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 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

i

Message from the Chairman

I am pleased to present the Nuclear Regulatory Commission’s

Performance and Accountability Report for Fiscal Year 2001. I am proud

to report that we have again achieved all of our safety performance goals.

This report also provides financial information, including audited

financial statements, which show the prudent management of the funds

entrusted to us by the American public.

As with other U.S. infrastructure, the tragic events of September 11th

have affected security considerations at nuclear reactors and other

commercial nuclear facilities. We are responding to these events by

enhancing security in the near term and reevaluating how security can

best be provided for the long term. We are confident that, in cooperation with the Office of

Homeland Security and other agencies, we will succeed in this effort to protect the U. S. from

future attacks.

We have at the same time continued to build on the progress we have made over the past

decade to improve nuclear safety. Our oversight of the industry is achieving its objective of

promoting safety without stifling the output of energy needed by our Nation, as evidenced by our

success in meeting our performance targets. As we look forward, we will continue to conduct an

efficient regulatory program that allows the Nation to use nuclear materials for civilian purposes

with adequate protection of the public health and safety and the environment. To this end, we

have adopted the President’s charge to improve management, performance and results.

Moreover, I believe we are well positioned to respond to future industry needs. Demand for

electric power and improving economic fundamentals for nuclear power generation have renewed

interest in nuclear power as a viable energy source. As a result, licensees are applying to renew

their operating licenses for existing plants and are considering new reactor designs and new plant

construction. We are responding by adding staff where necessary and reallocating our resources

where possible.

We at the U.S. Nuclear Regulatory Commission look forward to continuing to provide high

quality service to the American people.

Richard A. Meserve
U.S. NUCLEAR REGULATORY COMMISSION

ii

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 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

iii

Message From the Chief Financial Officer

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

financial statements for FY 2001 as an integral part of the agency’s FY 2001

Performance and Accountability Report. I am proud to report that our independent auditor has rendered an unqualified opinion on our financial statements for the eighth consecutive year. This opinion attests to the fact that

NRC’s financial statements are fairly presented, and demonstrates discipline

and accountability in the execution of our responsibilities as stewards of the

American taxpayers’ dollars.

As of September 30, 2001, the financial condition of the NRC is sound

with respect to having sufficient funds to meet its mission and having sufficient control of these funds to ensure our budget authority is not exceeded.

We successfully established and collected approximately $455 million in fees

paid by NRC licensees, or approximately 100 percent of the agency’s budget that is subject to fees.

Our yearend delinquent debt was only $2.1 million or less than one-half of one percent of the fees

collected. Payments to commercial vendors were made on-time 95 percent of the time, and 99 percent

of our payments were made electronically.

During FY 2001, NRC produced unaudited, interim financial statements for the first time. We

plan to produce unaudited, quarterly financial statements during FY 2002. During FY 2001, corrective

actions were completed for four reportable conditions and closed by the auditors. The reportable

conditions concerned management controls over the NRC’s fee development process, streamlining the

financial statement preparation process, documentation of debt collection activities, and compliance

with the Debt Collection Improvement Act. In November 2001, the agency replaced its human

resources, time and attendance, and payroll systems with a new integrated financial and human

resources management and cost accounting system. This allows the agency to accumulate more

useful labor costs and use a single entry system to collect information for payroll, fee billing, human

resources, and cost accounting purposes.

In addition to preparing financial statements and successfully undergoing the rigors of an

independent audit, the agency used its management control program to examine the adequacy of

our efforts to protect against waste, fraud, and mismanagement. Our annual assessment revealed

some areas that require strengthening. In the financial management area, our efforts to comply

with Statements of Federal Financial Accounting Standards, Nos. 4 and 10, relating to managerial

cost accounting and accounting for internal use software were incomplete. Building on previous

efforts, we have developed and are implementing appropriate remediation plans to correct the

deficiencies during FY 2002.

For the current fiscal year, our focus is to provide timely, reliable and useful data to our stakeholders, and using this data to improve our decision making. As such, I anticipate a very productive year

and look forward to reporting our successes next year.

Jesse L. Funches
U.S. NUCLEAR REGULATORY COMMISSION

iv

Table of Contents

Chapter I: Introduction ............................................................................................ 1

Chapter II: Management’s Discussion and Analysis ............................................... 5

Financial Performance ......................................................................................... 7

Financial Condition of the NRC ........................................................................ 10

Systems Controls and Legal Compliance .......................................................... 13

Biennial Review of User Fees ........................................................................... 15

Chapter III: Program Performance ........................................................................ 17

Nuclear Reactor Safety ...................................................................................... 18

Overview ...................................................................................................... 18

Ensuring the Safe Operation of Nuclear Reactors........................................ 18

Strategic and Performance Goals and Measures .......................................... 26

Program Funding .......................................................................................... 30

Program Evaluation ...................................................................................... 30

Nuclear Materials Safety ................................................................................... 33

Overview ...................................................................................................... 33

Ensuring the Safe Use of Nuclear Materials ................................................ 33

Strategic and Performance Goals and Measures .......................................... 36

Program Funding .......................................................................................... 41

Program Evaluation ...................................................................................... 41

Nuclear Waste Safety......................................................................................... 43

Overview ...................................................................................................... 43

Ensuring the Safe Transportation and Disposal of Nuclear Waste ............... 43

Strategic and Performance Goals and Measures .......................................... 46

Program Funding .......................................................................................... 50

Program Evaluation ...................................................................................... 50
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

v

International Nuclear Safety Support ..................................................................... 52

Overview ...................................................................................................... 52

Maintaining a Program of International Cooperation .................................. 52

Strategic and Performance Goals and Measures .......................................... 53

Program Funding .......................................................................................... 54

Program Evaluation ...................................................................................... 54

Verification and Validation of Performance Data .............................................. 54

Chapter IV: Corporate Management and Support ................................................. 57

Human Capital Management ............................................................................. 57

Information Technology And Information Management................................... 58

Administrative Support ..................................................................................... 59

Chapter V: Auditors’ Reports and Financial Statements ....................................... 61

Appendices

A Management Challenges ............................................................................ 103

B Management Decisions and Final Actions on Inspector General

Audit Recommendations ............................................................................ 121

C NRC Organization Chart ............................................................................ 127

Endnotes ............................................................................................................... 131
U.S. NUCLEAR REGULATORY COMMISSION

vi

This report presents the agency’s success in meeting its annual performance

goals, describes our important accomplishments, the actions we have taken

to address our management challenges, and our financial condition during

the past fiscal year. Taken in its entirety, this report gives the agency’s stakeholders an opportunity to assess how the agency serves the American public

and how it manages the funds entrusted to it.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

1

Chapter I: Introduction

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.

• make our decisions more effective

and efficient.

• reduce unnecessary regulatory burden.

• increase public confidence.

New Challenges

One of our most important new challenges

came at the end of the fiscal year; on

September 11, 2001. The terrorist attacks

which occurred that day require us to reevaluate

our safeguard measures involving nuclear

power and materials.

Security against sabotage has always been an

important part of our licensing and safeguards

In undertaking its mission, the NRC oversees

nuclear power plants, non-power reactors, nuclear

fuel-cycle facilities, transportation and disposal of

nuclear waste, and the industrial and medical uses of

nuclear materials. The use of nuclear materials

provides many benefits, chief among them the

generation of electrical energy and saving lives

through medical procedures. It is the NRC’s

mission to ensure the safe use of these materials.

Our strategic and performance goals emphasize the

priority we place on safety - safety is paramount.

To be an effective regulator, we also consider

the effects our decisions have on the public and

the industries we regulate. We have added three

additional performance goals to address this area:

The Nuclear Regulatory

Commission Headquarters in

Rockville, Maryland
U.S. NUCLEAR REGULATORY COMMISSION

2

Introduction (continued)

inspection activities. However, the attack

on September 11 has changed the threat

profile we face. As a result, we have begun

to review our security requirements for

both reactor and other NRC licensees as

well as NRC facilities and staff. We are

reevaluating our goals, measures, strategies,

and activities to account for this new threat

to America.

There have been a number of significant changes in the electrical power generation industry which have also had a significant impact on the Commission and its

regulatory programs. The economic deregulation of the electricity-generation industry

has resulted in a consolidation and restructuring of nuclear power assets. In addition,

the development of a competitive market

for electric power supplies has increased

financial pressures on NRC licensees to

improve efficiencies and improve operating

performance. Our challenge is to allow for

innovation and improvements by operators

in utilizing their power generation facilities

while ensuring that safety is not compromised and the focus on safety remains at

the forefront of nuclear power.

In addition, there is renewed interest in building and operating nuclear power plants. The

growth in demand for electric power, improved

economic fundamentals for nuclear power generation, and concerns about the supply of energy

from other sources and their environmental

impact have renewed interest in the viability of

nuclear energy. The President cited nuclear power

as a vital component of America’s energy portfolio. As a result, we have seen energy companies

renewing their licenses beyond their original 40

year terms, inquiring about potential investments

in new reactor design and construction, and

submitting applications to increase the power

generating capacity of plants currently in operation.

The NRC is responding to these changes in

the industry. One of our key strategies is the

development and implementation of probabilistic

risk models and tools to measure plant performance and focus our attention, and licensee

action, on those activities which are the most

Response to the Terrorist attacks:

Immediately after the crash into the World Trade Center

on September 11, the NRC activated its Emergency

Operations Center and issued a notice to advise our reactor

and fuel cycle facility licensees to go to the highest level of

security. We have maintained enhanced 24 hour per day

operation of the Emergency Operations Center since the

attack. We evaluate a steady flow of information from the

intelligence and law enforcement communities to determine

whether to revise the threat advisory for licensees. Working with the Office of Homeland Security, the Commission has taken appropriate steps throughout the crisis to

enhance security at all of our licensee facilities. In addition, there has been an increase in state police and National

Guard forces at many nuclear facilities.

For decades, security against sabotage has been an important part of our licensing and inspection activities. Nuclear

facilities are robust structures. We require that licensees be

able to respond with force to armed attackers. However,

the attack on September 11 has changed the threat profile

we face. As a result, we have undertaken a comprehensive

review of safeguards and security policies and strategies

and requirements for licensees.

safety significant. These tools have been integrated into a new reactor oversight process. The

new reactor oversight process is built around

plant performance indicators to objectively

measure plant safety. These risk analysis tools

allow the industry and the NRC to efficiently and

effectively evaluate plant performance and make

adjustments where necessary to ensure that safety

is maintained. Our vision is to have a regulatory

process focused on safety, that is internally consistent, is easy for licensees and the public to understand and practical for the NRC staff to implement.

We have reviewed reactor license renewals on

a timely basis. We have also prepared ourselves in

the event that the Department of Energy submits

an application for a construction authorization for

a high-level nuclear waste geologic repository in

Yucca Mountain, Nevada.

Another key issue facing the Commission is

the challenge of maintaining our human capital,

especially the core technical skills and knowledge
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

3

of NRC staff. Those that we regulate depend on the

NRC to have the ability to develop technically

sound, risk-informed rules, to make sound licensing

decisions without undue delay, and to conduct fair

and meaningful oversight of licensee operations.

The public depends on our ability to reach independent judgments on safety. To carry out these capabilities we must have top quality engineers and

scientists. While the current NRC staff is highly

qualified and technically proficient, we are faced

with an aging demographic profile among our

engineers and scientists. To address this challenge,

we are developing a human capital management

plan to ensure we maintain our human capital.

Of course, we continue to operate the regulatory programs which have been so successful in

carrying out our mission. This can be seen by the

fact that we have achieved all of our safety goals

since we began reporting them in 1997 as part of

the Government Performance and Results Act.

NRC Programs

The NRC has aligned its programs into four

operating arenas to sharpen our focus on the

discrete areas covered by our regulatory mission.

These are: Nuclear Reactor Safety arena, Nuclear

Materials Safety arena, Nuclear Waste Safety

arena, and International Nuclear Safety Support

arena. NRC also has a corporate management

and support function which includes information

technology, financial management, human

resources and policy development that provide

essential resources and capabilities to accomplish

our operational missions.

Our total budget was $487.3 million in FY 2001.

The NRC is a fee-based agency which gets over

90 percent of its funding from fees paid by the

industry. The following charts show the distribution

of our resources among the four safety arenas and

the management and support arena.

Readers are encouraged to visit our web site at

www.nrc.gov to learn more about who we are and

what we do to serve the American people. The

NRC brought down its web site in early October

2001, in response to the events of September 11,

2001. A thorough review of all material previously on the website is being conducted to ensure

that information that might be of clear benefit to a

terrorist is not made available. The site is being

brought back incrementally as this review is being

completed. The expectation is that the vast preponderance of information previously available

will be available in the coming months.

Nuclear Reactor

Safety

$218.3 M

Nuclear Waste

Safety

$62.3 M Management

and Support

$145.7 M

Nuclear

Materials

Safety

$50.6 M

International

Safety Support

$4.9 M

FY 2001 Budget Authority by Program

(Millions of Dollars)

Total Funding was $487.3 Million

Note: Chart does not include $5.5 million for funding the

Office of the Inspector General.

Nuclear Reactor

Safety

1,422

Nuclear Waste

Safety

271

Management

and Support

614

Nuclear

Materials

Safety

374

International

Safety Support

38

FY 2001 Distribution of Employees by Program

Total FTE: 2,763

Note: Chart does not include the 44 FTE for the

Office of the Inspector General.
U.S. NUCLEAR REGULATORY COMMISSION

4

Introduction (continued)
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

5

Chapter II: Management’s Discussion

And Analysis*

About the NRC

The NRC was established by the U.S. Congress on January 19, 1975, as an independent

Federal Government agency to regulate various

commercial and institutional uses of nuclear

energy. The agency has assumed the Atomic

Energy Commission’s regulatory function to

develop and regulate nuclear activities. The

NRC’s purpose is defined by the Atomic Energy

Act of 1954, as amended, and the Energy Reorganization Act of 1974, as amended. These Acts

provide the foundation for regulating the nation’s

civilian use of nuclear materials.

To fulfill the NRC’s responsibility to protect

the public health and safety, the agency performs

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 other uses of nuclear

materials to ensure compliance with regulatory

requirements. These regulatory functions relate to

both nuclear power plants and other uses of

nuclear materials, such as nuclear medicine,

academic activities, research work, and industrial

applications.

Organization

The top leadership of the NRC consists of a

five member Commission. The President nominates members to serve 5 year terms with the

consent of the U.S. Senate and designates one

member as Chairman. The Chairman serves as

the principal executive officer and official spokesman for the Commission. The chief operating

officer is the Executive Director for Operations

who carries out the program policies and decisions made by the Commission.

Approximately 2,800 staff members carried

out the agency’s mission for FYs 2001 and 2000

utilizing a budget of approximately $487.3 million

for FY 2001 and $469.9 million for FY 2000.

The NRC recovered the majority of its budget

from license fees.

The NRC’s headquarters is located in

Rockville, Maryland. Four regional offices are

located in King of Prussia, Pennsylvania; Atlanta,

Georgia; Lisle, Illinois; and Arlington, Texas; and

a technical training center in Chattanooga, Tennessee. The NRC also has resident inspector

offices at each commercial nuclear power plant.

An organization chart for the NRC is located in

Appendix C.

Program Performance

Highlights

The Government Performance and Results Act

(GPRA) requires Federal agencies to provide an

annual performance plan to Congress, setting goals

with measurable target levels of performance.

* Management’s Discussion and Analysis is a high-level overview of the Nuclear Regulatory Commission. It consists of five

sections: About the NRC, describes the agency’s mission and organizational structure; Program Performance, discusses the

agency’s success in achieving its strategic goals; Financial Performance, provides highlights of the financial statements and

NRC’s financial position; Financial Condition of the NRC, provides an overview of sources and uses of funds, prompt payment,

and debt collection; and Systems, Controls, and Legal Compliance, describes the agency’s internal control environment,

contains the Chairman’s statement regarding the agency’s compliance with the Federal Managers’ Financial Integrity Act

of 1982, and the results of the Chairman’s determination regarding the agency’s compliance with the Federal Financial

Management Improvement Act of 1996.
U.S. NUCLEAR REGULATORY COMMISSION

6

Management’s Discussion and Analysis (continued)

The NRC evaluates its program performance

by using a structured strategic planning process.

As such, NRC has organized its strategic goals,

performance goals, and strategies for achieving its

mission into four strategic arenas. Our highest

priority is safety, and our strategic goals focus on

the achievement of this priority.

The goal of the first arena, Nuclear Reactor

Safety, is to ensure that civilian nuclear power

reactors, as well as non-power reactors, are

operated in a manner that adequately protects

public health and safety and the environment.

The NRC regulates 104 civilian nuclear

power reactors and 36 non-power reactors.

During FYs 2001 and 2000, the NRC met all

five of the strategic goal measures for this arena.

For the past year, the NRC met or exceeded

all established schedules for license renewal

activities. This is significant given the interest by

our licensees whose licenses need to be renewed

to continue operations. To date, the NRC has

approved 64 requests from licensees to increase

the electrical generating capacity of their nuclear

reactor power plants (power uprates). Approval

STRATEGIC GOALS

• Prevent radiation-related deaths and illnesses,

promote the common defense and security, and

protect the environment in the use of civilian

nuclear reactors.

• 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.

• 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.

• Support U.S. interests in the safe and secure use of

nuclear materials and in nuclear non-proliferation.

of uprates has resulted in an electrical generating capacity gain equivalent to approximately two large nuclear power plants.

The goal of the second strategic arena,

Nuclear Materials Safety, is to ensure that

NRC-regulated activities associated with the

use of source, byproduct, and special nuclear

materials are conducted in a manner that

protects the public health and safety, the

environment, and promotes the common

defense and security. This arena includes

regulatory oversight for 47 fuel facilities,

including eight major fuel cycle facilities and

two gaseous diffusion plants. It also includes oversight of more than 20,000 specific licenses regulated by the NRC and the

Agreement States. During FYs 2001 and

2000, the NRC met all five of its strategic

goal measures for this arena.

In addition to achieving our strategic goal

measures, it is noteworthy to describe the NRC’s

progress in reviewing an application to construct

a mixed oxide fuel fabrication facility at the

Department of Energy’s Savannah River site near

Aiken, South Carolina. The proposed use of

mixed oxide fuel is part of the national nonproliferation effort to dispose of surplus weapons

grade plutonium by utilizing it in existing commercial light water reactors. The NRC performed

an acceptance review of the application and

announced an opportunity for a hearing. Also,

three public meetings were conducted at various

locations near the proposed site to obtain public

opinion on the scope of the proposed environmental impact statement for the license application

review.

The goal of the third strategic arena, Nuclear

Waste Safety, is to prevent adverse impacts from

radioactive waste to current and future public

health and safety, the environment, and to promote the common defense and security. The

Nuclear Waste Safety arena encompasses regulatory activities associated with the decommissioning of nuclear reactors and other facilities, storage
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

7

of spent nuclear fuel, transportation of radioactive

materials, and disposal of radioactive waste. For

FYs 2001 and 2000, the NRC met all four of its

strategic goal measures for this arena.

One of the NRC’s major accomplishments in

the high-level waste program in FY 2001 was the

approval of the final regulations for 10 Code of

Federal Regulations (CFR) Part 63, providing

site-specific criteria for use in a possible licensing

decision on a potential waste repository at Yucca

Mountain, Nevada. The NRC also reviewed the

U.S. Department of Energy’s (DOE) Supplemental Draft Environmental Impact Statement for the

Yucca Mountain repository. The agency continued technical exchanges with DOE on key licensing issues pertaining to the potential high-level

waste repository and also to resolve DOE subissues and NRC concerns.

Also during FY 2001, the NRC completed the

review of the Trojan Nuclear Plant License Termination Plan. This was a multi-year effort resulting in

the first NRC approval of a License Termination

Plan submitted in accordance with the NRC’s

reactor regulation. The NRC also completed its

evaluation of previously terminated licenses to

determine if the facilities had been adequately

decontaminated prior to license termination.

The goal of the fourth strategic arena, International Nuclear Safety Support, is to support U.S.

interests abroad in the safe and secure use of

nuclear materials and in nuclear non-proliferation.

This arena encompasses international nuclear

policy formulation, export-import licensing for

nuclear materials and equipment, treaty implementation, nuclear proliferation deterrence, international

safety assistance, and safeguards support and assistance. All three measures established for this arena

were met in FYs 2001 and 2000.

During FY 2001, the NRC completed action

on a proposed export of highly enriched uranium

to Canada for use as target material for medical

isotope production. The agency also played a key

role in defining criteria for international agreements on exclusion, clearance, and exemption of

contaminated and radioactive materials, and for

release of commodities for unrestricted use.

The NRC also conducted bilateral assistance

activities for nuclear safety and safeguards with

Russia, Ukraine, Armenia, Kazakhstan, and

countries of Central and Eastern Europe in close

coordination with the Departments of State and

Energy. Of particular note, the NRC participated

in the safe shutdown and decommissioning of the

BN-350 sodium-cooled fast breeder reactor near

Aktau, Kazakhstan; the closure of the Chernobyl

nuclear power plant in Ukraine; and proposals to

limit Russia’s long-term production of weaponsgrade plutonium. The NRC negotiated with

appropriate foreign counterparts four bilateral

exchange agreements in FY 2001 to ensure an

effective framework for the NRC’s international

exchanges is in place.

Financial Performance

As of September 30, 2001, and 2000, the

financial condition of the NRC was sound with

sufficient funds to meet program needs and

adequate control of these funds in place to ensure

NRC obligations do not exceed budget authority.

The NRC prepared its financial statements in

accordance with the accounting standards codified in the Statements of Federal Financial Accounting Standards (SFFAS) and Office of Management and Budget (OMB) Bulletin No. 97-01,

Form and Content of Agency Financial Statements, as amended, and applicable sections of

OMB Bulletin No. 01-09.

Audit Results

The NRC received an unqualified audit

opinion on its FY 2001 financial statements. This

was the eighth consecutive year the NRC received

an unqualified opinion. For FY 2001, the auditors

identified two material internal control weaknesses: incomplete implementation of SFFAS

Number 10 (SFFAS 10), Accounting for Internal

Use Software, and, SFFAS Number 4 (SFFAS 4),

Managerial Cost Accounting Concepts and Standards for the Federal Government. These two
U.S. NUCLEAR REGULATORY COMMISSION

8

Management’s Discussion and Analysis (continued)

weaknesses were also identified as being noncompliant with the Federal Financial Management Improvement Act (FFMIA) of 1996.

In FY 2000, the auditors also identified management controls over license fee development as a

material weakness. Because improved quality

control procedures over fee development were

instituted during FY 2001, the auditors closed the

finding.

The auditors also identified two new reportable conditions for FY 2001 concerning contract

close-out processing procedures and compliance

with computer software accountability. In addition, nine reportable conditions were carried over

from FY 2000. Four of these nine reportable

conditions remained open at the end of FY 2001.

These four include the incomplete implementation of managerial cost accounting, lack of a

tested business continuity plan for the core accounting system, inadequate controls over the

verification of small entity status for fee assessment, and development of the hourly rate for fees.

The lack of a tested business continuity plan for

the core accounting system was also identified as

being non-compliant with FFMIA. The agency

has taken action on these audit findings and

expects to fully implement corrective action

during FY 2002.

Financial Statement Highlights

The NRC’s financial statements summarize

the financial activity and financial position of the

agency. The financial statements, footnotes, and the

balance of the required supplementary information,

appear in a subsequent section of this report. Analysis of the principal statements follows:

Analysis of the Balance Sheet

The NRC’s assets were approximately $236.9

million as of September 30, 2001. This is an

increase of $11 million from the end of FY 2000,

and is mainly due to an increase in Accounts

Receivable resulting from mail delays and the late

receipt of payments from licensees due to the

September 11, 2001, terrorist attack on America.

The assets reported in NRC’s Balance Sheet are

summarized in the accompanying table.

ASSET SUMMARY (in millions)

FY 2001 FY 2000

Fund Balance with Treasury $140.5 $138.7

Accounts Receivable, Net 51.4 44.0

Property, Plant, & Equipment, Net 43.8 41.9

Other 1.2 1.3

Total Assets $236.9 $225.9

The Fund Balance with Treasury represents

the NRC’s largest asset of $140.5 million as of

September 30, 2001, an increase of $1.8 million

from the FY 2000 yearend balance. This balance

accounts for approximately 60 percent of total

assets and represents appropriated funds, collection of license fees, and other funds maintained at

the U.S. Treasury to pay current liabilities.

Accounts Receivable, Net, as of September

30, 2001 was $51.4 million and includes an

offsetting allowance for doubtful accounts of $3.1

million. This is a 17 percent increase over the FY

2000 yearend Accounts Receivable, Net, balance

of $44.0 million. Accounts Receivable Due from

the Public is $48.9 million, representing 21

percent of total assets.

The value of Property, Plant, and Equipment,

Net, was $43.8 million, representing 18 percent of

total assets. The majority of the balance is comprised of nuclear reactor simulators, leasehold

improvements, and computer hardware and

software. The Property, Plant and Equipment line

item reflects the adoption of capitalizing the full

costs of developing internal use software, as

required by SSFAS 10, Accounting for Internal

Use Software, implemented on October 1, 2000.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

9

The NRC’s liabilities were $143.4 million as

of September 30, 2001. The accompanying table

shows an increase in total liabilities of $13.6

million from the FY 2000 yearend balance of

LIABILITIES SUMMARY (in millions)

FY 2001 FY 2000

Accounts Payable $ 28.6 $ 26.5

Federal Employee Benefits 10.9 8.2

Other Liabilities 103.9 95.1

Total Liabilities $143.4 $129.8

increase in future funding requirements needed to

pay for accrued unfunded expenses. Unexpended

appropriations is the amount of authority granted

by Congress that has not been expended. Cumulative results of operations represent net results of

operations since the NRC’s inception.

Analysis of the Statement of Net Cost

The Statement of Net Cost presents the net

cost of NRC’s four strategic arenas as identified

in the NRC Annual Performance Plan. The

statement allows for linking program performance

under GPRA reporting to the cost of programs.

The NRC’s net cost of operations for the year

ended September 30, 2001, was $50.6 million,

which is an increase of $2.9 million over the

FY 2000 net cost of $47.7 million. Net costs by

strategic arena are shown in the accompanying table.

NET POSITION SUMMARY (in millions)

FY 2001 FY 2000

Unexpended Appropriations $86.8 $87.0

Cumulative Results of Operations 6.7 9.1

Total Net Position $93.5 $96.1

$129.8 million. This is mainly due to an increase

of $7.4 million in the liability to the U.S. Treasury

for assessed license fees, which, when collected,

are used to offset NRC’s appropriations. Of the

agency’s liabilities, $39.3 million were not covered by budgetary resources, which represents a

$3.7 million increase over the balance as of

September 30, 2000. Liabilities not covered by

budgetary resources are unfunded pension expenses, accrued annual leave, and future workers’

compensation. The Federal budget process does

not recognize the cost of future benefits for

today’s employees. Instead, the Federal budget

process recognizes those costs in future years

when they are actually paid.

The difference between total assets and total

liabilities, net position, was $93.5 million as of

September 30, 2001. This is a decrease of $2.6

million from the FY 2000 yearend balance. The

decrease is mainly the result of a $3.7 million

NET COST OF OPERATIONS (in millions)

FY 2001 FY 2000

Unexpended Appropriations $86.8 $87.0

Nuclear Reactor Safety $(57.8) $(60.0)

Nuclear Materials Safety 29.4 29.0

Nuclear Waste Safety 67.4 65.8

International Nuclear Safety Support 11.6 12.9

Net Cost of Operations $50.6 $47.7

Total exchange revenue for the year ended

September 30, 2001, was $464.0 million, which is

an increase of $1 million over the exchange

revenue of $463.0 million for the year ended

September 30, 2000. Exchange revenue is derived from license fees and fees for inspections

and other services, assessed in accordance with 10

CFR Parts 170 and 171.

The net cost of operations is expected to

increase in the future due to changes in the statutory fee collection requirements and the addition

of non-fee funds appropriated for new homeland
U.S. NUCLEAR REGULATORY COMMISSION

10

Management’s Discussion and Analysis (continued)

security activities. 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, was reduced to 98 percent in FY

2001 and will continue to decrease two percent

each year until FY 2005, for a total reduction of

10 percent.

Analysis of Statement of Changes in

Net Position

The Statement of Changes in Net Position

reports the net results of operations of $2.4 million as the difference between the NRC’s financing sources from other than exchange revenue of

$48.2 million and the net cost of operations of

$50.6 million. At the end of FY 2001, appropriations used represented $31.0 million, or 64 percent,

of the total financing sources from other than

exchange revenue. This represents a $4.9 million

increase from the FY 2000 yearend appropriations

used balance of $26.1 million. The NRC’s decrease

in Net Position of $2.6 million from FY 2000 to FY

2001 represents the net results of operations of $2.4

million and the decrease in unexpended appropriations of $0.2 million.

Analysis of the Statement of

Budgetary Resources

The Statement of Budgetary Resources shows

the sources of budgetary resources available and

the status at the end of the period. It presents the

relationship between budget authority and budget

outlays, and reconciles obligations to total outlays. For FY 2001, NRC had budgetary resources

available of $532.2 million. The majority of

which was derived from budget authority. This

represents a three percent increase over FY 2000

budgetary resources available of $515.9 million.

For FY 2001, the status of budgetary resources showed obligations of $503.3 million, or

95 percent of funds available. This is comparable

to FY 2000 obligations of $485.5 million, or 94

percent of funds available. Total outlays for FY

2001 were $487.0 million, which represents a

$3.1 million increase from FY 2000 total outlays

of $483.9 million.

Analysis of the Statement of Financing

The Statement of Financing is designed to

provide the bridge between accrual-based (financial accounting) information in the Statement of

Net Cost and obligation-based (budgetary accounting) information in the Statement of Budgetary Resources by reporting the differences and

reconciling the two statements. This reconciliation ensures that the proprietary and budgetary

accounts in the financial management system are

in balance. The Statement of Financing takes

budgetary obligations of $503.3 million and

reconciles to the net cost of operations of $50.6

million by deducting non-budgetary resources,

costs not requiring resources, and financing

sources yet to be provided.

Financial Condition of the NRC

Sources of Funds

The NRC has two appropriations: NRC

Salaries and Expenses Appropriation and the

Office of the Inspector General Appropriation.

Funds for both appropriations are available until

expended. The NRC’s total new FY 2001 budget

authority was $487.2 million, $481.7 million for

the Salaries and Expenses Appropriation and $5.5

million for the Office of the Inspector General

Appropriation. This represents an overall increase in new budget authority of $17.3 million

over FY 2000, $16.8 million for the Salaries and

Expenses Appropriation, and $0.5 million for the

Office of the Inspector General Appropriation.

Additional funds available to obligate in FY 2001

were $32.6 million from prior-year appropriations, $2.5 million from prior-year reimbursable

work, $4.8 million from current and prior-year

transfer of funds from other Federal agencies, and

$5.1 million for new reimbursable work to be

performed for others. The sum of all funds
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

11

available to obligate for FY 2001 was $532.2

million, which is a $16.3 million increase over the

FY 2000 amount of $515.9 million.

Consistent with the requirements of the

Omnibus Budget Reconciliation Act of 1990, as

amended, the NRC collected and offset approximately 98 percent of its new budget authority in

FY 2001 and approximately 100 percent of its

new budget authority in FY 2000, excluding

funds derived from the Nuclear Waste Fund,

General Fund, 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

2001 was $532.2 million. Of that amount, the

NRC incurred obligations of $503.3 million,

which was an increase of $17.8 million over FY

2000. Approximately 58 percent of obligations

were 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, training),

staff travel, and reimbursable work. (See Figure

2.) The unobligated budget authority available at

the end of FY 2001 was $28.9 million which is a

slight decrease over the FY 2000 amount of $30.4

million. Of the $28.9 million in budget authority

that was not obligated in FY 2001, $0.6 million of

transferred funds expired at the end of the fiscal

year, $4.5 million was for reimbursable work, and

$23.8 million in budget authority is available to

fund critical needs in FY 2002.

Nuclear Waste

Fund

$21.6 M

Reactor

Fees

$391.8 M

General

Fund

$12.5 M

Figure 1

Sources of Funds

FY 2001 Budget Authority $487.3 M FY 2000 Budget Authority $469.9 M

Nuclear

Materials

Fees

$58.0 M

Other

Receipts

$3.4 M

Nuclear Waste

Fund

$19.1 M

Reactor

Fees

$388.6 M

General

Fund

$3.8 M

Nuclear

Materials

Fees

$58.4 M
U.S. NUCLEAR REGULATORY COMMISSION

12

Management’s Discussion and Analysis (continued)

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. From FY 2000 to FY 2001, the

NRC had an increase of 508 invoices (from 8,237

Travel

$12.0 M

Salaries and

Benefits

$293.4 M

Reimbursable

Work

$7.2 M

Figure 2

Uses of Funds by Function

FY 2001 Total Obligations $503.3 M FY 2000 Total Obligations $485.5 M

Contract

Support

$190.7 M

Travel

$11.4 M

Salaries and

Benefits

$282.0 M

Reimbursable

Work

$9.9 M

Contract

Support

$182.2 M

to 8,745) that were paid and subject to the Prompt

Payment Act. For FY 2001, the NRC made 95

percent of its payments on-time that were subject

to the Prompt Payment Act. The amount of

interest penalties incurred during FY 2001 were

$3,151 which reflects a 51 percent decrease over

the FY 2000 amount of $6,400. In addition, the

agency made over 99 percent of its vendor payments electronically.

Figure 3

Prompt Payment

100

80

60

40

0

2001 2000 1999 1998 1997

Percentage of Total

Payments Made On-time

20

95% 96% 96% 96% 95%
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

13

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 the NRC at yearend at less than one percent

of its annual billings. The NRC continues to meet

its goal and has kept delinquent debt at less than one

percent for the past 5 years. Delinquent debt at the

end of FY 2001 was $2.4 million. This is an increase of $0.9 million over FY 2000; however, it

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. This act encompasses program, operational, and administrative

areas as well as accounting and financial management. The act requires the Chairman to provide

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

systems with Government-wide standards.

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

reflects a decrease in the number of outstanding

receivables from 254 to 208. The increase in

outstanding receivables is due to one licensee filing

for bankruptcy ($0.5 million) and a delay in the

receipt of some payments because of the disruption

to certain financial networks caused by the September 11, 2001, terrorist attack on America. The NRC

continues to aggressively pursue the collection of

delinquent debt and continues to meet the requirement that all eligible delinquent debt over 180 days

is referred to the U.S. Treasury for collection.

Figure 4

Delinquent Debt

3

2

1

0

2001 2000 1999 1998 1997

$ Millions

$2.1M $2.1M $2.5M

$1.5M

$2.4M
U.S. NUCLEAR REGULATORY COMMISSION

14

Management’s Discussion and Analysis (continued)

each agency to implement and maintain systems

that comply substantially with: (i) Federal financial management system requirements, (ii) applicable Federal accounting standards, and (iii) the

standard general ledger at the transaction level.

The act requires the Chairman to determine whether

the agency’s financial management systems comply

with the Improvement Act and to develop

remediation plans for systems that do not comply.

Management Controls

A committee of senior agency executives

reviewed individual assurance statements prepared by NRC office directors and regional

administrators that identified weaknesses and

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

executives from Offices of the Chief Financial

Officer and the Executive Director of Operations,

with the General Counsel and the Inspector

General as advisors. These statements were based

on various sources:

• 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.

The 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 for attention from senior managers.

The management control information in these

plans, combined with the individual assurance

statements discussed previously, provides the

framework for monitoring and improving the

agency’s management controls on an ongoing

basis. It also advises the Chairman of any management control deficiencies serious enough to

report as a material weakness or material noncompliance.

The NRC evaluated its management control

systems for the fiscal year ending September 30,

2001. This evaluation provided reasonable

assurance that the agency’s management controls

achieved their intended objectives. As a result,

management concluded that the NRC did not

have any material weaknesses in its programmatic

or administrative activities. However, the NRC’s

implementation of accounting for internal use

software (SFFAS 10) and managerial cost accounting (SFFAS 4) were identified as significant

weaknesses that merit the attention of senior

management.

Governmentwide requirements for accounting

for internal use software (SFFAS 10) became

effective on October 1, 2000. The NRC did not

have an adequate system to track labor hours, and

staff did not comply with agencywide implementation guidance. In FY 2002, the NRC will

implement a new time and labor reporting system

in order to resolve the system weakness. In

addition, the NRC will continue to monitor the

reporting of labor time for internal use software

development projects to ensure compliance with

established agency procedures and SFFAS 10.

The incomplete implementation of managerial

cost accounting was reported as a significant

weakness last year and continues to receive the

close attention of senior management. Progress

has been made over the past year to implement

managerial cost accounting. During FY 2001,

quarterly cost reports were developed and provided to agency managers as an initial step to

implement cost accounting. Cost accounting
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

15

software was configured to reflect how the

agency plans to report direct costs and allocate its

indirect costs. Consistent with the remediation

plan, the agency expects to fully implement

managerial cost accounting and achieve full

compliance with SFFAS 4 during FY 2002.

 Financial Management Systems

The NRC has five financial systems: the

Federal Financial System (FFS), Capitalized

Property System, License Fee Bill Generator

System, Allotment/Financial Plan System, and a

Budget Formulation System. For FYs 2001 and

2000, the NRC also had a mixed system - the

Payroll/Personnel System. The NRC evaluated its

financial management systems to determine if

they comply with Governmentwide standards, as

required by the Integrity Act (Section 4), and with

applicable Federal requirements and accounting

standards required by the Improvement Act. This

evaluation disclosed that NRC’s major financial

management systems are in compliance with the

Integrity Act.

 However, the Chairman also determined that

the NRC had three instances of substantial noncompliance with the Improvement Act. Reporting

for internal use software development represents

an instance of substantial non-compliance because the process did not comply with Federal

financial management systems requirements and

with the standard general ledger at the transaction

level. The NRC expects to implement

remediation actions required by the Improvement

Act during the first quarter of FY 2002.

The NRC’s financial management systems

complied 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 continues to

address the implementation of SFFAS 4 and expects

to complete implementation during FY 2002.

The third instance of substantial non-compliance with the Improvement Act relates to FFS

business continuity testing. 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. However, FMS has not tested its

business continuity plan for FFS because they

plan to terminate the cross-servicing agreement at

the end of FY 2002. The NRC expects to complete the transition of its cross-servicing of the

core accounting system to the National Business

Center of the Department of the Interior during

FY 2002.

Biennial Review of User Fees

The Chief Financial Officers Act of 1990

requires agencies to conduct a biennial review of

fees, royalties, rents, and other charges imposed

by agencies, and make revisions to cover program

and administrative costs incurred. During FY

2000 and FY 2001, the NRC reviewed each type

of fee subject to the biennial review requirement.

Each year, the NRC revises the hourly rates for

license and inspection fees and adjusts the annual

fees to meet the fee collection requirements of the

Omnibus Budget Reconciliation Act of 1990. The

most recent changes to the license, inspection,

and annual fees are described in the Federal

Register (66 FR 32452, June 14, 2001). 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 license 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.
U.S. NUCLEAR REGULATORY COMMISSION

16

Management’s Discussion and Analysis (continued)

 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

agencies to report on final actions taken on OIG

audit recommendations. This information as

well as data concerning disallowed costs determined through contract audits conducted by the

Defense Contract Audit Agency can be found in

Appendix B.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

17

Chapter III: Program Performance

Measuring and Reporting

Our Performance

This report presents information on our

performance during FY 2001. Our discussion is

centered around each of the four operating arenas:

Nuclear Reactor Safety, Nuclear Materials Safety,

Nuclear Waste Safety, and International Nuclear

Safety Support. We also have a section devoted to

our achievements and challenges in Corporate

Management and Support. We discuss our implementation of initiatives in support of the

President’s Management Agenda under Corporate

Management and Support.

In each arena discussion we provide a brief

overview of our key programs, discuss our key

accomplishments, present our performance

results, provide budget information for the arena,

and summarize the results of our program evaluations completed in FY 2001.

Our Performance

Measurement System

The NRC has adopted a performance measurement system which has strategic goals and

strategic goal measures, as well as performance

goals and performance goal measures. The strategic

goals represent the mission of the agency and

reflect the overall outcomes to be achieved.

NRC performance goals are the key contributors to achieving the strategic goals and focus on

outcomes. The performance measures indicate

how effectively the NRC is achieving its performance goals and establish the basis for performance management. Not achieving a performance

measure may not result in missing our strategic

goal, but it would signal NRC managers that their

programs need to be reevaluated to determine the

cause of the failure. The measures also establish

how far and how fast the agency will move in the

direction established by the performance goals.

New Performance Measures

for FY 2001

The NRC added three new performance goals

for each arena for FY 2001:

(1) increase public confidence,

(2) make NRC activities and decisions more

effective, efficient, and realistic, and

(3) reduce unnecessary burden on stakeholders.

While the goal of maintaining safety remains

paramount to the Commission, these three additional performance goals focus on the impact our

regulatory processes and decisions have on our

stakeholders. Thus, the Commission must ensure

that stakeholders’ interests and concerns are

considered and addressed.

These three new performance goals have

some performance measures that are still being

developed, and in some cases have milestones.

Increasing Public Confidence

Maintaining and building trust and confidence

that the NRC is carrying out its mission is an

important goal of the agency. The NRC strives to

ensure that our stakeholders are provided with

clear and accurate information about our regulatory programs. We also ensure that stakeholders

have the opportunity to participate in our regulatory processes.

Making NRC Activities and Decisions More

Effective, Efficient, and Realistic

The costs of most NRC activities and decisions contribute to our licensee’s costs and are

ultimately borne by the public. The electric
U.S. NUCLEAR REGULATORY COMMISSION

18

Program Performance (continued)

industry is in a transition from a rate-regulated to

a more market-based business environment. The

NRC must keep its regulatory costs reasonable

and predictable.

Reducing Unnecessary Burden

on Stakeholders

Reducing unnecessary regulatory burden will

enable more efficient use of both licensee and

NRC resources. During the past thirty years a vast

amount of technical knowledge and operational

experience has been accumulated on the safe

operation of nuclear plants. This knowledge

allows the NRC to refine and enhance its regulatory programs and technical requirements to

reduce unnecessary regulatory burden while

assuring the maintenance of safety. For example,

recent risk-informed initiatives for inspection and

testing provide the basis for reallocating resources

from lower risk-significant systems to higher risksignificant systems and components.

Nuclear Reactor Safety

Prevent radiation-related deaths and illnesses, promote the common defense

and security, and protect the environment in the use of civilian nuclear reactors.

Overview

The focus of the Nuclear Reactor Safety

Arena is to ensure that civilian nuclear power

reactors, as well as non-power reactors, are

operating in a manner that adequately protects

public health and safety and the environment and

that safeguards special nuclear material used in

reactors. The NRC regulates 104 civilian nuclear

power reactors and 36 non-power reactors. Research and test (Non-power) reactors are nuclear

reactors whose primary function is to safely

conduct research and development. Almost every

field of science; including physics, chemistry and

biology, use these reactors.

Reasonable assurance of adequate protection

of the public health and safety is, as a general

matter, defined by the Commission’s health and

safety regulations themselves. That is, unless

otherwise provided, there is reasonable assurance

of adequate protection of public health and safety

when the applicant or licensee demonstrates

compliance with the Commission’s regulations.

The regulations were established using defensein-depth principles and conservative practices that

provide an additional margin of safety.

The collective efforts of the NRC and the

nuclear industry are needed to maintain safety.

The NRC licensees have the responsibility to

safely design, construct, and operate civilian

nuclear reactors. Regulatory oversight of licensee

safety is the responsibility of the NRC. Thus, safe

performance reflects the results of the collective

efforts of the NRC and the nuclear industry.

Ensuring the Safe Operation of

Nuclear Reactors

The NRC ensures the safe operation of

nuclear reactors by licensing nuclear power plants

and their operators, providing oversight of plant

operating performance, maintaining an emergency

response program, establishing clear health and

safety regulations to follow, and conducting

research to resolve safety issues and provide

support for developing technical regulations. The

Nuclear Reactor Safety Arena consists of several

programs which work together to achieve our
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

19

safety goal. The licensing of nuclear plants requires that licensees follow regulations specifying

how plants are to be designed, constructed and

operated safely. It provides the basis for safe

operations. The NRC provides independent

oversight of the plants through its reactor oversight process to verify that they are being operated safely in accordance with NRC rules and

regulations. If violations are found, enforcement

actions may be taken. The emergency response

program ensures that public safety measures are

in place in the event an accident occurs. The

research program analyzes data from operations

and independently undertakes studies which

provide the basis for maintaining the safety of

nuclear power plants. The following sections

describe our safety programs in greater detail.

Licensing

The reactor licensing program ensures that

operating nuclear power plants maintain adequate

levels of protection of public health and safety in

the operation of the plant throughout its life. This

includes assurances that facilities are adequately

designed, properly constructed, correctly maintained and that trained and qualified operating and

technical support personnel can prevent or cope

with accidents and other threats to public health

and safety.

NRC licensing activities include: the review of

license applications and changes to existing licenses,

examining and licensing reactor operators; reviewing reactor events for safety significance; and

improving our safety regulations and guidance.

Note: There are no commercial

reactors in Alaska or Hawaii

U.S. Commercial Reactors

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

OR

WA

Licensed to Operate (104)
U.S. NUCLEAR REGULATORY COMMISSION

20

Program Performance (continued)

We met or exceeded established measures for

completing nuclear power plant licensing-related

actions. The NRC staff completed 1,617 licensing actions in FY 2001 (see graph below).

Included in the licensing actions 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.

Licensees have been applying for and implementing power uprates since the 1970s as a way

to increase the power output of their plants. The

NRC has been conducting power uprate reviews

since then and, as of October 1, 2001, has completed 64 such reviews. Approximately 7600

MWt (2530 MWe) or an equivalent of about two

large nuclear power plant units has been gained

through implementation of power uprates at

existing plants. In FY 2001, the NRC completed

reviews for power uprates at 16 units. These

resulted in an increase in electrical generating

capacity of about 450 megawatts.

Power uprate reviews are complex. Areas

covered in power uprate reviews include reactor

core and fuel performance, reactor coolant system,

containment performance, emergency core cooling

systems performance, loss of coolant accidents,

special events, limiting operational transients,

radiological consequences, system and component

capabilities, instrumentation and controls, electrical

power and environmental qualification, human

performance and operator response.

The NRC engaged in significant financial

review activities for nuclear power reactors as a

result of a number of States taking steps toward

deregulation of the power market, the unbundling of

services, and general industry consolidation. The

cases involved such issues as the sale of a passive

owner’s minority share and the creation of a separate

holding company. The NRC has established an

ambitious six-month target for completing license

transfer actions and has met that target in all cases.

With increasing interest on the part of the

nuclear industry in future reactors, the NRC has

We have improved our timeliness in responding to

license requests since 1997. In 1997, 72 percent

of licensee actions were handled within one year

or less. In FY 2001, we completed 97 percent of

licensing actions within one year (see graph below).

100

Licensing Action Age

80

60

40

0

1997 1998 1999 2000 2001

Percent Less than 1 Year Old

Percent Less than 2 Years Old

20

2000

Licensing Actions Completed

1500

1000

500

0

1997 1998 1999 2000 2001
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

21

assigned staff to work on new reactor licensing

activities, including pre-application reviews for

the AP 1000 advanced reactor design and the

pebble bed modular reactor.

License Renewal

The Reactor License Renewal program establishes the technical and regulatory requirements

for renewal of power plant licenses. Reactor

operating licenses were originally issued for 40

years and are allowed to be renewed for an additional 20 years. The review process for renewal

applications provides continued assurance that the

level of safety provided by an applicant’s current

licensing bases is maintained for the period of

extended operation. When reviewing a license

renewal application, the NRC performs a comprehensive review that focuses on passive structures

and components of the plants that are subject to

the effects of aging, with the purpose of ensuring

safety for the duration of the extended license.

Our license renewal review program is proceeding aggressively: three plants, totaling six

units, have received renewed licenses, as of the

end of FY 2001; and seven plants, totaling fourteen units were under review at the end of FY

2001 (see graph at right). We expect that almost

all of the plants in the U. S. will ultimately apply

to renew their licenses.

The NRC met or exceeded all established

schedules for license renewal activities in FY

2001. The renewed license for Arkansas Nuclear

One, Unit 1, was issued in June 2001.

Reactor Inspection and Performance

Assessment Program

The NRC provides oversight of plants

through its reactor oversight process (ROP) to

verify that they are being operated safely in

accordance with NRC rules and regulations. The

NRC has full authority to take whatever action is

necessary to protect public health and safety and

may demand immediate licensee actions, up to

and including a plant shutdown.

The ROP uses both inspection findings and

performance indicators (PIs) to assess the performance of each plant within a regulatory framework of seven cornerstones to safety. The ROP

recognizes that issues of very low safety significance inevitably occur and licensees are expected

to effectively address these issues. The NRC

performs a baseline level of inspections at each

plant. The NRC may perform supplemental

inspections and take additional actions as necessary to ensure significant issues are addressed.

The NRC communicates the results of its oversight process by placing plant-specific inspection

findings and PI information, as well as industrylevel indicators on the NRC’s web site. This

information has not been available since late

September 2001. We expect it to be posted on the

NRC’s web site shortly. The NRC also conducts

public meetings with licensees to discuss the

results of the ROP assessments

7

License Renewal Applications

6

5

4

0

1998 1999 2000 2001

License Renewals Received

License Renewals Completed

3

2

1
U.S. NUCLEAR REGULATORY COMMISSION

22

Program Performance (continued)

Safety Research

Our research program conducts independent

experiments and analysis, develops the technical

basis to support realistic safety decisions, and

prepares the agency for the future by evaluating

safety issues involving current and new designs

and technologies. The reactor safety research

program issued 41 research products that responded to high- and medium-priority needs of

the Commission in FY 2001. These products

include regulatory guides, technical reports,

assessments, and research studies.

The research program includes the following

key areas:

Risk Analysis

Work is underway to apply risk assessment

methods and analysis to improve NRC’s regulations. In FY2001, work was completed supporting a recommendation to modify the current

On Site inspection

NRC inspectors spend over 3,000 hours per

year inspecting a typical nuclear reactor plant.

Resident inspectors, located at each site, provide the NRC’s major on-site presence and

carry out a significant part of the inspection

program. Their primary role is to observe,

evaluate, and verify the adequacy of licensee

nuclear safety activities. This is accomplished

by inspecting licensee performance in operating activities and responses to events.

maintaining an emergency telecommunications

system, Emergency Response Data System, and

an Operations Center Information Management

System. Our Emergency Response Performance

Index is an overall measure of the degree to

which the agency believes it is ready to respond

to an emergency situation (see graph below). This

index stood at 100 percent in FY 2001.

The NRC completed the first year of implementation of its revised ROP in April 2001. Key

features of the revised process include a riskinformed regulatory framework, risk-informed

inspections, a significance determination process

to evaluate inspection findings, licensee-reported

performance indicator information, and streamlined assessment and enforcement activities.

These process improvements were developed in

response to NRC staff assessments, Commission

direction, and external stakeholder comments and

are intended to be more risk-informed, objective,

and predictable while being more understandable

and accessible to its stakeholders than the previous oversight process. The revised ROP more

effectively maintains safety by focusing staff and

industry attention on risk-significant activities

while reducing unnecessary regulatory burden on

its licensees.

Reactor Incident Response

Reactor incident response activities are conducted to ensure that safety-significant operational

events involving nuclear power reactors are investigated in a timely, systematic, and technically sound

manner. In addition, information is obtained on the

causes of the events so that the NRC can make

timely and effective corrective actions.

Emergency response activities are also conducted to ensure NRC is prepared to carry out its

role in a radiological emergency. This includes

100

Emergency Response Performance Index

98

96

94

90

1999 2000 2001

Percent

92
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

23

regulations for emergency core cooling systems.

In addition, risk assessment methods are used to

analyze operational data and events to help focus

NRC attention on the most important activities.

Fuel and Thermal-Hydraulic Research

NRC is conducting studies of fuel behavior

with advanced cladding and at high burn up.

Confirmatory experimental work ensures that

safety is maintained as the industry seeks the

economies of advanced fuel designs and high

utilization (burn up). The experimental program

along with analytic methods under development

will establish new safety limits for energy deposition and clad oxidation during postulated accidents. Much of the work is co-funded with the

international community and with industry, hence

achieving significant efficiencies.

NRC has an extensive thermal-hydraulic

program of model development and validation.

The application of these models provides the

technical basis for risk informing the regulations,

and addressing safety issues. Analysis of hydrogen generation during a severe accident using

NRC developed severe accident models provides

the technical basis for risk informing combustible

gas requirements, while analysis of small and large

break loss of coolant accidents provides the basis for

ongoing work to risk inform the Emergency Core

Cooling System Rule (10 CFR 50.46).

Structural Integrity Research

The ability of structures, components and

systems to withstand normal operational loads,

design basis loads, and accidental loads including

natural hazards, such as seismic events, tornados,

and floods, is important to safe nuclear power

plant operation. Several current projects relate to

the evaluation of aging and environmental effects

on plant components and structures as these

effects degrade the material and strength properties and may reduce the available safety margins.

These projects include evaluations of methods for

non-destructive examination to identify potential

degradations, methods for conditional assessment,

degradation mechanisms, methods to evaluate

performance of degraded components, and methods to repair and mitigate the potential unsafe

conditions. This research has been a key factor in

developing regulatory strategies to address the

aging effects, including cracking of steam generator tubes, piping systems, and the reactor pressure

vessel head penetrations.

These programs, performed in conjunction

with international collaborative programs, leverage the limited NRC resources, and provide data

for verification of analytical methods and realistic

assessment of the structural capacity for use in

risk assessments.

New Reactors

With increasing interest on the part of the

nuclear industry in future reactors, research

activities have been initiated to respond to requests for pre-application interactions on advanced light water reactor designs and the pebble

bed modular reactor and another high temperature

gas-cooled reactor. This has involved activities to

identify the safety issues and research needs for

the advanced designs, and development of the

necessary infrastructure (e.g., computer codes) to

support the licensing reviews.

Performance Results

The ultimate test of our programs in the

nuclear reactor safety arena is the continued safe

operation of nuclear power plants. In addition to

monitoring the performance of individual plants,

the NRC compiles data on overall performance

using several industry-level performance indicators, some of which are included below. These

indicators show significant improvement in

performance over the past decade.

Industry Safety Performance Record

Several industry indicators of safety performance show significant improvement over the

past 13 years. One such indicator is significant

operating events. Significant events are those

events that meet specific criteria, such as degrada-
U.S. NUCLEAR REGULATORY COMMISSION

24

Program Performance (continued)

tion of important safety equipment. The NRC

staff reviews operating events and assesses their

safety significance. The number of significant

events has declined steadily over the past decade

(see graph below).

The total radiation dose received by workers

at nuclear plants is an indicator of the effectiveness of personnel radiation exposure controls.

Worker radiation dose has been reduced significantly over the past decade (see graph below). In

addition, there have been no deaths or injuries

from radiation exposure during that time, or at

any time in the history of the U.S. commercial

nuclear power industry.

Safety systems mitigate off-normal events by

providing reactor core cooling and water addition.

Actuations of safety systems that are monitored

include certain emergency core cooling and

emergency electrical power systems. Actuations

can result from issues such as testing errors or

actual demands. The number of safety system

actuations has declined over the past decade (see

graph below).

A scram is a basic reactor protection safety

function that shuts down the reactor by inserting

control rods into the reactor core. Scrams can

result from events that range from relatively

minor incidents to precursors of accidents. The

number of unplanned scrams has declined steadily

over the past decade (see graph below).

1.0

Significant Events

0.8

0.4

0

1988

Per Reactor

1990 1992 1994 1996 1998 2000

0.6

0.2

400

Collective Radiation Exposure

350

250

150

0

1988

Exposure (Person-cSv)

50

1990 1992 1994 1996 1998 2000

300

200

100

1.4

Safety Systems Actuations

0.8

0.4

0

1988

Per Reactor

1990 1992 1994 1996 1998 2000

0.6

0.2

1.2

1.0

2.5

Automatic Scrams

2

1

0

1988

Per Reactor

1990 1992 1994 1996 1998 2000

1.5

0.5
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

25

The NRC staff assesses the risk significance

of events at plants. A precursor event is an event

that has a probability of greater than 1 in a million

or greater of leading to substantial damage to the

reactor fuel. The occurrence rate of precursor

events during the 1993-2000 period has generally

been declining (see graph below). A “significant”

precursor event has a probability of 1 in a thousand or greater of leading to substantial damage to

the reactor fuel. No “significant” precursor events

have been identified since 1996.

Safety system failures are any events or

conditions that could prevent the fulfillment of

the safety function of the safety systems. The

number of safety system failures has also declined

over the past decade (see graph below).

Source: DOE/EIA Monthly Energy Review

These improvements in safety have occurred

at a time when nuclear power generation has

increased significantly, increasing 43 percent

from 527,000 gigawatt hours in 1988 to 754,000

gigawatt hours in 2000 (see graph below).

The average annual capacity factor has increased from 65 percent in 1988 to 88 percent in

2000 (see graph below).

Source: DOE/EIA Monthly Energy Review

0.30

Precursor Occurrence Rate

0.20

0.10

0

Per Reactor Per Year

1993 1999 2000

0.15

0.05

1994 1995 1996 1997 1998

0.25

100

80

40

0

1988 1990 1992 1994 1996 1998 2000

60

20

Average Capacity Factor

Percent

The NRC’s Role in Improving Safety

The improvement in the safety record of

nuclear power plants has been a result of the

combined efforts of licensees and the NRC.

Both licensees and the NRC have gained experience in the operation and maintenance of

nuclear power facilities.

4.0

Safety System Failures

3.0

1.0

0

1988 1990 1992 1994 1996 1998 2000

2.0

0.5

3.5

1.5

2.5

Per Reactor

800

Nuclear Power Generation

700

500

300

1988 1990 1992 1994 1996 1998 2000

600

400

Gigawatt Hours
U.S. NUCLEAR REGULATORY COMMISSION

26

Program Performance (continued)

Licensees have the primary role in maintaining safety. They are expected to design and

operate nuclear power plants in a manner that

provides adequate protection of public health

and safety.

The NRC oversees plant operating performance, and will not allow licensees to operate

their plants if safety performance falls below

acceptable levels.

Experience in plant operations and feedback

from operating experience data have yielded a

steady stream of improvements in the reliability

of plant systems and components, plant operating procedures, training of power plant operators, and regulatory oversight.

Strategic and Performance Goals and Measures

MEASURES

1. No nuclear reactor accidents.1

2. No deaths resulting from acute radiation exposures from nuclear reactors.2

3. No events at nuclear reactors resulting in significant radiation exposures.3

4. No radiological sabotages at nuclear reactors.4

5. No events that result in releases of radioactive material from nuclear

reactors causing an adverse impact5 on the environment.

RESULTS

All measures were met

each year in FY 1997

through 2001.

The first measure tracks nuclear reactor

accidents. Nuclear reactor accidents are those

which result in substantial damage to the reactor

fuel. The second and third measure indicate

whether radiation-related deaths and illness are

being prevented. The fourth measure tracks the

security at nuclear reactor facilities against delibStrategic Goal: Prevent radiation-related deaths and illnesses, promote the common

defense and security, and protect the environment in the use of civilian nuclear reactors.

Performance Goals

In addition to our strategic goals, the NRC has four performance goals and measures for the nuclear

reactor safety arena. The performance goals are:

• Maintain safety, protection of the environment, and the common defense and security.

• Increase public confidence.

• Make NRC activities and decisions more effective, efficient, and realistic.

• Reduce unnecessary regulatory burden on stakeholders.

erate acts of sabotage. Radiation that is produced

in the process of generating power from nuclear

materials can also potentially harm the environment if not properly controlled. The fifth measure

tracks releases to the environment that have an

adverse impact. All of the targets for these measures have been met since 1997.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

27

MEASURES

1. No statistically significant adverse industry trends in safety performance.6

2. No more than one event per year identified as a significant precursor of a

nuclear accident.

7

3. No events resulting in radiation over exposures from nuclear reactors that

exceed applicable regulatory limits.8

4. No more than three releases per year to the environment of radioactive

material from nuclear reactors that exceed the regulatory limits.9

5. No breakdowns of physical security that significantly weaken the protection

against radiological sabotage, theft or diversion of special nuclear materials

in accordance with abnormal occurrence criteria.10

RESULTS

All measures were met

each year in FY 1997

through 2001.

The first measure tracks the trends of several

key indicators of industry safety performance.

The indicators provide insights on major areas of

reactor performance, including reactor safety,

radiation safety, and physical protection. Statistical analysis techniques are applied to each indicator to determine its long-term trend. Any indicator

that shows degrading safety performance will

result in not meeting our target for this measure.

To date, there have been no statistically significant adverse trends in any of the indicators. The

FY 2001 data is preliminary.

The second measure tracks significant precursor

events. A “significant” precursor event is defined as

an event that has a probability of 1/1000 or greater

of leading to substantial damage to the reactor

fuel. No precursor events have been identified

since 1996. The FY 2001 data is preliminary.

The third measure tracks individual radiation

over-exposures within any nuclear power plant.

Radiation levels are tracked carefully within the

plant, and this measure focuses on instances in

which an individual is exposed to radiation levels

which exceed set limits. Any exposures below

these limits would not be expected to harm an

individual. There have been no instances of

radiation exposures that exceed regulatory limits

since 1997. The FY 2001 data is preliminary.

In addition to ensuring the safe operation

within nuclear plants, the fourth measure tracks

our performance goal to ensure that the environment is not harmed by radioactive releases from

the generation of nuclear power. These releases

can be in the water that is used for cooling within

the plant or through vents to the atmosphere.

Radioactivity releases to the environment are

tracked using set regulatory limits. Any releases

below these limits would not be expected to harm

an individual or the environment. There have

been no releases of nuclear material into the

environment that exceed regulatory limits since

1997. The FY 2001 data is preliminary.

For the fifth measure, NRC regulations are

designed to promote physical security of nuclear

plants. Any breakdowns of security are reported

and an information assessment team is dispatched

to investigate the incident. Since 1997, there have

been no breakdowns of physical security that

significantly weaken protection against sabotage,

theft, or diversion of special nuclear materials.

Performance Goal Results

Performance Goal: Maintain safety, protection of the environment, and the common

defense and security.
U.S. NUCLEAR REGULATORY COMMISSION

28

Program Performance (continued)

Performance Goal: Increase public confidence.

MEASURES

1. Complete milestones relating to collecting, analyzing, and trending

information for measuring public confidence

2. Complete all the public outreaches

3. Complete the milestones specific to the agency allegation program

effectiveness assessment plan

4. Issue Director’s Decisions for petitions filed to modify, suspend, or revoke

a license under 10 CFR 2.206 within an average of 120 days.

RESULTS

All measures were met

in FY 2001.

The milestone for the first measure during FY

2001 was to conduct semi-annual evaluations of

public meeting feedback forms. This milestone

was met. The forms have been evaluated to

determine their usefulness in assessing public

confidence. NRC compiled and analyzed the

results of all the feedback forms received from the

public for the period March 31 to September 1,

2001. NRC has analyzed 182 public meeting

feedback forms, representing 33 meetings. Trending information was included in the semi-annual

evaluations. Most respondents (77 percent)

indicated that they worked for an interest organization which includes: licensee, non-governmental organization, licensee contractor, law firms,

local or state government, and community or

citizens group. Seventy three percent of respondents were very familiar with the meeting topic

prior to attending the meeting and 43 percent have

attended more than five NRC meetings. Seventy

five percent of the respondents were able to find

all the supporting information they wanted prior

to the meeting and 81percent indicated that

attendees’ questions were answered clearly,

completely, and candidly. The Commission will

use the results of the pilot to make a final determination regarding further use of the forms.

Holding public outreach meetings is a method

to provide the public with information on NRC

activities. For the second measure, all of the

scheduled public outreach meetings were held and

feedback from the public on revisions to the

Reactor Oversight Process was analyzed. This

feedback was very helpful and will be used as the

Reactor Oversight Process is further improved.

The third measure concerns the agency’s

allegation program. This program provides a

mechanism for workers in the industry and members of the general public to submit safety concerns directly to the NRC for evaluation and

response. The NRC evaluates any concerns that

are received by conducting inspections, investigations, or technical reviews. The individual that

submitted the concerns is notified in writing of

the results of the NRC’s evaluation. The FY 2001

milestone for this measure was to start distributing a survey to stakeholders who have brought

safety and non-compliance regulatory allegation

issues to the NRC’s attention. The purpose of the

survey is to ascertain how NRC did in responding

and addressing the allegers issues. The survey

results are currently being analyzed.

The fourth measure assesses the extent to

which Directors’ decisions are being handled

expeditiously. Any member of the public can

submit a petition under 10 CFR 2.206, asking the

NRC to take an enforcement action against a

licensee. The Director’s Decision is the NRC’s

acceptance or denial of the petitioner’s request. It

is signed by the cognizant Office Director. Details on the process are in MD 8.11. Director’s

Decisions were issued within an average of 120

days, which met our target.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

29

Performance Goal: Make NRC activities and decisions more effective, efficient,

and realistic.

MEASURES

1. Complete those specific reactor milestones in the Risk-Informed Regulation

Implementation Plan.

2. Complete at least two key process improvements per year in selected

program and support areas that increase efficiency, effectiveness, and

realism.

3. Complete all license renewals application reviews within 30 months.

RESULTS

All measures were met

in FY 2001.

The first measure focuses on progress in

developing a coordinated approach to implementing risk-informed decisions throughout the

agency’s regulatory processes. The milestones

towards developing a risk-informed regulation

implementation plan (RIP-IP) were completed on

schedule. These included sending the RIP-IP to the

Commission and briefing them on the contents

(October-November 2000) and developing final

criteria and milestones for Commission approval

(August 2001).

The second measure shows steps taken to

improve our internal processes. This year we

implemented two process improvements in the

nuclear reactor safety arena: revisions to the

reactor oversight process and revisions to the

10 CFR 2.206 petition process. Process improvements brought about by the revised reactor oversight process are discussed extensively in the

program evaluation section of this chapter.

The 10 CFR 2.206 petition process allows for

written requests to be filed by any person to

institute a proceeding to modify, suspend, or

revoke a license or any other enforcement action.

These process improvements enhance public communication, provide more avenues for stakeholder

feedback, and improve clarity to the process.

The third measure puts a target on license

renewal reviews to ensure they are handled

expeditiously while performing a comprehensive

evaluation of the renewal application. Guidance

documents were issued in FY 2001 to improve the

effectiveness and efficiency of this process. We

completed one license renewal in FY 2001. That

renewal was completed within 17 months, well

within the 30 month target. We plan to improve our

license renewal process to use fewer resources and

complete license reviews in 24 months.

Performance Goal: Reduce unnecessary burden on stakeholders.

MEASURES

1. Complete specific milestones to reduce unnecessary regulatory burden.

RESULTS

This measure was met

in FY 2001.
U.S. NUCLEAR REGULATORY COMMISSION

30

Program Performance (continued)

Program Evaluation

The reactor oversight process (ROP) provides

an integrated assessment of licensee performance

at each nuclear reactor site. The assessment is

used to identify agency actions to ensure licensees

address performance weaknesses. In FY 2000, the

NRC revised its ROP to improve its objectivity,

make it more understandable and predictable, and to

increase the focus on aspects of plant performance

which had the greatest impact on safe plant

operation. The improved processes include a riskinformed inspection program, use of licenseereported performance indicator information, and

revised assessment and enforcement activities.

The NRC conducted a program evaluation of

the revised ROP during FY 2001 to evaluate the

effectiveness of its first year of implementation.

The evaluation’s objectives were to determine

whether the revised ROP (1) improved the objectivity of the oversight so that subjective decisions

and judgments are not central features of the

process, (2) improved the clarity of the oversight

so that NRC actions have a clear tie to licensee

performance, and (3) risk-informed the process to

focus NRC and licensee resources on performance having the greatest impact on safety.

The staff collected internal and external

stakeholder feedback and comments to evaluate

the new process during its initial implementation.

As part of this effort, objective measures and predetermined criteria were used to evaluate its

performance. Internal feedback and comments

from NRC staff were obtained through periodic

meetings between Headquarters and regional

staff, regional and site visits by Headquarters

staff, the use of a formal feedback process, and a

staff survey. Feedback and comments from external

stakeholders were solicited through monthly public

meetings, a Lessons Learned Public Workshop held

at the end of initial implementation, and a Federal

Register notice. Finally, an Initial Implementation

Evaluation Panel (IIEP) was established by the

Agency in accordance with Federal Advisory

Committees Act (FACA) requirements to serve as an

advisory committee to the Agency.

Internal stakeholders generally had a more

positive view of the revised ROP following the

first year of implementation than they had followThe milestone to reduce unnecessary regulatory burden for FY 2001 was to develop a process

for collecting data and identify activities that have

the greatest impact on reducing unnecessary

regulatory burden while maintaining safety. In FY

2001 we surveyed our licensees to identify specific types of unnecessary regulatory burden they

encounter. We are now analyzing the concerns

and suggestions offered by the licensees and

stakeholders.

Funding for Achieving Our Strategic

and Performance Goals

The reactor budget totaled $218.3 million in

FY 2001. It was spent on six key programs (see

chart below). Each program provides a specific,

and linked, role to ensure safety at nuclear power

plants. For example, the licensing program sets

the standards and procedures for operating

nuclear power plants. The inspection and performance assessment program inspects the plants

and collects information which ensures that

licensing obligations are being followed and that

the plant’s performance is within the required

safety range.

Inspection and

Performance Assessment

$72.1 M

Safety

Research

$56.8 M

Other

$17.0 M

Licensing

$54.5 M

License

Renewal

$12.4 M

Budget Authority by Program

(Millions)

Total Funding was $218.3 Million

Incident

Response

$5.5 M
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

31

over the previous licensee performance assessment program. The IIEP determined that the ROP

has made progress toward achieving the Agency’s

four performance goals. The IIEP recommended

that the staff take certain actions to ensure that it

achieves the Agency performance goals in the longterm, and consider other actions to improve the

process. Most of the IIEP conclusions and recommended actions were consistent with the staff’s

evaluation of the results of initial implementation.

In addition to utilizing feedback to provide

insights regarding the efficacy of the ROP, the

staff took advantage of situations encountered

during initial implementation to identify lessons

learned and improvement opportunities. As a

result of specific lessons learned, adjustments to

resource estimates and planning models were

made and changes were made to strengthen

inspection procedures and guidance.

Based on its assessment of stakeholder feedback and the results and lessons learned from

initial implementation, the staff is confident that

the revised ROP is more objective, risk-informed,

understandable, and predictable. The ROP has

been tested such that the staff has gained insights

on many aspects of the ROP and identified issues

that were not revealed during the pilot program.

The staff recognized that the ROP will continue to

require scrutiny and oversight and has established

a self-assessment program that will identify

additional areas for improvement.

A reactor vessel loaded onto a ground transporter

ing a 6-month pilot program in 1999. They

showed a marked increase in their understanding and acceptance of it. They felt that

the process provided appropriate regulatory

attention to licensees with performance

problems and was an effective risk-informed approach to oversight. However,

internal stakeholders did express several

concerns. A majority indicated that the

significance determination processes

(SDPs) are not easy to use. Inspectors were

concerned that the threshold was too high

for documenting findings that could be

precursors to more significant issues and were

concerned about how cross-cutting issues are

addressed in the ROP framework. A significant percentage of internal stakeholders

continue to express concern regarding the

ROP’s ability to provide appropriate identification of

declining safety performance in a timely manner.

In general, external stakeholders indicated that

the ROP improved consistency, reduced unnecessary regulatory burden, and increased the predictability of Agency actions. The industry, and

many public stakeholders, perceived the ROP as

more objective and understandable, with an

increase in regulatory focus on risk significance.

Industry and public stakeholders also had numerous comments and concerns targeted at improving

various parts of the ROP. For example, many felt

that the characterization of safety significance by

the SDPs was slow and complex to the point of

being burdensome. The industry also strongly felt

that inconsistencies and overlap in the safety

system unavailability performance indicator

definitions (e.g., between the ROP and Requirements for Monitoring the Effectiveness of Maintenance at Nuclear Power Plants) needed to be

addressed. Feedback from public stakeholders

was mixed. While some members of the public

believed that the ROP was overall a more effective

oversight process, others felt that the ROP was

poorly focused, did not identify declining performers in a timely manner, and did not result in adequate

assurance of safe reactor operation. These cementers

view the new ROP as a step backwards.

The IIEP reviewed the results and lessons

learned for ROP initial implementation and

concluded that the ROP is a notable improvement
U.S. NUCLEAR REGULATORY COMMISSION

32

Program Performance (continued)

In addition to evaluating the ROP, the NRC

undertook a comprehensive evaluation of its

reactor safety research program. As a means of

supplementing internal planning, input was

sought from stakeholders on the role and future

direction of the research program. A panel of

experts was assembled to obtain their views and

comments on the vision, mission, role, and general direction of regulatory research. The 17-

member panel was chaired by former Commissioner Kenneth Rogers and included representatives from industry, academia, government, and

public interest groups. The results of the expert

panel review are documented in NUREG-1802,

Volumes I & II. The scope of the panel’s review

was broad and covered a wide range of NRC

research program issues. The panel recommended that the research program should:

• ensure its role as an unassailable source of

technical information and support for

regulatory actions;

• perform research in anticipation of regulatory needs;

• increase cooperative work with other

organizations; and

• establish a clear and concise definition of

the research conducted by the NRC.

In addition to the broad general recommendations, other important issues and recommendations made by individual panel members are

provided for NRC consideration.

In addition to the expert panel review, the

Advisory Committee on Reactor Safety (ACRS)

reviewed the research program. The ACRS

presented its findings and recommendations that

emerged from an assessment conducted from

March 2000 through March 2001. The report,

NUREG-1635, Vol. 4, “Review and Evaluation of

the Nuclear Regulatory Commission Safety

Research Program,” included a number of recommendations for new or expanded research activities as well as fifteen recommendations for research activities that should be closed.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

33

Nuclear Materials Safety

ment 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.

Ensuring the Safe Use of

Nuclear Materials

The Nuclear Materials Safety Arena has

oversight of several distinct program areas. These

programs are discussed below.

Fuel Facilities Licensing and Inspection

The NRC licenses and inspects all commercial nuclear fuel facilities involved in the processing and fabrication of uranium ore into reactor

fuel as part of the agency’s nuclear fuel cycle

safety and safeguards mission. The NRC conducts detailed health, safety, safeguards and

environmental licensing reviews

and inspections of licensee programs, procedures, operations, and

facilities to ensure safe and secure

operations. Each of the 47 fuel

cycle facilities holds a license that

specifies the materials the licensee

may possess, sets restrictions on

how the materials may be used,

and establishes additional licensee responsibilities (such as

worker protection, environmental

controls, and financial assurance), as appropriate.

NRC issues and maintains

licenses or certificates to fuel

facility operators, to authorize

their possession and use of source,

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.

Overview

The Nuclear Materials Safety strategic arena

encompasses NRC-regulated aspects of nuclear

fuel cycle facilities and nuclear materials activities. This arena has oversight of more than

20,000 specific and 150,000 general licensees.

These licensees are regulated by the NRC and its

32 Agreement 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 includes all regulatory

activities carried out by the NRC and the AgreeControl Room at a Nuclear Power Plant
U.S. NUCLEAR REGULATORY COMMISSION

34

Program Performance (continued)

special nuclear, and byproduct material, in accordance with requirements promulgated in the Code

of Federal Regulations upon NRC approval of

license or certificate applications. These applications demonstrate how the facilities will be operated to ensure adequate safety and safeguards. In

FY 2001, The NRC completed 299 fuel cycle

licensing actions and conducted 144 inspections of

fuel cycle licensees.

A significant licensing action was initiated in

February 2001, by the submission of the Duke,

Cogema, Stone & Webster (DCS) application to

construct a mixed oxide (MOX) fuel fabrication

facility on the Department of Energy’s (DOE)

Savannah River Site near Aiken, South Carolina.

The proposed use of MOX fuel is part of a national non-proliferation effort to dispose of surplus weapons-usable plutonium by irradiating it in

existing commercial light water reactors. The

NRC performed an acceptance review of the

application and announced an opportunity for a

hearing. An NRC web site for MOX information

was developed and has posted all appropriate

incoming and outgoing documents on this web

site as long as they are not proprietary.

Three public meetings were conducted at

various locations near the proposed site to gather

comments from the public on the scope of the

environmental impact statement that the staff will

prepare for the license application review.

In FY 2001, the NRC staff proceeded to

implement significant amendments to 10 CFR

Part 70 which became effective on October 18,

2000. The amendments increase the use of risk

information for fuel cycle facilities. To support

implementation of the amended Part 70, NRC

published NUREG 1513, Integrated Safety

Analysis Guidance Document, which provides

guidance to NRC fuel cycle licensees and applicants on how to perform an integrated safety

analysis and document the results. The NRC

worked with stakeholders to substantially complete development of the Standards Review Plan

to implement the new requirements. Staff also

reviewed and interacted with licensees on their

plans for developing integrated safety analyses

and associated revisions.

The NRC continued its oversight of the

United States Enrichment Corporation’s (USEC’s)

two gaseous diffusion uranium enrichment plants

Turbine-Generator
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

35

located in Paducah, Kentucky and Portsmouth,

Ohio. In March 2001, NRC issued an amendment

to the Certificate of Compliance for the Paducah,

Kentucky, facility which allowed the Paducah

facility to enrich uranium up to a maximum of 5.5

weight percentage.11 NRC issued an amendment

to the Certificate of Compliance for the Portsmouth facility to enable the licensee to continue

to utilize the facility for sampling and transfer

operations. This amendment was issued in a

timely manner enabling USEC to test the modification in advance of shutting down the Portsmouth cascade.

Materials Users Licensing and Inspection

Currently, the NRC licenses and inspects

approximately 4,900 specific licenses for the use

of nuclear byproduct and other radioactive material. These uses include medical diagnosis and

therapy, medical and biological research, academic training and research, industrial gauging

and nondestructive testing, production of

radiopharmaceuticals, and fabrication of such

commercial products as smoke detectors and

other sealed sources and devices. In FY 2001,

NRC completed 4,166 materials licensing actions.

Detailed health and safety reviews and inspections of licensee procedures and facilities provide

reasonable assurance of safe operations and the

development of safe products. The NRC routinely inspects materials licensees to assure that

licensees are using nuclear material in a safe

manner, maintaining accountability of materials,

and protecting public health and safety. The NRC

identifies issues resulting from incidents and

events and analyzes operational experience from

NRC and Agreement State licensees. NRC

completed 1,387 nuclear materials program

inspections in FY 2001.

In the past year, the Materials Licensing and

Inspection programs made significant progress

towards identifying the regulatory applications

that would be amenable to, and would benefit

from, an increased use of risk insights and information. Draft screening criteria were published

and eight case studies were completed to (1)

evaluate the effectiveness of the screening criteria

for identifying regulatory applications amenable

to being risk-informed, (2) identify potential nearterm process improvements, and (3) evaluate

existing tools, methods and data. The case studies

were also used to evaluate the feasibility and

usefulness of developing safety goals specific to

nuclear material and waste regulation. As a result

of this effort, proposed draft safety goals were

derived from the case studies, which will be

further evaluated and refined in FY 2002.

The NRC continued its monitoring of materials safety issues through its event evaluation and

incident response activities. In FY 2001, an event

occurred in Panama involving the incorrect use of

treatment planning software for performing

therapeutic radiation treatments. After an analysis

of the event, an Information Notice was sent to all

medical licensees to inform them about the proper

use of treatment planning software for performing

therapeutic radiation treatments.

State and Tribal Programs

The NRC provides for cooperation, oversight,

technical assistance, and liaison with States, local

governments, Indian tribes, and interstate organizations. The NRC shares its regulatory responsibilities with 32 states, called “Agreement States”.

This program works with these other organizations to ensure that the State programs are adequate and compatible with NRC regulatory

programs to attain a uniform materials safety

policy throughout the nation. The NRC, with

Agreement State participants, also conducts

periodic Integrated Materials Performance Evaluation Program (IMPEP) reviews of Agreement States

programs to ensure public health and safety and

compatibility of Agreement State programs with

NRC programs. IMPEP uses a common evaluation

process that is applicable to both Agreement State

and NRC regional materials programs.
U.S. NUCLEAR REGULATORY COMMISSION

36

Program Performance (continued)

MEASURE

1. 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 licensed material.12

2. No more than six events per year resulting in significant radiation or

hazardous materials exposures13 from the loss or use of source, byproduct,

and special nuclear materials.

3. No events resulting in releases of radioactive material resulting from civilian

uses of source, byproduct, or special nuclear materials that cause an adverse

impact on the environment.14

4. No losses, thefts, or diversion of formula quantities of strategic special

nuclear material; radiological sabotages; or unauthorized enrichment of

special nuclear material regulated by NRC.15

5. No unauthorized disclosure or compromise of classified information causing

damage to national security.16

RESULTS

All measures were met

each year in FY 1997

through 2001. In FY

1999, 4 events occurred

related to measure

Number 2.

Performance Goals

In addition to our strategic goals, the NRC also has four performance goals and measures for the

Nuclear Materials Safety. The performance goals are:

• Maintain safety, protection of the environment, and the common defense and security.

• Increase public confidence.

• Make NRC activities and decisions more effective, efficient, and realistic.

• Reduce unnecessary regulatory burden on stakeholders.

Strategic and Performance Goals and Measures

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.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

37

Performance Goal Results

MEASURES

1. No more than 35017 losses of control of licensed material per year.18

2. No occurrences of accidental criticality.19

3. No more than 40 events per year20 resulting in radiation over-exposures21

from radioactive material that exceed applicable regulatory limits.

4. No more than 45 medical events per year.22

5. No more than 6 releases per year23 to the environment of radioactive

material from operating facilities that exceed the regulatory limits.24

6. No more than 5 substantiated cases per year of attempted malevolent use25

of source, byproduct, or special nuclear material.

7. No breakdowns of physical protection or material control and accounting

systems resulting in a vulnerability to radiological sabotage, theft, diversion, or unauthorized enrichment of special nuclear material.26

8. No non-radiological events that occur during NRC-regulated operations

that cause impacts on the environment that cannot be mitigated within

applicable regulatory limits, using reasonably available methods.27

RESULTS

All measures were met

each year in FY 1997

through 2001.

For the first measure, there were 298 losses of

control of licensed material in FY 2001. This was

within our target of 350. The target was lowered

in FY 2001 from 356 to 350 and was further

lowered in FY 2002-2003 from 350 to 300.

(See graph below.)

This measure tracks reportable events of

materials entering the public domain in an uncontrolled manner. Many of the events counted here

do not, on an individual basis, present a public

health and safety risk. For example, majority of

the losses of control of licensed material are of

shielded materials, which are unlikely to result in

over-exposures to individuals or releases to the

environment. However, they are included because

their loss may indicate licensee program weaknesses, which, if ignored, could trigger a more

significant problem.

For the second measure, there were no instances of accidental criticality in FY 2001, or in

any year since data collection began in FY 1997.

Inadvertent criticality accidents are required to be

reported whether or not they result in exposures

or injuries to workers or the public and whether or

not they result in adverse impacts on the environment. Events of this magnitude are not expected

and would be rare.

Performance Goal: Maintain safety, protection of the environment, and the common

defense and security.

500

No More than 350 Losses of Control

of Licensed Nuclear Material

300

200

100

0

1997 1998 1999 2000 2001

283

239 246 259

298

400
U.S. NUCLEAR REGULATORY COMMISSION

38

Program Performance (continued)

Our third measure indicates that there were 18

events resulting in radiation over-exposures from

radioactive material that exceeded applicable

regulatory limits in FY 2001. For the years since

data collection began, the peak year was FY 1999

when 25 events occurred. (See graph below.)

This measure pertains to medical events

reported under 10 CFR Part 35, “Medical Use of

Byproduct Material.” The NRC’s medical use

program includes users of byproduct material in

medical diagnosis and therapy.

As an indicator of the effectiveness of our

nuclear materials environmental programs, for the

fifth measure there were no releases to the environment that exceeded regulatory limits in FY 2001.

(See graph below.)

Releases under 10 CFR 20.2203(a)(3) are

counted for this performance measure.

Our sixth performance measure tracks our

effectiveness at deterring or preventing malevolent uses of nuclear materials. There were no

cases of attempted malevolent use of source,

byproduct, or special nuclear material in FY 2001.

(See graph below.)

For fuel cycle facilities, this measure extends to

other hazardous materials used with, or produced

from, licensed material, consistent with 10 CFR

Part 70. Reportable chemical exposures are those

that exceed license commitments. It would also

include chemical exposures involving uranium

recovery activities under the Uranium Mill Tailings Radiation Control Act.

For the fourth measure there were 26 medical

events in FY 2001. For the years since GPRArelated data collection began, the peak year was FY

1998 when 42 events occurred. Since that time the

trend is downward. (See graph below.)

50

No More than 40 Events Resulting in

Radiation Over-Exposures

30

20

10

0

1997 1998 1999 2000 2001

10 11

25

15

18

40

35

25

15

45

5

50

No More than 45 Medical Events

30

20

1997 1998 1999 2000 2001

33

42

36 35

26

40

35

25

45

6

No More than 6 Releases

to the Environment

4

3

2

0

1997 1998 1999 2000 2001

1

0

1

2

0

5

1

6

5

4

3

0

1999 2000 2001

2

No More than 5 Substantiated Cases

of Malevolent Use of Source, Byproduct

or Special Nuclear Material

1

2 2

0
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

39

nuclear materials, thereby compromising public

health and safety.

For the eighth measure, there were no instances of non-radiological events that occur

during NRC-regulated operations that cause

impacts on the environment in FY 2001, or in any

year since GPRA related data collection began in

FY 1997. This measure only involves chemical

releases from the NRC-related activities under the

Uranium Mill Tailings Radiation Control Act. It is

limited to non-radiological environmental impacts

from operations, including remediation. Examples

of events that might be counted include chemical

releases resulting from excursions at in situ leach

facilities or releases from mill tailings piles that

could contaminate the groundwater.

Performance Goal: Increase public confidence.

MEASURES

1. Complete milestones relating to collecting, analyzing, and trending

information for measuring public confidence.

2. Complete all the public outreaches.

3. Complete the milestones specific to the agency allegation program

effectiveness assessment plan.

4. Issue Director’s Decisions for petitions filed to modify, suspend, or

revoke a license under 10 CFR 2.206 within an average of 120 days.

RESULTS

The first three performance

goal measure targets were

met in FY 2001 Performance measure four was

not applicable in FY 2001

because no petitions were

filed in the nuclear

materials safety arena

in FY 2001.

Malevolent use is defined as the deliberate

misuse of radioactive materials with the intent to

cause physical or psychological harm to a person or

persons, or to cause physical damage to a facility or

to the environment. NRC evaluates intentional

violations and deliberate acts against this definition.

Our seventh performance measure indicates

that there were no breakdowns of physical protection or material control and accounting systems

resulting in a vulnerability to radiological sabotage, theft, diversion, or unauthorized enrichment

of special nuclear material in FY 2001, or in any

year since GPRA related data collection began in

FY 1997. Events collected under this performance

measure may indicate a vulnerability to radiological sabotage, theft, diversion, or loss of special

For measure number one, the milestones to

conduct semi-annual evaluations of public meeting feedback forms were met for FY 2001. These

forms have been evaluated to determine their

usefulness in assessing public confidence. NRC

compiled and analyzed the results of all the

feedback forms received from the public for the

period March 31 to September 1, 2001. NRC has

analyzed 182 public meeting feedback forms

representing 33 meetings. Trending information

was included in the semi-annual evaluations.

(See the Nuclear Reactor Safety arena for discussion of trend analysis) NRC staff will be terminating the pilot program in February 2002 and

will make a final recommendation to the Commission regarding further use of the forms.

Holding public outreach meetings is a method

to provide the public with information on NRC

activities. All of the scheduled public outreach

meetings for measure number two were held.

The FY 2001 milestone for performance

measure three was to start distributing a survey to

stakeholders bringing safety and non-compliance

regulatory allegation issues to NRC’s attention.
U.S. NUCLEAR REGULATORY COMMISSION

40

Program Performance (continued)

The purpose of the survey is to ascertain how

NRC did in responding and addressing the

allegers issues. The survey results are currently

being analyzed.

Measure number four was not applicable

because there were no petitions filed under

10 CFR 2.206 in the Nuclear Materials Safety

Arena in FY 2001.

Performance Goal: Reduce unnecessary burden on stakeholders.

and Water Development Appropriations Act,

2002) included a prohibition on spending NRC

funds to implement or enforce revised Part 35,

with respect to diagnostic nuclear medicine. The

Commission was instructed by Congress to

reexamine revisions to Part 35 and provide a

Performance Goal: Make NRC activities and decisions more effective, efficient,

and realistic.

MEASURES

1. Complete those specific materials milestones in the Risk-Informed

Regulation Implementation Plan.

2. Complete at least two key process improvements per year in selected

program and support areas that increase efficiency, effectiveness, and

realism.

RESULTS

All of these performance

measure targets were

met in FY 2001.

Measure number one focuses on progress in

developing a coordinated approach to implementing

risk-informed decisions throughout the agency’s

regulatory processes. The milestones towards

developing a risk-informed regulation implementation plan (RIP-IP) were completed on schedule.

These included sending the RIP-IP to the Commission and briefing them on the contents (OctoberNovember 2000) and developing final criteria and

milestones for Commission approval (August 2001).

Measure number two shows steps taken to

improve our internal processes. This year four

process improvements were completed. These

were the Nuclear Materials Phase I and II studies,

a rulemaking efficiency process review, and a

self-assessment of the sealed source and device

program. These are described in more detail in

the Program Evaluation section of this report.

MEASURES

1. Complete specific milestones to reduce unnecessary regulatory burden.

2. Reduce paperwork and record keeping by the NRC on its licensees by at

least 25 percent over a period of 5 years.

RESULTS

We did not meet our

performance measure

targets for this goal in

FY 2001.

We did not meet our target for either measure.

For the first measure, the NRC completed work

on the Part 35 rule earlier this year, and received

conditional approval from OMB for clearance of

information collection requirements on September

18, 2001. However, Public Law 107-66 (Energy
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

41

Fuel Facilities Licensing

and Inspection

$14.6 M

Other

$6.7 M

Nuclear Materials

Users Licensing

and Inspection

$25.5 M

State and Tribal

Programs

$3.8 M

Budget Authority by Program

(Millions)

Total Funding was $50.6 Million

report to Congress in FY 2002 which explains

why the burden imposed by revised Part 35 could

not be further reduced. Once this report is submitted, the revised Part 35 may be implemented.

We did not meet our target for the second

measure. However, in FY 2001, the staff’s focus

on reducing paperwork and recordkeeping imposed by NRC centered on the revision to 10 CFR

Part 35, which the staff estimates will result in a

12 percent reduction as compared to the current

requirements, when it is made effective. Implementation of Part 35 was pending during FY 2001 while

awaiting Congressional decision but will proceed in

FY 2002. Note that other rulemaking actions result

in an increase in necessary burden (and therefore in

the total burden) as part of an effort to protect public

health and safety. For example, a change to Part 70

(Special Nuclear Material) created a modest increase

in paperwork requirements.

Funding for achieving our strategic

and performance goals

The nuclear materials safety arena budget

totaled $50.6 million in FY 2001. More than 85

percent of the funds in this arena were allocated

to three key program areas: fuel facilities licensing and inspection, nuclear materials users licensing and inspection, and state and tribal programs

(see chart below).

Program Evaluation

The National Materials Program

In the continuing effort to improve the effectiveness of the broader materials safety program,

NRC has undertaken to partner with Agreement

States on the development of a National Materials

Program. The objectives of this comprehensive

program review are:

• Protect public health and safety;

• Optimize resources of Federal, State,

professional, and industrial organizations;

• Account for individual agency needs

and abilities;

• Promote consensus on regulatory

priorities;

• Promote consistent exchange of

information;

• Harmonize regulatory approaches; and

• Recognize State and Federal needs

for flexibility.

In support of this effort, NRC convened a

Working Group of NRC and Agreement State

representatives to coordinate with a Panel established by the Conference of Radiation Control

Program Directors, Inc., (CRCPD), to examine

the structure and framework for a National Materials Program. The National Materials Program

Working Group, consisting of six representatives

from States, six NRC representatives and an NRC

advisor, first met in early 2000.

The Working Group evaluated different

approaches to and elements of a national materials and radiation control program. These elements included aspects of: licensing and inspection programs, rule and guidance development,

and mechanisms for communicating with stakeholders. Once basic program elements were

identified, the Working Group next developed and

evaluated a range of possible options for a national program. After defining the current national regulatory program, five alternative ap-
U.S. NUCLEAR REGULATORY COMMISSION

42

Program Performance (continued)

proaches were developed and evaluated. These

alternatives ranged from allowing all States to

independently regulate all radioactive materials

without Federal oversight, to a structure with only

one regulatory entity having jurisdiction over all

radioactive material in the United States.

During this process, the Working Group

conducted a tabletop exercise at the October 2000

Organization of Agreement States meeting, and

made presentations and held discussions at the

2000 and 2001 annual meetings of the CRCPD.

The Working Group considered the advantages and disadvantages of each option and

potential resource implications, and issued its

recommendations in a Report. The Working

Group Report also presents the history, current

status and a prediction of future challenges for the

national program. The Report envisions a

cooperative, consensus approach (Alliance

Option) to a national program as the best vehicle for achieving NRC’s current strategic

goals, as well as the goals and objectives of a

future National Materials Program.

Review of Byproduct Materials Program

A two-phase evaluation of aspects of the

nuclear materials program was conducted in FY

2001. The circumstances surrounding the overexposures at the Mallinckrodt facilities were reviewed in Phase 1, and the follow-on Phase 2

group conducted an independent review of the

nuclear byproduct materials program. Each of

these reviews led to a series of recommendations

(long-term and near-term) for improving and riskinforming the nuclear materials program.

Integrated Materials Performance Evaluation Program (IMPEP) Reviews

In FY 2001, NRC completed a review of the

Region I Materials Program. The review was

conducted by a multi-disciplinary team, and

included the participation of NRC and Agreement

State personnel. The team found the Region I

operations to be fully satisfactory with respect to

technical quality of licensing, inspections, status

of the inspection program, response to incidents

and allegations, and technical staffing and training. The Management Review Board (MRB)

supported the team’s proposed findings and

determined that the program was operating in a

manner that was adequate to protect public health

and safety.

Evaluation of Sealed Source and

Device Program

An evaluation of aspects of the Sealed Source

and Device Program was conducted. The review

team found program operations to be fully satisfactory as compared with performance benchmarks.

An MRB meeting was scheduled for a later date in

FY 2002 to review the team’s findings.

Other Reviews

A review of the rulemaking process was completed in FY 2001, resulting in the development of

an improved direct final rule process that will

streamline future rulemakings. Also in FY 2001, a

review of the IMPEP process, and a review of the

Event Reporting Program were conducted.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

43

Nuclear Waste Safety

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.

Overview

The Nuclear Waste Safety Arena encompasses

regulatory activities associated with decommissioning of nuclear reactors and other facilities, storage of

spent nuclear fuel, transportation of radioactive

materials, and disposal of radioactive wastes.

The NRC has regulatory oversight for the

transportation of radioactive materials and the

interim storage of spent nuclear fuel. In 1987,

the Nuclear Waste Policy Act (NWPA) was

amended, directing the DOE to characterize only

one site at Yucca Mountain in the State of Nevada. Therefore, the NRC’s activities under the

NWPA now focus on a potential Yucca Mountain

repository. NRC efforts in this arena also include

decommissioning, waste safety research, lowlevel waste disposal and spent fuel storage and

transportation licensing. The NRC’s low-level

radioactive waste activities are conducted in

accordance with the Low-Level Radioactive

Waste Policy Act of 1980, amended in 1985.

Ensuring the safe transportation

and disposal of nuclear waste

The Nuclear Waste Safety Arena has oversight

of several distinct program areas. These programs are discussed below.

Spent Fuel Storage and Transportation

Licensing and Inspection

Approximately three million shipments of

radioactive materials are made each year in the

United States. Regulating the safety and security

of these shipments is a responsibility shared by a

number of different Federal agencies, including

the NRC. To carry out its regulatory responsibilities for spent fuel and non-spent fuel storage and

transportation, the NRC certifies both transport

container package designs and spent fuel storage

cask designs. The NRC also licenses and inspects

interim storage of spent fuel at both reactor and

away-from-reactor sites. This helps ensure that

licensees transport nuclear materials in packages

that will provide a high degree of safety and that

licensees provide safe interim storage of spent

reactor fuel. NRC’s transportation activities are

closely coordinated with those of the Department

of Transportation (DOT) and, as appropriate, with

the DOE and the Federal Emergency Management Agency. NRC’s transportation activities

also include reviewing transportation plans,

performing physical security reviews and surveys

for shipments of nuclear material, and relaying to

DOT notifications from licensees and carriers of

planned import, export, or domestic shipment of

nuclear material.

During FY 2001, NRC implemented changes

to 10 CFR 72.48, “Changes, Tests, and Experiments.” These changes to the regulation permit a

licensee or certificate holder to make minor

changes to a spent fuel storage cask or facility,

without prior NRC review and approval, thereby

reducing the burden and increasing the flexibility

for both the licensee and the NRC.

These changes are limited to those that do not

impact public health and safety.

NRC also achieved a significant reduction in

the time necessary to process certificates of

compliance rulemaking actions for the interim

storage of spent fuel. This streamlining initiative

has increased industry storage options,

and in so doing, has addressed an important

national need.
U.S. NUCLEAR REGULATORY COMMISSION

44

Program Performance (continued)

Two rulemakings were completed to

certify new storage cask designs for use

at reactor sites under the general license

provisions, and eight significant

rulemakings associated with Certificate

of Compliance amendments for six

different storage cask designs were

completed. These rulemakings and

amendments support the storage needs of

specific utilities intending to use the

designs as modified. Also completed

were the initial transport certification of a

dual-purpose cask design, and two

transportation cask revisions for a dualpurpose design. In addition, the NRC

completed a safety evaluation report for a

Naval Reactors independent spent fuel

storage installation, and approved a topical

report on the Central Interim Storage

Facility for the Department of Energy.

In FY 2001, the Spent Fuel Storage and

Transportation Licensing and Inspection program completed 79 transport container design

reviews and 62 storage container and installation

design reviews. (See graph below that displays

the results from FY 1998-2001.) Note that the

number of transport container design reviews

completed during FY 1998-2001 reflect an increase in the number of amendment requests

received for non-spent fuel container designs in

those years due to new 10 CFR Part 71 requirements, incorporating 1985 International Atomic

Energy Agency regulations. Fewer completions of

design reviews in FY 2000-2001 reflects a decrease

in the numbers of amendment requests in each of

those years from prior fiscal years.

High-Level Waste Regulation

The NRC’s HLW program is conducted in

accordance with the Nuclear Waste Policy Act, as

amended, and the Energy Policy Act of 1992.

This legislation specifies an integrated approach

and a long-range plan for HLW storage, transportation, and disposal. It also prescribes the respective roles of the NRC, DOE, and EPA in the HLW

program. The DOE has the responsibility for the

actual disposal of the nation’s HLW commencing

with site characterization and repository design,

and continuing through development, operation,

and ultimate closure of a deep geologic repository. The EPA has been charged with developing

Starter tunnel at proposed Yucca Mountain site

140

Storage and Transportation Design

Reviews Completed

120

100

80

0

1998 1999 2000 2001

Transportation Container design Reviews

Storage Container/

Installation Design Reviews

60

40

20
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

45

Yucca Mountain specific environmental standards, consistent with the recommendations of the

National Academy of Sciences, that will be used

to evaluate the safety of the potential geologic

repository developed by DOE. The NRC has

extensive pre-licensing responsibilities and is the

regulatory authority to issue a license, if appropriate, after determining whether the potential DOE

license application for a geologic repository at

Yucca Mountain, Nevada, complies with the

applicable regulatory standards.

In FY 2001, the NRC approved the final

regulations for 10 CFR 63, providing site-specific

criteria for use in a possible licensing decision on

a potential waste repository at Yucca Mountain,

Nevada. These regulations are consistent with the

EPA standards. The NRC also reviewed the

DOE’s Supplemental Draft Environmental Impact

Statement for the potential high-level waste

repository at Yucca Mountain, Nevada.

NRC continued important technical exchanges

with DOE on the key technical issues most

important to licensing the potential HLW repository to resolve subissues or reach agreement for

DOE to submit additional information to address

NRC’s concerns. Further, NRC held numerous

meetings with stakeholders on health

and safety issues associated with a

potential HLW repository at Yucca

Mountain, Nevada.

Decommissioning

Decommissioning involves

removing radioactive contamination

in buildings, equipment, groundwater,

and soil to such levels that a facility

can be released from service for either

unrestricted or restricted use. This

program includes power and nonpower reactors, materials and fuel

facilities.

The NRC conducts decommissioning licensing and inspection activities for commercial

nuclear facilities currently in the decommissioning process. Licensing actions require

NRC review and approval before they can be

implemented by licensees. By conducting

inspections, the NRC evaluates the licensee’s

ability to store or dismantle and decontaminate

the facility in a safe manner maintaining the

licensed configuration of the facility and managing the use of decommissioning funds as

described in the regulations.

The decommissioning program focuses on

resolving key issues, including dose assessments for remediated sites, and institutional

control; conducting reviews of decommissioning plans; conducting environmental reviews;

and preparing Environmental Impact Statements (EISs), as appropriate.

The NRC maintains a Site Decommissioning

Management Plan (SDMP) list which contains

sites that are complicated by technical, financial,

and/or other challenges that must be addressed

before decommissioning can be completed.

During FY 2001, NRC approved the removal of

one site from the SDMP.

Decommissioning of the Ft. St. Vrain reactor in Colorado
U.S. NUCLEAR REGULATORY COMMISSION

46

Program Performance (continued)

The NRC also completed the safety and

environmental review of the Trojan Nuclear Plant

License Termination Plan (LTP) leading to the

first approval by the staff of an LTP submitted

pursuant to NRC’s requirements at 10 CFR 50.82.

NRC completed its evaluation of previously

terminated licenses to determine if the facilities

had been adequately decontaminated prior to

license termination. Appropriate follow-up actions are being taken for those sites requiring

further review.

Waste Safety Research

The Waste Safety Research program supports

the NRC’s activities associated with decommissioning of nuclear reactors and other facilities, and the

interim storage and transportation of spent nuclear

fuel. Research activities provide the technical basis

to confirm the adequacy of regulations and guidance

to maintain safety in areas such as decommissioning

and interim spent fuel storage.

Strategic and Performance Goals and Measures

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.

MEASURES

1. No deaths resulting from acute radiation exposure from radioactive waste.28

2. No events resulting in significant radiation exposure29 from radioactive waste.

3. No release of radioactive waste causing an adverse impact on the

environment.30

4. No losses, thefts, diversion, or radiological sabotages31 of special nuclear

material or radioactive waste.

RESULTS

All measures were met

each year in FY 1997

through 2001.

The first measure identifies death to an individual as a result of short term exposure to radiation. Events meeting this threshold are reported

to the NRC and/or Agreement States primarily

through required licensee notifications, though

other sources may also report events. The second

measure identifies significant radiation exposures

that result in unintended permanent functional

damage to an organ or a physiological system as

determined by a physician. Events meeting this

threshold are reported to the NRC and/or Agreement States primarily through required licensee

notifications, though other sources may also

report events. The third measure identifies releases that have the potential to cause “adverse

impact.” Such releases are currently undefined; as

a surrogate, NRC will use those that exceed the

limits for reporting abnormal occurrences. Events

meeting this threshold are also reported to NRC

and/or Agreement States primarily through required licensee notifications, though other sources

may also report events. The fourth measure identifies any losses, theft, diversion, or radiological

sabotages of radioactive waste being stored at a

nuclear facility or while in transit. Licensees report

events which entail losses, thefts, diversions, or

radiological sabotages of special nuclear material or

radioactive waste within one hour of their occurrence to the NRC Headquarters Operations Center.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

47

Performance Goals

In addition to our strategic goals, the NRC also has a set of four performance goals and associated

performance measures for the nuclear waste safety arena. The performance goals are:

• Maintain safety, protection of the environment, and the common defense and security.

• Increase public confidence.

• Make NRC activities and decisions more effective, efficient, and realistic.

• Reduce unnecessary burden on stakeholders.

Performance Goal Results

Performance Goal: Maintain safety, protection of the environment, and the common

defense and security

MEASURES

1. No events resulting in radiation overexposures32 from radioactive waste that

exceed applicable regulatory limits.33

2. No breakdowns of physical protection resulting in a vulnerability to radiological sabotage, theft, diversion, or loss of special nuclear materials or

radioactive waste.34, 35

3. No radiological releases36 to the environment from operational activities that

exceed the regulatory limits.37

4. No instances where radioactive waste and materials under the NRC’s

regulatory jurisdiction cannot be handled, transported, stored, or disposed of

safely now or in the future.38, 39

RESULTS

All measures were met

each year in FY 1997

through 2001.

For the first measure, there were no radiation

overexposures from radioactive waste that exceeded regulatory limits in FY 2001 or in any

year since GPRA related data collection began in

FY 1997. Radiation over-exposures are those

events that exceed limits provided by NRC

regulation10 CFR 20.2203(a)(2). This measure

focuses on events which could result in public or

worker overexposures. The events captured by

this measure were chosen to identify processes or

procedures that could be indicators of potential

weaknesses in the regulatory program which need

to be addressed.

For the second measure, there were no breakdowns of physical protection resulting in a vulnerability to radiological sabotage, theft, diversion,

or loss of special nuclear materials or radioactive

waste in FY 2001, or in any year since GPRA

related data collection began in FY 1997. Events

collected under this performance measure are

those that may indicate a vulnerability to radiological sabotage, theft, diversion, or loss of

special nuclear materials or radioactive waste,

thereby compromising public health and safety.

For the third measure, there were no radiological releases to the environment from operational activities that exceeded the regulatory

limits in FY 2001 or in any year since GPRA

related data collection began in FY 1997.

For the fourth measure, there were no instances where the NRC did not provide an ad-
U.S. NUCLEAR REGULATORY COMMISSION

48

Program Performance (continued)

equate regulatory framework for radioactive

waste and materials under the NRC’s regulatory

jurisdiction to be handled, transported, stored, or

disposed of safely in FY 2001 or in any year since

GPRA related data collection began in FY 1997.

NRC monitors the needs for transportation of

materials and waste within its regulatory authority. The NRC also monitors the needs for storage

and disposal of nuclear wastes under its regulatory authority. For the majority of radioactive

waste or materials, there are no expected instances where they cannot be handled, transported, or disposed of safely now or in the future.

However, there may be a potential that sites that

were thought to be previously cleaned up and

NRC’s licenses terminated may require additional

cleanup. To address this issue, NRC evaluated all

terminated licenses and, in FY 2001, identified

two facilities that could require additional

cleanup. Appropriate follow-up actions are

underway for these few facilities.

Performance Goal: Increase public confidence.

MEASURES

1. Complete milestones relating to collecting, analyzing, and trending information for measuring public confidence.

2. Complete all the public outreaches.40

3. Complete the milestones specific to the agency allegation program effectiveness assessment plan.

4. Issue Director’s Decisions for petitions filed to modify, suspend, or revoke a

license under 10 CFR 2.20641 within an average of 120 days.42

RESULTS

The first three performance

measure goal targets were

met in FY 2001. Performance measure 4 was not

applicable in FY 2001

because no petitions were

filed in the nuclear

materials safety arena in

FY 2001.

The first milestone to conduct semi-annual

evaluations of public meeting feedback forms was

met for FY 2001. These forms have been evaluated to determine their usefulness in assessing

public confidence. NRC compiled and analyzed

the results of all the feedback forms received from

the public for the period March 31 to September

1, 2001. NRC has analyzed 182 public meeting

feedback forms sent in by the Offices and Regions, representing 33 meetings. Trending information was included in the semi-annual evaluation. (See the Nuclear Reactor Safety arena for

discussion of trend analysis)

NRC staff will be terminating the pilot program in February 2002 and will make a final

recommendation to the Commission regarding

further use of the forms.

The second measure to holding public outreach meetings is a method to provide the public

with information on NRC activities. Four of the

scheduled public outreach meetings were held.

The FY 2001 milestone for performance

measure three was to start distributing a survey to

stakeholders bringing safety and non-compliance

regulatory allegation issues to NRC’s attention.

The purpose of the survey is to ascertain how

NRC did in responding and addressing the

allegers issues. The survey results are currently

being analyzed.

The fourth measure assesses the timeliness by

which Director’s Decisions for petitions filed to

modify, suspend, or revoke a license under 10

CFR 2.206 are issued. There were no petitions

filed under 10 CFR 2.206 in the Nuclear Waste

Safety arena in FY 2001.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

49

Performance Goal: Make NRC activities and decisions more effective, efficient,

and realistic.

MEASURES

1. Complete those specific waste milestones in the Risk-Informed Regulation

Implementation Plan.

2. Complete at least two key process improvements per year in selected program

and support areas that increase efficiency, effectiveness, and realism.

3. Complete all major prelicensing milestones needed to prepare for a licensing review of the potential Yucca Mountain repository, consistent with

DOE’s schedules and before DOE submits its license application.43

RESULTS

All of the performance

goal measure targets

were met in FY 2001,

except two milestones in

measure number three

over which the NRC did

not have control.

The first measure focuses on progress in

developing a coordinated approach to implementing risk-informed decisions throughout the

agency’s regulatory processes. The milestones

towards developing a risk-informed regulation

implementation plan (RIP-IP) were completed on

schedule. These included sending the RIP-IP to

the Commission and briefing them on the contents (October-November 2000) and developing

final criteria and milestones for Commission

approval (August 2001).

For the second measure, five process improvements were completed in FY 2001. The

nuclear waste safety arena developed and implemented a more efficient and focused regional

decommissioning inspection program; developed

and implemented a phased review of decommissioning plans for restricted release sites; developed guidance for changing Licensing Termination Plans without requiring a license amendment;

conducted annual self-assessment of the process

for resolving the key technical issues for licensing

a potential high-level repository at Yucca Mountain Nevada site; and issued generic guidance for

implementing revisions to 10 CFR 72.48, “Changes,

Tests and Experiments,” which were designed to

improve the flexibility of the regulation.

For the third measure, three of the five milestones were completed in FY 2001. The issuance

of the Yucca Mountain Review Plan document

could not be completed in FY 2001. 10 CFR Part

63 Disposal of High-Level Radioactive Waste in a

Proposed Geologic Repository at Yucca Mountain

Nevada,” formed the basis to complete the document, and the final rule was approved by the

Commission on September 7, 2001, after resolution of complex issues concerning Yucca Mountain standards. NRC published the final 10 CFR

Part 63, revised to conform to the final EPA

standards, on November 2, 2001. The Site Characterization Sufficiency Comments were not

completed in FY 2001 because in July 2001, DOE

requested that NRC include an additional document in its review and that request extended the

time needed by NRC to complete its review to

November, 2001.
U.S. NUCLEAR REGULATORY COMMISSION

50

Program Performance (continued)

Performance Goal: Reduce unnecessary burden on stakeholders.

MEASURE

1. Complete specific milestones to reduce unnecessary regulatory burden.

RESULTS

This performance

measure target was met

in FY 2001.

The milestone to reduce unnecessary regulatory burden for the Nuclear Waste Safety Arena

was completed. NRC reviewed and made recommendations for improving the

10 CFR Part 72 Cask Certification Process.

Improvements included using the direct final

rulemaking process and implementing a streamlined

rulemaking process to expedite approvals which

reduced regulatory burden to our stakeholders.

Funding for Achieving Our Strategic

and Performance Goals

The nuclear waste safety arena budget totaled

$62.3 million in FY 2001. The funding was

allocated on four key program areas (see graph

below). Each program area provides a specific

role to ensure safety and protection of the public

and environment from radioactive waste. High

level waste regulation accounted for approximately one third of the allocated funds. The

regulation of decommissioning accounted for

another 20 percent. Waste Safety Research, which

accounted for approximately 13 percent of the

allocated funds, supports the NRC’s activities

associated with decommissioning of nuclear

reactors and other facilities, and the interim

storage and transportation of spent nuclear fuel.

Program Evaluation

Regulation of Decommissioning,

Regional Laboratory Evaluations

In July 2001, NRC staff conducted an review

of the NRC Region I and Region III laboratories

to: (1) evaluate implementation of Regional

corrective actions resulting from the annual audit

conducted by the U.S. Department of Energy’ s

(DOE’s) Radiological and Environmental Sciences Laboratory (RESL); (2) determine the types

and number of samples analyzed since the last

audit; and, (3) evaluate results from independent

test sample analyses.

In general, Region I and Region III have

satisfactorily implemented the corrective actions

resulting from the annual RESL audits. To ensure

that radiological measurements performed by the

laboratories were of acceptable precision and

accuracy and also reflected actual conditions and

licensee performance, the laboratories participated in independent sample analysis programs.

The Region I and Region III laboratories produced acceptable results for all test samples

High-Level

Waste Regulation

$21.6 M

Other

$7.6 M

Spent Fuel

Storage

$11.5 M

Waste Safety

Research

$8.7 M

Budget Authority by Program

(Millions)

Total Funding was $62.3 Million

Decommissioning

$12.9 M
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

51

analyzed. The results from this limited scope

surveillance indicate that the Region I and Region

III laboratories had adequate controls in place

during FY 2001 to produce credible, technically

defensible analytical results.

High-Level Waste Regulation,

Self-Assessment of the Key Technical Issue

Resolution Process

Starting in August 2000, the NRC and DOE

began a series of Technical Exchange and Management Meetings, specifically focusing on Key Technical Issues (KTIs). The goal of the KTI issue

resolution meetings was to discuss and review the

DOE progress on resolving specific KTI sub-issues

and then reach agreement with the DOE on what

additional information need to be provided and the

schedule for providing that information.

Overall, this series of meetings was very successful in focusing the NRC staff in defining what

additional information it believes is needed from the

DOE to support any future license application. The

meetings also allowed the public to comment and

ask questions on the individual issues, as well as to

provide general comments regarding the potential

Yucca Mountain site.

The NRC staff decided that following the

completion of a number of these meetings, it

would perform a self-assessment of the overall

KTI issue resolution process. The self assessment

was broken into five main areas: (1) technical

exchange lessons learned; (2) issue resolution

terminology; (3) communications with the DOE;

(4) risk-ranking the KTI agreements; and (5)

tracking of the agreements. Each individual area

addressed one or more of the four NRC Strategic

Plan performance goals. As a result of this selfassessment, the staff identified a number of

lessons learned and has provided recommendations to NRC management to ensure that future

meetings and activities are effective and efficient,

and that the issue resolution process will increase the

public’s confidence regarding how the NRC will

evaluate and review any future license application.

Modern disposal facility designs employ multiple barriers to contain radioactive waste. Waste is placed in canisters, which are

stacked in concrete vaults. A multilayer cover allows runoff, prevents infiltration, and provides radiation shielding.
U.S. NUCLEAR REGULATORY COMMISSION

52

Program Performance (continued)

International Nuclear Safety Support

Support U.S. interests in the safe and secure use of nuclear materials and in

nuclear nonproliferation.

Overview

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.

Maintaining a Program of

International Cooperation

The NRC maintains a program of international cooperation to help enhance the safe,

secure, and environmentally acceptable civilian

uses of nuclear energy both in the U.S. and

throughout the world. This includes work with

international organizations such as the International Atomic Energy Agency and the Nuclear

Energy Agency.

The International arena also encompasses the

issuance of import/export licenses, and undertakes

activities to ensure compliance with statutes, treaties,

conventions, and agreements for cooperation and

support for International Development-related work

for the countries of the Former Soviet Union (FSU)

and Central and Eastern Europe (CEE).

As the regulator of the world’s largest civilian

nuclear program, the NRC has extensive regulatory experience to contribute to international

programs in areas such as nuclear reactor safety,

Participants from the Central and Eastern European countries and the Former Soviet Union and NRC managers at the

IAEA sponsored meeting, “Regulatory Review of Licensee Safety Programme.”
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

53

nuclear safety research, radiation protection,

nuclear materials safety and safeguards,44 waste

management, and decommissioning of nuclear

facilities. The NRC can learn, in turn, from the

regulatory experience of other countries. NRC

gains access to non-U.S. safety information

through interaction with foreign entities, thereby

leveraging NRC resources. Additionally, the

NRC supports the development and implementation of international regulatory standards, policies, and practices.

The International Nuclear Safety Support arena has established three measures to determine our

success in meeting our strategic goal for the International Nuclear Safety Support strategic arena.

These measures are:

MEASURE

1. Fulfills 100 percent of the significant45 obligations over which the NRC has

regulatory authority arising from statutes, treaties, conventions, and

Agreements for Cooperation.46

2. No significant proliferation incidents attributable to some failure of the NRC.

3. No significant safety or safeguards events that result from the NRC’s failure

to implement its international commitments.

RESULTS

The first measure was

met each year in

FY 1997 through 2001.

The other 2 measures

have been met since

they were established

in FY 2000.

For performance measure number one, In FY

2001, NRC carried out 100 percent of the significant obligations over which it has regulatory

authority arising from statutes, treaties, conventions and Agreements for Cooperation. For

example, NRC facilitated the timely processing of

all export license applications; provided timely

comments to the Executive Branch when consulted on proposed international nuclear agreements and technology transfers; identified safeguards-eligible facilities and provided associated

design information to the Department of State for

submission to the International Atomic Energy

Agency, as needed; required U.S. licensees to

meet mandatory physical protection criteria for

nuclear material during international transport;

and prepared the U.S. National Report for submission to Parties to the international Convention

on Nuclear Safety, in anticipation of the triennial

review meeting to be held in Vienna, Austria, in

FY 2002.

For performance measure number two, In FY

2001, no significant proliferation incidents were

reported by the U.S. Government, the International Atomic Energy Agency, or other authoritative international organization.

For performance measure number three, in FY

2001, no significant safety or safeguards events

were reported by the U.S. Government, the

International Atomic Energy Agency, or other

authoritative international organization.

During FY 2001, the U.S. National Report for

the Convention on Nuclear Safety (CNS) was

completed and approved by the Commission. The

report was transmitted to the International Atomic

Energy Agency (IAEA) Secretariat on September

12, 2001.

The NRC completed action on a proposed

export of highly-enriched uranium to Canada for use

as target material for medical isotope production.

The NRC also played a key role in defining

criteria for international agreements on exclusion,

clearance and exemption of contaminated and

radioactive materials, and for release of commodities for unrestricted use.
U.S. NUCLEAR REGULATORY COMMISSION

54

Program Performance (continued)

The NRC issued 122 import/export authorizations within 60 days (NRC licenses or amendments) including reviews of proposed exports of

proliferation-sensitive equipment and materials.

The NRC participated in IAEA Operational

Safety Review Team missions to the Czech

Republic (two) and Hungary; International Regulatory Review Team missions to Mexico,

Lithuania, the Czech Republic and Ukraine; and a

Radiation Protection mission to Tajikistan. We

conducted bilateral assistance activities in nuclear

safety and safeguards with Russia, Ukraine,

Armenia, Kazakhstan, and countries of central

and eastern Europe in close coordination with the

Departments of State and Energy. The NRC

successfully negotiated four bilateral exchange

agreements in FY 2001 between NRC and appropriate foreign counterparts to ensure that an

effective framework for NRC’s international

exchanges is in place.

Funding for Achieving Our Strategic

and Performance Goals

The international nuclear safety support arena

budget totaled $4.9 million in FY 2001, 87 percent

funded salaries and benefits, and 13 percent funded

contract support and travel.

Program Evaluation

There were no program evaluations identified

for the international nuclear safety arena in FY 2001.

160

Issuance of NRC Export/Import Licenses

For All Years, 100 Percent were

Completed within 60 Days

140

100

60

0

1998 2000 2001

Completed Staff Reviews

20

120

80

40

1999

Verification and Validation of

Performance 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 Report

Consolidation Act of 2000 requires that agency

heads assess the completeness and reliability of the

performance data used in this report. 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 by OMB.

Data Completeness

Data are considered complete if actual performance data are 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.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

55

Data Reliability

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 and Sources

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

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 normally

originate from external sources such as Agreement States and NRC licensees. The NRC

believes these data to be 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) periodic

review of Agreement State regulatory programs,

(5) NRC consultant/contractor reports, and (6)

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
U.S. NUCLEAR REGULATORY COMMISSION

56

Program Performance (continued)

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

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.

Improvements in performance data

In FY 2001, the Commission focused on

improving the Nuclear Materials Safety Arena

performance data received from Agreement

States. In response to issues identified during this

analysis, NRC staff members traveled throughout

the country to provide training to Agreement

State, NRC regional, and headquarters personnel

on the use of the events database and data collection procedures.

The NRC analyzed its data verification procedures for all of its performance measures during

FY 2001. The analysis evaluated the data collection, data analysis, and reporting procedures for

completeness, accuracy, consistency, and timeliness. The analysis also evaluated NRC management controls which ensure that the reported data

are valid and reliable. A Management Directive

which established standards and responsibilities

for our performance measurement system is being

developed during FY 2002 to provide guidance to

agency personnel on our performance measurement system.

A more complete discussion of data validation

and verification is included in our FY 2003

Budget Estimates and Performance Plan submitted to Congress. A complete explanation of data

verification and validation for each performance

measure is 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.

Management Challenges

Included in Appendix A is the Inspector

General’s summary of the most serious management challenges facing the agency and the

agency’s progress in addressing them. Also

included is management’s perspective on how

these challenges are being addressed. 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.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

57

Chapter IV: Corporate Management

and Support

approach to human capital planning and budgeting for the future.

The agency is focusing on using all available

personnel flexibilities and tools, and has obtained

authorities for new measures (e.g., authority to

waive dual compensation limitations) that have

strengthened the agency’s ability to meet staffing

requirements. These initiatives include recruitment bonuses, increased entry-level hiring,

retention incentives, waivers of dual compensation limitations, increases in higher level grades,

double-encumbering of positions to insure knowledge transfer, and student loan repayment programs. The use of several new recruitment

strategies resulted in a 54 percent increase over

FY 1999 hiring, including more than triple the

number of entry-level hires. The new recruitment

techniques include authorized on-the-spot job

offers, in selected circumstances; the personal

involvement of NRC senior managers in campus

visits; extensive up-front work in coordinating

assessments of students’ backgrounds prior to

visiting targeted universities; and increased entrylevel starting salaries to make them more competitive in the job market.

The agency has also implemented several new

programs, including a Nuclear Safety Intern

Program, a special Summer Hire Employment

Program, the renewal of the Graduate Fellowship

and Senior Fellowship programs, and the initiation of an undergraduate fellowship program.

The NRC is also focused on enhancing the

capabilities of its existing staff to meet the

agency’s needs more effectively. The training and

development of agency staff comprises three

major areas: external training, in-house training

and development, and management development.

Overview

The NRC has four primary corporate management and support areas which provide the infrastructure for the agency to effectively and efficiently

accomplish the mission and its strategic and performance goals. These areas are human capital management, information technology and information

management, financial management, and administrative support. The agency and these offices are

also focused on implementing the President’s

Management Agenda.

Human Capital Management

Human capital management and strategic

workforce planning at NRC are aimed at effectively supporting the agency’s mission, strategic

and performance goals, and other organizational

needs. During FY 2001, and continuing into FY

2002, NRC has developed and implemented a

systematic approach to ensure that it has the

appropriate staff skills and competencies to fulfill

its traditional safety mission, to enhance safeguards and security in response to the September

11, 2001, terrorist attacks on the United States,

and to address potential areas of new regulatory

responsibility.

In FY 2001, the staff presented integrated

resource data and information to the Commission

for the development of the FY 2003 budget

submission, that reflected the agency-wide human

capital management component of agency programs and resources. This approach was implemented as part of the agency’s FY 2003 Planning,

Budgeting, and Performance Management

(PBPM) process. This established an agencywide perspective for human capital management

and facilitated an integrated and coordinated
U.S. NUCLEAR REGULATORY COMMISSION

58

Corporate Management and Support (continued)

In concert, these task areas support the missionrelated need to facilitate workplace learning by

ensuring that continuous learning opportunities

are supported, promoted, and fully integrated into

the organizational culture. Training and development are provided using the “systems approach to

training” principles. The “systems approach to

training” is a multi-phase program that includes

training needs analysis, training program design

and development, implementation, and program

evaluation. The renewal of the Senior Fellowship

and Graduate Fellowship programs, and the

initiation of an Undergraduate Fellowship Program, are currently being developed. An SES

Candidate Development Program and a new

Leadership Potential Program have also been

implemented to establish a qualified pool of

candidates within the existing staff for future

leadership and management positions.

Strategic Workforce Planning

As part of the agency’s efforts in human capital

management, a strategic workforce planning initiative was initiated in FY 2001. Early in FY 2001, an

“Action Plan for Maintaining Core Competence,”

was developed that provided an approach for the

implementation of a systematic strategic workforce

planning process at NRC that would address core

competency issues. This plan was provided to the

Commission in late January 2001.

The pilot effort also focused on identifying

some of the highly specialized scientific, engineering, and technical skills and competencies

available in the agency, the skills and competencies needed over the next five years, and the gap

closure strategies necessary for acquiring and

maintaining the needed skills and competencies.

Results of this pilot effort and the associated

process are being reviewed to develop and implement an agency-wide strategic workforce planning process beginning in FY 2002. A web-based

application is being developed to support the acquisition and reporting of staff skills and competencies.

Additionally, all agency offices have been

asked to identify current and anticipated future

critical skill and competency needs to begin the

development of specific strategies to meet those

needs and to establish a baseline for human

capital management for the FY 2004 PBPM

process. The strategic workforce planning process and initiative will support the agency’s

corporate management strategy to sustain a highperforming, diverse workforce, the achievement

of the agency’s programmatic strategic and

performance goals, and will ensure that adequate

attention is devoted to addressing and resolving

core competency issues.

Information Technology and

Information Management

Information is critical for the NRC’s ability to

perform effectively the agency’s safety mission,

and is regarded as being as essential to our success in achieving our goals. Recognizing this,

NRC will continue development and standardization of agency Information Technology/Information Management (IT/IM) architectures and

standards, as well as assess trends to identify

opportunities to apply technology to improve our

processes and performance.

In addition, NRC’s computer security program

continues to be designed and conducted in recognition of Federal laws and regulations and Administration direction. These program activities

implement administrative, technical, and physical

security measures for the protection of the

agency’s information, automated information

systems, and information technology, which

includes special safeguards to protect classified

information, unclassified safeguards information,

and sensitive unclassified information that is

processed, stored, or produced in all automated

information systems.

Additionally, in response to recommendations

to strengthen the agency’s IT security program

under the Government Information Security

Reform Act, NRC developed a corrective action

plan, which includes hiring a senior-level official

responsible for overseeing the IT Security pro-
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

59

gram, establishing a centralized monitoring and

reporting function, developing program-level and

system-level performance measures, and establishing IT security training requirements.

Consistent with and supportive of the emphasis

placed on electronic government in the President’s

Management Agenda, NRC continues to make

important strides in utilizing electronic and technological solutions to make it simpler for citizens to

receive high-quality service from the NRC while

reducing the cost of delivering those services.

Information resources and management

activities support the agency’s mission and programs through ongoing development, integration,

and support of the agency’s IT infrastructure and

IM services.

During FY 2001, NRC strengthened computer

security defense program to monitor and protect

against the continued threat of cyber attacks on

agency systems. NRC network administrators

monitored the local and wide-area network for

attacks and probes. NRC updated its existing

desktop anti-virus detection/protection tools and

anti-virus checker at the NRC E-Mail and

Internet, and provided periodic Network Virus

Alerts. Also, the agency distributed anti-virus

software for employees to use on their home

computers to help limit the transmission of viruses in either direction. No business functions

have been compromised due to cyber attacks, or

natural or man-made disasters.

The NRC launched the Electronic Information

Exchange (EIE) production system during FY

2001. The EIE program is a key component of

NRC’s E-Gov activities. It provides for the

transmission of digitally signed electronic documents to NRC over the Internet in a way that

ensures the documents will have legal standing in

any hearing. EIE also gives NRC the opportunity

to realize internal processing efficiencies and

allow licensees to leverage the Internet to reduce

regulatory burden by eliminating the creation and

handling of paper-based documents.

For NRC to be effective and efficient in the

IT/IM program, we have established several

output measures to gauge our success in providing support services to our internal stakeholders,

the NRC staff personnel. For example, we established measures such as the availability of key

infrastructure services and availability of agency

network servers for NRC staff personnel. In FY

2001, we achieved a result of 99.6 percent and

99.8 percent respectively. The graph on “Availability of IT/IM Services” displays our results for

FY 1999-2001.

Administrative Support

One of the NRC’s corporate management

strategies is to acquire goods and services in an

efficient manner. We have continued our strong

emphasis on NRC’s procurement reinvention

efforts as the key to improving the efficiency of

the contracting process. In addition, the NRC has

established output measures associated with the

implementation of the Federal Activities Inventory Reform Act, performance-based contracting,

and the posting of procurement synopses on the

Internet.

The NRC’s corporate management strategy to

provide information management and information

technology services encompasses the government-wide reform to expand the applications of

on-line procurement and other E-government

services and information. Supporting strategies

directly address improving our ability to conduct

business electronically and providing access to

external stakeholders to publicly available information. The NRC will continue to post all synopses for acquisition valued at over $25,000 for

which widespread notice is required and all

associated solicitations unless covered by an

exemption in the Federal Acquisition Regulation

on the government-wide point-of-entry website.

Contract management is necessary to ensure

that the agency obtains goods and services in an

efficient manner consistent with mission needs. It

includes the development and implementation of
U.S. NUCLEAR REGULATORY COMMISSION

60

Corporate Management and Support (continued)

agency wide contracting policies and procedures,

and implementation of the agency’s Small Business Program, whose primary goal is to ensure

that small 8(a), disadvantaged, and women-owned

businesses receive a full and fair opportunity to

participate in NRC’s procurement activities. It

also includes the development and application of

streamlined procurement processes and adherence to

sound business practices in the negotiation, award,

administration, and closeout of agency contracts.

During FY 2001, the NRC completed a major

procurement reform initiative entitled, “Focused

Source Selection,” under the NRC’s Procurement

Reinvention Laboratory. The project, which

involves early posting of the scope of work during

a pre-solicitation phase and an early assessment

of bidder capabilities, had a significant impact on

the agency’s mission by successfully promoting

acquisition efficiency and fairness without sacrificing the quality of services needed by the NRC

staff. For example, procurement acquisition lead

time decreased by more than fifty days.

The NRC continued to implement performance-based contracts for facility management

services, data entry, and other support services.

The NRC includes such factors as measurable

performance requirements, quality standards,

quality surveillance plans, and provisions for

reduction of fee or price when services are not

performed to provide vendors with a better understanding of contract requirements.

The NRC also continued to expand the application of on-line procurement in FY 2001 by

publicizing its business opportunities and posting

its solicitations electronically on a single, easy to

access and easy to use Governmentwide Internet

location, . In addition, the agency streamlined its

paper-intensive ordering and payment functions

through increased use of the BankCard.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

61

Chapter V: FY 2001

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 2001 financial statements were audited by R. Navarro and Associates under

contract to the NRC’s Office of the Inspector General.
U.S. NUCLEAR REGULATORY COMMISSION

62

FY 2001 Audited Financial Statements (continued)
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

63

February 11, 2002

MEMORANDUM TO: Chairman Meserve

FROM: Hubert T. Bell

Inspector General

SUBJECT: RESULTS OF THE AUDIT OF

THE U.S. NUCLEAR REGULATORY

COMMISSION’S FISCAL YEAR 2001

FINANCIAL STATEMENTS (OIG-02-A-08)

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

(NRC) financial statements for the years ended September 30, 2001 and 2000. 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 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 report.

Audit Results

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

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

In the report 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 managerial cost accounting and inadequate

accounting for internal use software as material weaknesses.1

The auditors identified two new reportable conditions and closed four prior-year reportable

conditions. The new conditions concern accounting for internal use software and contract closeout procedures.

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

The first is that NRC did not comply with Executive Order 13103, Computer Software Piracy.

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

third is that is NRC is in substantial non-compliance with the Federal Financial Management

Improvement Act of 1996 (FFMIA). The specific issues related to FFMIA are that managerial

cost accounting was not implemented, as required, and that the agency did not adequately account for internal use software.

UNITED STATES

NUCLEAR REGULATORY COMMISSION

WASHINGTON, DC 20555-0001

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.
U.S. NUCLEAR REGULATORY COMMISSION

64

FY 2001 Audited Financial Statements (continued)

The prior year’s reportable condition relating to the Debt Collection Improvement Act is closed.

The 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 2002, 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. On February 23, 2001, OIG issued a separate report on the validity

and reliability of NRC’s performance information.2 The report noted that many efforts to improve internal controls and the reliability (e.g. completeness, timeliness) of performance data

were underway during FY 2001. These efforts should improve the validity and reliability of

NRC’s data. During FY 2002, OIG will evaluate the effect of these improvements on specific

performance data reported by NRC.

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 2002.

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

Attachment: As stated

cc: Commissioner Dicus

Commissioner Diaz

Commissioner McGaffigan

Commissioner Merrifield

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

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

65

Chairman Richard A. Meserve

U.S. Nuclear Regulatory Commission

Rockville, Maryland

INDEPENDENT AUDITORS’ REPORT

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

(NRC) as of September 30, 2001 and 2000, and the related statements of net cost, changes in net

position, budgetary resources, and financing for the years 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 audits.

SCOPE

We conducted our audits 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, Audit Requirements for Federal Financial Statements. Those standards require that we plan and perform the

audits to obtain reasonable assurance about whether the financial statements are free of material

misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and

disclosures in the financial statements. An audit also includes assessing the accounting principles

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

statement presentation. We believe our audits provide 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, and

applicable sections of OMB Bulletin 01-09, provide 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. However, following the advice of

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

was paid, rather than who received the benefits. This presentation does not entirely incorporate

the guidance in the Bulletin, however, OMB’s guidance enables the Agency to transition to the

required presentation.

U.S. Department of Energy Expenses

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

(DOE) National Laboratories. NRC’s Statements of Net Cost include reimbursed expenses of

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

66

FY 2001 Audited Financial Statements (continued)

approximately $46.6 and $57.7 million, respectively for the years ended September 30, 2001 and

2000. Our audits included testing these expenses for compliance with laws and regulations

within NRC. The work placed with DOE is under the auspices of a Memorandum of Understanding between NRC and DOE. The examination of DOE National Laboratories for compliance with laws and regulations is DOE’s responsibility. This responsibility was further clarified

by a memorandum of the General Accounting Office’s (GAO) Assistant General Counsel, dated

March 6, 1995, where he opined that “...DOE’s inability to assure that its contractors’ costs

[National Laboratories] are legal and proper...does not compel a conclusion that NRC has failed

to comply with laws and regulations.” DOE also has the cognizant responsibility to assure audit

resolution and should provide the results of its audits to NRC.

OPINION

In our opinion, the financial statements referred to in the first paragraph, present fairly, in all

material respects, the financial position of NRC as of September 30, 2001 and 2000, and its net

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

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

the United States of America.

As discussed in Note 1.I. to the financial statements, NRC adopted Statement of Federal Financial Accounting Standards No. 10, Accounting for Internal Use Software. The adoption of this

standard has a material effect on the comparability of the financial statements.

Our audits were conducted for the purpose of forming an opinion on the financial statements

taken as a whole. The Management Discussion and Analysis, contained in Chapter II, and the

required supplementary information, page 85, are not a required part of the financial statements

but are information required by OMB Bulletin No. 97-01, Form and Content of Agency Financial

Statements, as amended, and applicable sections of OMB Bulletin 01-09. This supplementary

information is the responsibility of 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 Financial Statements, we have also issued our report dated January 16, 2002, 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 this 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 audits.

January 16, 2002
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

67

BALANCE SHEET

(Dollars in Thousands)

As of September 30 2001 2000

Assets

Intragovernmental assets:

Fund balances with Treasury (Note 2) $140,465 $138,740

Accounts receivable (Note 3) 2,549 1,874

Other 1,144 1,225

Total Intragovernmental Assets 144,158 141,839

Cash and other monetary assets 20 20

Accounts receivable, net (Note 3) 48,905 42,163

Property and equipment, net (Note 4) 43,788 41,853

Other 15 51

Total Assets $236,886 $225,926

Liabilities

Intragovernmental liabilities:

Accounts payable $12,734 $10,591

Other (Notes 5 and 6) 56,411 50,157

Total Intragovernmental Liabilities 69,145 60,748

Accounts payable 15,859 15,860

Federal employees benefits (Notes 1.K. and 6) 10,849 8,230

Other (Notes 5) 47,501 44,937

Total Liabilities 143,354 129,775

Net Position

Unexpended appropriations (Note 8) 86,839 87,073

Cumulative results of operations (Note 9) 6,693 9,078

Total Net Position 93,532 96,151

Total Liabilities and Net Position $236,886 $225,926

U.S. Nuclear Regulatory Commission Principal Statements

The accompanying notes to the principle

statements are an integral part of this statement.
U.S. NUCLEAR REGULATORY COMMISSION

68

FY 2001 Audited Financial Statements (continued)

STATEMENT OF NET COST

(Dollars in Thousands)

For the year ended September 30 2001 2000

Nuclear Reactor Safety

Intragovernmental $101,541 $103,796

With the public 233,995 226,621

Total cost 335,536 330,417

 Less earned revenue (393,333) (390,401)

Net Cost of Nuclear Reactor Safety (57,797) (59,984)

Nuclear Materials Safety

Intragovernmental 19,851 17,873

With the public 59,292 62,812

Total cost 79,143 80,685

Less earned revenue (49,778) (51,677)

Net Cost of Nuclear Materials Safety 29,365 29,008

Nuclear Waste Safety

Intragovernmental 24,160 24,691

With the public 61,931 59,010

Total cost 86,091 83,701

Less earned revenue (18,636) (17,882)

Net Cost of Nuclear Waste Safety 67,455 65,819

International Nuclear Safety Support

Intragovernmental 6,151 7,892

With the public 7,695 8,034

Total cost 13,846 15,926

Less earned revenue (2,233) (3,078)

Net Cost of International Nuclear Safety Support 11,613 12,848

Net Cost of Operations $50,636 $47,691

U.S. Nuclear Regulatory Commission Principal Statements

The accompanying notes to the principle

statements are an integral part of this statement.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

69

STATEMENT OF CHANGES IN NET POSITION

(Dollars in Thousands)

For the year ended September 30 2001 2000

Net Cost of Operations $(50,636) $(47,691)

Financing sources other than exchange revenue (Note 12)

Appropriations used 31,042 26,120

Non-exchange revenue 657 875

Imputed financing 17,209 16,033

Transfers-in 453,348 447,000

Transfers-out (454,005) (447,875)

Total Financing Sources 48,251 42,153

Net Results of Operations (2,385) (5,538)

Increase (Decrease) in unexpended appropriations (234) (16,177)

Change in Net Position (2,619) (21,715)

Net Position - Beginning of Period 96,151 116,553

Prior-period adjustment (Note 13) – 1,313

Net Position 96,151 117,866

Net Position - End of Period $93,532 $96,151

U.S. Nuclear Regulatory Commission Principal Statements

The accompanying notes to the principle

statements are an integral part of this statement.
U.S. NUCLEAR REGULATORY COMMISSION

70

FY 2001 Audited Financial Statements (continued)

STATEMENT OF BUDGETARY RESOURCES

(Dollars in Thousands)

For the year ended September 30 2001 2000

Budgetary Resources

Budget authority $490,228 $471,975

Unobligated balances - beginning of period 30,377 29,894

Spending authority from offsetting collections 4,152 5,517

Adjustments 7,451 8,525

 Total Budgetary Resources 532,208 515,911

Status of Budgetary Resources

Obligations incurred 503,304 485,534

Unobligated balances - available 28,317 29,787

Unobligated balances - not available 587 590

Total Status of Budgetary Resources 532,208 515,911

Outlays

Obligations incurred 503,304 485,534

Less: Spending authority from offsetting

collections and adjustments (11,630) (14,129)

 Subtotal 491,674 471,405

Obligated balances, net - beginning of period 104,044 116,583

Less: obligated balance, net - end of period (108,704) (104,044)

Total Outlays $487,014 $483,944

U.S. Nuclear Regulatory Commission Principal Statements

The accompanying notes to the principle

statements are an integral part of this statement.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

71

STATEMENT OF FINANCING

(Dollars in Thousands)

For the year ended September 30 2001 2000

Obligations and Nonbudgetary Resources

Obligations incurred $503,304 $485,533

Less: Spending authority for offsetting collections

and adjustments (11,630) (14,129)

Imputed financing (Note 12) 17,209 16,033

Transfers - in (Note 12) 453,348 447,000

Transfers - out (Note 12) (453,348) (447,000)

Exchange revenues not in the budget (Note 10) (459,392) (457,944)

Total Obligations and Nonbudgetary Resources 49,491 29,493

Resources Not Funding Net Cost of Operations

Change in undelivered orders (1,239) 12,660

Capitalized costs (11,072) (6,683)

Other 2,258 520

Total Obligations and Nonbudgetary Resources (10,053) 6,497

Costs Not Requiring Resources

Depreciation and amortization 7,474 6,536

Total Costs Not Requiring Resources 7,474 6,536

Financing Sources Yet to be Provided 3,724 5,165

 Net Cost of Operations $50,636 $47,691

U.S. Nuclear Regulatory Commission Principal Statements

The accompanying notes to the principle

statements are an integral part of this statement.
U.S. NUCLEAR REGULATORY COMMISSION

72

FY 2001 Audited Financial Statements (continued)

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 operates through the execution of its congressionally approved appropriations for

salaries and expenses and the Inspector General, including funds derived from the Nuclear

Waste Fund. In addition, transfer appropriations are 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.

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 Nos. 97-01 and 01-09, 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 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 are described as follows:

Nuclear Reactor Safety encompasses all NRC efforts to ensure that civilian nuclear

power reactor facilities, as well as non-power reactors, are operated in a manner that

adequately protects public health and safety and the environment, and protects against

radiological sabotage and theft or diversion of special nuclear materials.

Nuclear Materials Safety encompasses NRC efforts to ensure that NRC-regulation

aspects of nuclear fuel cycle facilities and nuclear materials activities are handled in a

manner that provides adequate protection of public health and safety.

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.

NOTES TO PRINCIPAL STATEMENTS
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

73

International Nuclear Safety Support encompasses NRC’s efforts of international

cooperation to help ensure the safe, secure, and environmentally acceptable uses of

nuclear energy.

C. Budgets and Budgetary Accounting

Budgetary accounting measures appropriation and consumption of budget/spending authority

or other budgetary resources and facilitates compliance with legal constraints and controls

over the use of Federal funds. Under budgetary reporting principles, budgetary resources are

consumed at the time of purchase. Assets and liabilities, which do not consume current

budgetary resources, are not reported, and only those liabilities for which valid obligations

have been established are considered to consume budgetary resources.

For the past 27 years, Congress has enacted no-year appropriations, which are available for

obligation by NRC until expended. The Energy and Water Development Appropriations Act,

2001, required the NRC to recover approximately 98 percent of its new budget authority of

$487.2 million by assessing fees less amounts derived from the Nuclear Waste Fund of $21.6

million and $3.2 million from the General Fund. For FY 2000, the NRC recovered approximately 100 percent of its new budget authority of $469.9 million, as required by the Omnibus

Budget Reconciliation Act (OBRA) of 1990, as amended, less $19.2 million derived from the

Nuclear Waste Fund and $3.8 million from the General Fund.

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. 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 Code of Federal Regulations (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

No. 7, Accounting for Revenue and Other Financing Sources and Concepts for Reconciling

Budgetary and Financial Accounting.

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

NOTES TO PRINCIPAL STATEMENTS
U.S. NUCLEAR REGULATORY COMMISSION

74

FY 2001 Audited Financial Statements (continued)

of new budget authority for the year. Collections which exceed the new budget authority are

held to offset subsequent years’ appropriations. Appropriations expended for property and

equipment are recognized as expenses when the asset is consumed in operations (depreciation

and amortization).

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

Accounts receivable consist of amounts owed to the NRC by other Federal agencies and the

public. Amounts due from the public are presented net of an allowance for uncollectible

accounts. The allowance is based on an analysis of the outstanding balances. Receivables

from Federal agencies are expected to be collected; therefore, there is no allowance for

uncollectible accounts.

H. Non-Entity Assets

Accounts receivable include non-entity assets of $133 thousand and $214 thousand at September 30, 2001, and 2000, and consists of miscellaneous penalties and interest due from the

public, which, when collected, must be transferred to the U.S. Treasury.

 I. 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 the General Services Administration

(GSA), which charges NRC rent that approximates the commercial rental rates for similar

properties.

Property with a cost of $50,000 or more per unit and a useful life of 2 years or more is capitalized at cost and depreciated 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.

NRC adopted Statement of Federal Financial Accounting Standards No. 10, Accounting for

Internal Use Software, effective October 1, 2000. The standard requires the capitalization of

the costs of internal use software and provides guidance on capitalization thresholds, capitalization timing, and cost elements to capitalize, including the full cost of salaries and benefits

for agency personnel involved in software development.

NOTES TO PRINCIPAL STATEMENTS
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

75

J. Accounts Payable

Accounts payable represent vendor invoices for services received by NRC that will be paid in

the next fiscal year. Also included in these amounts are contract holdbacks on contracts that

have not been fully closed and advances that 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.

K. 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.

Intragovernmental

The U.S. Department of Labor (DOL) paid Federal Employees Compensation Act (FECA)

benefits on behalf of NRC which had not been billed or paid by NRC as of September 30,

2001, and 2000.

Federal Employee Benefits

Federal employee benefits represent the actuarial liability for estimated future FECA disability benefits. The future workers’ compensation estimate was generated by DOL from an

application of actuarial procedures developed to estimate the liability for FECA, which

includes the expected liability for death, disability, medical, and miscellaneous costs for

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 5.21 percent in year 1 and 5.21 percent

in year 2 and thereafter.

Other

Accrued annual leave represents the amount of annual leave earned by NRC employees but

not yet taken.

L. Contingencies

Contingent liabilities are those where the existence or amount of the liability cannot be

determined with certainty pending the outcome of future events. 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.

NOTES TO PRINCIPAL STATEMENTS
U.S. NUCLEAR REGULATORY COMMISSION

76

FY 2001 Audited Financial Statements (continued)

M. 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. To the extent that current or prior year funding is not available to cover annual leave

earned but not taken, funding will be obtained from future financing sources. Sick leave and

other types of nonvested leave are expensed as taken.

N. Retirement Plans

NRC employees belong to either the Federal Employees Retirement System (FERS) or the

Civil Service Retirement System (CSRS). During FY 2001, for employees belonging to

FERS, the NRC withheld 0.8 percent of base pay earnings, in addition to Federal Insurance

Contribution Act (FICA) withholdings, and matched the withholdings with a 10.7 percent

contribution. During FY 2000, for employees belonging to FERS, the NRC withheld 1.2

percent of base pay earnings and matched the withholding with a 10.7 percent contribution.

The sum was transferred to the Federal Employees Retirement Fund. During FY 2001, for

employees covered by CSRS, NRC withheld 7 percent of base pay earnings. This withholding was matched by NRC with an 8.51 percent contribution. During FY 2000, for employees

belonging to 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

belonging to either FERS or CSRS. For employees belonging to FERS, NRC automatically

contributes one percent of base pay to their account and matches contributions up to an

additional four percent. The maximum percentages of base pay that an employee participating in FERS may contribute was 10 percent in calendar year (CY) 2000. In CY 2001 the

maximum rate was 10 percent through June 30, 2001 and 11 percent thereafter. Employees

belonging to CSRS were able to contribute a maximum of 5 percent during CY 2000. In CY

2001 they were allowed to contribute 5 percent through June 30, 2001, and 6 percent thereafter. CSRS contributions made were of their base pay, and there is no NRC matching of the

contribution. The maximum amount that either FERS or CSRS employees may contribute to

the plan was $10.5 thousand in CY 2001 and CY 2000. The sum of the employees’ and

NRC’s contributions are transferred to the Federal Retirement Thrift Investment Board.

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 No. 5, Accounting for Liabilities of the

Federal Government, included in NRC’s financial statements as an imputed financing source.

O. Leases

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 equipNOTES TO PRINCIPAL STATEMENTS
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

77

ment, which is installed in various NRC facilities. The leases are for 3 and 5 years and the

interest rates paid were 6.59 percent and 4.75 percent, respectively. The reproduction equipment is depreciated over 5 years using the straight-line method with no salvage value.

Operating leases consist of real property leases with GSA. The leases are for NRC’s headquarters offices and regional offices. The GSA charges NRC lease rates which approximate

commercial rates for comparable space.

P. U.S. Department of Energy Charges

Financial transactions between the Department of Energy (DOE) and NRC are fully automated through the U.S. Treasury’s On-Line Payment and Collection (OPAC) System. The

OPAC System allows DOE to collect amounts due from NRC directly from NRC’s account at

the U.S. Treasury for goods and/or services rendered. Project manager verification of goods

and/or services received is subsequently accomplished through a system-generated voucher

approval process. The vouchers are returned to the Office of the Chief Financial Officer

documenting that the charges have been accepted.

Q. 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.

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.

R. Net Position

The NRC’s net position consists of unexpended appropriations and cumulative results of

operations. Unexpended appropriations represent appropriated spending authority that is

unobligated and has not been withdrawn by Treasury, and obligations that have not been paid.

Cumulative results of operations represent the excess of financing sources over expenses

since inception.

S. Use of Management Estimates

The preparation of the accompanying financial statements in accordance with generally

accepted accounting principles requires management to make certain estimates and assumptions that directly affect the results of reported assets, liabilities, revenues, and expenses.

Actual results could differ from these estimates.

NOTES TO PRINCIPAL STATEMENTS
U.S. NUCLEAR REGULATORY COMMISSION

78

FY 2001 Audited Financial Statements (continued)

NOTE 2. FUND BALANCES WITH TREASURY

(In thousands) 2001 2000

Fund Balances

Appropriated funds $137,588 $134,402

Other fund types 2,877 4,338

Total $140,465 $138,740

Status of Fund Balance with Treasury

Unobligated Balance

Available $31,194 $34,125

Unavailable 587 590

Obligated balance not yet disbursed 108,684 104,025

Total $140,465 $138,740

NOTE 3. ACCOUNTS RECEIVABLE

(In thousands) 2001 2000

Intragovernmental

Receivables and reimbursements $2,549 $1,874

Receivables with the Public

Materials and facilities fees - billed $10,445 $5,419

Materials and facilities fees - unbilled 41,300 39,864

Other (Penalties and Interest) 222 359

Total Accounts Receivable 51,967 45,642

Less: Allowance for uncollectible accounts (3,062) (3,479)

Accounts Receivable, Net $48,905 $42,163

NOTES TO PRINCIPAL STATEMENTS
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

79

NOTE 4. PROPERTY AND EQUIPMENT, NET

(In thousands) 2001 2000

Accumulated Net Net

Service Acquisition Depreciation and Book Book

Fixed Assets Class Years Value Amortization Value Value

Equipment 5-8 $19,191 $(16,372) $2,819 $3,315

ADP software 5 48,712 (34,237) 14,475 18,112

ADP software under development – 14,708 – 14,708 7,738

Leasehold improvements 20 19,725 (8,096) 11,629 12,593

Leasehold improvements in progress – 157 – 157 95

$102,493 $(58,705) $43,788 $41,853

NOTE 5. OTHER LIABILITIES

(In thousands) 2001 2000

Liability to offset net accounts receivable for fees assessed $50,813 $43,388

Liability from fees collected which will offset subsequent

years’ appropriations 1,724 3,173

Liability to offset miscellaneous accounts receivable 133 214

Advances from other Federal agencies – 22

Accrued workers’ compensation 1,780 1,521

Employee benefit contributions 1,961 1,839

Total Intragovernmental Other Liabilities $56,411 $50,157

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.

(In thousands) 2001 2000

Accrued annual leave $26,473 $25,627

Accrued salaries 16,143 14,303

Contract holdbacks, advances, and other 4,885 5,007

Total Other Liabilities $47,501 $44,937

All other liabilities, except accrued annual leave, contract holdbacks, and advances from others,

are current.

NOTES TO PRINCIPAL STATEMENTS
U.S. NUCLEAR REGULATORY COMMISSION

80

FY 2001 Audited Financial Statements (continued)

NOTE 6. LIABILITIES NOT COVERED BY BUDGETARY RESOURCES

(In thousands) 2001 2000

Intragovernmental

FECA paid by DOL $1,780 $1,521

Federal Employee Benefits

Future FECA 10,849 8,230

Other

Accrued annual leave 26,473 25,626

Capital lease liability 167 181

 Total Liabilities not Covered by Budgetary Resources $39,269 $35,558

NOTE 7. LEASES

Future Lease Payments Due: 2001 2000

Fiscal Year Capital Operating

2001 $ – $ – $ – $20,170

2002 89 19,509 19,598 19,477

2003 76 19,474 19,550 19,418

2004 2 19,563 19,565 19,457

2005 and thereafter – 158,255 158,255 158,190

Total 167 216,801 216,968 236,712

Less: imputed interest (9) – (9) (12)

Total Future Lease Payments $158 $216,801 $216,959 $236,700

NOTE 8. UNEXPENDED APPROPRIATIONS

(In thousands) 2001 2000

Unobligated $18,493 $18,711

Undelivered orders 68,346 68,362

Total Unexpended Appropriations $86,839 $87,073

Undelivered orders are amounts which have been obligated but not yet expended. The unobligated appropriations balance does not include $2,933 thousand and $3,054 thousand in unfilled

customer orders - unobligated as of September 30, 2001, and September 30, 2000, respectively.

The undelivered orders balance does not include $1,966 thousand and $2,886 thousand in unfilled

customer orders - obligated as of September 30, 2001, and September 30, 2000, respectively.

NOTES TO PRINCIPAL STATEMENTS
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

81

NOTE 9. CUMULATIVE RESULTS OF OPERATIONS

(In thousands) 2001 2000

Future funding requirements $(39,102) $(35,377)

Investment in property and equipment, net 43,788 41,853

Contributions from foreign cooperative research agreements 1,984 2,506

Other 23 96

Cumulative Results of Operations $6,693 $9,078

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

unfunded expenses as of September 30, 2001, and 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 10. EXCHANGE REVENUES

(In thousands) 2001 2000

Fees for licensing, inspection, and other services $459,392 $457,944

Revenue from reimbursable work 4,589 5,094

Total Exchange Revenues $463,981 $463,038

NOTE 11. BUDGET FUNCTIONAL CLASSIFICATION

(In thousands) 2001 2000

Earned

Functional Classification Gross Cost Revenue Net Cost Net Cost

276 - Energy Information, Policy,

& Regulation $511,644 $(463,792) $47,852 $44,441

151 - AID International Affairs $2,972 $(188) $2,784 $3,249

800 - GSA General Government – – – 1

Total $514,616 $(463,980) $50,636 $47,691

NOTES TO PRINCIPAL STATEMENTS
U.S. NUCLEAR REGULATORY COMMISSION

82

FY 2001 Audited Financial Statements (continued)

NOTE 11. BUDGET FUNCTIONAL CLASSIFICATION (continued)

Intragovernmental

(In thousands) 2001 2000

Earned

Functional Classification Gross Cost Revenue Net Cost Net Cost

276 - Energy Information, Policy,

& Regulation $149,865 $(29,241) $120,624 $121,001

151 - AID International Affairs 1,838 $(188) 1,650 2,171

Total $151,703 $(29,429) $122,274 $123,172

NOTE 12. FINANCING SOURCES OTHER THAN EXCHANGE REVENUE

Appropriations Used

Appropriations used is recognized to the extent that appropriated funds have been consumed less

the amount collected from fees assessed for licensing, inspections, and other services.

(In thousands) 2001 2000

Fees collected $455,044 $450,077

Less: collection from fees assessed (453,348) (447,000)

Collected Fees Available to Offset

Subsequent Years’ Appropriations $1,696 $3,077

Collections were used to reduce the fiscal year’s appropriations recognized:

(In thousands) 2001 2000

Appropriated funds consumed $490,434 $484,064

Less: collection from fees assessed (453,348) (447,000)

Subtotal 37,086 37,064

Amounts to offset subsequent years’ appropriations 6,044) (10,944)

Appropriations Used $31,042 $26,120

Appropriated funds consumed includes $30,377 thousand for FY 2001 and $29,894 thousand for

FY 2000 of available funds from prior years.

NOTES TO PRINCIPAL STATEMENTS
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

83

Non-Exchange Revenue

(In thousands) 2001 2000

Civil penalties $345 $632

Miscellaneous receipts 312 243

Total Non-Exchange Revenue $657 $875

Imputed Financing

(In thousands) 2001 2000

Civil Service Retirement System $9,676 $9,173

Federal Employee Health Benefit 7,486 6,807

Federal Employee Group Life Insurance 47 45

U.S. Treasury Judgement Fund – 8

Total Imputed Financing $17,209 $16,033

Transfers In/Out

(In thousands) 2001 2000

Transfers in from Treasury $453,348 $447,000

Transfers out to Treasury

License Fees 453,348 447,000

Non-exchange revenue 657 875

Total Transfer-Out to Treasury $454,005 $447,875

NOTE 13. PRIOR-PERIOD ADJUSTMENT

The prior-period adjustment reported in FY 2000 of $1,313 thousand consists of the net value of

computer hardware components received in FY 1999 by NRC but not capitalized as other assets,

equipment not in use. The assets were placed into operation during FY 2000. The impact of this

adjustment was to increase property and equipment, net, and cumulative results of operations as

of September 30, 1999, by $1,313 thousand.

NOTE 14. RECLASSIFICATIONS

Certain prior-year amounts have been reclassified to conform to the current year presentation.

NOTES TO PRINCIPAL STATEMENTS
U.S. NUCLEAR REGULATORY COMMISSION

84

FY 2001 Audited Financial Statements (continued)

NOTE 15. SUMMARY OF BUDGETARY RESOURCES

(In thousands) 2001 2000

Budgetary Resources X0200 X0300 All Other Total Total

Budget authority $481,766 $5,500 $2,962 $490,228 $471,975

Unobligated balances -

beginning of period 27,682 898 1,797 30,377 29,894

Spending authority from

offsetting collections 4,152 – – 4,152 5,517

Adjustments 7,156 279 16 7,451 8,525

Total Budgetary Resources $520,756 $6,677 $4,775 $532,208 $515,911

Status of Budgetary Resources:

Obligations incurred $494,730 $5,956 $2,618 $503,304 485,534

Unobligated balances - available 26,026 721 1,570 28,317 29,787

Unobligated balances - not available – – 587 587 590

Total Status of

Budgetary Resources $520,756 $6,677 $4,775 $532,208 $515,911

Outlays:

Obligations incurred $494,730 $5,956 $2,618 $503,304 $485,534

Less: Spending authority from

offsetting collections

and adjustments (11,335) (279) (16) (11,630) (14,129)

Obligated balance,

net beginning of period 98,927 1,064 4,053 104,044 116,583

 Less: Obligated balance,

net end of period (104,078) (910) (3,716) (108,704) (104,045)

 Total Outlays $478,244 $5,831 $2,939 $487,014 $483,943

The adjustments of $7,451 thousand for FY 2001 and $8,525 thousand for FY 2000 to budgetary

resources above consist of recoveries to prior-year obligations less $27.3 thousand for FY 2001

and $87 thousand that was rescinded for FY 2000.

NOTES TO PRINCIPAL STATEMENTS
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

85

As of September 30 2001 2000

Intragovernmental Assets

Fund Balance with Treasury

Department of the Treasury $140,465 $138,740

Accounts Receivable

Tennessee Valley Authority 1,283 1,025

Department of Veterans Affairs 162 280

Department of Energy 817 225

Other Agencies 287 344

Total Accounts Receivable 2,549 1,874

Other Assets

Department of Commerce 29 137

Department of Interior 486 171

Department of the Navy 11 209

Department of Labor 256 267

General Services Administration 329 326

Other Agencies 33 115

Total Other Assets 1,144 1,225

Total Intragovernmental Assets $144,158 $141,839

As of September 30 2001 2000

Intragovernmental Liabilities

Accounts Payable

General Services Administration $7,841 $5,182

Department of Energy 4,082 4,747

Other Agencies 811 662

Total Accounts Payable 12,734 10,591

Other Liabilities

Department of Labor 1,781 1,521

Department of the Treasury - General Fund 52,670 46,775

Office of Personnel Management 1,960 1,839

Other Agencies – 22

Total Other Liabilities 56,411 50,157

Total Intragovernmental Liabilities $69,145 $60,748

U.S. Nuclear Regulatory Commission Required Supplementary Information
U.S. NUCLEAR REGULATORY COMMISSION

86

FY 2001 Audited Financial Statements (continued)

INDEPENDENT ACCOUNTANTS’ REPORT ON MANAGEMENT’S ASSERTION

ABOUT THE EFFECTIVENESS OF INTERNAL CONTROL AND INDEPENDENT

AUDITORS’ REPORT ON COMPLIANCE WITH LAWS AND REGULATIONS

Chairman Richard A. Meserve

U.S. Nuclear Regulatory Commission

Rockville, Maryland

INDEPENDENT ACCOUNTANTS’ REPORT ON MANAGEMENT’S ASSERTION

ABOUT THE EFFECTIVENESS OF INTERNAL CONTROL

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

(NRC) systems of accounting and internal control in place as of September 30, 2001, are 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 should be properly recorded, processed, and summarized to enable the

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

assets are to be safeguarded against loss from unauthorized acquisition, use or disposal. Management is responsible for maintaining effective internal control over financial reporting. Our

responsibility is to express an opinion on management’s assertion based on our examination.

Our examination was made in accordance with the attestation standards established by the

American Institute of Certified Public Accountants; the 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, and accordingly, included obtaining an understanding of

the agency’s internal controls, determining whether these internal controls had been placed in

operation, assessing control risk, and performing 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, 2001.

Because of inherent limitations in internal control, misstatements due to 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, 2001 are 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, nor did they identify an adequate system to monitor the implementation of accounting for internal use software.

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 signifiR. Navarro & Associates, Inc.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

87

cant 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 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 Accounting for Internal Use Software are considered material weaknesses. Both conditions

are considered a substantial non-compliance with the Federal Financial Management Improvement Act (FFMIA).

Current Year Comments

A. Managerial Cost Accounting

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

FY 2001, the NRC has not implemented Statement of Federal Financial Accounting Standards (SFFAS) No. 4, Managerial Cost Accounting Concepts and Standards for the Federal

Government, 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 has continued to respond to the FY 1998 condition by revising the

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

The remediation plan has undergone various revisions to reflect the tasks planned and accomplished. The most recent revision of the plan was issued May 31, 2001. Management has not

made measurable progress in implementing interim techniques or processes to provide useful,

routine and reliable cost information for managers as of the end of FY 2001. NRC projects

implementation of cost management during FY 2002.

The strategy adopted by management places significant emphasis on changing the culture and

practices of the agency. Although managements strategy included plans for interim cost

reports at the strategic arena level, 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. For

example, in the current year, the lack of cost accounting data impacted the agency’s ability to

transition smoothly to accounting for internal use software. (See Comment B for details of

the condition and recommendation.)

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

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

88

FY 2001 Audited Financial Statements (continued)

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 the agency pursue additional software. Since agencies

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

standards ... implementation of a cost accounting system is not necessarily a prerequisite with

SFFAS Number 4.”

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

non-compliance.

Recommendation

1. The Chief Financial Officer (CFO) should give greater priority to implementing a cost management system within the revised milestones. The preparation of routine, useful and reliable

cost accounting information for agency managers should become a higher priority. Cost

accounting information should enhance the agency’s ability to evaluate the cost of outputs.

CFO’s Comments

“Agree. A high priority has been and will continue to be placed on implementing a cost

management system within the revised milestones of the remediation plan, dated May 31,

2001. These milestones are linked to the implementation of the PeopleSoft payroll, time and

labor, and human resources modules. The PeopleSoft modules were implemented on November 4, 2001. Some of the remediation plan milestones have been delayed due to the one

month deferral of the implementation of the PeopleSoft modules beyond the time frame

projected in May 2001 and by unforeseen increased efforts to resolve issues associated with

the interfaces between the PeopleSoft modules and the cost accounting system. Cost management reports will be provided to offices for the first quarter of FY 2002 early in calendar year

2002.”

Auditors’ Position

We are fully cognizant of the initiatives, which have preceded the implementation of cost

accounting and the importance of those initiatives to the agency. However, we continue to

urge the CFO to meet the milestone dates in the revised remediation plan, as doing so will

expedite and enhance the implementation of a cost management strategy for the agency.

During the next audit we will evaluate the full implementation of cost management, and

compliance with the remediation plan milestones. The condition is resolved.

B. Accounting for Internal Use Software

In 1998, the Federal Accounting Standards Advisory Board issued standards for agencies to

account for the development of internal use software. The Statement became effective October 1, 2000. The guidance prompted the Chief Financial Officers’ community to develop

policy, redesign systems, designate documentation standards and develop an adoption strategy for the new accounting standard. The NRC, in a very timely and thorough fashion,

developed policy guidance for adoption of the standard. However, the management controls

R. Navarro & Associates, Inc.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

89

needed to ensure compliance were not satisfactorily implemented. Consequently, the agency

cannot adequately demonstrate adoption of the accounting standard.

The Financial Accounting Standards Advisory Board Statement of Federal Financial Account

Standards No. 10 (SFFAS No. 10) established the accounting standards for the cost of software developed or obtained for internal use. Paragraph 16 requires that, “For internally

developed software, capitalized cost should include the full cost (direct and indirect cost)

incurred during the software development stage.” For internally developed software, “Such

costs include those for new software (e.g., salaries of programmers, systems analysts, project

managers, and administrative personnel; associated employee benefits; outside consultants’

fees; rent; and supplies) . . .” The General Accounting Office’s, Standards for Internal

Control in the Federal Government, states “Internal control should generally be designed to

assure that ongoing monitoring occurs in the course of normal operations. It is performed

continuously and is ingrained in the agency’s operations. It includes regular management and

supervisory activities, comparisons, reconciliations, and other actions people take in performing their duties.”

The agency’s policy is to track and capture labor costs by strategic arena. To separately

account for labor costs related to internal use software development, the agency established

an “unofficial” information technology (IT) strategic arena, as they did in prior years to track

management and support costs. Within the IT arena, job codes were established for each

individual software development project. Employees working on software development

projects were instructed to charge their time to the IT arena by entering time in the time and

labor module of the payroll system. That system contained an IT detail screen for charging

time to individual projects.

The new arena was deployed in a software “patch” to the Pay/Pers time and labor module

(T&L). However, OCFO failed to include certain functions, thoroughly test the new routine,

and develop reports to enable management review and oversight of the new cost accumulation process. For example, when an employee generally charges all time to a single arena, the

employee’s time defaults to that arena. In this instance, the system generates a one-page time

and attendance (T&A) report that the employee and certifying official sign. However, when

an employee charges time to more than one arena, the system generates a two-page T&A

report so that the employee and certifying official can see the hours charged to each arena.

The T&A report also indicates that the default arena was modified. Thus, the hours shown on

the T&A report and hours charged in the system agreed.

However, the IT “patch” did not generate a second T&A report page when IT was one of two

strategic arenas involved, and the hours shown on the printed T&A reports continued to be

charged to the default arena. Consequently, many of the sampled T&A reports, signed by

employees and certifying officials, did not agree with the hours reflected in the system. In an

effort to address this condition, the agency provided other alternative documentation to

support hours charged to the IT arena, such as all T&A reports for selected employees, functional position descriptions, monthly activity reports for IT projects, personal calendars,

annual employee performance appraisals, and other documents of varying evidentiary value.

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

90

FY 2001 Audited Financial Statements (continued)

Other examples of the condition identified include:

• Another shortcoming of the “patch” was that a system edit was not provided to require

completion of the IT detail screen when hours were charged to the IT arena. Thus, hours

could be charged to the general IT arena without specifying the job code to which the

costs should be assigned.

• Labor reports were not distributed to the Project Managers until March 2001, and, at that

time, the agency did not require them to certify the accuracy of the hours reported.

• OCFO personnel did not timely monitor the implementation of the IT labor time tracking

process. During the third quarter of FY 2001, the OCFO performed a review of employee

hours charged to IT. OCFO personnel discovered that IT hours were being under reported.

Further analysis revealed that some employees were not charging hours to the IT arena

because they believed that the projects they were working on did not meet the requirements of SFFAS No. 10. Other employees were not charging the IT arena because of an

oversight. In October 2001, OCFO requested the Project Managers to certify the time

reported. However, certification at that late date was considered untimely and unreliable.

Because the agency did not have an adequate system to (1) track the labor time incurred or

(2) monitor procedures to implement SFFAS 10, the agency is not in compliance with accounting standards.

Recommendation:

2. The Chief Financial Officer should review the agency practices for transitioning to new

software applications or routines, which have financial statement impact. The following are

essential to the deployment of new applications:

• adequacy of testing the process controls,

• developing the control activities necessary to ensure reasonable assurance in the process,

• monitoring the implementation of the application and development of managerial reports

to assist the review, and

• reconciling the data provided by the new process.

Implementation of business practices of this nature could assist the OCFO with deployment

of other applications in the future.

CFO’s Comments

“Agree. The OCFO will review the practices for transitioning to new software applications

or routines that have financial statement impact. On November 4, 2001, the agency implemented the PeopleSoft Human Resources Management System. This new system integrates

human resources, payroll, and time and labor, and is a single-entry system for time, attendance and labor reporting. This new system is expected to correct all of the system weaknesses identified in the Payroll/Personnel System. The staff is currently extracting IT labor

data from the new Time and Labor module so we can monitor IT labor reporting. The staff

plans to issue first quarter labor data to IT project managers by the end of February 2002 for

R. Navarro & Associates, Inc.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

91

their review and certification. This completes all remediation actions required by the Federal

Financial Management Improvement Act.”

Auditors’ Position

The activities described by the CFO should enable the agency to evaluate the appropriateness of

new software applications implemented. Furthermore, the CFO’s planned actions described

timeliness of data extracts and related monitoring and analysis may enhance the reliability of

financial information provided by the system and provide an early warning system in the event

that issues are identified. We concur that such actions should be pursued as means to remediate

the FFMIA condition identified. This condition is resolved. Closure is dependent on an evaluation of actions taken and the reliability of data provided by the new application.

C. Contract Close-out Processing Procedures

The Division of Contracts and Property Management (DCPM) performs a review of contracts

in close-out and determines the amounts that should remain available for future payments and

the amounts that are available for deobligation. This process is normally followed to determine the continued viability of recorded undelivered orders. We noted that DCPM notified

OCFO’s General Accounting Branch (GAB) of amounts to be expensed without adequate

supporting documentation. Subsequently, GAB recognized the expense without adequate

supporting documentation such as contractor invoices, receiving reports or project manager

certifications that the services had been performed.

Statement of Federal Financial Accounting Standards No. 5, which established accounting

standards for federal government liabilities, contains the following definition, “A liability for

federal accounting purposes is a probable future outflow or other sacrifice of resources as a

result of past transactions or events. . .” NRC’s Accounting Policy Manual, Chapter II. E.,

Accounting Procedures, states, “The documentation of a financial event shall be purposeful

and useful to managers in controlling their operations and to auditors or others involved in

analyzing operations. The documentation shall provide a link between the SGL [standard

general ledger] and all supporting records for the financial event.”

Information provided by DCPM for transaction processing was not reviewed by GAB personnel to ensure the underlying completeness, necessity and propriety of the entry. The present

practice used by GAB does not require adequate supporting documentation for the amount

proposed as an accrual for contracts in close-out. As a result, the amounts presented on the

financial statements for liabilities and expenses may be overstated. The amount in contracts

in close-out at year-end was approximately $705,000.

Recommendation:

3. The Chief Financial Officer should instruct the General Accounting Branch of their inherent

responsibility to evaluate amounts being recorded as liabilities and expenses. It is essential

that the review process include an understanding of the source of the information and the

underlying techniques used to develop amounts referred for inclusion in the agency’s financial records. At a minimum, OCFO should require DCPM to provide documentation to

justify valid expenses and liabilities.

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

92

FY 2001 Audited Financial Statements (continued)

CFO’s Comments

“Agree. The General Accounting Branch will ensure that all expenses recorded for contracts

in closeout are supported by adequate documentation and will work with DCPM to obtain the

necessary documentation.”

Auditors’ Position:

We commend the CFO for his commitment to the actions described. The condition is resolved. During a subsequent audit we will evaluate the adequacy of actions taken.

Status of Prior Years’ Comments

A. Program Cost Accounting

In FY 1999, 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. The OCFO implemented an

interim labor distribution system in FY 2000 by strategic arena in an effort to collect labor

data. A follow-up analysis of the data available for allocation and distribution of labor cost

was performed in the current year. The analysis showed that the new system sufficiently

improved the information collection process. This condition is closed.

B. 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. In FY 2000, we reported that

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. In the current year the agency implemented a “Red Folder”

process, whereby tracking and documentation of files can be managed more fully. Thus, the

condition is closed.

C. 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). 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 (FY 2000), the agency engaged a contractor to conduct an analysis of the fee

development methodology. In a 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 for the Federal

Government. The report also provided suggestions that would improve the current process.

R. Navarro & Associates, Inc.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

93

Quality controls were not addressed specifically in the report. A subsequent OIG assessment

of quality control procedures over fee development disclosed that improved controls were

instituted. This condition is closed.

D. 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. During FY

2000, the NRC improved its financial management compilation practices as evidenced by

delivering the compiled statements by the agreed-upon milestone. In the current year, the

agency further refined its compilation process, as evidenced by timely delivery of the principal statements and notes. More importantly, the agency was able to meet the delivery milestones. The condition is closed.

E. Management Controls Over Small Entity Certifications

As reported in prior years, materials licensees can qualify as small entities and pay reduced

annual fees depending on their size (per 10 CFR 171.16). 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 OCFO

performs a cursory review of NRC Forms 526 received, primarily for completeness. A few

certifications are denied each year based on information available to license fee analysts.

During FY 1999, the agency granted 1,180 fee reductions totaling $6.4 million or 83 percent

from the originally billed materials fees of $7.7 million. The agency granted fee reductions of

approximately $5.2 and $5.8 million for FY 2001 and FY 2000, respectively.

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. As of the end of our FY

2001 field work, a corrective action plan had not been provided for review. On December 7,

2001, the agency issued a memorandum documenting an approach that will be used for FY

2002. Since a plan was not implemented to address this condition in FY 2001, the condition

remains unresolved.

Assurance on Performance Measures

With respect to internal controls related to performance measures, the OIG performed those

procedures and will report on 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.

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

94

FY 2001 Audited Financial Statements (continued)

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, 2001, and have issued our report thereon dated January 16, 2002. 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 an opinion.

The results of our tests of compliance with the laws and regulations described in the preceding paragraph, exclusive of FFMIA, disclosed an instance of noncompliance with the following

laws and regulations that are required to be reported under Government Auditing Standards and

OMB Bulletin No. 01-02, which is described below.

Current Year Comment

Compliance with Computer Software Accountability

A review was performed by the OIG (Report No. OIG-02-A-02) of the NRC’s management

controls governing the accountability and control of software and software licensing

agreements. The review evaluated the extent of compliance with Executive Order 13103,

Computer Software Piracy, which requires all executive agencies to ensure compliance with

applicable copyright laws.

The report identified two conditions evidencing weaknesses in the agency’s current practices:

• NRC Management Directives do not address the full scope of the executive order.

• The agency’s software management controls do not implement the Chief Information

Officer (CIO) Council’s guidelines.

NRC’s policies and procedures do not address the full scope of the executive order because

the NRC focused its actions on personal use, rather than all uses of software. As a result, the

NRC has not conducted an initial assessment of its software, established a baseline for

software inventory, or determined if all software on agency computers is authorized.

The OIG further concluded that these conditions place the agency, its employees and

contractors at risk.

R. Navarro & Associates, Inc.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

95

Recommendation:

Refer to the OIG report for detailed description of the conditions and recommendations.

Follow-up and resolution actions will be tracked by OIG.

Status of Prior Years’ Comments

A. Compliance with the Debt Collection Improvement Act

In the prior year, we reported that the NRC did not comply fully with the referral provisions

of the Debt Collection Improvement Act. 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 identified a 60 percent exception rate for accounts that were outstanding

for more than 180 days. In the current year, the agency implemented a “Red Folder” process,

whereby tracking and documentation of files can be managed more fully. Thus, the condition

is closed.

B. Part 170 Hourly Rates

As previously reported in fiscal years (FY) 1998 through 2000, the Omnibus Budget Reconciliation Act (OBRA) of 1990 requires the NRC to recover approximately 100 percent 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

calculations did not include certain contract support costs of approximately $70 million, net

of contract support costs directly billable to licensees and applicants. The $70 million represented approximately 15 percent of the FY 1998 NRC appropriation of $472.8 million.

The contract support costs were excluded because, based on the OBRA conference agreement, the OCFO 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 (Report No. 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. The report did

not provide for a solution to be implemented during FY 2001. We do, however, understand

that the agency is looking to the future implementation of cost accounting to assist them in

fully addressing this condition. Planned actions to be taken by the agency have resolved this

condition. Closure is dependent on subsequent audit follow-up.

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

96

FY 2001 Audited Financial Statements (continued)

FEDERAL FINANCIAL MANAGEMENT IMPROVEMENT ACT

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 years’ instances of noncompliance.

FFMIA - Current Year Comment

Accounting for Internal Use Software

Refer to the Report on Management’s Assertion About the Effectiveness of Internal Control,

Current Year Comment B - Accounting for Internal Use Software for a detailed discussion of

the condition and recommendation. This condition is considered a material weakness and a

Federal Financial Management Improvement Act substantial non-compliance.

FFMIA - Status of Prior Year Comments

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 a material weakness and a Federal Financial Management Improvement Act substantial non-compliance.

B. 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 and FY 2000, the issue identified with the core

general ledger - Federal Financial System (FFS) - operated by Treasury’s Financial Management Service (FMS) remained an unresolved condition and continues to be an FFMIA substantial non-compliance.

In the prior year, we reported that 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. We consider this condition resolved and closure depends on the

agency migrating from FMS during FY 2002.

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.

R. Navarro & Associates, Inc.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

97

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 of 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 (1) expressing an opinion on whether the principal statements are free

of material misstatement and presented fairly, in all material respects, in conformity with

generally accepted accounting principles, and (2) 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;

• 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 of 1950, Federal

Financial Management Improvement Act (PL 104-208); Government Information Security

Act (PL 106-398); 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.

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

98

FY 2001 Audited Financial Statements (continued)

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, the standards applicable to financial audits contained in Government Auditing Standards and OMB Bulletin No. 01-02, Audit Requirements for

Federal Financial Statements.

This report is intended solely for the information and use of the Commissioners and 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.

January 16, 2002

R. Navarro & Associates, Inc.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

99

CHIEF FINANCIAL OFFICERS’ RESPONSE TO

THE AUDITORS’ REPORT
U.S. NUCLEAR REGULATORY COMMISSION

100

FY 2001 Audited Financial Statements (continued)
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

101

January 11, 2002

MEMORANDUM TO: Stephen D. Dingbaum

Assistant Inspector General for Audits

FROM: Jesse L. Funches /RA/

Chief Financial Officer

SUBJECT: DRAFT AUDIT REPORT - AUDIT OF

THE NUCLEAR REGULATORY COMMISSION’S

FISCAL YEAR 2001 FINANCIAL STATEMENTS

I have reviewed the draft audit report of the Nuclear Regulatory Commission’s FY 2001 Financial Statements, dated January 9, 2002. Our responses to the recommendations are as follows.

Recommendation 1

The Chief Financial Officer (CFO) should give greater priority to implementing a cost management system within the revised milestones. The preparation of routine, useful, and reliable cost

accounting information for agency managers should become a higher priority. Cost accounting

information should enhance the agency’s ability to evaluate the cost of outputs.

Response

Agree. A high priority has been and will continue to be placed on implementing a cost management system within the revised milestones of the remediation plan, dated May 31, 2001. These

milestones are linked to the implementation of the PeopleSoft payroll, time and labor, and human

resources modules. The PeopleSoft modules were implemented on November 4, 2001. Some of

the remediation plan milestones have been delayed due to the one month deferral of the implementation of the PeopleSoft modules beyond the time frame projected in May 2001 and by

unforeseen increased efforts to resolve issues associated with the interfaces between the

PeopleSoft modules and the cost accounting system. Cost management reports will be provided

to offices for the first quarter of FY 2002 early in calendar year 2002.

Recommendation 2

The CFO should review the agency practices for transitioning to new software applications or

routines, which have financial statement impact. Essential to the deployment of new applications

is the adequacy of testing the process controls, developing the control activities necessary to

ensure reasonable assurance in the process, monitoring the implementation of the application and

development of managerial reports to assist the review and reconciliation of the data provided by

the new process. Implementation of business practices of this nature could assist the OCFO with

deployment of other applications in the future.

UNITED STATES

NUCLEAR REGULATORY COMMISSION

WASHINGTON, DC 20555-0001
U.S. NUCLEAR REGULATORY COMMISSION

102

FY 2001 Audited Financial Statements (continued)

Response

Agree. The OCFO will review the practices for transitioning to new software applications or

routines that have financial statement impact. On November 4, 2001, the agency implemented

the PeopleSoft Human Resources Management System. This new system integrates human

resources, payroll, and time and labor, and is a single-entry system for time, attendance and labor

reporting. This new system is expected to correct all of the system weaknesses identified in the

Payroll/Personnel System. The staff is currently extracting IT labor data from the new Time and

Labor module so we can monitor IT labor reporting. The staff plans to issue first quarter labor data to

IT project managers by the end of February 2002 for their review and certification. This completes all

remediation actions required by the Federal Financial Management Improvement Act.

Recommendation 3

The Chief Financial Officer should instruct the General Accounting Branch of their inherent

responsibility to evaluate amounts being recorded as liabilities and expenses. It is essential that

the review process include an understanding of the source of the information and the underlying

techniques used to develop amounts referred for inclusion in the agency’s financial records. At a

minimum, OCFO should require DCPM to provide documentation to justify valid expenses and

liabilities.

Response

Agree. The General Accounting Branch will ensure that all expenses recorded for contracts in

closeout are supported by adequate documentation and will work with DCPM to obtain the

necessary documentation.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

103

APPENDIX A
U.S. NUCLEAR REGULATORY COMMISSION

104

Appendix A (continued)
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

105

December 17, 2001

MEMORANDUM TO: Chairman Meserve

FROM: Hubert T. Bell

Inspector General

SUBJECT: INSPECTOR GENERAL’S ASSESSMENT OF

THE MOST SERIOUS MANAGEMENT CHALLENGES

FACING NRC (OIG-02-A-06)

SUMMARY

On January 24, 2000, Congress enacted the Reports Consolidation Act of 2000 to provide

financial and performance management information in a more meaningful and useful format for

Congress, the President, and the public. Included in the act is the requirement that the Inspector

General (IG) of each Federal agency summarize what he or she considers to be the most serious

management and performance challenges facing his or her respective agency and assess the

agency’s progress in addressing those challenges. In accordance with the Reports Consolidation

Act of 2000, I submit my annual statement assessing the most serious management challenges

facing the U.S. Nuclear Regulatory Commission (NRC).

Congress left the determination and threshold of what constitutes a most serious management challenge to the discretion of IGs. As a result, I applied the following definition in

preparing my statement:

UNITED STATES

NUCLEAR REGULATORY COMMISSION

WASHINGTON, DC 20555-0001

Serious management challenges are mission critical areas or programs that have the potential for a perennial weakness or vulnerability that, without substantial management attention, would seriously impact agency operations or strategic goals.

The most serious management challenges facing NRC may be, but are not necessarily, areas

that are problematic for the agency. The challenges, as identified, represent critical areas or

difficult tasks that warrant high-level management attention.

DISCUSSION

The most serious management challenges that follow are not ranked in any order of importance.
U.S. NUCLEAR REGULATORY COMMISSION

106

Appendix A (continued)

CHALLENGE 1

Protection of nuclear material and facilities used for civilian purposes.

NRC’s primary mission is to ensure that public health and safety are protected in the many

different peaceful uses of nuclear energy. In light of the attacks of September 11, 2001, the

agency needs to (1) reassess whether new terrorist threats require a change to the physical security standard of nuclear material and facilities, and (2) maintain a rigorous approach in its reviews

of physical security and safeguards programs at NRC-regulated nuclear facilities. At the same

time, NRC’s oversight should be conducted in a manner that ensures public safety and aligns

with the agency’s goal to reduce unnecessary regulatory burden.

NRC’s security program contains many facets to protect against the design basis threat

(DBT). The DBT defines the threat against which power plants and selected fuel cycle facilities

must be capable of defending. NRC’s DBT does not currently include an attack using an airplane. As a result, the agency is re-evaluating the threat assessment methods and approach used

to define the DBT. NRC is also reviewing the measures needed to protect against this new

manifestation of terrorism. Furthermore, the agency will continue its efforts to coordinate with

law enforcement and intelligence agencies.

NRC’s immediate response to the attacks of September 11, 2001, was to advise nuclear power

plants and fuel facilities to go to the highest level of physical security. The agency also fully

staffed its Incident Response Center around the clock. The Chairman further tasked the agency

to conduct a comprehensive study on how the threat of terrorism affects NRC and those it regulates. In response, the agency has established a special task force and identified the group’s role,

responsibilities, and objectives.

Prior to the events of September 11, 2001, NRC already had a program, the Operational

Safeguards Response Evaluation (OSRE), in place for assessing physical security at nuclear

power plants. In July 2001, the agency also announced the start of a 1-year pilot of the Safeguards Performance Assessment (SPA) program, a process by which a power-reactor licensee

tests the effectiveness of key elements of its physical security program. NRC announced that it

would use the pilot program to determine if the SPA had merit as a possible replacement program

for OSRE. In the meanwhile, the agency continues to run both programs.

While the agency has initiatives underway to ensure the protection of nuclear material and

facilities, NRC must remain focused on public safety and, at the same time, not increase licensees’ unnecessary regulatory burden.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

107

NRC continues to make its regulatory framework more risk-informed so that areas of highest

risk receive the greatest focus. Where appropriate, NRC is also making its regulatory framework

more performance-based by (1) using measurable outcomes to monitor systems and licensee

performance and (2) focusing on the results as the primary basis of regulatory decision-making.

This approach allows licensees more flexibility in determining how to meet NRC’s regulatory

requirements. The overall goals of this shift are to enhance safety decision-making, improve

efficiency, and reduce resources devoted to issues with low safety significance. To be successful,

NRC’s stakeholders (particularly staff members responsible for implementing this approach)

must fully understand its dynamics and the agency’s goals.

NRC has made progress over the past year to transition to a more risk-informed and performance-based framework. With regard to nuclear reactors, the Office of Nuclear Reactor Regulation (NRR) took steps to improve coordination of office risk-informed initiatives by identifying a

specific NRR branch as the central focal point for coordinating risk-informed activities within

NRR and creating a new management group to oversee risk-informed initiatives. Another

multidisciplinary group assigned to help the transition independently monitored and evaluated

the results of implementation of the agency’s Reactor Oversight Program. Other ongoing reactor-related efforts include the (1) development of risk-based performance indicators to be considered for use in the plant assessment process and

(2) conversion to new technical specifications developed to promote more consistent interpretation and application of technical specification requirements.

NRC is also using a task group to support its efforts to apply risk-informed techniques and

approaches to the materials and waste arena regulatory framework. The Office of Nuclear

Material Safety and Safeguards (NMSS) Risk Task Group (RTG) is using case studies and

applying screening criteria to identify regulatory applications appropriate for risk-informing. The

RTG has held public meetings about this methodology, trained NMSS staff in application of risk

analysis tools and techniques, and used risk information to modify the inspection program.

These efforts to risk-inform oversight of reactors, waste, and materials indicate that NRC is

attempting to take a coordinated approach to further the transition. However, as the Chairman

noted in a recent speech at the Nuclear Safety Research Conference, this transition is proving to

be a slow and challenging process.

CHALLENGE 2

Development and implementation of an appropriate risk-informed and performance-based

regulatory oversight approach.
U.S. NUCLEAR REGULATORY COMMISSION

108

Appendix A (continued)

Federal agencies’ attention to and investment in information resources are crucial in (1)

supporting critical mission-related operations and (2) providing more effective and cost-efficient

government services to the public. NRC, like other Federal agencies, continues to struggle in its

efforts to obtain a good return on these investments. And, without proper protection, NRC’s

information resources could be compromised by a malicious cyber-attack.

NRC relies on a variety of information systems and networks to help carry out its responsibilities and support its business functions. The Agencywide Documents Access and Management

System (ADAMS) - NRC’s electronic information system for maintaining the agency’s unclassified official program and administrative records in a centralized electronic document repository -

is a system that continues to pose problems for NRC, both internally and externally. The agency

is implementing an action plan to address these problems and received an assessment of ADAMS

from an independent contractor. NRC also continues to work through issues with its Standard

Financial and Integrated Resource Enterprise (STARFIRE) system - its proposed single, authoritative source of financial and resource information. STARFIRE was to consist of 10 modules and

be operational by October 1999. However, that plan did not come to fruition, and the STARFIRE

system implementation was downsized to include only those modules having the most immediate

impact on the agency. As of

November 4, 2001, the human resources, payroll, and time and labor modules were implemented as the agency’s system of record. The agency’s goal is to make the remaining modules

the subject of a future project action.

NRC’s information security program is composed of a comprehensive set of policies and

procedures. However, the agency did not have a process to consistently implement its program

and recently received a grade “F” in computer security from a congressional score card. Based

on findings and recommendations from OIG’s evaluation based on the Government Information

Security Reform Act, NRC developed and issued a Corrective Action Plan to address these issues.

While the agency has made some strides in the information resources area, the need for close

management attention, integrated decision-making processes, and more diligent planning still exists.

CHALLENGE 4

Administration of all aspects of financial management.

NRC must be a prudent steward of its fiscal resources through sound financial management.

Sound financial management includes the production of timely, useful, and reliable financial

information to support agency management; an effective cost-accounting system; well- developed strategic planning; and an integrated method for planning, budgeting, and assessing perforCHALLENGE 3

Identification, acquisition, implementation, and protection of information resources.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

109

mance to better enable NRC to align programs with outcomes. Sound financial management also

includes the manner in which an agency procures products and services. Procurements must be

made in accordance with Federal guidance and with an aim to achieve the best value for the

agency’s dollars. Without effective management controls, the procurement process is susceptible

to fraud, waste, and abuse.

NRC has taken steps to strengthen controls over financial management processes during the

past year. Actions planned or taken include measures to improve control and accountability of

NRC property, clarify agency procedures for awards made under General Services Administration Federal Supply Schedule contracts, and ensure consistency in the development and implementation of the annual license fee process. The agency also modified its primary information

technology and related operations support vehicle, the Comprehensive Information Systems

Support Consolidation (CISSCO) program. CISSCO II allows NRC more purchase options and

is expected to facilitate tighter control over the billing process.

NRC is still working to implement a cost accounting process as required by Federal accounting standards. Full implementation is expected in 2002. During the first quarter of fiscal year

(FY) 2002, NRC implemented STARFIRE’s human resources, payroll, and time and labor modules. However, NRC has yet to achieve its vision for a fully integrated, agencywide financial

management system. During FY 2001, NRC reduced the number of material weaknesses identified in the FY 1999 financial statement audit. During FY 20001, the agency also closed out four

of nine reportable conditions and it expects to close out another reportable condition this year.

Further, NRC received an unqualified opinion on its financial statements for the seventh consecutive year during FY 2000. While progress has been made to tighten controls over financial

management processes, further improvements are needed.

CHALLENGE 5

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. To this end, the agency should provide its diverse group of

external stakeholders (e.g., the Congress, general public, other Federal agencies, industry, citizen

groups) with clear, accurate, and timely information about, and a meaningful role in, NRC’s

regulatory process. This is a challenging task because of the highly technical nature of NRC’s

operations, the sensitivity of its information, and the balance the agency must maintain to remain

independent.

NRC is implementing initiatives to improve the quality, clarity, and credibility of its communications with all stakeholders. The agency’s initiatives include the development of

(1) communication plans to involve stakeholders early in regulatory activities, (2) a redesigned website to provide a richer variety of information, and (3) formal training courses to

provide NRC staff with the necessary skills.
U.S. NUCLEAR REGULATORY COMMISSION

110

Appendix A (continued)

CHALLENGE 6

Intra-agency communication (up, down, and across 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 with staff, the

organization, and other stakeholders - enabling people to do their jobs and to work cooperatively

and efficiently in a coordinated manner. However, unless the information is organized in a useful

manner, it is merely data and not meaningful.

NRC has undertaken various actions to improve its internal communication over the past year

and included plans for addressing this challenge in its performance plan for FY 2002. Actions

taken or initiated over the past year include the (1) realignment of the Chief Information Officer

to report to the EDO; (2) use of the electronic “EDO Updates,” a new type of communication

between the Executive Director for Operations (EDO) and the entire staff; and (3) updating of

various management directives and production of other guidance to provide clearer direction to

NRC staff. In May, the Senior Executive Service Candidate Development Program (SES CDP)

class of 2001 produced a plan to improve internal communication, and in August the EDO sent a

memo to office directors and regional administrators referencing the SES CDP report and establishing his expectations for making internal communication a priority. These efforts represent

steps in a positive direction, and we will watch with interest the effect that these measures have

on NRC’s internal communication.

Another important initiative that the agency has underway is to enhance public participation

through the three types of NRC meetings open to the public. Category 1 meetings (which focus

on subjects most likely to have a direct impact on the public) invite the public to observe the

business portion of the meeting. After that is concluded, NRC staff members are available to

answer the public’s questions. Category 2 and category 3 meetings allow for a higher level of

public participation.

The challenge for NRC is to afford all stakeholders, including the public, with appropriate

and meaningful access to its regulatory process. This access must be provided in a committed,

stipulated, consistent, timely, and an unambiguous manner that fosters confidence in the agency.

At the same time, the agency is also faced with the responsibility of protecting sensitive security

and safeguards information from unauthorized access.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

111

NRC continues to be in a period of transition in several dimensions. As recently as a few

years ago, the agency expected that a number of nuclear power plants would enter into early

decommissioning. That has now changed and NRC expects most plants to apply for 20-year

renewals to their operating licenses. The agency also continues to face deregulation of the

electric power industry and is dealing with a significant consolidation of nuclear plant owners/

operators.

The response to changes in the nuclear industry can have a significant impact on the safety of

a plant and present challenges to the regulator. NRC is also dealing with the evolution of its

nuclear material program.

NRC’s external environment continues to evolve. For example, in a speech, the Chairman

stated that the agency’s license renewal program is proceeding aggressively, with three applications granted, seven plants under active review, and almost half the plants in the U.S. having

indicated that they intend to pursue renewal. NRC is also proceeding with “pre-application”

reviews of new reactor designs in anticipation of formal applications. To further prepare for new

reactors and emerging issues, the agency established several multi-disciplinary groups to coordinate NRC activities. The Office of Nuclear Regulatory Research is also coordinating, with other

program offices, to develop a research plan that identifies major areas for research and development to support advanced reactor licensing efforts.

While NRC has the authority to regulate the use of certain nuclear material, States are allowed to regulate the use of such radioactive material by entering into an agreement with the

agency. The States that enter into this agreement with NRC are known as Agreement States. As

the number of Agreement States continues to rise, NRC is now directly regulating a decreasing

number of licensed users. As a result, these remaining NRC material licensees are bearing the

burden of increasing fees to support agency efforts. In an effort to examine the impact, the

agency formed a working group that developed and evaluated a range of possible options for a

national program to better define State and Federal roles.

To meet the intent of the Government Performance and Results Act, NRC put in place a

planning, budgeting, and performance management (PBPM) process. PBPM is the agency’s

disciplined, integrated planning framework. Currently, NRC’s major program offices are using

the process and the agency is making improvements for the use of PBPM in its service-oriented

offices. An agency goal is to ensure that employees understand their roles and responsibilities

under the PBPM process. Also, NRC’s plan is to update and review its listing of external factors

influencing agency activities.

As the agency continues to face a changing external environment, it must ensure that NRC’s

processes are well planned, budgeted, and integrated throughout the agency. Furthermore,

agency managers need to be kept fully aware of what each organizational component is doing in

an effort to reduce regulatory burden without compromising the public’s health and safety.

CHALLENGE 7

Integration of regulatory processes in a changing external environment.
U.S. NUCLEAR REGULATORY COMMISSION

112

Appendix A (continued)

NRC needs a dynamic, diverse workforce with the appropriate knowledge, skills, and abilities

to achieve its public health and safety mission. Although the agency’s expertise appears sufficient today, factors such as the aging workforce and a shortfall in nuclear engineering graduates

suggest that NRC’s future expertise and technical capability will likely decline without appropriate attention and action. Human capital management - a process for identifying the human

capital required to meet organizational goals and developing the strategies to meet these requirements - provides managers with a framework for making sound staffing decisions. NRC needs to

integrate its approach to human capital management into budgetary and strategic planning processes to ensure the agency’s ability to function over the long run.

NRC has made a concerted effort to respond to this challenge over the past year. In response

to the Chairman’s request for a plan to assess and maintain the agency’s scientific, engineering,

and technical core competencies, staff developed and are working through an action plan for

maintaining core competence by comparing the skills it has against the skills it will need and

developing strategies to address those gaps. The agency has strengthened its recruitment

program, offered its second recent SES CDP, developed and submitted an agencywide budget

request for human capital initiatives, expanded the student intern program, and received

permission from the Office of Personnel Management to waive the dual compensation reduction

to hire Federal retirees in certain situations.

The agency needs to meet this challenge in order to address all other management challenges.

Continued efforts are needed to ensure that the agency’s workforce planning efforts become institutionalized and continue to get the high level of attention they have received over the past year.

CONCLUSION

While I identified eight distinctive management challenges, the challenges are also interdependent.

NRC can align itself to enhance its efforts to meet its public health and safety mission by continuing

the important activities it has underway to address these most serious management challenges.

cc: Commissioner Dicus

Commissioner Diaz

Commissioner McGaffigan

Commissioner Merrifield

CHALLENGE 8

Maintenance of a highly competent staff (i.e., human capital management).
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

113

Management’s Actions To Address

Major Challenges

Protection of Nuclear Material

and Facilities Used for Civilian

Purposes

In a memorandum dated December 17,

2001, the OIG added this new management

challenge in light of the terrorist attacks of

September 11, 2001. The NRC took immediate action as a result of the terrorist attacks,

including issuing a notice to advise our

reactor and fuel cycle facility licensees to go

to the highest level of security and maintaining

enhanced 24 hour per day operation of the

Emergency Operations Center. The agency

also initiated a thorough review of our safeguards and physical security programs.

The NRC will undertake a review of the

strategic plan to determine if our goals,

strategies, and measures adequately address

the actions necessary as a result of the

terrorist attacks of September 11, 2001.

Actions and milestones to meet this

challenge are currently being developed and

will be included in the FY 2004 Budget

Estimates and Performance Plan.

Development and

Implementation of an

Appropriate Risk-informed and

Performance-based Regulatory

Oversight Approach

Nuclear Reactors Safety Arena

In FY 2001, the NRC reactor safety

arena met this challenge by implementing an

important transition to an improved Reactor

Oversight Process (ROP). The improved

processes included developing and implementing a risk-informed inspection program

to provide increased focus on aspects of

plant performance which had the greatest

impact on safe plant operation. It also uses

licensee-reported performance indicator

information to improve the program’s

objectivity, and to make it more understandable and predictable. We will continue to

improve this program and build on its

successful transition.

In addition, a recent NRC study (SECY01-0133 of July 23, 2001) provided staff

recommendations to the Commission for

using risk analysis as a basis to revising

nuclear reactor regulations (Section 10 CFR

50.46). These recommendations were based

upon a feasibility study conducted by the

NRC staff. The paper is publically available.

Moreover, the Commission is making

significant progress towards developing a

risk-informed rule on the special treatment

requirements for systems, structures, and

components of reactor facilities. A significant exemption was granted to the South

Texas Plant in FY 2001 on special treatment

requirements. A risk-informed amendment

to 10 CFR 50.44, pertaining to hydrogen

monitoring , is well underway, and exemptions from the current rule have been granted

to several licensee.

Nuclear Materials Safety Arena

In FY 2001, significant progress was

made towards identifying regulatory applications that would be amenable to, and would

benefit from, an increased use of risk insights and information. Draft screening

criteria were published and eight case

studies were completed to (1) evaluate the

effectiveness of the screening criteria for

identifying regulatory applications amenable
U.S. NUCLEAR REGULATORY COMMISSION

114

Appendix A (continued)

to being risk-informed, (2) identify potential

near-term process improvements, and (3)

evaluate existing tools, methods and data.

The studies were used to evaluate the feasibility and usefulness of developing safety

goals specific to nuclear material and waste

regulation. In conducting these activities, an

enhanced participatory process was used that

included six public stakeholder workshops.

Also during FY 2001, NRC developed and

began to offer general risk assessment and

communication training to management and

staff, as well as risk training focused on

specific technical regulatory areas.

A revision to 10 CFR Part 70 became

effective on October 18, 2000. This revision

increased the use of risk information for fuel

cycle facilities. During FY 2001, the NRC

worked with stakeholders to substantially

complete development of the Standard Review

Plan to implement the new requirements.

The NRC also completed the medical

pilot inspection program in FY 2001.

During FY 2001, stakeholders were

engaged in two public meetings held at

NRC headquarters in Rockville, MD, and

four public meetings held in the vicinity of

six fuel cycle facilities to discuss changes

proposed for fuel cycle oversight.

Nuclear Waste Safety Arena

In August 2001, NRC issued an internal

version of the Integrated Issue Resolution

Status Report (IRSR). In fiscal year 2002,

NRC plans to incorporate additional information from six issue resolution meetings

conducted in the latter half of fiscal year

2001, as well as reference final 10 CFR 63

and the Yucca Mountain Review Plan in the

Integrated IRSR. NRC plans to publish the

Integrated IRSR around the middle of fiscal

year 2002.

NRC is conducting a Probabilistic Risk

Assessment for Dry Cask Storage.

The draft report on screening analysis is

scheduled for June 2002 with final report

scheduled for April 2003.

In FY 2001, significant progress was

made towards identifying regulatory applications that would be amenable to, and would

benefit from, an increased use of risk insights and information. Draft screening

criteria were published and eight case

studies were completed to (1) evaluate the

effectiveness of the screening criteria for

identifying regulatory applications amenable

to being risk-informed, (2) identify potential

near-term process improvements, and (3)

evaluate existing tools, methods and data.

The studies were used to evaluate the feasibility and usefulness of developing safety

goals specific to nuclear material and waste

regulation. In conducting these activities, an

enhanced participatory process was used that

included six public stakeholder workshops.

Also during FY 2001, NRC developed and

began to offer general risk assessment and

communication training to management and

staff, as well as risk training focused on

specific technical regulatory areas.

Clear and Balanced

Communication With External

Stakeholders

Nuclear Reactors Safety Arena

The NRC had extensive interaction with

licensees, the public, and other stakeholders

as it developed the revised Reactor Oversight Program. Feedback and comments

from external stakeholders were solicited

through a series of monthly public meetings

with industry, a public workshop which

focused on the lessons learned, and issuance

of a Federal Register notice for public

comment. Finally, an Initial Implementation

Evaluation Panel (IIEP) was established by

the Agency in accordance with the Federal

Advisory Committees Act (FACA) to serve
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

115

as an advisory committee to the Agency on

the efficacy of the ROP. The panel included

senior representatives, licensees, and public

interest groups.

Nuclear Materials Safety Arena

During FY 2001, the materials arena

developed and issued an array of integrated

plans governing communications regarding:

Event Response and Assessment, MOX

Facilities, Materials Inspections, Medical

Uses, Decommissioning, Enrichment Technology, and Uranium Recovery.

The Fuel Facilities Licensing and Inspection program conducted approximately 25

public meetings on significant regulatory

issues. These meetings afforded NRC the

opportunity to solicit stakeholder viewpoints

and provided stakeholders the opportunity to

exchange information on a variety of issues

including the MOX licensing initiative, the

fuel cycle oversight process, and the integrated safety analysis required by the revised

Part 78. More than half of these meetings

were held in the vicinity of those affected.

The NRC invited Agreement States to

the Sealed Source and Device Seminar held

in April 2001, and participated with the

States on numerous work and management

teams to arrive at collegial solutions to

issues of common concern.

 NRC conducted Working Group meetings on 10 CFR Part 40 (Licensing of Source

Material) jurisdictional issues with stakeholders’ participation.

Nuclear Waste Safety Arena

In FY 2001, NRC staff met with representatives of Native American tribes potentially impacted by the possible siting of a

High Level Waste (HLW) geological repository at Yucca Mountain, Nevada to facilitate

communication with Native American tribal

governments and entities on health and

safety issues associated with a possible

licensing decision on a HLW repository.

NRC held public workshops for a proposed rulemaking on Part 71 (Packaging and

Transportation of Radioactive Materials).

NRC hosted a workshop for industry and

other interested stakeholders on ways to

improve the decommissioning of nuclear

facilities, and NRC staff participated in

several meetings with interested stakeholders to discuss the decommissioning of

nuclear facilities.

NRC also actively solicited comments

from industry and the public for incorporation into the final guidance to be developed

for site-specific 10 CFR Part 72 license

renewals. The draft guidance was sent to

Virginia Power in March 2001 since Virginia

Power intends to submit a renewal application for the Surry independent spent fuel

storage installation in Spring 2002.

NRC staff held four public meetings to

gather comments prior to the initiation of

environmental impact statements for the

Sequoyah Fuels site decommissioning and

the application to construct and operate a

mixed-oxide fuel fabrication facility. Staff

also prepared and released for interim use

and public comment draft guidance for

environmental reviews for licensing actions

associated with the NRC’s Office of Nuclear

Materials Safety and Safeguards’ programs.

Intra-agency Communication

Nuclear Reactors Safety Arena: The

offices involved in the nuclear reactor arena

have initiated periodic meetings with intraagency stakeholders to enhance their communications and support functions. Offices

in the arena have also developed and implemented a set of communications plans.

The Office of Nuclear Reactor Regulation

has developed and improved the

prioritization of its user needs. The interface

between the Office of Nuclear Regulatory
U.S. NUCLEAR REGULATORY COMMISSION

116

Appendix A (continued)

Research and the Office of Nuclear Reactor

Regulation has been improved through

monthly meetings to enhance integration and

cooperation throughout both offices.

Communications between headquarters

offices and regional offices have improved

with the establishment of constructive relationships with key regional stakeholders and

periodic conference (video) calls and trips.

Nuclear Materials Safety Arena

The arena has expanded the use of

Division Director Headquarters/Regional

Counterpart Meetings to improve communication and reach agreement on solutions to

policy and technical issues.

The Office of Nuclear Materials Safety

and Safeguards increased focus on regularly

scheduled and effective staff meetings at all

levels throughout the organization to ensure

open lines of communications. The Office

also encouraged and supported staff rotational assignments throughout the organization, and team work group assignments, in

order to share insights across arenas, and to

increase team-building and arena-based

solutions to issues.

Periodic counterpart meetings are conducted by managers of the Office of Nuclear

Material Safety and Safeguards, the Office

of State and Tribal Programs, and the Office

of Incident Response Operations to ensure

communication on items of mutual interest.

Nuclear Waste Safety Arena

The Office of Nuclear Material Safety

and Safeguards increased focus on regularly

scheduled and effective staff meetings at all

levels throughout the organization to ensure

open lines of communication. The Office

also encouraged and supported staff rotational assignments throughout the organization, and team work group assignments, in

order to share insights across arenas, and to

increase team-building and arena-based

solutions to issues.

Inter-office communication on important

issues such as the high-level waste management and decommissioning areas is made

more effective through the use of Management Boards which meet bi-weekly to discuss

status reports regarding action items and to

provide additional direction to these programs,

particularly in the area of policy issues.

Regulatory Processes That Are

Integrated and Continue to Meet

NRC’s Safety Mission in a

Changing Environment

Nuclear Reactors Safety Arena

One of the most important changes to the

environment faced by the nuclear reactor

arena is consolidation and restructuring of

nuclear power assets. The NRC conducted a

study to assess the implications for safety

from consolidation within the industry. The

study was published in the Federal Register

on June 27, 2001 to allow the public an

opportunity for comment on its findings. A

public workshop was held to address comments on the paper on November 1, 2001. A

final paper will be presented to the Commission in FY 2002.

Nuclear Materials Safety Arena

Quarterly meetings of the Probabilistic

Risk Assessment Steering Committee ensure

that risk-informed activities are integrated

across the agency.

The NRC’s Response to Terrorist Attacks

Task Force, formed after the September 11, 2001

terrorist attack, and the Safeguards Steering

Committee will facilitate an integrated

agency response to the terrorist events of

September 11.

Nuclear Waste Safety Arena

In FY 2001, an integrated effort was

conducted on the issue of the unaccounted
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

117

Millstone rods to determine the health and

safety impacts of their potential loss, what

corrective and mitigative actions were

needed, and whether any regulatory changes

might be needed.

Identification, Acquisition,

Implementation, and Protection

of Information Resources

Information Security

GAO and OMB have identified information system security as a critical government

management challenge. Enhanced information security is a requirement of PDD-63,

PDD-67, and GISRA. On September 10,

2001, the NRC provided to OMB its response to the OMB memorandum of June

22, 2001 entitled, “Reporting Instructions for

the Government Information Security Act

(GISRA).” The response consisted of two

separate components, one prepared by

NRC’s Inspector General (IG) characterizing

the results of an independent IT security

evaluation and the other prepared by the

NRC Chief Information Officer (OCIO),

based on the results of its annual IT security

program review. These summaries were the

primary input for OMB’s summary report to

Congress on the state of the federal

government’s compliance with GISRA.

While the results of the program review

found that NRC’s information security

program comprises a comprehensive set of

policies and procedures, it also concluded

that more oversight and measurement of

NRC’s computer security program is necessary in order to ensure that proper security

practices are being followed.

In recognition of the importance of

protection of critical agency information

resources and systems, NRC is undertaking

the development of a centralized information

security oversight and performance measurement process.

This process will be based on the Federal

IT Security Assessment Framework developed by the National Institute of Standards

(NIST) and the CIO Council.

During FY 2001, NRC strengthened its

computer security defense program to

monitor and protect against the continued

threat of cyber attacks on agency systems.

NRC network administrators monitored the

local and wide-area network for attacks and

probes. NRC updated its existing desktop

anti-virus detection/protection tools and antivirus checker at the NRC E-Mail and

Internet, and provided periodic Network

Virus Alerts. Also, the agency distributed

anti-virus software for employees to use on

their home computers to help limit the transmission of viruses in either direction. As a

result, there were absolutely no interruptions to

or loss of data from NRC’s business applications due to computer viruses.

The NRC completed an independent

review (penetration test) of NRC’s cyber

protection mechanisms. Network security

controls and detection tools were tested and

the report determined that NRC is adequately protected from outside attacks.

Plans were developed to conduct the next

test of this sort in FY 2002.

We have provided employees with new online training in computer security awareness.

Plans are in place to upgrade this awareness

course with new/improved material in FY

2002 which will continue to inform employees

about how to recognize and deal with possible

computer security problems.

Electronic Government (E-Gov)

The President has identified Electronic

Government (E-Gov) as an Administration

management priority. Consistent with this

direction, NRC has undertaken a number of

process improvements and initiatives with a

view toward expanding productivity and
U.S. NUCLEAR REGULATORY COMMISSION

118

Appendix A (continued)

enhancing customer service. In an October

22, 2001 report to OMB, NRC outlined its

E-Gov and Government Paperwork Elimination Act (GPEA) priorities, as follows:

• Complete implementation of GPEA

(and extend with digital signature

capability).

• Move to electronic document

management (from creation to

retirement).

• Move to a single, fully-integrated

human resources information management system (and provide employee self-service facilities).

• Leverage the Web for external and

internal communications.

E-Gov advances in FY 2001 included a

focus on implementing the Government

Paperwork Elimination Act (GPEA): In its

report to OMB, NRC identified a total of

625 types of information transactions conducted with the public, and found that most

transactions are already conducted via email

and the web. Sixteen percent of transactions

are already compliant with GPEA; 66 percent more are expected to be compliant by

the October 2003 deadline; 17 percent are

exempt due to external statutory or security

requirements; and 1 percent are still under

consideration.

In FY 2001, NRC launched the Electronic

Information Exchange (EIE) production

system. The EIE program is a key component

of NRC’s E-Gov activities. It provides for the

transmission of digitally signed electronic

documents to NRC over the Internet in a way

that ensures the documents will have legal

standing in any hearing. EIE also gives NRC

the opportunity to realize internal processing

efficiencies and allow licensees to leverage the

Internet to reduce regulatory burden by eliminating the creation and handling of paperbased documents.

The NRC is developing an Electronic

Licensing rule that will allow NRC licensees

and others to electronically submit almost all

documents and data via EIE as well as CDRom, E-mail, and fax. NRC plans to expand

this capability to include adjudicatory

processes in FY 2002.

Administration of All Aspects

of Financial Management

NRC has an overarching corporate

management strategy to employ innovative

and sound business practices and a supporting strategy to strengthen our financial

systems and processes to ensure that our

financial assets are adequately protected

consistent with risk and that our financial

information is better integrated with

decisionmaking. For example, we will

continue to implement new and existing

financial accounting standards to maintain

an unqualified financial opinion and to

improve the effectiveness of our internal

controls. We will provide reliable, timely

financial information to managers for use in

decision-making. We will increase managers’ accountability/responsibility for their

decisions by placing more agency funds

under their controls. We will increase

awareness of using financial information

through training. We will use information

technology to streamline our financial

management processes.

NRC has a number of significant

achievements in FY 2001. The Chief Financial Officer (CFO) and the Executive Director of Operation (EDO) staff participated in

agency wide interdisciplinary group to

develop a statement of work (SOW) for the

new CISSCO II program that addresses the

financial management weaknesses of the

original CISSCO I program that ends in

August 2001. The CFO and EDO staff

participated in agency wide interdisciplinary

group to select vendors for the new CISSCO
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

119

II program. The CFO evaluated the status of

the implementation of new systems that

support cost accounting and revised the cost

accounting remediation plan for implementing

new cost accounting system in January, 2002.

The CFO reviewed the potential of creating

more meaningful cost reports to better meet the

needs of managers on an interim basis (prior to

implementing new cost accounting system).

Maintenance of a

Highly Competent Staff

Human capital management is one of the

foremost management issues facing government agencies today. It is one of the five

issues on the Presidents Management

Agenda. The General Accounting Office

(GAO) and the NRC’s Inspector General

(IG) have both identified human capital

management as an important issue facing the

NRC. The GAO report, “Major Management

Challenges and Program Risks,” highlighted

the potential skill shortages NRC can expect

in the future as a result of an increasing

number of retirements and a decreasing

number of university nuclear engineering

and safety programs. The NRC’s IG found

that the NRC is making a concerted effort to

strengthen its approach to workforce planning; however, it noted the lack of a comprehensive, agency wide workforce plan.

The NRC is taking a number of steps to

respond to this challenge. First, our strategic

workforce planning efforts are being integrated into the NRC Planning, Budgeting,

and Performance Management (PBPM)

process for the FY 2004 budget. Integrating

human capital planning with strategic planning and budgeting efforts strengthens our

efforts to meet our mission and business

requirements effectively and efficiently and

to achieve our goals. In addition, as noted

above, performance goals and measures are

being instituted in our FY 2003 budgeting

and performance plan to measure our

progress in meeting our goals for human

capital management. By FY 2003, the

agency will have human capital performance

goals and measures in place that will measure the agency’s progress in maintaining a

highly competent staff with the skills and

competencies needed to carry out the

agency’s mission and business requirements.

Secondly, we are aggressively using all

available personnel flexabilities and tools, as

well as seeking to add new measures, to

provide needed flexibility to recruit and

retain qualified staff. Recruitment and

retention are being enhanced by approving

selected waivers of dual compensation

limitations under delegated authority from

the Office of Personnel Management. We are

also using retention allowances, as appropriate, for current employees, and increasing

the number of recruitment bonuses offered

to new applicants. To recruit highly-skilled

entry-level professional employees necessary to build the workforce for the future, we

are instituting a student loan repayment

program to offset college loan indebtedness

and creating a new undergraduate fellowship

program to help pay the expenses of promising college seniors.

Third, we are building a capability to

inventory current agency skills and competencies and forecast future skills and competency needs. We completed a pilot effort to

identify the highly specialized skills and

competencies currently available in the

agency, the skills and competencies needed

over the next five years, and the gap closure

strategies necessary for acquiring and maintaining the needed skills and competencies.

The results of this pilot and its associated

process are being reviewed to develop and to

implement an agency wide skills assessment

and needs forecasting process beginning in

FY 2002. By FY 2004, the agency plans to

have a fully integrated process and an
U.S. NUCLEAR REGULATORY COMMISSION

120

Appendix A (continued)

automated skills database to support human

capital management. The process as well as

the data and information available from the

database will provide the tools for the

agency and its managers to assess effectively the highly specialized skills and

competencies available in the agency, the

current and future skills and competencies

needed, and the basis to develop strategies to

address those needs that will result in more

effective management and utilization of the

agency’s human capital resources.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

121

APPENDIX B
U.S. NUCLEAR REGULATORY COMMISSION

122

Appendix A (continued)
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

123

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 agencies to

report on final actions taken on OIG audit recommendations. The following table gives the dollar

value of disallowed costs determined through contract audits conducted by the Defense Contract

Audit Agency. Because of the sensitivity of contractual negotiations, details of these contract

audits are not furnished as part of this report. As of September 30, 2001, there were no outstanding audits recommending that funds be put to better use.

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

For the Period October 1, 2000-September 30, 2001

Number of Questioned Unsupported

Category Audit Reports Costs Costs

A. Audit reports with management 0 $0 $0

decisions on which final action had not

been taken at the beginning of this

reporting period.

B. Audit reports on which management 1 $2,422 $0

decisions were made during this period.

C. Audit reports on which final action was 1 $2,422 $0

taken during this report period.

(i) Disallowed costs that were recovered 1 $2,422 $0

by management through collection, offset,

property in lieu of cash, or otherwise.

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

by management.

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

taken by the end of the reporting period.

Management Decisions not Implemented within One Year

Management decisions were made before September 2000 for the OIG audit reports discussed

in the following paragraphs. As of September 30, 2001, the NRC did not take final action on

some issues. However, the OIG did not recommend that funds be otherwise allocated.
U.S. NUCLEAR REGULATORY COMMISSION

124

Appendix B (continued)

Independent Auditors’ Report and Principal Statements for the Year Ended

September 30, 1998

The OIG determined that the agency’s implementation of managerial cost accounting was

insufficient to comply with SFFAS 4, which requires Federal agencies to accumulate and report

costs of activities on a regular basis for management information purposes. In addition, interim

cost management information should be provided to agency managers to support outcomes and

outputs realized by the agency.

A cost accounting software package has been installed and is being configured to reflect how

the agency initially plans to report costs, including the allocation of indirect costs. During FY

2001, the cost accounting module was used to provide agency managers with interim cost reports

at the strategic arena level for labor costs and planned accomplishment level for non-labor costs.

In November 2001, the agency implemented the PeopleSoft Human Resources Management

System (HRMS), which is an integral component for implementing managerial cost accounting.

The HRMS will enable the agency to report labor costs by planned accomplishment. During the

first quarter of 2002, the agency expects to issue the first set of cost reports utilizing HRMS data.

This will complete the corrective actions to resolve the auditor’s material internal control weakness in this area.

Independent Auditors’ Report and Principal Statements for the Year Ended September 30, 1999

The OIG recommended that the agency improve management controls over small entity selfcertification in order to adequately determine the eligibility of small entity applicants. During FY

2001, the NRC developed a strategy, to be implemented during FY 2002, that includes a 100

percent review of small entity self-certifications. The policy issued December 2001 identifies

new sources of information to validate or contradict a claim for small entity status. This will

complete the planned corrective actions to resolve this condition.

NRC’s License Fee Development Process Needs Improvement December 14, 1999

The OIG recommended that the methodology for calculating the hourly rate be reevaluated to

include the full-cost concept as embodied in OMB Circular No. A-25, User Fees, and SSFAS 4,

Managerial Cost Accounting Concepts and Standards for the Federal Government, and that actual

billing and cost data be used to refine future rate calculations.

The agency is in the process of implementing a cost accounting system. When cost accounting is

implemented, the Office of the Chief Financial Officer will use the cost data as input to review

and refine, as appropriate, the existing full cost rate, including identification and assignment of

direct and allocated indirect costs. The agency expects to complete corrective action during the

third quarter of FY 2002.

Review of NRC’s Decommissioning Fund Program February 1, 2000

The OIG recommended: (1) that reviews of decommissioning funds be implemented consistent

with the Standard Review Plan on Power Reactor Licensee Financial Qualifications and Decommissioning Funding Assurance to ensure that all reporting requirements are met and that reported

data is consistent, and (2) that a lessons learned be conducted to strengthen and enhance the

review process.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

125

The agency issued to the power reactor licensees Regulatory Issue Summary 2001-07 entitled

“10 CFR 50.75(f)(1) Reports on the Status of Decommissioning Funds (Due March 31, 2001)”

on February 23, 2001. The improved quality control process was used during the NRC’s review

of the biennial trust fund reports which were due March 31, 2001. When reviewing the licensees’

reports, the primary reviewers verified that all of the reports met all reporting requirements,

clearly identified radiological costs, and did not include non-radiological costs in the licensees’

certification amounts. When deficiencies or ambiguities in the licensees’ reports were identified,

additional information was obtained from the licensees.

Based on the findings of the OIG audit and experience gained from the first biennial review in 1999,

the staff completed an evaluation of the lessons learned on December 16, 1999. As part of the March

2001 biennial reviews, another lessons learned study was conducted. As a result, the enhanced quality

control measures have been integrated into the review process for evaluating these decommissioning

trust fund reports. The agency considers corrective actions for this audit complete.

Review of the Development and Implementation of STARFIRE June 29, 2000

The OIG recommended that the definition of “significant variation” from approved costs, schedule, and performance goals for major information technology (IT) projects be clarified so that

senior agency managers can make informed decisions whether or not to continue, modify, or

terminate major IT projects.

As part of the capital planning and investment control (CPIC) process, a lessons learned review

is currently underway to determine if “significant variation” of cost, schedule, and performance

goals are being further clarified, and alternative approaches for monitoring progress are being

considered. The results will be incorporated into Management Directive 2.2, Capital Planning

and Investment Control. The agency expects to complete correction action during the third

quarter of FY 2002.

Review of Audit Follow Up System August 14, 2000

The OIG recommended that the Management Directive 6.1 Handbook, Resolution and Follow

Up of Audit Recommendations, be revised to reflect the periodic scheduling standards for conducting analyses of audit recommendations to determine possible trends and system-wide problems and for conducting audit follow-up reviews. Trend analyses will be conducted annually and

audit follow-up reviews will be conducted biannually. The agency expects to complete revisions

to the Management Directive 6.1 Handbook during the third quarter of FY 2002.

Special Evaluation of the Role and Structure of

NRC’s Executive Council August 31, 2000

The OIG recommended that the NRC’s management directives and communication mechanisms

be updated to reflect the responsibilities and alignment of the Executive Director for Operations,

the Chief Financial Officer, and the Chief Information Officer after the Commission decided on a

management strategy for the NRC’s Executive Council. In January 2001, the Commission

announced the abolishment of the Executive Council. The Executive Director for Operations, the

Chief Financial Officer, and the Chief Information Officer continued to meet periodically. The

agency is currently determining which management directives require revisions. The agency

expects to complete corrective action during the second quarter of FY 2002.
U.S. NUCLEAR REGULATORY COMMISSION

126

Appendix B (continued)

Review of NRC’s Differing Professional View/

Differing Professional Opinion Program September 20, 2000

The OIG recommended that Management Directive 10.159 be revised to improve the oversight

and timeliness of the Differing Professional View/Differing Professional Opinion (DPV/DPO)

processes, that awards be publicized for outstanding issues benefitting the agency that resulted

from DPV/DPOs, and that a special review group be convened every 3 years to assess the DPV/

DPO program operations.

A Special Review Panel was convened in May 2001. The panel, which is still in session, has

completed the initial review of all DPV/DPO cases filed since the last special panel met in 1994.

Names of potential interviewees were proposed as a result of this effort. Interviews of all office

directors and regional administrators, as well as DPV/DPO filers, ad hoc panel chairs, and panel

members selected by the Special Review Panel, were completed in December 2001.

After all the data have been collected, analyzed, and evaluated, the panel will prepare a report

recommending any necessary changes to or modifications of the DPV/DPO process. Another of

the panel’s tasks is to make recommendations regarding the recognition of filers whose contributions to the agency have not been adequately recognized. These recommendations will be made

concurrent with the issuance of the report.

Revisions to Management Directive 10.159, Differing Professional Views or Opinions, will be

made in accordance with the recommendations found in the Special Review Panel’s report, as

well as other recommendations found in this OIG report. The new directive will include the

requirement that a Special Review Panel convene 1 year from the date of its publication and

every 3 years thereafter. The agency expects to complete corrective action during the fourth

quarter of FY 2002.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

127

Appendix C
U.S. NUCLEAR REGULATORY COMMISSION

128

Appendix B (continued)
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

129

NRC Organization Chart

as of September 30, 2001

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

Office of the

Inspector General

Office of

Congressional

Affairs

Office of Public

Affairs

Executive Director for

Operations

The Commission

Commissioner Commissioner Chairman Commissioner Commissioner

Incident Reponse

Operations

Legend

Direct ReportingRelationshipGeneral SupervisionAdvisory Body

Office of

Chief Information

Officer

Office of

Chief Financial

Officer

Deputy Executive Director

for Materials, Research,

and State Programs

Deputy Executive Director

for

Management Services
U.S. NUCLEAR REGULATORY COMMISSION

130

Appendix A (continued)
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

131

End Notes

1. “Nuclear reactor accidents” is defined in the NRC Severe Accident Policy Statement (50

Federal Register 32138, August 8, 1985) as those events which result in substantial damage

to the reactor fuel, whether or not serious offsite consequences occur. Data sources and

verification: The NRC requires licensees to notify the NRC Operations Center of the

declaration of any emergency specified in the licensee’s NRC approved Emergency Plan.

Further, notifications are required for those non-emergency events specified in the regulations. Licensee compliance with notification regulations are periodically inspected by the

NRC. In addition, NRC resident inspectors are aware of the events that occur at nuclear

plants.

2. Data sources and verification: The NRC requires licensees to report radiation exposures to

the NRC. Licensee compliance with the reporting criteria and radiological release criteria is

periodically inspected by the NRC. A resident inspector monitors the facility and would be

aware of deaths resulting from acute radiation exposures.

3. “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 Criterion I.A.3. Data sources and verification: The

NRC requires licensees to report radiation exposures to the NRC. Licensee compliance with

the reporting criteria and radiological release criteria is periodically inspected by the NRC.

A resident inspector monitors the facility and would be aware of significant radiation exposures.

4. Data sources and verification: Licensees are required to call the NRC to report any

breaches of security or other event that may potentially lead to sabotage at a nuclear facility

within one hour of its occurrence. Information assessment teams would follow-up any

significant events. A written report would also be filed by the licensee within thirty days of

its occurrence. The investigation would verify the accuracy of the information.

5. 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 Criterion 1.B.1 (normally 5,000 times Table 2 (air and

water) of Appendix B, Part 20). Data sources and verification: The NRC requires licensees

to report radiation exposures to the NRC. Licensee compliance with the reporting criteria

and radiological release criteria is periodically inspected by the NRC. A resident inspector

monitors the facility and would be aware of instances in which radiation is released from the

reactor in excess of reporting limits.

6. Data sources and verification: The NRC monitors industry safety performance through its

reactor oversight process. Licensees are required to file reports which contain operational and

event information. NRC Inspections confirm that these reports are complete and reliable.
U.S. NUCLEAR REGULATORY COMMISSION

132

Endnotes (continued)

7. Such events have a 1/1000 (10-3) or greater probability of leading to a nuclear reactor accident. Data sources and verification: The NRC’s Accident Sequence Precursor

program(ASP) systematically evaluates operating experience to identify, document, and

rank events which have the potential to cause core damage. These events are identified by

first computer-screening of licensee event reports or other events designated by the NRC

staff. Selected events undergo an engineering evaluation to identify, analyze, and document

precursor events. Preliminary analysis of potential precursor events are submitted for independent peer review by licensees and NRC staff to ensure that the plant design and its

response to the precursor event are correctly characterized.

8. Over exposures are those that exceed limits as provided by 10 CFR 20.2203(a)(2), excluding instances of over exposures involving a shallow dose equivalent from a discrete radioactive particle in contact with the skin. Data sources and verification: Licensees are required

to file reports that contain information on events of radiation exposure to an individual.

Inspections confirm that event reports are complete and reliable. In addition, areas of a

nuclear facility that may be subject to radiation contamination have monitors that record

radiation levels. Any occurrences of radiation levels exceeding regulatory limits would be

identified.

9. These are releases for which a 30-day reporting requirement under 10 CFR 20.2203(a)(3) is

required. Data sources and verification: Licensees are required to file reports that contain

information on events of excess levels of radiation exposure or concentrations of radioactive

material. The NRC conducts inspections of licensees to ensure that releases to the environment through effluent pathways are being properly monitored and controlled. Any instances

in which radiation had been released to the environment would be recorded on monitors and

a follow-up investigation would be conducted.

10. Data sources and verification: The NRC tracks a variety of security performance data

furnished by licensees to determine trends in physical security over time.

11. Weight percentage - (i.e. percent of uranium 235 atoms out of the total number of uranium

atoms).

12. Data source and verification: Events resulting in deaths could be reported to the NRC

and/or Agreement States through a number of sources, but primarily through required

licensee notifications. These events are summarized in Event Notifications and Preliminary

Notifications which are used to widely disseminate the information to the appropriate

managers and staff. For events of this magnitude, media reports would likely provide

another source of reporting, which would lead NRC to verify and validate the information

through other sources. For Nuclear Materials Safety arena activities, the NMED is an

essential system used to collect information on such events. For fuel cycle activities, this

extends to other hazardous materials used with, or produced from licensed material consistent with 10 CFR Part 70. The decision on whether or not to ascribe the cause of a death to

conditions related to acute radiation exposures, or other hazardous materials, will be made

by NRC or Agreement State technical specialists, or our consultants. The fuel cycle and

materials inspection programs are key elements in verifying the completeness and accuracy

of licensee reports. The Integrated Materials Performance Evaluation Program (IMPEP)

also provides a mechanism to verify that Agreement States and NRC regions are properly
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

133

collecting and reporting such events as received from the licensees, and entering them into

NMED.

13. 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 (as defined by the Occupational Safety and Health Administration) exposures only

apply to fuel cycle and uranium recovery activities in the Nuclear Materials Safety arena.

Data source and verification: Events meeting this threshold would be reported to the

NRC and/or Agreement States through a number of sources but primarily through required

licensee notifications. Event Notifications and Preliminary Notifications are used to communicate this information internally. For events of this magnitude, media reports would

likely provide another source of reporting, which would lead us to verify and validate the

information through other sources. For Nuclear Materials Safety arena activities, the

NMED is an essential system used to collect information on such events.

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, as agreed upon

by NRC or Agreement State technical specialists, or our consultants. Hazardous material

exposures only apply to fuel cycle activities in the Nuclear Materials Safety arena. For fuel

cycle activities, this extends to other hazardous materials used with, or produced from,

licensed material consistent with 10 CFR Part 70. The fuel cycle and materials inspection

programs are key elements in verifying the completeness and accuracy of licensee reports.

The IMPEP also provides a mechanism to verify that Agreement States and NRC regions

are properly collecting and reporting such events as received from the licensees, and entering them into NMED.

14. 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

Data source and verification: Events meeting this threshold would be reported to the NRC

and/or Agreement States through a number of sources but primarily through required licensee notifications. Event Notifications and Preliminary Notifications are used to communicate this information internally. For events of this magnitude, media reports would likely

provide another source of reporting, which would lead us to verify and validate the information through other sources. For Nuclear Materials Safety arena activities, the NMED is an

essential system used to collect information on such events. 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 AOs as given in AO criteria 1.B.1. The fuel cycle and materials inspection programs are key elements in verifying the completeness and accuracy of

licensee reports. The IMPEP also provides a mechanism to verify that Agreement States

and NRC regions are properly collecting and reporting such events as received from the

licensees, and entering them into NMED.
U.S. NUCLEAR REGULATORY COMMISSION

134

Endnotes (continued)

15. In accordance with Appendix G to 10 CFR Part 73 and 10 CFR 74.11(a).

Data source and verification: Licensees are required to report events in which there are

losses, thefts, or diversions of formula quantities of strategic special nuclear material;

radiological sabotages; or unauthorized enrichment of special nuclear material regulated by

the NRC to the NRC Headquarters Operations Center within one hour of their occurrence.

The licensee is also required to file a follow up written report within 30-days of the event to

the NRC. The report must include sufficient information for NRC analysis and evaluation.

Events are entered and tracked in the NMED. The NRC initiates independent investigations

that verify the reliability of reported information. NRC investigation teams evaluate the

validity of materials event data, in order to assure that proper event data is being reported

and collected. Any failures of appropriate licensee reporting would be discovered through

the routine inspection program. The NRC holds periodic meetings to validate previously

screened events.

16. In accordance with the requirements of 10 CFR 95.75.

Data source and verification: Any alleged or suspected violations of the Atomic Energy

Act, Espionage Act, or other Federal statutes related to classified information are reported to

the NRC under the requirements of 10 CFR 95.57. However, for performance reporting, the

NRC only counts those disclosures or compromises that actually cause damage to national

security. Such events are reported to the Cognizant Security Agency (i.e., the security

agency with jurisdiction) and the Regional Administrator of the appropriate NRC Regional

Office, as listed in Appendix A of 10 CFR Part 73. The Regional Administrator then contacts the Division of Facilities and Security at NRC headquarters. The Division of Facilities

and Security assesses the violation and notifies other offices at the NRC as well as other

government agencies, as appropriate. A determination is then made as to whether the

compromise caused damage to national security. Any unauthorized disclosures or compromises of classified information causing damage to national security would result in immediate investigation and follow up by the NRC.

17. Performance targets have changed from FY 2000 to FY 2003 to reflect additional historical data.

18. Reportable events of material entering the public domain in an uncontrolled manner as

reported under 10 CFR 20.2201(a). The Nuclear Materials Events Database (NMED)

contains the list of these events as reported by the NRC licensees and, through the Agreement States, the Agreement State licensees. Data sources and verification: Events meeting this threshold would be reported to the NRC and/or Agreement States through a number

of sources but primarily through licensee notifications. The materials inspection program is

a key element in verifying the completeness and accuracy of licensee reports.

19. Data sources and verification: Criticality events are reported by the licensee immediately

to the NRC Operations Center by telephone. Licensees’ follow up written reports are required to be submitted to NRC within 30 days of the initial report. These reports must

contain specific information describing the event as required by NRC regulations. The NRC

will dispatch an Augmented or Incident Inspection Team depending on the severity of

accident to confirm the reliability of the report. An event of this nature is immediately

investigated and followed up.

20. Performance targets have changed from FY 2000 to FY 2003 to reflect additional historical data.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

135

21. Over exposures are those exposures that exceed the dose limits as specified in 10 CFR

20.2203(a)(2) as tracked in NMED. For fuel cycle activities, this extends to other hazardous materials used with, or produced from, licensed material, consistent with 10 CFR Part

70. Reportable chemical exposures are those that exceed license commitments. It would

also include chemical exposures involving uranium recovery activities under the Uranium

Mill Tailings Radiation Control Act. Multiple people may be affected by a single causal

event. Data sources and verification: Events meeting this threshold would be reported to

the NRC and/or Agreement States through a number of sources but primarily through

licensee notifications. The materials inspection program is a key element in verifying the

completeness and accuracy of licensee reports. The Integrated Materials Performance

Evaluation Program also verifies the accuracy of the reported events.

22. Medical events (misadministrations)as reported under 10 CFR Part 35, as tracked in

NMED. Multiple patients may be affected by a single causal event. Data sources and

verification: Events meeting this threshold would be reported to the NRC and/or Agreement States through a number of sources but primarily through licensee notifications. The

materials inspection program is a key element in verifying the completeness and accuracy of

licensee reports.

23. Performance targets have changed from FY 2000 to FY 2003 to reflect additional historical data.

24. 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. Data sources and verification: Events meeting this

threshold would be reported to the NRC and/or Agreement States through a number of

sources but primarily through licensee notifications. The materials inspection program is a

key element in verifying the completeness and accuracy of licensee reports.

25. Malevolent use is defined as the deliberate misuse of radioactive materials with the intent to

cause physical or psychological harm to a person or persons, or to cause physical damage to

a facility or to the environment. NRC evaluates intentional violations and deliberations acts

against this definition. Data sources and verification: Events meeting this threshold

would be reported to the NRC and/or Agreement States through a number of sources but

primarily through licensee notifications. The NRC responds to either a licensee report or

allegation by initiating an independent investigation to verify the validity of the data.

26. NRC recognizes that no explicit reporting requirements exist for substantiated breakdowns

of programs. The NRC relies on its safeguards inspection findings and licensee notifications. Data sources and verification: Events as described above must be recorded within

24 hours in a safeguards log maintained by the licensee. The NRC relies on its safeguards

inspection program to help validate the reliability of the recorded data and determine

whether a breakdown of a physical protection or material control and accounting system

has, in actuality, resulted in a vulnerability. The NRC also evaluates the data in order to

assure that the proper event data are being reported and collected.

27. This involves chemical releases from NRC regulated activities under the Uranium Mill

Tailings Radiation Control Act. Data sources and verification: Events meeting this threshold would be reported to the NRC and/or Agreement States through a number of sources but
U.S. NUCLEAR REGULATORY COMMISSION

136

Endnotes (continued)

primarily through licensee notifications. The materials inspection program is a key element

in verifying the completeness and accuracy of licensee reports. Releases that cause impacts

to the environment that cannot be mitigated within applicable regulatory limits using reasonably available methods are not readily defined. The expert judgement of NRC personnel

and that of other agencies, such as the EPA, are relied upon to make that determination.

Events of this magnitude would result in prompt and thorough investigation.

28. Data source and verification: Events meeting this threshold are reported to the NRC and/

or Agreement States primarily through required licensee notifications, though other sources

may also report events. These events are summarized in Event Notifications and Preliminary Notifications which are used to widely disseminate the information to the appropriate

managers and staff. The reports are entered into the NMED for tracking and evaluation

purposes. For events of this magnitude, media reports may also provide another source of

reporting which would lead NRC to verify and validate the information through other

sources. The decision on whether or not to ascribe the cause of a death to conditions related

to acute radiation exposures will be made by NRC or Agreement State technical specialists,

or our consultants. The IMPEP provides a mechanism to verify that Agreement States and

NRC regions are properly collecting and reporting such events as received from the licensees, and entering them into NMED.

Determining whether or not any deaths result from acute radiation exposures is valid and

fundamentally essential to protecting public health and safety. Events of this magnitude are

not expected and would be rare. If such an event were to occur, it would result in prompt

and thorough investigation of the event, its consequences, its root causes, and the necessary

actions needed by the licensee and NRC to mitigate the situation and prevent recurrence.

29. 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.

Data sources and verification: 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, as agreed upon by NRC or Agreement State technical specialists, or

our consultants. Events meeting this threshold are reported to the NRC and/or Agreement

States primarily through required licensee notifications, though other sources may also

report events. Event Notifications and Preliminary Notifications are used to communicate

this information internally. The reports are entered into the NMED for tracking and evaluation purposes. For events of this magnitude, media reports may also provide another source

of reporting, which would lead us to verify and validate the information through other

sources. The IMPEP provides a mechanism to verify that Agreement States and NRC

regions are properly collecting and reporting such events as received from the licensees, and

entering them into NMED.

Any event resulting in an unintended permanent function damage to an organ or physiological system, compromises public health and safety. Events of this magnitude are not expected and would be rare. If such an event were to occur, it would result in prompt and

thorough investigation of the event, its consequences, its root causes, and the necessary

actions needed by the licensee and NRC to mitigate the situation and prevent recurrence. In

addition to these immediate actions, the NRC holds periodic meetings where staff and

management will validate previously screened events.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

137

30. 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). 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.

Data sources and verification: Releases of radioactive waste that have the potential to

cause an adverse impact on the environment are currently undefined. Therefore, for this

performance measure, releases that exceed the limits for reporting AOs as given in AO

criteria 1.B.1 are counted as releases that cause an adverse impact on the environment.

Events meeting this threshold are reported to NRC and/or Agreement States primarily

through required licensee notifications, though other sources may also report events. For

events of this magnitude, media reports may also provide another source of reporting, which

would lead us to verify and validate the information through other sources. Event Notifications and Preliminary Notifications are used to communicate this information internally.

The reports are entered into the NMED for tracking and evaluation purposes. The IMPEP

provides a mechanism to verify that Agreement States and NRC regions are properly collecting and reporting such events as received from the licensees, and entering them into

NMED.

The events reported under this measure are those that threaten the environment. Events of

this magnitude are rare. If such an event were to occur, it would result in prompt and

thorough investigation of the event, its consequences, its root causes, and the necessary

actions needed by the licensee and NRC to mitigate the situation and prevent recurrence. In

addition to these immediate actions, the NRC holds periodic meetings where staff and

management will validate previously screened events.

31. In accordance with Appendix G to 10 CFR Part 73 and 10 CFR 74.11(a).

Data source and verification: Licensees report events which entail losses, thefts, diversions, or radiological sabotages of special nuclear material or radioactive waste within one

hour of their occurrence to the NRC Headquarters Operations Center. A followup written

report is required to be submitted within 30 days of the event to the NRC. The report must

include sufficient information for NRC analysis and evaluation. The NRC also initiates an

independent investigation of the reported event. Events are entered and tracked by the

NMED. Any strategic plan failure results in immediate investigation and followup, and is

tracked in the Safeguards Summary Event List Database. Any lack of appropriate licensee

reporting would be discovered through the routine inspection program. The NRC holds

periodic meetings where staff and management will validate previously screened events.

This measure only applies to actual losses, thefts, diversions, or actual radiological sabotage. Attempts to steal, divert, or conduct sabotage using special nuclear material or radioactive waste are covered by a parallel measure at the performance goal level. Such events

could compromise public health and safety, the environment, and the common defense and

security.

32. Over exposures are those exposures that exceed the dose limits specified in 10 CFR

20.2203(a)(2).
U.S. NUCLEAR REGULATORY COMMISSION

138

Endnotes (continued)

33. Data sources and verification: Events meeting the regulatory threshold are reported to the

NRC and/or Agreement States primarily through required licensee notifications, though

other sources may also report events. The Integrated Materials Performance Evaluation

Program (IMPEP) reviews provide a mechanism to verify that Agreement States and NRC

regions are properly collecting and reporting such events as received from the licensees, and

that they are being correctly entered into the NRC’s Nuclear Materials Events Database.

34. NRC recognizes that no explicit reporting requirements exist for substantiated breakdown

determination. The NRC relies on its safeguards inspection findings and licensee notifications.

35. Data sources and verification: Events as described above must be recorded within 24

hours of the identified event in a safeguards log that is maintained by the licensee. No

explicit reporting requirements exist for substantiated breakdowns of physical protection.

The NRC relies on its safeguards inspection program to help validate the reliability of

recorded data and determine whether a breakdown of a physical protection system has, in

actuality, resulted in a vulnerability. The NRC also evaluates the event data in order to

assure that the proper event data is being reported and collected.

36. Releases for which a 30 day reporting requirement under 10 CFR 20.2203(a)(3) is required.

37. Data sources and verification: Radiological releases to the environment from operational

activities that exceed the regulatory limits are required to be reported within 30 days under

10 CFR 20.2203(a)(3). Events meeting this threshold are reported to the NRC and/or

Agreement States primarily through required licensee notifications, though events may also

be reported by other sources. The reports are entered into the NMED for tracking and

evaluation purposes. The IMPEP provides a mechanism to verify that Agreement States and

NRC regions are properly collecting and reporting such events as received from the licensees, and entering them into NMED.

38. Measuring the protection of future generations over the planning period of the next five

years is a unique challenge which the Commission is continuing to evaluate.

39. Data sources and verification: The NRC monitors events and issues related to the safe use,

transport, storage, and disposal of radioactive waste and materials that are reported to the

Commission in accordance with existing regulations. The NRC monitors events that might

indicate a licensee’s or licensee’s contractor’s current or future inability to perform a required function or activity in a safe manner. Any event, condition or substantiated allegation

formally reported to the NRC is evaluated for safety impact and potential generic implications.

In FY 2001, NRC completed a review of formerly terminated licensed sites with potential

contamination that could require cleanup and disposal. NRC identifies a responsible party that

will need to clean up such sites and works with the party to facilitate cleanup.

40. All of the scheduled public outreach meetings were held as scheduled consisting of meetings in Pahrump, NV on 5/22/2001, Las Vegas, NV on 5/23/2001, Mesquite, NV on 5/24/

2001, and Tribal Interaction at Las Vegas, NV on 9/26-27/2001.

41. A 10 CFR 2.206 petition is a written request filed by any person to institute a proceeding to

modify, suspend, or revoke a license, or for any other enforcement action. The petition

specifies the action requested and sets forth the facts that constitute the basis for the request.
FY 2001 PERFORMANCE AND ACCOUNTABILITY REPORT

139

The NRC evaluates the technical merits of the safety concern presented by the petition.

Based on the facts determined by the NRC technical evaluation or investigation of the

merits of the petition, the Director will issue a decision to grant the petition, in whole or in

part, or deny the petition. The Director’s Decision explains the bases upon which the

petition has or has not been granted or denied and identifies the actions that NRC staff has

taken or will take in response to the petition.

42. The start time of the 120 days is the date that the Petition Review Board (PRB) determines

that the proposed petition satisfies the criteria of NRC Management Directive 8.11, “Review

Process for 10 CFR 2.206 Petitions” and acknowledges by letter the petitioner’s request. For

petitions received after October 1, 2000, the end time is the date of the proposed Director’s

Decision. Supplements to the petition which require extension of the schedule will reset the

beginning of the metric to the date of a new acknowledgment letter.

43. Prelicensing activities such as this constitute informal conferences between a prospective

applicant and the staff and are not part of a potential licensing proceeding.

44. Domestic safeguards are those nuclear material control and accounting measures and physical protection measures implemented by and within any country, including the U. S. , to

prevent sabotage of nuclear materials or facilities or theft or diversion of nuclear materials

by an individual or a group within that country. Secure use of nuclear materials is achieved

through the successful implementation of domestic safeguards. International safeguards are

the independent verifications performed by the International Atomic Energy Agency of a

country’s “peaceful use” declarations on nuclear materials and nuclear facilities.

45. Significant incidents are incidents which would include a loss by theft or diversion of one or

more kilograms of weapons grade uranium or plutonium, the detonation by a non-nuclear

weapon state of a nuclear explosive device, or the abrogation of Nuclear Nonproliferation

Treaty safeguards commitments by a non-nuclear weapon state.

46. 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 alterations 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.
U.S. NUCLEAR REGULATORY COMMISSION

140

Endnotes (continued)
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.

This document also available at: www.nrc.gov/who-we-are/performance.html

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: (202) 512-1800 Fax: (202) 512-2250

Mail: Stop SSOP, Washington, DC 20402-0001

ISBN 0-16-050750-2
NUREG – 1542

Vol. 7