ML20044B943

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Transcript of 930308 Open Meeting in Rockville,Md Re Briefing on NRC Financial Mgt Matters.Pp 1-41.Viewgraphs Encl
ML20044B943
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Issue date: 03/08/1993
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NRC COMMISSION (OCM)
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REF-10CFR9.7 NUDOCS 9303150121
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} UNITED S TA-TE S OF AMERIC A NUCLEA-R REGULATORY COMMIS SION o f I3 BRIEFING ON NRC FINANCIAL MANAGEMENT MATTERS i Location: ROCxvIttE, MARytANo D3I6l MARCH.8, 1993 Pa06S: 41 PAGES .i .l -l i t NEALR.GROSSANDC0.,INC. l COURT REFORTERS AND TRANSCRISERS 1323 Rhode Island Avenue, Northwest Washington, D.C. 20005 (202) 234-4433

DISCLAIMER o This is an unofficial transcript of a meeting of ~* the United States Nuclear Regulatory Commission held on March 8,1993 in the Commission's office at one White Flint North, Rockville, Maryland. The meeting was open to public attendance and observation. This transcript has not been reviewed, corrected or edited, and it may contain inaccuracies. i The transcript is intended solely for general informational purposes. As provided by 10 CFR 9.103, it is not part of_the formal or informal record of decision of the matters discussed. Expressions of _ opinion in this t transcript do not necessarily reflect final determination 'i or beliefs. No pleading or other paper may be filed with the Commission in any proceeding as the result _of, or addressed to, any statement or argument contained herein, except as the Commission may authorize. 1 0 t h o NEAL R. GROSS couer nepoersas Ano inAuscaissas 1333 RNOOe 15 LAND AVsMue, N.W. (202) 234-4433 WASHINGTON, D.C. 20005 (202) 232-6600 w

1 UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION BRIEFING ON NRC FINANCIAL MATTERS PUBLIC MEETING Nuclear Regulatory Commission One White Flint North Rockville, Maryland Monday, March 8, 1993 The Commission met in open

session, pursuant to notice, at 10:00 a.m.,

Ivan

Selin, Chairman, presiding.

COMMISSIONERS PRESENT: IVAN SELIN, Chairman of the Commission KENNETH C. ROGERS, Commissioner FORREST J. REMICK, Commissioner-JAMES R. CURTISS, Commissioner E. GAIL de PLANQUE, Commissioner 9 NEAL R. GROSS. COURT REPORTERS AND THANSCRIBERS 1323 RHODE ISLAND AVENUE, N.W. l (202) 2344433 WASHINGTON, D.C, 2000$ (202) 234-4433 l i

.= i 2 i i STAFF SEATED AT THE COMMISSION TABLE: i SAMUEL J. CHILK, Secretary JOE SCINTO, Office of the General Counsel JAMES TAYLOR, Executive Director for Operations t RONALD SCROGGINS, Deputy Chief Financial Office, Controller JESSE FUNCHES, Deputy Controller E. LEE HILLER, Director, Division of Accounting and Finance 3 t t l t n } I t I h i NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE N.W. (202) 2344433 . WASHINGTON, D.C. 20005 (202) 2344433

i t 3 1 1 P-R-O-C-E-E-D-I-N-G-S l 2 10:00 a.m. r i 3 CHAIRMAN SELIN: Good morning, ladies and 4 gentlemen. 5 This morning the Commission will be 6 briefed by the staff on questions.of NRC's internal r 7 financial management, the management of our own 8 financial resources. The Chief Financial Officers Act j t 9 of 1990 has put considerably more responsibility in i 10 the hands of the financial managers of the Agency, in ~i 11 this case the EDO is our CFO. The Act requires that 12 the NRC prepare an annual financial statement which 13 can be audited by the Office of Inspector General. So 14 it's a challenge for both organizations. 15 In doing this

work, a

number-of l l 16 interesting topics, not so much quantitative but l t 17 having to do with some of our financial management f 18 practices, have arisen. The report itself will be i t 19 discussed today. That is the fiscal year 1992 l 20 unaudited financial statement. It has been submitted -f 21 to the Commission for review and I assume there wil! 22 be some management topics as well. I 23 Mr. Taylor? l = ^ 24 ~. TAYLOR: Good morning. I'm pleased to I 25 appear bei.>re the commission for the first time in my .] NEAL R. GROSS I COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE. N.W. (202) 234 4433 WASHINGTON, D.C. 20005 (202) 2344433

4 1 capacity as Chief Financial Officer. At the table are 2 Ron Scroggins, the Deputy CFO and Controller, Jesse 3

Funches, the Deputy Controller, and Lee Hiller, 4

Director of the Division of Accounting and Finance. 5 Mr. Hiller's division is responsible for the financial 6 aspects of the statement. 7 (Slide) Chart 1, please. 8 At this briefing we plan to discuss two 9 topics. As you may be aware, the financial statement 10 itself is only one component of the government effort I 11 to improve financial management at agencies and f 12 departments. To place this financial statement in 13 context, I will first discuss the overall direction 14 that we are moving in to provide good financial 15 management at the NRC. Mr. Scroggins will then 16 discuss the NRC's first financial statement. A draft 17 of that statement was provided to the Commission on i 18 February 25th for their consideration and approval. 19 Although the financial statement includes 20 both financial and program performance for fiscal year 21 1992, this briefing will be principally on financial { I 22 performance. We do not plan to discuss the program 23 performance and the indicators that were included in i 24 the financial statement. However, we do believe they 25 are indicative of the Agency satisfactorily performing i NEAL R. GROSS "" = = =."""' 1 3 (202) 2344433 WASHINGTON, D.C. 20005 site) 2344433

E 5 1 in meeting its basic obligation for protection of l 2 public health and safety in the application of nuclear 3 materials and in reactors. 4 (Slide) Chart 2, please. [ 5 There are a number of changes that have j 6 occurred that have impacted the government and 7 certainly NRC's approach to financial management. The l i 8 following external changes have caused specific 9 impacts here in NRC on our financial management and 10 what we do. First, as you mentioned, Mr. Chairman, 11 was the Chief Financial Officers Act itself. The i 12 whole object of that act was to improve government j l 13 financial management and trying to make it more 14 " business like" and raising the organizational level ~ 15 for financial management and integrating financial 16 management in the day to day activities of the agency. i 17 The second major change was the 100 18 percent fee recovery rule or law, which has caused us, f 19 of course, to issue rules. That has increased, I 20 believe, the industry and public's interest in our j 21 financial management. j 22 The third is the passage of the Inspector. 23 General Act providing NRC with an inspector general. I 24 That has certainly picked up the area of auditing of 25 our financial activities. l NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS l 1323 RHODE ISLAND AVENUE. N W. I (202) 2344433 WASHINGTON, D.C. 23:YJ5 (202) 2344433

6 1 In general, I believe that this increased 2 scrutiny has been healthy and we have and are taking 3 some broad-based steps to improve financial 4 management. 5 (Slide) Can I have chart 3, please? 6

First, we're raising NRC managers' 7

awareness of their individual financial management 8 responsibilities. For example, I've placed in each 9 SES contract a subelement on financial management 10 performance. Second, I personally meet with managers 11 and staff who have financial responsibilities to 12 reinforce my expectations on their performance in 13 controlling and managing our money.

Third, I-14 emphasized in discussions at the senior management 15
meeting, this last one in January, all managers' 16 financial management responsibilities, including all 17 the offices and the regional administrators.

18 Financial management is a frequent topic 19 at the EDO staff meeting usually held every Friday. 20 The office directors and regions, regions by phone, 21 and I talk about ongoing problems. 22 Lastly, I've tried to recognize both staff 23 and managers where I see indications of good financial 24 management and careful tending of resources. 25 Another important step was the NEAL R. GROSS COURT Rc. PORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE, N W. (202) 2344433 WASHINGTON. D.C 20005 (202) 2344433

7 1 establishment of a financial council comprised of the i 2 Office of the Controller, IRM and all allottees in the 3 offices and regions. This group will help by sharing 4 information on financial management, problems and 5 practices and solutions and fostering a professional 6 and corporate attitude about financial management. 7 That group is meeting on a regular basis under the t 8 direction of the Deputy Controller and a lot of ideas 9 are surfacing about ways to improve our financial 10 management. 11 We're also trying to improve the tools 12 that are available for financial management within the 13 staff. For example, we have subscribed and are in the 14 process of implementing a federal financial system 15 provided to us under the auspices of the Department of 16 the Treasury. We're currently in the transition 17 period instituting that system fully for our 18 accounting and tracking in the Agency. This is a big 19 change and the first major change of this type in our 20 accounting and financial practices since the Agency 21 was founded. 22 We are also planning in fiscal year 1995, 23 is that right, Ron, to replace our existing payroll 24 system with an integrated payroll / personnel system. 25 That's still in the planning stages. We are placing NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1 1323 RHODE ISLAND AVENUE, N.W. I (202) 2344433 WASHINGTON, D.C. 20005 (202) 2344433

l 8 s 1 more resources on financial management consistent with 2 its importance to the NRC and improving the controller 3 staff capabilities by increasing the number of trained 4 accountants and using contractors, qualified { 5 contractors to provide unique expertise and help us 6 with some of our peak work loads and backlogs that [ 7 occur. 8 We're providing guidance and training to 9 program office staff and financial management [ 10 personnel in two high priority areas. One is the 11 administrative control of funds and in the interagency i 12 activities and agreements with the Department of ( t 13 Energy labs, which I know the Commiscion is aware we f i 14 spend a great deal of money through the labs. l 15 Lastly, we continue to work as a staff to 16 assess financial management problems and risks and i 17 deficiencies, both on our own and as identified by the [ I 18 IG, to help improve our system. i 19 CHAIRMAN SELIN: Mr. Taylor, could you l 20 just stop for a second? We've had the experience that 21 the unit rates that these different national labs j 22 charge us are really quite different from one lab to 23 another. Is that the function of the financial [ I 24 management people, to look in and see why and if i 25 they're plausible, or is that more the program l t NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS j 1323 RHODE ISLAND AVENUE, N.W. (202) 2344433 WASHINGTON, D.C. 20005 (202) 2344 433 I

P h 9 i 1 manager's responsibility? 2 MR. TAYLOR: Yes. I'll let Ron respond to that. 4 MR. SCROGGINS: Actually, at this point j 5 it's being handled pretty much by our procurement s 6 people who are looking at that as part of the role 7 that they have assumed this year, which is sort of a 8 coordinated oversight of our operations with DOE l 9 laboratories. We are still involved in the financial 10 management side with the interagency agreements on 11 what I'll call the financial aspects as to how 12 payments are made, billings, et cetera. But the 13 issue, for example, that you raise, which is the front 14 end billing rates, negotiating and what have you, that I 15 is being looked at in the development of the new 16 management directives that are being handled by our 17 office of Administration. 18 MR. TAYLOR: I'd like to acknowledge the 19 help that the Division of Contracts has provided to [ i 20 the program staff in this area. They've been.very, [ 21 very helpful under Pat Norry and Ed Halman in i 22 providing us expertise to go after some of these j 23 issues. ~ t 24 Now Mr. Scroggins will continue on some of 25 the lessons learned so far in preparing our first I NEAL R. GROSS c court REPORTERS AND TRANSCRIBERS 13D RHDDE ISLAND AVENUE, N W. (202) 234-4433 WASHINGTON, D.C. 20005 (202) *W33

10 1 financial statement. 2 MR. SCROGGINS: (Slide) Okay. Chart 4, 3 please. e i 4 At the outset, I'd just like to put into t l 5 context in effect why we are here, having prept. red a + 6 financial statement for fiscal 1992. As indicated by 7 Jim, the Act -- and you Mr. Chairman, the Act does t 8 require a financial statement. However, the Act is 9 very specific and requires a financial statement at 10 this time only for three types of accounts, revolving 11 funds, trust funds and what they define as substantial 12 commercial functions. During discussions with OMB 13 once the Act was put out, the NRC was included as a l 14 substantial commercial function because of the 100 l t 15 percent fee base. That is why we are doing a 16 financial statement. 17 Most agencies and departments are doing 18 only financial statements for the specific accounts t 19 that meet the criteria laid out in the Act, in other 20 words for special funds and what have you. There are 21 five other agencies which are doing full financial 22 statements, but they're doing them as the result of 23 pilot programs that were initiated even prior to the 24 Act and they are Agriculture, Labor, VA, HUD and GSA. l 25 Then the NRC is the sixth agency doing a total NEAL R. GROSS COURT REPORTERS AND TRANSORIBERS 1323 RHODE ISLAND AVENUE, N.W. (202) 234 4433 WASHINGTON. D.C. 20005 (202) 234-4433

11 1 financial statement. Everybody else is just doing 2 pieces of the statements. 3 MR. TAYLOR: I might tell you that we i i 4 looked at those financial statements sort of as i 5 guides. We obtained a number of these through the j 6 past year or two where government departments have 7 been preparing this sort of document. j 8 MR. SCROGGINS: Yes. I should mention 9 that the statements were initially required for fiscal 10 '91, but a waiver was allowable in the Act and most i 11 agencies, including the NRC, did receive a waiver for j 12 not doing a financial statement for fiscal '91. But 13 the Act allowed no waivers for fiscal '92, so 14 everybody is putting them out this year. So, we did l 15 have fiscal '91 financial statements from some i 16 agencies to look at prior to this. l 17 COMMISSIONER REMICK: What's the rationale 18 of the 100 percent recovery being considered a l 19 commercial function? l 20 MR. SCROGGINS: The guidelines at OMB. 21 The initial intent of that by Congress was obviously [ i 22 if you had a very specific commercial function you 23 were -- and I'll use as an example NOAA doing maps and 24 selling, let's say, maps out there that they were 25 charging almost like a commercial function, that NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE. N W. (202) 234-4433 WASHINGTON, D.C. 20005 (202) 2344433 -{

[ i 12 1 that's something -- again, trying to look at financial l 2 management in the government and bring some i i 3 commonality to how private industry and the commercial 4 functions do financing. That was what the original i 5 intent was. When OMB laid out its guidelines as to 6 how it would meet that criteria, they used as a 7 guideline where fees greater than $1 million were I 8 collected. Essentially we fell within that guideline f 9 and the Agency, after some discussions with OMB, both 10 the staff and the Inspector General decided to just 11 accept the definition and move on from that point. l 12 COMMISSIONER ROGERS: Do you have any idea i 13 that if you didn't have to produce such a complete 14 audit what the savings would be? l 15 MR. SCROGGINS: Well, the cost of the 16 audit right now, the cost of the financial statement 17 this year, probably something between $500,000.00 and 18 $600,000.00, including staff and contractor time. i 19 That does not include the cost of the audit. 20 COMMISSIONER ROGERS: You'd still have to 7 21 do some part of that. 22 MR. SCROGGINS: Oh, yes. One thing I 23 should mention is that we have always done a number of 24 reports to Treasury, to OMB, to GAO that have been 25 required by various regulations over the years. In NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE. N.W. ' (202) 2344433 WASHINGTON, D.C. 20005 (202) 2344433

{ 13 1 fact, the principal statements that are included in t 2 this financial statement are very similar, though not. 3 exactly, are similar to a number of reports that have 4 gone to Treasury in the past. So, most of this data 5 was there and was presented in similar form. It's the 6 whole compilation of a financial statement and the 7 uniqueness of the audit aspect, which is clearly 8 different than just, "Here's what our systems show the 9 data to be." 10 CHAIRMAN SELIN: Do you have to send still 11 those specialized reports :.o Treasury or can we just 12 send them our financial statement and say, "Here it [ 13 is?" 14 MR. SCROGGINS: No, we still send the 15 specialized reports to Treasury. 16 CHAIRMAN SELIN: Well, we ought to try to 17 get some relief from that. I think it's foolish to do l 18 these -- 19 MR. SCROGGINS: That issue has come up in I 20 the Chief Financial Officers Council. In fact, there i. 21 is one subcommittee that has been set up in what they 22 call the Deputy's Council to look at going back and j 23 looking at all the requirements, given everything else 24 that has come on the table and trying to minimize -- 25 CHAIRMAN SELIN: It doesn't make any sense i 1 NEAL R. GROSS CDURT FIPORTERS AND TRANSCRIBEPS l 1323 AHODE ISLAND AVENUE. N W. [ (202) 2344433 WASHINGTON, D.C. 20005 (202) 2344433 {

14 f 'l to do a financial statement if it doesn't meet our 2 financial reporting requirements. 3 MR. TAYLOR: We'll pursue that now that we 4 have our first one. i 5 MR. SCROGGINS: Good point. 6 COMMISSIONER REMICK: When they indicated-7 that the 100 percent fee recovery should be commercial 8 function, was the intent to protect the government or 9 protect the licensees, the commercial interest that we 10 charge? 11 MR. SCROGGINS: No, the original intent of 12 the Act, as I understand it in talking to some of the 13 people on the staff there, was that they were trying [ 14 to initially -- and they didn't really want agencies 15 to be doing full financial statements. ' They wanted to i 16 go into a learning curve. What they wanted to do was 17 pick out those kinds of activities that were somewhat 18 akin to commercial type or special type of funds. l ~! 19 That's why they picked revolving funds, trust funds 20 that are commercial functions. I honestly do not 21 believe it was the intent of Congress when they passed 22 the Act that because we were doing a 100 percent fee j 23 recovery for revenue, that that was what the intent of 24 calling that a commercial function. But we fell into l 25 that definition and OMB obviously was very interested .f NEAL R. GROSS CoVRT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE, N.W. (202) 2344433 WASH!NGTON. D.C. 20005 (202) 234 4433

15 l 1 and so were the members -- the committees on the Hill 2 to move in the direction as rapidly as possible. So, 3 that's where we're at. 4 (Slide) Can I have chart 5, please? 5 The Act also prescribed some very specific 6 dates. It prescribes that the head of the agency must 7 submit the unaudited financial statement to OMB no 8 later than March 31 and that is-the statement that has 9 been submitted to the Commission. It is our intent at 10 that t'.ne to also submit the unaudited statement to 11 the Appropriation and the oversight Committees at the 12 same time that it is submitted to OMB. The Act also 13 then requires that the formal and final audit of the i 14 statement be submitted to the Chairman by the 15 Inspector General no later than June 30. 16 Two points I'd like to make on that. One 17 is that the intent of that audit, given the guidelines 18 that we have received, both on how to prepare the 19 audit, the agency, and how to prepare the statement, 20 is that the basic approach or the intent of an audit 21 is is this statement a fair and reasonable portrayal 22 of the financial condition of the agency. There is 23 also within the guidelines the stressing the point 24 that it is an iterative and continual process. In 25 other words, the unaudited statement that you have now NEAL R. GROSS court REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE. N W. (202) 2344433 WASHINGTON, D.C. 20005 (232) 234-4433

16 1 is now expected to be final, that during this current 2 time that we're continuing to look at it, the IG has 3 already received the copy of the same draft statement 4 that you have and during their formal audit phase, 5 that if points are raised, if there is an ability to 6 go in and make some changes to make it more clear or 7 m o r e. understandable or more descriptive of what 8 actually has occurred, it is -- the guidance that both 9 we and the IG have received is that you go and make 10 changes in the financial statement all th" way up 11 until the time of, in effect, June 30 you have that 12 ability to do ro. The guidance that we have both 13 received encourages that where appropriate. So, 14 again, the financial statement is the best statement 15 possibly that the Agency can make. 16 The final then presentation required in 17 the Act is in the CFO annual report, that in effect 18 the CFO makes to the Chairman and OMB at the end of 19 August. That report is to include the financial 20 statement, the audit of the financial statement. It 21 also includes summaries of the Financial Management 22 Federal Integrity Act, the internal control process 23 and other statements of other status of actions 24 underway in financial management. That is where 25 everything is then packaged finally at the end of NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE, N.W. (202) 2344433 WASHINGTON, D.C. 20005 (202) 2344433

17 1 August. i 2 (Slide) Chart 6. 3 Just very briefly, the guidance from OMB i 4 specified actually, in effect, five sections, one we } f 5 do not have to do. There's the overview section, l l I 6 which in our case overview briefly describes the NRC, 7 'its mission, summarizes the financial performance for 8 fiscal '92 and also summarizes the program 9 performance. The principal statements, as I indicated 10 earlier, as somewhat similar. They are different [ i 11 previous Treasury reports and continuing reports that 12 we do. They look more like the standard commercial i 13 annual reports. The footnotes, and the footnotes are 14 very important because the footnotes, the principal 15 statements are essentially numbers. The footnotes l 16 describe those numbers, describe the basis for them, 17 define them and any comments or uncertaintiry 18 regarding those numbers. Finally the supplemental 19 financial management is anything else in a sense that 20 you wish to. include and in our supplemental

21 information we have more detailed descriptions of 22 certain of our activities, such as the fees, the i

23 missions, the performance measures, et cetera. 24 There's one other section which is so-25 called combined statements. It does not apply to this NEAL R. GROSS COURT REPORTERS AND TRANSCRIDER3 1323 RHODE ISLAND AVENUE, N W. ) 202) 2344433 WASHINGTON, D.C. 20005 (202) 2344433

18 1 Agency, but that is the intent there, is where because 2 of given accounts where you might have bureaus and 3 departments within agencies that have multiple 4 accounts, you would do a combined statement so you 5 coald see the total financial picture of that-bureau i 6 or that department or that overall program in a more 7 clear manner than just giving the subaccount. Since 8 we're doing the entire Agency, that doesn't apply I 9 here. 10 (Slide) Chart 7. 11 In preparing the statement, just some 12 points that I'd like to make. The form and content of 13 the statement was prescribed by OMB, but to put into 14 context, the final form and content guidance from OMB 15 was received in October 1992. So, it was received l 16 after the fiscal year. So, there was a fair amount of 17 activity to conform some of the data into the new 18 format that OMB has. It's going to be an ongoing 19 thing which I'll mention later for a number of years. 20 We did receive assistance from an 21 independent CPA firm to help us in the preparation of 22 the statement and I should note also that the 23 Inspector General has an independent firm almost 24 helping it, assisting it in doing its audit. 25 A very large activity went on into NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE, N W. (202) 234-4433 WASHINGTON, D.C. 20005 (202) 234 4433

J 19 1 reconciliation of accounts. Recognizing that we have l 2 existing systems in fiscal '92, we had to reconcile j 3 those to the new form and content. We have a number 4 of subsidiary ledgers. There was a significant 5 activity that went on in an effect reconciling our 6 data with Treasury, with all of our subsidiary 7 ledgers, to the general ledger, et cetera, and this 8 was a -- and the contractor assisted in this, but this 9 was a very significant activity on the staff. 10 One point I should make that most 11 financial statements and would be expected, certainly 12 in our case in the future, one very important part of f 13 it is comparing how did you do this year, where were j 14 you the year before. Since this is a first financial 15 statement for the Agency and it's done in certain 16 matters like accrual cost basis which most of our r 17 reports have not been in the past. We have no basis 18 for that comparison, but certainly that would occur in 19 the future. That would be an aspect of the next l 20 financial statement, would be comparing where we're at 21 in say, for example, '93 to '92. 22 We've also had continual action with the 23 IG through this whole process, starting back really [ 24 late summer, early fall, even before the end of the 25 fiscal year. Drafts of sections that we've been-l NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE, N.W. l l (202) 2344433 WASHINGTON, D.C. 20005 (202) 2344433

20' 1 preparing have been going back and forth for comments j i' 2 from the IG. They've had the benefit of our i I 3 contractor. We've had benefit of some of the I won't call them

audits, but 4

preliminary t 5 preliminary reviews by their contractor. So, there i 6 has been a continual interaction with the IG and 7 that's been the intent. Again, the intent by Congress j 8 and by the federal government in taking these, shall 9 we say, activities on financial statements is really i 1 10 to not play "gotcha" games. The intent is to do the i 11 best job you can in laying out what the financial t 12 position is and-it's going to be expected to be a 13 learning process over a number of years and the intent 14 is for all parties to work together to, in effect, end i 15 up with something that everybody feels that we are now 16 finally understanding the financial status in the 17 federal government and presenting it in a manner which 18 is understandable to people. That's what,the full 19 intent is. 20 (Slide) Chart 8. 21 I'd now like to very briefly summarize 22 over the next few charts some of the financial' 23 information that's included in the statement. The l 24 first one here is the sources.of our funds that were 25 available during fiscal '92. Primary source obviously NEAL R. GROSS COURT REPORTERS AND TRANSORIBERS 1323 RHODE ISLAND AVENUE, N.W. (202) 2344435 WASHINGTON. D.C. 2000S -(202) 234 4433 )

i f 21 1 was.our new budget authority which we received from 1 2 Appropriation of that $512.5 million, just to note i 3 that about $20 million of that was appropriated from .l 4 the waste fund, the rest appropriated from the general j 5 fund. We also received reimbursable authority, about 6 $4.5 million. That is much higher than we normally 7 have been and the reason for that is that about $4 { 8 million of that was aid money that was received late 9 in September. We've normally not run this kind of 10 level of reimbursable from other appropriation l t r 11 accounts. 12 Budget authority from prior years, that 13 includes not only carryover from fiscal '91 to '92, 14 but the monies that were made available during fiscal 15 '92 from deobligations. I should indicate *. hat about 16 $6.5 million of that total was monies that were made 17 available during the fiscal year from deobligating f 18 prior year monies, closing out of contracts, et 19 cetera. 20 CHAIRMAN SELIN: Do you expect that to run i 21 over five percent a year indefinitely or is that -- l 22 MR. SCROGGINS: The overall carryover? l 23 CHAIRMAN SELIN: Yes. s 24 MR. SCROGGINS: No, I expect that to come 25 down some. There were some uniquenesses to that NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS { 1323 RHODE ISLAND AVENUE. N W. (202) 2344433 WASHINGTON. D.C. 20005 (202) 2344433

22 1 number that year. The carryover was not $28 million. 2 The carryover was about $21 to $22 million from the 3 prior year. Like I say, this includes the monies made 4 available during the year from deobligating. 5 MR. TAYLOR: We've had a big campaign to r 6 deobligate money and to close contract accounts that f 7 provided us funds. L 8 MR. SCROGGINS: And you'll see that when l 9 the end -- 10 CHAIRMAN SELIN: I should tell you I'm 11 comfortable with having some unobligated funds because 12 that's much better than the end of the year waste 13 campaign. But getting the pressure up to deobligate 14 the money is clearly something that yes, we need to do 15 more. 16 MR. TAYLOR: Yes. 17 MR. SCROGGINS: And you'll 'see that 18 reflected in the numbers when you see at the end of. l 19 '92 because, as Jim was indicating, there was a very r 20 significant activity starting in '91 and also during 21 '92 to close out old contracts and that has l 22 contributed also to the balance at the end of '92 as 23 well. 24 The GSA transfers just monies that are i 25 made available from GSA to maintain our facilities as t NEAL R. GROSS court REPORTERS AND TRANSCRIBERS i 1323 RHODE ISLAND AVENUE N.W. (202) 234 4433 WASHINGTON, D.C. 20005 (202) 2344433

23 1 part of our agreement. 2 (Slide) Chart 9. 3 During the year, we obligated against that 4 authority the $520 million. Just a couple points to 5 make here. Obviously the two primary sources of our 6 fund obligations were in salaries and benefits for the 7 employees and in our contractual support, which is 8 shown here, split as program and administrative 9 support, the program support just being the more 10 technically oriented contractual support to the major 11 programs of the Agency and the administrative support 12 being the more classical, rent telephones, et cetera, 13 type of costs. 14 The only other point I'd like to make here 15 is that you will note that we only obligated about 16 $200,000.00 of that over $4 million in reimbursable i 17 and the reason for that is that AID money was received 18 essentially in the last week of September. So, there 19 was clearly no time frame to obligate those funds. ~ 20 MR. TAYLOR: In fact, we didn't reach 4 21 agreement until the 30th of September. 22 MR. SCROGGINS: Basically, it was almost 23 an instantaneous -- 24 MR. TAYLOR: Last minute. 25 MR. SCROGGINS: AID got it off of their NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE, N W. (202) 2344433 - WASHINGTON, D.C. 20005 (202) 2344433

24 i 1 books, but it came on our books at-that point in time. 2 (Slide) Go to chart 10. 3 This is, in a sense, a point that you 4 raised, Mr. Chairman. If you just take the previous 5 two charts and say, "Here's what we had available, 6 here's what we obligated," the amount of monies that 7 we then transferred from fiscal '92 into '93 is the 8 $28 million there. But I would like to put that into 9 context. That does include about $4.5 million in 10 reimbursable, which is a number which is significantly 11 higher, almost by that amount than we've ever had in 12 the past and that resulted because of the action of 13 receiving the money from AID at the end of the fiscal 14 year. It also includes close to $6.million of funds 15 that were committed and were, in fact, in the process 16 of being obligated but had just not been obligated as 17 of midnight September 30. This would be contract 18 actions that were in contracts but the contract hadn't 19 been signed. It could even include orders to 20 laboratories where the order had not been received 21 back from the lab and therefore was not officially 22 obligated as of September 30. T Now, what usually happens there is that 24 once we receive our apportionment for the new fiscal 25 year, those monies are then -- which includes monies NEAL R. GROSS CoVRT REPORTERS ANDTRANSCRIBERS 1323 RHODE ISLAND AVENUE, N W. (202) 2344433 WASHINGTON, D.C. 20005 (202) 2344433

25 1 that are carried over, our estimates of that,.those 2 monies are reallotted back to the source of the l 2 3 commitment so that the obligation is usually made 4 within the first month or so of the fiscal year. 5 It also includes -- and I think this was 6 a point we were starting to make. It includes the { 7 results of I think some very good financial management 8 actions taken during the fiscal year. During fiscal i 9 '92, as we say, we deobligated about $6.5 million of t 10 prior year money. This was closing out of old 11 contracts, et cetera. So, those monies became i 12 available. i 13 There are a number of other actions that 14 were taken. One example was that of significant 15 negotiations with GSA on the rent that the Agency-l 16 paid. At the beginning of the year we had certain 17 estimates from GSA based upon how they felt they were 18 going to charge us given their estimated increases due 19 to inflation, et cetera. We felt that the numbers -- l 20 and we had built that into the budget, but then we 21 felt that the numbers were definitely over excessive 22 and we went back and negotiated and actually I think 4 23 it was about $1.5 million, something like that, that 24 we actually reduced on the rent charges. That money 25 also became available near the end of the year. So, 1 NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE, N W. (202) 2344433 WASHINGTON, D.C. 20005 (202) 2344433

26 ? I there were a number of actions like this which, in t 2 effect, give this number appearance to be what it is. .I 3 But I think putting it in context, it 4 still comes out to less than three percent of our t 5 total budget authority. So, we are obligating 97 to 6 98 percent of our budget authority. Whether that's 7 good or bad, I'm not -- but that puts it into context. l 8 CHAIRMAN SELIN: $28 million is six 9 percent of the -- 10 MR. SCROGGINS:

Well, I'm saying the 11 reimbursable and the committed.

If you take that 12 away, then basically you're in the $17, $15, $17 l 13 range. That's putting that in context. 14 (Slide) Chart 11, 15 CHAIRMAN SELIN: That's not right because l 16 you have that money at the beginning of the next -- I 17 mean the beginning of the fiscal year you're 18 obligating funds that were left over from the year 19 before. It's just a rolling quantity. t i 20 MR. SCROGGINS: It is, but it's also 21 identified. Like, for example, the reimbursable can 22 only be used for those specific purposes. It's not 23 generally available, is I think the point I was trying 24 to make, and the same with the committed. 25 The next chart, and I'll just briefly r NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS i 1323 RHODE ISLAND AVENUE, N.W. . ASHINGTON, D C. 20005 (202) 2W33 W (202) 2344433

r 27 1 touch on this one, this is just a summary of what is l 2 in the financial statement that sort of keeps the 3 auditors happy and that says that the liabilities in 4 that position equals the assets. 5 The assets as indicated here, financial 6 and non-financial, just a couple of points. The 7 financial assets are essentially the unobligated and 8 unexpended obligations that exist primarily in 9 Treasury, our accounts receivable. The non-financial 10 assets is primarily what equipment we have and it is 11 not large. I think we're on the order of like $15 12 million of equipment that the Agency has. The 13 liabilities are basically the accounts, accrued costs 14 where payments have not been made and certain other 15 accruals, such as payroll, leave, et cetera. These t 16 are the kinds of things that are defined as the 17 liabilities and these are defined in the financial 18 statement. 19 CHAIRMAN SELIN: The interesting questions 20 are sort of the subcategories of receivables, like 21 advances to employees or fees and things like that 22 which have to be monitored separately. I assume we 23 have subledgers that we keep track of -- 24 MR. ' SCROGGINS: Oh, yes, like for the 25 accounts receivable -- I mean, as you say, the travel NEAL R. GROSS j COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE, N.W. (202) 234 4433 WASHINGTON, D.C. 20005 (202) 234-4433

28 1 advances, these type of things are managed as part of 2 our travel system, et cetera. In fact, we put out 3 most of these

areas, for example the one you 4

mentioned, we put out reports to.the program offices 5 and the employees on a continual basis so they know l 6 where they're at with regard to advances. We take f 7 certain actions to try to keep them down to a minimum 8 and if the advance hasn't been returned and the trip 9 hasn't been taken to receive those monies back and r 10 that's just one example. I 11 MR. FUNCHES: One of the performance 12 measures that we do look at in a year are done by the 13 execution in relation to those accounts receivable 14 both in travel and in fees. 15 CHAIRMAN SELIN: Did the amounts of 16 advances go down significantly when we issued credit i 17 cards or did people still take the same larger -- 18 MR. SCROGGINS: No, no. They have gone 19 dt.cwn significantly. In fact, that was part of our 20 cash management type of actions that we took. The 21 credit cards went down and also another thing in cash 22 management was the issuance of the third party drafts 23 and the traveler's checks as part of the advance as 24 well. So, while there are advances involved, the cash 25 part of advance has gone down significantly over the NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE, N.W. (202) 2344433 WASHINGTON, D.C. 20005 (202) 234-4433

29 1 past two to three years. 2 (Slide) Chart 12. 3

Again, in summary, these are how the 4

expenses that we accrued during the year and I have to 5 put this in appropriate accounting terms.- These 6 expenses are accruad costs. They are not just 7 disbursements. They do include in addition -- though 8 they are primarily disbursements that we made out of 9 Treasury, it also includes such things as accrued 10 payroll and bills that we have received where the 11 service obviously had been rendered but the 12 disbursement had not yet been made come october 1. 13 So, these are accrued costs, but this is mostly what 14 has been disbursed. 15 It's presented here in the classical 16 object classes which we have to report to Treasury, et I 17 cetera. And again, the major point here is clearly 18 most of our expenses are in the personnel services and 19 benefits and our contractual services. 20 (Slide) Chart 13. 21 The last set of numbers relates to the 22 fees. As we've indicated earlier, we are required to 23 collect 100 percent of our budget authority less those 24 monies appropriated from the waste fund, which for 25 fiscal '92, in round figure, was $492.5 million. We i l NEAL R. GROSS court REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE, N.W. (237) 2344433 WASHINGTON, D.C. 20005 (202) 234 4433 1

30 1 did collect, as you will see here, a little under $490 2 million in fiscal '92. The great majority obviously 3 in the annual fees, vis-a-vis the license fees. The 4 only other point that I'd like to make on this is of 5 all the fees that have been billed in fiscals '91 and 6 '92, at the end of '92 less than two percent of those 7 dollars were still accounts receivable, that we had 8 actually collected over 98 percent of all the dollars 9 that were billed in both fiscal years combined '91 and 10 '92. 11 So, while there's a lot of action still 12 going on there as far as a number of accounts that are 13 billed, the dollars are very, very small. 14 MR. TAYLOR: I'm very pleased with this 15 rate of collection of fees. I think it's -- and the 16 branch works very hard. A lot of the fees are small, 17 but they work very hard to turn in this kind of 18 performance. 19 CHAIRMAN SELIN: That's exceptional. Are 20 there any particular characteristics of the late 21 payers? 22 MR. SCROGGINS: They tend to be in most 23 all cases, let's say the non-reactor reactors. 24 MR. TAYLOR: They're easier to collect. 25 MR. SCROGGINS: They gripe, but they pay. NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE N.W. (202) 2344433 WASHINGTON. D.C. 20005 (202) 234 4433

31 i / 1 In fact, they're mostly the materials licensees. i 2 They're in many cases the ones, for example, in j 3 accounts receivable would be licensees who are in the 4 process of trying to maybe terminate their license or j l 5 they're still concerned about it, et cetera. 6 CHAIRMAN SELIN: But they're still liable? f f 7 MR. TAYLOR: Yes, sir. i 8 MR. SCROGGINS: Yes. Now, we are in the 9 process and have initiated a year ago, we do have a i 10 debt collection process that is time consuming as 11 required by law and also by our rules. We give up to l l 12 three notices. We then go through a process, and I j 13 have been signing out orders terminating licenses on i 14 the basis of non-payment of fees. But it is very time l t 15 consuming. [ 16 From a legal standpoint we make sure ) 17 everything is -- we've tied a ribbon around everything i i 18 before we take that final action. In fact, even prior i 19 to me signing an order, all licensees are contacted j i 20 usually by telephone and told what is happening, that 21 an order is being sent up to my office to sign. We've I 22 found that in many of.those cases, especially where i 23 there were other federal agencies, that the payment j 24 was then received very post haste and orders were not. 25 signed. In fact -- i NEAL R. GROSS [ COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE, N W. (202) 234-4433 WASHINGTON, D.C. 20005 (202) 2344433 ,i s

32 l i 1 MR. TAYLOR: We reduced the list of 2 federal agencies markedly after a series of phone l 3 calls from Scroggins to some of the people because we 4 did have quite a list. 5 MR. SCROGGINS: Yes, we had a very large i 6 number. I think I've only signed one order for 7 another federal agency terminating their license, or 8 at least a small bureau of a federal agency. There 9 may be a few more than that, but it has not been 10 large. 11 Finally, in summary, and I will certainly 12 make this first bullet as my statement, not speaking 13 for the Inspector General but my personal opinion is 14 that the statement we have put together, and I'll give 15 a number of reasons why I believe, I think does 16 provide a reasonable portrayal of our financial 17 condition. 18 I certainly would not sit here and say i 19 that every figure there is exact to the penny by any 20 manner of means. There's a number of estimates. We 21 have to live with the systems that we had in place. 22 I think we've done a very good job in trying to 23 reconcile and understand where these uncertainties 24 are, but I do not think that they are material in the [ i 25 sense that there are large differences that would give i NEAL R. GROSS f COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE, N.W. . (202)N33 WASHINGTON, D.C. 20005 (202) N33 i L

=. 33 l 1 people a totally different view of where we were. I I 2 think we really do stand. t 3 Obviously our financial condition is not 4 unsound. We certainly have not obligated more funds [ i 5 than we had available. Resources were not a problem { 6 during fiscal '92 and in meeting our mission. We did I 7 collect almost all the monies we had to collect I i 8 through fees. l 9 In putting that into context, that next l 10 bullet is really what I'm trying to say. Financially ? 11 we are not a complex agency. We don't have f 12 significant contingent liabilities, large loans and 13 other monies out there that we're trying to collect. 14 We don't have a huge property, for example like HUD, 4 ( u 15 that we're trying to manage and what have you, and 16 grants like in the contingent liabilities and loans i 17 like Education. We don't have a lot of complex l [ 18 special accounts, revolving funds, trust funds and i 19 what have you. So, in a sense, financially we are a l i 20 fairly straightforward and simple agency financially. J 21 I'm not unhappy about that. ] 22 CHAIRMAN SELIN: If you can't get it l l 23 right, you have no excuse. 24 MR. SCROGGINS: Right. That's a point 25 that my staff has pointed out, that there's no reason l NEAL R. GROSS court REPORTERS AND TRANSCRIBERS 1323 RHODE ISt.AND AVENUE, N W. (202) 234 4433 WASHINGTON. D.C. 20005 (202) 2344433 q r

34 1 -- I think the phrase was used by one of my staff that 2 we're sort of a vanilla agency financially and in a 3 sense we are. .And there is no reason, therefore, 4 since we don't have these huge complexities, that we 5 cannot come into the modern day and be able to do a 6 very good job. 7 MR. TAYLOR: There's still cobwebs in the 8 attic. 9 MR. SCROGGINS: Right. And as I point out 10 here, we've learned a lot of things in preparing the 11 financial statement. We've been learning things 12 during a lot of the other actions that Jim mentioned 13 at the outset in our financial management activities. 14 We still have a lot of work to do on systems, as he 15 indicated. We, for fiscal '93, are just, in fact, 16 still in the process of converting and transitioning 17 into the new federal financial system that's put out 18 by Treasury. We're not utilizing all of its 19 capabilities at the outset because that would be.too 20 difficult. So, those will be coming along. 21 For example, we're not utilizing the full 22 accounts receivable capability, but we plan to do that 23 for fiscal '94. 24 CHAIRMAN SELIN: But what about the 25 general ledger? Where do you stand on the general NEAL R. GROSS COURT REPORTERS AND TRANSCRSERS 1323 RHODE ISLAND AVENUE. N W. (202) 2344433 WASHINGTON, D.C. 20005 (202) 2344433

35 1 ledger? 2 MR. SCROGGINS: On the general ledger, i 3 again we know that there are some problems. But the-4 primary problems tend to be in the interfaces with the f 5 subsidiary ledgers, as pointed out by the IG, and we i 6 agree. There's no indication that there are a large 7 number of problems there. The concern that the IG has 8 pointed out to us on a primarily basis is the concern 9 of risk because a number of the interfaces are manual 10 and a number of the interfaces need to -- there need 11 to be more attention given when a change is-made in 12 the general ledger of making sure the change is then ~ 13 made back in a subsidiary ledger and what have you, l 14 though very honestly based on our interactions with 15 the IG to date, there has been nothing that's come out 16 that points out that because of this that there is.a 17 large number of problems. But there is high risk and 18 there are concerns. Therefore, they've pointed out 19 the need and that was the second point there, the need 20 to have much more attention and discipline in the 21 controls and how we control interact on this basis, I 22 and we accept that as a very valid concern on their 23 part. 24 I'll just mention a few things on the l 25 systems. We are working on accounts receivable, f NEAL R. GROSS-COURT REPORTERS AND TRANSCRIBERS l 1323 RHODE ISLAND AVENUE, N W. I (202) 23W33 WASHINGTON, D.C. 20005 (202) 2M33 l

I r 36 1 bringing that into play. We will need to over the -l 2 next year or so, this year actually, to define for t 3 fiscal '94 a better way of tracking our property, for i 4 example. We do have property systems in the Agency, 5 but they are essentially inventory systems. They're 6 not " financial" systems. So, we need to do that j 7 instead of doing what we did this yedr which is go to 8 a number of contractual documents, documents in our 9 subsidiary ledgers and the past system to try to come 10 up with a valid definition of what our property values 11 are. And we will be going in the future, in a couple i f 12 of years anyway, we have already reached a tentative 13 agreement with HHS and we will be cross servicing on 14 their paper system. The current schedule, as Jim j 15 indicated, was fiscal '95 and there is'a task force 16 that's been put together between my office, between ] 17 IRM and the Office of Personnel to bring that into i l 18 play by that time frame. 19 There's going to be other things that are i i 20 going to be identified during the audit, clearly, and 21 a continuing basis. I-guess putting things into 22 context, we expect guidance from OMB. We'll be still 23 changing. They indicate over the next three to five 24 years they will still be learning and revising how the 25 financial statements will be done and we will i NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE, N.W. (202) 2344433 WASHINGTON, D.C. 20005 (202) 234 4 33

h 37 1 obviously conform with that. As I've indicated, we 2 are just now getting into a new system. That will i 5 point out some things that we don't know right now l 4 when we get into its use and prepare for the '93 [ 5 statement. Certainly the findings of the IG audit and 6 other audits that it does on a ccntinual basis will 7 iinpact what we do. We know some of these systems that 8 we're trying to improve now this fiscal year, we would 9 not have them available for the '93 statement, but 10

hope, for
example, like property and accounts i

11 receivable, that they would be available for the '94 12 Erntement. 13 So, it's still going to be a learning l 14 process, but certainly the intent being that each year 1 15 will show improvement over the prior year. That's 16 certainly what our goal is. 17 That's sort of where we're at at this 18 point. 19 CHAIRMAN SELIN: I'd like to ask you one 20 question and stress a couple points. 21 There's really no intrinsic reason that we 22 and the IG need separate contractors. I realize we're { t 23 going through a kind of a write-up process where we 24 have to get the accounting straight and it's not 25 appropriate for the one who does the accounting to do 7 NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE N.W. (202) 23W33 WASHINGTON, D.C. 20005 (202) 234-4433

38 1 the audit. But once that's done, once we really have I 2 our accounts in order, then you're just getting 3 advice, what's the proper way to score something or l 4 what should the controls be. We could save the 5 government some money if we can get to the point where 6 we don't have contractors briefing each other on 7 what's going -- no company I know of as a separate 8 accounting contractor and auditing contractor, unless 9 they're really in a mess, and I don't think we're r 10 really in a mess. So, it seems to me that unless j 11 there's something in the law about procurement, that 12 that's an objective to the -- 13 MR. SCROGGINS: No, Mr. Chairman, let me i 14 just comment that a number of other agencies, in fact, 15 are using the.same contractor to assist both in the f 16 preparation and the audit and, in fact, both of our 17 contractors, both ours and the IG's this year, are off 18 the Department of Labor's, in effect, list which they i 19 have been doing both preparation and audit. It was a' j 20 decision -- in fact early this year there - was some 21 discussions with us in the-IG of having only one i 22 contractor, but the decision was made at least for the r 23 time being by the IG to go with separate contractors. 24 CHAIRMAN SELIN: Let me stress something. I 25 You can't have the same fellow do the accounting, but NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND A\\ ' 'JE N.W. (202) 234 4433 WASHWGTON, D.C. 20005 (202) 234 4 33

i 39 1 we're supposed to do the accounting. They're just i 2 supposed to give us generic advice, not classified 3 specific transactions. As soon as we can get to that 4 point, then there's no reason to have two separate i 5 contractors. 6 MR. TAYLOR: We'11 work with the IG on 7 that. 8 CHAIRMAN SELIN: The other thing I'd like 9 to stress is this briefing is a little mistitled. i 10 This is an accounting briefing and that's fine. It's { 11 sort of depicting the situation after the fact. As 12 you point out, we're a plain vanilla agency. That's 13 pretty easy. The reason to get a financial statement j e 14 is for a HUD or an HHS or somebody that has student 15 loans that are very complicated. In our case, the 16 real emphasis has to be on the financial operations, 17 not on the accounting, to control our cash, get our i 18 money obligated faster, have a much clearer idea of' l 19 where w-a stand on obligations, deobligations, contract j 20 management. 21 So, this is a very good report, but let's l 22 really put the effort where we have to do, which is on 23 the financial management of the agency rather than the 24 depiction of our financial situation. I'd be stunned ~ r 25 if you ever came in and said, We're not in a position NEAL R. GROSS I COURT REPORTERS AND TRANSCR!BERS 1323 RHODE ISLAND AVENUE, N.W. (202) 2344 433 WASHINGTON. D.C. 20005 (202) 2344433 I

4 40 j 1 to carry out our business." 2 MR. TAYLOR: Contract management both in 1 3 the labs and outside the lab is a very important i 4 element of what we do. 5 CHAIRMAN SELIN: Contract management, 6 short-term forecasts, making sure that our allotments 'l 7 are reasonable, things like that, which are the 8 operations, the real financial management. 9 Commissioner Rogers? t 10 COMMISSIONER ROGERS: Well, yes. I had 5 11 somewhat the same thoughts, that I'd be shocked if I j 12 found our condition wasn't excellent, our financial ) 13 condition by the bottom line. But it is the systems 14 that are important here that are looked at. i 15 As you move more and more into new systems 16 that you share with other people and less hand work 17 and more computer systems, the IG's concern about t 18 computer security, I think, becomes even more and more 19 important, as is obvious. But I think it is something t 20 that has very much to be kept in mind as to the i 21 vulnerabilities of the Agency to mischief. It should j 22 not be possible to get into our system and alter [ t 23 records. The hacker problem has not gone away and l i 24 it's something that I think we have to be very mindful 25 of. i NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE, N W. (202) 2344433 WASHINGTON, D.C. 20005 (202) 2344433 1

P 41 1 I just wanted to say that I thought the 2 report was a very readable one. I found it easy to i I won't say particularly 3 read and somewhat 4 illuminating but I thought it was clear. So, I want 5 to just compliment whoever wrote it, that the prose 6 was pretty good. 7 MR. SCROGGINS: Thank you. 8 CHAIRMAN SELIN: Commissioner Curtiss? i 9 Commissioner Remick? 10 COMMISSIONER REMICK: No, thank you. 11 CHAIRMAN SELIN: Commissioner de Planque? 12 Fine. Thank you for -- it's really very 13 heartening to see a much progress in such a short 14 time. The Departme.. of Agriculture has been working 15 their financial statements for 20 years. They really l 16 are a leader for the whole government. 17 MR. SCROGGINS: Yes, they are. 18 CHAIRMAN SELIN: And we stand to learn f 19 something from them. 20 MR. SCROGGINS: Yes, we have. 21 CHAIRMAN SELIN: Fine. Thank you very f 22 much. 23 MR. SCROGGINS: Thank you. 24 (Whereupon, at 10:51 a.m., the above-25 entitled matter was concluded.) NEAL R. GROSS COURT REPORTERS AND TRANSCR;BERS 1323 RHODE ISLAND AVENUE, N W. (202) 234-4433 WASHINGTON, D C. 20005 (202) 2344433 r I

.~ f I CERTIFICATE OF TRANSCRIBER i This is to certify that the attached events of a meeting i of the United States Nuclear Regulatory Commission entitled: TITLE OF MEETING: BRIEFING ON NRC FINANCIAL MANAGEMENT MATTERS PLACE OF MEETING: ROCKVILLE, MARYLAND DATE OF MEETING: MARCH 8, 1993 were transcribed by me. I further certify that said transcription t is accurate and complete, to the best of my ability, and that'the transcript is a true and accurate record of the foregoing events. f 'i N V i Reporter's name: PETER LYNCH i l ) l ) i i 5 NEAL R, GROSS COUtf REPotitel AND TRAN$ctittt$ 1333 RNODE ISLAND AVIMUt, N.W. (30g) 234 4433 WASNIN870N, DC 2000$ (202) 232 4 000 ,....-m,_,

1 l PRESENTATION TO THE COMMISSION-NRC FINANCIAL STATEMENT MARCH 8,1993 James M. Taylor, CFO Ronald M. Scroggins, DCFO/ Controller

Contact:

Jesse Funches Phone: 492-7351 .-..-..=:-..--.--...--.-...,~.......-. .-.-.~-.:...-...-..-

PURPOSE OF BRIEFING o Overall Direction for Financial Management o First NRC Financial Statement (FY 1992) Discussion of Financial Performance Program Performance Summary I C________________.__________________________--

c t P SIGNIFICANT CHANGES IMPACTING FINANCIAL' MANAGEMENT t 1 o IG Act of 1988 o LCFO' Act of 1990 o OBRA of 1990 100% Fee Recovery Requirements t 2-L wU 6. v -= w i,rm ,-o, =-- w w

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A STRATEGIES OF ENHANCING FINANCIAL MANAGEMENT o Raise.-Managers' Awareness of Their Financial Management Responsibilities o Establish Finan.cial Managers' Council o - Improve Financial Systems I o increase Financial Management Resources o improve Staff Capabilities / Skills o improve Guidance and Training o improve Accounting Policy and: Procedures o Assess Financial Management. Risk and Implement improvements 4 ..u........2= -. ..2. .a . ~ . ~ - - -. -..

1 CHIEF FINANCIAL OFFICERS ACT OF 1990 o Annual Audited Financial Statement Required For: Revolving and Trust Funds Accounts with Substantial Commercial Functions i NRC Appropriations Considered Commercial Functions Due to Fees i l e,.',e. men,,.-,th , * [, .ww- ,-we-w-w,- .-w, ,.,mne=

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MILESTONES ASSOCIATED WITH FINANCIAL STATEMENT FOR FY 1992 o Unaudited Financial Statement to OMB by 3/31 o Audit of Financial Statement to the Chairman by 6/30 o CFO Annual Report to Chairman and OMB by 8/31. -.

FY 1992 FIN ANCIAL STATEMENT CONTENT o Overview Section o Principal Statements and Related Footnotes o Supplemental Financial Management information .---.-- a - -u ...----r -,a .e

PREPARATION OF THE FY 1992 FINANCIAL STATEMENT o Form and Content of the Financial Statement Prescribed by OMB o Assistance From independent CPA Firm o Reconciliation of Accounts o No Comparative Analyses _, ast-Year Statement o Continual interaction with OlG._

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i I ~ y o ys t r ia r e e oy h - lb t r a u o Ai sr ( rM ug t P y e b 9 M g 3 r m 6 dm8 e m M a f u o2 i r s e 4 Bf$ A n9 m S R 3 a D S r 2 ~ N GTS U F 2 9 9 1 Y 8 F F O SE e C b l R y a l U t ia i vM r O o A3 S h t s u d 8 A n4 u5 te F $ g l d1 a v t ut o B 5 T w2 1 e5 N$ m ,li1i lll1li1ll1 i! } 4 m

FY 1992 NRC OBLIGATIONS Total Obligations $520.2M Salaries anti Benefits 5243.0M av.. m: Mjh/.Q.hh[h55:'jj{Ijfjggg.- GSATransfer W Reimbursabic Work 52.7M 30.2 M ' Administrative Support / $97.4M Program Support Travel $162.0M 314.9M .g.

9 FY 1992 UNOBLIGATED FUNDS AVAILABLE FOR FUTURE USE MILLIONS o Total Funds Available for FY 1992 $548.3 Less: Total Obligated in FY 1992 520.2 o Total Funds Unobligated and Available for Future Use 128.1 l l l l l 1

NRC'S FINANCIAL POSITION (AS OF 9/30/92) MILLIONS o' Assets .$_242.9 Financial Non-Financial o Liabilities 74.6 Funded-Unfunded o Net Position 168.3 o Fund Balance Less: Future Funding Requirements o - Total Liabilities and Net Position 242.9 11- .--m ..,miet.---e. s e- -ers.- v w =u-w...--- ...sw,.,s- .m*[=u,se--,e...< e. e.w-'wc..-.-. or ..e-=e- -e.,--.<-%-4, -*w.w.-----w-we er -,.-..,. -- rwu<m,ns'5. -m..-.e4 -.m

3 -FY-- 1992 NRC. OPERATING EXPENSES BY OBJECT CLASS + MILLIONS o Personnel-Services and Benefits $244.3 o. -Travel and Transportation 16.1 o Rent, Communication and Utilities 29.6 o Printing and Reproduction 2.1 o Contractual Services 195.2 o . Supplies and Materials 13.2-o- Grants, Subsidies and Contribuaons 1.4 o insurance Claims:and indemnities 1 Total Operating Expenses $502.0 12-t __._-_.-___._.-_____m_______m__mm,,..L,--..,._w.-.._-- .,., _,, _...m. ....~,...-._.,-,..-.w..,-..y, ,w.,.,_mw.,.,....,w~. ,-,e,.,,,-,,, ..,~,,s,_. .. +,

f 3 3 FEES COLLECTED IN FY 1992 1 i o -Collected 99.3% of FY 1992 New Budget Authority REACTORS NONREACTORS TOTAL License Fees. $ 93.3 $ 13.5 $106.8 l Annual Fees-- _3_3_8.4 44.1-

382.5 Total Fees-

_S431.7 $57.6 $489.3 ^ i e 13-- i. .e-,-+-. s,.-. .n4w,-~~e.-..s- --m,....,,,..%--.-.-e-. -r=~.....~e-.--mm.---.......~.v,-. m.-.,. .....,.-.....a.-- ..~~w ...r.- -+-. - - -...- ~ ~ - e

l

SUMMARY

o Financial Statement Provides a Reasonable Portrayal of NRC's a Financial Condition o Financial Condition is Sound at the End of FY 1992 Sufficient Funds to Carry Out the Mission of NRC During FY 1992 Approximately 100% of Budget Recovered Through Fees o No. Significant Contingent Liabilities, Non-Financial Assets, . Special A'ccounts o improvements Needed

Systems Controls
To.Be identified - Audit / Annual Report h

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