ML18073A260

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Management Directive 6.1, Resolution and Followup of Audit Recommendations.
ML18073A260
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Issue date: 07/03/2014
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DT-17-137 MD 6.1
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U.S. NUCLEAR REGULATORY COMMISSION MANAGEMENT DIRECTIVE (MD)

MD 6.1 RESOLUTION AND FOLLOWUP OF DT-17-137 AUDIT RECOMMENDATIONS Volume 6 Internal Management Approved by: Allison M. Macfarlane Chairman Date Approved: July 3, 2014 Cert. Date: N/A, for the latest version of any NRC directive or handbook, see the online MD Catalog.

Issuing Office: Office of the Executive Director for Operations Contact Name: Jesse Arildsen 301-415-1785 EXECUTIVE

SUMMARY

Directive and Handbook 6.1 are being revised in conjunction with required periodic management directive review. The revision also better defines the agency's periodic analyses of audit recommendations to determine possible trends and systemwide problems and recommend solutions, as required by Office of Management and Budget Circular A-50.

TABLE OF CONTENTS I. POLICY..............................................................................................................................2 II. OBJECTIVES ....................................................................................................................2 III. ORGANIZATIONAL RESPONSIBILITIES AND DELEGATIONS OF AUTHORITY ........... 2 A. Chairman ......................................................................................................................2 B. Commission..................................................................................................................3 C. Executive Director for Operations (EDO) ......................................................................3 D. Chief Financial Officer (CFO)........................................................................................4 E. Inspector General (IG), Office of the Inspector General (OIG) ......................................5 F. Directors of Commission Offices, Panels, and Advisory Committees ............................6 G. Deputy Executive Directors for Operations (DEDOs) and Deputy Chief Financial Officer, Office of the Chief Financial Officer (OCFO) .....................................6 H. Regional Administrators and Office Directors Reporting to the EDO .............................7 For updates or revisions to policies contained in this MD that were issued after the MD was signed, please see the Yellow Announcement to Management Directive index (YA-to-MD index).

MD 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS I. Director, Acquisition Management Division (AMD), Office of Administration (ADM) ...........................................................................................................................7 IV. APPLICABILITY ................................................................................................................8 V. DIRECTIVE HANDBOOK ..................................................................................................8 VI. REFERENCES ...................................................................................................................8 I. POLICY It is the policy of U.S. Nuclear Regulatory Commission to resolve audit recommendations promptly and to correct deficiencies identified in final audit reports. This directive and handbook provide internal guidance to NRC personnel for implementation of Office of Management and Budget (OMB) Circular A-50, "Audit Followup," as revised (September 29, 1982), and the Inspector General Act of 1978, as amended (5 U.S.C. App. 3). OMB Circular A-50 establishes policies and procedures for use by agencies in following up on audit reports. Additionally, the Inspector General Act imposes reporting requirements on agency heads with respect to audit recommendations.

II. OBJECTIVES Establish systems to ensure prompt and proper resolution and implementation of audit recommendations.

Ensure that all attempts are made to recover amounts due NRC as a result of management determinations on audit findings and recommendations.

Provide specific guidance on addressing audits by the U.S. Government Accountability Office (GAO) and the NRC Office of the Inspector General (OIG), which can be used as a framework for other auditing organizations.

III. ORGANIZATIONAL RESPONSIBILITIES AND DELEGATIONS OF AUTHORITY A. Chairman

1. Transmits responses to congressional committees regarding recommendations in reports from the GAO.
2. With regard to audit recommendations addressed to the Chairman (a) Responds to the OIG on behalf of the Commission or on behalf of the Chairman alone, as appropriate, on recommendations contained in draft and final OIG audit reports and to GAO on behalf of the Commission on final and, where appropriate, draft GAO audit reports.

For the latest version of any NRC directive or handbook, see the online MD Catalog. 2

MD 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS (b) Ensures that recommendations of audit reports are resolved; that corrective actions are assigned, tracked, and completed; and that the Audit Followup Official (AFO) is advised of actions taken, as discussed in Section III.C.3 of this directive.

3. When necessary, resolves differences between OIG and the Commission offices, Executive Director for Operations (EDO) staff offices, and the Chief Financial Officer (CFO) with regard to recommendations contained in OIG internal audit reports.

However, when the resolution involves matters relating to policy formulation, certain types of rulemaking or orders, adjudications (as defined in the Reorganization Plan No. 1 of 1980 (5 U.S.C. App.), or any other matter within the Commission's authority, refers such issues to the Commission.

4. Transmits the Performance and Accountability Report informing Congress on management decisions and final actions taken with regard to audit recommendations from OIG that are more than 1 year old.
5. Transmits the OIG semiannual reports to congressional committees, along with any agency comments, within 30 days of receipt from the Inspector General (IG).

B. Commission

1. Approves responses to congressional committees regarding recommendations in reports from GAO.
2. Approves responses to GAO on selected draft audit reports from GAO.
3. Ensures that appropriate agency actions are taken to address matters raised in audit reports when they involve policy formulation, certain types of rulemaking or orders, adjudications as defined in the Reorganization Plan No. 1 of 1980, or any other matter within the Commission's authority.

C. Executive Director for Operations (EDO)

1. Provides policy guidance to ensure that management officials throughout the agency understand the value of the audit process and are responsive to audit recommendations.
2. With regard to audit recommendations addressed to the EDO (a) Responds to OIG, with a copy to the Chairman and each Commissioner, on recommendations contained in draft reports for any offices reporting directly to the EDO (including multiple Deputy Executive Directors for Operations (DEDOs)), as well as final OIG reports for all offices under the EDO.

For the latest version of any NRC directive or handbook, see the online MD Catalog. 3

MD 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS (b) Responds to GAO, with a copy to the Chairman and each Commissioner, on the accuracy of facts and conclusions contained in draft GAO reports.

(c) Ensures that recommendations of audit reports are resolved, that corrective actions are assigned, tracked, and completed, and that OIG is advised of actions taken relative to their audit report recommendations.

3. Serves as the NRCs AFO (a) Provides oversight and direction to ensure that recommendations of audit reports are resolved in a timely manner and that corrective action is assigned and completed.

(b) Provides a system to maintain accurate records and track the status of audit reports and recommendations through the entire process of issue resolution and corrective action implementation (except for contract audits as discussed in Section III.I.6 of this directive).

(c) Facilitates resolution of any disagreements between offices reporting to the Commission (including Commission panels and advisory committees) and the IG regarding internal audit findings and recommendations.

(d) Resolves any disagreements between the DEDOs and OIG regarding internal audit findings and recommendations.

(e) Provides for a triennial review of implementation of selected audit recommendations, including analyses of audit recommendations, resolution, and corrective action activities to determine if there are any trends or problems that warrant further action and to recommend solutions.

(f) Reports periodically on the status of GAO assignments to the Commission for information.

4. Forwards to the Commission for approval and transmittal the required statements to congressional committees on recommendations contained in final GAO audit reports.
5. Integrates input from individual regions and offices to prepare the section of the Performance and Accountability Report on management decisions and final actions on OIG audit recommendations that are more than 1 year old.

D. Chief Financial Officer (CFO)

1. Ensures that timely action is taken to pursue collection of funds that result from management determinations on audit findings and recommendations.
2. Establishes accounts receivable and pursues collection action under Management Directive 4.1, "Accounting Policy and Practices"; 10 CFR Part 15; "Debt Collection For the latest version of any NRC directive or handbook, see the online MD Catalog. 4

MD 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS Procedures"; 10 CFR Part 16,"Salary Offset Procedures for Collecting Debts Owed by Federal Employees to the Federal Government"; and 31 CFR, Parts 900-904, "Federal Claims Collection Standards" for funds owed NRC as a result of audits.

3. Notifies the Assistant Inspector General for Audits when accounts receivable are established for funds owed NRC as a result of NRC contract audits.
4. Informs the AFO of significant audit findings and of any disagreements with OIG on audit findings and recommendations.
5. With regard to an audit of the office (a) Responds directly to OIG, with a copy to the Chairman, each Commissioner, and the AFO on recommendations contained in draft OIG and final audit reports.

(b) Responds to GAO, with a copy to the Chairman, each Commissioner, and the AFO on the accuracy of facts and conclusions contained in draft GAO reports.

(c) Ensures that recommendations of audit reports are resolved; that corrective actions are assigned, tracked, and completed; and that the AFO and OIG are advised of actions taken.

6. Forwards to the Commission, with a copy to the AFO, for approval and transmittal the required statements to congressional committees on recommendations contained in final GAO audit reports.
7. Develops a remediation plan in consultation with the Director of OMB if there is a sustained audit finding that NRC financial management systems are not in compliance with the requirements of the Federal Financial Management Improvement Act of 1996 (31 U.S.C. 3512).
8. Evaluates OIG and GAO audit reports to identify areas concerning internal controls for appropriate followup and for preparation of the annual report to the President and Congress as required by 31 U.S.C. 3512.

E. Inspector General (IG), Office of the Inspector General (OIG)

1. Provides copies of all final internal audit reports to the Chairman, each Commissioner, and the AFO.
2. Provides copies of all contract audit reports issued by OIG to the Acquisition Management Division (AMD), Office of Administration (ADM).
3. Informs the AFO about disagreements on internal audit recommendations and provides information copies of matters referred to the Commission for resolution.

For the latest version of any NRC directive or handbook, see the online MD Catalog. 5

MD 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS

4. Periodically evaluates audit recommendations, management decisions, and resulting corrective actions to identify trends and systemic problems.
5. Evaluates the adequacy of NRCs audit followup system.
6. Reviews implementation of corrective actions in response to OIG audit recommendations by NRC management to determine whether these actions were consistent with the management decision.
7. Forwards to the Chairman for transmittal to congressional committees those semiannual reports required by the Inspector General Act of 1978.
8. With regard to GAO audits of OIG (a) Responds directly to draft and final GAO audit reports, with copies to the Chairman and each Commissioner.

(b) Transmits the required statements to congressional committees on recommendations contained in final GAO audit reports, with copies to the Chairman and each Commissioner.

F. Directors of Commission Offices, Panels, and Advisory Committees With regard to audits of their offices

1. Respond directly to OIG, with a copy to the Chairman, each Commissioner, and the AFO on recommendations contained in draft and final OIG audit reports.
2. Respond to GAO, with a copy to the Chairman, each Commissioner, and the AFO, on the accuracy of facts and conclusions contained in draft GAO audit reports.
3. Forward to the Commission for approval and transmittal the required statements to congressional committees on recommendations contained in final GAO audit reports, with a copy to the AFO.
4. Ensure that recommendations of audit reports are resolved; that corrective actions are assigned, tracked, and completed; and that the Chairman, each Commissioner, the AFO, and OIG are advised of actions taken.

G. Deputy Executive Directors for Operations (DEDOs) and Deputy Chief Financial Officer, Office of the Chief Financial Officer (OCFO)

1. Review and respond directly to OIG on draft internal audit reports for their respective areas of responsibility.
2. Coordinate resolution and corrective action on audit recommendations involving more than one internal program or agency.

For the latest version of any NRC directive or handbook, see the online MD Catalog. 6

MD 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS

3. Inform the AFO of significant audit findings and of any disagreements with OIG on audit findings and recommendations.

H. Regional Administrators and Office Directors Reporting to the EDO

1. Develop, coordinate, and submit responses to audit reports to the appropriate DEDO or to the EDO (for offices reporting directly to the EDO).
2. Ensure that corrective actions within areas of responsibility are prioritized, assigned, tracked, and implemented and advise the AFO and OIG of the action taken.
3. Notify the CFO when corrective actions in response to audit recommendations result in significant changes to existing internal controls or in the development of new internal controls.
4. Prepare input on management decisions and final actions on OIG audit recommendations that are more than 1 year old and submit it to the EDO for inclusion in the Performance and Accountability Report.

I. Director, Acquisition Management Division (AMD), Office of Administration (ADM)

1. Resolves any disagreements on contract audit recommendations between contracting officers and OIG (including audits performed by the Defense Contract Audit Agency).
2. Informs the AFO of any disagreements on contract audit recommendations before taking final action.
3. Establishes target dates for completing corrective action in response to contract audit recommendations.
4. Ensures there is written documentation that demonstrates the adequacy and appropriateness of actions taken in response to contract audit recommendations.
5. Ensures that contracting officers (a) Make initial management decision on recommendations resulting from audits of NRC contracts and grants.

(b) Refer any disagreements with OIG on contract audit recommendations to the Director of AMD for final management decision and resolution.

(c) Provide the OCFO with a copy of the written determination establishing a contractors indebtedness to NRC as a result of audits of NRC contracts.

(d) Inform the Assistant Inspector General for Audits, OIG, at the time OCFO is notified of the debt to be collected by NRC as a result of audits of NRC contracts.

For the latest version of any NRC directive or handbook, see the online MD Catalog. 7

MD 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS

6. Provides information on contract audits and disallowed costs to the AFO for inclusion in the annual Performance and Accountability Report.
7. Provides for the maintenance of accurate records of the status of contract audit reports and recommendations through the entire process of resolution and corrective action.

IV. APPLICABILITY This directive and handbook apply to all NRC and regional office employees responsible for resolution and followup of audit recommendations in reports issued by OIG, executive branch audit organizations, GAO, and non-Federal organizations.

V. DIRECTIVE HANDBOOK Handbook 6.1 contains detailed guidance for resolution and followup of audit recommendations.

VI. REFERENCES Code of Federal Regulations 10 CFR Part 15, Debt Collection Procedures.

10 CFR Part 16, Salary Offset Procedures for Collecting Debts Owed by Federal Employees to the Federal Government.

31 CFR Parts 900-904, "Federal Claims Collection Standards.

48 CFR Subpart 42.1, Contract Audit Services.

Department of the Treasury Department of the Treasury, Treasury Financial Manual, I TFM 8025.20.

General Services Administration Federal Acquisition Regulation, 1.603-2.

Nuclear Regulatory Commission Management Directive 4.1, "Accounting Policy and Practices."

4.4, "Internal Control."

Office of Inspector General Web site:

http://www.nrc.gov/insp-gen.html.

For the latest version of any NRC directive or handbook, see the online MD Catalog. 8

MD 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS Office of Management and Budget OMB, Circular A-50, "Audit Followup," as revised, September 29, 1982.

OMB, Circular A-133, "Audits of States, Local Governments, and Non-Profit Organizations," as revised, June 26, 2007.

United States Code Agency Reports (31 U.S.C. 720).

Anti-Deficiency Act (31 U.S.C. 1341).

Availability of Draft Reports (31 U.S.C. 718(b)(1)).

Chief Financial Officers Act of 1990 (31 U.S.C. 902(a)).

Contract Disputes Act of 1978 (41 U.S.C. 601 et seq.).

Debt Collection Improvement Act of 1996 (31 U.S.C. 3701 et seq.).

Executive Agency Accounting and Other Financial Management Reports and Plans (31 U.S.C. 3512).

Federal Financial Management Improvement Act of 1996 (31 U.S.C. 3512 et seq.).

Federal Managers' Financial Integrity Act of 1982 (35 U.S.C. 3512 et seq.).

Inspector General Act of 1978, as amended (5 U.S.C. App. 3).

Reorganization Plan No. 1 of 1980 (5 U.S.C. App. 1).

For the latest version of any NRC directive or handbook, see the online MD Catalog. 9

U.S. NUCLEAR REGULATORY COMMISSION DIRECTIVE HANDBOOK (DH)

DH 6.1 RESOLUTION AND FOLLOWUP OF DT-17-137 AUDIT RECOMMENDATIONS Volume 6 Internal Management Approved by: Allison M. Macfarlane Chairman Date Approved: July 3, 2014 Cert. Date: N/A, for the latest version of any NRC directive or handbook, see the online MD Catalog.

Issuing Office: Office of the Executive Director for Operations Contact Name: Jesse Arildsen 301-415-1785 EXECUTIVE

SUMMARY

Directive and Handbook 6.1 are being revised in conjunction with required periodic management directive review. The revision also better defines the agency's periodic analyses of audit recommendations to determine possible trends and systemwide problems and recommend solutions, as required by Office of Management and Budget Circular A-50.

TABLE OF CONTENTS I. GUIDANCE FOR RESOLUTION AND FOLLOWUP OF AUDIT RECOMMENDATIONS ......................................................................................................3 A. Introduction...................................................................................................................3 B. Distribution of Audit Reports .........................................................................................4 C. Resolution of Audit Recommendations .........................................................................4 D. Review of Implementation of Corrective Action .............................................................9 E. Tracking Corrective Actions ........................................................................................10 II. ACCOUNTING AND COLLECTION CONTROLS............................................................11 A. Recording Receivables ...............................................................................................11 B. Interest Charges .........................................................................................................12 C. Allowance for Uncollectible Amounts ..........................................................................12 For updates or revisions to policies contained in this MD that were issued after the MD was signed, please see the Yellow Announcement to Management Directive index (YA-to-MD index).

DH 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS D. Payment of Debts .......................................................................................................12 E. Exceptions ..................................................................................................................12 III. REPORTING REQUIREMENTS ......................................................................................13 A. The Chairman's Report to Congress on Management Decisions and Final Action on OIG Recommendations ......................................................................13 B. OIG Semiannual Report .............................................................................................14 C. The Chairmans Written Statement of the Actions Taken on GAO Recommendations......................................................................................................15 D. The Chairmans Summary of Actions Taken in Response to GAO Recommendations......................................................................................................15 IV. GLOSSARY .....................................................................................................................15 EXHIBITS Exhibit 1 Sample Response to OIG Audit Report ...............................................................18 Exhibit 2 Sample Response to Draft GAO Report ..............................................................20 Exhibit 3 Sample Response to Final GAO Report ..............................................................22 Exhibit 4 Sample Annual Statement to Congress on GAO Recommendations ..................25 For the latest version of any NRC directive or handbook, see the online MD Catalog. 2

DH 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS I. GUIDANCE FOR RESOLUTION AND FOLLOWUP OF AUDIT RECOMMENDATIONS A. Introduction

1. Audit followup is an integral part of good management and is a shared responsibility of agency management officials and auditors. Corrective action by management on resolved findings and recommendations is essential to improving the effectiveness and efficiency of agency operations. NRC will establish systems to ensure the prompt and proper resolution and implementation of audit recommendations. These systems will provide for a complete record of action on both monetary and nonmonetary findings and recommendations.
2. Audits of NRC programs and operations are conducted by the Office of the Inspector General (OIG) and the Government Accountability Office (GAO). OIG audits are typically limited to NRC programs while GAO audits tend to include NRC programs as part of a Governmentwide audit.
3. Audits of NRCs financial statements are conducted by the OIG. NRCs audited financial statements become part of the financial statements of the U.S. Government that are audited by GAO.
4. Under the Federal Acquisition Regulation (FAR), 48 CFR, Subpart 42.1, Contract Audit Services, the Defense Contract Audit Agency conducts audits of NRC commercial contracts. In certain circumstances, the OIG or another agency may have audit cognizance of a particular contractor. For educational institutions and nonprofit organizations, audit cognizance is determined according to OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Institutions, as revised, June 26, 2007. Sometimes these reports contain findings that affect NRC funds.
5. A management decision regarding audit recommendations on program and financial audits will generally be made by NRC staff within 30 days after issuance of a final audit report. NRC will maintain audit followup systems to track audit recommendations until corrective action has been completed. NRC will provide a report to Congress on the status of audit recommendations as part of the annual Performance and Accountability Report.
6. A management decision regarding audit recommendations on contract audits will generally be made by the Acquisition Management Division (ADM), Office of Administration (ADM). AMD, ADM, will establish target dates for completing corrective action (i.e., negotiations with contractor in response to contract audit recommendations). Controls will be in place to ensure amounts owed NRC as a result of contract audits are accounted for and collected promptly.

For the latest version of any NRC directive or handbook, see the online MD Catalog. 3

DH 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS

7. The procedures for distributing audit reports, resolving audit recommendations, and implementing and tracking corrective actions are explained in the following Section I.B of this handbook. Accounting and collection controls and reporting to Congress are explained respectively in Sections II and III of this handbook.

B. Distribution of Audit Reports

1. Draft OIG Audit Reports OIG will issue draft internal audit reports for comment to the officials designated in the following chart. In addition, the Audit Followup Official (AFO) receives a copy of all draft OIG reports.

AUDITED ORGANIZATION RECEIVING OFFICIAL Commission Chairman Office of the Chief Financial Officer CFO Offices reporting to the Commission (including Office Director Commission panels and advisory committees)

Office of the Executive Director for Operations EDO Offices reporting to the EDO and regional offices EDO

2. Final OIG Audit Reports OIG will issue final audit reports to the NRC officials to whom the recommendations in the report are addressed. OIG will also provide copies of final reports to the AFO, the CFO, the Chairman, and each Commissioner. In addition, electronic distribution is made to members of the public who have requested copies. All unclassified audit reports are available to the public on the OIG Web site, available at http://www.nrc.gov/insp-gen.html.
3. Contract Audit Reports OIG will issue audit reports to the Director of AMD, ADM, for appropriate action.

C. Resolution of Audit Recommendations

1. OIG Audit Recommendations (a) A management decision regarding an audit recommendation will generally be made by NRC staff within 30 days after issuance of a final audit report. A formal For the latest version of any NRC directive or handbook, see the online MD Catalog. 4

DH 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS response to OIG is required. Corrective action should proceed as rapidly as possible.

(i) If the audited organization disagrees with a recommendation in an audit report, the response will explain fully the reason for the disagreement, as well as any alternative action the audited organization believes is necessary.

Where disagreement is based on interpretation of law, regulation, or the authority of officials to take or not take action, the response will be coordinated with the Office of the General Counsel (OGC) and will state the legal basis for the disagreement.

(ii) The response to each audit report will document the management decision, that is, whether or not the audited organization agrees with each recommendation. If the audited organization agrees with a recommendation, the response will give the planned corrective action and an estimate of the date each action will be completed.

(iii) Audit recommendations are considered resolved when OIG and agency management agree on the action to be taken on reported findings and recommendations and the dollar savings resulting from a management decision. At times, issues may be resolved before the issuance of the final report. OIG will annotate the report to indicate this fact.

(iv) Per OIG policy, all audit followup correspondence is considered official agency record material. This material should be available to OIG and placed in the Agencywide Documents Access and Management System (ADAMS),

as appropriate. Generally, all followup correspondence that is unclassified, Non-Safeguards Information, and unsensitive should be available to the public in ADAMS.

(b) The Chairman, after consultation with the Commission, as appropriate, responds to OIG on recommendations directed to the Chairman or the Commission that are contained in final OIG audit reports. The CFO, directors of offices reporting to the Commission, panels, and independent advisory committees respond to final OIG audit reports containing recommendations for their offices, with a copy to the Chairman, each Commissioner, and the AFO.

(c) The Deputy Executive Directors for Operations (DEDOs) respond to final OIG audit reports containing recommendations for their respective areas of responsibility. If the audit encompasses areas of responsibility of more than one DEDO, the associated DEDOs will coordinate to provide a single response. If the audit encompasses areas of responsibility for offices that report directly to the EDO, the EDO will respond to the report. Exhibit 1 is an example of a response memo to an OIG report.

For the latest version of any NRC directive or handbook, see the online MD Catalog. 5

DH 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS (d) When a course of action on an audit recommendation cannot be reached between the OIG and the respective DEDOs or office directors, the impasse will be taken to the AFO for resolution. Impasse issues can also be taken to the Chairman for resolution, if warranted.

(e) The Chairman, as head of the agency, has the final agency management authority for audit recommendation resolution, except for matters relating to policy formulation, certain types of rulemaking, orders, adjudications as defined in the NRC Reorganization Plan No. 1 of 1980 (5 U.S.C. App.1) or any other matter within the authority of the Commission. The Chairman will refer matters in these latter areas for Commission consideration and will subsequently communicate the decision to OIG.

(f) A recommendation is closed when final action has been taken.

Recommendations may also be closed administratively in conjunction with the issuance of a new audit or audit followup report that requires the same corrective actions. OIG determines when a recommendation is closed. An audit report is closed when final action has been taken on all of its recommendations.

2. Financial Audit Recommendations (a) Audits of agency financial statements required by the Chief Financial Officers Act of 1990 (31 U.S.C. 902(a)) may be performed by the NRC OIG, or an independent external auditor as determined by the IG. Reports are issued to the Chairman not later than November 15 following the fiscal year for which a financial statement is submitted. These reports are processed in accordance with the procedures for resolution of audit recommendations.

(b) With regard to an audit finding that the NRC financial management systems do not substantially comply with the requirements of the Federal Financial Management Improvement Act of 1996 (31 U.S.C. 3512 et seq.), a remediation plan for bringing noncompliant systems into compliance will be established in consultation with the Director of the Office of Management and Budget (OMB).

(c) GAO also may review any audit of a financial statement conducted by the NRC Inspector General (IG) or an external auditor. GAO reports its audit findings and recommendations to Congress, the Director of OMB, and the Chairman. These reports are processed under the procedures for resolution of GAO audit recommendations.

3. GAO Audit Recommendations (a) GAO usually provides draft reports to NRC for review and comment so that final reports may incorporate agency views. Under 31 U.S.C. 718(b)(1), NRC must provide comments on draft GAO reports within 30 days of issuance. However, For the latest version of any NRC directive or handbook, see the online MD Catalog. 6

DH 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS GAO may provide less time because of the demands of its sponsors. An extension of the comment period may be requested if it is not possible to respond within the time allotted. Typically, comments on GAO draft reports address the accuracy of facts and conclusions and the appropriateness of any recommendations.

(b) The Commission, the CFO, directors of offices reporting to the Commission, panels, and boards respond to draft GAO audit reports involving their offices, with a copy to the AFO. The EDO responds to draft GAO audit reports concerning agency programs and operations within the EDO's area of responsibility. However, the Commission may identify certain EDO-level GAO reports requiring their review. In all cases, a copy of the response shall be provided to the Chairman and each Commissioner. The IG responds to draft GAO audit reports involving OIG.

(c) GAO issues final reports to Congress or to the Chairman. If the report is issued to Congress, a copy is provided to the Chairman after it is released by the audit sponsor. Additional copies are provided to the AFO and to the Director of OMB.

(i) Under 31 U.S.C. 720, Agency Reports, GAO final reports require a response to Congress within 60 days on the recommendations presented by GAO. The response will discuss the agencys views on the recommendations and the action taken, or to be taken, by the agency. Where appropriate, dates for achieving actions shall be provided when the Commission reviews and approves the NRC response, which is signed out by the Chairman.

Commission review and approval typically requires 14 calendar days.

Commission approval constitutes a management decision and resolution of the GAO recommendations.

(ii) If NRC staff disagrees with a recommendation contained in a final audit report, the response will state the reason for the disagreement, as well as any alternative action the staff believes necessary. Where disagreement is based on interpretation of law, regulation, or the authority of officials to take or not take action, the response will be coordinated with OGC and will state the legal basis for the disagreement.

(d) Statements to OMB are processed as follows:

(i) The Chairman must submit a statement to the Director of OMB within 60 calendar days after formal transmittal of a GAO report to NRC when at least one of the following applies:

  • The report contains a specific recommendation for the Chairman, For the latest version of any NRC directive or handbook, see the online MD Catalog. 7

DH 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS

  • The report contains financial statements accompanied by either a qualified audit opinion or a disclaimer of opinion,
  • The report indicates a violation of the Anti-Deficiency Act (31 U.S.C. 1341) that has not been reported to the appropriate authorities,
  • The report indicates a violation of other laws, or
  • OMB requests NRC to comment.

(ii) The statement will identify the GAO report by number and date and will be submitted in duplicate. The statement will inform OMB of NRC's views on GAO's findings and recommendations and identify any action taken, or planned, in response to each significant finding or recommendation. A copy of the agency's response to the final GAO report will satisfy this requirement, provided the response accurately and adequately reflects NRC's current views. When corrective action is incomplete, still under study, or planned, a statement will be included as to when NRC expects action to be completed.

The corrective action will be reported to OMB after it is completed.

(iii) Copies of statements required by 31 U.S.C. 720 will be submitted along with the statement to OMB. These statements may be used to satisfy the initial OMB reporting requirements. The statements should be accompanied by any additional information not provided to Congress but otherwise required by OMB.

(e) Statements to congressional committees are processed as follows (i) Under 31 U.S.C. 720, when a GAO report contains recommendations to the Commission, NRC shall

  • Submit a written statement to the Senate Committee on Governmental Affairs and the House Committee on Homeland Security and Government Reform no later than 60 days from the date of receipt of the report. This statement will report the action taken or to be taken by NRC with respect to the GAO's recommendations.
  • Submit a written statement to the Committees on Appropriations of the Senate and the House of Representatives in connection with the first request for appropriations submitted to Congress more than 60 days after the date of the GAO report. This statement will report the action taken or to be taken by the agency with respect to the recommendations to the Commission.

(ii) A copy of the above statements will be submitted on the same date to OMB and GAO.

For the latest version of any NRC directive or handbook, see the online MD Catalog. 8

DH 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS (f) Samples of these statements are included in Exhibits 2, 3, and 4 of this handbook. Copies of the required statements are to be provided to the AFO.

4. Executive Branch Agency Audits (a) Generally, other executive agencies do not have authority or jurisdiction to audit NRC programs without the prior consent of OIG and OEDO. This consent is usually given only to gather information for use in conducting an audit of the parent organization. As such, no recommendations should be made to NRC by any other executive branch OIG.

(b) If contacted by a member of the IGs office from another Federal agency, prior to responding to their inquiries, NRC staff should contact the Assistant for Operations, OEDO, or the Assistant Inspector General for Audits, for guidance.

5. Contract Audit Recommendations (a) Audits of NRC contracts are conducted by the cognizant audit agency, usually the Defense Contract Audit Agency. These audit reports are sent directly to the IG who issues the reports and comments to AMD, ADM, for resolution.

(b) Contract audits are resolved when OIG and the contracting officials agree on the action to be taken on reported findings and recommendations and the dollar savings. These actions are documented on NRC Form 518, Audit Report Tracking Form. NRC Form 518 is provided to staff by the OIG.

(c) Contract audit reports containing questions and unsupported costs are reported in the OIGs Semiannual Report to Congress.

D. Review of Implementation of Corrective Action

1. NRC Management Followup Reviews (a) This review will ensure that the corrective action agreed to as a result of audit recommendations has been implemented and the desired effect is being achieved.

(b) The AFO will periodically, at least triennially, select a sample of completed audits in a variety of programs for followup review. Where applicable, program evaluations should be considered. The AFO will inform responsible office directors and regional administrators of the audit followup review and provide the name of the person who will review each selected program. Office directors will be asked to provide the AFO with the name of an office contact who will assist the reviewer.

For the latest version of any NRC directive or handbook, see the online MD Catalog. 9

DH 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS (c) The reviewer will prepare a brief report to the AFO that includes the following information:

(i) The audit reviewed, (ii) Description of how the review was conducted, (iii) Recommendations reviewed, (iv) Effectiveness of agency corrective action, and (v) Findings and any recommended corrective actions.

(d) The reviewer's report will be submitted to the AFO within 30 days after the audit followup review is completed. Any recommendations resulting from these reviews will be discussed with the appropriate DEDO and office director or regional administrator and included in the agency's system for tracking corrective actions.

(e) The initiation of reviews will be coordinated with OIG to avoid duplication of effort.

(f) In addition to the above, the AFO will conduct a triennial analysis of audit recommendations, resolutions and corrective actions to look for trends and systemwide problems, and to recommend solutions. The reviewer will prepare a brief report to the AFO that provides this information.

2. OIG Followup Reviews (a) OIG will perform reviews of the agency's followup system to determine whether management is carrying out this responsibility in a satisfactory manner. In addition, OIG will generally perform followup reviews of prior audit recommendations whenever another audit is scheduled in the audit area. This action will serve as a partial basis for OIG's evaluation of the adequacy of the agency's audit followup system. Any recommendations resulting from OIG's reviews of the agencys followup system will be included in the agency's system for tracking corrective actions.

(b) The scope of followup reviews is an examination of management's performance in implementing the response concurred during the management decision process. Followup reports state the results of this examination. Where progress in implementing corrective action is found to be unsatisfactory, the reports identify, to the extent possible, the cause of the unsatisfactory progress.

E. Tracking Corrective Actions

1. Official Agency System The AFO will maintain the official agency system to track resolution of audit recommendations and the actions NRC management has agreed to take in response For the latest version of any NRC directive or handbook, see the online MD Catalog. 10

DH 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS to audit reports. The Director of AMD, ADM, will maintain a separate system to track contract audits. Other tracking systems may be established with the approval of the AFO.

2. Unresolved Recommendations The AFO or an appropriate manager will include all unresolved recommendations in the appropriate tracking system and will monitor the status of these recommendations until a final management decision is made and the recommendations resolved. In accordance with the Inspector General Act of 1978, as amended, (5 U.S.C., App. 3, Section 5(a)(10)), all unresolved recommendations must be reported in the OIGs Semiannual Report to Congress after 6 months in this status.
3. Implementation of Corrective Actions The AFO will track recommendations until the action agreed to by management is implemented and, if an OIG recommendation, closed by the OIG. In accordance with Section 5(a)(3) of the Inspector General Act, significant recommendations described in a previous semiannual report on which corrective action has not been completed is reported in the OIGs Semiannual Report to Congress.
4. Recovery of Funds The AFO will track audit recommendations that involve the recovery of funds until the issues have been settled and the related funds have been recovered or the debt is otherwise resolved.

II. ACCOUNTING AND COLLECTION CONTROLS The Office of the Chief Financial Officer (OCFO) will ensure effective recovery action for amounts determined to be owed the Government resulting from resolved audit findings and recommendations. Unless otherwise required by statute, collection action must be pursued on all claims arising from audit disallowances in accordance with the 31 CFR Ch. 9, Parts 900-904, Federal Claims Collection Standards, 10 CFR Part 15, "Debt Collection Procedures"; 10 CFR Part 16, "Salary Offset Procedures for Collecting Debts Owed by Federal Employees to the Federal Government"; and Management Directive 4.1, "Accounting Policy and Practices."

A. Recording Receivables Amounts due the Government must be recorded promptly as accounts receivable in the Division of Controller (DOC), OCFO, upon completion of the actions that entitle NRC to pursue collection of the amounts. Amounts determined to be owed as a result of the audit recommendations will be recorded as accounts receivable within 30 days of being For the latest version of any NRC directive or handbook, see the online MD Catalog. 11

DH 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS resolved. These accounts receivable are to be recorded even though the indebtedness is subject to administrative appeal or litigation by persons outside the agency.

B. Interest Charges Interest on audit-related debts begins to accrue on the date that the auditee is notified of the debt; however, interest will be waived on the debt or any portion of the debt that is paid in full within 30 days after the date the auditee is notified of the debt. To discourage unwarranted appeals, interest will continue to accrue while an appeal is in progress.

Unless otherwise required by statute or regulation, the interest applied will be that prescribed by the Department of the Treasury, Treasury Financial Manual (I TFM 8025.20).

C. Allowance for Uncollectible Amounts NRC management should consider the potential for not being able to collect audit-related debts. An allowance account will be established in DOC to reflect the amount of accounts receivable estimated to be uncollectible.

D. Payment of Debts Procedures will be established in DOC to ensure that the payment of audit-related debts does not result in charges to other Federal programs or in a reduced level of program activity.

E. Exceptions

1. There may be instances in which a portion of the funds owed by NRC on a grant, a contract, or other agreement are held back (a) As a safeguard against overpayment.

(b) Pending completion, final inspection, or approval of work.

(c) Under other provisions of a grant or contract.

2. In these instances, it is not necessary to record a receivable because disallowed costs may reduce the amount payable from undisbursed funds in the grant or the contract audited.

For the latest version of any NRC directive or handbook, see the online MD Catalog. 12

DH 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS III. REPORTING REQUIREMENTS A. The Chairman's Report to Congress on Management Decisions and Final Action on OIG Recommendations

1. With input from the offices and regions, as applicable, the AFO will prepare, for the Chairman's approval and submission to Congress as part of the annual Performance and Accountability Report, a summary of management decisions and final actions with regard to recommendations from the OIG that are more than 1 year old. The Commission should be provided a copy of the Chairman's comments on any portion of the report that involves matters within the authority of the Commission before submission to Congress.
2. The Chairman's report will contain any comments the Chairman believes appropriate and will include the following (a) Statistical tables showing the total number of audit reports and the dollar value of disallowed costs for audit reports (i) For which final action had not been taken by the commencement of the reporting period.

(ii) On which management decisions were made during the reporting period.

(iii) For which final action was taken during the reporting period, including

  • The dollar value of disallowed costs that were recovered by management through collection, offset, property in lieu of cash, or otherwise.
  • The dollar value of disallowed costs that were written off by management.

(iv) For which no final action has been taken by the end of the reporting period.

(b) Statistical tables showing the total number of audit reports and the dollar value of recommendations that funds be put to better use by management agreed to in a management decision for audit reports (i) For which final action had not been taken by the commencement of the reporting period.

(ii) On which management decisions were made during the reporting period.

(iii) For which final action was taken during the reporting period, including the dollar value of recommendations for which

  • Corrective action has been completed.
  • Management has subsequently concluded should not or could not be implemented or completed.

For the latest version of any NRC directive or handbook, see the online MD Catalog. 13

DH 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS (c) A statement with regard to audit reports on which management decisions have been made but final action has not been taken, other than audit reports on which a management decision was made within the preceding year, containing (i) A list of such audit reports and the date each such report was issued.

(ii) The dollar value of disallowed costs for each report.

(iii) The dollar value of recommendations that funds be put to better use agreed to by management for each report.

(iv) An explanation of the reason final action has not been taken with regard to each such audit report. (Such statement may exclude audit reports that are under formal administrative or judicial appeal or upon which management of an establishment has agreed to pursue a legislative solution, but shall identify the number of reports in each category so excluded.)

(d) The report will be annotated to identify the number of audit reports issued by the Defense Contract Audit Agency and the related dollars that are included in the statistics reported by the agency.

B. OIG Semiannual Report In accordance with requirements of the Inspector General Act of 1978, as amended, the semiannual report is a document prepared by the IG that summarizes OIGs activities during the 6-month periods ending March 31 and September 30. It is submitted to the Chairman by the end of the subsequent month. The report describes

3. Any significant problems, abuses, or deficiencies related to the administration of NRCs programs and operations and associated recommendations,
4. Significant audit recommendations described in previous semiannual reports on which corrective action has not been completed,
5. Audit recommendations from reports described in previous semiannual reports for which no management decision has been made, and
6. Statistical tables showing the monetary impact of OIGs audits during the reporting period.

The agency may comment on the report but cannot change it. The Chairman will submit the report, along with any agency comments, to Congress within 30 days of receipt.

For the latest version of any NRC directive or handbook, see the online MD Catalog. 14

DH 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS C. The Chairmans Written Statement of the Actions Taken on GAO Recommendations Under 31 U.S.C. 720, the head of a Federal agency is required to submit a written statement of the actions taken on recommendations in GAO final reports to the Senate Committee on Homeland Security and Governmental Affairs and the House Committee on Government Reform. NRC statements are in the form of a letter signed by the Chairman and are to be transmitted not later than 60 calendar days after the day the report is released. Details on the information to be provided in the statement are provided in Section I.D.3 of this handbook and a sample is included in Exhibit 2.

Commission approval of the statement constitutes a management decision and resolution of the GAO recommendations.

D. The Chairmans Summary of Actions Taken in Response to GAO Recommendations Under 31 U.S.C. 720, the agency head must submit a summary of progress made in addressing recommendations contained in GAO reports. These reports are transmitted to Congress, GAO, and the Office of Management and Budget during the second quarter of the fiscal year for agency activity during the prior calendar year. A sample of this report is included in Exhibit 3. Following the initial agency response to a final GAO report, these reports provide status updates on open recommendations and may be used to document the completion of NRCs actions in response to GAO report recommendations.

IV. GLOSSARY Audit A planned and documented activity performed by an organization using accepted auditing practices to determine by investigation, examination, or evaluation the adequacy of programs and activities, including their effectiveness, economic use of resources, and compliance with established procedures, laws, and regulations. Reports that may be generated as a result of an audit include the following:

  • Draft Audit Report. A report issued at the conclusion of audit activities that is provided to NRC for review and comment. The auditing organization may modify the draft report based on its assessment of the comments.
  • Final Audit Report. A report of record of the audit. Reports may include audits performed by internal or external auditors and may contain monetary and nonmonetary recommendations.

For the latest version of any NRC directive or handbook, see the online MD Catalog. 15

DH 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS

  • Financial Audit Report. A report (final) of audit of agency financial statements as required by the Chief Financial Officers Act of 1990.These audits express an opinion on the accuracy and fairness of NRC. GAO may also audit agency financial statements and issue financial audit reports.

Contract Audit Report Contract audits are conducted to provide professional audit advice on accounting and financial matters to assist in the negotiation, award administration, re-pricing, and settlement of contracts. Contract audits may result in identification of questioned and/or unsupported costs. Overall, contract audits determine whether agency contractors have met their responsibility to the Government.

Corrective Action Measures taken to implement audit recommendations.

Disallowed Costs A questioned cost that management, in a management decision, has sustained or agreed should not be charged to the Government.

Final Action The completion of all actions necessary with respect to the findings and associated recommendations in a final audit report. For OIG reports, OIG must agree that the final action adequately addresses the recommendation before it is closed.

Management Decision Management's evaluation of audit findings and recommendations, and the issuance of a decision concerning its response to these findings and recommendations, including any actions deemed necessary. Management decisions will be documented in a formal response to the auditing organization.

OIG Disposition Terminology The characterization OIG provides regarding the audited organizations management decisions relative to audit recommendations.

  • Resolved: Proposed corrective actions are responsive, but not yet complete.
  • Unresolved: Proposed corrective actions are inadequate or nonresponsive.
  • Closed: Corrective actions are responsive and considered by OIG to be complete or staff rationale for taking no corrective action is considered to be acceptable.

For the latest version of any NRC directive or handbook, see the online MD Catalog. 16

DH 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS Program Audits Program audits are conducted on NRC administrative and program operations to evaluate the effectiveness and efficiency with which managerial responsibilities are carried out. Program audits provide objective analysis so that management can use the information to improve program performance and operations, reduce costs, facilitate decision making, and contribute to public accountability.

Questioned Cost A cost questioned as a result of an alleged violation of law, regulation, contract, grant, cooperative agreement, or other agreement governing the expenditure of funds; or a finding that the expenditure of funds for the intended purpose is unnecessary or unreasonable.

Recommendation That Funds Be Put To Better Use Funds identified in audit recommendations as funds that could be used more efficiently if NRC management took action to implement and complete the recommendation, including reductions in outlays; deobligation of funds from programs or operations; costs not incurred by implementing recommended improvements related to the operations of NRC, a contractor, or a grantee; avoidance of unnecessary expenditures noted in preaward reviews of contract or grant agreements; or any other savings that are specifically identified.

Resolution For most audits, the point at which the audit organization and agency management or contracting officials agree on the action to be taken on reported findings and recommendations and the dollar savings resulting from the management decision in terms of disallowed costs and funds to be put to better use. The Chairman has final audit recommendation resolution authority for internal audits.

An audit report may be considered resolved despite the right of persons outside the agency to negotiate, appeal, or litigate. Resolution of a report with respect to parties outside the Government does not preclude further consideration of issues in the report by agency management.

For GAO reports, the point at which NRC responds to Congress, as required by 31 U.S.C. 720.

Unsupported Cost A cost questioned by an audit organization because the cost was not supported by adequate documentation at the time of the audit.

For the latest version of any NRC directive or handbook, see the online MD Catalog. 17

DH 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS EXHIBITS Exhibit 1 Sample Response to OIG Audit Report For the latest version of any NRC directive or handbook, see the online MD Catalog. 18

DH 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS For the latest version of any NRC directive or handbook, see the online MD Catalog. 19

DH 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS Exhibit 2 Sample Response to Draft GAO Report For the latest version of any NRC directive or handbook, see the online MD Catalog. 20

DH 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS For the latest version of any NRC directive or handbook, see the online MD Catalog. 21

DH 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS Exhibit 3 Sample Response to Final GAO Report For the latest version of any NRC directive or handbook, see the online MD Catalog. 22

DH 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS For the latest version of any NRC directive or handbook, see the online MD Catalog. 23

DH 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS For the latest version of any NRC directive or handbook, see the online MD Catalog. 24

DH 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS Exhibit 4 Sample Annual Statement to Congress on GAO Recommendations For the latest version of any NRC directive or handbook, see the online MD Catalog. 25

DH 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS For the latest version of any NRC directive or handbook, see the online MD Catalog. 26

DH 6.1 RESOLUTION AND FOLLOWUP OF AUDIT Date Approved: 07/03/2014 RECOMMENDATIONS For the latest version of any NRC directive or handbook, see the online MD Catalog. 27

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