Managing for Results: Efforts to Strengthen the Link Between Resources and Results at the Nuclear Regulatory Commission
Published: 2002-12-10T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Encouraging a clearer and closer link between budgeting and planning is essential to improving federal management and instilling a greater focus on results. Through work at various levels within the organization, this report on the Nuclear Regulatory Commission (NRC)--and its two companion studies on the Administration for Children and Families (GAO-03-09) and the Veterans Health Administration (GAO-03-10)--documents (1) what managers considered successful efforts at creating linkages between planning and performance information to influence resource choices and (2) the challenges managers face in creating these linkages.
section_title: What GAO Found
paragraphs: Although in differing stages of implementation throughout NRC, NRC designed the Planning, Budgeting, and Performance Management Process (PBPM) to better integrate its strategic planning, budgeting, and performance management processes. PBPM links four individual components: (1) setting the agency's strategic direction, (2) determining activities and performance targets of component offices and related resources, (3) executing the budget and monitoring performance targets and taking corrective actions, if needed, to achieve those targets, and (4) assessing agency progress toward achieving its goals. GAO's report provides examples of how the PBPM framework can influence budget formulation and execution decisions. These examples show (1) how NRC informs its resource allocation decisions by providing strategic direction to operating units prior to budget formulation, (2) how operating units that have implemented these processes link strategic direction to budgets through tools that set priorities and assign resources to office activities to accomplish these priorities, and (3) how operating units monitor performance targets and make adjustments as necessary during budget execution. In addition, agency managers have told GAO that PBPM also promotes agencywide coordination of budget formulation and execution decisions by providing a common language and common goals. Integrating budget and planning processes and improving performance management in NRC is an ongoing effort that includes addressing a series of challenges. They are (1) creating performance measures that balance competing goals and keep performance measures current, (2) associating resource requests with outcomes, (3) standardizing PBPM practices and techniques but still allowing some flexibility among offices to tailor the process to their needs, (4) developing the assessment component, and (5) committing significant effort to maintain PBPM. In addition, NRC must continue developing a cost accounting system to support PBPM.

section_title: Letter
paragraphs: During the past decade, the Congress and the executive branch have  sought to improve federal management and instill a greater focus on  results.  By enacting a number of major management reforms, the Congress  has created a statutory framework, with the Government Performance and  Results Act (GPRA) as its centerpiece.  One of GPRA’s major purposes is to  encourage a closer and clearer link between planning, performance—that  is, results, and the budget process.  Each administration takes a slightly  different approach to implementing results management.  Improving the  integration of budget and performance is a high priority initiative in the  President’s Management Agenda.  A central piece of that initiative is the  Office of Management and Budget’s (OMB) new diagnostic tool, the  Program Performance Assessment Rating Tool (PART).  PART is designed  to provide a consistent approach to reviewing program design, planning,  and goals development as well as program management and results.  OMB  expects to use PART assessments in considering department and agency  budget submissions for the fiscal year 2004 President’s Budget request to  the Congress.
In a number of different reports to the Congress, we have examined  different aspects of the resources-to-results link.  A series of three reports  described agencies’ progress over a 4-year period in aligning performance  plans; budgets; and, in the most recent report, financial statements.   We  found that from fiscal years 1999 through 2002, agencies made significant  progress in showing a direct link between expected performance and  requested program activity funding levels—either through structural  changes or crosswalks—as the first step in defining the performance  consequences of budgetary decisions.  However, we concluded that  additional effort was needed to describe the relationship between  performance expectations, requested funding, consumed resources, and  performance results.  Furthermore, we found that progress likely would be  uneven and the pace of development affected by mission complexity and  differences in operating environments across the government.  Finally, we  observed that describing the planned and actual use of resources in terms  of measurable results was an essential long-term effort that would take  time and adaptation on the part of all agencies.
We also studied ways to guide agencies to better integrate performance  information into the budget process.  In this work, we developed a  framework of budget practices that we believe can contribute to an  agency’s capacity to manage for results.  We view these practices as  desirable dimensions of budgeting that could be implemented in many  different ways to reflect the characteristics and circumstances of a  particular agency.  Both our assessments of performance and budget  account alignments and the framework of budget practices have led to the  next phase of work and the subject of this report.  This report—one of a  group of three—looks at the resources-to-results link from the perspective  of agency managers charged with making the link happen.
The objectives of this report on the Nuclear Regulatory Commission  (NRC), and its two companion studies on the Administration for Children  and Families within the Department of Health and Human Services and the  Veterans Health Administration within the Department of Veterans Affairs,  are (1) to document what managers in these three agencies considered  successful efforts at creating links between planning and performance  information to influence resource choices and (2) the challenges they face  in doing so.  For the purposes of this report, we take a broad view of  performance information—possible sources include GPRA and program  evaluations.  We neither evaluated agency choices nor critiqued their  processes.  Instead, we asked managers to describe when and how  planning and performance information was included in the budget cycle, to  explain what strategies were used and why, and to provide evidence that  there was a related programmatic effect.  A secondary purpose was to  show that there are multiple ways to establish these links, and that there  can be successful applications even if progress in budget and performance  integration is uneven.
Budgeting is and will remain an exercise in political choice in which  performance can be one, but not necessarily the only, factor underlying  decisions.  However, efforts to infuse performance information into  resource allocation decisions can more explicitly inform budget  discussions and focus them—both in the Congress and in agencies—on  expected results rather than on inputs. We believe that showcasing  agencies’ successes with and challenges in integrating budgeting and  planning may prove useful to other agencies; congressional authorizing,  appropriations, and oversight committees; and OMB in the shared goal of  strengthening the link between program performance and resources.
subsections: section_title: Background
paragraphs: NRC is an independent federal agency that (1) establishes standards and  regulations for commercial nuclear power plants and non-power research,  test, and training reactors; fuel cycle facilities; medical, academic, and  industrial uses of nuclear materials; and the transport, storage, and  disposal of nuclear materials and wastes, (2) issues licenses for nuclear  facilities and uses of nuclear materials, such as industrial applications,  nuclear medicine, academic activities, and research work, and (3) inspects  facilities and the uses of nuclear materials to ensure compliance with  regulatory requirements.
While safety is a paramount goal, a reassessment in 2001 added three  subordinate performance goals to NRC’s strategic plan: (1) to make NRC  activities and decisions more effective, efficient, and realistic, (2) to reduce  unnecessary regulatory burden on industry without affecting safety, and   (3) to increase public confidence in NRC actions.
Figure 1 shows NRC’s organization.  NRC is governed by a five-member  commission with one member designated by the President to serve as  Chairman.  The Chairman serves as the principal executive officer and  official spokesperson of the commission.  Reporting to the Commission  Chairman is the Executive Director for Operations (EDO).  The EDO is the  chief operational and administrative officer of NRC, and is generally  responsible for executing the program policies and decisions made by the  NRC.  Also reporting to the Commission Chairman is the Chief Financial  Officer (CFO), who is responsible for the agency’s PBPM and all of NRC’s  financial management activities.  NRC is organized into seven program  offices under the EDO.   The Office of Nuclear Reactor Regulation (NRR),  the Office of Nuclear Material Safety and Safeguards (NMSS), the Office of  Nuclear Regulatory Research (RES), and the newly created Office of  Nuclear Security and Incident Response (NSIR) are NRC’s four largest  offices.  It also has three smaller program offices, various other  management and mission support offices, and four regional offices.
While strategic planning, budgeting, and program implementation involve  headquarters offices and regional operations, we focused our work on  those offices that NRC officials said had more experience in PBPM  implementation.  The Office of the CFO which includes the Division of  Planning, Budget, and Analysis, is responsible for NRC’s financial  management and reporting under GPRA.  NRR licenses and inspects  nuclear power reactors and non-power reactors.  NMSS directs and  oversees licensing, inspection, and environmental activities for nuclear fuel  cycle facilities and safeguards nuclear materials, including the  management and disposal of high- and low-level radioactive wastes.  RES  provides technical support to the frontline regulatory activities involving  licensing and inspection, oversight and development of regulatory  products.  NSIR combines NMSS responsibilities for protection of fuel  cycle facilities and materials with NRR responsibilities for physical security  at nuclear power plants and other facilities.  The four regions execute NRC  policies and various programs relating to inspection, licensing,  enforcement, investigation, governmental liaison, as well as emergency  response within their regional boundaries.
NRC employed approximately 2,900 people and had a total budget of  approximately $559 million in fiscal year 2002.  Of that amount, the  Congress transferred about $23.7 million from the Nuclear Waste Fund.   The remainder was to be financed by a mix of revenues from licensing,  inspection services, and other services and collections, and amounts from  the general fund of the Treasury.  These amounts were made available in  NRC’s annual appropriations and in an emergency supplemental  appropriation to support homeland-security-related activities.  Over half of  NRC’s annual budget is used to pay staff salaries and benefits.  The  remaining funds are used to support other operating expenses, purchase  technical assistance for regulatory programs, and conduct safety research.
During the 1990s, various concerns were raised about NRC’s performance,  particularly the way NRC conducted inspections and promulgated  regulations.  Agency officials told us that NRC’s former Commission  Chairman, Shirley Jackson, was concerned that NRC’s practices were  narrowly focused on ensuring that its activities and processes were  consistent with regulatory law without adequate attention to the results of  its activities.  Both the nuclear industry and public interest groups  criticized NRC’s plant assessment and enforcement processes as lacking  objectivity, consistency, and predictability.  An NRC report also described  its former regulatory approach as punitive and reactive.  According to a  senior agency official, the agency was concerned that the Congress would  cut about one-third of the agency’s staff from the NRC budget for fiscal year  1999 unless the agency changed the way it conducted business.
NRC took various steps to improve regulatory oversight and agency  management.  These changes included a comprehensive strategic planning  effort from 1995 to 1997 to reassess and establish new baselines for its  programs, led by then-Chairman Jackson.  NRC also charged the OCFO and  the former Executive Council with developing a new planning, budgeting,  and performance management process.  NRC staff said that PBPM changes  also supported the agency’s efforts to implement GPRA.  NRC established  PBPM in the fall of 1997 and implemented a pilot project in NRR.  In 1999,  NRC extended PBPM to NMSS and RES for the fiscal year 2000 budget.   NRC plans to further develop PBPM to include more detailed procedures,  the products involved, and the roles of various management levels.
section_title: Scope and Methodology
paragraphs: To achieve our objectives, we interviewed selected NRC staff members  from the offices of the EDO, the CFO, and the Chief Information Officer;  from three headquarters offices in Rockville, Maryland (NRR, NMSS, and  RES); and from the Region II (Atlanta) office for their perspectives on  PBPM and how it supports resource decisions.  The Region II office was  selected because, according to NRC officials, this region had been  instrumental in developing a cohesive operating plan—one of the PBPM  techniques used by NRC to enhance coordination among program offices  and regions.  Within these organizations, we interviewed officials at various  levels of management involved in the budget decision-making process,  including office directors, division directors, and unit managers.  In total,  we interviewed more than 30 NRC officials on the various aspects of  planning and budgeting practices.  We reviewed NRC’s planning, budget,  and program documents, including strategic plans, annual performance  plans, budget requests, operating plans, and performance reports, that  support PBPM.
This report presents NRC’s budget and planning practices as described by  the NRC officials we interviewed and described in the NRC documents we  reviewed.  The views of those individuals and the information in these  documents, which we have summarized for reporting purposes, may not  necessarily be generalized across NRC.  We also did not observe or  evaluate the processes in operation, nor did we assess the program or  financial information contained in documents provided by NRC.  We also  did not evaluate the completeness or accuracy of NRC performance goals  and measures or the effectiveness of NRC rule making, licensing,  inspection, and oversight programs.  Our work was conducted from  February through May of 2002 in accordance with generally accepted  government auditing standards.
section_title: The Current Budget and Planning Process
paragraphs: Implementation of PBPM is a work in progress.  PBPM was created by NRC  to improve program and service performance by integrating NRC’s  strategic planning and budgeting processes.  This section describes how  components of the process were designed to operate, while the next  section (“Planning and Performance Information Influences Resource  Allocation Decisions in Various Ways”) explains how performance  information informs resource decisions in those offices that have  implemented PBPM and its techniques.
subsections: section_title: PBPM: A Work in Progress
paragraphs: NRC has gradually introduced PBPM techniques across the agency and has  allowed offices some flexibility during implementation of the process.   NRC began implementation in its larger program and mission support  offices.  As NRC has gained experience, it is examining ways to extend the  process to the smaller program and mission support offices and to more  fully standardize PBPM techniques across the agency.
NRC designed PBPM as an integrated process that functions most  effectively when information from one component is used to inform  decisions in other components.  Figure 2 shows how the four components  interact over a budget cycle.  For example, the strategic direction setting in  Component 1 relies in part on the assessment elements in Component 4.   The effectiveness review element in Component 2 relies on performance  goals developed during strategic direction setting.  Finally, the assessment  elements in Component 4 incorporate information gathered from  Component 3, performance monitoring, to identify topics for program  evaluations and self-assessments.
section_title: Four Components of PBPM
subsections: section_title: Component 1: Setting the Strategic Direction
paragraphs: In Component 1, NRC establishes agencywide strategic direction by  formulating the strategic plan and by issuing Commission guidance  throughout the year.  The plan includes NRC’s strategic and performance  goals and corresponding measures and identifies general strategies on how  best to achieve the agency’s mission.  The plan is developed with  Commission and stakeholder involvement by a senior management group  with a broad perspective of the agency, and is approved by the  Commission.  Although the plan covers 5 years and is reexamined every 3  years as required by GPRA, if circumstances warrant, the plan can be  changed more often.  The plan also establishes a framework called  “strategic arenas,” each of which is composed of related programs with a  common purpose.  NRC’s strategic arenas correspond to program  activities in the President’s budget.  In addition, the Commission provides  direction to its managers on programs and operations through various  written directives.
section_title: Component 2: Determining Planned Accomplishments and Resources
paragraphs: In Component 2, managers in offices using PBPM employ a set of  interrelated tools to translate agency goals and strategies into individual  office work activities, performance targets, and resource needs.  To  determine how work activities contribute to achieving NRC’s four  performance goals, individual offices conduct what are called  effectiveness reviews.  These reviews are not comprehensive assessments  of programs but rather a structured way for managers to evaluate the  contribution of work activities to achieving performance goals prior to  budget formulation.  For example, an office will examine each of its work  activities and ask how a given activity achieves each of the performance  goals.  Effectiveness reviews also assist offices in identifying where there  are gaps in activities or where new initiatives are needed.  Agency officials  said that offices that conduct these reviews have used various  methodologies to rank office activities relative to agency performance  goals.
According to agency officials, if an office determines through an  effectiveness review that activities are not critical to achieving NRC  performance goals, the office will likely propose reducing or eliminating  resources for the activity in the upcoming budget year.  Effectiveness  review discussions may begin prior to the start of the annual budget  process, concurrent with Component 1 activities establishing strategic  direction.  These discussions enable senior management to provide  guidance on expectations for work priorities (targets).
The budget assumptions document is a tool used to plan work activities  based on workload and set performance targets.  This document identifies  external and internal factors, such as anticipated number of license  reviews that will affect the agency’s workload over the next 2 fiscal years.   These assumptions are developed by the offices and approved by NRC  executive-level managers.   These assumptions then become key inputs for  offices when formulating their resource needs for the upcoming budget  year.
Each budget assumption is supported by a summary of the factors that  were evaluated to produce the assumption and to indicate the likelihood  that this assumption will materialize.  For example, the fiscal year 2003- 2004 budget assumptions document estimates approximately 1,500  enforcement actions for each year.  This estimate is based on historical  trends and anticipated results from implementation of the revised reactor  oversight process.  In addition, the budget assumptions document includes  related information that may affect the assumptions.  In the above example,  NRC is attempting to integrate Alternative Dispute Resolution techniques  into the enforcement program, a decision that may require additional  resources to implement.
Finally, through its annual budget call NRC provides instructions to  individual offices for developing office budget priorities.  Individual offices  submit budgets to the NRC executive level by program.  These submissions  address resources needed by each office to accomplish NRC strategic and  performance goals.  A group of senior managers then reviews office budget  submissions by strategic arena and submits the proposed office budget to  the CFO and EDO.  The CFO and EDO then submit their proposed budget  to the Chairman for Commission approval.  After Commission approval,  NRC submits a combined annual budget and performance plan to OMB for  inclusion in the President’s budget.  The combined budget and performance  plan also serves as the agency’s budget justification to the Congress.   Figure 3 shows how NRC’s performance plan links program activities and  funding allocations by goal.
In Component 3, NRC executes the approved budget through office  operating plans based on appropriations, congressional guidance, and  Commission priorities.  Each office prepares operating plans to reflect the  allocation of staff years and funds available following appropriations action  and OMB apportionment.  The operating plans, tailored by each office  implementing PBPM, tie allocated staff and other resources to each work  activity and to performance goals and define how success is measured for  each activity.
As the budget is executed, operating plans also are used to compare actual  office resources to budget estimates and actual performance to targeted  performance, and to identify necessary programmatic and fiscal actions.  Based on targets established in the operating plans, individual offices  develop quarterly reports on the status of resources and performance.  Any  performance issues identified in the quarterly reports are discussed with  the deputy executive director responsible for that particular office.   Generally, when an office meets with its cognizant deputy executive  director, it has prepared a course of corrective action it intends to take.   However, if an issue is significant, senior staff members will meet with their  deputy when they become aware of the issue rather than wait for the  quarterly operating plan update.  Follow-up actions are incorporated into  the next scheduled operating plan meeting as appropriate.  The Office of  the EDO does not prepare quarterly reports summarizing its review of  office operating plans for the Commission.  Instead, the Commission is  kept informed of operating plan issues throughout the year by various  means including Commission meetings, staff papers, the Budget Execution  Report, and individual briefings.  Finally, performance results are reported  annually through a publicly available agency performance report.
section_title: Component 4: Assessing Performance
paragraphs: In Component 4, NRC assesses agency performance.  This component is  designed to use information from and feed information to other  components.  Although this component is the least developed of the four  components, products are intended to both inform future planning and  budget deliberations and further improve performance. (A later section of  this report, “Challenges to Improving the NRC Budget and Planning  Process,” more fully discusses challenges to improving the assessment  component).  When fully operational, this component should help NRC to  determine whether a program should be continued, restructured, or  curtailed and, as designed, may influence planning and budget decisions in  Components 1 and 2.  In July 2002, NRC proposed that this component  include performance reviews conducted for the four major strategic arenas  as well as selected management and support offices.  However, no decision  has been made on who in NRC will conduct these reviews.  In addition,  individual offices can identify issues during the performance monitoring  component that they may select for internal self-assessments during  Component 4.
section_title: Planning and Performance Information Influences Resource Allocation Decisions in Various Ways
paragraphs: PBPM provides NRC with a framework through which it can use  performance information to influence planning and resource allocation  decisions and is consistent in key respects with our framework for budget  practices.  NRC informs its resource allocation decisions by providing  strategic direction to operating units prior to budget formulation and by  monitoring actual performance against performance targets during budget  execution.  PBPM also promotes agencywide coordination of budget  formulation and execution decisions by providing a common language and  common goals.
subsections: section_title: Strategic Direction Influences Resource Allocation Decisions
paragraphs: A key principle driving PBPM is that the agency’s strategic direction  influences internal policy and resource decisions.  NRC seeks to use PBPM  to identify general strategies to achieve goals, identify programs to  implement these strategies, and determine resources to fund and staff  programs.  NRC practices are similar to those proposed in our framework  for budget practices.  Under the framework for budget practices, agency  management should provide context during budget formulation in the form  of general guidance to program managers on proposed agency goals,  existing performance issues, and resource constraints—consistent with  Components 1 and 2 of PBPM.  The following are examples of operation  and program decisions that link NRC’s strategic direction with  corresponding resource decisions made though PBPM.
One of the strategies used to implement the four performance goals in the  strategic plan is risk-informed regulation and oversight.  This strategy uses  risk assessment findings, engineering analysis, and performance history to  focus attention on the most important safety-related activities; establishes  objective criteria to evaluate performance; develops measures to assess  licensee performance; and uses performance results as the primary basis  for making regulatory decisions.
As part of its risk-informed regulation and oversight strategy, NRC modified  its reactor oversight program to help achieve its three subordinate  performance goals—developed through Component 1—while maintaining  its primary safety goal.  The Commission provided guidance throughout  the development and implementation of the revised reactor oversight  program.  This guidance included requirements for staff reporting to the  Commission, approval of a pilot program, and instructions for future  program development.  In one modification to the inspection process, NRC  stopped inspecting some elements affecting the plant operators’ work  environments (e.g., how well lights in the plant illuminate the operating  panel).  NRC determined that these factors did not critically contribute to  safety and created unnecessary regulatory burdens to industry.  Regional  officials told us that NRC could now focus on the significant work activities  that maintain safety.
The reactor oversight program’s procedure for assessing nuclear plants  was also changed to increase public confidence in NRC operations by  increasing the predictability, consistency, objectivity, and transparency of  the oversight process.  Each quarter, NRC posts the performance of each  nuclear plant on its Web site to provide more information to the public.   Regional officials told us that the overall level of resources required to  implement the revised reactor oversight program is similar to that of the  prior oversight program but that significant changes have occurred in how  they manage their inspection program.  Specifically, the new inspection  procedure includes baseline inspections of all plants but focuses more of  the agency’s resources on plants that demonstrate performance problems.   Whether the revised reactor oversight program will reduce costs is  unknown, but regional officials said that potentially fewer resources may  be needed in the future using this approach.  NRC established a focus  group to identify where or how possible resource savings could occur.
As part of its risk-informed regulation and oversight strategy, NRC  developed the Risk-Informed Regulation Implementation Plan (RIRIP),  which is updated periodically.  The first RIRIP, issued in October 2000,  examined a range of staff activities including rule making to achieve NRC  performance goals.  The Commission provided guidance throughout the  development and implementation of the new plan, including instructions  for future program development as NRC updates the plan.  To facilitate its  use, the plan is organized around the strategic arenas.  Organizing the plan  around arenas helps offices to establish priorities and identify resources as  part of PBPM.  For example, the plan describes activities designed to  improve fire protection for nuclear power plants.  In this area, NRC plans to  develop less prescriptive, more performance-based risk-informed  regulations to support its primary goal of safety.   NRC is working with  industry to study alternatives to existing fire protection standards and  emergency postfire shutdown procedures.
A senior NRC official gave additional examples of changes NRC has made  to its regulations to reduce unnecessary regulatory burden on licensees  without compromising safety.  He cited the decision to have NRC oversee,  but no longer perform, examinations to qualify power plant operators since  the industry conducts its own examinations.  In addition, this official said  NRC eliminated its regulation requiring all nuclear power plants to install  state-of-the-art equipment, for example, they could continue to use analog  rather than digital equipment, focusing instead on whether use of the  current equipment adversely affected safety.
NRC also changed its licensing regulations to support its performance  goals of reducing unnecessary regulatory burden on licensees and  becoming more effective and efficient. One official said NRC changed its  regulation governing the length of a power plant license from 40 years to 60  years in some circumstances.  Before this change, NRC would only license  a power plant for 40 years.  At the end of the 40-year license period, the  licensee would be required to shut down and decommission the plant.   The change in regulation means that NRC will extend the term of a license  from 40 to 60 years if it determines through licensing review that existing  plant design will support a longer term.  According to NRC officials, these  license extensions can eliminate extremely large costs to licensees while  reducing NRC costs because it is less costly to renew a plant operating  license than to review a request for a license for a new power plant.
The Commission directed the reorganization of NRC’s three major NRC  program offices so that they could become more effective and efficient.   For example, in NRR the reorganization established reporting lines  consistent with major NRR program functions—inspection, performance  assessment, license renewal, and licensing.  An NRR official said the  previous organizational structure in NRC had contributed to inconsistent  processes for inspecting power plants and duplication of work.
To address the overall safety goal, NRC developed a program to measure  trends in industry nuclear power reactor performance.  One part of the  safety goal is that there should be no statistically significant adverse  industry trends in safety performance.  Performance indicators are  included in the NRC performance plan and are reported to the Congress  through the NRC annual performance report.  Resources for this new  program are determined through PBPM.
section_title: Work Performance Influences Resource Allocation Decisions
paragraphs: NRC uses performance information to inform resource allocation decisions  during budget execution by monitoring current year work performance and  by adjusting resource allocations as necessary.  This practice is consistent  with our proposed framework for budget practices.  As noted previously,  office operating plans track performance against established targets for  each planned work activity to call attention to significant performance  issues needing corrective action.  For example, shortly after September 11,  2001, NRC conducted a comprehensive review of its security program.  As  part of this review, NRC examined lists of prioritized work activities  prepared during the effectiveness review process in Component 2.  These  lists helped NRC determine which activities to delete or modify as it  prepared to use existing resources to respond to security threats in the  post-September 11 environment.  For example, NRC staffed around-the- clock emergency response centers for significantly longer than originally  anticipated.
As part of this comprehensive review of its security program, NRC began  research on the structural integrity of power plants if they were attacked by  large aircraft.  NRC also delayed routine inspections at non-power reactors  for 3 months to help fund these new activities.  In addition, in April 2002,  NRC established NSIR to streamline selected NRC security, safeguards, and  incident response responsibilities and related resources.
Operating plans are also used to monitor performance and make necessary  adjustments.  For example, NRR discovered that the May 2000 operating  plan report showed plant license renewal applications and associated staff  years well below annual expected target levels that year.  NRR was thus  able to shift resources to other priorities.  An NRR official said this  example showed NRR the importance of monthly monitoring of the budget  assumptions prior to the beginning of the fiscal year.  Furthermore, in  another example, NRR management officials also reviewed the fiscal year  2002 first quarter operating plan report and found that the workload impact  from the September 11 attacks would prevent NRR from achieving annual  licensing action targets.  These officials redirected additional staff  resources to complete these licensing actions.  As a result, the third quarter  projection is that NRR will slightly exceed its annual target for these  actions.
section_title: Enhanced Cooperation and Communication among Offices
paragraphs: PBPM is designed to enhance cooperation and coordination among offices.    This practice matches our proposed framework for budget practices,  which states that agency managers should share information on policy and  programs among offices during budget decision making.
Sharing information during budgeting is important because many offices  share responsibilities for achieving NRC goals.  NRC office managers said  they coordinate their work with others to determine if necessary skills are  already available elsewhere in the agency.  For example, one official said he  relies on another unit’s expertise in conducting environmental studies.  In  another example, regional officials reported that they occasionally share  specialized staff with other regions to perform nonroutine inspections.
PBPM provides NRC with reference points such as common goals,  performance measures, and strategies that help offices communicate and  reach agreement on budget priorities.  For example, NRR, which depends  upon research studies conducted by RES, meets regularly with that office  to discuss program and budget priorities for risk analysis, structural  integrity, and new reactor designs. NRR also meets with other offices as it  develops its budget proposal to coordinate its resource requests for  mutually agreed-upon priorities.  For instance, NRR shares information  with NMSS to ensure that crosscutting activities, such as rule making, have  adequate resources.  In addition, the NRC crosswalk of all program  activities into strategic arenas allows NRC to clarify the relationship  between budget requests and agency goals.  Our report on federal agency  efforts in linking performance plans with budgets found that NRC’s budget  presentation linked its program activities to performance goals, which  showed funding needed to achieve goals.  NRC uses the arena reporting  structure to communicate its budget needs to audiences outside the  agency, including OMB and the Congress.
section_title: Challenges to Improving the NRC Budget and Planning Process
paragraphs: When it introduced PBPM, NRC recognized that continued development of  the process would be necessary.  After gaining experience for several years,  NRC is now in the process of addressing several challenges to PBPM  implementation.  Agency officials noted challenges in (1) creating  performance measures that balance competing goals and keep  performance measures current, (2) associating resource requests with  outcomes, (3) standardizing PBPM practices and techniques but still  allowing individual offices to tailor the process to their needs,   (4) developing the assessment component, and (5) committing significant  effort to maintaining PBPM.  In addition, NRC must continue developing a  cost accounting system to support PBPM.
subsections: section_title: NRC Efforts to Develop PBPM
subsections: section_title: Issues in Creating Performance Measures That Balance Goals and Remain Current and Linked to Resources
paragraphs: As NRC officials create new performance measures or redesign existing  measures, they find it a challenge to refine performance measures so that  they balance performance goals.  While safety is a paramount goal, NRC  also seeks to progress in reducing unnecessary regulatory burden on the  industry and improving public confidence in NRC’s operations.  One official  said it is a balancing act to minimize the time and steps it takes to license a  facility while at the same time being sure that the agency is licensing a safe  operation.  Several NRC officials also said current performance measures  track office efficiency well but capture the quality of license review poorly.   NRC officials said they are beginning to develop performance measures  that better capture quality.  For example, NRR is now using a template to  assess the quality of its evaluation of safety issues during review of  licensing actions.  Officials believe that when measures of quality are in  place, they can be used to determine whether adjusting budget resources  will have an effect on the quality of their activities.
New strategies, such as risk-based regulation and oversight programs, can  dictate changes in performance measures.  NRC must also keep its  performance measures relevant as the industry changes.  Several examples  illustrate these points.  NRC plans to develop new performance measures  for reviewing applications to upgrade power output from existing plants  because of concern that existing measures did not accurately measure NRC  performance in this area.  In another example, NRC is studying new  performance measures to determine if it can predict, and thus avoid,  emergent problems in the Reactor Oversight Program.  NRC and industry  representatives jointly developed a new set of performance indicators to  measure availability of nuclear plant safety systems.  NRC believes the new  performance indicators will provide more accurate risk assessments.
section_title: Link between Expected Outcomes and Resource Requests Is Not Always Clear
paragraphs: NRC officials said that linking outcomes to resources is challenging for  several reasons.   First, the budget process focuses on performance targets  and budget decisions for the short term while achieving some outcomes  may take many years.  Therefore, it is difficult to know the incremental  effect of adjusting resources annually for longer-term outcomes.  For  example, one official noted that research leading to safer reactor design  takes many years to bear fruit.  Agency officials said linking outcomes to  resources is also difficult because achieving many agency goals depends on  the actions of others not directly under NRC’s control.  NRC’s strategic plan  states that achieving its strategic goals requires the collective efforts of  NRC, licensees, and the agreement states. Yet, as one NRC official noted,  neither NRC nor stakeholder representatives could identify how much each  contributes to achieving NRC strategic goals.  Nonetheless, this official said  that both NRC and stakeholders strongly believe in establishing  quantifiable outcome measures so that all stakeholders understand NRC’s  goals.  While the particular links and interdependencies are specific to  NRC, many of these challenges permeate federal agencies.  Many federal  programs depend on other actors.  For many federal activities ultimate  outcomes are years away, but ways must be found to evaluate progress and  make resource decisions annually.
section_title: Standardizing Practices and Techniques while Maintaining Office Flexibility Is Difficult
paragraphs: A continuing challenge during PBPM implementation is to determine which  process techniques and information should be standardized across offices.   For example, NRC officials said the major program offices use different  procedures and methodologies to rank the contribution of their work  activities to achieving NRC performance goals.  Nonstandard weighing of  priorities has made cross-office comparisons of activities and related  resource allocation decisions more challenging for NRC officials.  NRC  officials said they established a task force to develop a common  methodology to prioritize the contributions of the major program offices to  NRC goals.  They said their goal is to have aspects of a common ranking  process among the major program offices for the fiscal year 2005 budget.   In addition, NRC is in the process of further defining the roles and  responsibilities of participants in PBPM through a management directive.
In a related example, an NRC official said the agency faces a challenge to  improve comparison of performance measures across both major program  and mission support offices.  Major NRC program offices are required to  include agency strategic goals and performance goal measures in their  annual operating plans.  These measures are reported in the annual  performance report by strategic arena.  However, mission support offices  are not required to report on these strategic performance goals.  In  addition, each office has been permitted to develop additional, office- specific, detailed performance measures to provide supplemental  management information.
section_title: The Assessment Component Needs Further Work
paragraphs: NRC officials describe NRC’s current assessment process as the weakest  component of PBPM.  These officials said existing guidance does not  adequately describe what an assessment is or how to select programs for  evaluation.  Since there is not a clear definition of what qualifies as an  assessment within Component 4, NRC performance reports vary and may  not capture the full range of assessments that occurred or are planned at  NRC.
Because information contained in assessments is intended to inform the  other PBPM components, NRC officials see the performance assessment  component as a critical element of its process.  For example, performance  assessments can capture key information on how the agency is performing  that can be used for setting the agency’s strategic direction.  This practice,  consistent with our framework for budget practices, can help NRC to seek  continual improvement by evaluating current program performance and  identifying alternative approaches to better achieve agency goals.
NRC is taking steps to improve its assessment process by developing a new  procedure for selecting programs and activities for evaluation.  In July  2002, NRC established annual performance reviews for the four major  strategic arenas and an annual assessment plan that identifies subjects for  evaluation during the upcoming fiscal year.  Programs will be selected for  evaluation where a strong potential exists for performance improvement,  cost reduction, or both.  Results of the program evaluations will inform the  next strategic direction phase of PBPM and may also result in changes  during the performance monitoring process.
section_title: Implementation of New Processes Requires Commitment
paragraphs: Agency officials describe the introduction of PBPM as a culture shift  requiring a commitment of time and effort by NRC employees. NRC  officials said the agency sought to facilitate this cultural change by holding  staff meetings at all levels and by using task force working groups to  introduce PBPM.  The introduction and evolution of PBPM also presents a  continuing workload challenge to NRC.  For example, one official said the  detailed work associated with PBPM had been added to reporting  requirements already in place.  Nevertheless, key officials reported that  implementing PBPM has been worth the time and effort because it provides  a framework for more informed and focused resource allocation decisions.   According to one official, PBPM has resulted in agency officials asking the  key questions about why and how they conduct an activity.
section_title: Cost Accounting System Not Fully Developed
paragraphs: NRC faces the challenge of developing a cost accounting system that can  support budget decision making.  Developing a cost accounting system is  important to budget decision making because it can help managers track  direct, indirect, and unit costs of activities and compare the cost of  activities to appropriate benchmarks.  The October 2001 NRC Managerial  Cost Accounting Remediation Plan noted that the prior accounting system  supported general financial reporting but did not include a managerial cost  accounting system.  An example in the remediation plan states that labor  hour tracking systems were not integrated with payroll systems.  NRC  officials said the agency has since developed a cost accounting system to  help in resource allocation decisions.  They said the new system will  integrate payroll and nonpayroll costs at a level that will enable NRC to  compare total direct costs of work activities with appropriate benchmarks.   However, officials told us that they only started using the cost accounting  system in the first two quarters of fiscal year 2002 and plan to refine the  information collected based on what is the most useful and relevant.   Agency officials estimate that fully implementing the system will take 4 to 5  years.
section_title: Agency Comments and Our Evaluation
paragraphs: We requested comments on a draft of this report from NRC.  NRC  expressed appreciation for our recognition of its efforts and progress and  the fact that we note consistencies with our framework for budget  practices.  NRC expressed some concern about our report  underrecognizing how far beyond conceptual stage PBPM is, about our  statement that a good cost accounting system was necessary, and about our  reference to operating plans.  We modified our language to clarify our  views on the implementation of PBPM.  The agency’s letter and our  response are contained in appendix I.  NRC officials also provided  clarifying comments, which we have incorporated in the report as  appropriate.
We are sending copies of this report to the Chairman of the Nuclear  Regulatory Commission and will make copies available to other interested  parties upon request. In addition, the report will be available at no charge  on the GAO Web site at http://www.gao.gov.
Please contact me on (202) 512-9573 or Denise Fantone, Assistant Director,  on (202) 512-4997 if you or your staff has any questions about this report.   Major contributors to this report are Robert Hadley, James Whitcomb, and  Robert Yetvin.
section_title: Comments from the Nuclear Regulatory Commission
paragraphs: The following are GAO’s comments on the Nuclear Regulatory  Commission’s (NRC) letter dated November 22, 2002.
subsections: section_title: GAO Comments
paragraphs: 1. Our point is not that the Planning, Budgeting, and Performance  Management Process is still at a conceptual stage but rather that  implementation is in various stages throughout NRC, and that  refinement of agencywide implementation is still necessary.  This is  consistent with what we were told and saw at NRC. We modified  wording to clarify this point.  (See pp. 4 and 9.)  2. We consistently have said that good cost accounting is critical to  linking resources to results/outcomes.  For example, in our recent  testimony on performance budgeting we said that the integration of  reliable cost accounting data into budget debates needs to become a  key part of the performance budgeting agenda.   3. NRC uses operating plans to set milestones, track progress, and make  adjustments to improve program outcomes.  This is—and was so  described in our interviews at NRC— an important part of PBPM.   4. The footnote was modified to clarify that this report neither observed  nor evaluated reported safety problems in the Davis-Besse power plant.   (See p. 9.)
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