Assessment 

In FY 1999, RES completed a self-assessment 

that established goals and strategies to guide RES 

program development and budget formulation. 

This assessment increased the contribution by 

RES to the agency mission by defining desired 

outcomes; systematically examining new and 

existing activities to achieve outcomes; maintain

ing work with the highest outcome leverage; and 

eliminating work with the lowest outcome lever

age. The process promoted integration of activi

ties through an organization-wide focus on issue 

resolution strategies. The results of the assess

ment were used to develop and implement: (1) a 

new outcome-based prioritization scheme for 

informing the budget; and (2) an outcome based 

FY 2001 budget. The Research Programs for FY 

2000 are available on the Research Program 

section of the NRC website at http:/www.nrc.gov/ 

RES/nrc.html. 

Codes and Standards 

In FY 1999, NRC took several actions to 

promote the NRC process for implementing 

Public Law 104-113 and OMB Circular A- 119, 

"Federal Participation in the Development and 

Use of Voluntary Consensus Standards and in 

Conformity Assessment Activities." The NRC 

staff used information gained from a stakeholder 

meeting it held in Chicago in September 1998 to 

prepare a recommendation8 to the Commission to 

develop guidance for staff in the development 

and use of consensus standards. The Commission 

supported the staff recommendation.9 In May and 

December of 1999, the NRC held follow-up 

meetings to the Chicago 1998 meeting to focus on

communications with standards developing 

organizations (SDOs). These meetings demon

strated the value of getting together to understand 

the current needs, priorities, and constraints of 

each organization. Because of the success of the 

1998-1999 meetings, the NRC expects to hold 

future meetings periodically. 

During FY 1999, the NRC staff prepared a 

MD1

" to provide internal direction for staff 

functions to support the NRC standards strategy. 

The MD has enhanced the RES program by 

providing a structured process for ensuring the 

effective and efficient use of staff resources to 

implement the NRC strategy for participating in 

the development and use of consensus standards. 

The MD defines NRC organizational responsibili

ties for standards activities and provides direction 

for staff participation in the development and use 

of consensus standards. Specifically, the MD 

provides direction for identifying and prioritizing 

new and revised technical standards that are 

needed, selecting and nominating staff as autho

rized agency representatives on SDO committees, 

and coordinating standards activities with SDOs 

and other stakeholders. It provides direction for 

identifying and prioritizing standards for timely 

endorsement, annual reporting, exceptions to 

using a consensus standard, and monitoring and 

assessing the NRC standards program. The MD 

requires periodic training of staff involved with 

standards activities to provide updates on Federal 

requirements for standards development and to 

discuss lessons learned. The October 21, 1999 draft 

Management Directive, Subject: Revision 1 to Draft 

(continued on page 98) 

SECY-99-029, "NRC Participation in the Development 

and Use of Consensus Standards," January 28, 1999 is 

available on the NRC website at http://www.nrc.gov/ 

NRC/REFERENCE/STANDARDS/index.html. 

Staff Requirements, SECY-99-029, February 17, 1999 is 

available on the NRC website at http://www.nrc.gov/ 

NRC/REFERENCE/STANDARDS/index.html. 

10 Management Directive 6.5, "NRC Participation in the 

Development and Use of Consensus Standards," issued 

November 1999 is available on the NRC website at http/ 

/www.nrc.gov/NRC/REFERENCE/STANDARDS/ 

index.html. 

A97 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT 5ý
Appendix C (continued)

Management Directive 6.4, "Generic Issue Pro

gram," is available on the NRC website at http// 

www.nrc.gov/NRC/REFERENCE/STANDARDS/ 

index.html. 

Incident Response Operations 

The Incident Response Function 

Self-Assessment 

The Incident Response Operations office 

(IRO) conducted a recent self-assessment. The 

self-assessment team was established in May 

1998, and the report was completed on March 29, 

1999. The primary focus of the Incident Response 

Function Self-Assessment Report was to identify 

initiatives to improve the efficiency and effective

ness of the Incident Response Program. Specifi

cally, the team assessed the incident response 

functions and the incident response readiness 

activities and how they were implemented to: 

" identify activities that do not critically 

contribute to the success of the incident 

response function or incident response 

readiness activities; 

" recognize excess capacity or duplication of 

efforts that is not required to achieve measur

able outcomes or program outputs; and 

" seek approaches that can deliver services 

more economically and re-engineer work 

processes to improve overall efficiency and 

effectiveness. 

The team was also chartered to identify other 

initiatives that would significantly improve the 

effectiveness and efficiency of the NRC's pro

cesses for responding to incidents and emergen

cies involving facilities licensed by the NRC or an 

Agreement State. These included power reactors, 

fuel cycle facilities, transportation, spent fuel 

storage, research reactors and industrial, medical 

and research uses of byproduct material. Initia

tives to improve the interactions with the NRC's 

response partners, such as State and Federal 

agencies, were also included in the scope of its

charter. Within the broad-based scope, the team 

included initiatives identified by the former 

Chairman, as well as applicable "related strategic 

issues" from the NRC's Strategic Assessment and 

Rebaselining initiative. 

Implementation 

Before completing the self-assessment, the 

IRO staff expeditiously implemented several of 

the risk significant recommendations such as: 

" conducting the required response training for 

NRC managers, technical staff and commis

sioner assistants regarding NRC's responsi

bilities under the Federal Radiological 

Emergency Response Plan; 

" clearly delineating NRC's role as an observer 

for event reports for nuclear materials not 

licenced by the NRC or agreement states; 

"• reestablishing a nuclear materials fuel cycle 

facility (FCF) incidence response coordinator 

in IRO; and, 

" ensuring the implementation of IRO's plans 

to have the headquarters operations officers 

take additional training on FCF and materials 

devices and incorporating NRC training 

materials into Federal Emergency Manage

ment Agency's standard radiological re

sponse training package. 

Summary 

To date, the IRO staff has reviewed all recom

mendations, and has implemented or is in the 

process of implementing the additional specific 

effectiveness and efficiency improvements, as 

appropriate. In the future the IRO staff intends to 

periodically revisit the Incident Response Func

tion Self-Assessment Report for insights gained in 

order to assess how well IRO is meeting the 

established goals and to critically and honestly 

assess the effectiveness and efficiency of IRO's 

existing programs. An executive summary of the 

final report on the IRO self-assessment, "The 

Incident Response Function Self-Assessment" is 

available in the Public Document Room.

U/ U.S. NUCLEAR REGULATORY COMMISSION
Appendix D

Crosscutting Functions 

with Other Government 

Agencies 

Several Government agencies have missions 

that are related to the NRC. The NRC identified 

no inconsistent or duplicative areas in its respec

tive strategic plans, but the agency continues to be 

alert to potential inconsistencies or duplication in 

its cooperative activities. These interaction and 

coordination efforts are important in accomplish

ing the agency's mission. In most instances, the 

NRC has, or is developing, memoranda of under

standing (MOU) or other agreements with these 

agencies to ensure that areas of mutual interest 

and cooperation are treated in a consistent, coor

dinated, and complementary way that avoids 

unnecessary duplication or conflict. 

To develop programs in those areas that are 

critical to the NRC's mission, senior agency 

management meet with their counterparts in other 

agencies to establish plans and strategies in the 

areas of common programs and goals. Inter

agency committees are established, as necessary, 

to facilitate consensus on programs and promote 

consistent approaches for their implementation. 

One such example is the Interagency Steering 

Committee on Radiation Standards. The Com

mission also holds briefings on the status of 

programs such as the periodic briefings by the 

Department of Energy (DOE) on the high-level 

waste program, and agency staff coordinates other 

areas of mutual interest as appropriate. 

The review of crosscutting programs, the 

coordination of those programs, and the identifi

cation of any issues are also an integral part of the 

NRC's internal technical program review process. 

The NRC has no substantive crosscutting or 

overlap between intra-agency cross-cutting

program activities and functions within the 

agency. See Table 5 for the major crosscutting 

functions with other agencies and their relation

ship to NRC programs, followed by descriptions 

of the specific NRC areas of mutual interest with 

other agencies. 

DOE-The NRC and DOE share responsibil

ity for high-level radioactive waste (HLW) dis

posal. As specified in the Nuclear Waste Policy 

Act of 1982, as amended (NWPA), DOE is 

responsible for characterizing the site and for the 

design and construction of the repository, and 

NRC is responsible for regulatory oversight, 

including licensing the construction and operation 

of the facility. Our strategy is to provide regula

tory guidance to DOE and to prepare to license a 

HLW repository at a pace consistent with the 

national program. The NRC has an agreement 

with DOE that outlines the procedures for staff 

consultation and exchange of information. This 

procedural agreement was updated in 1999 to 

incorporate all changes to the HLW program 

since 1993. 

The NRC also interacts with DOE on a num

ber of activities associated with the transportation 

and storage of spent nuclear fuel and HLW. The 

NRC and DOE have a procedural agreement 

regarding spent fuel and HLW transportation 

packaging. Further, DOE is required by law to 

use NRC-certified packaging for certain waste 

and spent fuel shipments. NRC and DOE have 

signed a cost-reimbursable interagency agreement 

whereby NRC provides DOE with oversight of 

physical security arrangements for certain foreign 

research reactor spent fuel shipments. NRC and 

DOE have signed a second cost-reimbursable 

interagency agreement whereby NRC provides 

DOE with review of a cask design for shipment of 

(continued on page 102) 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT (5
Appendix D (continued) 

Table 8: Crosscutting Functions With Other Agencies 

Agency Areas of Mutual Interest NRC Program/(Strategic Arena) 

Department of Energy (DOE) High-Level Waste Disposal High-Level Waste/(Nuclear Waste 

Safety) 

Transportation and Storage of Spent Fuel Spent Fuel Storage and Transportation 

and Waste Licensing and Inspection 

(Nuclear Waste Safety) 

Uranium Mill Tailings Radiation Control Act Uranium Recovery Licensing and 

Inspection 

(Nuclear Waste Safety) 

Low-Level Waste Regulation of Low-Level Waste 

(Nuclear Waste Safety) 

Excess Plutonium Disposition Fuel Facilities Licensing and Inspection 

Mixed Oxide Fuel Fabrication (Nuclear Materials Safety) 

DOE Tank Waste Remediation System 

(TWRS) 

Regulatory Oversight at Gaseous Diffusion 

Plants 

Mitigation of Threat from Certain Discrete Regulation of Low-Level Waste 

Radioactive Material (Nuclear Waste Safety) 

Security of Classified National Security Fuel Facilities Licensing and Inspection 

Information and Restricted Data (Nuclear Materials Safety) 

DOE Threat Assessment Reactor Incident Response 

Federal Bureau of Investigation (FBI) (Nuclear Reactor Safety) 

U.S. Customs Service (Customs) 

Defense Intelligence Agency (DIA) Fuel Facilities Licensing and Inspection 

Central Intelligence Agency (CIA) (Nuclear Materials Safety) 

Department of State (State) 

Environmental Protection Agency (EPA) Protection of Public Health and Safety and (Nuclear Materials Safety) 

the Environment (Nuclear Waste Safety)High-level Waste 

High-level Waste Site-specific Standards High-Level Waste Regulation 

(Nuclear Waste Safety) 

FBI Response to Suspected Terrorist or Criminal Reactor Incident Response 

Initiated Threat or Incident Involving (Nuclear Reactor Safety) 

Licensed Reactor, Material or Fuel Facilities (Nuclear Materials Safety) 

Federal Emergency Management Agency Offsite Nuclear Power Plant Emergency Reactor Licensing 

Planning Reactor Incident Response 

(Nuclear Reactor Safety) 

Offsite Fuel Cycle Facility Emergency Fuel Facilities Licensing and Inspection 

Planning (Nuclear Materials Safety) 

National Dam Safety Program Uranium Recovery Licensing & 

Potassium Iodide (DI) Supplement Program Inspection 

(Nuclear Waste Safety) 

? U.S. NUCLEAR REGULATORY COMMISSION
Table 8: Crosscutting Functions With Other Agencies (continued)

Agency Are-as of Mutual Interest NRC Program/(Strategic Arena) 

Federal Energy Regulatory Commission Utility Economic Deregulation, Antitrust and Reactor Licensing 

(FERC) Market Power Issues (Nuclear Reactor Safety) 

Department of Transportation (DOT) Transportation of Radioactive and Spent Fuel Storage and Transportation 

Fissile Materials Licensing and Inspection 

(Nuclear Waste Safety) 

Food & Drug Administration (FDA) Approval of Medical Devices Incorporating Nuclear Materials Users Licensing and 

Byproduct Materials, Radiopharmacuticals, Inspection 

and Radioactively Labeled Biologic Materials (Nuclear Materials Safety) 

Occupational Safety & Health Worker Health and Safety Fuel Facilities Licensing & Inspection 

Administration (OSHA) (Nuclear Materials Safety) 

Department of Health and Human Services, Public Health and Safety in the Release and Reactor Inspection 

Public Health Service, Agency for Toxic Transportation of Ionizing Radiation Reactor Incident Response 

Substances and Disease Registry (Nuclear Reactor Safety) 

(HHS/PHS/ATSDR) Fuel Facilities Licensing and Inspection 

Materials Incident Response State 

Programs 

(Nuclear Materials Safety) 

High-Level Waste Regulation 

(Nuclear Waste Safety) 

Department of Interior (DOI) Protection of the Environment Reactor Licensing 

(Nuclear Reactor Safety) 

Uranium Recovery Licensing and 

Inspection 

(Nuclear Waste Safety) 

Department of Labor (DOL) Enforcement Reactor Enforcement Actions 

Department of Justice (DOJ) (Nuclear Reactor Safety) 

Materials Enforcement Actions 

(Nuclear Materials Safety) 

Investigations Reactor Investigations 

(Nuclear Reactor Safety) 

Materials Investigations 

(Nuclear Materials Safety) 

State Nuclear Safety Assistance to Other Countries Participation in International Activities 

Department of Defense (DoD) (International Nuclear Safety Support) 

Agency for International Development (AID) 

DOE 

State Export of Nuclear and Nuclear Related Participation in International Activities 

DoD Materials, Equipment, and Technology 

DOE 

Department of Commerce (DOC) 

National Security Council (NSC) Nuclear Safeguards Assistance to Other Participation in International Activities 

State Countries (International Nuclear Safety Support) 

DOE

1999 ACCOUNTABILITY AND PERFORMANCE REPORT
Appendix D (continued)

spent fuel from the West Valley Demonstration 

Project to the Idaho National Engineering and 

Environmental Laboratory. Finally, NRC and 

DOE-Naval Reactors (NR) have signed a cost

reimbursable interagency agreement whereby 

NRC provides DOE-NR with review of a spent 

fuel dry storage facility for navy fuel. 

The NRC and DOE have joint responsibility 

for carrying out the Uranium Mill Tailings Radia

tion Control Act (UMTRCA) Title I Program and 

for the long-term care of reclaimed uranium mill 

tailings sites. Although DOE has the responsibil

ity for carrying out remedial action, the NRC 

must concur in DOE's selection and completion 

of the remedial action and must license the sites 

for long-term care. The NRC and DOE have an 

MOU to minimize or eliminate unnecessary 

duplication of effort between the two agencies. 

NRC and DOE are assigned responsibility for 

managing of low-level radioactive waste (LLW) 

under the Low-Level Radioactive Waste Policy 

Act of 1980 and its 1985 amendments. These 

responsibilities are different but complementary; 

thus, an MOU or other type of agreement has not 

been necessary. NRC and DOE interact on LLW 

policy, regulatory, and technical issues. 

DOE and NRC have established a reimburs

able agreement for NRC to provide technical 

assistance and coordinate with DOE on regulatory 

issues associated with DOE's disposition of 

excess plutonium through measures other than 

mixed-oxide (MOX) fabrication/irradiation. 

Under the agreement, NRC advises DOE on 

regulatory issues associated with activities such as 

pit disassembly, conversion and immobilization. 

The FY 1999 Defense Authorization Act (P.L. 

105-261) gave NRC statutory licensing authority 

over any MOX fuel fabrication facility con

structed by DOE or its contractors to convert 

excess weapons plutonium into MOX reactor 

fuel. The facility will be located at DOE's Savan

nah River Site. This program depends on a 

number of factors outside of NRC control, includ

ing national policy, DOE funding, and Russian 

progress on the disposition of excess plutonium.

The NRC will continue to assist DOE in 

regulating the Tank Waste Remediation System 

(TWRS) at Richland, Washington. DOE initiated 

regulation of this system in 1996 to demonstrate 

technologies for solidifying highly radioactive 

tank waste at the Hanford site through the design 

of a pilot-scale facility. NRC and DOE developed 

an MOU in 1997 and are updating it to reflect the 

current status and required objectives for the 

TWRS program. 

The NRC and DOE have regulatory oversight 

of different portions of the Portsmouth and 

Paducah Gaseous Diffusion Plants. The NRC 

regulates those portions that are leased by the 

United States Enrichment Corporation (USEC) 

while DOE has the regulatory oversight for the 

remainder of the sites. Regulatory issues occa

sionally arise that concern both DOE and NRC. 

An MOU establishes the protocol between the 

NRC and DOE to address those issues. 

The NRC and DOE currently have an agree

ment that outlines the procedures for NRC re

quests for DOE assistance to mitigate threats to 

the public from certain discrete radioactive 

material, including material that exceeds Class C 

waste classification. This agreement is being 

formalized in an MOU. 

The NRC and DOE share responsibility for 

the security of classified National Security infor

mation and Restricted Data at certain licensees 

(principally Naval Nuclear Fuel Facilities) and at 

the USEC. Although DOE has principal responsi

bility at Naval Nuclear Fuel Facilities under the 

auspices of its classified contracts with those 

firms, NRC has responsibility for the personnel 

security program for access to or control over 

strategic nuclear material and for information 

related to the physical protection plans for the 

protection of the strategic nuclear material. At 

USEC, NRC has primary responsibility for the 

protection of classified information and DOE for 

the personnel security program. The NRC and 

DOE have several MOUs in place to minimize or 

eliminate duplication of effort between the two 

agencies.

C5 U.S. NUCLEAR REGULATORY COMMISSION
DOE, FBI, CIA, Customs, DIA, State- The 

NRC, as part of its mission to protect public 

health and safety and ensuring the common 

defense and security, maintains close working 

relationships with other agencies to ensure that 

the design basis threat for radiological sabotage 

and theft or diversion are current and accurate. 

For this reason, NRC has established MOU and 

Letters of Agreement for the exchange of relevant 

threat information. These arrangements also 

facilitate the timely receipt by NRC of any poten

tial threats to NRC licensed materials or facilities. 

EPA-The NRC and EPA share responsibility 

for protection of public health and safety and the 

environment. The NRC and EPA have numerous 

MOUs and interrelated activities. Many of these 

interrelated activities have been successful: 

" the development of the Multi-Agency Radia

tion Site Survey and Investigation Manual 

and the Multi-Agency Radiation Laboratory 

Protocols Manual; 

" support for the National Research Council 

Committee on the Biological Effects of 

Ionizing Radiation; 

" development of the Joint NRC/EPA Guid

ance for Testing Requirements for Mixed 

Radioactive and Hazardous Waste; 

" development of a Technical Position for 

Disposition of Cesium-137 Contaminated 

Emission Control Dust; 

" development of a nationwide survey to 

analyze for radioactive contamination of 

sewer sludge and ash at publicly-owned 

treatment works; and 

" development of modeling scenarios in sup

port of potential rulemakings for recycle and 

reuse of radioactively contaminated materi

als. The NRC is currently working with EPA 

to define roles, responsibilities, and jurisdic

tions regarding orphan source issues and to 

develop regulations to facilitate the disposal 

of mixed wastes.

As specified in the Energy Policy Act of 1992 

(EnPA), EPA is tasked to develop site-specific 

HLW standards consistent with the recommenda

tions of the National Academy of Sciences report 

on the Technical Bases for Yucca Mountain 

Standards. NRC has one year to develop an 

implementing rule after EPA issues final stan

dards. EPA proposed a HLW standard in August 

1999 for public comment. Both Houses of Con

gress have legislation pending that would, among 

other things, prescribe an overall performance 

standard for Yucca mountain, and, depending on 

which bill is enacted, could impact NRC and EPA 

responsibilities. The NRC maintains a formal 

liaison with the EPA staff and has implemented a 

strategy for the conforming requirements to 

ensure that the NRC completes the implementing 

rule within a year of issuance of the final EPA 

standards. Differences continue between the EPA 

and the NRC on groundwater protection require

ments and other matters; and may impact the 

requirements, complexity, and costs of licensing 

the repository. 

The NRC and EPA have been unsuccessful is 

in setting standards to establish radiological 

criteria for decommissioning and cleanup of 

contaminated sites, and HLW disposal. EPA is 

responsible for developing general radiation 

standards, which are then reflected in NRC 

regulations and other requirements. The NRC 

continues to seek legislation as reflected in House 

Report 2531, "The Nuclear Regulatory Commis

sion Authorization Act for Fiscal Year 2000, Title 

II", that would make it clear that, with very 

limited exception, the standard issued by NRC 

and Agreement States governs cleanup of Atomic 

Energy Act material at facilities licensed by them. 

EPA expressed concerns with certain provisions 

of NRC's license termination rule and included in 

their guidance, "Establishment of Clean-up 

Levels for Comprehensive Environmental Re

sponse, Compensation, and Liability Act 

(CERCLA) Sites with Radioactive Contamina

tion," a statement that the dose limits established 

in the NRC license termination rule would not 

(continued on page 104) 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT
Appendix D (continued)

provide a protective basis for establishing prelimi

nary remediation goals for cleanup at CERCLA 

sites and that the NRC sites could require further 

remediation. Top-level NRC and EPA manage

ment will continue to address these issues to 

resolve the question of finality for sites that have 

complied with the NRC cleanup standards for 

license termination based on the House Report 

2684, "Hazardous Substance Superfund (Includ

ing Transfers of Funds)." It is NRC's current 

position is that changes to legislation are needed 

to resolve these issues, however NRC will con

tinue to engage EPA in resolution of this matter as 

directed by the House Report 2684. The NRC has 

also supported provisions in HLW legislation in 

both Houses of Congress that would effectively 

remove EPA from the standard-setting role for the 

Yucca Mountain repository and establish a Con

gressional standard for which NRC would issue 

implementing regulations. While the bills differ 

on specifics, either would be preferable to the 

current statutory provisions on standard setting. 

FBI-The NRC and the FBI share responsi

bility (along with FEMA) for response to a 

suspected terrorist or criminal initiated threat or 

incident involving NRC licensed facilities or 

material. The FBI has lead responsibility for 

crisis management during a threat or an incident 

and the NRC retains the responsibility for radio

logical matters. The NRC and FBI have an MOU 

to minimize or eliminate unnecessary duplication 

of effort between the two agencies. 

FEMA-FEMA has lead responsibility for 

offsite nuclear power plant emergency planning 

and for nuclear materials emergency planning. 

FEMA also has the lead in assessing offsite 

emergency plans and preparedness for adequacy. 

NRC is responsible for onsite radiological emer

gency preparedness and for review of FEMA 

findings and determinations as to whether offsite 

plans are adequate and can be implemented. 

NRC also has the responsibility to make radio

logical health and safety decisions with regard to 

the overall state of emergency preparedness, such 

as assurance for continued operation and shutdown of operating reactors. Should an actual 

peacetime radiological emergency require more 

than one agency to respond, the Federal Radio

logical Emergency Response Plan (FRERP) 

provides for coordination of all Federal response 

activities. The FRERP is maintained by the 

Federal Radiological Preparedness Coordinating 

Committee (FRPCC); NRC is actively involved 

as a member of several FRPCC subcommittees 

that develop Federal procedures and guidance. In 

the event of an emergency involving an NRC

regulated entity, NRC is the lead Federal agency 

and works closely with six agencies: FEMA, 

DOE, EPA, Department of Agriculture (USDA), 

HHS, and National Oceanic and Atmospheric 

Administration (NOAA). Representatives of 

these agencies train with, and are integrated into, 

the NRC response team. Response coordination 

on a broader scale is provided by the Federal 

Response Plan (FRP) for emergencies of all 

kinds, including responses under the National 

Contingency Plan (NCP) for emergencies involv

ing chemical and radiological hazards together. 

NRC is a member of the teams that coordinate 

actions under the NCP. The NRC and FEMA 

share responsibility (along with FBI) for a re

sponse to a suspected terrorist or criminal initi

ated threat or incident involving NRC licensed 

facilities or material. FEMA has lead responsibil

ity for consequence management during a threat 

or incident and the NRC retains the responsibility 

for radiological matters. The NRC and FEMA 

have a memorandum of understanding (MOU) to 

minimize or eliminate unnecessary duplication of 

effort between the two agencies. 

FEMA and the NRC share involvement in the 

National Dam Safety Program. The primary 

purpose of this program is to bring together the 

expertise and resources of the Federal and non

Federal communities to achieve national dam 

safety hazard reduction. The NRC has regulatory 

authority over only uranium mill tailings dams 

and those dams integral to the operation of li

censed facilities, or the possession and use of 

licensed material, that pose a radiologically 

safety-related hazard if these dams should fail.

U N104M 

(J5jU.S. NUCLEAR REGULATORY COMMISSION
FERC-The NRC and the FERC have ongo

ing interaction regarding issues of mutual con

cern, such as (1) FERC actions with respect to 

economic deregulation of the electric utility 

industry and the potential impact of FERC's 

deregulation activities on the NRC's mandate to 

protect public health and safety; and (2) the 

respective roles of the NRC and FERC in evaluat

ing antitrust and market power issues arising from 

NRC power reactor license applicants or licens

ees. NRC supports those aspects of the 

President's electric sector restructuring legislation 

that pertain to it, in particular, the elimination of 

NRC's duplicative role in antitrust reviews. 

DOT-In accordance with their MOU, the 

NRC and the DOT share responsibility for devel

oping, establishing, implementing, and enforcing 

consistent and comprehensive regulations and 

requirements for the safe transportation of radio

active and fissile materials, often through inter

agency committees. Generally, the NRC works 

with DOT to develop regulations for transporting 

materials, and the NRC adopts DOT requirements 

into its regulations. 

FDA-The NRC and the FDA have an MOU 

that outlines procedures for sharing information 

of mutual interest relating to the approval of 

medical devices, radioactive drugs, and radioac

tive biologies when these products contain NRC

regulated material. The NRC routinely relies on 

prior FDA approval of medical devices as an 

essential component of the NRC's sealed source 

and device safety evaluations. The MOU also 

establishes procedures for notification, sharing of 

information, and coordination of joint inspections 

of events related to design and manufacturing 

defects and failures of these devices or of radioac

tive drugs or radioactive biologies. 

OSHA-By an October 1988 OSHA/NRC 

MOU, NRC and OSHA share responsibility for 

worker health and safety at NRC-regulated 

facilities. NRC regulates worker safety concern

ing radiation and chemical risks resulting from 

processing radioactive material and OSHA regulates worker safety concerning non-radiological 

and other industrial hazards. 

ATSDR-The NRC coordinates with ATSDR 

on issues relevant to the agency's mission to 

prevent exposure and human health effects and 

diminished quality of life associated with expo

sure to hazardous substances from waste sites, 

unplanned releases, and other sources of pollution 

present in the environment. This coordination 

involves ATSDR's hazardous substances role in 

public health, including the impact of radioactive 

releases from power plants on adjacent communi

ties' and Indian reservations' air, water, and food 

chain and impacts resulting from transportation of 

nuclear waste. 

DOI, Fish and Wildlife Service-Under the 

Endangered Species Act, the NRC has responsi

bility to ensure that its actions are protective of 

endangered species. NRC consults with the Fish 

and Wildlife Service (FWS) in evaluating effects 

on endangered species of proposed NRC actions. 

If a proposed NRC action has the potential of 

affecting endangered species, NRC prepares a 

biological assessment of the effects, and the FWS 

then renders a biological opinion. This consulta

tion process can be extensive, as in the Atlas 

uranium mill tailings remediation case. 

DOL/DOJ-The NRC monitors discrimina

tion actions filed with the DOL under Section 211 

of the Energy Reorganization Act and develops 

enforcement actions if either NRC's Office of 

Investigations or DOL adjudications reveal 

properly supported findings of discrimination. 

Suspected criminal activities concerning NRC 

licensees, and others within NRC's regulatory 

jurisdiction, are referred to the DOJ. Coordina

tion with DOJ occurs before NRC initiates any 

civil enforcement action for matters DOJ is 

considering for criminal prosecution. 

State, DoD, AID, DOE, Commerce-The 

NRC shares responsibility with State, DOE, DoD 

and AID in providing nuclear safety and safe

guards assistance to other countries. State pro

vides foreign policy guidance for U.S. 

(continued on page 106) 

1999 ACCOUNTABILITY AND PERFORMANCE REPORT
Appendix D (continued)

government agencies in carrying out such assis

tance, while NRC contributes actively to the 

formulation of this guidance and clears its assis

tance programs with State to ensure they are 

within U.S. Government policy. The NRC also 

shares responsibility with DOE for providing 

nuclear safety and safeguards assistance interna

tionally. The NRC and DOE coordinate their 

efforts with each other and with other countries 

that provide assistance to ensure they are comple

mentary and to avoid duplication and conflict. 

The National Security Council and the Office of 

the Vice President provide high-level policy 

guidance on key issues in the international assis

tance area and resolve questions that arise in 

providing such assistance. 

The NRC, DOE, State, DoD, and Commerce 

have interrelated roles in controlling exports of 

nuclear and nuclear-related materials, equipment, 

and technology. The NRC's primary role in

volves issuing export licenses for nuclear materi

als and equipment, including reactors. The

following agencies issue licenses or authoriza

tions in related areas: 

" DOE for nuclear technology exports and for 

retransfers or changes in form or content of 

previously exported nuclear materials and 

equipment; 

" State for munitions made with depleted 

uranium; and 

"• Commerce for nuclear reactor balance-of

plant equipment and "dual use" commodities. 

Each agency is obliged to consult with the 

others (including, if warranted, DoD) for signifi

cant cases. 

DOE and NRC are in the process of establish

ing a reimbursable agreement for NRC to provide 

Material Protection, Control, and Accounting 

Support to the regulatory agencies of Russia, 

Ukraine, and Kazakhstan through the develop

ment of regulations and the development of the 

licensing, inspection, and enforcement programs.

(5 U.S. NUCLEAR REGULATORY COMMISSION
Federal Recycling Program 

ISBN 0-16-050334-5 

1 I90000 

9 780160 503344-
NUREG - 1542 

Vol. 5