ML20058F409

Chairman Semiannual Rept to Congress:Mgt Decisions & Final Actions on Ofc of Inspector General Audit Recommendations, Apr-Sept,1993

ML20058F409
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Issue date:	09/30/1993
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Chairman's Semiannual Report to the Congress J

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April 1,1993 - September 30,1993 '

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N ANAGEMENT DECISIONS AND E

FINAL ACTIONS ON OFFICE OF THE INSPECTOR GENERAL AUDIT RECOMMENDATIONS

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Chairman's Semiannual Report to the Congress I

MANAGEMENT DECISIONS AND FINAL ACTIONS ON I

OFFICE OF THE INSPECTOR GENERAL AUDIT RECOMMENDATIONS I

g April 1,1993 - September 30,1993 I

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l U.S. Nuclear Regulatory Commission

-l Washington, DC 20555 1

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I FOREWORD I

The U.S. Nuclear Regulatory Commission's ninth semiannual report, " Management Decisions and Final Actions on Office of the Inspector General [OlG] Audit Recom-

l mendations," covers the six months from April 1,1993, to September 30,1993, and is required by Section 106(b) of the Inspector General Act Amendments of 1988 (RL.100-504). It complements the report prepared by the OlG on audit reports issued l

during the same six months and gives information on actions taken in response to audit reports.

I During the reporting period, the OlG issued seven audit reports containing 14 recom-mendations and six contract audit reports. Management closed eight audit reports and a total of 22 recommendations during this period and continues to place emphasis on g

the timely implementation of OlG recommendations.

The NRC submitted its first audited financial statement for FY 1992 in August 1993. The I

audit was conducted by an independent contractor who rendered a qualified opinion and stated that the financial statements present fairly, in all material aspects, the finan-cial position of the NRC, l

The Commission endorses the reorientation of the Inspectors General as presented in the " Report of the National Performance Review." The NRC has already started to broaden the focus of the inspector General from strict compliance auditing to evaluat-l ing management control systems. Using the expertise of the Inspector General to im-prove systems to prevent waste, fraud, and abuse will serve the Agency by enhancing efficient, effective operations.

j Ivan Selin, Chairman U.S. Nuclear Regulatory Commission I

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CONTENTS Page FOREWORD........

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INTRODUCTION...........

1 B AC KG R O U N D......................................

1 STATUS OF RECOMMENDATIONS REMAINING FROM THE PREVIOUS PERIOD....................

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NRC'S JUSTIFICATION FOR RENEWING ITS CONTRACT FOR FEDERALLY FUNDED RESEARCH AND DEVELOPMENT

.l CENTER OPERATIONS 1

IRM'S MANAGEMENT OF ITS CONTRACTS.

2 EMERGENCY PLANNING REGULATIONS AND IMPLEMENTING GUIDANCE.

2 PERFORMANCE CRITERIA AND BETTER MANAGEMENT OVERSIGHT NEEDED TO ENHANCE NRC'S RESEARCH PROGRAM CONTRIBUTIONS 3

REVIEW OF NRC'S 'M" ACCOUNT..

3 RESOLVING FIVE DISAGREEMENTS 3

MANAGEMENT DECISIONS ON REPORTS ISSUED DURING TH I S P E R I O D...................................

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REVIEW OF IMPREST FUNDS 4

MANAGEMENT OF MISADMINISTRATION INFORMATION IS INADEOUATE...

5 AUDIT OF NRC'S FY 1992 FINANCIAL f TATEMENTS 5

REVIEW OF NRC'S REACTOR RESTARY PROCESS.

6 REVIEW OF NRC'S SYSTEM TO FOLLOWUP ON AUDIT RECOMMENDATIONS.

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I CONTENTS (cont.)

Page STATISTICAL TAB LES..................................

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'l STATISTICAL TABLE I Disallowed Costs 9

I STATISTICAL TABLE 11 Funds To Be Put To Better Use...

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Q MANAGEMENT DECISIONS NOT IMPLEMENTED WITHIN W

O N E YEAR.................................

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INTRODUCTION This is the ninth semiannual report to the Congress on management decisions and final l

actions taken by the U.S. Nuclear Regulatory Commission (NRC) in response to the recom-mendations ensuing from the audits performed by the Office of the inspector General (OlG). This report presents the status of (1) open recommendations existing before the l

reporting period, (2) recommendations made during the reporting period, and (3) recom-mendations remaining open for more than a year. The sections titled " Status of Recom-mendations Remaining from the Previous Period" and " Management Decisions on Reports l

Iscued during this period" present the status ofitems of Commission interest. The statisti-cal tables and the section titled " Management Decisions not Implemented within One Year" are required to be presented in accordance with the Inspector General Act Amendments of l

1988.

BACKGROUND l

Public Law 100-504, inspector General Act Amendments of 1988, placed new reporting requirements on both inspectors general and agency heads to report to the Congress on I

audits performed, audit findings, and audit recommendations. Sectio,' 106(b) of this law requires that agency heads submit semiannual reports to the Congress regarding man-agement decisions and final actions taken pursuant to audit recommendatons.

l STATUS OF RECOMMENDATIONS REMAINING FROM THE PREVIOUS PERIOD I

The Agency continues to take the necessary steps to resolve open recommendations pending from the last reporting period. During this reporting period, the staff completed final action on 19 recommendations and closed five audit reports remaining from the pre-I vious period. The seven reports remaining open from the previous reporting period con-tain 15 recommendations in varying stages of completion. Actions taken to complete the five audit reports are described below. One report from the previous reporting period has g

had recommendations open for more than a year and is discussed in the last section of the report, " Management Decisions Not Implemented Within One Year." Management also re-solved five outstanding disagreements associated with the audits " improvements Needed I

in NRC's Process for Approving Payments to the Department of the Energy" and " Internal Control Reviews of the NRC's Accounting Systems," as described below.

'E NRC'S JUSTIFICATION FOR RENEWING ITS CONTRACT B

FOR FEDERALLY FUNDED RESEARCH AND DEVELOPMENT CENTER OPERATIONS I

in response to a September 1992 request from the Office of Federal Procurement Policy (OFPP), Office of Management and Budget, the OlG audited the nature and adequacy of NRC's justification for renewing its contract with the Federally Funded Research and Devel-l opment Center (FFRDC). NRC sponsors one such center through its contract with South-west Research Institute (SwRI) of San Antonio, Texas: the Center for Nuclear Waste Regula-tory Analyses was established at SwRI in 1987 to give technical assistance to, and conduct l

research for, NRC's High-Level Waste Management program. OFPP's request was I

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prompted by a recent Senate Subcommittee report on FFRDCs and recommendations to strengthen Federal controls over FFRDC' operations. The Federal Acquisition Regulation g

(FAR) requires that the sponsoring agency review the use and need for an FFRDC before 5

extending its contract.

jl The OlG found that although NRC addressed and met all five FAR requirements for an FFRDC review before extending its contract, it was unable to adequately support some statements in its renewal justification. Of particular concern was NRC's limited efforts to evaluate the availability of alternative sources to meet the Agency's needs. Although the I

OlG recognized that the FAR does not specify how to conduct and document an FFRDC review, it recommended that NRC develop a plan, or procedures, tojustify requirements for future FFRDC reviews Minimally, the NRC plan should (1) address allfive FAR FFRDC crite-I ria with special emphasis on ensuring that full consideration be given to alternative sources, (2) include steps to ensure that all criteria are compared to actual conditions and reasons for not covering certain criteria if not applicable, and (3) require that the justification effort

'g and all analyses be documented. NRC management agreed with the recommendation and proposed to develop the procedures once it receives guidance from OFPP on how the review should be conducted, the level of documentation required, and the threshold for

,g considering alternative sources. Since OFPP's schedule indicates that any additional guid-

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l ance may not be available untilJanuary 1994, NRC completed interim procedures in June l

1993 based on experience gained during its initial FFRDC contract extension review.

IRM'S MANAGEMENT OF ITS CONTRACTS The OlG staff completed a review of contracts managed by the Office of Information Re-ll sources Management (IRM). IRM relies heavily on commercial contracting to meet its mis-sion and in Fiscal Year (FY) 1992 spent about $36.6 mi!! ion on more than 50 contracts. The OlG found that IRM had taken steps to improve its oversight of individual contracts but l

needed to (1) establish office-wide policies and procedures to govern its management of contracts and to ensure adherence to applicable laws and regulations and (2) issue a man-agement bulletin to IRM project officers outlining unauthorized procurement actions and

,j reminding them that violations will not be tolerated. The Director, IRM, issued a memoran-dum to all IRM project officers on March 31,1993, to clarify their responsibilities and to em-phasize that only the contracting officer is empowered to execute or modify contracts. On July 30,1993, the Director issued the "lRM Project Officer Desk Reference for FlP Resource l

Acquisitions and Contract Management." The document contains the most criticalIRM-l wide policies and procedures and will be supplemented over time with additional policy j

guidance and procedures.

EMERGENCY PLANNING REGULATIONS AND IMPLEMENTING GUIDANCE in this report, OlG made eight recommendations, five of which had been previously closed.

The three remaining recommendations were closed on June 17,1993. They involved changes to the 1985 Memorandum of Understanding (MOU) between the Federal Emer-gency Management Agency (FEMA) and the NRC on radiological emergency planning and preparedness. On February 16,1993, the Commission unanimously approved revisions j

to the MOU, which were then signed by both agencies. On May 27,1993, the Commission 1I 2

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also approved an amendment to the MOU dealing with recovery from disasters affecting emergency preparedness based on lessons learned from Hurricane Andrew. On June 17, 1993, a new MOU, incorporating all these changes, was signed for the NRC by the EDO and I

for FEMA by the Acting Associate Director, State and Local Programs and Support. The MOU was published in the Federal Register on September 14,1993 (58 FR 47996).

l PERFORMANCE CRITERIA AND BETTER MANAGEMENT OVERSIGHT NEEDED TO ENHANCE NRC'S RESEARCH PROGRAM CONTRIBUTIONS During 1992 and 1993, the OlG reviewed the NRC process for managing research. OlG found that (1) neither RES nor any other NRC office had established criteria to measure the performance and contributions of the research program and supporting projects and (2)

I there was a lack of strong internal management controls to guide NRC research. in ad-dressing these recommendations, RES has reviewed its criteria for evaluating research projects as defined in the " Nuclear Regulatory Research Philosophy." Also, procedures I

are now in place that require that these criteria be used to evaluate each RES project before it is initiated, as well as annually to validate the project's continuance, and to evaluate each project's usefulness upon completion. Further, to review each project's continued useful-I ness in accordance with the guidance in the Five-Year Plan, these criteria will be used annu-ally at mid-year and when RES senior management submits its budget.

I RES issued draft procedures during September 1993 requiring senior.RES Division man-agement to review individual projects during various stages of the project's life cycle against the criteria in the Research Philosophy section of the NRC Five-Year Plan. These I

procedures were scheduled to take final form in October 1993 and will be implemented in November 1993.

REVIEW OF NRC'S "M" ACCOUNT I

The OlG contracted with R. Navarro & Associates, Inc. (Navarro), a certified public ac-counting firm, to review the Agency's "M" account as part of the audit of the Agency's FY g

1992 financial statements. The NRC does not have an "M" account in the traditional sense because appropriated funds are available for use until expended. The "M" account re-viewed represented account balances from fiscal year 1990 and prior. Navarro had five I

recommendations which focused on the need to investigate and reconcile "M" account bal-ances, review all negative balances, establish dollar thresholds to close out accounts, and ensure the new accounting system had the capabilities of account queries and sort func-I tions. The OlG also added recommendations to develop quality assurance procedures for.

posting transactions and to require offices to perform periodic reviews of "M" account obli-gations. All recommendations have been completed.

RESOLVING FIVE DISAGREEMENTS In advance of the audit of the FY 1992 financial statement required by the Chief Financial l

Officers Act of 1990, the OlG reviewed the internal control structure of the general ledger, induding the payro',, travel, commercial payments, property, and license fee billing subsid-iary systems. The OlG rated the generalledger as a high-risk environment and concluded l

that the internal control structure surrounding the system was inadequate.

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The major findings focused on the problems with the subsidiary systems combining manu-al operations with automated ones to provide monthly summary accounting data to the

'g general ledger. Because these systems are not integrated with the general ledger, labor-E intensive reconciliations are required.

Management disagreed with 4 of 17 recommendations offered. The OlG deferred action l

on these recommendations pending the completion of the Agency's FY 1992 financial statement audit. Subsequently, the financial statement audit was completed and the OlG determined no additional action was necessary on the 4 recommendations.

In accordance with the Agency's plan for improving its financial management, NRC changed its accounting system to the Federal Financial System (FFS) through a cross-I servicing agreement with the U.S. Department of the Treasury beginning in FY 1993. Incor-poration of subsidiary accounting systems into the FFS is proceeding as scheduled. Com-mercial payments and travel accounting were implemented initially. An automated I

interface between FFS and fees accounts receivable / collections will be completed during FY 1994. As recommended by the OlG report, policies and procedures for reconciling property management records to the general ledger will be phased in and completed dur-ing FY 1994.

The OlG also reviewed the financial and administrative accountability of RES-funded work at DOE laboratories. The OlG expressed concerns that RES did not have adequate internal l

controls to ensure that DOE vouchers are reviewed and approved in accordance with agency policies and procedures. Moreover, concems were expressed that the Office of the Controller (OC) should verify completion of the review and approval process prior to final l

posting in the accounting system by ensuring that all vouchers are returned after review and the DOE billed amount is correct by reviewing approval signatures.

I Management disagreed about the timing of the posting of charges in the NRC accounting system and requested a decision from the Comptroller General. Clarification was received from the General Accounting Office, and OC and the OlG agree about the procedures to be followed.

MANAGEMENT DECISIONS ON REPORTS ISSUED DURING THIS PERIOD I

Seven new audit reports containing 14 recommendations were issued during this period.

Two of the reports made no recommendations. NRC management agreed to all recom-I mendations and three have already been implemented. The following summarizes the five reports that contained recommendations.

REVIEW OF IMPREST FUNDS The OlG reviewed imprest funds to ensure that all such funds were accounted for and to determine whether appropriate internal controls were in place. The review found that all l

funds were accounted for and appropriate internal controls were generally in place to pro-tect the funds from loss or misuse. The OlG recommended that the Headquarters Imprest Cashier discontinue accepting cash from employees in settlement of travel claims because l

of the potential that cash could be lost.

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The OC has received a legal opinion from the Office of the General Counselthat the Agency cannot legally enforce a policy prohibiting employees from making cash payment in settle-ment of travel claims. Accordingly, the Agency did not adoptthe recommendation. In addi-I tion, the Office of the Controller informed the regional offices that cash cannot be refused in settlement of employee claims. No further action is required for this report.

MANAGEMENT OF MISADMINISTRATION INFORMATION ISINADEQUATE I

Due to increasing reports of medical misadministrations and heightened public and Con-gressionalinterest in the effectiveness of NRC's regulation of nuclear medicine, the OlG reviewed N RC's collection and analysis of misadministration data. To obtain a Commission I

perspective on the medical misadministration issue, the OlG attended oversight briefings on (1) NRC's initiatives to prevent misadministrations, (2) a misadministration that killed a patient, (3) views of the medical community on misadministrations, and (4) the Agreement I

States program regarding reporting medical misadministrations. The OlG met with appropriate headquarters and regional staff to obtain their perspective on misadministra-tions and the medical license inspection program, and reviewed and analyzed medical misadministration reports and other programmatic information.

The O!G concluded that NRC's management of medical misadministration information has significant weaknesses and recommended that NRC (1) independently verify the number l

and type of procedures involving the medical use of byproduct materiallicensees pedorm annually, (2) use misadministration data to establish performance indicators to evaluate the effectiveness of its programs and strengthen its regulatory oversight, and (3) encourage l

Agreement States to (a) report all misadministrations and (b) adopt NRC's new reporting criteria before 1995.

I NRC is currently exploring two options to obtain the number of annual medical procedures that involve nuclear misadministrations: (1) review the records of operational data and (2) issue a rule to ensure that licensees collect the information in a consistent format and report I-it to the Agency. By January 1994, NRC will decide which to pursue. Also, NRC will begin in January 1994 to use medical misadministration information collected as a basis for devel-oping a performance indicator for NRC regions and Agreement State programs. One of I

the indicators being evaluated is the rate of misadministrations per licensee. NRC contin-ues to encourage Agreement States to adopt compatible regulations and to report all mis-administrations. All29 Agreement States collected and sent medicaladministration data to NRC for calendar year 1992.

AUDIT OF NRC'S FY 1992 FINANCIAL STATEMENTS l

The independent auditor retained by OlG rendered an opinion on the NRC FY 1992 finan-cial statements as required by the Chief Financial Officer's Act. The opinion stated that the financial statements present fairly, in all material respects, the financial position of the NRC.

l The opinion was qualified because of the following scope limitations: (1) the assessment of compliance with laws and regulations did not provide for a review of DOE's extent of com-pliance with laws and regulations for the NRC funds DOE expended and (2) the lack of com-l plete historical accounting records to support the value and depreciation assigned to 5

I property, plant, and equipment. Additionally, the independent auditor presented a report on the NRC's internal control structure which identified four material weaknesses and two I

reportable conditions. The material weaknesses presented were: (1) general accounting controls at the general ledger level not maintained, (2) interagency responsibilities over re-imbursements to DOE work not adequate, (3) lack of timely billing of fees, and (4) capital-g ization policies for supplies inventory, leasehold improvements, and ADP software were 5

nonexistent. The reportable conditions were: (1) accounting system does not provide ob-ject class and program information and, (2) accounting records for reversionary interest in property, plant, and equipment held by the DOE nationallaboratories were not maintained.

During FY 1993, the NRC implemented a new accounting system in order to address the problems identified with generalledger controls. The lack of automated subsystem con-I nections was the primary reason for the lack of generalledger controls. The new account-ing system automates the subsystems interface with the general ledger. Three subsys-tems were not integrated during the initial FY 1993 implementation and continue to be I

manual: (1) fees accounts receivable, (2) payroll, and (3) property. There are plans to build automated interfaces for all subsystems except property. The integrity of the manualinter-faces will be assured by a reconciliation method.

NRC is presently reviewing the process for procuring, managing projects, and paying for the work performed by the DOE national laboratories. Internal controls have been im-proved associated with the NRC review of the billing for work performed by the DOE nation-I allaboratories as well as project management of the reversionary interest in property. Ne-gotiations between the NRC and DOE Inspectors General are under way in an effort to remove the scope limitation on future financial statement audits through a cooperative audit I

effort.

j Capitalization policies have been established and will be published in the Agency's policy g

directive. Documentation to support the value and depreciation assigned to property,

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plant, and equipment will be maintained.

REVIEW OF NRC'S REACTOR RESTART PROCESS The OlG reviewed the NRC's reactor restart process and recommended that (1) NRR es-tablish a definitive process for tracking and documenting the resolution of restart issues l

and (2) NRR and AEOD work with the Federal Emergency Management Agency (FEMA) to establish contact points within the agencies for all communications regarding emergency preparedness (EP) issues related to reactor restarts.

To address the first recommendation, N RR revised Inspection Manual Chapter 0350, " Staff Guidelines for Restart Approval," on September 30,1993. The revision incorporates a pro-cess for tracking and documenting the resolution of restart issues. The OlG has reviewed I

the revised manual chapter and considers the revision responsive to its audit recommen-dation.

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The NRC has taken the following actions to address the second recommendation. On May 27,1993, the Commission approved an amendment to the Memorandum of Understand-ing (MOU) with FEMA dealing with recovery from disasters affecting emergency prepared-l ness, based on lessons learned from Hurricane Andrew. On June 17,1993, a new MOU, 6

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incorporating these changes was signed; it was published in the Federal Register on Sep-tember 14,1993 (58 FR 47996). The revised MOU includes working arrangements that pro-vide for an oversight NRC/ FEMA Steering Committee forimplementing the MOU. Manage-ment has taken corrective actions on both recommendations and considers this report closed.

REVIEW OF NRC'S SYSTEM TO FOLLOWUP ON AUDIT RECOMMENDATIONS OMB Circular A-50, " Audit Followup," requires each agency to establish systems to ensure

-l the prompt and proper resolution and implementation of audit recommendations. The OlG review found that overall, NRC has an adequate followup system in place and NRC officials have been effective in implementing and closing out recommendations. The OlG recom-I mended one area in which the system could be made more efficient. The OlG's report rec-ommended the Audit Followup Official be authorized to track audit recommendations made to Commission-level offices in the Agency's centralized tracking system. The Com-I mission responded to the OlG on October 19,1993 that no change in authority or responsi-bility was necessary to achieve the results contemplated. This report will be closed in the next semiannual report.

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STATISTICAL TABLES Table i presents the doriar value of disallowed costs deterrnined through contract audits conducted by the Defense Contract Audit Agency (DCAA). These costs were subsequent-ly transmitted to the Agency by the OlG. The details of these contract audits do not appear as part of this report.

Table 11 presents the dollar value of recommendations for funds to be put to better use.

These figures combine pre-award contract audits conducted by DCAA and the OlG, as well as internal program audits performed by the OlG. With one exception, DCAA performed all the contract audits reported on both tables. The NRC conducted a desk audit of the con-tract performed by " Professional Examination Services" and questioned how $232,250 had been spent. Final action has been taken and appropriate adjustments made to this contract. The OlG conducted an internal program audit and identified $1.4 million in funds that could be put to better use. Categories A and D reflect this $1.4 million of RES funds that 4

are associated with approximately 1,200 DOE laboratory projects that are in the process of being closed out. Approximately 100 of these have been closed and the associated funds deobligawl. RES plans on closing out the remaining projects and deobligating a!! available funds by h>ruary 1994.

It should be noted that the Department of Defense also takes credit for cost savings result-hig from all DCAA audits in its semiannual report.

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MANAGEMENT REPORT ON OFFICE OF INSPECTOR GENERAL AUDITS WITH DISALLOWED COSTS l

For the Period April 1,1993 through September 30,1993 Number of Disallowed Category audit reports costs A. Audit reports with management I

decisions on which final action had not been taken at the beginning of this reporting period 2

$ 73,109 B. Audit reports on which management decisions were made during this reporting g

period 3

$644,181 C. Audit reports on which final action was taken during this reporting

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$717,290 (i) disallowed costs that were re-l covered by management through collection, offset, property in lieu of cash, or otherwise (2)

($ 45,819)

(ii) disallowed costs that were written off by management (3)

($671,471)

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Reports on which no final action had been taken by the end of this reporting i

period 0

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TABLE 11 I

MANAGEMENT REPORT ON OFFICE OF INSPECTOR GENERAL AUDITS WITH RECOMMENDATIONS THAT FUNDS BE PUT TO BETTER USE For the Period April 1,1993 through September 30,1993 l

Recommendations that funds be put to better use by manage-l Number of ment agreed to in a Category audit reports management decision A. Audit reports on which final action has not been taken by the commencement of this reporting period 2

$ 1,409,580 B. Audit reports on which manage-I ment decisions were made during this reporting period 5

$ 757,822 C. Audit reports on which final action was taken during this reporting period 5

$ 757,822 (i) recommendations that were actually completed (5)

($ 757,822) l (ii) recommendations that man-agement has subsequently concluded should not or l

could not be implemented or completed 0

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D. Audit reports on which no final action has beer, taken by the end of this reporting period 2

$ 1,409,580 g

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MANAGEMENT DECISIONS NOT IMPLEMENTED WITHIN ONE YEAR Management decisions were made before September 1992 for the four OlG audit reports l

discussed below, but as of September 30,1993, final actions had not been taken. The title of each report is given below with the due it was issued and a description of related activi-ties.

REVIEW OF NRC MANAGEMENT OF REPORTING REQUIREMENTS UNDER 10 CFR PART 21 November 30,1990 l

In this report, OlG made five recommendations concerning NR C management of reporting requirements under 10 CFR Part 21. Final action has been taken on four of these recom-mendations. The outstanding item required clarification of 10 CFR Part 21 compliance by l

nereactor licensees and vendors. To address this issue, management is developing a pro 30 sed rule to clarify that Part 21 requirements apply to all non-reactor licensees. Under the proposed rule, major non-reactor licensees (fuel cycle, waste disposal, spent fuel stor-l age, and certificate holders) will have to comply with all the current requirements of 10 CFR Part 21, including the development and implementation of specific procedures for evaluat-ing equipment defects. The proposed amendments will clarify the evaluation and reporting l

requirements and make them iess burdensome for the materials licensees, the group that constitute's the majority of the nonreactor licensees. During this reporting period, the lan-guage of the proposed rule has had extensive internal coordination and management re-l view. The proposed rule was discussed with the Agreement States on October 28,1992.

The Agreement State representatives raised possible jurisdictional and compatibility is-sues and requested that they be consulted early in the development of the rule. Conse-l quently, a draft of the proposed rule was sent to the Agreement States for review in May r

1993 with a 30-day comment period. The comment period, which was later extended for another 45 days upon the States' request, expired in July 1993. The States raised a number l

of substantive policy and legalissues such as: (1) a State has no authority to impose Part 21 requirements upon suppliers not licensed by that State; (2) a State has no authority over suppliers located outside its State borders; (3) NRC's alternate proposal to retain authority l

for implementing Part 21 in Agreement States may conflict with the agreement between the State and the NRC under Article 274 of the Atomic Energy Act.The NRC's Office of General Counsel (OGC) is currently considering these issues. A new schedule for issuing the pro-l posed rule awaits resolution of these issues.

REVIEW OF THE PROCUREMENT PRACTICES OF THE I

ADVISORY COMMITTEE ON REACTOR SAFEGUARDS (ACRS)

September 17,1991 in reviewing the procurement practices of the ACRS in dealing with the DOE laboratories, l

OlG made four recommendations. Two remain open. The open recommendations require oversight by Division of Contracts and Property Management (DCPM) for goods and ser-i vices procured from the DOE laboratories and recommend legal evaluation of NRC policies l

concerning ACRS members employed by DOE laboratories. The EDO delegated over-sight responsibility for contract management at the DOE laboratories to the Office of Ad-renistration in November 1992 and directed the DCPM in January 1993 to establish a tem-porary satellite office in the Office of Nuclear Regulatory Research (RES) for the purpose of 11

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helping RES implement the draft management directive. A pilot program utilizing the draft management directive as guidance was completed on July 30,1993. Lessons learned from the pilot program were incorporated into a final draft sent for office comment on Octo-I ber 7,1993. After addressing final Agency comments, the staff will coordinate the manage-ment directive with DOE. The management directive is expected to be issued April 1,1994.

I Concerning the second recommendation, a letter was written on October 26,1992 to the Comptroller General requesting his opinion on the legality of obtaining the services of an l

individual from the laboratories to serve on the ACRS. Representatives from the GAO met with NRC staff in September 1993 to discuss our request. The GAO requested clarification and additional information; these were sent to GAO on October 22,1993.

REVIEW OF CONTRACTING FOR CONSULTING SERVICES January 29,1992 l

TL OlG made one recommendation in its annual audit of the Agency's compliance with OMB Circular No. A-120 regarding guidance on consulting services. This recommenda-I tion remains open. OlG recommended that DCPM review and approve all project manage-ment guidance and procedures developed by NRC program offices in order to strengthen NRC oversight of the procurement process and administration of work orders placed with DOE nationallaboratories. DCPM developed a comprehensive management directive as I

outlined above for placing work with the DOE laboratories and expects to issue the man-agement directive by April 1,1994.

l IMPROVEMENTS NEEDED IN NRC'S PROCESS FOR APPROVING PAYMENTS TO THE DEPARTMENT OF ENERGY August 31,1992 I

The OlG staff reviewed the project management practices in the Office of Nuclear Regulato-ry Research (RES) related to the acquisition of goods and services from DOE nationallabo-rmries. OlG made three recommendations that centered on the review and approval of I

cost vouchers and subsequent verification of RES work performed. One of the three rec-ommendations remains open. The OlG also addressed the need for an internal quality t

control process to ensure that DOE vouchers are reviewed and approved in accordance I

with Agency policy and proce me; RES implemented a quality control process and the NRC Controller implemmten fnhv up procedure to ensure that approved vouchers are on fM to support DOE w ymeres. ihis requirement is being placed in the management directive that is schedule 11. oc issued on April 1,1994.

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