ML19322E327

Transcript of 800319 Hearing in Washington,Dc Re Ofc of Inspector & Audit 1980 Audit Program.Pp 1-40.Ofc of Inspector & Audit Briefing Notes & Slides Encl

ML19322E327
Person / Time
Issue date:	03/19/1980
From:	NRC COMMISSION (OCM)
To:
References
REF-10CFR9.7 NUDOCS 8003270192
Download: ML19322E327 (71)

Text

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UNITED STATES 1

NUCLEAR R EG UL ATO RY COMMISSION in the m atte r of:

DISCUSSION OF OIA AUDIT PROGRAM s

Pl ace:

washington, D. C.

Date:

March 19, 1980 Pcge5:

1 - 40 l

INTERNATIONAL VERBATIM REPORTERS. INC.

499 SOUTH CAPITCL STREET. S. W. SUITE 107 WASHINGTCN. D. C. 20002 202 484-3550 8003 270I92 l'h

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UNITED STATES l

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NUCLEAR REGULATORY COMMISSION I

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_____________________________x

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4 In the Matter of:

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DISCUSSION OF OIA i

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i AUDIT PROGRAM l

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to Room 1130, Eleventh Floor l

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1717 H Street, N.W.

6 11 Washington, D.C.

II Wednesday, March 19, 1980 1,

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j IJ The Commission met, pursuant to notice, for g4 presentation of the above-entitled matter, at 10:00 a.m.,

j BEFORE:

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gg JOHN AHEARNE, CHAIRMAN l

i JOSEPH M. HENDRIE, COMMISSIONER 19 I

PETER A.

BRADFORD, COMMISSIONER i

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LEONARD BICKWIT, GENE,RAL COUNSEL i

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PRESENT:

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ED HANRAHAN A

JAMES CUMMINGS l

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l GEORGE MESSENGER

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,i ARTHUR SCHNEBELEN i

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HARRY BOULDEN I

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AL GAUTHIER i

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CHAIRMAN AHEARNE:

Welcome to the large gathering.

n Those who don't appreciate the, power and might A

of the Office of Inspector and Audit have not been exposed to the searching keen gaze of the audit branch.

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l COMMISSIONER HENDRIE:

My understanding, John, t

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8 is that they are all in the other room watching the T.V.

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camera because they are a li'ttle afraid to be in the same i

room with the' Chief Inspector and Auditor.

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l CHAIRMAN AHEARNE:

But seriously, this morning ti i

we come to hear the presentation by from the audit side l

of the Office of Inspector and Audit.

Ihaveaskedforthisl' 13 l

because both of the importance that the office can be as l

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l far as the Commission's functioning as well as the recom-l' IJ i

mendations of the GAO that we make greater use of this 14 office.

I 17 From my experience in the Defense Department, 14 I

19 I found that the audit branch to be invaluable in providing j l

f an objective review of critical elements of the department'sj

c functions.

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In general, they are not well loved.

They are 3

viewed in many cases as interlopers into an organization's functions.

They tend to because of their role, to be 3

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critical and there are times that there is a tendency for 1

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the organizations that have been reviewed, to resent that criticism.

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l I think after, at least my experience has been, I

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organizations have lived with an audit:. organization for l

e a number of years they gr.adually begin to appreciate that I

i the function of the auditor is to improve the overall 7

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operation of the agency and in the long run it is extremely g

beneficial.

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Consequently, I think it is critical that the 10 i

l Commission itself focus on what are the items that the 11 auditor is going to review and in particular, insure that i

those are the items that the Commission is most interested i

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in and also prepare itself so that when the audit is fin-l

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I ished.that it can understand them and react appropriately.

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With those opening words, Jim, it is nice to i

M see you this morning.

What can you tell us?

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MR. CUMMINGS:

Well, as you said, John, the la l

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,9 main purpose of.1this_ morning's briefing to the Commission is to review with you our 1980 audit plan and to solicit

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j comments, criticisms, or suggestions that the Commission i

i might have with respect to that plan.

7 George Messenger,.who.is the Assistant Director 2

for Audits is on my immediate left, and I would also like g

to take one moment to introduce to you the branch chiefs n

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who are sitting in the first row to your right.

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They are Harry Boulden, Safety & Enforcements, l

and his responsibility is basically the ITE function.

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Next to him is Fred Herr, who has the Licensing & Standards I

Branch.

Next to him:is Art Schnebelen, who does all our 4

I administrative type audits, ADP, Comptroller, and that e

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l type of audit.

And, finally,AlGauthier,whoisresponsibld g

s for the Research Branch.

9 With that I will turn it over to George.

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MR. MESSENGER:

Thank you.

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Could I have slide 1, ;please?

i What we intend to do is go through the slides 13 that are in front of you and kind of briefly highlight la i

s the purpose, h'ow our activity works and interfaces with i

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the auditing throughout government and then get into j

fo, our audit plan. relating to these purposes, as Jim just i,'

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f' The first one, of course, was this document that j l

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0 came down to the Commission in January.

Each year we p

l are required by OMB Circular A-73 to come up with an l

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audit plan.

We use this as the vehicle to come up with that plan.

At the same time we can capsulize all that

2 ve.hawb. done throughout the year at the same time, and give; j

u a total picture of where we are heading.

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Could I have the next slide, please?

l-Okay9.-going back to the establishment / authority f

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Atomic Energy Act; of 1954, they did have_an IG shop l

under the old AEC. I_ recall.it was under the Office of L

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the Comptroller at that time but with the current thinking l

4 with the passage of Inspector General Act in

'78, they r

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tried to elevate the IG activity up to the top management.

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g The purpose behind_is bring the audit investigations to-l 9

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gether under one head,.and to give the top management, to l

the head of the agency, in this case, the Commission, 11 i

an independent look at that rest of the organization.

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I If a program office, etcetera, the audit 13 l

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side is feeding management information inte the T people s

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I and this is not valid information, the assurance c.u.ei.w ller is.

s IJ Inspector and Auditor and this goes back to the comment l

I4 why we are always not loved.

l 17 Ij The Energy Reorganization Act is, if I recall, ta l

l the Commission when it was established could set up 5 i

19 separate offices.

Of course, one..of those that they chose to establish was the Office of Inspector and Auditor.!

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l OMB Circular A-73, this is the guidance that l

really stems from GAO but is put into circular form through the Office of Management and Budget which really oversees the audit community instructionalwise throughout

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the government.

I In stemming from this we get our standards that we follow as well as there is a body called the Federal A

Audit Executive Council which I am a member and represent NRC.

There we meet quarterly to interchange ideas, to find f k

l out the stay with the Community.

We met last Thursday, l

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i' in fact.

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f Once a year we will meet two days solid to gg 9

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over mutual problems. Tae real benefit here is when' you get into!

10 things like responding to President Carter's request for i

i more emphasis on the Fraud, Waste, and Abuse Programs.

i When that document first came down to respond 13 l

l to, it was really kind of a joint pulling together of l

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the whole audit community and responding to that.

It is 13 a lot of exchange of information so that we could give the OMB,who is the President's agent, the best possible response.

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19 Also, in that circular, they tie us in to the i

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GAO standards for auditing and they are in this little

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book, I will touch on them lightly.

Really, they set

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So, the circular kind of locks us in.

2 Also, while I am at it, GAO also puts out i

,5 a little book here on the " Internal Auditing Federal I

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Agencies and the way it is to be Conducted".

It goes i

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i further in that in here they will talk about the follow i

up, the rest of the standards that appl-y to the Auditor.

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As you recall, the follow-up has been an item

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of concern in government.and the reason being if recom-i I

mendations are made and they are not followed up, correctivej 7

i' actions not taken, the auditors job is almost rendered I

worthless.

9 CHAIRMAN AHEARNE:

The OMB Circular doesn't, 10 however, require follow-up?

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MR. MESSENGER:.Yes, the OMB Circular does.

I There is a little bit more explanation here and in essence, 13 they are the same thing.

The Circular does require the 12 e

follow-up.

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While I am on that, as they recently revisad j

their follow-up system this year, so there was a revision i

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to the follow-up chapter of this Circular and what it g

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really is talking to, they want to put the onus of followup

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on management.

So, right now really the follow-up system, i although we do a close out type audit to see that every-l I

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thing is done, follow-up here in this agency is now done

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with the EDO, done through their work item tracking

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2 So, when we issue a report, EDO takes those

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I recommendations, puts them on the work item tracking system,i

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and we get print outs on that.

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Once they drop off the system, that means that I

they are completed.

We go out, perform sufficient checks I

to see that they were in fact implemented, and we will issue i

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reports to the Commission closing out the audit.

MR. CUMMINGS:

If we had a significant difference g

where the EDO would say " We have done it" and we would l

follow up and say, " Gee, we don't think it is done" i

10 we would have another meeting and then, theoretically, i

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the way the paper is set out, we would come to the 12 Commission if we had a serious difference.

That has 13 l

not, in fact, happened.

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MR. MESSENGER:

Going down the report by t.:

I the House Committee on Government Operations, the details id are listed in this little book.

In effect, what they t

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are doing was encouraging internal auditing as a must la l

l within all the government agencies departments.

I i9 The same is with Item 6, we are periodically l

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i subject to audit by GAO and they oversee the audit commun-l 1

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ity and in this report, in fact I thought we looked quite well, because they criticized the regulatory agencies for not having an internal audit. function.

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,A I think right now and it may still be we are the

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only regulatory agency with an internal work function, I

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l-unless one has come down the pike soon.

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MR. CUMMINGS:

We don't want you to get any ideas.

I COMMISSIONER HENDRIE:

Nice station for you 0

in the Southwest.

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MR. MESSENGER:

On this we are currently part i

l of the audit plan.for GAO.

They keep pusNing it forward I

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and I don't know when they will look at us.

Th,ey will to look at us and hopefully it won't be a blue covered report, i

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but it may.

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Could I have the next slide, please?

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COMMISSIONER HENDRIE:

Will that be Dexter g

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MR. MESSENGER:

Yes, it will.

It comes under f4 the -- the audit site out here would probably do it, but t

i they are under Dexter Peach.

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14 There is a number of other divisions at GAO.

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COMMISSIONER HENDRIE:

They are bound to

c criticize, that is what they are in business for.

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i you don't have an audit section, maybe they wouldn't audit it and then we wouldn't be criticized.

Do you realize you are creating,a vulnerability for us, George?

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MR. MESSENGER:

My point is, I try to follow l

their stuff rate down the line and their standards, so i

i if they should come in, they are not -

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l CHAIRMAN AHEARNE:' The other way of looking at l

2 it, Joe, is that at least. in that case we will be doing 5

I battle with GAO with their own weapons.

7 MR. MESSENGER:

By the way, I would say 65 to i

70% of my Staff is formerly from GAO.

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A battle of the wits.

10 COMMISSIONER HENDRIE:

I can see the line offices,i!

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do you remember the story about the mountaineer and his 12 wife and the wild animal and the standing at the side, 13 saying, "Go it wife"?

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i CHAI'RMAN AHEARNE:

Go ahead, George.

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MR. MESSENGER:

Mission, this is straight out of our manual chapter but encompasses both sides, our I7 l

i side is primarily dealing with the effectiveness and fa

9 efficiency and the investigative side primarily with the f

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l Next slide, please?

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I This is how we are currently set up, and on t

the audit side and the reason for the original setup of

2 the four branches, they are something like, if you can U

use a measurement. standard, 196 auditable units that I m m.w wm. m x l

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would call within NRC, and that is separate activities, I

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mainly from the branch on up.

What we have tried to I

do is, we broke these down 4 ways.

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So the Branch Chief, as they are set up, they t

cover the whole agency.

The Branch Chief is responsible j

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as well as the audits of those programs for staying on top 7

and being current with them.

So, they have a large amount i

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of expertise.

The way they do this is we get every SECY paper i

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We get every manual chapter that is 11 issued.

We comment on every draft chapter before it is I:

published.

They are into the activities, they have 10 l

their contacts..they get their management information 14 l

documents.

We gr> the DUTS printouts, we got all the l

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memos on the PPPG, etcetera.

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So, we have a library of this and they just stay l 17 l

on top of it.

On the audit staff under them, while 14 l

l they are small, and we were geared for expansion at any time, but the audit staff we will rotate the auditors l

c a nonda to cross train.

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Primarily, they are brought..in through the

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adminictration and program direction audits branch, 3

because usually that is the easiest place for them to P

3 get a handle on the agency at the same time all the program i

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l activities are going through either the Comptroller or i

aidn one way or the other, so by the time they are

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trained.

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1 Of course, here.we are geared just as the i

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1 Inspector General Act set up the IG uctivities, Audits j

7 Investigations under a common directory reporting directly 3

i to the head of the agencies.

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Next slido, please?

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l This is how our current body count is broken down,

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N and of course the slide represents the Commission approved

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bodies that were marked by OMB and I guess, probably will l

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be marked by. I.think that the Authorization and Appropria-l j

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tion Acts, I dontt think they have come forth yet.

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So, what we are dealing with primarily now is a tosn is 14 auditors also ' nneshed in that you would have the of e

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GAO liaison function that we do.

We do investigation

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l assist because on certain investigations they need the 19 I

expertise to program areas, so they draw on the audit

'O staff.for that.

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l Also, we comment on and are asked for advice l

in the accounting area.

We have CPA's on the staff and 3

people well versed in accounting.

So, usually if they have a problem systemic, they will come over an ask.

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The same with certain'other areas, like security if they i

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advice.

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Next slide, please?

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This goes.back to the little yellow book on i

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j the GAO standards.and really what we are chartered to do, j

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i and back in 1972 is really the expansion of the audit j

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function.

If you go way back in time it'was pretty i

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much the financial audit and-it was a compliance audit.

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By compliance I mean a regulation is published and all the j

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t does is.go in dnd says - U ~, f -- "Did they follow the I:

book by accordance with regulations?".

That has since l

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l expanded while it is still there.

We still have a finan-l la i

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cial responsib'ility, we have a compliance responsibility.

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Where it has broadened, is into the economy io, and efficiency audits.

Those are what we call really t,o i

value received.

Is the Government getting the maximum j

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Is it wasteful ~.use of resources?

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Is the~ e duplication of effort?

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to see are they..following it, we are looking to see is l

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$c.roi'edure any good?

I.; the procedure outdated?

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2 tl... a you know from some of the reports, we have had i

u reports in that area where we changed the procedures or

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f That is what we are talking there.

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the top bullet, desired program results-and objectives are being achieved effectively.

Here we are talking I

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primarily is the organization activity meeting the l

4 l-objectives of the program primarily as the Commission

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1 I guess the most recent example would be on i

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the resident inspector. program.. We are trying to look 10 i

the goals and objectives and see are they accomplishing at II I

those.

Of course, I think that we did have some recommend-t2 ations that will prove fruitful to_the agency.

Going.down to the -- well, I should touch

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l briefly on the. financial reports.

We still have responsi-

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bility there for overseeing them, but the staffing that 14 4

we have is so light in the admin area and so big that

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wehavedecidedthatwearegoingtopursuethecontractingf la out with a CPA firm as some of the other agencies are r,

doing.

10 01 In our next move, w5 visit a couple of agencies, i

i we are going to go to.the Comptroller of Currency, which i

I understand just had an audit.

We will monitor, oversee that'and set the scope of the

audit, The second surveys are fact finding studies on I

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an entity.

What we do here and probably see the term l

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survey.

We primarily do this when we go into an area that I

is broad scoped, new program and we real-ly don't know where L

we want to focus until.we get in there.

We will see t

some of those as we get into the plan.

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From there we use the techniques of interview 7

observation records and review.

We go in and we start g

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with the broad, we focus down, and again, like they say 9

I auditors are critical, we are going to look where the 10 l

problems are and usually the correction of those problems 11 is where we can be the best benefit.

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But, at the same time, what we are trying to do 13 l

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is give balance reporting where we find something good j

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as we did with'the semi-scale research program.

We will l

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.t report that also, f

That is what we really do as our. survey, we go l

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in and try to narrow..the scope of an audit. Of course, la l

lastly, our followup review, which I mentioned earlier i

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t that we will -- it is' a close suit system, where we close i

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out each job.

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Next slide, please?

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This is how we develop our audit plan.

Probably it is where the Commission can be of the most benefit for

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l The first thing we do is we request input from I

h the Commission, EDO, and NRC offices.

This is done usually in the November / December timeframe getting ready for our ann report.

That is our first shot at development.

Then, we consider the audits required by l

4 government regulation or OMB.

This'would be the impress I

T fund type audits which is an annual thing and now they o

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have directed us to get into the area to figure security 9

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which is a hot item, so we have got to get that,in our 10 I

l audit plan.

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l CHAIRMAN AHEARNE:

To what extent, when OMB makes such a statement is that a requirement which you I

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j must follow?

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l MR. MESSENGER:

Pretty much if you want to l

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stay with the. audit community.

Usually it comes in i

through a circular to the head of the agency and the 17 reponse will go out.

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Our response on the security, I recall, was part [

19 of the overall security package.

In there, there was one 20 t

line item on audit.

That went out from the Commission

1 back to OMB.

So, it really kind of poses a requirement.

The timeframe is kind of left open a little bit.

Consider onging and recently completed audits by GAO.

We are really an extension of GAO.

That was one ni v

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I of the original provisions under the Accounting Procedures I

f Act of '50 where GAO could not cover all the audit functions i

in government.

So, what they did is'they encouraged L-internal auditing to help them out and that is why we are bound to coordinate with GAO on our audits.

We try 3

not to --

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O CHAIRMAN AHEARNE:

That is under that particular f

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law?

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i MR. MESSENGER:

Yes.,I Think they quote it in i

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this little book here that --

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MR. CUMMINGS:

We wouldn't purposely go into I:

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an area that they are going to audit to go in behind them

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j and do another audit in the same. area.

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CHAIRMAN AHEARNE:

I can see the logic of that i

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l but I am asking a different question, is it required by 14 f

law that you coordinate your audits with GAOS 17

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MR. MESSENGER:

Not by law, by standard, it la l

19 would be the requirement.

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t The law, through the responsibility at GAO and i

,2 in there it talks about management control and the manage-l i

j ment control in the agency and them looking at that control.

So, this is really the advocacy of internal audit.

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CHAIRMAN AHEARNE:

I guess what I was wondering w

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l is that it may just be a theoretical situation, but let I

us suppose that we ask you to do a particular internal i

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audit and you go to GAO, and they say W ell, we, GAO had j

f in mind doing that also'and our schedule is such that e

we can't get started for three or four months".

I MR. CUMMINGS:

I think my answer to that would i

7 I

be, tough.

t i

MR. MESSENGER:

I can give it in the nutshell,

~,

9 l

I think it says it better than I can.

Under the Budget i

10 I

and Accounting Procedures Act of

'50, the Comptroller i

i 11 i

=

General in carrying out sort of responsibilities is t:

required.~.to prescribe principle procedures, rules, and 10

(

l regs, for carrying out such work giving due regard ts i

n l

to generally accepted principles of auditing, including l

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consideration for the effectiveness of internal audit and 14 I

o control on related administration practices of the 17 i

respective agencies.

14 l

l The Act further requires the head of each agency l 19 t

to establish and maintain systems of internal control

c i

designated to provide effective control over and accounting l II i'

for all funds, property, and other assets for which the y

agency is responsible including appropriate internal audit.

, 1 So, I think that is kind of the first --

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l MR. CUMMINGS:

.I. don'.t.think it ties your I

f question'down. It does say that if we are going to pre-I scribe to certain standards then we have-to do it.

We L

can't just have different standards throughout government.

I 1

That has not, I don't believe, ever become a 3

problem.

t i

e 7

CHAIRMAN AFEARNE:

No, it is a.more theoretical question.

t 9

MR. MESSENGER:

Okay, but we do. coordinate our 10 l

audits.

Of course, one way is through the liaison would 11 i

have to know what they are doing.

We try not to get into 1

the same area, one it disturbs managemen* st the same time.

1:2 l

If you take the total, we should, between GAO

(

14 i

l and us, have a'very comprehensive plan.

IJ I

MR. CUMMINGS:

It is in our benefit, too, to l

f4 have a good relation with GAO on what they are going to I

i g

I t

do and what their plans are.

l

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MR. MESSENGER:

And the other thing, of course, f.

li the internal studies that are going on in NRC, we ha've "C

to consider those.

So, again we don't want to go in and

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just totally be in the same area at the same time.

Consider priority programs, example TMI, of 3

special interest.

This again, is what we will get into later as the setting priorities of what we look at.

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l We do consider requests received from NRC offices.;

i l

Probably the bulk of these have come either from the l

l EDO themselves, or the Comptroller type area, cashier l

L operations, the recent one that the director of accounting e

r had a concern and they called us in.

l 4

I EDO, of course, asked for the overall inspection i.

I y

l of procurement.

E'

.3 Consider the dollar value of NRC programs.

9 i

Again, we don't want to spend our effort in something i

l 10 l

l that doesn't --

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i CHAIRMAN AHEARNE:

That leaves you to keep i:

coming back to research.

i 13 l

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MR. MESSENGER:

Then, consider programs withir

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an agency not 'yet reviewed by OIA and that will be the l

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i balance of our plan in effect.

id Next slide, please?

l i

i Here is what we initially sent down as we see f

it the three priority audit, areas.

These cover -- there I

,9 i

is one being done in each branch, although the revised review

,0 of the RES plant for TMI related research, while it is l

1 I

being done primarily by the. Branch Chief now due to one our auditors, had to be detailed to one of the, I guess,

=

3 would you call them investigation, Jim?

MR. CUMMINGS:

Yes, I don't know what I am

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going to call it.

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MR. MESSENGER:

The point being the same.

i MR. CUMMINGS:

Yes.

A j

MR. CUMMINGS:

Other than that, these are the 3 and I think what we have laid out is really the narrative b

of how we get into it, it s.tartscod.page 6.

If you i

7 want to take a look.at that.

i l

3 t<

l In effect,:we: plan..to.first hit, to take a look 9

i on the Lessons Learned, we picked to go into the operator i

10 l

training and licensing 7.

On 7, pretty much our approach li would be as laid out there, number 1.,

identify and evaluate 13 I

the management structure within NRR to.a. implement,.

l 13 l

i monitor and. assure. timely completion of the recommended t

14 i

i I

corrective actions.

j T1 i

We will look at the status of these changes.

We id will look at from the NRR side, the NRC side, and then f

i, i

t we are going to look at from the licensee side, which l

will entail some visits to kind of give the Commission j

B an independent look.

M The next program on'the resident inspectors j

,I i

is just a continuation and looking at the training, which I think is very important.

1 The third we want to look at, which is related 3

3 somehow to the first, is the research side.

We are going g

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i to look at all these documents, we will analyze all these e

l reports to see those areas that research within their role y

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should be taking a look at.

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At the same time,-we have ongoing which shows I

up later, the international agreements.

So, we have 4

I two ongoing, which again.should mesh because a piece I

o' i

of that where we can get the research that is being done i

by our counterparts overseas if we are using that research 9

which we don't know at this point, we are going to look at r

IC l

that, and it.should

. mesh to get the total picture to it tie in.back to the Rogovin, Kemeny, all the reports that I:

have been issued in the recommendations as such.

We IU i

will trace those, of course, through the action plan.

t.L i

l l

So, those are the 3 priority areas.

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Next. slide, please?

j Okay, g.oing down by branch, Licensing and to s'

Standards Branch, this is headed by Fred Herr, who has a j

ta t

l major area.

Fred has under him, primarily, NMSS, NRR, 19 Standards Development, and International Programs and State 1

c Programs. So,.he has gotca broad scope of responsibility, r

and if we get future bodies, some will definitely go right into this area.

3 Fred also is part of the Rogovin Task Force, so we lost him for a while and the bulk of his people.

They f

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I should have gained a lot of knowledge while they were over l

i.

i there.

1 l

l This Materials Licensing Regionalization Pilot f

I L

Test Program, again, the Commission directed backlog on I

e that.

So, we will be looking at that.

l i

-l l

3 Survey of training utilization --

l 7.

l l

CHAIRMAN AHEARNE:

That is particularly important n

because we are now addressing the question of whether we 1

should go to further regionalization and that was viewed i

i 10 l

as a test, not..only of Materials Licensing but of a general i

11 t

concept of regionalization.

somewherel, It MR. MESSENGER:

So, we will p* aably be I

10 s

i I would gather, in a couple months, we are going to look j

I4 at the evaluat' ion ones,

)j IJ i

Survey of training and utilization.of increased 14

?

personnel authorized for NRR.

What we have done there is t

17 I

we started and then we backed off.

l 14 l

l CHAIRMAN AHEARNE:-

First they got to get them.

MR. MESSENGER:

With the pending reorganization

,c and everything, we decided th'at.we got stopped.

Review of NRR implementation of TMI lessons and we just talked about that and that is in the starting stages, although it hasn't been officially announced yet.

3 Review of the regulatory requirements review

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Committee.

This is one that we are going to, if I recall, e

it is the Rogovin report that talks into this area quite e

I extensively.

What we are going to do,"and we have done i

some preliminary work on this, is analyze, and look at what i, e'

they have done.

We may decide not to go into that if we 4

feel satisfied that they.are -- in that.something is i

I 7

b'ing done.as.:a result:of.what:is in here.

l 3

.I State review of the processing operating license 9

i amendments again, we didn't put narrative in the package i

to l

but we intend to take a look at this right now, there is it i

i still a backlog of amendments, and they hired the Franklin 1:

Institute, if I recall'.

II I

CHAIRMAN AHEARNE:

George, I think there will l

I4 i

i I

be a backlog o'f amendments for years, but it is worthwhile,l Il I

i in my view, to take a look at it.

j 14 MR. CUMMINGS:

I think we are interested in the

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1,,

i second stage, even when it comes out of Frankl;.a and gets la i

l back down.

Who is going to lock at it then?

Is it

,9 i

going to be.a contractor doing it?

0 Eve"y year we hear this, so r

MR. MESSENGER:

I we want to go in t.nd tee, you know, the whole management

=

system, maybe it is r.n geared to it.

I don't know.

3 Maybe the prioritic-4re wrong, but we will take a look.

3 COMMISSIONER HENDRIE:

Look beyond the management l

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l system because I have got a notion that no matter how I

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you manage them under the present licensing requirements, i

that you just get stuck with an awful'-lot of actions on

't which a certain amount of formalism, handling of papers, t*

signatures here, forms, all have to be carried out.

You N

l 3

might talk.to the people who are worrying abcen dcing i

1 7

l something about that and see what you think of some of their t,

l thoughts,about rearranging the way the technical specifica-1 I

l tions set up all these conditions.

to l

Is it ' absolutely. necessary that these. great nu:rbers of; i

it i

detailed matters be full licensed conditions which then I:

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require formal amendments under the Act to change in any l

way, or is it possible to have a set of rigorous licensed l

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14 i

i l

conditions and then supplementing appendices which are more i 14 j

easily alterable upon concurrence by the agency and which 14 wouldn't require all that process.

17 i

f MR. CUMMINGS:

Formalization, i

it

)

MR...MES SENGER :. Possibly streamlining the I

19 i

process or c: nging something could effc.ct -- we wouldn't 10 have this backlog.

U I

i MR. CUMMINGS:

The regulation that they have

~

2 is what is hamstringing the operation.

i COMMISSIONER HENDRIE:

If you assume that the 3

present configuration of the regulations and the tech specs

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l and the amendment process, and'the whole thing is a God-given;j i

input, why then I think you will find your ability to sug-l i

gest any way to deal with it more effectively than is L

being dealt..with.

I think the source of the problem is e'

back up stream one step.

r MR. MESSENGER:

State programs, again, we have

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this on the. schedule --

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MR. CUMMINGS:

We just never looked at State 9

i programs.

I IC l

l l

MR. MESSENGER:

And it is one of the areas we f

ti have to get into.

l CHAIRMAN AHEARNE:

Better hurry up.

13

(

i COMMISSIONER HENDRIE:

That's right, you got la i

l half of tiiem otit of town already.

You better snap in f

IJ

.i there and audit.

i I4 MR. MESSENGER:

Also, we are going to have an 17 ii O

added requirement with the grants that are going to be la 8

,1

,9 issued, I guess, for uranium mill tailing, we have an i

audit of grant responsibility for the first time.

We

.c will have to be looking at that.

l 7

I Star, this was something we touched on when e

7 we issued a report on the upgrade rule.

We realize that 3

there are similar.-groups being established around a 2

senior contracts review board that may come down the pike wmm. m ~<.

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28

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TAPE 1/28 l

i as a result of the Authorization Act.

I i

So, we just have some concerns, and we would i

I like to look at it.

We probably look=at-how they are L

interfacing with other agencies, as well as how they deal l

1 with the contract once it comes in.

Are they only looking i

i at it from -- say is the.NRR guy only looking from an NRR's perspective?

And everybody else is saying, "Oh, v

s I

that is yours", so we have got that right now, that we I

9 i

wanted to take a harder look at.

i 10 l

Next,,please?,._

II This is Harry Boulden's Branch and it deals with i

t l

I&E and its regional offices.

He is the author of the IA l

i

(

resident inspection reports and of course the first one j

is i

we mentioned. 'We are staying in the resident inspector f

training program, we are going tu look at that.

Then,

[

14 we are going to broaden out and look at the whole I&E 17 l

a v t.

la training program from there, which will give us a good l

l foundation.

,9 i

i 0

Then, of course, the safeguards program and 4

i the highest group of facilities.

We have that schedule l

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now, primarily because we need that to round out our audit

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programs,it.'s'something we haven't looked at.

2 CHAIMinN AHEARNE:

I ought to mention the training a

program.

I think that is particularly important because we

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TAPE 2/1g have been talking to OPM about the necessity for the NRC i

i

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to do more initial training of its people to focus more 4

on getting entry level people and then= train them, rather 8

1 than going out and recruiting at the higher levels.

l i

e

~

JLs the amount of available personnel begins l;

i I

to get at least harder and harder to find, we are going i

to have to do more of that.

So, I think we will be moving I

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l more into training, so, this is the only really operating 9

i training program we have_now.

So, it is a good, idea to i

10 I

l l

have a good review of it.

l 11 l

MR. CUMMINGS:

I think we have to keep that in 12 perspective with I&E that they are the only ones that l

13 are really doing it.

l I4 Sometimes it is a target that gets picked on j

j a

little bit in that respect.

I4 CHAIRMAN AHEARNE:

Sure.

5 1,

i MR. MESSENGER:

It is my understanding that the l

14 l

j I&B type training, at least, they are the sponsor of a' lot !

19 1

of the NRR training.

A lot of it is going over, and done j

,c i

out of I&E.

l

,1 Next slide, please?

This is our branch that deals with all the money, NRC research branch.

Again, I have talked about 3

two of them, the international research agreements and the 3

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RES plan of TMI related research.

We hope to have those f

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going simultaneously.

The next area we wanted to look-at is the capital l

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1 4.

j equipment held at DOE Labs and this is really the NRC j

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so-called purshes equipment, when say one researcher's i

i

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f project ends, they start another, what happens to that I

equipment, what is being done.with that?

3 l

r' l

CHAIRMAN AHEARNE:

Why do you focus on national 9

i lab?

10 I

l MR. MESSENGER:

Well, that is primarily where 11 i

most of the research --

12 CHAIRMAN AHEARNE: 'Yes, but I thought the focus 13 l

{

l of the review was on capital equipment?

14 What leads you to conclude -- it might be j

IJ l

correct.

14 MR. MESSENGER:

Yes, that is the capital 17 l

equipmefit that we are interested in, the one that is it i

l out there.

19 i

CHAIRMAN AHEARNE:

It would be the write up l

,c i

that you have was review of contractor held equipment.

i j

So, it was at DOE Laboratories or contractors, here you 7

e have got at least a shorthanded DOE' Labs and'I i

l l

3 wondered whether that meant that you --

3 MR. MESSENGER:

Maybe Al can answer.

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l MR. GAUTHIER:

Well, the primary emphasis will l

i i

be the equipment that we have at the Labs.

There are j

i I

the situations such as maybe the TARA' contract or something l l

that we might provide some NRC equipment.

So, the primary emphasis is on.the Labs.

5 MR. MESSENGER:

I think there is 11 million there,1 7

John.

w 4

l CHAIRMAN AHEARNE:

It is just that I have I

h-recently read'a letter from a gentleman with whom we had I

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i/

i a research contract at the University, and he mentioned t

11 that now he has completed building the $500,000 or $450, i:

000 piece of equipment that we contracted for, that his 13 l

contract is running out.

The problem he was addressing l

['

la i

l is, how can he continue his contract?

It led me to

[

I!

i believe that there is a large piece of equipment that j

14 we own sitting out there.

17 l

MR. CUMMINGS:

I..think we want to look at the l

14 i

accountability system, too.

Do we have any system?

Is I

19 I

it working for duplication and that type of thing?

M There is a good deal of bucks in it.

l MR. MESSENGER:

The last one would be the survay of the waste management research program.

Again, this is kind of a roundout of our audit plan.

l l

MR. CUMMINGS:

I think that survey there, as l

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4 George was saying earlier, we want to get a little better e

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handle on that whole program.

We don't really feel com-fortable quite yet with that.

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l l

MR. MESSENGER:

On waste management, a reason 3

we haven't been in there too much, as you know, GAO has l

5 l.

been in there heavily and has a current draft, I think, j

7 pending on waste' management.

So, we are kind of waiting l

V' 3

for them to filter down.

I 9

Next slide, please?

i 10

)

l The last area, sometimes we call it our bread 11 i

and butter branch, is'.the Administration and Program 1:

Direction.

This' branch primarily is headed by Art 13

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Schnebelen, primarily has the Comptroller, Dan Donohue's j

7

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I O f fice., as well as this would be the branch that would j

IJ j

audit Commission Staff offices, the EEO Staff offices, etcetera, and say program direction.

17

!i We have 4 areas right now that a draft will 14 I

l be issued probably within the next month.

These audits,

,9 8

the field work is all complete on those 4 audits and we

.c are now getting ready -to issu'e a draft report on those.

l g

l So, you should lxa seeing something coming down fairly soon.,

The big area we were in now is technical infor-7 3

mation document control.

We are initially looking at the 2

broad area, probably coming down the focus will be on the

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j TARA contract which I understand is somewhere in $12 plus j

i million today.

We..are taking a. loo.c at that whole operation.:

Going down the line, survay of-ADP systems,

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I here our plan initially is to look at the DUTS, and from t

the DUTS broaden out.

6 l

I guess we have a concern of besides always l

I a) s the usefulness of the information, the tie in of all of 3

T' I

these systems.

9 Is management using them, are they awbre of how 10 l

they operate?

11 I

i Next small purchase function, of course, we I;

have looked at the contract area, but we really haven't I

got into in depth in the small purchase.

Mainly items l

$10,000 and below.

IJ i

t ADP security, this is a must audit but we would i

f4 I

do this anyhow, and we will take a look at that and that i

i7 i

i will be -- we issued two reports'Sn ADP and this will f

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l be the third.

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9

.g Then, of course, a part of our round out of our i

program, we have to look at personnel management.

f I

l That completes the slides.

Again, I feel if you all are in concurrence, this would be an initial

2 audit plan.

What we do after each job, we reascess after U

every job that we complete and we again look at the plan.

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If we feel'._that something else has all of a sudden --

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I events have changed and we should go.into something else, t

I we do use the means, we will announce it to the Commission,

+

and we will have an entrance conference with management i

3 and if the Commission would like us either to change i

5 the area audit or would like to have us look at particular l

7 f

areas, that would be an ideal vehicle, that opening our l

entrance letter.

9 6

j Jim, do you have anything?

[

i MR. CUMMINGS:

I think the thrust of the GAO 11 i

report has been to say two_ things, basically, they would i

g~

like to see greater evidence of_ Commission participation la l

in the audit plan, number one.

Number two, I think they,

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i to a certain extent, view OIA as to be kind of like the i

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t GAO, where they,can just throw people out and be very id responsive.

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17 That has some problems, that type of application

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to our operation from our staff, just simply has somo 19 I

problems.

c I do think that the audit plan for this year 1

i has been very responsive to the main thrust of the GAO i

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report and that is,the question of evaluating NRC goals and objectives.

I think, for instance, the TMI study that we

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are going to try to do on those three areas that we mentioned,)

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!l The area of TMI related research, I think that j

i that is very important and responsive ~to-major goals that L

NRC has this year.

e So, I feel that from that standpoint we really I

5 have tried to give you our best effort on being responsive 7

5 f

to that, and I think we have.

I am satisfied with it, 3

i that is why we are here.

9 f

l CHAIRMAN : AHEARNE :. Joe ?

10 i

l COMMISSIONER HENDRIE:

I have indicated It i

concurrence with the 1.80. Audit. Plan on SECY 80-121, it i

iT seemed to me.that as laid out in the annual report it 1::

was a good workable plan. As always, extraordinary events

(

14 1

1 come along andyou have to go in other directions.

We i

,4 t

are as quick on a right turn as the next fellow.

j to, t

MR. MESSENGER:

One thing I might mention that i

t we would be happy to do, as you recognize, we do cover the whole agency.

Ifyouhaveaconcern,anyCommissioner,f

9 and would like us to come down and just informally discuss g

i

?

something or if you feel that maybe the auditors would 1

l have an independent look, we would be happy to do that i

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1 on an individual basis.

i

2 COMMISSIONER HENDRIE:

With regard to some J

part of the organization?

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Right or if you have -- I know e

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other audit shops, Inspector General activities are used

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that way, supposedly the independent" eyes and ears and A

you would get an objective opinion that would be nuts.

J Sometimes you get a biased opinion when the 4

program office involved is this.

CHAIRMAN AHEARNE:

Peter?

3 i

COMMISSIONER BRADFORD:

Thank you for the l

.7 i

paper.

I am sorry I missed part of the presentation, 10 l

but it gives me a much better feel for what your.capabilitie; 11 i

are.

I will be more alert in ways in which the audit C

i function can be helpful in the future.

I U

l i

5' CHAIRMAN AHEARNE:

I have two questions.

l I4

,i I

First, myself, I would like you to think about

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I how to audit the agencies follow up on the PPPG.

We are 14 r

in the process, hopefully in the final stages of putting l

out the PPPG for the first time.

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The Commission has spent a lot of time, itself, I

,9 i

1 addressing it.

We have sent it down to the Staff, it J,

1 was sort of their final crack'at rebuttal and I would ex-l 7

pect at the end of March, we will put it out.

Here it is.

=

We have in a number of places now, including 2

our response to the Congress on the GAO report pointed I

i 2-out that this was a major document.

The agency is now l

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f going to use this to lay on on the part of active involve-I I

q ment to the Commissioners in establishing the policy.

I I think it is very important that we have an x

assessment of how is the age.ncy responding to that?

I Is it having an effect?

U That,.JI think, is going to be very important

+

7 t

i particularly to have available for us so that at the i

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1-8 i

end of the year, when we go to a revision of that document, i

9 1

l to understand its impact.

Imthink that is a critical l

10 I

i thing that you ought to think about.

11 i

MR. CUMMINGS:

We were looking at that, John, 12 in relation to DUTS.

It just seems to me, and I don't have I l2 a complete handle on it, but I would hope that there is l

ts i

some way that we can tie. those together.

j L!

i CHAIRMAN AHEARNE:

Yes, that is fine, Jim, but la j

please be careful because DUTS basically is a tracking I

17 ii system who is generated primarily for the use of the l

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,i Staff and EDO is to follow those performance objectivos.

19

,f It is important, but it is a tracking system.

10 The PPPG is primarily a guidance system, and I l

01 think it is very important that we get an assessment of the ability of the agency to handle that.

Second question. I have is that in the OMB

,4 Circular that you talked about, and then the GAO

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direction, the IG Act, there seems to be the flavor e

l that the OIA should be or the Audit Branch should report i

to the head of the agency.

Why then'do-you send your A

j recommendations to the EDO?-

1 MR. MESSENGER:,In the past it has been I

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I they are the,JI guess, executor recipient, to get them j

7

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l corrected.

What we aim to do is to give the Commission i

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f a so-called agreed report, the final report to the 9

i Commission which shows --

to l

l MR. CUMMINGS:

It is kind of the GAO system ti i

of getting a crack at the draft.

12 l

CHAIRMAN AHEARNE:

But, for example, let's say

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13 l

I you audit research, and you have the research report, l

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l why don't you 'end them that draft to the Director.

I s

IJ of Research for the response?

14 i

MR. CUMMIUGS:

We could, it.is just that in the past --

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t CIIAIRMAN AHEARNE:

I am not saying that you l

,9 i

should, I was just trying to wrestle through.

It neither t

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seemed to be that you were sending it to the head of g

i the offico --

7 MR. CUMMINGS:

It is kind of a system that tries to get it resolved any way we can before bringing 3

g-it up to the top.

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COMMISSIONER HENDRIE:

The report at that i

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stage is a draft report, in a sense we get GAO drafts i

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which are pretty. final but they are saying "Look, here j

l is how we came out, what do'you have to say?".

I CHAIRMAN AHEARNE:

Yes, but they don't send 5

i; l

it to the head of the office that was audited, that was 7

my puzzle.

l g

MR. MESSENGER:

It has just been a policy that 9

I I

has been evolved since the start, that was the agreed.

to way we would do it.

11~

That.!s..who, in effect, does it.

i I:

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COMMISSIONER HENDRIE:

I'll tell you what it does, IU I

John.

Where you have got an audit area, where here is l

I4 i

i research but the. audit area has covered all of that, i

L!

t but some peripheral matters as well, then it saves them la, trying to figure out if that is the case on a given 1,,

report.

They send it to the EDO and figure he will have l

to sort that out.

9 3

i j

MR. CUMMINGS:

I think it is a. tradition

.g more than anything else that it goes to the EDO and he

j i

I in turn giv(s it to Bob Budnitz or what have you and i

says come up with an answer.

s MR. MESSENGER:

But, the other one is the 2

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.SC SC TAPE 2/12 assistant which is Tom Reim, is really the mechanism for the EDO and the one that gets under the tracking system.

N-L Most of our audits involve more than one L

office, the upgrade rule, the exit with standards, and --

6 CHAIRMAN AHEARNE:

I understand that, that is 7

s why I use the question and research, i

4 MR. MESSENGER:

But, we could on those that don't stray, we could do that.

10 l

i MR. CUMMINGS:

We usually send it over there.

it i

l Don't forget, they are responsible for the tracking

too, for the recommendations.

i I:

CHAIRMAN AHEARNE:

I think, as I said in the

(,

I4 i

beginning, I b'elic,o that the office is very important.

14 I have been in agencies where it ser"ed a very valuable t o, function.

I thought the resident inspector report was excellent and I look forward to continued very good work.

g 3

Thank you.

(Whereupon the meeting 1

was called adjourned at 11:10 p.m.)

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1 COMMISSI0ft BRIEFIfiG l

by the 1

OFFICE OF INSPECT 0h AND AUDITOR March 19, 1980 i

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w e,

BRIEFING OUTLINE Pace INTRODUCTION l

BACKGROUND l

THE OIA AUDIT PLAN 5

PRIORITY AUDITS FOR 1980 6

Review of NRR's Implementation of the 6

THI Lassons Learned Review of the IE Training Program for 8

Resident Reactor Inspectors Survey of HRC's Revised Research Plans 8

Developed in Response to the TMI Accident BALANCE OF THE AUDIT PLAN 8

Licensing and Standards Audits Branch 9

Safety and Enforcements Audits Branch 10 Research Audits Branch 11 Administration and Program Direction 12 4

Audits Branch RESPONDING TO THE GA0 RECOMMENDATION 14 0

4 l

l

INTRODUCTION On January 31, 1980, the Office of Inspector and Auditor (OIA) issued its fourth annual report to the Commission covering OIA activities during Calendar Year 1979.

OIA's proposed audit plan. for 1980 was included as Attachment D to the OIA Annual Report.

Also, as you will recall, on January 15, 1980, a General Accounting Office (GAO) report entitled "The Nuclear Regulatory Commission:

More Aggressive Leadership Needed," recommended that the Commission " increase the Conimissioner's use of the Office of Inspector and Auditor in evaluating the NRC staff's performance in meeting NRC goals and objectives."

On February 8,1980, OIA provided the Commission, the Office of Policy -

Evaluation, and the Office of General Counsel, a proposed Canmission responsa to the GA0 recommendation.

That proposed response indicated Commission agreement with the recommendation and, as a first step, increased Commission involvement in OIA's audit planning process and establishing audit prio'ities.

In our memorandum transmitting the proposed response, we r

also frontified 01A's three priority audits for 1980.

The purpose of this meeting is to discuss 0IA's audit plan,1980 audit priorities, and other approaches to implement the GA0 recommendation.

BACKGROUND Before we get into the details of OIA's audit plan, I believe it would be 1

helpful to briefly outline OIA's history, charter, and organization and what its audit capabilities are.

2 OIA was established in April 1975 to conduct audits, inspections, and investigations and to assist the Commission in the fulfillment of its statutory responsibilities.

This 3 consistent with the requirements, provisions, and suggestions of the Atomic Energy Act of 1954, as amended; the Energy Reorganization Act of 1974, as amended; the Budget and Accounting Procedures Act of 1950; Office of Management and Budget (OMB) Circular A-73 (fonnerly Federal Management Circular 73-2); and the Comptroller General's audit report to the Congress entitled "An Overview of Federal Internal Audit."

The staff began coming on board in July 1975, and the first audits were started about October 1975 when the majority of the staff had reported for duty.

OIA was initially authorized 25 full-time, permanent positions of which 13 were auditors.

Based upon its responsibilities, OIA recognized from the inception that a minimum staff of 34 people was needed to maintain effective audit and inspection functions.

However, it was decided to phase into this staffing by initially ' requesting 25 positions in Fiscal Year (FY) 1976, then increasing to 34 positions during the next two to three years.

With the advent of the

~

Resident Inspection Program, OIA staffing requirements for FY 1982 increased from the original foreseen 34 to 36.

Due to OMB marks, OIA was held to 25 positions for FY 1977, 26 for FY 1978, and 28 for FYs 1979 through 1981. The Commission approved a staff increase of five positions for FY 1981 and two positions for FY 1982.

However, OMB marked no increate for FY 1981.

NRC's FY 1981 budget is currently being reviewed by Congressional authorization and appropriation committees.

3 OIA is organizationally split to conduct audits and investigations under separate assistant directors.

This paper deals with the audit activity of OIA.

The audit activity is divided into four functional branches of spe:

1iration 1

to assure complete coverage of the agency and give the offices uniform coverage and expertise for the 198 auditable units within the Nuclear Regulatory Commission (NRC).

There are fourteen professionals divided among four branches, each headed by a branch chief.

The majority of the professional staff had extensive auditing experience with other Feder.a1 organizations when they were hired by OIA. Of the fourteen auditors, eight came to the NRC from GAO, two from Air Force Audit, three from NRC's Office of the Controller and one from the accounting firm, Price Waterhouse.

The Assistant Director for Audits is fomerly Assistant Director of the U.S.

Government Interagency Auditor Training Center and previously from the Internal Revenue Service Inspector General's Office.

The staff consists principally of experienced auditors with wide ranging backgrounds including certified internal auditors, certified public accountants, and employees with advanced degrees.

i The overall objective of internal auditing is to assist agency management in attaining its goals by furnishing information, analyses, appraisals, and recommendations pertinent to management's duties and objectives.

Internal auditing is a staff and advisory function, not a line-operating function. Thus, the internal auditor should not have authority to make or direct changes in his agency's procedures or operations.

His job is to independently and objectively analyze, review, and evaluate existing procedues

4 and activ'ities; to report on conditions found; and, whenever he deems it necessary, to recommend changes or other action for management and operating officials to consider.

~

An internal auditor should not be given direct operating responsibilities.

Rather, he should be expected to coni:ern himself primarily with the performance of others, to retain an independent outlook in all of his work, and to direct particular attention to matters requiring corrective action.

His function is to present his views and suggestions constructively in such a manner as to stimulate or encourage action on his suggestions by others.

DIA conducts internal audits of NRC programs and administrative functions at all levels of operations in accordance with OMB Circular A-73 and the GA0 " Standards for Audit of Governmental Organizations, Programs, Activities, and Functions" to determine whether:

(1) desired program results and objectives are being achieved effectively; (2) resources are managed and used economically and efficiently; (3) there is compliance with applicable laws and regulations; (4) financial operations are conducted properly; and (5) financial reports are presented fairly.

DIA recommends improvements where appropriate.

During these audits, a continuous effort is made to detset any fraudulent practices or mismanagement and to eliminate waste and l

error.

To date, 01A's audits have been 'primarily the program results, efficiency and economy, and compliance type audits of HRC programs. ' Major audits of these types which OIA has completed include audits of the materials licensing and inspection programs; export licensing; the Office of Nuclear Reactor j

5 Regulation's (NRR) standardization policy for nuclear power plants; the Office of Nuclear Regulatory Research's (RES) use of Department of Energy (DOE) labs; the semiscale research program; fuel cycle licensing; and, most recently, the Resident Inspection Program.

Numerous aspects of the management of NRC's administrative and acccunting activities have been audited.

OIA's principal interface with NRC on audit reports is through the Executive Director for Operations (ED0). Draft audit reports are issued to the EDO for comment before they are issued in final form to the Commission. The ED0 is also responsible for tracking OIA audit recommendations on its Work Item Tracking System to assure that recommendations which the staff agrees to implement are, in fact, implemented.

After the EDO has advised OIA that all recommendations have been implemented, OIA perfoms sufficient checks to assure satisfactory implementation and issues a followup (closeout) report.

THE OIA AUDIT PLAN Each January, OIA prepares an audit plan to guide its activities during the coming year and to infona the Commission of our plans.

Traditionally, we have solicited input to our audit plan from the Commission, the EDO, and all NRC of fices to insure that we are auditing programs which have significance.

However, we have received only limited responses to our requests.

As a result, 01A's Calendar Year 1980 audit plan, like those for prior years, was primarily self-initiated.

In developing our audit plan we consider:

i 1.

Audits required by Government regulation or OMB; l

i l

6

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2.

Ongoing and recently completed audits by GA0; 3.

Ongoing studies of NRC programs; 4.

NRC priority programs we believe should be reviewed; 5.

Requests received from NRC offices; 6.

Dollar value of NRC programs; and 7.

NRC programs which OIA has not yet audited.

PRIORITY AUDITS FOR 1980 The three audits we have designated as having the highest priority in our audit plan for 1980 are:

1.

Review of HRR's Implementation of Three Mile Island (TMI) Lessons Learned; 2.

Review of the Training Program for Resident Reactor Inspectors; and 3.

Review of RES's plan for THI-related research.

Following is a brief discussion of our proposed audit approach in each of these areas:

Review of NRR's Implementation of the TMI Lessons Learned Foll'owing the accident at THI, NRR initiated several studies to identify lessons to be learned from the accident. These studies included the Lessons Learned Task Force, the Bulletin and Orders Task Force, and studies of specific licensing problems, such as operator licensing..by existing organizations within NRR.

These studies resulted in recommendations in three broad areas:

7 1.

Oper'ator training; 2.

Design and analysis (e.g., emergency power supply for power-operated relief valves and pressurizer heaters; containment isolation; improved auxiliary feedwater systems); and 3.

Plant operations (e.g., in-plant emergency procedures, shift / supervisors responsibilities, shift technical advisors).

Our audit objective will be to determine the status of actions underway within NRR to implement recommendations resulting from these studies.

Our initial effort will be in the area of operator training and licensing and will generally involve:

1.

Identification and evaluation of the management structure within NRR to implement, monitor and assure timely completion of the recommended corrective actions; 2.

Determination of the status of NRR program changas required by TilI; and 3.

Determination of the status of license.e implementation of NRR-required

' corrective actions.

As currently planned, our initial report, dealing with operator training and licensing, will set out the' status of NRR's implementation of 'the lessons learned and will identify problems delaying or p'eventing their full implementation.

l r

f

8 Review of the Office of Inspection and Enforcement (IE) Training Prosran for Resident Reactor Inspectors This is the third in a series of OIA audits of IE's Resident Inspector Program.

At the present time, IE Headquarters has a centralized training program for inspectors which is supplemented by regional training programs.

The objectives of our audit will be to:

(1) evaluate. the adequacy of the Headquarters' training program for meeting the established IE goals and objectives; (2) compare and evaluate the various regional training programs; and (3) evaluate the qualifications of resident inspectors, including education, work, and training experience, against the established IE standards.

We will also monitor IE's progress in filling resident inspector positions.

Survey of NRC's Revised Research Plans Developed in Response to the TMI Accident This survey will compare NRC's revised research plan to address safety issues raised by the TMI accident to those areas identified as requiring further research in the Kemeny, lessons Learned and Rogovin reports.

The principle objective of the survey will be to identify areas of TMI-related research contained in the above-mentioned reports that are not being addressed by NRC or require greater or reduced emphasis.

If such research areas are identified, they will be the subject of a more detailed review.

BALANCE OF THE AUDIT PLAN At the completion of each audit, the audit plan is reevaluated with due consideration,given to changes in priority and other factors in order to determine the next area of audit.

Normal procedure is to advise the office

9 scheduled' for audit of our initial plans and to set up an entrance conference.

The Commission is also advised of the start of an audit should they have any comments or desire emphasis in certain areas.

The currently scheduled balance of the 1980 audit plan for each audit branch follows:

Licensino and Standards Audits Branch 1.

Monitoring Materials Licensing Pilot Test Program--Final Evaluation When the Commission authorized the pilot test to regionalize the materials licensing program in May 1977, OIA was directed to be "one of the participants in both the planning and evaluation stages."

OIA will be reviewing the final evaluation document prepared by the Office of Nuclear flaterial Safety and Safeguards later this year to assure that a comprehensive evaluation was perfomed and that the conclusions and recommendations logically flow from the facts.

2.

Review of Regulatory Requirements Review Committee (RRRC)

The RRRC plays a very important role in stabilizing the reactor licensing process while assuring that all important safety issues are backfitted

, as necessary.

We are currently considering the coverage of the RRRC by the Special Inquiry and may cancel our plans in this area if we are satisfied with the Special Inquiry coverage.

3.

Survey of the Office of State Programs (Except Emergency Planning)

Our survey in this area will look at the Agreement States Program, the program of providing grants to states for uranium mill licensing, and the State Liaison Officer Program, specifically its implementation in the regions.

10 4.

Review of the Safeguards Technical Assistance and Research Coordinating (STAR) Group During our recently completed audit of the safeguards physical security upgrade program, we noted areas in the functioning of the STAR group warranting review.

Since other groups similar to the STAR group have been considered within NRC, we believe a review of the STAR group could have broader applicability within the agency.

Safety and Enforcement Audits Branch 1.

Comprehensive IE Training Program This is contemplated to be a broad-based look at the total IE traini.ng program, what it is, what it does and does not do, a history of the program, a review of prior studies, etc. The review is intended to cover the training encompassed by the femal IE Headquarters administered education and training programs and the less formal training conducted at and by the regional offices but will exclude those aspects of the resident training program covered and reported to the Commission in our current ongoing review.

Although we have not yet formulated our detailed audit plans for this assignment, we have in mind to consider the qualifications needed by the various categories of IE inspectors and the skills and training which are, or ought to be, provided by NRC to both new hires and regular employees to maintain or upgrade their qualifications.

We expect.to ascertain the views of supervisors and journeymen on various aspects of training such as perceived training needs and the adequacy of training received, improvements needed, etc.

As a result of our review, we would like to be able to express an opinion of what is good about IE training and reach some conclusions as to those improvements which are most needed to assure that IE

11 inspectors are well qualified to perfona the types of inspections which are required of them. This review will cover all four IE inspection program areas--reactor operations, reactor construction, fuel facility and materials safety, ar.d safeguards--but.will exclude training for administrative, clerical and senior executive service personnel.

2.

Safeguards Program (Safeguards Group I Facilities)

This is a lower priority OIA assignment and is scheduled because this is the only major IE program area which OIA has not yet examined in any meaningful way. A review of the Safeguards Inspection Program is required of OIA's initial coverage of IE's major programs.

It has been a part of OIA's overall plan to examine all NRC major program.

areas within the first several years after estsblishment of our office.

We have looked into the Safeguards Inspection Program briefly and have become familiar with several facets of the program in connection with our other reviews.

At this time, we do not believe it should be accorded a 'high priority except that it should be accomplished at some time to complete OIA's coverage of IE.

Research Audits Branch 1.

Sury-y of International Research Agreements This survey will concentrate on agreements between NRC and foreign cour tries for the exchange.of reactor safety research information or for the mutual participation in research projects.

Some efforts will a,so be directed toward other internal agreements and organization.

i The primary purposes of the survey will be to identify topics for detailed review and to determine whether the agreements are being

~

12 prop'erly implemented and whether NRC is benefiting from the agreements at a level comparable to that of foreign countries.

For the most part, the survey and review will be perfomed at NRC Headquarters; however, some inte.enational travel may be. necessary.

2.

Review of Contractor-Held Equip 512nt The preponderance of contractor-held equipment is generated through research tasks assigned to DOE laboratories or contractors. This review will involve a determination of the quantity and value of NRC equipment in the possession of contractors or other Federal agencies and the adequacy of NRC's accounting of such equipment.

The re,'iew will also cover the procedures for ultimate disposal of such equipment and whether such procedures, if any, are being adhered to.

In addition, we will explore the relationship of the program offices with the Office of Administration in accounting for and safeguarding NRC assets.

3.

Survey of Waste Management Research Program This survey will examine RES's program for waste management research to detemine if it is meeting the needs of the user offices and is consistent with national policy objectives.

The primary purpose of

. this survey will be to identify areas for further detailed review.

Administration and Program Direction Audits Branch 1.

Technical Infomation and document Control (TIDC)

Our review will entail an examination of all functional activities with TIDC to determine if they are being operated in an effective and l

13 economical manner.

One main area of concentration will be the ongoing development and implementation of the document control system and its associated costs.

2.

Survey of Automatic Data Processing (ADP) Systems (DUTS, RMS, etc.)

Initial efforts will concentrat' on the Decision Unit Tracking System (DUTS).

e We will examine the needs and t ses for this system and how it interfaces with NRC's other management information systems.

3.

Review of Small Purchase Function Our survey of the small purchase function of the Division of Contracts will examine the use of Government supply schedules, methods of obtaining the best prices, and closing out of purchase orders.

4.

Review of Automatic Data Processing Security We will examine how NRC has implemented the requirements of OMB Circular A-71, Transmittal Memorandum No.1. The review will cover the roles of the Division of Security, Division of Contracts, and other offices concerned with the security of ADP systems.

5.

Imprest Funds These required annual audits will include a count of funds on hand, review of levels of the funds, and control and use of the funds over the past year.

l

14 6.

Personnel Management This audit will be conducted in several phases and will start with a survey of each branch in Personnel and how they inteiface with each other and perfom the personnel managemen't function in order to Dest serve NRC.

7.

Financial Management Because of the limited audit resources in the Administration and Program Direction Audits Branch and the higher priority audits, DIA is planning to contract out the requirements to perfom an audit of NRC's financial statements.

However, this branch will establish the objectives and areas for audit and will monitor the contractor's perfortnance.'

RESPONDING TO THE GA0 RECOMMENDATION As stated previously, GA0 recommended that the Commission " increase the Commissioner's use of the Office of Inspector and Auditor in evaluating the NRC staff's performance in meeting NRC goals and objectives." Although the GA0 report does not indicate how the Commission should increase its use of OIA, the report seems to imply that the Commission should use OIA more to perfonn evaluations for it.

A parallel to this would be the way the Congress uses GA0 when they make an audit request.

l While such action has the advantage of assuring that DIA is responsive to the needs of the Commission, it is not without problems.,

l First, because a routine audit program will continue to be needed to fill the gaps between Commission requests and to meet the long-range goal of covering all of HRC's activities, two possibilities exist:

15 l.

Ongoing audits may have to be cancelled or delayed, resulting in lost effort, to be immediately responsive to a Commission request; or 2.

A Commission request would have to await available staff.

While neither alternative may be attractive, unless a Commission request should happen to be made when staff members are between audits, limited staff flexibility would require that one or the other would have to occur.

Second, some evaluations which OIA may be asked to perform could benefit from technical assistance which OIA does not currently possess.

DIA may, therefore, need to request that technical staff members from other NRC offices be temporarily assigned to OIA for short periods of time to provide technical assistance, or OIA would use the servi, es of an outside consultant, similar to the way GAO uses a consultant.

[his completes our formal presentation. We would be happy to answer any questions you might have.

OFFICE OF INSPECTOR AND AUDITOR' COMMISSION BRIEFING MARCH 19, 1980, SLIDE DISCUSSION 1

PURPOSE OF THIS BRIEFING 2

ESTABLISHMENT / AUTHORITY 3

OIA filSSION 4

OIA ORGANIZATION 5

OIA STAFF 6

TYPES OF AUDITS PERFORMED 7

DEVELOPMENT OF THE AUDIT PLAN 8

1980 PRIORITY AUDIT AREAS 9

LICENSING AND STANDARDS AUDITS BRAliCH--

1980 AUDIT PLAN 10 SAFETY AND ENFORCEMENT AUDITS BRANCH--

1980 AUDIT PLAN 11 RESEARCH AUDITS BRANCH--1980 AUDIT PLAN 12 ADMINISTRATION AND PROGRAM DIRECTION AUDITS BRANCH--1980 AUDIT PLAN l

l

-b2Iv w

PURPOSE OF THIS BRIEFING 1.

DIA AUDIT PLAN FOR 1980 SENT TO COMMISSION ON JANUARY 31, 1980.

2.

GA0 REPORT OF JANUARY 15, 1980, ENTITLED "THE NUCLEAR REGULATORY COMMISSION:

MORE AGGRESSIVE LEADERSHIP NEEDED" RECOMMENDED THAT THE COMMISSIONERS " INCREASE (THEIR) USE OF THE OFFICE OF INSPECTOR-AND AUDITOR IN EVALUATING THE NRC STAFF'S PERFORMANCE IN MEETING' NRC G0ALS AND OBJECTIVES."

I

R ESTABLISHMENT / AUTHORITY 1.

ATOMIC ENERGY ACT OF 1954, AS AMENDED.

2.

ENERGY REORGANIZATION ACT OF 1974', AS AMENDED.

3.

OMB CIRCULAR A-73, REVISED (FORMERLY FEDERAL MANAGEMENT CIRCULAR 73-2).

4.

COMPTROLLER GENERAL'S STANDARDS FOR AUDITINF.

5 REPORT BY HOUSE COMMITTEE ON GOVERNMENT OPERATIONS (HOUSE REPORT NO. 456, 88TH CONGRESS, IST SESSION

[1963]).

6.

GA0 REPORT, "AN OVERVIEW 0F FEDERAL INTERNAL AUDIT."

DIA MISSION THE OFFICE OF INSPECTOR AND AUDITOR CONDUCTS AUDITS', INVESTIGATIONS, AND INSPECTIONS TO PROVIDE THE COMMISSION WITH AN INDEPENDENT REVIEW AND APPRAISAL OF ALL NRC OPERATIONS:

TO ASSURE THAT RESPONSIBILITIES AT ALL ORGANIZATIONAL LEVELS ARE DISCHARGED WITH EFFECTIVENESS AND EFFICIENCY TO ASCERTAIN AND VERIFY FACTS TO ASSURE THE MAINTENANCE OF THE HIGHEST STANDARDS OF INTEGRITY OF ALL NRC ORGANIZATIONS, PROGRAMS; AND ACTIVITIES,

U.S. NUCLEAR REGULATORY COMMISSION OIA ORGANIZATION THE COMMISSION I

0FFICE OF INSPECTOR AND AUDITOR JAMES J. CUMMINGS DIRECTOR I

ASSISTANT DIRECTOR FOR INVESTIGATIONS ASSISTANT DIRECTOR FOR AUDITS ROGER FORTUNA GEORGE MESSENGER ADMINISTRATION & PROGRAM DIRECTION AUDITS BRANCH ARTHUR SCHNEBELEN, CHIEF INVESTIGATIVE STAFF SAFETY & ENFORCEMENT AUDITS BRANCH HARRY BOULDEN, CHIEF LICENSING & STANDARDS AUDITS BRANCH l FRED HERR, CHIEF RESEARCH AUDITS BRANCH AL GAUTHIER, CHIEF

OIA STAFF kk99 khk0

/

/

DIRECTOR 1

1 1

1 ASSISTANT DIRECTOR FOR 1

1 1

1 AUDITS ASSISTANT DIRECTOR FOR 1

1 1

1 INVESTIGATIONS AUDITORS 14 14 18 20 INVESTIGATORS 7

7 7

7 SECRETARIAL STAFF PERMANENT 4

4 5

5 TEMPORARY

_1

_1

_1

_1 2R 2R 3a 3fi

• THE COMMISSION APPROVED A STAFFING INCREASE OF FIVE POSITIONS FOR FY 1981 i

AND TWO POSITIONS FOR FY 1982.

OMB MARKED NO INCREASE.

NRC'S FY 1981 BUDGET IS CURRENTLY BEING REVIEWED BY CONGRESSIONAL AUTHORIZATION AND APPROPRIATION COMMITTEES.

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TYPES OF AUDITS PERFORMED 1.

CONDUCTS INTERNAL AUDITS OF NRC PROGRAMS AND ADMINISTRATIVE FUNCTIONS AT ALL LEVELS OF OPERATIONS IN ACCORDANCE WITH OMB CIRCULAR A-73 AND THE GA0 " STANDARDS FOR AUDIT OF GOVERNMENTAL ORGANIZATIONS, PROGRAMS, ACTIVITIES, AND FUNCTIONS," TO DETERMINE WHETHER:

DESIRED PROGRAM RESULTS AND OBJECTIVES ARE BEING ACHIEVED EFFECTIVELY RESOURCES ARE MANAGED AND USED ECONOMICALLY AND EFFICIENTLY THERE IS COMPLIANCE WITH APPLICABLE LAWS AND REGULATIONS FINANCIAL OPERATIONS ARE CONDUCTED PROPERLY FINANCIAL REPORTS ARE PRESENTED FAIRLY.

2.

PERFORMS SURVEYS OR FACT-FINDING STUDIES OF AN ENTITY OR ACTIVITY.

3.

CONDUCTS FOLLOWUP REVIEWS IN ACCORDANCE WITH PARAGRAPH 8, " FOLLOWUP,"

0F OMB CIRCULAR A-73, REVISED.

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DEVELOPMENT OF THE AUDIT PLAN 1.

REQUEST INPUT FROM COMMISSION, EDO, AND NRC 0FFICES.

2.

CONSIDER AUDITS REQUIRED BY GOVERNMENT REGULATION OR OMB.

3.

CONSIDER ONGOING AND RECENTLY COMPLETED AUDITS BY GAO, 4.

CONSIDER ONGOING STUDIES OF NRC PROGRAMS.

5.

CONSIDER PRIORITY PROGRAMS (E.G., TMI) 0F SPECIAL INTEREST.

6.

CONSIDER REQUESTS RECEIVED FROM NRC 0FFICES, 7.

CONSIDER DOLLAR VALUE OF NRC PROGRAMS.

8.

CONSIDER PROGRAMS WITHIN THE AGENCY NOT YET REVIEWED BY OIA.

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4 1980 PRIORITY AUDIT AREAS 1.

REVIEW 0F NRR'S IMPLEMENTATION OF TMI LESSONS LEARNED:

OPERATOR TRAINING t

DESIGN AND ANALYSIS PLANT OPERATIONS.

2.

REVIEW 0F THE TRAINING PROGRAM FOR RESIDENT INSPECTORS.

3.

REVIEW 0F RES PLAN FOR TMi-RELATED RESEARCH.

LICENSING AND STANDARDS AUDITS BRANCH 1980 AUDIT PLAN STk bTE MATERIALS LICENSING REGIONALIZATION PILOT TEST 01/28/80 PROGRAM--FINAL EVALUATION SURVEY OF TRAINING AND UTILIZATION OF INCREASED 01/28/80 PERSONNEL AUTHORIZED FOR NRR IN FY 1980 REVIEW 0F NRR'S IMPLEMENTATION OF TMI LESSONS LEARNED 02/11/80 REVIEW 0F THE REGULATORY REQUIREMENTS REVIEW 02/11/80 COMMITTEE REVIEW 0F NRR PROCESSING 0F OPERATING LICENSE 05/02/80 AMENDMENTS SURVEY OF THE OFFICE OF STATE PROGRAMS (EXCEPT 08/04/80 EMERGENCY PLANNING)

REVIEW 0F SAFEGUARDS TECHNICAL ASSISTANCE AND 10/01/80 RESEARCH (STAR) C0ORDINATING GROUP

SAFETY AND ENFORCEMENT AUDITS BRANCH 1980 AUDIT PLAN STkk'hhhkTE RESIDENT INSPECTION PROGRAM ONG0ING 01/01/80 INSPECTOR TRAINING PROGRAM

-- TRAINING PROGRAM FOR RESIDENT INSPECTORS 01/14/80 COMPREHENSIVE IE TRAINING PROGRAM HEADQUARTERS-BASED TRAINING EFFORT 03/17/80 REGION-EASED TRAINING PROGRAMS 05/01/80 SAFEGUARDS PR33 RAM (SAFEGUARDS GROUP I 10/01/80 FACILITIES)

RESEARCH AUDITS BRANCH 1980 AUDIT PLAN stb k hTE SURVEY OF NUCLEAR REGULATORY RESEARCH (RES)

RES PLAN FOR IMPROVED SAFETY FOR LWR ONG0ING 01/01/80 REVIEW 0F RES PLAN FOR TMI-RELATED RESEARCH 01/14/80 INTERNATIONAL RESEARCH AGREEMENTS 01/14/80 CAPITAL EQUIPMENT HELD AT DOE LABS 07/14/80 WASTE MANAGEMENT 07/14/80

ADMINISTRATION AND PROGRAM DIRECTION AUDITS BRANCH 1980 AUDIT PLAN ST hk bkTE LICENSE FEE MANAGEMENT ONG0ING 01/01/80 CASHIER OPERATIONS ONG0ING 01/01/80 TRAVEL V0UCHER PROCESSING ONG0ING 01/01/80 REPRODUCTION SERVICES ONG0ING

' 01/01/80 TECHNICAL INFORMATION AND DOCUMENT CONTROL 02/01/80 SURVEY OF ADP SYSTEMS (DUTS, RMS, ETC.)

06/02/80 REVIEW 0F SMALL PURCHASE FUNCTION 06/02/80 REVIEW 0F ADP SECURITY 09/01/80 IMPREST FUNDS 09/01/80 PERSONNEL MANAGEMENT 10/01/80

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