PERFORMANCE AND

ACCOUNTABILITY

REPORT

U . S . N UCLEAR R EGULA T O R Y C OMMISSION

Fiscal Y ear 2000
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, 11555 Rockville Pike, Rockville, MD 20852-2738

2. The Superintendent of Documents, U.S. Government Printing Office, Mail Stop SSOP,

Washington, DC 20402-0001

3. The National Technical Information Service, Springfield, VA 22161-0002

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

notices, inspection and investigation notices; licensee event reports; vendor reports and correspondence;

Commission papers; and applicant and licensee documents and correspondence.

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

agreement reports, grantee reports, and NRC booklets and brochures. Also available are regulatory guides,

NRC regulations in the Code of Federal Regulations, and Nuclear Regulatory Commission Issuances.

Documents available from the National Technical Information Service include NUREG-series reports

and technical reports prepared by other Federal agencies and reports prepared by the Atomic Energy Commission, forerunner agency to the Nuclear Regulatory Commission.

Documents available from public and special technical libraries include all open literature items, such as

books, journal articles, and transactions. Federal Register notices, Federal and State legislation, and congressional reports can usually be obtained from these libraries.

Documents such as theses, dissertations, foreign reports and translations, and non-NRC conference

proceedings are available for purchase from the organization sponsoring the publication cited.

Single copies of NRC draft reports are available free, to the extent of supply, upon written request to the

Office of the Chief Information Officer, Publishing Services Branch, U.S. Nuclear Regulatory Commission,

Washington, DC 20555-0001.

Copies of industry codes and standards used in a substantive manner in the NRC regulatory process are

maintained at the NRC Library, Two White Flint North, 11545 Rockville Pike, Rockville, MD 20852-2738,

for use by the public. Codes and standards are usually copyrighted and may be purchased from the originating organization or, if they are American National Standards, from the American National Standards Institute, 1430 Broadway, New York, NY 10018-3308.
NUREG – 1542

Vol. 6

PERFORMANCE AND

ACCOUNTABILITY

REPORT

U.S. N UCLEAR R EGULATORY C OMMISSION

Fiscal Year 2000

U.S. Nuclear Regulatory Commission

Office of the Chief Financial Officer

Reflection of the One White Flint Building on the Two White Flint

Building at NRC Headquarters Located in Rockville, Maryland
ii

U.S. NUCLEAR REGULATORY COMMISSION

NRC Principles of Good Financial Management

Those 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 Management.

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 accomplish its mission. Ongoing projects should be evaluated to ensure results justify continued funding. Appropriate 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 accomplishments.

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.
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

iii

Table of Contents

(continued on page iv)

NRC Principles of Good Financial Management..................................................... ii

Foreword ................................................................................................................ vii

The NRC’s Mission .............................................................................................. viii

Message From the Chairman .................................................................................. ix

Message From the Chief Financial Officer ............................................................. xi

Management’s Discussion and Analysis.................................................................. 1

About the NRC ................................................................................................... 1

Mission .......................................................................................................... 1

Organization .................................................................................................. 2

Regulatory Responsibility ............................................................................. 2

Program Performance Highlights ....................................................................... 2

Financial Performance ........................................................................................ 4

Financial Statement Highlights ..................................................................... 4

Financial Condition of NRC .......................................................................... 5

Sources of Funds ........................................................................................... 5

Uses of Funds by Function ............................................................................ 5

Prompt Payment ............................................................................................ 7

Debt Collection.............................................................................................. 7
iv

U.S. NUCLEAR REGULATORY COMMISSION

Table of Contents (continued)

Systems Controls and Legal Compliance ................................................................ 7

Chairman’s Integrity Act Report ................................................................... 7

NRC’s Management Control Program .......................................................... 8

Financial Management Systems .................................................................... 8

Biennial Review of User Fees ....................................................................... 9

Management Decisions and Final Actions on Office of

the Inspector General Audit Recommendations ............................................ 9

Performance Report ............................................................................................... 13

Strategic Arenas................................................................................................ 14

Nuclear Reactor Safety ..................................................................................... 14

Nuclear Reactor Safety Accomplishments for FY 2000.............................. 15

Nuclear Materials Safety .................................................................................. 20

Nuclear Materials Safety Accomplishments for FY 2000 ........................... 21

Nuclear Waste Safety ....................................................................................... 24

Nuclear Waste Safety Accomplishments for FY 2000 ................................ 25

International Nuclear Safety Support................................................................ 28

International Nuclear Safety Accomplishments for FY 2000...................... 29

Management and Support Accomplishments for FY 2000 .................................... 30

Verification and Validation of Data ....................................................................... 31

Program Evaluations .............................................................................................. 33

Management Challenges ........................................................................................ 33

Crosscutting Functions with Other Government Agencies .................................... 33

Fiscal Year 2000 Principal Financial Statements

and Independent Auditors’ Report ......................................................................... 35
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

v

Figures

1 Sources of Funds ........................................................................................... 6

2 Uses of Funds by Function ............................................................................ 6

3 NRC Organization Chart ............................................................................. 12

4 U.S. Commercial Reactors .......................................................................... 15

Tables

1 Management Report on Office of the Inspector General Audits

with Disallowed Costs ................................................................................. 10

2 Nuclear Reactor Safety Performance........................................................... 16

3 Nuclear Materials Safety Performance ........................................................ 22

4 Nuclear Waste Safety Performance ............................................................. 26

5 International Nuclear Safety Support Measures .......................................... 29

Appendix

The Inspector General’s Assessment of Management Challenges ................... 87
vi

U.S. NUCLEAR REGULATORY COMMISSION
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

vii

Foreword

This report was prepared to meet the requirements of the Reports Consolidation Act of 2000

(RCA), Public Law 106-531. This legislation builds on the success of a pilot program

authorized under the Government Management Reform Act of 1994 which demonstrated that

consolidated and integrated reports yield better information in a more useful and understandable

manner. The RCA provides permanent authority for agencies to integrate financial and performance

information into a single consolidated report beginning with the Fiscal Year 2000 submission.

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

• The NRC’s annual financial statements and auditor’s report, required by the

Chief Financial Officer’s act of 1990 (CFO Act);

• The NRC’s annual performance report, required by the Government Performance

and Results Act of 1993 (GPRA);

• The Chairman’s annual report to the President and the Congress on internal controls,

required by the Federal Manager’s Financial Integrity Act of 1992 (Integrity Act);

• The Chairman’s statement on the compliance of the agency’s financial management

systems with applicable Federal requirements and accounting standards, required by the

Federal Financial Management Improvement Act of 1996 (Improvement Act); and

• 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

Inspector General Act of 1978, as amended.

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

Office of the Chief Financial Officer

Mail Stop O-17 F3

U.S. Nuclear Regulatory Commission

Washington, DC 20555-0001

or

Internet Address: cfd@nrc.gov
viii

U.S. NUCLEAR REGULATORY COMMISSION

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.
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

ix

Message From the Chairman

(continued on page x)

I

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

(NRC) Performance and Accountability Report for Fiscal Year 2000.

This report reflects the NRC’s continued commitment to employ sound

management strategies in regulating the Nation’s use of nuclear materials. NRC’s Fiscal Year 2000 Performance Report has been integrated

into this report and shows that the agency achieved its overall goals of

protecting public health and safety.

In September 2000, NRC published a revised Strategic Plan for

Fiscal Years 2000 to 2005 that describes how we intend to accomplish

our mission. In particular, it discusses our core principles and strategies

and sets out both performance goals and measures to gauge performance. It has been exciting to observe the NRC’s continuing efforts to create an environment in

which the agency and its programs are managed to performance goals.

I am also pleased that the agency has earned its seventh consecutive unqualified audit opinion on its financial statements. This achievement reaffirms the NRC’s continued commitment to

ensure that sound financial management principles are consistently followed by all employees

responsible for public assets. However, important work remains to be completed in order to

comply fully with Federal accounting and reporting standards. The NRC evaluated its management control and financial management systems for Fiscal Year 2000 as required by the Federal

Manager’s Financial Integrity Act of 1982 (Integrity Act) and the Federal Financial Management

Improvement Act of 1996 (Improvement Act). The results of the Integrity Act evaluation disclosed no material weaknesses. The Improvement Act 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 Accounting Standards Number 4, Managerial Cost Accounting Concepts and Standards for the Federal Government and (2) the inability of the Treasury’s Financial Management Service to test business

continuity plans for the NRC’s core accounting system. The agency’s response to the audit

report on the agency’s financial statements, provided at the end of this report, contains a discussion of NRC’s corrective actions.

Consistent with the requirements of the Reports Consolidation Act of 2000, this report

includes a summary and an assessment by the agency’s Inspector General of the most serious

management challenges facing the agency and the agency’s progress in addressing them. While

some of these issues concern initiatives which are not central to our mission, others are critical in

maintaining our future capability to protect the public health and safety. Each of these issues is

important, and each will continue to receive senior management attention.

Of course, external factors beyond NRC’s control will have a major influence on how the

NRC carries out its mission. Such factors include deregulation in the electrical power industry,
x

U.S. NUCLEAR REGULATORY COMMISSION

a renewed interest in expanding the capacity to produce nuclear power, and the disposition of

spent nuclear fuel. My colleagues and I look forward to meeting the challenges and are confident

the American public will be the benefactors of our success.

Richard A. Meserve

Message from the Chairman (continued)
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

xi

Message From the Chief Financial Officer

I

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

(NRC) has completed another productive and successful year in the

performance of its financial management responsibilities. The NRC

first issued audited financial statements for FY 1992 and has received an

unqualified audit opinion each fiscal year since FY 1994.

Our financial performance also reflects notable accomplishments in

other areas. Efficiency and effectiveness were achieved by making

almost all of our payments to employees and commercial vendors

electronically. Delinquent debt owed to the NRC was held to less than 1

percent of the total amount that was billed and was reduced by 40

percent over the FY 1999 amount. We met the requirements of the

Omnibus Budget Reconciliation Act of 1990, by assessing and collecting fees to offset 100

percent of our new FY 2000 budget authority which was required to be offset.

We continue to strive to be a leader in the Federal government for financial management.

During FY 2000, progress was made in implementing the Statement of Federal Financial Accounting Standard Number 4 (SFFAS 4), Managerial Cost Accounting Concepts an Standards

for the Federal Government. We are currently parallel testing an integrated payroll, human

resources, and time and labor financial management system. This new system coupled with our

cost accounting module will help us comply with SFFAS 4 and provide additional cost-based

information to agency managers. We expect the system to be operational during 2001.

We also made progress, during FY 2000, in integrating program performance with resource

and program management by fulfilling the requirements of the Government Performance and

Results Act of 1993. We issued NRC’s FY 2000-2005 Strategic Plan, our first triennial update

of the strategic plan; a combined and integrated FY 2001 Budget Estimate and Performance

Plan; and our first Performance Report to Congress. These efforts have helped to ensure that our

programs and activities are aligned with our mission and goals, and that we can effectively

measure our performance.

While we have had success, work remains as the NRC continues to strive for excellence in

financial management. We look forward to another productive and successful year in FY 2001.

Our strength lies in unified, coordinated action, and this report is an important indicator in the

process of achieving this outcome. We will continue to maintain the high standards we have

achieved and seek improved methods to carry out our fiscal responsibilities.

Jesse L. Funches
xii

U.S. NUCLEAR REGULATORY COMMISSION

Message from the Chief Financial Officer (continued)
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

1

Management’s Discussion and Analysis

(continued on page 2)

The Management’s Discussion and Analysis

is designed to provide a high-level overview of

the agency. It consists of four sections: About the

NRC which describes the agency’s mission, organizational structure, and regulatory responsibility;

Program Performance which discusses the agency’s

success in achieving its strategic goals; Financial

Performance which provides highlights of the

NRC’s financial position; and Systems, Controls,

and Legal Compliance which describes the agency’s

internal control environment and contains the

Chairman’s reasonable assurance statement.

About the NRC

The NRC was established as an independent

regulatory agency of the Federal Government on

January 19, 1975. It was created by the

U.S. Congress to regulate various commercial and

institutional uses of nuclear energy. The agency

succeeded the regulatory function of the Atomic

Energy Commission, which had the responsibility

to both develop and regulate nuclear activities.

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.

Mission

The NRC’s mission is 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.

The Nuclear Regulatory

Commission Headquarters

in Rockville, Maryland
2

U.S. NUCLEAR REGULATORY COMMISSION

Organization

The NRC is headed by a Commission composed

of five members, with one member designated by

the President to serve as Chairman. Each member

is appointed by the President, by and with the advice

and consent of the Senate, and serves a term of 5

years. The Chairman serves as the principal executive officer and official spokesman for the Commission. The Executive Director for Operations carries

out the program policies and decisions made by

the Commission.

The agency’s mission is carried out with a

staff of approximately 2,800 and a budget of

approximately $470 million, most of which is

recovered through fees charged to NRC licensees.

The agency’s budget has been declining since

FY 1993. The FY 2000 budget reflects an overall

reduction of 13 percent in funding and 16 percent

in staffing compared to FY 1993.

The NRC executes its mission at its headquarters offices in Rockville, Maryland, and four

regional locations in King of Prussia, Pennsylvania; Atlanta, Georgia; Lisle, Illinois; and Arlington, Texas. The NRC also has resident inspector

offices at each commercial nuclear power plant.

The NRC organization chart is located at the end

of this section.

Regulatory Responsibility

Under its responsibility to protect the public

health and safety, the NRC has three principal

regulatory functions: (1) establish standards and

regulations, (2) issue licenses for nuclear facilities

and users of nuclear materials, and (3) inspect

facilities and users of nuclear materials to ensure

compliance with the requirements. These regulatory functions relate to both nuclear power plants

and to other uses of nuclear materials, such as

nuclear medicine programs at hospitals, academic

activities at educational institutions, research

work, and industrial applications for gauges and

testing equipment.

Management’s Discussion and Analysis (continued)

Program Performance Highlights

The Government Performance and Results

Act requires Federal agencies to provide an

annual performance plan to Congress that sets

goals with measurable target levels of performance beginning with FY 1999. Within 6 months

of the end of that fiscal year, agencies must

submit actual program performance data to the

Congress. The NRC established four strategic

goals consistent with its mission. To assess the

results in achieving the strategic goals, the NRC

identified FY 2000 strategic goal measures and

subsequently modified them in the Budget Estimates and Performance Plan - FY 2001 (NUREG1100, February 2000).

STRATEGIC GOALS

• Prevent radiation-related deaths and

illnesses in the use of civilian nuclear

reactors.

• Prevent radiation-related deaths and

illnesses in the use of source,

byproduct, and special nuclear

material.

• Prevent significant adverse impacts

from radioactive waste.

• Support U.S. interests in the safe and

secure use of nuclear materials and

in nuclear nonproliferation.

The NRC has organized its strategic goals into

four strategic arenas: Nuclear Reactor Safety,

Nuclear Materials Safety, Nuclear Waste Safety,

and International Nuclear Safety Support.

The NRC has also established performance

goals to support the strategic goals for each of the

four strategic arenas. These performance goals

and their associated performance measures for

FY 2000 will be reported in the NRC’s FY 2000

Performance and Accountability Report.
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

3

Nuclear Reactor Safety

Strategic Goal: Prevent radiationrelated deaths and illnesses, promote

the common defense and security,

and protect the environment in the

use of civilian nuclear reactors.

In FY 2000, the NRC met its

nuclear reactor safety strategic goal

measures and had:

• No nuclear reactor

accidents.

• No deaths resulting from acute

radiation exposures from

nuclear reactors.

• No events at nuclear

reactors resulting in significant

radiation exposures.

• No radiological sabotages at nuclear reactors.

• No releases of radioactive material from

nuclear reactors causing an adverse impact

on the environment.

Nuclear Materials Safety

Strategic Goal: Prevent radiation-related

deaths and illnesses, promote the common

defense and security, and protect the

environment in the use of source, byproduct,

and special nuclear material.

In FY 2000, the NRC met its nuclear materials safety strategic goal measures and had:

• No deaths resulting from acute radiation

exposures from civilian uses of source,

byproduct, or special nuclear materials or

deaths from other hazardous materials used

or produced from license material.

• No events that result in significant radiation

or hazardous material exposures from the

loss or use of source, byproduct, and special

nuclear materials.

• No events resulting in releases of radioactive material from the civilian use of source,

byproduct, or special nuclear materials that

cause an adverse impact on the environment.

• No losses, thefts, or diversion of formula

quantities of strategic special nuclear

material; radiological sabotages; or unauthorized enrichment of special nuclear

material regulated by the NRC.

• No unauthorized disclosures or compromises of classified information causing

damage to national security.

Nuclear Waste Safety

Strategic Goal: Prevent significant adverse

impacts from radioactive waste to the current

and future public health and safety and the

environment, and promote the common defense

and security.

In FY 2000, the NRC met its nuclear waste

safety strategic goal measures and had:

• No deaths resulting from acute radiation

exposures from radioactive waste.

• No events resulting in significant

radiation exposures.

(continued on page 4)

Pressurized Water Reactor Diagram
4

U.S. NUCLEAR REGULATORY COMMISSION

• No releases of radioactive waste causing an

adverse impact on the environment.

• No losses, thefts, diversions, or radiological

sabotages of special nuclear material or

radioactive waste.

International Nuclear Safety Support

Strategic Goal: Support U.S. interests in the

safe and secure use of nuclear materials and in

nuclear nonproliferation.

In FY 2000, the NRC met its international

nuclear safety support strategic goal measures

and had:

• Fulfilled 100 percent of the

significant obligations over

which NRC has regulatory

authority arising from

statutes, treaties, conventions, and Agreements for

Cooperation.

• No significant proliferation

incidents attributable to

some failure of the NRC.

• No significant safety or

safeguards events that

resulted from NRC’s failure

to implement its international commitments.

FINANCIAL

PERFORMANCE

Financial Statement Highlights

The NRC prepared its financial statements in

accordance with the accounting standards codified in the Statements of Federal Financial Accounting Standards and Office of Management

and Budget Bulletin No. 97-01, Form and Content of Agency Financial Statements, as amended.

The NRC has prepared audited financial statements since FY 1992 and has received an unqualified opinion on its principal statements for the

Management’s Discussion and Analysis (continued)

Chairman Richard A. Meserve, U.S. Nuclear Regulatory Commission, and

Chairman Miroslav Lipar, Nuclear Regulatory Authority of the Slovak Republic

signing the renewal of the bilateral nuclear safety arrangement.

seventh consecutive year. Preparation of financial

statements is an important step towards improved

financial management and providing accurate and

reliable information to be used in assessing

performance and allocating resources.

For FY 2000, the auditors identified two

material internal control weaknesses concerning

implementation of Statement of Federal Financial

Accounting Standards Number 4 (SFFAS 4),

Managerial Cost Accounting Concepts and

Standards for the Federal Government, and

management control over license fee development. The auditors also identified two new

reportable conditions concerning debt collection.

In addition, 11 reportable conditions were carried

over from FY 1999. Seven of the reportable

conditions from previous years remained open at

the end of FY 2000. They included the implementation of managerial cost accounting, the

agency’s progress in developing financial systems

to aggregate payroll transactions to the strategic

arena level, ineffective management controls over

fee development, business continuity plan for the

core accounting system, the financial statement
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

5

(continued on page 6)

Sources of Funds

The NRC has two appropriations, and funds

for both are available until expended. One appropriation is for agency salaries and expenses, and

the other is for the Office of the Inspector General. The NRC’s total new FY 2000 budget

authority was $469.9 million including

$464.9 million for the Salaries and Expenses

appropriation and $5.0 million for the Inspector

General appropriation. Additionally, available to

obligate in FY 2000 were $31.1 million from

prior-year appropriations, $3.6 million from prioryear reimbursable work, $5.7 million from current

and prior-year transfer of funds from other Federal agencies, and $5.6 million for new reimbursable work to be performed for others. The sum of

all funds available to obligate for FY 2000 was

$515.9 million.

Consistent with the requirements of the

Omnibus Budget Reconciliation Act of 1990,

the NRC collected and offset approximately

100 percent of its new budget authority, excluding

$19.1 million derived from the Nuclear Waste

Fund, $3.8 million from the General Fund for

regulatory review and other assistance provided

to the Department of Energy and other Federal

agencies, and other offsetting receipts.

(See Figure 1.)

Uses of Funds by Function

As previously stated, the total budgetary

resources available for use by the NRC in FY

2000 was $515.9 million. Of that amount, the

NRC incurred obligations of $485.5 million, with

approximately 58 percent used for salaries and

benefits. The remaining 42 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 automation, and training), staff travel, and reimbursable work. (See

Figure 2.) Of the $30.4 million in budget authority that was not obligated in FY 2000, $0.6 million of transferred funds expired at the end of the

preparation process, controls over the verification

of small entity status for fee assessment, and

development of the hourly rate under Title

10 Code of Federal Regulations (CFR) Part 170.

The agency has taken corrective action on these

audit findings and expects to fully implement

corrective action during FY 2001.

Financial Condition of NRC

As of September 30, 2000, 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.

NRC’s total assets were $225.9 million. Total

liabilities as of September 30, 2000, were $129.8

million, which included $94.2 million of liabilities covered by budgetary resources and $35.6

million not covered by budgetary resources.

Liabilities not covered by budgetary resources are

primarily from unfunded liabilities associated

with accrued annual leave and future workers’

compensation. Total exchange revenue for the

year ended September 30, 2000, was $463.0

million which was derived from licensing fees

and fees for inspections and other services,

assessed in accordance with 10 CFR Parts 170

and 171. The net cost of NRC operations totaled

$47.7 million for the year ended September 30,

2000. The majority of these costs were in the

Nuclear Materials Safety and Nuclear Waste

Safety arenas.

The net cost of operations is expected to

increase in the future as a result of recent changes

to the fee collection requirement, as contained in

the Energy and Water Development Appropriations Act, 2001. The requirement to recover

approximately 100 percent of the agency’s new

budget authority by assessing fees, less amounts

appropriated for the Nuclear Waste Fund and the

General Fund, will be reduced to 98 percent in FY

2001 and continue to decrease 2 percent per year

until FY 2005, for a total reduction of 10 percent.

This change is expected to result in an increase in

NRC’s net cost of about $9 million for FY 2001.
6

U.S. NUCLEAR REGULATORY COMMISSION

Management’s Discussion and Analysis (continued)

Figure 1

Sources of Funds

Figure 2

Uses of Funds by Function

Reactor Fees

$388.6M Nuclear Waste Fund

$19.1M

Nuclear Materials Fees

$58.4M

General Fund

$3.8M

New Budget Authority $469.9M

Salaries and Benefits

$282.0M Travel

$11.4M

Contract Support

$182.2M

Reimbursable Work

 $9.9M

Total Obligations $485.5M
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

7

(continued on page 8)

fiscal year, $4.3 million was for reimbursable

work, and $25.5 million in budget authority is

available to fund critical needs in FY 2001.

Prompt Payment

The Prompt Payment Act requires Federal

agencies to make timely payments to vendors for

supplies and services, to pay interest penalties

when payments are made after the due date, and

to take cash discounts when they are economically justified. For FY 2000, the NRC made

96 percent of its 8,237 payments subject to the

Prompt Payment Act on-time. This exceeds the

goal established by the Office of Management and

Budget for Federal agencies to make 95 percent

of payments subject to the act on-time and reflects

the third consecutive year NRC has achieved 96

percent. The amount of interest penalties incurred

was just under $6,400. In addition, the agency

made over 99 percent of its vendor payments

electronically. This exceeds the Governmentwide

goal of 69 percent.

Debt Collection

The Debt Collection Improvement Act of

1996 was enacted to enhance the ability of the

Federal Government to service and collect debts.

The agency’s goal is to maintain the delinquent

debt owed to NRC at year-end to less than one

percent of its billings for that year. The NRC

continues to meet its goal and has kept delinquent

debt at less than one percent for the past 5 years.

Control over delinquent debt is accomplished

through a concerted debt management strategy.

The strategy includes license revocations and

referral to the Department of the Treasury’s Debt

Management Services through a cross-servicing

arrangement.

Delinquent debt at the end of FY 2000 was

$1.5 million which is 40 percent less than the

amount at the end of FY 1999. This reduction

was the result of implementing accounting policy

changes pursuant to revised guidance issued by

the Department of the Treasury and the reduction

in the number of licensees due to the establishment of a new Agreement State.

SYSTEMS, CONTROLS, AND

LEGAL COMPLIANCE

The Federal Managers’ Financial Integrity Act

of 1982 (Integrity Act) mandates that agencies

establish controls that reasonably ensure that:

(i) obligations and costs comply with applicable

law; (ii) assets are safeguarded against waste,

loss, unauthorized use, or misappropriation; and

(iii) revenues and expenditures are properly recorded and accounted for. The Integrity Act encompasses program, operational, and administrative

areas as well as accounting and financial management. It also requires the Chairman to provide an

assurance statement on the adequacy of management controls and conformance of financial systems

with Governmentwide standards.

The Federal Financial Management Improvement Act of 1996 (Improvement Act) requires

each agency to implement and maintain systems

that comply substantially with: (i) Federal financial management system requirements,

(ii) applicable Federal accounting standards, and

(iii) the standard general ledger at the transaction
8

U.S. NUCLEAR REGULATORY COMMISSION

Management’s Discussion and Analysis (continued)

level. The Chairman is required to determine

whether the agency’s financial management

systems comply with the Improvement Act and

to develop remediation plans for systems that do

not comply.

NRC’s Management

Control Program

A committee of senior agency executives

reviewed individual assurance statements prepared by NRC office directors and regional

administrators that identified weaknesses that

warranted the attention of the executive committee. This committee was comprised of senior

executives from the following offices: Chief

Financial Officer, Chief Information Officer, and

Executive Director of Operations, with the General Counsel and the Inspector General as advisors. These statements were based on various

sources including:

 •Management knowledge gained from the

daily operation of agency programs and

reviews.

 •Management reviews.

 •Program evaluations.

 •Audits of financial statements.

 •Reviews of financial systems.

 •Annual Performance plans.

 •Inspector General and General Accounting

Office reports.

 •Reports and other information provided by

the congressional committees of jurisdiction.

NRC’s ongoing management control program

requires, among other things, that management

control deficiencies are integrated into offices’

and regions’ annual operating plans. The operating plan process has provisions for periodic

updates and receives the attention of 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 previously, provide the

framework for monitoring and improving the

agency’s management controls on an ongoing

basis and for advising the Chairman on whether

there are any management control deficiencies

serious enough to report as material weaknesses

or material noncompliances.

The NRC evaluated its management control

systems for the fiscal year ending September 30,

2000. This evaluation provided reasonable

assurance that the agency’s management controls

achieved their intended objectives. As a result, it

was concluded that NRC did not have any material weaknesses in its programmatic or administrative activities.

However, the agency recognizes that incomplete implementation of managerial cost accounting (SFFAS 4) continues to be a significant

weakness which merits the close attention of

senior management. Progress has been made over

the past year to implement managerial cost accounting. A cost accounting software package

was selected, purchased, and installed and is

being configured to reflect how the agency initially plans to report direct costs and allocate its

indirect costs. Consistent with the remediation

plan, the agency expects to implement managerial

cost accounting and achieve compliance with

SFFAS 4 during FY 2001.

Actions have also been taken to strengthen the

management controls over fee development. The

license fee rule development process has been

documented, and an analysis of the fee model has

been completed and improvements made. The

agency completed these corrective actions in

November 2000.

Financial Management Systems

The NRC evaluated its financial management

systems to determine whether the agency’s systems comply with Governmentwide standards, as

required by the Integrity Act, and with applicable

Federal requirements and accounting standards, as

required by the Improvement Act. This evaluation
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

9

(continued on page 10)

disclosed that NRC’s major financial management

systems are in compliance with the Integrity Act.

The evaluation also disclosed that overall financial systems are in compliance with the Improvement Act. NRC’s financial management systems

comply substantially with Federal financial

management systems requirements and the standard general ledger at the transaction level, but

did not comply substantially with applicable

Federal standards due to the lack of implementation of SFFAS 4, managerial cost accounting. As

discussed previously, the agency is continuing to

address the implementation of SFFAS 4.

The NRC has five financial systems: the

Federal Financial System (FFS), Capitalized

Property PC System, License Fee Bill Generator

System, Allotment-Financial Plan System, and a

Budget Formulation System. The NRC also has a

mixed system, the Payroll/Personnel System.

The FFS is the core accounting system that

the NRC uses through an interagency agreement

with the Department 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 vulnerability 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 effective; contains necessary

controls; and conforms with the principles, standards, and related requirements prescribed by the

Comptroller General with one exception. The

FMS has yet to test its business continuity plan

for FFS and this exception is considered a material nonconformance. FMS has delayed such

testing because of higher priorities imposed on its

data center.

The FMS has also notified the agency that

they will terminate cross-servicing core accounting services at the end of FY 2002. During

FY 2001, NRC will pursue acquiring core accounting services from another Federal agency.

Biennial Review of User Fees

The Chief Financial Officers Act of 1990

requires agencies to biennially conduct a review

of fees, royalties, rents, and other charges imposed by agencies and make revisions, if necessary, to cover the program and administrative

costs incurred. During FY 1999 to FY 2000, the

NRC reviewed each type of fee subject to the

biennial review of fees requirement. Each year,

the hourly rates for licensing and inspection fees

are revised and the annual fees are adjusted to

meet the fee collection requirements of the Omnibus Budget Reconciliation Act of 1990. The most

recent changes to the licensing, inspection, and

annual fees are described in the Federal Register

(65 FR 36946, June 12, 2000). The following

fees and charges were also revised to more appropriately recognize actual costs: fees for public use

of the auditorium, administrative charges imposed

on delinquent debt (10 CFR 15.37(f)), fees for

search and review time to respond to Freedom of

Information Act and Privacy Act requests, and

licensing and inspection fees based on average

number of hours. Reviews of other types of fees

concluded that fee revisions were not warranted at

this time.

Management Decisions and

Final Actions on OIG Audit

Recommendations

The agency has established and continues to

maintain an excellent record in resolving and

implementing open audit recommendations

presented in Office of the Inspector General

(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 1 gives the dollar value of disallowed

costs determined through contract audits conducted by the Defense Contract Audit Agency

(DCAA). “Questioned Costs” are those costs that

are questioned as to whether they are allowable.
10

U.S. NUCLEAR REGULATORY COMMISSION

Management’s Discussion and Analysis (continued)

“Unsupported Costs” represent costs challenged

because of a lack of adequate supporting data.

Because of the sensitivity of contractual negotiations, details of these contract audits are not

furnished as part of this report.

Management Decisions Not Implemented

Within One Year

Management decisions were made before

September 1999 for the OIG audit reports discussed in the following paragraphs, but as of

September 30, 2000, 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 NRC has implemented the Training

Administration module of the PeopleSoft Human

Resources Information System. The implementation was completed as part of Phase II of the

Starfire project. The live date for Training Administration was November 14, 2000. The Training

Administration module combined the information

residing in three separate administrative systems:

the Agency Training system (ATS), the Technical

Training Center registration system, and the

Professional Development Center registration

Number of Questioned Unsupported

Category Audit Reports Costs Costs

A. Audit reports with management decisions 0 $0 $0

on which final action had not been taken at

the beginning of this reporting period.

B. Audit reports on which management 4 $113,797 $0

decisions were made during this period.

C. Audit reports on which final action was 4 $113,797 $0

taken during this report period.

(i) Disallowed costs that were 4 $113,797 $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.

Table 1

Management Report on Office of the Inspector General Audits with Disallowed Costs

For the Period October 1, 1999-September 30, 2000

As of September 30, 2000, no outstanding audits recommended that funds be put to better use.
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

11

system. The PeopleSoft Training Administration

module is now the official training records system

for the agency. Course registration is now accomplished through the Training Administration

module. All NRC offices now have a designated

training contact who has the ability to enter

external training completion (Form 368 training)

into individual training records. These office

individuals can also report on individual training

portfolios and monitor the enrollment of individual training sessions. In addition, each training contact has full access to all of the public

reports and queries developed for the Training

Administration module.

As a result of implementing this new system

and providing full access to appropriate individuals in each office, the agency now has a training

tracking system that meets management needs for

producing reliable information for overseeing

inspector training. As stated in a previous update

on this subject, an upgrade to the enhanced

features of the PeopleSoft Training Administration module along with additional PeopleSoft

implementation will provide desktop access to all

staff members, through an employee self-service

function, enabling them to review their own

training portfolios and check their course session

enrollment status.

Make NRC Management Directives

Available on the NRC Web Site

The OIG recommended that the Office of

Chief Information Officer (OCIO) make agency

management directives and corresponding handbooks available on the NRC’s web site to facilitate easy search and retrieval of pertinent guidance. In January 1999, the OCIO agreed to make

all management directives and corresponding

handbooks available. In November 2000, the

entire set of management directives and the

corresponding handbooks were placed on the web

as web pages.

Independent Auditors’ Report and

Principal Statements for the Year Ended

September 30, 1998

The OIG recommended the Chief Financial

Officer assess the immediate needs of NRC

managers to receive reliable and routine cost

accounting information in light of performance

and results mandates included in the Government

Performance and Results Act. Additionally, the

Chief Financial Officer, in preparing a

remediation plan should develop a strategy,

including milestones, to incorporate cost management standards and concepts throughout the

agency.

Progress has been made over the past year to

implement managerial cost accounting. A cost

accounting software package was selected, purchased, and installed and is being configured to

reflect how the agency initially plans to report

direct costs and allocate its indirect costs. Consistent with the remediation plan, the agency expects

to implement managerial cost accounting and

achieve compliance with Governmentwide cost

accounting requirements during FY 2001.
12

U.S. NUCLEAR REGULATORY COMMISSION

Management’s Discussion and Analysis (continued) Figure 3 NRC Organization Chart as of September 30, 2000

Office of Nuclear

Material Safety

and Safeguards

Office of Nuclear

Regulatory

Research

Office of

State and Tribal

Programs

Office of Nuclear

Reactor

Regulation

Office of

Enforcement

Office of

Investigations

Office of

Administration

Office of

Human Resources

Office of

Small Business

and Civil Rights

Region I

Philadelphia, PA

Region II

Atlanta, GA

Region III

Chicago, IL

Region IV

Arlington, TX

Office of the General

Counsel

Office of

Commission

Appellate Adjudication

Office of

International

Programs

Office of the

Secretary of the

Commission

Atomic Safety and

Licensing Board

Panel

Advisory Committee

on Nuclear Waste

Advisory

Committee on

Reactor Safeguards

Deputy Executive Director

for

Reactor Programs

Deputy Executive Director

for

Management Services

Deputy Executive Director

for Materials, Research,

and State Programs

Office of the

Inspector General

Office of

Congressional

Affairs

Office of Public

Affairs

Office of

Chief Information

Officer

Office of

Chief Financial

Officer

Executive Director for

Operations

The Commission

Commissioner Commissioner Chairman Commissioner Commissioner

Incident Reponse

Operations

Legend

Direct Reporting RelationshipGeneral SupervisionAdvisory Body
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

13

Performance Report

The Government Performance and Results Act

(GPRA) of 1993 requires agencies to develop

and institutionalize processes to plan for and

measure mission performance. The NRC has

made progress in becoming a more performancebased organization. This effort began as a result

of the agency’s strategic rebaselining and continued with subsequent implementation of the

GPRA. The agency established a framework for

implementing the performance approach throughout the agency referred to as the Planning, Budgeting, and Performance Management (PBPM)

process. Products that emanated from our PBPM

process include submitting to Congress the

triennial update to the FY 2000-2005 Strategic

Plan, the FY 1999 Accountability and Performance Report, and the FY 2001 Budget Estimates

and Performance Plan.

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 estimated performance. The

safety performance indicators reported within this

report are based on NRC’s FY 2000-2005 Strategic Plan that sets the framework for the development of the performance indicators. These

outcome-based safety performance indicators

MANAGING

TO OUTCOMES

Assessing Performance

Direction

Setting the Strategic

Determining Resources

an

d

Planned Accomplishments

Measuring and Monitoring

Performance

and

Assessments

Program

Evaluations

Strategic Plan

Budget Assumptio

n

s

Budget/Performance

Pla

n

Operating Plan

Performance Report

and Reviews

(continued on page 14)
14

U.S. NUCLEAR REGULATORY COMMISSION

Performance Report (continued)

provided the first critical link to the

NRC’s long term strategic objectives.

These safety strategic goal measures

were originally established in our FY

2000 Final Performance Plan (February 1999) and subsequently modified

in our FY 2000 Revised Final Performance Plan (as reflected in the FY

2001 Performance Plan, dated February 2000). Note that the non safety

performance goals which are identified

in the updated FY 2000-2005 Strategic

Plan (increase public confidence,

make NRC decisions more effective,

efficient, and realistic, and reduce

unnecessary regulatory burden on

stakeholders) which have associated

FY 2001 milestones will be reported in

the FY 2001 Performance and Accountability Report. The FY 2000

Performance and Accountability

Report contains new and revised safety performance measures as identified in the FY 2001

Performance Plan. Unlike many of the previous

safety performance measures in the FY 1999

Accountability and Performance Report that used

a “combined five-year average” method of calculating value, the FY 2000 Performance and

Accountability Report measures were changed to

an annual value. The FY 2000 Performance and

Accountability Report contains actual performance data for FY 1999-2000. The actual data

reported for some of our strategic goal and the

maintain safety performance goal measures are

subject to change as a result of NRC analysis of

reported information as well as the receipt of

newly reported information. Changes to this data

will be reported and explained in future performance report submissions.

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 FY 2000-2005 Strategic Plan,

provide a brief introduction to the arena, delineate

the strategic and performance goals and measures,

and identify performance. 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 the

regulatory oversight of licensees is the responsibility of NRC and the Agreement States. Thus,

achieving these goals requires the collective

efforts of the NRC, the Agreement States, and

their licensees.

Nuclear Reactor Safety

STRATEGIC GOAL: Prevent radiation-related

deaths and illnesses and protect the environment

in the use of civilian nuclear reactors.

The Nuclear Reactor Safety strategic arena

encompasses all NRC efforts to ensure that

civilian nuclear power reactor facilities, as well as

Control Room at a Nuclear Power Plant
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

15

(continued on page 17)

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 diversion of special nuclear

materials. 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.

These efforts include reactor licensing; reactor

license renewal; operator licensing; financial

assurance; inspection; performance assessment;

identification and resolution of safety issues;

reactor regulatory research; regulation development; operating experience evaluation; incident

investigation; threat assessment; emergency

response; investigation of alleged wrongdoing by

licensees, applicants, contractors, or vendors;

imposition of enforcement sanctions for violations

of NRC requirements; and reactor technical and

regulatory training. Table 2 identifies nuclear

reactor safety performance goals and related

FY 1999 - 2000 performance data.

Nuclear Reactor Safety

Accomplishments for FY 2000

In FY 2000, the NRC continued to make major

changes and improvements in its nuclear reactor

safety program. Discussed below is a brief description of noteworthy program achievements.

Revised Reactor Oversight Process

Began implementation of major process

improvements to the reactor oversight process.

The revised process includes a risk-informed

baseline inspection program, use of licenseereported performance indicator information, and

revised assessment and enforcement activities.

Process improvements were developed in response to staff assessments, Commission direction, and external stakeholder comments to

provide for greater objectivity, predictability, and

consistency, and to provide the public with greater

access to plant performance information.

Note: There are no commercial

reactors in Alaska or Hawaii

MA

CT

RI

ME NH

VT

NY

PA

NJ

OH

MD

DE

VA WV

MI

IN

KY

NC

TN

IL

SC

AL GA

FL

MS

MO

AR

TX

OK

KS

LA

IA NE

WI

MN

ND

SD

WY

MT

CO

NM

AZ

CA

NV

UT

ID

O

WA

Licensed to Operate (103)

Figure 4

U.S. Commercial Reactors
16

U.S. NUCLEAR REGULATORY COMMISSION

Performance Report (continued)

STRATEGIC GOAL: Prevent radiation-related deaths and PERFORMANCE

illnesses, promote the common defense and security, and protect

the environment in the use of civilian nuclear reactors

MEASURES Target Actual

No nuclear reactor accidents.1 FY 2000: 0 FY 2000: 0

FY 1999: 0 FY 1999: 0

No deaths resulting from acute radiation exposures from nuclear reactors. FY 2000: 0 FY 2000: 0

FY 1999: 0 FY 1999: 0

No events at nuclear reactors resulting in significant radiation exposures.2 FY 2000: 0 FY 2000: 0

FY 1999: 0 FY 1999: 0

No radiological sabotages at nuclear reactors. FY 2000: 0 FY 2000: 0

FY 1999: 0 FY 1999: 0

No releases of radioactive material from nuclear reactors causing an adverse FY 2000: 0 FY 2000: 0

impact3 on the environment. FY 1999: 0 FY 1999: 0

PERFORMANCE GOAL: Maintain safety, protection of the environment, PERFORMANCE

and the common defense and security.

MEASURES Target Actual

No more than one event per year identified as significant precursors of FY 2000: 1 or less FY 2000: 0

nuclear accidents.4 FY 1999: 1 or less FY 1999: 0

No statistically significant adverse industry trends in performance.5 FY 2000: 0 FY 2000: 0

FY 1999: 0 FY 1999: 0

No events resulting in radiation overexposures6

 from nuclear reactors that exceed FY 2000: 0 FY 2000: 0

applicable regulatory limits. FY 1999: 0 FY 1999: 0

No more than three releases per year to the environment of radioactive material FY 2000: 3 or less FY 2000: 0

from nuclear reactors that exceed the regulatory limits.7 FY 1999: 3 or less FY 1999: 0

No breakdowns of physical security that significantly weaken the protection against FY 2000: 0 FY 2000: 0

radiological sabotage, theft or diversion of special nuclear materials in accordance FY 1999: 0 FY 1999: 0

with abnormal occurrence criteria.

Table 2

Nuclear Reactor Safety Performance

1 “Nuclear reactor accidents” is defined in the NRC Severe Accident Policy Statement (50 Federal Register 32138, August 8, 1985) as

those accidents which result in substantial damage to the reactor core, whether or not serious offsite consequences occur.

2 “Significant radiation exposures” are defined as those that result in unintended permanent functional damage to an organ or a

physiological system as determined by a physician in accordance with Abnormal Occurrence Criteria I.A.3.

3 Releases that have the potential to cause “adverse impact” are currently undefined. As a surrogate, we will use those that exceed the limits

for reporting abnormal occurrences as given by AO criteria 1.B.1 (normally 5,000 times Table 2 (air and water) of Appendix B, Part 20).

4 Such events have a 1/1000 (10-3) or greater probability of leading to a reactor accident.

5 The agency provides oversight of plant safety performance on a plant-specific basis as well as on an industry-wide basis. As a refinement to

the existing process, new parameters and criteria for measuring statistically significant adverse trends in industry wide safety performance

will be developed. In the interim, the NRC continues to use the same parameters as in past years. Future parameters to be monitored could

include NRC-approved performance indicators, inspection findings, accident sequence precursor results, and other risk-related indications or

measures of industry safety performance that will be developed and qualified for use in phases.

6 Overexposures are those that exceed limits as provided by 10 CFR 20.2203(a)(2), excluding instances of overexposures involving a

shallow dose equivalent from a discrete radioactive particle in contact with the skin.

7 Releases for which a 30 day reporting requirement under 10 CFR 20.2203(a)(3) is required.
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

17

(continued on page 18)

The revised reactor oversight process will maintain safety by focusing staff and industry attention

on risk-significant activities while reducing

unnecessary regulatory burden, thus achieving

gains in staff effectiveness. A six-month pilot

program to test the new regulatory oversight

process at nine nuclear power plant sites was

completed in November 1999. Staff activities

included the conduct of a number of public

workshops to solicit feedback on process changes;

establishment of internal and

external web sites to provide

plant performance information to industry and members of the public; and

extensive work on inspection procedure development

and inspector staff training.

The NRC ensured a high

level of stakeholder participation in the development of

the revised process, including public workshops in

each of the regions to inform

licensees and the public

about the new process,

roundtable public meetings

in the vicinity of the nine

pilot program plant sites,

and the conduct of a Lessons

Learned Public Workshop on

the pilot program. The NRC

began industry wide implementation of the revised reactor oversight process,

with the exception of DC Cook, in April 2000.

License Renewal

Continued to meet or exceed all established

schedules for license renewal activities. The agency

issued the first renewed license on March 23, 2000,

for the Calvert Cliffs Nuclear Power Plant, followed

by the second renewed license on May 23, 2000, for

the Oconee Nuclear Station. License renewal

applications were received for Arkansas Nuclear

One, Unit 1, on February 1, 2000; for Hatch Nuclear

Plant on March 1, 2000; and for Turkey Point on

September 11, 2000. These applications, which

reflect an increasing interest by licensees in

license renewal, are under review by the staff.

The agency also issued for public comment on

August 31, 2000, draft improved license renewal

guidance consisting of a Generic Aging Lessons

Learned report, Standard Review Plan for License

Renewal, and a Regulatory Guide for License

Renewal that proposes to endorse an industry

implementation guideline.

Year 2000 Programs

Implemented in the first quarter of FY 2000 a

plan for responding to potential Year 2000 (Y2K)

problems affecting the commercial nuclear industry. This effort required extensive communication

and coordination with other Federal agencies, the

White House, the public, and the nuclear industry.

Due to the extensive collaborative effort between

the industry and NRC in preparing for and addressing Y2K issues, NRC and its licensees made

the transition to Y2K without incident. NRC’s

Y2K contingency plan was extensively tested

Chairman Richard A. Meserve meets with Mr. Christian H. Poindexter, Chairman of the

Board and Chief Executive Officer, Constellation Energy Group (formery Baltimore

Gas and Electric) on the occasion of the renewal of the Calvert Cliffs Nuclear Power

Plant license (March 24, 2000)
18

U.S. NUCLEAR REGULATORY COMMISSION

Performance Report (continued)

through exercises involving other Federal agencies, the White House, State and local officials,

and the industry. One of NRC’s goals in developing a Y2K contingency plan was to maximize the

extent to which the Y2K preparations could be

leveraged for future benefit to the agency. For

example, upgrades and testing of telecommunication and emergency power systems in Region IV

(the backup to NRC Headquarters during the Y2K

transition) were completed during FY 2000.

These upgrades also support the NRC’s continuity

of operations plan required by Presidential Decision Directive 67. Similarly, steps were taken to

enhance the reliability of communications with

licensee and State decision makers, so that emergency communications will be assured in the

event of public telephone network congestion or

unavailability. NRC also developed a secure

Internet-based Year 2000 early warning system

(YEWS) to facilitate international informationsharing during the Y2K transition. NRC has

provided this computer code to the International

Atomic Energy Agency for future use.

Reactor Licensing

Continued to meet or exceed established

performance measures for completing nuclear

power plant related actions. The NRC staff

completed 1,574 licensing actions, and maintained 98 percent of all licensing actions in its

working inventory to an age of one year or less

and 100 percent at two years or less. Included in

the licensing actions completed are responses to

licensee requests to change or amend their licenses in areas such as license transfers, power

uprates, initiatives involving risk informed regulation, and voluntary conversions of plant technical

specifications to an improved standard format.

Risk-Informed Regulation

Continued to incorporate risk information into

the regulatory process through a systematic, riskinformed examination of current technical requirements in 10 CFR Part 50. Results of this

examination included the recommendation to

change NRC’s regulation on combustible gas

control during reactor accidents, potentially to

eliminate requirements which have minimal

safety benefit and impose unnecessary burden,

and to add requirements where necessary to

ensure safety.

License Transfers

With a number of States taking steps toward

deregulation of the power market, the unbundling

of services, and general industry consolidation,

there was significant activity in the financial

review program for nuclear power reactors.

During the performance period, the NRC provided regulatory guidance in the form of Regulatory Issue Summaries, Regulatory Guides, and

Standard Review Plans to enhance stakeholder

understanding of practices involving license

transfer applications. These included guidance on

foreign ownership, antitrust issues, non-owner

operators, and an overarching guide that summarizes NRC practices. The NRC completed over

25 licensing actions under this program during the

period with cases ranging from the sale of a

passive owner’s minority share, to the creation of

an intermediary holding company, to the merger

of two major license holders to form Exelon. The

latter case was the most complex transaction seen

to date and involved over 20 nuclear power

reactors. The NRC has established an ambitious

six-month target for completing license transfer

licensing actions and has met that target in virtually all cases.

Public Outreach Efforts

The agency increased its focus on initiatives to

improve the effectiveness of communications.

Various actions were used to methodically improve

the consistency of staff communication activities,

improve the management of communication

activities, and improve communication skills.

For the more visible programs, the staff developed and implemented communication plans

(CPs). Additionally, a large effort was undertaken

to evaluate and redesign the NRC web site to

increase its effectiveness. The significant implementation activities included: 1) Developed CPs

for significant and generic topics; 2) Identified
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

19

(continued on page 20)

communication interfaces (organizations/groups); 3) Solicited

feedback from stakeholders at

public meetings; 4) Developed

guidance and provided training on

CP development and implementation; and 5) Established a Web

Redesign Work Group

Other Accomplishments

• Amended its regulations in

January 2000 to allow

holders of operating licenses

for nuclear power plants to

voluntarily replace the

traditional source term used

in design basis accident

analyses with alternative

source terms (ASTs). This

action allows interested

licensees to pursue costbeneficial licensing actions to reduce

unnecessary regulatory burden without

compromising the margin of safety of the

reactor facility. In July 2000, the NRC

issued a new guide in its Regulatory Guide

series to provide guidance to licensees in

implementing an AST at their facility. By

the end of FY 2000, the NRC reviewed and

approved two AST implementations and

had four AST implementations under

review. Seven additional nuclear power

plant sites have expressed interest with

submittals expected in FY 2001. Additional

submittals are also expected in FY 2002.

• Conducted several significant rulemakings

in FY 2000, including revisions to 10 CFR

50.59, 50.72, and 50.73. In the beginning

of FY 2000, NRC published a revision to 10

CFR 50.59 which, when effective in midMarch 2001, will provide clarity and flexibility in regulations that allow licensees to

make certain changes to their facilities and

procedures, or to conduct tests and experiments. In July 2000, the Commission

approved a revision to the reporting requirements of 10 CFR 50.72 and 50.73. These

revisions reduce the reporting burden

associated with events of little or no safety

significance, clarify the reporting requirements where needed, and extend reporting

time limits consistent with the need for

prompt NRC action.

• Certified in January 2000, the Westinghouse

advanced passive pressurized water reactor

(AP600) standard plant design after a

comprehensive review. The AP600 was the

third standard plant design to achieve

certification, joining the General Electric

Advanced Boiling Water Reactor and the

ASEA Brown Boveri Combustion Engineering System 80+ standard plant designs

that were certified in 1997.

• Supported the license renewal effort

through resolution of Generic Safety Issue

190, “Fatigue Evaluation of Metal Components for 60-Year Life,” and through evaluation of technical issues such as thermal

aging embrittlement of cast stainless steels.

Outcomes of these efforts have contributed

to both maintaining safety and the reduction

Spent Fuel Storage Pad at Calvert Cliffs.
20

U.S. NUCLEAR REGULATORY COMMISSION

Performance Report (continued)

of unnecessary burden through development of technically defensible positions that

justified not imposing generic requirements

in these areas for license renewal.

• Approved for use ABB Combustion

Engineering’s (CE) 800 steam generator

tube repair technique at Baltimore Gas &

Electric’s (BG&E) Calvert Cliffs plant.

BG&E is expected to become the first U.S.

plant to apply this repair method, which

uses differential thermal expansion to repair

steam generator tubes. According to ABB

CE, the sleeve’s non-welded design allows

quick installation and easier in-service

inspection.

• Issued the safety evaluation report (SER)

for the ABB “Crossflow” measuring system

topical report. The increased accuracy of

the Crossflow measuring system can be

used to support a reduction in the power

level margin used in the plant emergency

core cooling system (ECCS) evaluations.

In turn, licensees can submit a license

amendment to operate the power plant at

higher power levels. With issuance of

the ABB Crossflow SER, licensees seeking

such license amendments now have a

choice between two vendor designs.

• Submitted for Commission approval a final

rule that amends 10 CFR Part 50, Appendix

K, “ECCS Evaluation Models.” The

amendment will facilitate small but costbeneficial power uprates for commercial

nuclear power plants seeking to utilize the

improved feedwater flow measurement

systems discussed above. While all plants

could conceivably benefit from this riskinformed rulemaking, if only 50 plant

licensees pursue a marginal power uprate,

they would share an annual benefit ranging

from $50 million to $135 million.

• Approved a rulemaking plan to revise 10

CFR 73.55, “Requirements for Physical

Protection of Licensed Activities in Nuclear

Power Reactors Against Radiological Sabotage.” The staff’s proposal includes a requirement for periodic drills and exercises for

evaluating power reactor licensees’ capability

to respond to safeguards contingency events.

The proposed rule is scheduled to be submitted to the Commission in May 2001. The

staff and industry continue to work on a

voluntary industry initiative called the Safeguards Performance Assessment that is

intended to test the concepts being considered

in the new rule and maintain assurance of

licensee readiness to respond to safeguards

contingency events.

• Held meetings regarding the licensees’

interest in amendment requests for a 15 percent power uprate. Five plants representing 9

units are expected to submit their licensing

amendment requests in the coming year. A

15 percent uprate for these 9 units represents

about 3,400 Mwt (1,100 Mwe) of additional

generating capacity. Until late 1998, power

uprates have been limited to 5 percent nominal. A total of 42 power uprate amendments

were issued between 1977 and mid-1998, all

within 5 percent. Any uprate beyond the

5 percent threshold would require significant

balance-of-plant equipment upgrades.

Nuclear Materials Safety

STRATEGIC GOAL: Prevent radiation-related

deaths and illnesses, promote the common

defense and security, and protect the

environment in the use of source, byproduct,

and special nuclear materials.8

The Nuclear Materials Safety strategic arena

encompasses NRC efforts to ensure that NRCregulated aspects of nuclear fuel cycle facilities

and nuclear materials activities are handled in a

manner that adequately protects public health and

safety and promotes common defense and security. This arena encompasses more than

20,000 specific and 150,000 general licensees that

are regulated by the NRC and 32 Agreement
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

21

States. This diverse regulated community includes: uranium extraction; uranium conversion;

uranium enrichment; nuclear fuel fabrication; fuel

research and pilot facilities; and large and small

users of nuclear material for industrial, medical,

or academic purposes. The last group—the large

and small users of nuclear materials—includes:

radiographers, hospitals, private physicians,

nuclear gauge users, large and small universities,

and others. This arena also includes all regulatory 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 Energy Act (AEA) of 1954, as amended,

the Energy Reorganization Act of 1974, as

amended, and the Uranium Mill Tailings Radiation Control Act of 1978, as amended,

(UMTRCA), provide the foundation for regulating the Nation’s civilian uses of nuclear materials.

The scope of regulatory

activities carried out under this

arena includes regulation and

guidance development;

nuclear materials research;

licensing/certification, inspection, and enforcement activities; identification and

resolution of safety and safeguards issues; regulation of

uranium recovery activities;

operating experience evaluation; incident investigation;

threat assessment; emergency

response; technical training;

and investigation of alleged

wrongdoing by licensees,

applicants, certificate holders,

and contractors. Table 3

identifies nuclear materials

safety performance goals

and related FY 1999-2000

performance data.

Nuclear Materials Safety

Accomplishments for FY 2000

In FY 2000, 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 focused on risk assessment and risk management to

ensure a more consistent decision-making process

and a consistent underlying risk basis for nuclear

materials regulations, regulatory guides, and staff

review guidance. Discussed below is a brief

description of noteworthy program achievements.

Licensing Process and Application

Improved the efficiency and timeliness of the

nuclear materials licensing process that will result

in improved service to stakeholders. Completed a

major portion of the materials licensing guidance

consolidation project by issuing 20 NUREG

documents in draft of final form. This will assist

An off-shore platform in the Gulf of Mexico where NRC conducts unannounced

inspections of well-logging activities.

(continued on page 22)
22

U.S. NUCLEAR REGULATORY COMMISSION

licensees by providing an up-to-date electronic

reference for preparing licensing submissions.

This will also make it easier for NRC and Agreement State license reviewers to complete their

reviews in a more timely, efficient, and uniform

fashion. Initiated efforts to streamline the materials inspection process (i.e., a pilot temporary

inspection procedure for some medical licensees).

Completed 1,600 materials inspections with the

program focused on those licensees engaged in

activities with the highest risk, and those licensees

with previous performance problems.

Performance Report (continued)

Issued a final Standard Review Plan in anticipation of a license application for a mixed oxide

(MOX) fuel fabrication facility. The NRC held

public meetings to describe our role and to obtain

comments and questions regarding the proposed

MOX facility and plans for the use of MOX fuel

in commercial power reactors.

Regulatory Framework

Completed a number of changes to NRC’s

rules and regulations that will improve the regulatory framework of the Nuclear Materials Safety

(continued on page 24)

STRATEGIC GOAL: Prevent radiation-related deaths and illnesses, promote the PERFORMANCE

common defense and security, and protect the environment in the use of source,

byproduct, and special nuclear materials.

MEASURES Target Actual

No deaths resulting from acute radiation exposures from civilian uses of source, FY 2000: 0 FY 2000: 0

byproduct, or special nuclear materials, or deaths from other hazardous materials FY 1999: 0 FY 1999: 0

used or produced from license material.

No more than six events per year that result in significant radiation or hazardous material FY 2000: 6 or less FY 2000: 0

exposures9 from the loss or use of source, byproduct, and special nuclear materials. FY 1999: 6 or less FY 1999: 4

No events resulting in releases of radioactive material from civilian use of source, FY 2000: 0 FY 2000: 0

byproduct, or special nuclear materials that cause an adverse impact on the environment.10 FY 1999: 0 FY 1999: 0

No losses, thefts, or diversion of formula quantities of strategic special nuclear FY 2000: 0 FY 2000: 0

material; radiological sabotages; or unauthorized enrichment of special nuclear FY 1999: 0 FY 1999: 0

material regulated by the NRC.11

No unauthorized disclosures or compromises of classified information causing FY 2000: 0 FY 2000: 0

damage to national security.12 FY 1999: 0 FY 1999: 0

Table 3

Nuclear Materials Safety Performance

8 For fuel cycle activities, this extends to other hazardous materials used with, or produced from, licensed material, consistent

with proposed amendments to 10 CFR Part 70. It also includes exposures from uranium recovery activities under the Uranium

Mill Tailing Radiation Control Act.

9 Significant exposures are defined as those that result in unintended permanent functional damage to an organ or a physiological system as determined by a physician. Hazardous material exposures only apply to fuel cycle and uranium recovery

activities in the Materials Arena.

10 Releases that have the potential to cause “adverse impact” are currently undefined. As a surrogate, we will use those that

exceed the limits for reporting abnormal occurrences as given by abnormal occurrence criteria 1.B.1 (normally 5,000 times

Table 2 (air and water) of Appendix B, Part 20). This information is available in the Abnormal Occurrence Report to Congress, NUREG-0090, which can be located at http://www.nrc.gov/NRC/NUREGS/SR0090/V22/sr0090V22.pdf.

11 In accordance with Appendix G to 10 CFR part 73 and 10 CFR 74.11(a).

12 In accordance with the requirements of 10 CFR 95.57.
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

23

Table 3 (continued)

Nuclear Materials Safety Performance

PERFORMANCE GOAL: Maintain safety, protection of the environment, Performance

and the common defense and security.

MEASURES Target Actual

No more than 356 losses of licensed material.13 FY 2000: 350 or less FY 2000: 201

FY 1999: 350 or less FY 1999: 22714

No occurrences of accidental criticality. FY 2000: 0 FY 2000: 0

FY 1999: 0 FY 1999: 0

No more than 19 events per year resulting in radiation over exposures15 from FY 2000: 19 or less FY 2000: 11

radioactive material that exceed applicable regulatory limits. FY 1999: 19 or less FY 1999: 2614, 16

No more than 45 medical events per year.17 FY 2000: 45 or less FY 2000: 28

FY 1999: 45 or less FY 1999: 3514

No more than 39 releases per year to the environment of radioactive material from FY 2000: 39 or less FY 2000: 1

operating facilities that exceed the regulatory limits.18 FY 1999: 39 or less FY 1999: 314

No events that occur during the NRC-regulated operations that cause impacts on FY 2000: 0 FY 2000: 0

the environment that can not be mitigated within applicable regulatory limits, using FY 1999: 0 FY 1999: 0

methods that are within available licensee resources and are not cost prohibitive.19

No more than five substantiated cases per year of attempted malevolent use of FY 2000: 5 or less FY 2000: 2

source, byproduct, or special nuclear. FY 1999: 5 or less FY 1999: 2

No breakdowns of physical protection or material control and accounting systems FY 2000: 0 FY 2000: 0

that result in a vulnerability to radiological sabotage, theft, diversion, or FY 1999: 0 FY 1999: 0

unauthorized enrichment of special nuclear material20.

13 Material entering the public domain in an uncontrolled manner. The Nuclear Materials Event Data base contains the list of these

events as reported by the NRC licensees and, through the Agreement States, their licensees.

14 Actual FY 1999 data has been revised as reported in the FY 2001 Budget Estimates and Performance Plan based on more reliable

historical data.

15 Overexposures are those maximum annual exposures that exceed limits as provided by 10 CFR 20.2203(a)(2). For fuel cycle

activities, this extends to other hazardous materials used with, or produced from, licensed material, consistent with proposed

amendments to 10 CFR 70. Reportable chemical exposures are those that exceed license commitments. It would also include

chemical exposures involving uranium recovery activities under the Uranium Mills Tailings Radiation Control Act.

16 The metric was not in place in FY 1999. The metric was developed for FY 2000. The performance plan numbers for FY 1999 as

shown in the FY 2001 Budget Estimates and Performance Plan, NUREG-1100, Volume 16, were based on the best information

available as of October/November 1999 as reported in the Nuclear Materials Events Database. Data were collected for FY 1999 on

a retrospective basis based upon data available at that time, to provide a context for future comparisons. Metrics fluctuate over time

based on additional reports from Agreement States and subsequent analyses of the events by consultants, licensees, States, and/or

NRC, based on definitions in this footnote. Revised FY 1999 figure is based on data as of 1/01.

17 Misadministrations as reported under 10 CFR 35.

18 Releases for which a 30 day reporting requirement under 10 CFR 20.2203(a)(3) is required. This measure also includes chemical

releases from regulated activity under the Uranium Mill Tailings Radiation Control Act.

19 This involves chemical releases from the NRC regulated activities under the Uranium Mill Tailings Radiation Control Act. In the

FY 2001 Budget Estimates and Performance Plan, this was a Nuclear Waste Safety measure. This measure was moved to the

Nuclear Materials Safety Arena due to an internal reorganization in the Office of Nuclear Materials Safety and Safeguards.

20 We recognize that no explicit reporting requirements exist for substantiated breakdowns of programs. The NRC relies on its

safeguards inspection findings and licensee notifications.
24

U.S. NUCLEAR REGULATORY COMMISSION

arena, including 10 CFR Part 39 (well-logging),

Part 70 (special nuclear material), and Part 72

(spent fuel storage). The revision to Part 70 will

make the regulations for fuel cycle facilities more

risk-informed and performance-based and will

ensure that the regulatory burden imposed by the

regulation is commensurate with the health and

safety benefit.

Public Outreach Efforts

Conducted three public workshops, one open

meeting with the steel industry, and held two open

Commission briefings to provide an opportunity

for public input on the Commission’s approach to

the issues surrounding the control of solid materials at licensed facilities.

Issued, for public comment, a report on

potential radiation doses associated with source

and byproduct material that are currently exempt

from NRC regulations and some potential candidates for exemption from licensing requirements.

The results of this study provide an assessment

tool that NRC will use to examine the radiological

impact of current regulations and to determine if

regulatory changes are needed.

Other Accomplishments

• Completed approximately 4,000 licensing

actions and 1,700 inspections for fuel

facility and materials licensees.

• Worked effectively with the nuclear materials community to ensure that nuclear safety

and safeguards were not adversely affected

by potential Year 2000 (Y2K) problems.

• Analyzed the nuclear criticality accident at

Tokai-mura, Japan, and determined that no

changes to NRC’s regulatory program for

fuel cycle facilities were needed. NRC

disseminated lessons learned to stakeholders and provided a report to the Congress

and other stakeholders.

• Developed a comprehensive rule (10 CFR

Parts 31 and 32) to improve NRC’s control of

generally-licensed (GL) devices and a new

computer database General Licensed Device

Tracking System (GLDTS) to track GL

information and facilitate registration of

certain GL devices.

• Conducted integrated safety and safeguards

exercises with the Federal Bureau of Investigation, Department of Energy, Federal Emergency

Management Agency, States, licensees, and local

government and emergency responders.

• Oklahoma became the 32nd Agreement

State when NRC staff completed the review

of an application from Oklahoma for an

Agreement. The Agreement became effective on September 29, 2000, in accordance

with the State’s requested schedule.

• Issued a revised policy statement on the

medical uses of NRC-regulated radioactive

material to put greater emphasis on higher

risk procedures, and correspondingly less

emphasis on procedures posing lower risk

to the patient, workers and the public. The

policy statement affirms the Commission’s

determination to continue its role in regulating the use of certain radioactive material in

medicine with the goal of providing adequate radiation protection for workers, the

public, and patients. The policy statement

focuses the Commission’s direction on

radiation safety issues and furthers the

objective of utilizing industry and professional standards that define acceptable

levels of radiation safety.

Nuclear Waste Safety

STRATEGIC GOAL: Prevent adverse impacts

from radioactive waste to the current and future

public health and safety and the environment

and promote the common defense and security.

The NRC has regulatory oversight for the

transportation of radioactive materials and the

interim storage of spent nuclear fuel both at and

away from reactor sites to maintain operational

safety of spent fuel in storage and full-core offload capability at operating reactors sites, and to

prepare for dry storage at decommissioned reacPerformance Report (continued)
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

25

Proposed High-Level Waste Disposal Site at Yucca Mountain, Nevada

(continued on page 27)

tors. NRC also has

regulatory oversight for

the long-term storage and

disposal of high-level

waste (HLW). Our HLW

regulatory activities are

mandated by the Atomic

Energy Act of 1954, as

amended, and by the

Energy Reorganization

Act of 1974, and are

further set out in the

Nuclear Waste Policy Act

of 1982, as amended

(NWPA), and the Energy

Policy Act of 1992. The

NWPA specifies a detailed approach for the

long-range undertaking of

HLW disposal, with the

U.S. Environmental Protection Agency responsible for developing standards (which the NRC is

required to implement) and DOE responsible for

characterizing the site and developing the repository, subject to NRC regulatory oversight. In

1987, the NWPA was amended, directing the

DOE to characterize only one site at Yucca Mountain in the State of Nevada. Likewise, the NRC’s

activities under the NWPA now focus on a potential Yucca Mountain repository. NRC efforts also

address decommissioning, waste safety research,

and spent fuel storage and transportation licensing. The NRC’s low-level radioactive waste

activities associated with the disposal of waste are

conducted in accordance with the Low-Level

Radioactive Waste Policy Act of 1980, amended

in 1985. Table 4 identifies nuclear waste safety

performance goals and related FY 1999 - 2000

performance data.

Nuclear Waste Safety

Accomplishments for FY 2000

In FY 2000, the NRC continued efforts to

improve the effectiveness of its nuclear waste

safety program. Discussed below is a brief

description of noteworthy program achievements

High-Level Waste Program

Provided comments to DOE on its proposed

revision to the guidelines for the siting of DOE’s

proposed Yucca Mountain High-Level Waste

(HLW) repository. In addition, NRC provided

comments to DOE on its draft Environmental

Impact Statement for the proposed HLW repository. Also, during FY 2000, technical exchanges

with DOE resulted in the resolution of several

subissues associated with key technical issues

most important to licensing the potential HLW

repository.

Spent Nuclear Fuel Storage-Part 72

Rulemaking

Completed three rulemakings to improve the

efficiency of the spent nuclear fuel storage and

transportation cask certification process. For

example, two of the rules have increased the

flexibility for certificate holders. 10 CFR 72.48

was expanded to include certificate holders and

thus has reduced the need for the certificate

holder to submit an amendment application, when

the Certificate of Compliance holder desires to

change the cask design. In addition, the scope of
26

U.S. NUCLEAR REGULATORY COMMISSION

Performance Report (continued)

STRATEGIC GOAL: Prevent adverse impacts from radioactive waste to the PERFORMANCE

current and future public health and safety and the environment and promote

the common defense and security.

MEASURES Target Actual

No deaths resulting from acute radiation exposures from radioactive waste. FY 2000: 0 FY 2000: 0

FY 1999: 0 FY 1999: 0

No events resulting in significant radiation exposures.21 FY 2000: 0 FY 2000: 0

FY 1999: 0 FY 1999: 0

No releases of radioactive waste causing an adverse impact on the environment.22 FY 2000: 0 FY 2000: 0

FY 1999: 0 FY 1999: 0

No losses, thefts, diversions, or radiological sabotages23 of special nuclear material FY 2000: 0 FY 2000: 0

or radioactive waste. FY 1999: 0 FY 1999: 0

PERFORMANCE GOAL: Maintain safety, protection of the environment, PERFORMANCE

and the common defense and security.

MEASURES Target Actual

No events resulting in radiation over exposures24 from radioactive waste that FY 2000: 0 FY 2000: 0

exceed applicable regulatory limits. FY 1999: 0 FY 1999: 0

No breakdowns of physical protection that result in a vulnerability to radiological FY 2000: 0 FY 2000: 0

sabotage, theft, diversion, or loss of special nuclear materials or radioactive waste.25 FY 1999: 0 FY 1999: 0

No releases26 to the environment from operational activities that exceed the FY 2000: 0 FY 2000: 0

regulatory limits. FY 1999: 0 FY 1999: 0

No instances where radioactive waste and materials under NRC’s regulatory FY 2000: 0 FY 2000: 0

jurisdiction cannot be handled, transported, stored, or disposed of safely. FY 1999: 0 FY 1999: 0

Table 4

Nuclear Waste Safety Performance

21 Significant radiation exposures are defined as those that result in unintended permanent functional damage to an organ or a physiological system as determined by a physician.

22 Releases that have the potential to cause “adverse impact” are currently undefined. As a surrogate, we will use those that exceed

the limits for reporting abnormal occurrences as given by AO criteria 1.B.1 (normally 5,000 times Table 2 (air and water) of

Appendix B, Part 20).

23 In accordance with Appendix G to 10 CFR part 73 and 10 CFR 74.11(a).

24 Overexposures are those that exceed limits as provided by 10 CFR 20.2203(a)(2).

25 We recognize that no explicit reporting requirements exist for substantiated breakdown determination. The NRC relies on its

safeguards inspection findings and licensee notifications.

26 Releases for which a 30 day reporting requirement under 10 CFR 20.2203(a)(3) is required. This measure includes only

radiological releases.
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

27

specific license hearings was reduced when the

applicant uses a cask design that was approved by

the NRC or is under review. Furthermore, guidance was provided on which sections of Part 72

apply to specific licensees, general licensees, and

certificate holders. This has reduced the need for

applicants to raise questions on the applicability

of a particular regulation to their activities.

Public Outreach Efforts

A strategic goal of the NRC is to increase

public confidence. Activities in support of this

goal included holding seven workshops to receive

stakeholder input related to the development of

decommissioning guidance, including a standard

review plan, to support the License Termination

Rule. Staff issued the Standard Review Plan to

provide clear guidance on complying with provisions in the License Termination Rule.

Issued a site-specific safety evaluation report,

published the Draft Environmental Impact Statement, and held several public meetings on the

application for the Private Fuel Storage facility to

be located on the reservation of the Skull Valley

Band of Goshute Indians.

Held a series of public meetings and workshops with stakeholders describing the Package

Performance Study and Spent Fuel Risk Study,

and the proposed rulemaking conforming U.S.

regulations for transportation of radioactive

materials (10 CFR Part 71) with international

standards (International Atomic Energy Act

(IAEA) Standard ST-1).

Four public meetings as well as four public

workshops were held in FY 2000 to gather public

recommendations and comments on which issues

they would like addressed in the Package Performance and Spent Fuel Risk Studies. Various

members of the involved public complimented the

NRC on the high level of involvement as well as

the public’s ability to provide recommendations

before the studies were conducted.

Other Accomplishments

• Completed development of probabilistic

versions of Residual Radiation and Residual Radiation Build codes developed by

Argonne National Laboratory for evaluation

of contaminated DOE sites. The new codes

provide the capability to estimate uncertainty of key parameters and provide the

staff with enhanced capability to carry out

site specific dose assessments at decommissioning sites. These new tools will enhance

the staff’s ability to conduct realistic dose

assessments of decommissioning plans in a

timely manner.

• Completed characterization phase of research on radioactive slags. This work

provided the licensing office with an identification of the key mineral components of

slags, specified those which contained

radioactive species, and established degradation rates for these mineral phases by

looking at current and archeological slags.

This effort supports the goal of obtaining

more realistic assessments of radiation

exposure.

• Approved removal of three Site Decommissioning Management Plan (SDMP) sites

from the current list, reducing the number

of sites from 26 to 23. The SDMP list

contains sites that are complicated by

technical, financial, and/or other challenges

that must be addressed before

decommissioning can be completed.

• Completed review of 15 environmental

assessments for SDMP sites, fuel cycle

facilities, and uranium recovery facilities.

• Developed an assessment for Commission

review on the viability of entombment as a

decommissioning option for nuclear power

reactors by reviewing and evaluating

regulatory issues, and holding a public

workshop to discuss the issues associated

with the entombment option.

• Published a Federal Register notice (64 FR

68005) reaffirming the results of the

Commission’s first review of its Waste

Confidence Decision, originally issued on

(continued on page 28)
28

U.S. NUCLEAR REGULATORY COMMISSION

Performance Report (continued)

Decommissioning of the Ft. St. Vrain Reactor in Colorado

August 31, 1984 (49

FR 34658). A 1990

review of the initial

decision determined

that spent fuel could

be safely stored and

managed under

existing processes

through the first

quarter of the 21st

century and 30 years

beyond the licensed

life for power reactor

operation. In its

1990 review, the

Commission stated

that its next review

of the waste confidence issues would

occur in ten years.

As the ten year period for review approaches, the Commission is of the view

that experience and developments since

1990 confirm the Commission’s 1990

Waste confidence findings. Thus, the

Commission has decided that a comprehensive evaluation of the Waste Confidence

Decision at this time is not necessary. The

Commission would consider undertaking a

comprehensive evaluation when the impending repository development and regulatory activities have run their course or if

significant and pertinent unexpected events

occur, raising substantial doubt about the

continuing validity of the 1990 Waste

Confidence findings.

• Received a letter from Virginia Electric and

Power Company (Virginia Power) formally

notifying the Commission of Virginia Power’s

intent to submit a license renewal application

for its Surry independent spent fuel storage

installation (ISFSI). This will be the first

ISFSI license renewal. Virginia Power plans

to submit its application for ISFSI license

renewal in April 2002. The Surry ISFSI’s

current 20 year license expires in 2006.

International Nuclear Safety

Support

STRATEGIC GOAL: Support U.S. interests in

the safe and secure use of nuclear materials and

in nuclear nonproliferation.

The International Nuclear Safety Support

strategic arena encompasses international nuclear

safety and regulatory policy formulation, importexport licensing for nuclear materials and equipment, treaty implementation, international

information exchange, international safety and

safeguards assistance, and deterring nuclear

proliferation. The agency’s international activities support broad U. S. national interests, as well

as the NRC’s domestic mission. The legal basis

for these activities is the Atomic Energy Act of

1954, as amended, the Energy Reorganization Act

of 1974, as amended, the Nuclear Non-Proliferation Act of 1978, other statutes, executive orders,

treaties and conventions, other international

agreements, and Commission directives. Table 5

identifies the International nuclear safety support

strategic goal and related FY 1999 - 2000

performance data.
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

29

(continued on page 30)

International Nuclear Safety

Accomplishments for FY 2000

The NRC international activities support of

the agency’s domestic mission, as well as broad

U.S. domestic and international interests. In FY

2000, the NRC continued to make major changes

in its international program. Below is a brief

description of noteworthy program achievements.

Early Warning System

Deployed the Year 2000 Early Warning

System (YEWS) in cooperation with the international community as a means for nuclear facility

operators to report any observed date-changed

effects at their nuclear facilities. U.S. nuclear

power plant staff monitored YEWS for potential

problems overseas, and it was acknowledged

internationally as one of the most useful real-time

reporting mechanisms during the rollover period.

Operational Safety Review Team

In the area of cooperation with multilateral

organizations, the agency arranged for an International Atomic Energy Agency-led Operational

Safety Review Team (OSART) mission to the

North Anna Nuclear Power Plant in Virginia. The

focus of the OSART, the first in the U.S. in over

four years, was to review the safety and reliability

of plant operation.

Other Accomplishments

• Completed action on a proposed export of

highly enriched uranium to the Netherlands.

This case was subject to restrictions imposed

by the Energy Policy Act of 1992 and to

commitments recently made by the U. S.

Government and the European Commission.

STRATEGIC GOAL: Support U.S. interests in the safe and secure use of nuclear PERFORMANCE

materials and in nuclear nonproliferation.

MEASURE Target Actual

Fulfills at least 100 percent of the significant obligations over which NRC has regulatory FY 2000: 100% FY 2000: 100%

authority arising from statutes, treaties, conventions, and Agreements for Cooperation.27. FY 1999: 100% FY 1999: 100%

No significant proliferation incidents attributable to some failure of the NRC. FY 2000: 0 FY 2000: 0

FY 1999: N/A FY 1999: N/A

No significant safety or safeguards events that result from NRC’s failure to FY 2000: 0 FY 2000: 0

implement its international commitments. FY 1999:N/A FY 1999: N/A

Outcomes in international forums are consistent with U.S. Government objectives FY 2000: FY 2000:

identified as pertinent to and actively supported by the NRC at least (60) percent Measure discontinued28 Measure discontinued

of the time. FY 1999: N/A FY 1999: N/A

Table 5

International Nuclear Safety Support

27 Agreements for Cooperation in the Civil/Peaceful Use of Nuclear Energy are required under section 123 of the Atomic Energy Act

of 1954, as amended, to establish the legal framework for technical cooperation in the production and use of special nuclear material

as well as for the supply of such material or fuel cycle equipment, or related sensitive information to another country or international

organization. These Agreements for Cooperation (or Section 123 Agreements, as they are also known) include such nonproliferation conditions and controls as safeguards commitments; a guarantee of no explosive or military use; a guarantee of adequate

physical protection; and U.S. rights to approve retransfers, enrichment, reprocessing, other alternations in form or content, and

storage of U.S.-supplied or derived material. They must be in effect before an NRC export license can be issued.

28 Although the FY 2000-2005 Strategic Plan identified a target of at least 60 percent for FY 2000, clear objectives have not been

established. Therefore, this measure has been deleted.
30

U.S. NUCLEAR REGULATORY COMMISSION

Performance Report (continued)

• Completed staff reviews for and issued 156

import/export authorizations (NRC licenses

or amendments) including significant

license actions such as approving the export

of highly enriched uranium to Canada for

use in isotope production. Staff reviews

were completed within 60 days.

• Conducted bilateral assistance activities in

nuclear safety and safeguards with Russia,

Ukraine, Armenia, Kazakhstan, and countries of central and eastern Europe.

• Developed and implemented NRC assistance activities to the Kazakhstani Atomic

Energy Committee on issues associated

with the safe shutdown and decommissioning of the BN-350 sodium-cooled fast

breeder reactor near Aktau, Kazakhstan.

• Negotiated 8 bilateral exchange arrangements between NRC and appropriate

foreign counterparts to ensure that an

effective framework for NRC’s international exchanges is in place.

• Led the U. S. delegation in March, 2000 in

successfully advocating sunsetting of the G24 Nuclear Safety Assistance Coordination

(NUSAC) mechanism.

• Facilitated over 100 foreign visits to NRC from

28 countries, plus Taiwan, including 5 international organizations. Five assignees from 4

countries were placed with the NRC technical

staff for on-the-job training during FY 2000.

Management and Support

Accomplishments for FY 2000

Management and support is comprised of

offices such as Management Services (Administration, Human Resources, and Small Business

and Civil Rights), Chief Information Officer, (Information Management and Technology) Chief Financial Officer, and Policy Support. Below is a brief

description of noteworthy program achievements.

• Launched in December, 1999, a major

procurement reform initiative entitled,

“Focused Source Selection,” under NRC’s

Procurement Reinvention Laboratory. The

procedure involves easy posting of the

scope of work during a pre-solicitation

phase and an early assessment of bidder

capabilities. The solicitation itself would be

sent to the top three ranked pre-solicitation

bidders. Focused Source Selection is the

first of its kind in the Federal government

and provides a web-based, streamlined,

interactive, and more focused approach to

procurement of management support

products and services.

• Conducted (1) staff training to provide the

required knowledge and skills necessary to

support implementation of new NRC

regulatory and business processes, including the revised reactor oversight process,

ADAMS, and the agency Financial and

Human Resources Management System,

and (2) 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.

• Met the requirements of the Omnibus

Budget Reconciliation Act of 1990, by

collecting fees to offset approximately

100.7 percent of NRC’s new budget authority that was required to be offset by fees.

• Supported the government wide electronic

commerce initiative by making approximately 100 percent of NRC’s payments

electronically.

• Met the goal to maintain delinquent debt at

year-end to less than 1 percent of NRC’s

billings for FY 2000.

• Began a major redesign of NRC’s public Web

site to enhance the public’s ability to find the

information needed to participate in the regulatory process, improve information quality and

timeliness, and comply with requirements of the

Americans with Disabilities Act.

• Initiated a pilot test using “media streaming” technology to broadcast selected
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

31

public Commission meetings live over the

Internet. 16 public Commission meetings

were broadcast over the Internet as a means

of improving communications with the

public. All “streamed” meetings will be

archived and available to Internet users

worldwide at www.nrc.gov/live.html.

• Reduce the number of managers and supervisors from slightly over 700 in 1993 to

approximately 330 as of 2001. Achieved the

agency target ratio of 8:1 in FY 1999 and

has maintained an 8.5 to 1 ratio since then.

Verification and Validation

of Data

Data Completeness and Reliability

Assessing the reliability and completeness of

performance data is critical to managing for

results. Comparing actual performance with the

projected levels of performance can only be

accomplished if the data used to measure performance are complete and reliable. The Reports

Consolidation Act of 2000 requires that agency

heads assess the completeness and reliability of

the performance data used in this report. A draft

revision to Part 2 of OMB Circular A-11 part

232.10 describes specifically how an agency

should assess the completeness and reliability of

the performance data. The following discussion

on data completeness and reliability is based on

the guidance provided in the draft revision to

OMB Circular A-11.

Data Completeness

OMB’s draft A-11 guidance indicates that data

are considered complete if actual performance

data is reported for every performance goal and

indicator in the annual plan. Actual performance

data may include preliminary data if those are the

only data available when the report is sent to the

President and Congress. The agency must identify those goals for which actual data are not

available at the time the annual report is transmitted and note that the data will be included in a

subsequent annual report. The data used by the

NRC meet this test for completeness. Actual or

preliminary data have been reported for every

strategic and performance measure.

Data Reliability

OMB’s draft A-11 guidance indicates that data

are considered reliable when there is neither a

refusal nor a marked reluctance by agency managers or decision makers to use the data in carrying out their responsibilities. Data need not be

perfect to be reliable and the cost and effort to

secure the best performance data possible may

exceed the data’s value. The agency managers

and decision makers use the data contained in this

report on an ongoing basis in the normal course of

their duties. There is neither a refusal nor a

marked reluctance by agency managers or decision makers to use the data in carrying out their

responsibilities. The data used by the NRC meet

the test for reliability.

Data quality

The NRC’s data collection and analysis

methods are largely driven by the regulatory

mandate entrusted to it by Congress. The NRC’s

mission is to regulate the Nation’s civilian use of

byproduct, source, and special nuclear materials

to ensure adequate protection of public health and

safety, to promote the common defense and

security, and to protect the environment. Section

208 of the Energy Reorganization Act of 1974, as

amended, 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. The abnormal

occurrence (AO) criteria were developed by NRC in

order to comply with the legislative intent of the Act

to determine which events should be considered

significant. Events that meet the AO criteria are

included in an annual “Report to Congress on

Abnormal Occurrences” (NUREG -0090).

Most of the data used to measure the strategic

goals and the performance goals focused on

maintaining safety are attained or derived from

the NRC’s AO data and reports submitted by

(continued on page 32)
32

U.S. NUCLEAR REGULATORY COMMISSION

Performance Report (continued)

licensees. In 1997, the Commission determined

that events occurring at Agreement State licensed

facilities that meet the AO criteria should be

reported in the annual AO report to Congress.

Therefore, the AO 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.

One important characteristic of the data used

in this report, then, is that the data originate from

these external sources, such as Agreement States

and NRC licensees. The NRC believes this data

are credible 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. The NRC

database systems that support this process include

the Sequence Coding and Search System (SCSS),

the Accident Sequence Precursor (ASP) Database,

the Nuclear Materials Events Database (NMED),

and the Radiation Exposure Information Report

System (REIRS).

The NRC has established procedures for the

systematic review and evaluation of events

reported by NRC licensees and Agreement State

licensees. The objective of the review is to

identify events that are significant from the

standpoint of public health and safety based on

criteria that include specific thresholds. The NRC

uses a number of sources to determine the reliability and the technical accuracy of events

information reported to NRC. Such sources

include: (1) the NRC licensee reports themselves,

which are carefully analyzed, (2) NRC inspection

reports, (3) Agreement State reports, (4) NRC

consultant/contractor reports, and (5) U.S. Department of Energy Operating Experience Weekly

Summaries. In addition, daily interaction and

exchange of events information occurs between

headquarters and regional offices, and periodic

conference calls are placed between headquarters,

the region, and Agreement States to discuss event

information. Events identified that meet the

abnormal occurrence criteria are validated and

verified by all applicable NRC headquarters

program offices, regional offices, and agency

management prior to submission to Congress.

Data security is ensured by the agency’s

computer security program. This program provides administrative, technical, and physical

security measures for the protection of the

agency’s information, automated information

systems, and information technology infrastructure. This includes special safeguards to protect

classified information, unclassified safeguards

information, and sensitive unclassified information that is processed, stored, or produced on all

types of automated information systems.

The Commission is currently focusing on

improving the performance data for 10 of the

measures in the Nuclear Materials Safety arena

that rely on data from Agreement States. With

over 15,000 Agreement State regulated licensees

and over 5,000 licensees regulated by the NRC,

the materials arena presents a significant challenge to reporting and collecting performance

data. The Commission has recently analyzed

present and past years’ data to verify the accuracy

of the data (“Nuclear Materials Safety Arena

Performance Data”,

SECY-00-0217). This analysis identified

several concerns about the collection and

analysis of the materials events data. One

concern was with the absence of uniformity in

the data and data reporting, especially with

respect to the timeliness of reporting. Another

concern is that data entered by licensees are

subject to modification based on later analysis

of the events or due to inspections in which

inspectors identify reportable events that have

not been previously reported.

As a result of this analysis, the NRC has

adopted a number of measures to improve the

data it reports. For example, NRC staff members

have traveled throughout the country providing

training to Agreement State, NRC regional, and
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

33

29 NRC’s Strategic Plan and Appendix for FY 2000-2005, can be found at http://www.nrc.gov/NRC/planning.html.

The FY 2002 Budget Estimates and Performance Plan will be available at this website in April 2001.

headquarters personnel on the database and data

collection procedures. In addition, an NRC/

Agreement State Working Group has been formed

to make recommendations for making the materials event program more effective, efficient, and

realistic. As part of its efforts, the Working Group

will identify event information that is needed to

support implementation of the Strategic Plan and

compare that information to the current reporting

requirements. This project is ongoing and is

expected to result in improved data collection,

analysis, and reporting.

A more complete discussion of data validation

and verification is included in the FY 2002 Budget Estimates and Performance Plan.29 A complete

explanation of data verification and validation

issues for each safety or performance goal are

provided there. This allows our stakeholders to

see specifically what data are being collected for

each measure and assess whether those data are

appropriate for the measure.

Program Evaluations

While NRC has initiated a number of program

evaluations, none were completed during this

reporting cycle. Additional information concerning program evaluations and scheduled completion dates are identified in the Appendix to NRC’s

FY 2000-2005 Strategic Plan.29

Management Challenges

Consistent with the requirements of the

Reports Consolidation Act of 2000, this report

includes a summary of what the Inspector General

considers to be the most serious management

challenges facing the agency and the agency’s

progress in addressing them. While some of these

issues concern initiatives which are not central to

NRC’s mission, others are critical in maintaining

the agency’s future capability to protect the public

health and safety. Specific actions and milestones for these challenges are included in NRC’s

FY 2002 Budget Estimates and Performance

Plan29 , along with linkages to NRC’s strategic

and performance goals and corporate management strategies.

Crosscutting Functions with

other Government Agencies

Several Government agencies have missions

that are related to the NRC. The NRC has identified major cross-cutting functions with other

agencies and their relationship to NRC programs

followed by descriptions of the specific NRC

areas of mutual interest in the FY 2002 Budget

Estimates and Performance Plan29. The NRC

identified no inconsistent or duplicative areas

among other federal agencies.
34

U.S. NUCLEAR REGULATORY COMMISSION
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

35

FY 2000 Audited Financial Statements

Limitations of the Financial Statements

The principal statements have been prepared to report the financial position and results of operations of the NRC, pursuant to 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 the NRC in accordance with the formats prescribed by

the Office of Management and Budget. 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, liabilities not covered by budgetary resources cannot be liquidated without the

enactment of an appropriation, and the payment of all liabilities other than for contracts can be

abrogated by the sovereign entity. Other limitations are included in the footnotes to the principal

statements.

The NRC’s FY 2000 financial statements were audited by R. Navarro and Associates under

contract to the NRC’s Office of the Inspector General.
Audit of FY 2000 Financial Statement (continued)

36

U.S. NUCLEAR REGULATORY COMMISSION
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

37

OFFICE OF

THE INSPECTOR GENERAL

U.S. NUCLEAR

REGULATORY COMMISSION

INDEPENDENT AUDITOR’S REPORT AND

 PRINCIPAL STATEMENTS FOR THE

YEAR ENDED SEPTEMBER 30, 2000

OIG-01-A-06 MARCH 1, 2001

AUDIT REPORT

All publicly available OIG reports (including this report) are

accessible through NRC’s website at:

http:www.nrc.gov/NRC/OIG/index.html
38

U.S. NUCLEAR REGULATORY COMMISSION
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

39

UNITED STATES

NUCLEAR REGULATORY COMMISSION

WASHINGTON, DC 20555-0001

March 1, 2001

MEMORANDUM TO: Chairman Meserve

FROM: Hubert T. Bell

Inspector General

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

REGULATORY COMMISSION’S FISCAL YEAR 2000

FINANCIAL STATEMENTS (OIG-01-A-06)

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

(NRC) Fiscal Year 2000 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 independent 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 auditors concluded that management’s assertion is not fairly stated. The auditors reached this conclusion because management did not identify the lack of the following as material weaknesses:1

(1) managerial cost accounting; and (2) management controls for license fee development.

The auditors identified one new reportable condition and closed four prior-year reportable

conditions. The new condition concerns inadequate documentation of debt collection activities.

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

The first is that NRC did not comply with the Debt Collection Improvement Act of 1996. The

1 OIG’s annual assessment of NRC’s implementation of the Federal Manager’s Financial Integrity Act will also

report the same issues as material weaknesses. OIG Report OIG-01-A-07, Review of NRC’s Implementation of

the Federal Manager’s Financial Integrity Act for Fiscal Year 2000, February 23, 2001.

(continued on page 40)
40

U.S. NUCLEAR REGULATORY COMMISSION

second is that NRC’s 10 CFR Part 170 license fee rates are not based on full cost, and the third

is that managerial cost accounting was not implemented, as required. Issue three is considered a

substantial noncompliance 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 was dependent on

the Department of the Treasury to resolve this condition. During FY 2001, NRC plans to transfer its accounting system to a new provider. Tests of compliance with selected provisions of

other laws and regulations disclosed no other instances of noncompliance.

Performance Reporting

Office of Management and Budget Bulletin No. 01-02, Audit Requirements for Federal Financial Statements, requires OIG to “obtain an understanding of the components of internal control

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

included in the MD&A [Management’s Discussion and Analysis].” 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. OIG recently issued a separate report on the validity and reliability

of NRC’s performance information.2

 Although the report focused on FY 1999 performance

measures and results, it noted that many efforts to improve the reliability (e.g. completeness,

timeliness) of performance data will not be in place until after FY 2000.

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. We will follow-up on the CFO’s corrective action during FY 2001.

We appreciate NRC staff’s cooperation and continued interest in improving financial management within NRC.

Attachment: As stated

Audit of FY 2000 Financial Statement (continued)

2 OIG Report OIG-01-A-03, Government Performance and Results Act: Review of the Fiscal Year 1999

Performance Report, February 23, 2001.
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

41

CONTENTS

INDEPENDENT AUDITORS’ REPORT ON THE PRINCIPAL STATEMENTS .............. 43

PRINCIPAL STATEMENTS ..................................................................................................... 45

Balance Sheet ...................................................................................................................... 47

Statement of Net Cost .......................................................................................................... 48

Statement of Changes in Net Position ................................................................................. 49

Statement of Budgetary Resources ...................................................................................... 50

Statement of Financing ........................................................................................................ 51

Notes to Principal Statements .............................................................................................. 52

Required Supplementary Information:

Schedule of Intragovernmental Balances ............................................................................ 65

INDEPENDENT AUDITORS’ REPORT ON MANAGEMENT’S ASSERTION

ABOUT THE EFFECTIVENESS OF INTERNAL CONTROL ........................................... 67

INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE WITH

LAWS AND REGULATIONS ................................................................................................... 77

COMMENTS OF THE CHIEF FINANCIAL OFFICER ...................................................... 83
42

U.S. NUCLEAR REGULATORY COMMISSION
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

43

(continued on page 44)

R. Navarro & Associates, Inc.

Chairman Richard A. Meserve

U.S. NUCLEAR REGULATORY COMMISSION

Rockville, Maryland

INDEPENDENT AUDITORS’ REPORT ON THE PRINCIPAL STATEMENTS

We have audited the accompanying balance sheet of the U. S. Nuclear Regulatory Commission

(NRC) as of September 30, 2000, and the related statements of net cost, changes in net position,

budgetary resources, and financing for the year then ended, collectively referred to as the financial statements. These financial statements are the responsibility of the management of NRC.

Our responsibility is to express an opinion on these financial statements based on our audit.

Scope

We conducted our audit in accordance with auditing standards generally accepted in the United

States of America, Government Auditing Standards issued by the Comptroller General of the

United States, and Office of Management and Budget (OMB) Bulletin No. 01-02, Audits of

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 accounting principles used and

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

presentation. We believe our audit provides a reasonable basis for our opinion.

Matters for Emphasis

Classification of Costs

OMB Bulletin 97-01, Form and Content of Agency Financial Statements, as amended, provides

guidance to federal agencies for presenting program costs classified by intragovernmental and

public components. The basis for classification relies on the concept of who received the benefits of the costs incurred (e.g. private sector licensees versus federal licensees) rather than who

was paid. Following the advice of OMB, NRC classified the costs on the Statement of Net Cost

using an underlying concept of who was paid.

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 $57.7

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
Principal Financial Statements (continued)

44

U.S. NUCLEAR REGULATORY COMMISSION

R. Navarro & Associates, Inc.

work place 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 regulations is DOE’s responsibility. This responsibility was further clarified by a memorandum of the

General Accounting Office’s (GAO) Assistant General Counsel, dated Mach 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 financial statements referred to in the first paragraph, present fairly, in all

material respects, the financial position of NRC as of September 30, 2000, and its net cost,

changes in net position, budgetary resources, and reconciliation of budgetary obligations to net

cost for the year then ended in conformity with accounting principles generally accepted in the

United States of America.

Our audit was conducted for the purpose of forming an opinion on the financial statements

taken as a whole. The required supplementary information consisting of the Management’s

Discussion and Analysis and the Schedule of Intragovernmental Balances is not a required part

of the financial statements but is information required by OMB Bulletin No. 01-02, Audit

Requirements for Federal Financial Statements, and by Statement of Federal Financial Accounting Standards No. 15, Management’s Discussion and Analysis. This supplementary information

is the responsibility of the NRC’s management. We have applied certain limited procedures,

which consisted principally of inquiries of management regarding the methods of measurement

and presentation of the supplementary information. However, we did not audit such information

and we do not express an opinion on it.

In accordance with Government Auditing Standards issued by the Comptroller General of the

United States and OMB Bulletin No. 01-02, Audit Requirements for Federal Statements, we

have also issued our report dated February 8, 2001, on our consideration of NRC’s internal

control over financial reporting and our tests of its compliance with certain provisions of laws,

regulations, contracts, and grants. That report is an integral part of an engagement to perform an

audit in accordance with Government Auditing Standards and should be read in conjunction with

this report in considering the results of our audit.

February 8, 2001
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

45

PRINCIPAL FINANCIAL STATEMENTS

FOR FISCAL YEAR 2000
Principal Financial Statements (continued)

46

U.S. NUCLEAR REGULATORY COMMISSION
The accompanying notes to the principal statements

are an integral part of this statement.

FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

47

BALANCE SHEET

As of September 30, 2000

(in dollars)

Assets

Intragovernmental assets:

Fund balances with Treasury (Note 2) $138,740,086

Accounts receivable (Note 3) 1,874,393

Other 1,224,560

Total intragovernmental assets 141,839,039

Cash and other monetary assets 20,000

Accounts receivable, net (Note 3) 42,162,594

Property and equipment, net (Note 5) 41,853,364

Other 51,433

Total Assets $225,926,430

Liabilities

Intragovernmental liabilities

Accounts payable $ 10,590,557

Other (Notes 6 and 7) 50,157,465

Total intragovernmental liabilities 60,748,022

Accounts payable 15,859,810

Federal employees benefits (Note 7) 8,230,000

Other (Notes 6 and 7) 44,937,322

Total Liabilities 129,775,154

Net Position

Unexpended appropriations (Note 9) 87,073,470

Cumulative results of operations (Note 10) 9,077,806

Total Net Position 96,151,276

Total Liabilities and Net Position $225,926,430
Principal Financial Statements (continued)

The accompanying notes to the principal statements

are an integral part of this statement.

48

U.S. NUCLEAR REGULATORY COMMISSION

STATEMENT OF NET COST

For the year ended September 30, 2000

(in dollars)

Nuclear Reactor Safety

Intragovernmental $103,796,213

With the public 226,621,251

Total 330,417,464

Less earned revenue 390,400,624

Net cost of Nuclear Reactor Safety $(59,983,160)

Nuclear Materials Safety

 Intragovernmental 27,707,063

 With the public 73,502,935

Total 101,209,998

Less earned revenue 55,011,902

Net cost of Nuclear Materials Safety 46,198,096

Nuclear Waste Safety

Intragovernmental 14,856,560

With the public 48,319,530

Total 63,176,090

Less earned revenue 14,547,764

Net cost of Nuclear Waste Safety 48,628,326

International Nuclear Safety Support

Intragovernmental 7,892,108

With the public 8,033,704

Total 15,925,812

Less earned revenue 3,077,698

Net cost of International Nuclear

 Safety Support 12,848,114

Net Cost of Operations (Note 12) $ 47,691,376
The accompanying notes to the principal statements

are an integral part of this statement.

FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

49

STATEMENT OF CHANGES IN NET POSITION

For the year ended September 30, 2000

(in dollars)

Net Cost of Operations $(47,691,376)

Financing sources other than exchange revenue

 (Note 13)

Appropriations used $ 26,120,547

Non-exchange revenue 875,347

Imputed financing 16,032,598

Transfer-in 447,000,000

Transfers-out (447,875,347)

Total financing sources 42,153,145

Net results of operations (5,538,231)

Decrease in unexpended appropriations (16,176,632)

Change in Net Position (21,714,863)

Net Position - Beginning of Period $116,553,292

Prior-period adjustment (Note 14) 1,312,847

Net Position - Restated Beginning of Period 117,866,139

Net Position - End of Period $ 96,151,276
Principal Financial Statements (continued)

The accompanying notes to the principal statements

are an integral part of this statement.

50

U.S. NUCLEAR REGULATORY COMMISSION

STATEMENT OF BUDGETARY RESOURCES

For the year ended September 30, 2000

(in dollars)

Budgetary Resources (Note 15)

Budget authority $471,975,231

Unobligated balances - beginning of period 29,893,840

Spending authority from offsetting collections 5,516,691

Adjustments 8,524,924

Total Budgetary Resources $515,910,686

Status of Budgetary Resources

Obligations incurred $485,533,580

Unobligated balances - available 29,786,831

Unobligated balances - not available 590,275

Total Status of Budgetary Resources $515,910,686

Outlays

Obligations incurred $485,533,580

Less: Spending authority from offsetting

collections and adjustments (14,128,615)

Subtotal 471,404,965

Obligated balances, net - beginning of period 116,582,904

Less: obligated balance, net - end of period (104,044,499)

Total Outlays $483,943,370
The accompanying notes to the principal statements

are an integral part of this statement.

FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

51

STATEMENT OF FINANCING

For the year ended September 30, 2000

(in dollars)

Obligations and Nonbudgetary Resources

Obligations incurred $485,533,580

Less: Spending authority for offsetting

collections and adjustments (14,128,615)

Imputed financing (Note 13) 16,032,598

Transfer-in (Note 13) 447,000,000

Transfer-out (Note 13) (447,000,000)

Exchange revenues not in the budget (Note 11) (457,944,314)

Total Obligations and Nonbudgetary Resources 29,493,249

Resources Not Funding Net Cost of Operations

Change in undelivered orders 12,659,897

Capitalized costs (6,683,272)

Financing sources that fund costs of prior periods -

Other 520,704

Total Resources Not Funding Net Cost of Operations 6,497,329

Costs Not Requiring Resources

Depreciation and amortization 6,536,224

Total Costs Not Requiring Resources 6,536,224

Financing Sources Yet to be Provided 5,164,574

Net Cost of Operations $ 47,691,376
Principal Financial Statements (continued)

NOTES TO PRINCIPAL STATEMENTS

September 30, 2000

52

U.S. NUCLEAR REGULATORY COMMISSION

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 use of

nuclear materials.

The NRC FY 2000 appropriations for salaries and expenses and the Inspector General

include approximately $19.2 million of funds derived from the Nuclear Waste Fund

and $3.8 million from the General Fund for assistance provided to the U. S. Department of Energy (DOE) and other Federal agencies. In addition, $2 million was

available for obligation from appropriations provided by the U. S. Agency for International Development for the development of nuclear safety and regulatory authorities in Russia, Ukraine, Kazakhstan, and Armenia for the independent oversight of

nuclear reactors in these countries. At the beginning of FY 2000, $4 million authorized by Public Law (P.L.) 105-62 for FY 1998 for the licensing of a multi-purpose

canister design was rescinded by P.L. 106-60 and funding was transferred back to the

DOE. In addition, NRC’s appropriation was reduced by $87,000 through a recission

of funding in accordance with P.L. 106-113.

The accompanying financial statements of NRC include the accounts of all funds

under NRC control. The NRC appropriations are under budget functional classification 276, Energy Information, Policy, and Regulation, and departmental code 31.

The transfer appropriations from: (1) the U.S. Agency for International Development

are under budget functional classification 150, International Affairs, and departmental code 72 and (2) the General Services Administration (GSA) 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 accounting

principles generally accepted in the United States of America, the requirements of

Office of Management and Budget (OMB) Bulletin No. 97-01, Form and Content of

Agency Financial Statements, technical amendments, and NRC accounting policies.

These statements are, therefore, different from the financial reports, also prepared by

the NRC pursuant to OMB directives, which are used to monitor and control NRC’s use
NOTES TO PRINCIPAL STATEMENTS

September 30, 2000

FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

53

of budgetary resources. NRC has not prepared a Statement of 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 plans and the FY 2000 budget structure. The budget line items for Management and Support and the Office of the Inspector General were allocated to strategic

arenas using direct costing and cost-finding techniques consistent with Statement of

Federal Financial Accounting Standards Number 4, Managerial Cost Accounting

Concepts and Standards 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. The NRC regulates 103 civilian nuclear power reactors that

are licensed to operate and 17 that are undergoing decommissioning.

Nuclear Materials Safety encompasses NRC efforts to ensure that NRCregulation 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 regulated by the NRC and 31 Agreement States.

Nuclear Waste Safety encompasses NRC’s regulatory activities associated

with uranium recovery, decommissioning, storage of spent nuclear fuel, transportation of radioactive materials, and disposal of radioactive wastes.

International Nuclear Safety Support encompasses NRC’s efforts of international cooperation to help ensure the safe, secure, and environmentally

acceptable uses of nuclear energy. This arena includes international nuclear

policy formulation, export-import licensing for nuclear materials and equipment, treaty implementation, international information exchange, international

safety and safeguards 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 26 years, Congress has enacted no-year appropriations which are available for

obligation by NRC until expended. The Omnibus Budget Reconciliation Act (OBRA) of

1990, as amended, requires the NRC to recover approximately 100 percent of its new

budget authority of $469.9 million by assessing fees less the amounts derived from

the Nuclear Waste Fund of $19.2 million and $3.8 million from the General Fund for

(continued on page 54)
Principal Financial Statements (continued)

NOTES TO PRINCIPAL STATEMENTS

September 30, 2000

54

U.S. NUCLEAR REGULATORY COMMISSION

regulatory review and other assistance provided to DOE and other Federal agencies

which is excluded from license fee revenues.

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 Appropriation 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 Accounting.

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. 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 demand 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 (appropriations used) at the time expenses are accrued. At the end of the fiscal year, appropriations 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.
NOTES TO PRINCIPAL STATEMENTS

September 30, 2000

FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

55

Appropriations expended for property and equipment are recognized as expenses

when the asset is consumed in operations (depreciation and amortization). Appropriations used do not include: (1) expenses incurred but not yet funded by Congress, such

as workers’ compensation benefits and annual leave expenses; and (2) 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 U.S. 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

allowable 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. Receivables from Federal agencies are

expected to be collected; therefore, 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 consist 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 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 using the straight-line method over the useful life.

Other property items are expensed when purchased. Normal repairs and maintenance

are charged to expense as incurred.

I. 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 represent collections received in advance of performing services under a variety of reimbursable agreements. The services will be provided and the revenue earned in a

subsequent fiscal year.

(continued on page 56)
Principal Financial Statements (continued)

NOTES TO PRINCIPAL STATEMENTS

September 30, 2000

56

U.S. NUCLEAR REGULATORY COMMISSION

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 Government acting in its sovereign capacity.

K. Contingencies

The NRC is a party to various administrative proceedings, legal actions, environmental 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 statements.

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

At the end of FY 2000 approximately 42 percent of NRC employees belong to the

Civil Service Retirement System (CSRS) and 58 percent belong to the Federal Employees’ Retirement System (FERS). In FY 2000, for employees in FERS, the NRC

withheld 1.2 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 transferred to the Federal Employees Retirement Fund.

During FY 2000, for employees covered by CSRS, NRC withheld 7.4 percent of base

pay earnings. This withholding was matched by NRC with a 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 contribute to the plan in a calendar year 2000 was $10,500. The sum

of the employees’ and NRC’s contributions is transferred to the Federal Retirement

Thrift Investment Board.
NOTES TO PRINCIPAL STATEMENTS

September 30, 2000

FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

57

(continued on page 58)

The NRC does not report on its financial statements FERS and CSRS assets, accumulated plan benefits, or unfunded liabilities, if any, applicable to its employees. Reporting 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 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 systemgenerated voucher approval system. The vouchers are returned to the Office of the

Chief Financial Officer documenting that the charges have been accepted. For the

year ended September 30, 2000, NRC had expenses of approximately $ 57.7 million

for research conducted by the DOE National Laboratories.

O. 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, liabilities, revenue, and expenses. Actual results could differ from these

estimates.
Principal Financial Statements (continued)

NOTES TO PRINCIPAL STATEMENTS

September 30, 2000

58

U.S. NUCLEAR REGULATORY COMMISSION

NOTE 2. FUND BALANCES WITH TREASURY

Fund balances with the Treasury consist of the following amounts as of September 30, 2000:

Appropriated funds:

Obligated $118,576,942

Unobligated 15,824,682

134,401,624

Other fund types 4,338,462

$138,740,086

The obligated and unobligated balances exclude amounts related to unfilled customer orders.

Other fund types include miscellaneous receipt accounts and budget clearing accounts.

NOTE 3. ACCOUNTS RECEIVABLE

Accounts receivable is composed of the following:

Intragovernmental accounts receivable consists primarily of receivables and reimbursements

due from other Federal agencies which were $1,874,393 at September 30, 2000.

The non-Federal accounts receivable, net, is comprised of the following amounts as of

September 30, 2000:

Materials and facilities fees - billed $ 5,418,605

Materials and facilities fees - unbilled 39,864,362

Other 359,056

Total accounts receivable 45,642,023

Less: Allowance for uncollectible accounts (3,479,429)

Accounts receivable, net $42,162,594

Other accounts receivable of $359,056 represent miscellaneous amounts due from NRC

employees and penalties and interest due from the public.

NOTE 4. NON-ENTITY ASSETS

Included in the accounts receivable balance is $214,176 consisting of miscellaneous penalties

and interest due from the public, which, when collected, must be transferred to the U.S. Treasury.
NOTES TO PRINCIPAL STATEMENTS

September 30, 2000

FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

59

(continued on page 60)

NOTE 5. PROPERTY AND EQUIPMENT, NET

Property and equipment, net, consists of the following as of September 30, 2000:

Accumulated

Depreciation

Service Acquisition and Net Book

Fixed Assets Class Years Value Amortization Value

Equipment 5-8 $18,997,699 $(15,682,494) $ 3,315,205

ADP software 5 53,102,079 (34,990,208) 18,111,871

ADP software under development - 7,738,081 - 7,738,081

Leasehold improvements 20 19,665,214 (7,072,329) 12,592,885

Leasehold improvements in progress 95,322 - 95,322

$99,598,395 $(57,745,031) $41,853,364

NOTE 6. OTHER LIABILITIES

Other intragovernmental liabilities as of September 30, 2000, include:

Liability to offset net accounts receivable for fees assessed $43,388,134

Liability related to fees collected which will offset

subsequent year’s appropriations 3,172,811

Liability to offset miscellaneous accounts receivable 214,376

Liability for advances from other Federal agencies 22,393

Accrued worker’s compensation 1,520,707

Liability for employee benefits contributions 1,839,044

$50,157,465

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.

Other liabilities as of September 30, 2000, include:

Accrued annual leave $25,626,852

Accrued salaries 14,303,335

Contract holdbacks, advances, and other 5,007,135

$44,937,322

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.
Principal Financial Statements (continued)

NOTES TO PRINCIPAL STATEMENTS

September 30, 2000

60

U.S. NUCLEAR REGULATORY COMMISSION

NOTE 7. LIABILITIES NOT COVERED BY BUDGETARY RESOURCES

Liabilities not covered by budgetary resources are not funded by current or prior years’ appropriations and assessments. Funding will be provided from future years’ appropriations. As of

September 30, 2000, liabilities not covered by budgetary resources included:

Intragovernmental

Included in the $50,157,465 of other intragovernmental liabilities is $1,520,707 related to Federal 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, 2000.

Federal Employees Benefits

Federal employees benefits of $8,230,000 for FY 2000 represents 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 approved compensation cases. The liability was calculated using historical benefit

payment patterns 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. The

interest rate assumptions utilized for discounting were 6.275 percent in year 1 and 6.300 percent

in year 2 and thereafter.

Other

Included in the $44,937,322 of other liabilities is $25,626,852 of accrued annual leave and

$181,097 for the 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, 2000 follows:

Capital Leases

Future payments due:

Fiscal Year Lease Payments

2001 $ 70,378

2002 70,378

2003 52,784

2004 and thereafter -

Total future lease payments 193,540

Less: imputed interest (12,443)

Net capital lease liability $181,097
NOTES TO PRINCIPAL STATEMENTS

September 30, 2000

FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

61

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 equipment, 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 Lease Payments

2001 $ 20,099,771

2002 19,406,694

2003 19,364,621

2004 19,457,404

2005 and thereafter 158,190,133

Total future lease payments $236,518,623

Operating leases consist of real property leases with GSA. The leases are for NRC’s headquarters 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, 2000:

Unexpended appropriations:

Unobligated $18,711,100

Undelivered orders 68,362,370

$87,073,470

Unexpended appropriations include: (1) unobligated appropriation balances and (2) undelivered

orders, which are amounts which have been obligated but not yet expended. The unobligated

appropriations balance does not include $3,054,083 in unfilled customer orders - unobligated as

of September 30, 2000. The undelivered orders balance does not include $2,886,418 in unfilled

customer orders - obligated as of September 30, 2000.

NOTE 10. CUMULATIVE RESULTS OF OPERATIONS

The cumulative results of operations as of September 30, 2000, consists of the following:

Future funding requirements $(35,377,560)

Investment in property and equipment, net 41,853,364

Contributions from foreign cooperative research agreements 2,505,896

Other 96,106

$ 9,077,806

(continued on page 62)
Principal Financial Statements (continued)

NOTES TO PRINCIPAL STATEMENTS

September 30, 2000

62

U.S. NUCLEAR REGULATORY COMMISSION

Future funding requirements represent the amount of future funding needed to pay the accrued

unfunded expenses as of September 30, 2000. These accruals are not funded from current or

prior-year appropriations and assessments, but rather should be funded from future appropriations 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, 2000:

Fees for licensing, inspection, and other services $457,944,314

Revenue from reimbursable work 5,093,674

Totals $463,037,988

NOTE 12. BUDGET FUNCTIONAL CLASSIFICATION

The gross cost and earned revenue by budget functional classification for NRC are as follows:

Gross Earned Net

Functional Classifications Cost Revenues Cost

276 - Energy Information,

Policy & Regulation $506,936,643 $(462,494,646) $44,441,997

150 - AID International Affairs 3,791,761 (543,342) 3,248,419

800 - GSA General Government 960 - 960

Totals $510,729,364 $(463,037,988) $47,691,376

The transactions with intragovernmental entities were as follows:

Gross Earned Net

Functional Classifications Cost Revenues Cost

276 - Energy Information,

Policy & Regulation $152,080,387 $(31,079,476) $121,000,911

150 - AID International Affairs 2,171,557 - 2,171,557

Totals $154,251,944 $(31,079,476) $123,172,468

NOTE 13. 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, 2000, $450,077,215 was collected from fees

assessed for licensing, inspections, and other services. At the end of the fiscal year, appropriations recognized are reduced by the amount of assessed fees collected during the fiscal year to
NOTES TO PRINCIPAL STATEMENTS

September 30, 2000

FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

63

(continued on page 64)

the extent of new budget authority for the year. Collections which exceed the new budget authority are held to offset subsequent years’ appropriations. Included in the $450,077,215 of fees

collected is $3,077,215 available to offset subsequent years’ appropriations.

For the year ended September 30, 2000, $447,000,000 of FY 2000 collections were used to

reduce the fiscal year’s appropriations recognized:

Appropriated funds consumed $ 484,064,861

Less: Collection from fees assessed (447,000,000)

37,064,861

Amounts to offset subsequent years’ appropriations (10,944,314)

$ 26,120,547

Appropriations used includes $29,893,840 of available funds from prior years.

Non-exchange Revenue

Non-exchange revenue of $875,347, consisted of $632,038 received from civil penalties and

$243,309 of miscellaneous receipts. Miscellaneous receipts included interest on delinquent debt,

late penalties, Freedom of Information Act fees, and indemnity fees.

Imputed Financing

The imputed financing source of $16,032,598 represents the service costs related to NRC

employees’ post-employment benefits which are paid by the Office of Personnel Management

and payments from the U.S. Treasury Judgement Fund, as follows:

Civil Service Retirement System $ 9,173,094

Federal Employee Health Benefit 6,807,220

Federal Employee Group Life Insurance 44,784

U. S. Treasury Judgement Fund 7,500

$16,032,598

Transfers In/Out

NRC transferred-out to the U.S. Treasury $447,875,347 consisting of license fee collections of $447,000,000

and non-exchange revenue of $875,347 and received back as a transfer-in $447,000,000.

NOTE 14. PRIOR-PERIOD ADJUSTMENT

The prior-period adjustment of $1,312,847 consists of the net value of computer hardware components

received in FY1999 by NRC but not capitalized as other assets, equipment not in use. The assets were

placed into operation during FY2000. The impact of this adjustment is to increase property and

equipment, net, and cumulative results of operations as of September30, 1999, by $1,312,847.
Principal Financial Statements (continued)

NOTES TO PRINCIPAL STATEMENTS

September 30, 2000

64

U.S. NUCLEAR REGULATORY COMMISSION

NOTE 15. SUMMARY OF BUDGETARY RESOURCES

The budgetary resources by major fund follows:

All

Budgetary Resources: X0200 X0300 Other Total

Budget authority $464,975,231 $5,000,000 $2,000,000 $471,975,231

Unobligated balances -

 beginning of period 25,224,977 1,191,076 3,477,787 29,893,840

Spending authority from

 offsetting collections 5,516,691 - - 5,516,691

Adjustments 8,094,616 283,920 146,388 8,524,924

Total Budgetary Resources $503,811,515 $6,474,996 $5,624,175 $515,910,686

Status of Budgetary Resources:

Obligations incurred $476,129,523 $5,577,236 $3,826,821 $485,533,580

Unobligated balances

- available 27,681,992 897,760 1,207,079 29,786,831

Unobligated balances

- not available 0 0 590,275 590,275

Total Status of

Budgetary Resources $503,811,515 $6,474,996 $5,624,175 $515,910,686

Outlays:

Obligations incurred $476,129,523 $5,577,236 $3,826,821 $485,533,580

Less: Spending authority

from offsetting collections

 and adjustments (13,698,307) (283,920) (146,388) (14,128,615)

Obligated balance,

net beginning of period 111,072,928 1,190,652 4,319,324 116,582,904

Obligated balance transferred, net - - - -

Less: Obligated balance,

net end of period (98,927,140) (1,063,981) (4,053,378) (104,044,499)

Total Outlays $474,577,004 $5,419,987 $3,946,379 $483,943,370

The adjustments of $8,524,924 to budgetary resources above consist of recoveries to prior-year

obligations less $87,000 that was rescinded.
NOTES TO PRINCIPAL STATEMENTS

September 30, 2000

FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

65

INTRAGOVERNMENTAL ASSETS

INTRAGOVERNMENTAL LIABILITIES

Fund Balances Accounts

Trading Partner with Treasury Receivable Other

Department of the Treasury $ 138,740,086

Commerce Department $136,830

Interior Department 170,555

Navy Department 209,016

Department of Labor 267,480

General Services Administration 325,687

Tennessee Valley Authority $1,025,345

Department of Veterans Affairs 279,800

Department of Energy 224,993

Other 344,255 114,992

Total $138,740,086 $1,874,393 $1,224,560

Trading Partner Accounts Payable Other

Department of Labor $ 1,520,707

Department of the Treasury 46,775,321

Office of Personnel Management 1,839,043

General Services Administration $ 5,180,850

Department of Energy 4,747,330

Other 662,377 22,394

Total $10,590,557 $50,157,465

Required Supplementary Information: Schedule of Intragovernmental Balances
66

U.S. NUCLEAR REGULATORY COMMISSION
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

67

(continued on page 68)

R. Navarro & Associates, Inc.

Chairman Richard A. Meserve

U.S. NUCLEAR REGULATORY COMMISSION

Rockville, Maryland

REPORT ON MANAGEMENT’S ASSERTION ABOUT THE EFFECTIVENESS

OF INTERNAL CONTROL

We have examined management’s assertion that U.S. Nuclear Regulatory Commission’s (NRC)

systems of accounting and internal control in place as of September 30, 2000 is in compliance

with the internal control objectives defined in Office of Management and Budget (OMB) Bulletin No. 01-02, Audit Requirements for Federal Financial Statements. The Bulletin states that

transactions are 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 Institute of Certified Public Accountants; standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and, OMB

Bulletin No. 01-02. 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 our

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

controls in place as of September 30, 2000.

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 due to 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 accounting systems and the internal controls

in place as of September 30, 2000 is in compliance with the internal control objectives defined in

OMB Bulletin No. 01-02 is not fairly stated. Management did not identify the lack of managerial cost

accounting, 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 controls that, in our judgment, could adversely affect the agency’s ability to record, process, summarize, and report financial data consistent with the assertions made 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 does not reduce to a relatively low level the risk that misstatements in amounts that
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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 performing 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. Managerial Cost Accounting and

Management

Controls Over Fee Development are considered material weaknesses. Managerial Cost Accounting is also considered a substantial non-compliance with Federal Financial Management Improvement Act (FFMIA).

Current Year Comments

A. Managerial Cost Accounting

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

through FY 2000, the NRC has not implemented Statement of Federal Financial Accounting

Standards (SFFAS) No. 4, Managerial Cost Accounting Concepts and Standards, to 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 FY 1998 condition by preparing a remediation plan

and outlining the milestones for an integrated resource management system. The remediation

plan has undergone revision to reflect the tasks planned and accomplished. An updated plan

was issued December 27, 2000. However, management has made minimal progress in developing interim techniques or processes to provide routine and reliable cost information for managers

as of the end of FY 2000. Although managerial cost accounting has been a requirement since

FY 1998, NRC projects implementation of cost management during FY 2001.

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 to support compliance with the Government Performance and Results Act.

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 capabilities, 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 capabilities are, should agency pursue additional software. Since agencies

may use cost finding techniques and cost studies as long as they comply with cost accounting

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(continued on page 70)

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 an FFMIA substantial

non-compliance.

Recommendation

The Chief Financial Officer (CFO) should strive to meet the revised milestones in the

remediation plan to provide cost accounting information to agency managers. Cost accounting information should enhance the agency’s ability to evaluate the cost of outputs and

outcomes realized. Because the remediation milestones have seen some delays due to the

staging of complementary software solutions, the CFO should develop interim cost management techniques based on the needs of agency managers.

CFO’s Comments:

“We agree with the importance of striving to meet the revised milestones contained in the

remediation plan, dated December 27, 2000. However, due to issues associated with implementing the PeopleSoft payroll, time and labor, and human resources modules, we will not be

able to meet the milestones contained in that plan.

We are currently evaluating these issues and plan to issue a revised remediation plan in April

2001. In addition, we will review the potential of creating more meaningful cost reports to

better meet the needs of managers on an interim basis. We expect to complete this review by

March 2001....”

Auditors’ Position:

We commend the CFO for continually monitoring and the accuracy of the remediation plan

to address this issue. The implementation strategy that is in place is complex due to the

solutions being pursued, however, gradually introducing cost management tools to agency

managers will expedite and enhance the implementation of this plan . During the next audit

we will evaluate the agency’s actions described in the plan.

B. Program Cost Accounting

OMB Bulletin 97-01, Form and Content of Agency Financial Statements, as amended, requires

the preparation of a Statement of Net Cost as part of the principal statements. This statement is

designed to provide the accounting for the net cost of programs as defined by the agency in its

budget, strategic, and annual plans. In FY 2000, approximately $282 million (55%) of the agency

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

In the prior year, we reported (Report No. OIG/99A-12) that NRC did not have a general

ledger process supporting the preparation of the Statement of Net Cost. This condition

continues to exist. However, during the current year, the OCFO implemented an interim data

collection method, a time allocation tool, improving the collection of labor data. Because the

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agency’s financial management processes are in transition while the agency develops a fully

integrated accounting system, interim processes are being implemented to support the accumulation of labor costs by program.

Our assessment of the implementation of the time allocation tool used to collect labor data

identified conditions requiring attention in order to increase the reliability of the information

provided. These conditions include:

• For most employees, time allocations were pre-set to default to a specific strategic arena

instead of actively requiring an allocation of time;

• Routine reporting of time allocation data was not provided to accountable managers;

• Policies for reviewing time allocation reports were not implemented;

• Continuous monitoring of the information gathered by the system was not conducted;

• One-time payments, bonus, leave, etc., were allocated based on payment date, rather than

to the period where the benefit was earned; and

• Inaccurate data base files supporting the hours and salaries reflected on the Statement of

Net Cost were initially provided.

These conditions, although essential to the improvement of the reliability of information

supporting the Statement of Net Cost, are indicative of first year implementation issues.

JFMIP SR-99-4, Core Financial System Requirements, states, “The financial management

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...”

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.

Although OCFO initiatives addressed this condition, classified as a substantial non-compliance with FFMIA in the prior year, additional emphasis is necessary.

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71

Recommendation

The Chief Financial Officer should continue to refine the methodology implemented and

should provide for continuous monitoring of the agency’s use of the system. While the

agency implements an integrated financial management solution, routine reporting, policy

guidance, and continued on-site assessments should aid in fully implementing this interim

time allocation tool.

CFO’s Comments:

“We agree the Pay/Pers time and labor reporting process implemented during FY 2000 requires

refinement. By March 15, 2001, we will provide managers with reports that compare RITS and

Pay/Pers data and that provides time allocation data as of the first quarter FY 2001. This information will be provided on a monthly basis thereafter, beginning in April 2001. We will also monitor

agency reporting by strategic arena and reconcile time and labor hours to hours paid in the payroll

system as part of our current monthly reconciliation of payroll data.”

Auditors’ Position:

The proposed information described by the CFO will begin to formalize the internal control

review process for time distribution. During a subsequent audit we will evaluate the timeliness and reliability of the process described.

C. Documentation of Debt Collection Activities

The License Fee and Accounts Receivable Branch (LFARB) is responsible for collecting NRC

receivables generated in the billing of NRC services to the regulated community. Policies provide

for the collection actions at specified time periods. The collection actions are normally suspended

during the period LFARB reviews billings that are disputed by licensees.

The OCFO Accounting Policy Manual, Chapter IV, Accounts Receivable and Debt Collection, paragraph G.2.(a)(2), states, “The NRC Debt Collection Strategy given in the appendix

to this chapter provides an organized plan of action for collection of debt and gives the

actions that shall ordinarily be taken following the issuance of the first demand letter [considered to be an invoice]. The specific [collection] actions and the times at which they occur are

required unless the collection of the debt is in jeopardy or another course of action is strongly

indicated by the information available...”

Collection Actions Chapter IV Appendix Benchmarks

Second Demand Letter At 31 days

Third Demand Letter At 61 days

Telephone Call or Personal Interview Within 61 – 90 days

License Suspension or Revocation Within 6 months

(continued on page 72)

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LFARB creates a separate collection file for each billing that is outstanding for over 90 days.

These files are assigned to specific license fee analysts for processing. Documents relating to

uncollected billings are to be retained in the collection files. We noted that the collection

files were generally in poor condition and were incomplete. The results of tests indicated

that required collection actions were either not performed, or were not documented for a

large portion of the billings.

The sampled items showed no documented evidence that:

• Second demand letters were sent to 6 of 33 (18%) licensees with billings outstanding for

more than 31 days;

• LFARB analysts contacted 14 of 38 (37%) licensees with billings outstanding for more

than 61 days; or that,

• Orders were issued to suspend or revoke the licenses of 5 of the 8 (63%) licensees with

billings outstanding for more than six months.

Recommendation

The Chief Financial Officer should direct the License Fee and Accounts Receivable Branch

to create complete collection files for tracking all billings not collected within 61 days.

Collection files should include a method for tracking the required collection actions and

listing relevant collection documentation. The CFO should reiterate to LFARB the need to

follow existing policies and procedures.

CFO’s Comments:

“While we agree with the recommendation, we do not believe this condition rises to the level

of a reportable condition. The evidence presented in the report indicates debt collection files

were not complete. However, in the absence of trend data that suggests deterioration in this

area or interviews that suggest staff are not knowledgeable or adequately trained to perform

this function, we believe it would be more appropriate to include this in a management letter.

To remedy this condition, revised desk procedures for processing delinquent debt were developed

in November 2000. The procedures, among other things, require a file checklist be placed in

every collection file folder. The branch chief held meetings with all staff responsible for processing delinquent debt and training was given in the use of the check list for recording milestones in

the debt collection process follow-up. Management will monitor this process for efficiencies and

improvement and will ensure that complete and accurate records of delinquent debt files are

maintained. We believe corrective actions have been completed.”

Auditors’ Position:

The actions described by the CFO appear to address the points that are at issue in the observation. The comment, however, continues to be identified as a reportable condition since the

agency overlooked the design of a well defined and documented internal control process to

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73

insure that debt management activities were carried out in accordance with management’s

intent. The remedy described by the CFO herein more closely complies with the standards

prescribed by the GAO’s Internal Controls for Federal Agencies. During a subsequent audit

we will evaluate the actions implemented.

Status of Prior Years’ Comments

A. Management Controls over Fee Development

During FY 1999, an audit was conducted by the Office of the Inspector General (OIG) that identified

management control issues relating to the development of fees (Report No. OIG/99A-01).

OMB Circular A-123, Management Accountability and Control, states, “...management

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 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.”

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 stated that there

were no formally documented procedures for calculating fees and preparing the fee rule.

In October 1999, the agency engaged a contractor to conduct an analysis of the fee development methodology. In their report dated, March 27, 2000, the contractor concluded that

although NRC’s current hourly rate calculation is not as precise as it could be, it is acceptable

under SFFAS No. 4, Managerial Cost Accounting Concepts and Standards. The report also

provided suggestions that would improve the future feasibility of the current process. Quality controls were not addressed specifically in the report.

In October 2000, NRC issued new license fee policies and procedures. The corrective actions will not be completed until FY 2001. This condition is considered resolved. Closure

will be dependent on the assessment of quality control procedures over fee development in a

subsequent audit.

B. Financial Statement Preparation

The FY 1998 management letter included an observation on the Financial Statement Preparation Process, and in FY 1999 this issue was elevated to a reportable condition. 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 stated, “...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.”

(continued on page 74)

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In the current year, the NRC improved its financial management compilation practices as

evidenced by delivering the compiled statements by the agreed-upon milestone. However,

essential documentation such as the cost allocation worksheets to support the Statement of

Net Costs could not be provided in a timely manner. Additionally, the quality assurance

process that would ensure the completeness and accuracy of supporting data base information

was not fully in place. Although we consider this condition resolved, closure will depend on

the agency’s continued improvement.

C. Management Controls Over Small Entity Certifications

As reported in the prior year, NRC did not have a process to adequately determine the eligibility of entities submitting for fee adjustments as small entities. Under 10 CFR 171.16,

materials licensees can qualify as small entities and pay reduced annual fees 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 completeness. A few

certifications are denied each year, based on information available to licensee fee analysts.

During FY 1999, the agency granted 1,180 fee reductions totaling $6.4 million or 83%, from

the originally billed materials fees of $7.7 million. In FY 2000, the agency granted fee

reductions of approximately $5.8 million.

The CFO responded in the prior year that they planned to explore the recommendation

provided and that they would advise us of their results by June 1, 2000. An initial corrective

plan was provided to the Office of Inspector General on August 2, 2000, however, it was later

withdrawn pending some additional refinements. As of the end of our field work, a corrective action plan had not adopted. Therefore, this condition remains unresolved.

D. Segregation of Duties - PAY/PERS

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

General state “...(k)ey duties and responsibilities in authorizing, processing, recording, and

reviewing transactions should be separated among individuals.”

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

1999 review of user access identified three Division of Accounting and Finance (DAF)

employees, including the team leader in charge of payroll operations, who held a Level 3

profile. Level 3 allows for unrestricted access to the system, including the security tables.

The payroll operations team leader had incompatible functions. The team leader’s functions

were not properly segregated because the individual could commit both errors and irregularities and conceal them in the course of discharging the normal duties of the position.

In the current year, review of access profiles showed that the OCFO changed the payroll operations team leader’s profile to Level 2, eliminating the incompatibility. This condition is closed.

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75

E. Controls Over Authorized Users - PAY/PERS

Part II of OMB Circular A-123, Management Accountability and Control, states “Specific

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. As reported

in the prior year, 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.

Because OCFO has developed and uses a management report identifying user access sessions

in PAY/PERS, this condition is closed.

F. Management Controls Over General Services Administration (GSA) Credits

The OCFO controls the payments made through drawdowns 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. In FY 1999, the standard practice for transactions of this nature were

not followed by the Financial Operations Branch (FOB), DAF, for GSA rental charge credits.

As of February 2000, DAF established an effective process to track and monitor GSA credits.

An amendment was also made to the accounting manual to reflect the revised agency policy.

This comment is closed.

G. Revenue from Reimbursable Agreements

During FY 1998, the NRC did not record revenue from reimbursable agreements on a consistent basis. Partial corrective action was taken in FY 1999, however, the agency was awaiting

issuance of the revised policy to close this condition. During the current year, the policy was

issued. Therefore this condition is closed.

Assurance on Performance Measures

With respect to internal controls related to performance measures, the OIG performed those

procedures and will report this issue separately. Our procedures were not designed to provide assurance over reported performance measures, and, accordingly, we do not provide an

opinion on such information.

This report is intended solely for the information and use of the management of the U.S. Nuclear

Regulatory Commission, OMB, Congress, and the NRC Office of the Inspector General and is

not intended to be and should not be used by anyone other than these specified parties.

February 8, 2001

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FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

77

(continued on page 78)

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Chairman Richard A. Meserve

U.S. NUCLEAR REGULATORY COMMISSION

Rockville, Maryland

INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE WITH

LAWS AND REGULATIONS

We have audited the principal statements of the U. S. Nuclear Regulatory Commission (NRC) as of

and for the year ended September 30, 2000, and have issued our report thereon dated February 8,

2001. We conducted our audit in accordance with auditing standards generally accepted in the United

States of America; the standards applicable to financial audits contained in Government Auditing

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

Budget (OMB) Bulletin No. 01-02, Audit Requirements for Federal Financial Statements.

The management of the U. S. Nuclear Regulatory Commission 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 which

could have a direct and material effect on the determination of financial statement amounts, and

certain other laws and regulations specified in OMB Bulletin No. 01-02, including the requirements of the Federal Financial Management Improvement Act (FFMIA) of 1996. Our objective

was not to issue an opinion on compliance with laws and regulations and, accordingly, we do not

express such and 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. 01-02, which is described below.

Current Year Comment

Compliance with Debt Collection Improvement Act

The Debt Collection Improvement Act of 1996 states at 31 USC 3711 (g)(1) that “If a nontax

debt or claim owed to the United States has been delinquent for a period of 180 days – (A) the

head of the executive, judicial, or legislative agency that administers the program that gave rise

to the debt or claim shall transfer the debt or claim to the Secretary of the Treasury;...”

The License Fee Accounts Receivable Branch (LFARB) is responsible for collecting NRC

receivables. LFARB tracks the aging of the receivables using the monthly Aged Billings Report

(NC110). Uncollected receivables that are over 180 days delinquent are required to be transferred to the U.S. Treasury.

The results of our tests of accounts receivable, which were outstanding for more than 30 days,

identified 28 of 45 (62%) instances where accounts receivables were delinquent for more than

180 days. An analysis of the instances determined that 10 were eligible for transfer to the
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U.S. Treasury as required by the Act. Five of these receivables were transferred late, ranging

from 35 to 196 days and averaging 90 days late. Additionally, one account receivable was not

referred to the U.S. Treasury but was collected 91 days after the date of its eligibility for referral.

NRC policy provides for some exceptions to the Act. For example, accounts receivables that are

being disputed by licensees or that are owed by licensees filing for bankruptcy are not transferred to the U.S. Treasury because these debts are not legally enforceable. Additionally, accounts receivables owed by licensees with installment payment plans are not transferred unless

they default on their payment plans.

LFARB did not use a tracking system to monitor compliance with the Act. Additionally, LFARB

personnel did not always employ uniform practices for determining if debts should be transferred to the U.S. Treasury.

Recommendation

The Chief Financial Officer should ensure that all non-federal licensee debt over 180 days

delinquent is referred timely to the U.S. Treasury. The exceptions to that practice would be for

billings that are disputed by the licensees or owed by licensees that have filed for bankruptcy or

been referred to the Department of Justice.

CFO’s Comments:

“A monthly process was implemented in November 2000 for the team leader to review delinquent debt from aged accounts receivable reports and ensure eligible debt over 180 days is

referred to the Treasury. We believe corrective actions have been completed.”

Auditors’ Position:

The process described in the CFO’s response adequately addresses the recommendation. During a

subsequent audit we will evaluate the implementation, reliability and effectiveness of the process.

Status of Prior Year Comment

Part 170 Hourly Rates

As previously reported in fiscal years (FY) 1998 and 1999, 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 for specific licensing

actions, inspections and other services provided to NRC’s 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.

The FY 1998 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

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Compliance with Laws and Regulations (continued)
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

79

calculations did not include certain contract support costs of approximately $70 million, net of

contract support costs directly billable to licensees and applicants. During the review in FY

1998, the OCFO excluded contract support costs, $70 million, primarily consisted of research

projects. The $70 million represented approximately 15% of the fiscal year 1998 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). Subsequent to the issuance of the FY 1999

financial statement report (Report No. OIG/99A-12) the agency provided a report intended to

address the issues identified in this observation. However, the review and assessment of that

report, indicates that the underlying methodology, objective, and conclusion reached did not

sufficiently address this condition. Furthermore, the report did not provide for a solution to be

implemented in the current year. We do, however, understand that the agency is looking to the

future implementation of cost accounting to assist them fully address this condition. Planned

actions to be taken by the agency have resolved this condition. Closure is dependent on subsequent audit follow-up.

FFMIA - Status of Prior Year Comments

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 transaction level. To meet this requirement, we performed tests of compliance using the implementation

guidance for FFMIA included in Appendix D of OMB Bulletin No. 01-02. The results of our

tests provided us the basis to update the status of prior year instances.

A. Managerial Cost Accounting

Refer to the Report on Management’s Assertion About the Effectiveness of Internal Control,

Current Year Comment A - Managerial Cost Accounting for a detailed discussion of the condition

and recommendation. This condition continues to be considered for FY 2000 a material weakness

and a Federal Financial Management Improvement Act substantial non-compliance.

B. Program Cost Accounting

We reported in the prior year the agency’s lack of a general ledger data at the transaction level for

program cost accounting supporting the Statement of Net Costs. Although the solution implemented by the agency is not an integral component of the general ledger system, the new process

improves the discipline of the information collection to support the Statement of Net Cost. This

condition is no longer classified as a FFMIA issue for the current year.

Refer to the Report on Management’s Assertion About the Effectiveness of Internal Control,

Current Year Comment B - Program Cost Accounting for a detailed discussion of the condition and recommendation.

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C. Business Continuity

In prior years, we reported conditions resulting from our assessment of NRC’s management

control program relating to the agency’s business continuity practices for major financial

management systems. At the end of FY 1999, the issues identified with the core general

ledger - Federal Financial System (FFS) operated by Treasury’s Financial Management

Service (FMS) remained an unresolved condition.

In the current year, FMS announced that it would no longer support the FFS system used by

the agency. Therefore NRC is in the process of identifying an alternative provider of such

services. The initial actions planned by the agency indicate that it will transfer to a new

provider. We consider this condition resolved and closure will be dependent on the agency

migrating from FMS.

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

measurement 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 generally

accepted accounting principles, 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 Circular A-123, Management

Accountability and Control. As of the date of our report, NRC management had completed its

evaluation of financial management 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;

R. Navarro & Associates, Inc.

Compliance with Laws and Regulations (continued)
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

81

• evaluated the overall presentation of the principal statements;

• obtained an understanding of internal controls related to safeguarding of assets, compliance with laws and regulations including execution of transactions in accordance with

budget authority and financial reporting, in the principal statements;

• 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: AntiDeficiency Act (Title 31 U.S.C.), National Defense Appropriation Act (PL 101-510),

Omnibus Budget Reconciliation Act of 1990 (PL 101-508), Debt Collection Act of 1982

(PL 97-365), Prompt Pay 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 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 management 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 effectiveness of internal controls.

We performed our work in accordance with auditing standards generally accepted in the United

States of America, Government Auditing Standards and OMB Bulletin No. 01-02, Audit Requirements for Federal Financial Statements.

Agency Comments

The CFO responded to the Inspector General on our draft report and addressed the recommendations noted in the report. Based on our review of the CFO’s comments, we are satisfied that the

actions described meet the intent of our recommendations. The CFO’s comments are appended

to this report in their entirety.

This report is intended solely for the information and use of the management of the U.S. Nuclear

Regulatory Commission, OMB, Congress and the NRC Office of the Inspector General and is

not intended to be and should not be used by anyone other than these specified parties.

February 8, 2001

R. Navarro & Associates, Inc.
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FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

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UNITED STATES

NUCLEAR REGULATORY COMMISSION

WASHINGTON, DC 20555-0001

February 16, 2001

MEMORANDUM TO: Stephen D. Dingbaum

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 2000

FINANCIAL STATEMENTS

I have reviewed the draft audit report of the Nuclear Regulatory Commission’s FY 2000 Financial Statements, dated February 5, 2001. Overall, I agree with the report’s recommendations.

Our response to the recommendations is as follows.

Recommendation 1: The Chief Financial Officer (CFO) should strive to meet the revised

milestones in the remediation plan to provide cost accounting information to agency managers.

Cost accounting information should enhance the agency’s ability to evaluate the cost of outputs

and outcomes realized. Because the remediation milestones have seen some delays due to the

staging of complementary software solutions, the CFO should develop interim cost management

techniques based on the needs of managers.

Response: We agree with the importance of striving to meet the revised milestones contained in

the remediation plan, dated December 27, 2000. However, due to issues associated with implementing the PeopleSoft payroll, time and labor, and human resources modules, we will not be

able to meet the milestones contained in that plan. We are currently evaluating these issues and

plan to issue a revised remediation plan in April 2001. In addition, we will review the potential

of creating more meaningful cost reports to better meet the needs of managers on an interim

basis. We expect to complete this review by March 2001. Also, we suggest you insert the words

“continue to” after the word “should” in the last sentence of the recommendation.

Recommendation 2: The CFO should continue to refine the methodology implemented and

should provide for continuous monitoring of the agency’s use of the system. While the agency

implements an integrated financial management solution, routine reporting, policy guidance, and

continued on-site assessments should aid in fully implementing this interim time allocation tool.

Response: We agree the Pay/Pers time and labor reporting process implemented during

FY 2000 requires refinement. By March 15, 2001, we will provide managers with reports that

compare RITS and Pay/Pers data and that provides time allocation data as of the first quarter

(continued on page 84)
Comments of the Chief Financial Officer (continued)

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FY 2001. This information will be provided on a monthly basis thereafter, beginning in

April 2001. We will also monitor agency reporting by strategic arena and reconcile time and

labor hours to hours paid in the payroll system as part of our current monthly reconciliation of

payroll data.

Recommendation 3: The CFO should direct the License Fee and Accounts Receivable Branch

(LFARB) to create complete collection files for tracking all billings not collected within 61 days.

Collection files should include a method for tracking the required collection actions and listing

relevant collection documentation. The CFO should reiterate to LFARB the need to follow

existing policies and procedures.

Response: While we agree with the recommendation, we do not believe this condition rises to

the level of a reportable condition. The evidence presented in the report indicates debt collection

files were not complete. However, in the absence of trend data that suggests deterioration in this

area or interviews that suggest staff are not knowledgeable or adequately trained to perform this

function, we believe it would be more appropriate to include this in a management letter.

To remedy this condition, revised desk procedures for processing delinquent debt were developed in November 2000. The procedures, among other things, require a file checklist be placed

in every collection file folder. The branch chief held meetings with all staff responsible for

processing delinquent debt and training was given in the use of the check list for recording

milestones in the debt collection process follow-up. Management will monitor this process for

efficiencies and improvement and will ensure that complete and accurate records of delinquent

debt files are maintained. We believe corrective actions have been completed.

Recommendation 4: The CFO should ensure that all non-Federal licensee debt over 180 days

delinquent is referred timely to the U.S. Treasury. The exceptions to that practice would be for

billings that are disputed by the licensees or owed by licensees that have filed for bankruptcy.

Response: A monthly process was implemented in November 2000 for the team leader to

review delinquent debt from aged accounts receivable reports and ensure eligible debt over 180

days is referred to the Treasury. We believe corrective actions have been completed.

We suggest this recommendation be modified to include two additional exceptions for referring

delinquent debt over 180 days to the U.S. Treasury: (1) debt referred to the Department of

Justice, and (2) debt under litigation.

The following comments address a prior-year recommendation and a report finding.

Management Controls Over Small Entity Certifications - Our current process for reviewing

small entity certifications uses information provided by Dun & Bradstreet to make our initial

comparison of the information provided by the licensee. For certifications submitted by hospitals and non-profit educational institutions, we use the American Hospital Association Guide and

the Directory of Postsecondary Institutions, respectively, to identify irregularities with their

certification forms. We also perform searches for company information on the internet. When

we identify information which does not agree with the information the licensee has provided on

their small entity certification, we initiate contact and request they provide sufficient corroborating evidence to support their claim. If the licensee cannot provide this information, we deny

their small entity status.
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

85

In response to the recommendation, we plan to develop an information collection package to

seek Office of Management and Budget (OMB) approval, under the Paperwork Reduction Act of

1955 (44 U.S.C. Chapter 35), to request financial information from licensees. We expect to have

this package ready for submission to OMB by November 30, 2001. Once we obtain OMB

clearance, we will develop and implement a sampling technique to identify those small entity

reviews that we will conduct. We will establish the statistical sampling technique within 90 days

of receipt of final OMB clearance for the new information collection. The new information we

collect will consist of income tax returns, audited financial statements, and quarterly employer’s

tax returns (Form 941).

Managerial Cost Accounting - Page 3, paragraph 1, of the draft report states that “...management has not made progress in developing interim techniques ....” We believe progress was made

during FY 2000 in developing interim techniques for assembling cost information. During

FY 2000, an interim time and labor reporting system was implemented to capture labor cost by

strategic arena and reports were provided to offices for their review. We believe the report

should be modified to reflect this progress.
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FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

87

APPENDIX

INSPECTOR GENERAL’S

ASSESSMENT OF MANAGEMENT CHALLENGES
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FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

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(continued on page 90)

UNITED STATES

NUCLEAR REGULATORY COMMISSION

WASHINGTON, DC 20555-0001

February 20, 2001

MEMORANDUM TO: Chairman Meserve

FROM: Hubert T. Bell

Inspector General

SUBJECT: INSPECTOR GENERAL’S ASSESSMENT OF THE MOST

SERIOUS MANAGEMENT CHALLENGES

SUMMARY

The Reports Consolidation Act of 2000 requires the Inspectors General (IG) of the CFO agencies

to include in the agency’s Accountability Report to Congress an assessment of the NRC’s most

serious management challenges and the actions being taken to address them.

NRC senior management has a planned approach through the strategic planning process to

address each of the seven management challenges identified by the OIG. NRC included a

crosswalk in an appendix to its new strategic plan that shows the connection of the management

challenges with steps the agency is taking to address them. While the agency has many initiatives planned or underway, managers must continue to focus their attention to determine if the

agency is adequately meeting the challenges.

DISCUSSION

CHALLENGE 1

Development and implementation of an appropriate risk-informed and performancebased regulatory oversight approach

NRC is making its regulatory framework more risk-informed so that areas of highest risk receive

the greatest focus. The overall goal of this risk-informed regulatory approach is to enhance

safety decision making, improve efficiency, and reduce resources devoted to issues with low

safety significance. For example, NRC has some inherent difficulties to overcome in applying a

risk-informed regulatory approach for its nuclear materials licensees. The complexity of developing a risk-informed approach that adequately covers all types of licensees is exacerbated by
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Office of the Inspector General Assessment of Management Challenges (continued)

the almost 21,000 licensees and the diversity of activities that they conduct. The agency formed

a Risk Task Group to help address these issues. Likewise, in April 2000, the agency implemented its revised Reactor Oversight Process for commercial nuclear power plants. Although

the agency is aware of what it needs to do, the adjustment in regulatory approach will continue

to be a critical area that warrants high-level management attention.

CHALLENGE 2

Identification, acquisition, and implementation of information technologies

Federal agencies’ investments in information technology (IT) are critical in providing more

effective and cost-efficient government services to the public. However, NRC, like other

Federal agencies, continues to struggle in its efforts to obtain a good return on these investments. In addition to the high costs and risk generally associated with IT investments, another

global challenge is the protection of information from unauthorized access, tampering, and

destruction. Therefore, the information security area poses an array of potential challenges for

the international, Federal, and private sectors, including NRC. While the agency has made

improvements in how it budgets for new systems development efforts, it still needs to improve

in the areas of planning and managing projects.

CHALLENGE 3

Administration of all aspects of financial management

NRC must be a prudent steward of its fiscal resources through sound financial management,

including the implementation of the Government Performance and Results Act of 1993. This

includes developing the agency’s strategic plan; implementing the NRC Planning, Budgeting,

and Performance Management process; and acquisitions management. The financial reporting

process, an important aspect of financial management, is an agency method for tracking and

reporting on its resources. For the past six consecutive years (1994 through 1999), NRC received an unqualified opinion on its financial statements. The agency has taken actions to

implement a system to capture labor-cost data by strategic arenas. NRC also developed a

remediation plan for achieving compliance and projects implementation of cost management by

mid-fiscal year 2001.

CHALLENGE 4

Clear and balanced communication with external stakeholders

To maintain public trust and confidence, NRC must be viewed as an independent, open, efficient, clear, and reliable regulator. The agency states that it will accomplish this by providing its

diverse group of external stakeholders (e.g., the Congress, general public, other Federal agencies, industry, citizen groups) with clear and accurate information about, and a meaningful role
FY 2000 PERFORMANCE AND ACCOUNTABILITY REPORT

91

(continued on page 92)

in, its regulatory process. This is a difficult task because of the highly technical nature of NRC’s

operations and the balance the agency must maintain to remain independent. NRC is implementing a plan to improve the quality, clarity, and credibility of its communications with all stakeholders.

CHALLENGE 5

Intra-agency communication (up, down, and across agency organizational lines)

Internal communication is a fundamental and necessary aspect of conducting agency business.

NRC needs effective internal communication channels and methods to support its critical health

and safety mission. Information is the key resource that links managers to the staff, the organization, and other stakeholders--enabling them to do their jobs. NRC has organized its strategic

goals, performance goals, and strategies for achieving its mission into the following four strategic arenas: Nuclear Reactor Safety, Nuclear Materials Safety, Nuclear Waste Safety, and International Nuclear Safety Support. Through its strategic plan, the agency has identified increased

efforts in each of these arenas to improve the coordination and communication between its

program offices.

CHALLENGE 6

Regulatory processes that are integrated and continue to meet NRC’s safety mission

in a changing external environment

As Chairman of the NRC, you stated that the agency is currently in a period of transition in

several dimensions and that the change is more rapid than in any other period in the history of

civilian nuclear power, certainly since the event at Three Mile Island. Several of the factors

driving this period of transition are economic deregulation of electric utilities, license transfers,

and license renewals. NRC’s organizational structure can also affect the way its regulatory

processes are integrated. All of these conditions pose a challenge for the agency. NRC recently

abolished the Executive Council and gave greater responsibility for the daily management of the

agency to the Executive Director for Operations.

CHALLENGE 7

Maintenance of a highly competent staff to carry out NRC’s public health and

safety mission (i.e., human capital management)

NRC needs a dynamic, results-oriented, diverse workforce with the appropriate knowledge,

skills, abilities, and competencies to achieve its public health and safety mission. Although the

agency’s expertise appears to be sufficient today, it is likely that the future expertise and technical capability of NRC will decline without appropriate preventive measures. Declining univer-
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Office of the Inspector General Assessment of Management Challenges (continued)

sity enrollment in nuclear studies, dilution of university courses in nuclear studies, and the high

number of staff eligible to retire further exacerbate NRC’s ability to maintain a technically

qualified staff.

NRC is addressing human capital management issues in the context of its Planning, Budgeting,

and Performance Management process. For example, the agency is working to develop and

maintain a pool of high-potential management candidates through its SES Candidate Development Program. Recently, staff was directed to perform an assessment of the scientific, engineering, and technical core competencies that NRC needs and propose specific strategies for

ensuring that they are maintained.

NUREG – 1542

Vol. 6