ML20058L749
| ML20058L749 | |
| Person / Time | |
|---|---|
| Issue date: | 12/10/1993 |
| From: | NRC COMMISSION (OCM) |
| To: | |
| References | |
| REF-10CFR9.7 NUDOCS 9312170176 | |
| Download: ML20058L749 (74) | |
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bOtO DECEMBER 10, 1993 Pag 6S:
48 PAGES i
e NEAL R. GROSS AND C0., INC.
COURT REPORTERS AND TRANSCRIBERS 1323 Rhode Island Avenue, Northwest Washington, D.C.
20005 (202). 234-4433 b
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I
DISCLAIMER a
i This is an unofficial transcript of a meeting of the United States Nuclear Regulatory Commission held on December 10, 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 i
the matters discussed.
Expressions of opinion in this 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.
l
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NEAL R. GROSS covat aseoetsas me rarusensens 1313 kHost 19 LAME AYgMut. N.W.
(202) 234-4433 WASMIMatoN. D.C. 2000$
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UNITED STATES OF AhERICA NUCLEAR REGULATORY COMMISSION l
'l BRIEFING BY IG ON FEE AUDIT r
5 i
PUBLIC MEETING l
t
- -)
Nuclear Regulatory Commission One White Flint North Rockville, Maryland i
1 i
Friday, December 10, 1993 i
r The Commission met in open session,-
l t
pursuant to
- notice,
-at 9:30 a.m.,
Ivan
- Selin, Chairman, presiding.
COMMISSIONERS PRESENT.
l IVAN SELIN, Chairman of the commission KENNETH C. ROGERS, Commissioner
- i FORREST J. REMICK, Commissioner i
E. GAIL de PLANQUE, Commissioner i
i i
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)
J 3
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2 STAFF SEATED AT THE COMMISSION TABLE:
DOCTOR ANDREW BATES, Office of the Secretary TRIP ROTHSCHILD, Office of the General Counsel l
DAVID C. WILLIAMS, Inspector General i
THOMAS BARCHI, Assistant IG for Audits l
WILLIAM GLENN, Team A Leader, OIG F
GARY JANOSKO, Senior Auditor, OIG l
CORENTHIS KELLEY, Senior Auditor, OIG i
I i
)
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'i I
e l
l
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r NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE, N W.
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P-R-O-C-E-E-D-I-N-G-S i
1 9:30 a.m.
2 CHAIRMAN SELIN:
Good morning, ladies and 3
gentlemen.
4 The Commission is meeting at this time to 5
receive a briefing from the Inspector General on the 6
review of the fees that we charge licensees.
He 7
provided a report of his review to the Commission in 8
late October.
This review is actually, at least in i
9 part, a request from the Commission because we have a 10 lot of information and it seemed like a management i
11 audit was really called for to take a look at both our i
12 performance and to sort of step back half a step and l
13 look at the numbers and what's happening.
There were 14 a number of specific questions, to see if such 1
15 questions as the number of licensees goes down in some 16 area.
In fact, are our costs going down or are we 17 just saddling those who are left such that the last l
18 person pays for the entire program, and a number of 19 other questions.
20 The report was quite interesting.. We've 21 all had a chance to review the report, so'we look 22 forward to the presentation and particularly the i
23 opportunity to discuss with you in this forum some of l
24 the points that you gave.
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Commissioners?
2 Mr. Williams, the floor is yours.
3 MR. WILLIAMS:
Thank you, sir.
4 4
I've asked Tom Barchi to provide the 5
presentation this morning and I'll turn it over to
+
6 him. Since it's a lengthy presentation, I'll defer to 7
him immediately.
3 MR. BARCHI:
We certainly appreciate the 9
offer to meet with you this morning and discuss that 10 audit report.
We'd also like to talk with you this 11 morning about additional audit work that we've done in -
12 looking --
13 CHAIRMAN SELIN:
Introduce your 14 colleagues.
15 MR. BARCHI:
Yes, sir.
16 We'd also like to discuss additional audit
[
17 work that we've completed, looking at the various 18 systems that feed into the audit, into the fee-setting 19 process and the methodology in which we employ to 20 establish our licensee fees.
21 Thirdly this morning, we'd like to share 22 with you some observations that we had spelled out in.
23 the memo transmitting the report to you which would
(
24 suggest possibly a new way of looking at how we go
[
25 about establishing license fees.
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This will be a
fairly comprehensive I
i 2
briefing and I would ask, if we could, to hold our 3
questions until the end, naturally recognizing though I
4 if there is a need for point of clarification, please 5
feel free to ask for that.
6 Finally, to get to the introduction of my 7
staff, and it's with great pleasure that I have the 8
opportunity to introduce them to you this morning.
9 They've done some superb work for us and it's always 10 fun to bring them out and give the a chance to strut I
11 their stuff, so to say.
i 12 Bill Glenn is our team leader for the team l
13 that handles financial management issues. In addition 14 to that, Ren Kelley at the far end of t.he table, is a 15 senior auditor, and Gary Janosko is also a senior r
10 auditor.
Gary will initiate the briefing this 17 morning.
j 18 Gary?
19 MR. JANOSKO:
The Chairman requested the 20 NRC Office of the Inspector General to assist the l
21 Commission and staff in performing a comprehensive i
22 review of NRC fee policy by conducting an audit of the j
23 basis by which license fees are established.
We 24 reviewed NRC's development of license fees for fiscal 25 years 1992 and 1993 in order to answer specific l
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questions raised by the Chairman and assess the fee 2
development process.
3 To accomplish this objective, we examined 4
applicable documentation, interviewed cognizant NRC 5
personnel, and held discussions with several other i
6 federal regulatory agencies that possess fee systems.
7 We conducted our review from July through October 1993 8
and issued our report on October 26th, 1993.
9 (Slide)
Our work effort can be divided 10 into five major areas: overhead costs and fees; direct 11 costs and fees; determination of direct hours; 12 effectiveness of small entity fee; and increases in 13 annual fees for materials licensees.
14 (Slide)
Background.
NRC assesses two 15 types of license fees on its facilities and materials 16 licensees.
The first type is a fee for specific 17 licensing acti.ons and inspection services provided to 18 tr.+ licensees.
The amount of the fee must bear a 19 direct relationship to the cost of providing 20 regulatory services to an identifiable license.
This 21 fee, which is covered under Part 170 of Title X of the 22 Code of Federal Regulations, is authorized by Title V 23 of the Independent Offices Appropriate Act of 1952.
24 Approximately 20 percent of NRC's annual budget, 25 excluding the nuclear waste
- fund, is currently NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE. N W.
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7 1
recovered through the assessment and collection of 1
2 Part 170 fees.
3 The second type of license fee assessed by 4
NRC on its licensees is an annual fee which is covered 5
under Part 171 of Title X of the Code of Federal 6
Regulations.
The amount of the annual fee charged to 7
a licensee must bear a reasonable relationship to the i
8 cost of providing regulatory services.
r 9
With the advent of the Omnibus Budget 10 Reconciliation Act of 1990, otherwise known as OBRA 11
'90, and the requirement for NRC to recover 12 approximately 100 percent of its annual budget through 13 collection of fees, the annual fee is designed to collect the bhlance of the budget, not recover through 14 15 part 170 fees.
16 (Slide)
Overhead costs and fees.
NRC l
17 license fees are calculated based primarily on 18 budgetary data.
The NRC budget is divided into seven
'9 mission areas and within these mission areas are four 20 categories of costs:
salaries / benefits; program 21 support, administrative support; and travel.
The 22 administrative support and travel categories are i
I' 23 classified as overhead, whereas salaries / benefits and 24 program support contain both direct and overhead
{
25 costs.
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\\
'l P-R-O-C-E-E-D-I-N-G-S 1
9:30 a.m.
2 CHAIRMAN SELIN:
Good morning, ladies and 3
gentlemen.
4 The Commission is meeting at this time to t
5 receive a briefing from the Inspector General on.the 6
review of the fees that we charge licensees.
He i
7 provided a report of his review to the Commission in 8
late October.
This review is actually, at least in i
9 part, a request from the Commission because we have a 10 lot of information and it seemed like a management 11 audit was really called for to take a-look at both our 12 performance and to sort of step back half a step and 13 look at the numbers and what's happening.
There were 24 a number of specific questions, to see if such 15 questions as the number of licensees goes down in some 16 area.
In fact, are our costs going down or.are we i
17 just saddling those who are left such that the last 18 person pays for the entire program, and a number of I
19 other questions.
)
20 The report was quite interesting.
We've 21 all had a_ chance to review the report, so we look-t l
22 forward to the presentation and particularly the t
1 l
(
23 opportunity to discuss with you in this forum some of
?
24 the points that you gave.
l NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISt.AND AVENUE, N W.
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(Slide)
All overhead costs included in 2
NRC's annual budget are factored into the calculation 3
of the professional hourly rate.
The professional 4
hourly rate is multiplied by applicable direct labor 5
hours to determine Parts 170 and 171 fees for NRC j
6 licensees.
i 7
Typically, unless the number of licensees 8
changes dramatically, it is our opinion that overhead
-l 9
costs will not vary significantly in relation to the 10 number of licensees.
11 CHAIRMAN SELIN: That's a finding that you 12 made based on your review or is it an assumption that 13 you made going into the study?
14 MR. JANOSKO:
It's an assumption going i
15 into the study.
16 Overhead consists of such costs as 17 facilities, secretarial
- support, contract 18 administration and the accounting and personnel 19 operations.
These activities are not affected by a 20 modest change in the number of licensees.
In other 21 words, the INw workload can be accommodated without 22 adjusting the amount of existing resources.
- However, 23 if the change is dramatic, NRC would be forced to i
24 increase or reduce resources within these activities 25 to corpensate for the new work load, thereby impacting NEAL R. GROSS COURT REPORTERS AND TRANSCR BERS 1323 RHODE ISt.AND AVENUE, N W.
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.I 9
.I 1
overhead costs.
2 (Slide) Direct costs and fees. All other j
3 things being equal, if the number of licensees in a
{
4 given category decreases, direct costs for those 1
5 licensees should decrease.
However, as priorities f
6 change within NRC and as new issue areas arise, a 7
shift in resources may negate any decreases in direct 8
costs which would have otherwise been achieved.
9 CHAIRMAN SELIN:
I don't understand that.
10 What do you mean by that?
{
11 MR. JANOSKO:
If in certain --
i 12 CHAIRMAN SELIN:
Give me an example.
[
13 MR. JANOSKO:
Sure.
For instance, in the 14 materials area, the number of materials licensees has 15 decreased significantly over the last couple of years, 16 but the actual budget amount dedicated to materials 17 licensees increased due to the fact that materials
[
18 inspection activity has increased over those last 19 couple of years as well.
So, we have an offset 20 whereby eve'n though there was a decrease in the number 21 of licensees, the emphasis was placed on increasing 3
22 the magnitude and the comprehensiveness of the l
23 inspections and that resulted in an overall increase L
24 in resources.
25 CHAIRMAN SELIN: Do you have a sense as to i
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'whether this increase effort per licensee was because 2
we decided the program needed to be buttressed or did 3
we just have more resources and people looking for 1
4 work?
5 MR. JANOSKO: Well, the comprehensiveness 6
of the inspection activity was increased markedly i
7 since the last review of the inspection fees was 8
conducted.
Back in 1984 was the time when the t
9 inspection fees were last evaluated.
In conjunction 10 with the CFO Act requirehents, it'.1993 the inspection 11 fees were reviewed again to determine if they were j
12 adequate.
Because a.
number of changes in the 13 inspection program have been made since 1984, that 14 caused the inspection fees to increase a great deal.
15 CHAIRMAN SELIN:
Was it your impression 16 these are program-driven changes or as the number of 17 licensees went down or the inspectors are looking for 18 work to fill out their --
19 MR. BARCHI:
We did analyze it to make 20 that kind of a determination, sir.
We didn't try to 21 evaluate the rationale behind it.
What we asked for l
22
- was, what was the rationale and that's what was 23 presented to us.
These were programmatic changes.
24 CHAIRMAN SELIN:
So, at least it was 25 sufficient to explain the --
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MR. JANOSKO:
It seemed reasonable.
2 CHAIRMAN SELIN:
Okay.
3 MR. WILLIAMS:
We do know though that the 4
determination was nearly ten years ago and a great 5
deal has happened since that time its terms of 6
expansion and emphasis of other areas.
We wouldn't 7
expect that kind of thing to occur now that it's being 8
adjusted so frequently.
9 CHAIRMAN SELIN:
Okay.
Thank you.
10 COMMISSIONER REMICK:
I'm not sure I 11 understand the first bullet, unless it means that the 12 total of the direct cost should decrease.
It seems 13 like if we reduce licensees and kept our direct effort 14 the same, the cost would go up per licensee.
15
'MR. WILLIAMS:
I'm speaking in total.
16 COMMISSIONER REMICK:
But you're talking 17 total, okay.
8 MR.
WILLIAMS:
The idea we meant to
+
19 communicate is that although logic would tell you that
?
20 it should go down, we don't want to eliminate the 21 possibility that it remain stable if program 22 expansions are made.
23 MR. JANOSKO:
(Slide)
Determination of 24 direct hours.
As our next slide shows, direct hours 25 are determined in different ways for Parts 170 and 171 NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE. N W (203 234-4433 WASHINGTON. O C. 20905 (202) 234-4433
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fees.
For Part 170 fees, direct hours are calculated 2
using two methodologies.
For some licensing actions l
1 3
and inspections, average hours are utilized which are i
4 determined by the program offices and are to be 5
reviewed biennially in accordance with the Chief 6
Financial Officers Act.
7 This method of calculating Part 170 fees 8
typically pertains to materials licensees and the 9
resultant fees are called flat fees. The other method 10 used to determine direct hours for Part 170 fees is to l
5 11 track the actual hours spent performing certain 12 licensing actions and inspections. The resultant Part 13 170 fees are called full cost fees.
14 COMMISSIONER ROGERS: Excuse me. Have you 15 done a dual calculation?
In other words, in this i
16 method that you're talking about here, is this the 17 method that the staff uses for assessing fees or is 18 this that there are two different methods, a flat fee 19 method and a full cost fees method that are applied 20 differently to different kinds of activities? Is that 21 the case?
22 MR.
JANOSKO:
The staff utilizes that 23 current methodology.
24 COMMISSIONER ROGERS:
Right.
Now, have i
25 you ever done two calculations for those different NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE. N W.
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1-situations?
In other words,'to look at a situation 2
where average hours, flat fees are used and actually 3
tried to do a full cost analysis and see how they 4
compare?
1 5
MR. JANOSKO: We did not do that, sir, no, 6
but the average hours are based on a determination of 7
what it would physically take to do that work.
The 8
average hours are based on a best guess in terms of 9
what the actual hours would be for that particular 10 action.
11 COMMISSIONER de PLANQUE:
On average?
12 MR. JANOSKO:
Yes, correct.
t 13 COMMISSIONER ROGERS:
Yes, on average.
14 But that's the point.
15 MR. JANOSKO:
Right.
Right.
16 COMMISSIONER ROGERS:
It's always I
17 assume somebody did it at one time, but it would te a 18 good idea to check where there are average type 19 calculations done to actually do it all out in detail 20 on a full cost basis and see what the difference is.
t' r
21 They're not going to be identical, I'm sure, and how 22 much fluctuation is reasonable there?
l 23 Go ahead.
1 24 MR. JANOSKO:
(Slide)
For Part 171 fees, 25 direct hours are determined as follows.
Based on NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE. N W.
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14 1
input received from the program offices, the NRC's 2
activities and subactivities are broken down into the 3
classes of licensees that utilize the greatest amount 4
of agency resources in these areas.
The direct FTEs
{
5 associated with these activities and subactivities are 6
also identified.
The number of direct FTEs are then 7
multiplied by annual productive hours as specified by-8 OMB to obtain direct hours for fee purposes.
I 9
(Slide)
Effectiveness of small entity 10 fee.
A sighificant amount of effort was expended in 11 developing NRC's initial definition of small entity l
12 during the early to mid-1980s.
This initial I
13 definition was developed in response to the Regulatory 14 Flexibility Act of 1980 which required federal 15 agencies to consider the impact of regulatory actions 16 on small entities.
Substantial input was received 17 from the Small Business Administration and through i
18 public comment via the Federal Reaister.
19 The onset of the requirement for NRC to i
20 collect approximately 100 percent of its annual j
21 appropriation resulted in the need for NRC to 22 reconsider its definition of small entity to determine i
1 23 if changes were necessary, given the new environment.
24 In order to achieve 100 percent recovery, NRC greatly 25 increased the
- fees, especially the annual
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assessed to its' licensees.
2 This created a
hardship for many l
3 licensees, especially the small entities.
NRC's i
4 response to this new environment, keeping in mind the
-5 somewhat conflicting requirements of OBRA '90 versus 6
the Regulatory Flexibility Act, was to. establish 7
during fiscal year 1992 a lower tier category of small 8
entity.
Lower tier licensees are charged a
i 9
significantly lower annual fee than other _ small 10 entities.
A determination as to whether NRC's small-11 entity fee has been effective would depend upon one's i
12 perspective.
The reduced fees certainly demonstrate l
13 that the agency has attempted to be responsive to the 14 concerns raised by smaller materials licensees and 15 have likely enabled some of these entities to retain 16 their-licenses.
However, given the requirement for 17 NRC to recover approximately 100 percent of its annual 18 budget, the implementation of the small entity fee has 19 resulted in the assessment of significant surcharges 20 to other materials licensees and especially power 21 reactors.
Although these larger licensees may have 22 the capability to pay the surcharges, the end result 23 is that they are subsidizing the small entities.
24 CHAIRMAN SELIN:
My remembrance of the 25 staff's calculations when they proposed this fixed i
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schedule for small entities was that the total amount-2 of money we were talking about was really quite small 3
compared to what the other licensees were already 4
being assessed. Did you do that calculation, in fact?
5 Do you know what the difference would have been if the 6
small entitles had not gotten this dispensation?
In
.p 7
other words', if we hadn't gone below the $1800.00 8
level. As I r'emember, it was less than one percent of 9
the base for the other licensees.
Did you check that 10 figure?
11 MR. JANOSKO:
In an overall sense the i
12 percentage is fairly small, but the dollars are fairly 13 large too as well, the surcharge that' is being 14 assessed to the power reactors.
15 CHAIRMAN SELIN:
Large with respect to 16 what?
17 MR. JANOSKO:
I believe the surcharge to 18 the power reactors was somewhere around $100,000.00, 19 in that vicinity.
20 CHAIRMAN SELIN:
Per --
21 MR. JANOSKO:
Per reactor.
22 COMMISSIONER ROGERS:
Did you have any 23 feeling about introducing this new small entity fee, 24 to what extent that.actually increased our cost of
.]
25 carrying it out?
In other
- words, once we've NEAL R. GROSS COURT REPORTERS AND TRANSCRIDERS i
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f 17
[
1 established this new system, perhaps there were 2
additional costs, I don't know, in following this over
^
3 and above the earlier assessment method that we used.
~
4 In other words, did this increase the overhead costs
}
i 5
by -- that then had to be shared by everybody?
In r
6 other words, did we increase the cost'of our overhead 7
by introducing this new small entity fee?
8 MR. JANOSKO:
In my opinion, all we're 9
doing is real, locating the existing fees or the 10 existing budget already.
11 COMMISSIONER ROGERS:
But it didn't 12 require considerably more effort to do that, is that 13 what you're saying?
14 MR. JANOSKO:
Based on what I saw, no.
I 15 can't specifically say directly that that's the case, l
16 but in my opinion it would not result in any 17 additional costs.
18 MR. BARCHI:
Any significant --
19 MR. JANOSKO:
That's correct.
20 CHAIRMAN SELIN: Especially since we don't 21 audit the statement.
When somebody comes in and says 22 he's a small licensee, we assume he's telling the 23 truth.
It may be that we should do more to determine 24 that, but the way we do it today there's essentially 25 no cost.
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MR. JANOSKO:
(Slide)
.NRC is currently
]
2 compiling the results of a survey that was recently 3
conducted to obtain information to update the 4
financial profiles of its materials licensees.
These j
5 financial profiles were initially developed 6
approximately ten years, when NRC conducted its first 7
and only such survey.
Since the financial profiles 8
are not current, the agency cannot be certain as to 9
whether qualified small entities are taking advantage 10 of the small entity fee until compilation of the 11 recent survey results is completed.
NRC intends to 12 analyze the compiled survey results in order to make f
13 this determination.
14 (Slide)
NRC has invested considerable 15 resources in order to determine how best to define 16 small entity.
This definition is based on achieving 17 a middle ground between the requirements of OBRA '90 18 and the Regulatory Flexibility Act and is very 19 opinionated in nature.
In other words, it is not 20 based on compliance with specific statutory 21 pronouncements.
- Also, the Small Business 22 Administration has recently solicited comments on 23 proposed changes to its size standards.
Once 24 promulgated, the final rule on this matter may impact 25 NRC's definition of small entity.
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CHAIRMAN SELIN:
It would increase the 2
number of firms that would be eligible to be called a 3
small entity, I assume.
_i 4
MR. JANOSKO: They have increased the size 5
standards, correct, to allow for inflation since they 6
last made those categories.
7 (Slide)
Increases in annual fees for 8
materials licensees.
The amount of annual fees 9
charged some categories of materials licensees 10 increased significantly from 1992 to 1993.
After 11 reviewing the calculation of materials licensees l
12 annual
- fees, we concluded that the significant 13 increases were due to two occurrences, increases in 14 inspection fees charged to materialr. licensees and
(
15 increases in the budgeted amount ilPutable to 16 materials licensees.
As our slide shows, the 17 increases in inspection fees were due to the fact that 18 these fees had not been reviewed since 1984 and major 19 changes have been made to the materials inspection-20 program since then to improve safety.
21 The inspection fees were reviewed for 22 fiscal year 1993 in accordance with the Chief 23 Financial Officers Act which requires a biennial 24 review of fees charged by a federal agency for 25 services provided.
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fees will now be reviewed on an biennial basis in the 2
future.
3 An increase in the budgeted amount 4
attributable to materials licensee was caused by 5
increases in license and inspection efforts and 6
increases in general government costs.
7 In conclusion --
8 CHAIRMAN SELIN:
Wait a minute.
So 9
basically you said one is there's been some price 10 adjustment, that the fixed fees just didn't reflect 11 current prices.
12 MR. JANOSKO:
Correct.
13 CHAIRMAN SELIN:
And then the second is 1
14 there's just been some increase in actual activity in 15 terms of hours as opposed to prices.
16 MR. JANOSKO:
Yes, sir.
17 CHAIRMAN SELIN:
It's been a kind of a 18 double whammy, to update the current pricing, but then 19 also to look at the current level of activity for 20 changing a licensee's address or what have you.
21 MR. JANOSKO:
Correct.
22 (Slide)
In conclusion, our review 23 disclosed that NRC is unable to determine whether 24 qualified small entities are taking advantage of the 25 small entity fee because the financial profiles i
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21-1 maintained for materials licensees are not current.
2 These financial profiles were initially established 3
approximately ten years ago and have not been updated.
l 4
Efforts are underway to compile the 5
results of a recent survey of materials licensees 6
which was conducted in part to update this
-l 7
information.
No other reportable exceptions were 8
noted during our review.
9
- Now, Ren will present additional 10 information gained during our review of the licensee r
11 billing process, including cost data related to 12 assessing Part 170
- fees, automated systems that 13 provide fee data, and correspondence between NRC and 14 licensees.
15 CHAIRMAN SELIN: Good morning, Ms. Kelley.
16 MS. KELLEY: Mr. Chairman, Commissioners.
l 17 In addition to.OIG's review of the fees 18 for licensees. conducted at the request of the 19 Chairman, OIG has completed phase 1 of a two phase 20 assessment of the license fee billing process.
Phase 21 1 of this assessment was to gain an understanding of 22 the processes for calculating the various fee 23 categories, the quality controls associated with the 24 processes, the information systems from which data is 25 downloaded for fee determination purposes, and.the e
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t 32 i
1 extent to which licensees have complained about the r
2 assessed fees.
3 The second phase of the assessment will i
4 encompass a more in-depth review of selected systems 5
from which license fee information is obtained and the _
6 use of the systems by the program offices in the i
7 decision making process.
8 This portion of our assessment of the 9
license fee billing process disclosed that the process 10 is resource intensive and cumbersome.
We know that i
11 the resource intensity and the cumbersome nature of j
12 the license fee billing process is due in part to tne.
13 provisions of the related regulations and the rules 14 which reflect the laws and court decisions regarding 15 fees.
For example, some activities are fee bearing, 16 some are not.
Some activities are recovered at full 17 cost, others are at an established flat rate.
Fees 18 are dependent on licensing decisions and the type of i
19 licensee in question.
Some positions have been 20 designated as fee bearing, others are not.
21 The agency collects two types of fees.
22 The amount of one fee depends on what's recovered from 23 the other type of fee.
These and other provisions 24 require an exhaustive record keeping system and close 25 scrutiny oL the staff hours applicable to each of NEAL R. GROSS i
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23 1
these categories.
The agency expends substantial 2
effort to ensure the accuracy and the equity of the 3
billing process.
i i
4 We will discuss the information obtained 5
during our assessment regarding the cost to process 6
Part 170 and Part 171 fees, the automated systems from 7
which data is taken during the fee determination I
I 8
process, and the results of our analysis.of the fee-9 related correspondence between NRC and the licensees.
10 (Slide)
We are unable to bring a great i
11 deal of precision to the cost to process Part 170 and 12 Part 171 licensee fees primarily because the agency 13 generally does not maintain cost data in this manner.
14 Therefore, the figures presented represent best 15 estimates provided by the headquarters and regional l
i 16 offices involved in this process.
We found that 17 approximately
$1 million and about 11 FTE were_
18 expended by the agency to process Part 170 fees which 19 generated about $105 million for fiscal year 1993.
20 The
$1 million cost includes about 21
$500,000.00 expended by the license fee and debt 22 collection branch for staff salaries and contractor 23 effort.
The portion of the $500,000.00 for staff 24 effort equales to about 11 FTEs, or about 62 percent 25 of the FTEs devoted to fees by the License Fee and I
i NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE, N W.
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Debt Collection Branch.
2 The $1 million estimate to process fees 3
also includes about $225,000.00 in contractor support 4
and two FTEs for the Office of Information Resources l
5 Management to maintain the fee billing systems.
The 6
estimate also includes an undetermined portion of the I
7 cost to maintain the regulatory information tracking 8
system, better known as RITS.
The RITS costs are-9 shown in the next-slide.
10 (Slide)
RITS is the primary system used 11 to supply labor hours for Part 170 fee determination.
12 NRC's program and regional offices spend about nine 13 FTE per year to maintain RITS.
NRC spends an 14 additional $313,000.00 per year in contract cost for 15 RITS data entry.
i 16 CHAIRMAN SELIN:
Let me see if I
17 understand this.
18 MS. KELLEY:
Okay.
19 CHAIRMAN SELIN:
Graing back to the 20 previous chart, you said it's $1 million and 11 FTE.
1 1
21 Are you saying that the million dollars is not for 22 personnel
- costs, that's just contract and i
23 administrative costs?
24 MS. KELLEY:
The million dollars -- yes, i
)
25 the million dollars does include personnel cost.
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CHAIRMAN SELIN:
But it include the cost 2
of the 11 FTE?
3 MS. KELLEY:
The million dollars for the i
4 170 fees does include the cost of FTE for the people
.l 5
that are in the License Fee and Debt Collection 6
Branch.
It does not include a calculation of the nine i
7 FTE for the people that assist in maintaining RITS.
8 data.
9 CHAIRMAN SELIN:
In that case, the cost 10 estimate is almost certainly too low.
I mean 11 FTE j
11 would have to use up the million dollars without the' 12 contract.
l 13 COMMISSIONER ROGERS:
- Right, by 14 themselves.
[
15 CHAIRMAN SELIN:
The more interesting 16 thing -- I mean that's important, but more interesting 17 is that sure they generate $105 million in fees, but 18 we're going to get that $105 million anyway.
The 19 question that you raised in your report is what's the 20 variation between the most heavily billed and the 21 least heavily billed of the reactor licensees? It was 22 very small, wasn't it?
23 MR. JANOSKO:
It was about two, three 24 percent.
?
25 CHAIRMAN SELIN:
So, this would almost --
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one could almost suggest that while we're spending $1 I
2 million or $2 million to collect $105 million, but 3
that's not right. We're going to collect $105 million I
4 anyway.
We're spending the $2 or $3 million to make 5
distinctions between the most heavily visited 6
licensees and the most lightly visited licensees. Not 7
to collect $105 million, but to get relatively small 8
variations from one to the other.
Is that correct?
9 MS. KELLEY:
That's correct.
The cost I
10 figures are conservative that we're presenting to you.
11 They are conservative.
12 MR. BARCHI:
But your point is right on i
13 target.
i 14 CHAIRMAN SELIN:
Well, it's your point.
15 I'm just trying to show you I read your report.
16 MR. BARCHI:
Yes.
17 CHAIRMAN SELIN:
If this were an IRS 18 calculation and you went to the Commissioner and said, 19 "For $2 million we could collect another $100 million 20 in taxes," he'd probably say that's a good idea.
But i
21 we're going to collect $100 million.
- Now, the 22 question is, "For a couple million dollars we think we 23 can allocate that a little more fairly.
Is that 24 worthwhile?"
That's a very different question.
25 MS. KELLEY:
In addition to what is shown i
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1 on the chart, the Office of Information Resources i
2 Management also expends another $200,000.00 a year for i
i 3
time sharing and other operating costs for the RITS 4
system.
j 5
CHAIRMAN SELIN:
I really would like you t
6 to go back and look at those costs, taking more c
i i
7 generous assumptions of what an FTE really costs us t
8 and what the contract -- because these tend -- I know 9
you're being conservative, but in this case that's not 10 serving us that well.
11 MS. KELLEY:
Okay.
12 CHAIRMAN SELIN:
There have to be sort I
13 of
-- if you have say $50,000.00 in salary costs and
[
f 14 you've got another $25,000.00 in benefits, but then l
r 15 you also have a share of space, supplies, telephones, 16 et cetera, and you have supervisors.
They shouldn't 17 be as fully loaded as the inspectors cost because they 18 shouldn't carry overhead on overhead.
But we want to 19 use reasonable cost allocation factors.
Not to 20 tightly conservatively audit one, but reasonably to 21
- say, "What is it really costing us to run this 22 program?"
In the long run, if we did it differently, 23 that's money we could save. You couldn't save it just 24 by dropping a person.
25 MR. WILLIAMS:
We will do that.
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CHAIRMAN SELIN:
Thank you.
2 MS. KELLEY:
We note that since RITS is 3
used for other purposes, not all costs associated with 4
RITS relate directly to fees.
The offices that 5
provided cost data on RITS were unable to state what t
6 portion of those costs relate directly to fees.
It is 7
clear that the agency cannot calculate Part 170 fees 8
without-manpower data and RITS contains the manpower 9
data which is used in determining these fees.
f 10 CHAIRMAN SELIN:
Let me make
- clear, i
11 personally I'm willing to accept your FTE estimates 12 without saying go back and redo those.
It's really 13 the cost per FTE when you take sensible allocations of l
l 14 long-term variable costs, like supplies, space, et j
15 cetera, into account, which we don't usually when we i
16 put our budgets --
17 MS. KELLEY: We've been told by the Office l
18 of the Controller that $75,000.00 is an estimated j
i 19 amount per FTE to factor that.
20 CHAIRMAN SELIN:
I don't think that's 21 right.
I think that's just the average salary and 22 benefits.
If you take a look at the rest, it's got to i
23 be at least twice the direct salaries.
f 24 MS. KELLEY:
Okay.
l 25 MR. WILLIAMS: We'll do a good emphasis on NEAL R. GROSS l
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that and, as you said, we'll focus on overhead.
2 CHAIRMAN SELIN:
Thank you.
3 MS.
KELLEY:
(Slide)
Part 171 fees l
4 required about $800,000.00 in salaries and contractor 5
support and generated about $415 million in fiscal 1
6 year 1993.
Almost all of the costs were expended by 7
the License Fee and Debt Collection Branch.
The i
8
$800,000.00 includes staff and contractor effort. The 9
portion of the $800,000.00 for. staff ef fort equates to 10 about 6.5 FTEs or about 38 percent of the FTEs devoted 11 by the. License Fee and Debt Collection Branch.
The 12
$25,000.00 a year expenditure by IRM is for contractor 3
13 costs to maintain one of the fee billing systems for 14 Part 171 fees.
15 We were intrigued by the cost estimates in 16 that information previously provided by the agency 17 indicated that about 80 percent of the fee processing 18 effort is devoted to collecting Part 170 fees.
19 However, as shown, the estimates provided by the 20 License Fee and Debt Collection Branch showed that the 21 branch devoted more of its total resources for I
22 processing fees to Part 171 fees than it did for 23 processing Part 170 fees.
This is true primarily 24 because of the overwhelming majority of the contractor i
25 support dollars were used to generate Part 171 fees.
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CHAIRMAN SELIN: But the overall costs are t
2 only the 171 program, given that we know the cost of 3
running the agency is trivial compared to --
t 4
MS. KELLEY:
Yes.
i 5
CHAIRMAN SELIN:
It's basically rough and
{
6 ready justice, is what we're talking about.
7 MS.
KELLEY:
We also point out that
{
8 although a
substantial amount of resources are I
9 expended to process fees and maintain fee-related 10 systems, the process is streamlined over what it 11 previously was, i
12 The flow charts in the next two slides 13 illustrate how detailed or involved the fee billing f
processispndthevariousinformationsystemsthat 14 15 feed data to the fee billing systems.
16 (S,lide)
The first slide displays the 17 systems from which data is downloaded during the 18 process for determining Part 170 fees.
Our first I
19 impressions upon looking at this flow chart was that 20 there must be a more efficient way to collect the data 21 and calculate the fees.
- However, upon closer 22 examination, we came to appreciate the agency's 1l3 decision to, where practical, capitalize on the 24 information systems developed for other purposes 25 rather than duplicating efforts by initially capturing
?
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.31 1
fee data directly into fee systems.
2 The three systems to the far left were not j
3 developed for the purposes of fees.-
- However, 4
information is taken from these systems either by 5
electronic transfer or manually and uploaded into the 6
fee systems shown in the center of the chart.
These 7
systems process the calculations for the different 8
categories of fees.
Once the bills are issued,.they 9
are entered into the collect system of open accounts j
10 receivables The accounts receivable balances are 11 manually entered into the federal financial system.
12 The Office of the Controller estimates 13 that the data that is entered into the federal i
14 financial system will be automatically downloaded by I
15 the end of the fiscal year.
Obviously, i
16 vulnerabilities are inherent in a process of this 17 sort.
However, our assessment disclosed that the 18 License Fee and Debt Collection Branch, the Office of 19 the Information Resources Management, and the other i
20 offices, have put in place various management controls 21 to protect the integrity of the data that flows to and 22 from these systems.
23 Slide number 19 also indicates the fees 24 that are involved in the process of calculating the 25 Part 170 fees.
Here again the systems that are on the NEAL R. GROSS COUAT REPORTER $ AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE, N W.
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1 left side of the chart are the ones that were not put 1
2 in place for fee purposes, but where data is taken in 3
the fee calculation process. The fee systems are also'
- t 4
in the middle. Again, af ter the bills are issued, the 5
information goes to the collect system and the 1
6 accounts receivables go to the federal financial 7
systr 9.
i 8
This flow chart does not show data for the 1
9 Office of Nuclear Material Safety and Safeguards as it i
10 does for the Office of the Nuclear Reactor Regulation 11 because, according to NMSS officials, the contract 12 data for NMSS is a part of the RITS data.
13 Correspondence review.
14 CHAIRMAN SELIN:
Before you get off that, i
i 15 basically what you've pictured is a fairly cumbersome i
16 but pretty cheap system to operate where a relatively f
17 large share of what is not a great deal of money is 18 going into doing the Part 170 variable, the variable 0
19 part, but the difference is that 170 bills, at least 20 to reactor licensees, are very small after all tnat.
21 What I interpreted your last remarks to be are there 22 isn't a lot to be gained by trying to streamline the f
f 23 system. The basic question is should we be running it l
24 at all.
What you didn't say, but I think another j
25 reasonable assumption is that if we're going to run
(
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4he system, that we should strive to make more of the j
2 costs variable so that -- I mean if only 20 percent of 3
the costs are variable, why are we going to all this 4
trouble? Either the cost should be more variable and 5
more of the cost should be collected in 170 or it's 6
hardly worth the trouble to run the system.
7 MR. WILLIAMS:
That is a good -- that's t
8 exactly the point we're making.
9 CHAIRMAN SELIN: Are you suggesting these 10 things or am I just putting words in your mouth?
l 11 MR. WILLIAMS:
No.
I was about to say 12 that that's exactly the points we were making. We did i
13 see some value in using this integrated system for i
14 manpower kinds of purposes and billing kinds of l
15 purposes.
We think it's the general trend of 16 government and under this agency.
You're right, one
'i 17 cf the unintended results is it is a bit cumbersome, i
18 but it seems so much better than creating parallel, t
19 possibly conflicting systems.
We were glad for the 20 fact that the decision had been made.
,1 YCHAIRMAN SELIN:
Ms. Kelley?
22 MS.
KELLEY:
(Slide)
Cxrespondence 23 review.
As of September 30, 1993, licensees owed NRC 24 approximately $4.8 million in assessed license fees.
25 A significant portion, or about $3 million, consisted f
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of about 700 accounts more than 180 days old.
'We
{
2 reviewed these accounts and a
sample of the.
3 correspondence between NRC and licensees to determine j
-i 4
whether the non-payment of fees was attributable to I
i 5
errors in NRC's processing of fee data or within the 6
data itself.
We found that less than one percent of 7
the accounts receivable balances was due to NRC 8
billing errors.
9 The outstanding accounts were primarily 10 for materials annual fees.
The delays in payments 11 were due for the most part to the failure of licensees 12 to timely notify HRC of desired changes in licensing 13 status.
One specific example was delays by licensees 14 in accurately completing the required paperwork to 15 obtain small entity status.
16 CHAIRMAN SELIN:
I'm sorry.
17 MS. KELLEY:
Go ahead.
18 CHAIRMAN SELIN: I was just saying we were 19 talking about roughly $3 million late out of $100
[
20 million in materials licensees.
t 21
. MS. KELLEY:- That's not a lot of money.
t 22
' CHAIRMAN SELIN: It's about three percent.
23 No, that's not bad for any kind of a receivable 24 operation, even though ten percent of the accounts are 25 more than 700 out of roughly 7,000 or 8,000 accounts.
~
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i 35 i
1 MS. KELLEY:
That's for over a two year i
2 period.
The 700 is taken from '91 and
'92.
So, 3
actually, the 700-compares more to 1400 or roughly l
4 five percent of those. The 700 accounts came from two i
5 years of billing rather than from a single year.
q 6
CHAIRMAN SELIN:
So, it's 14,000.
7 MS..KELLEY:
14,000, yes.
8 CHAIRMAN SELIN:
Okay.
So it's five t
9 percent of the accounts.
10 MS. KELLEY:
Roughly five percent, yes.
11 CHAIRMAN SELIN:
That's not bad.
12 COMMISSIONER REMICK:
Are they all 170 or 13 both 170 and 171?
i 14 MS. KELLEY:
Most of them are materials t
15 annual fees which would be 171.
16 COMMISSIONER REMICK:
Okay.
So it's not 17
$100 million.- The base is not $100 million.
The 171 i
18 were what?,How many?
19 CHAIRMAN SELIN:
It's 80 percent of it.
20 But if you' looked at the materials area in general, 21 say we collected about $100 million in license fees t
22 between 170 and 171, mostly at 171, it says about i
23 three percent are significantly overdue, which there's j
4 t
24 room for improvement. That's a lot of money, but it's 25 not bad.
But what you're really saying is only five NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS
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percent of the accounts are significantly overdue.
2 MS. KELLEY:
Yes.
3 COMMISSIONER REMICK:
I'm confused.
The 4
$100 million is for what, 170 fees?
5 CHAIRMAN SELIN:
170 plus 171, but just 6
for materials licensees.
7 COMMISSIONER REMICK: Is that correct, for 8
materials licensees, $100 million?
9 MS. KELLEY: I'm sorry, I don't understand i
10 the question that you're asking.
5 11 CHAIRMAN SELIN:
What is the amount of 12 license fees that we get just from the materials 13 licensees in total?
14 MR. GLENN:
It should be - approximately 15
$200 million.
j 16 CHAIRMAN SELIN:
$200 million.
17 MR. GLENN:
It's going to be somewhere 18 around there.
But one thing, if you look at these old 19 accounts receivable, there's a
lot that are in
-j 20 litigation, firms are bankrupt.
So, the agency is 21 doing something to collect these fees.
I think you
- t 22 have to go back and look at it and you can see the 23 record that we looked at where they are in litigation 24 and something is going on where maybe NRC has to make 25 a decision through the General Counsel's Office or NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE, N W.
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37 1
something like this.
i 2
CHAIRMAN SELIN:
But let's just go back.
3 You're saying there's $3 million overdue over two 4
years?
5 MS. KELLEY:
Yes.
Right.
6 CHAIRMAN SELIN: So it's over two years of l
7 licenses.
8 MS. KELLEY:
Yes, two years of licensees, 9
two years of billing.
10 CHAIRMAN SELIN:
So, it's even less.
I 11 MS. KELLEY:
So, if you compare it to the 12 total for two years, then you to factor the i
13 percentage, which we did not think that it was very 14 high.
15 CHAIRMAN SELIN:
Right.
I 16 MS. KELLEY: Okay. As Bill indicated, the 17 various open accounts were at different processes 18 along the way in terms of bei.1g resolveci. by the 19 agency.
We note that the 700 outstanding accounts 20 receivable balances were about five percent of ' the 21 approximate 14,000 bills that were processed in the 22 [
two year period.
lI D
To conclude this segment of our briefing, i
?4 phase 1 of our assessment disclosed that the-license.
j 25 fee assessment ana billing process consumed NEAL R. GROSS COURT HEPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE, N W
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substantial resources and is cumbersome.
l 2
Surprisingly, the License Fee and Debt Collection 3
Dranch expends more resources to determine and collect 4
Part 171 fees than for Part 170 fees.
The agency uses 5
a substantial nu$nber of information systems during the 6
fee determination process and has put in place 7
controls to mitigate the vulnerabilities.
The 8
outstanding accounts receivable balances for fees are i
9 not due to NRC processing errors.
10 Now, Gary Janosko will summarize the two 11 segments of this briefing and provide observations on 12 ways of streamlining NRC's license fee process.
13 COMMISSIONER REMICK:
Before we go to 14 that, I have one question. The costs of administering 15 the Part 170 fees, do you know what portion of that 16 cost is due to nuclear power plants compared to all 17 other licensees?
18 MS. KELLEY: We did not do the calculation 19 in that way.
So, I don't have our figure of how that 20 breaks down in terms of reactors versus --
21 MR. BARCHI:
I'm not sure that we could 22 necessarily do it either.
23 COMMISSIONER REMICK:
Okay.
24 MR. BARCHI:. Frankly.
We didn't capture 25 the costs that way.
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-1 COMMISSIONER REMICK:
~How about the i
2 variability among material licensees?
The chairman i
i 3
referred to the fact that among power reactor 4
licensees there was not much variation as a result of 5
all of the auditing and looking at it.
How about i
6 material licensees?
Is there much variation in the 7
170 fees?
8 MR. BARCHI:
In terms of the cost to bill?
{
9 CHAIRMAN SELIN:
No, the collections.
10 MS. KELLEY:
The collections?
It does 11 vary, I believe, yes.
Because of the size of the f
12 licensee in question, some would --
13 COMMISSIONER REMICK:.
- Well, isn't it 14 possible that a larger portion of the 170 fees, the 15 costs of administering it are due to a larger number 16 of material licensees and a lot more variables?
I 17 MR. BARCHI:
That's plausible.
4 18 COMMISSIONER REMICK: Now, whether that's i
19 justified or not, I'm not sure.
But I don't think you 20 can draw conclusions just on the fact that nuclear i
21-power reactor fees might not vary it by much or differ 22 by much.
If you include material licensees, there
~I 23 might be some justification.
Thank you.
l 24 MR. JANOSKO:
(Slide)
In summary, as 25 discussed earlier, NRC license fees have greatly l
l NEAL R. GROSS COURT AEPOnTERS AND TRANSCRIBERS 1323 AHODE ISLAND AVENUE. N W j
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1 40 1
increased with the advent of the requirement for the 2
agency to recover approximately 100 percent of its l
3 annual budget through fee collection.
It is likely l
4 that this requirement and the resultant high license 5
fees will continue. This situation, combined with the 6
fact that the number of power reactors which pay the 7
highest fees will decrease due to decommissions could 8
have profound effects upon the agency's licensees and 9
license fee process.
10 It is our understanding that no long-range 11 plan has been prepared by NRC to address these 12 potential effects.
The Commission may be interested i
13 in determining the economic implications of future 14 higher license fees and a
declining number of 15 licensees.
16 The agency's license fee development 17 process is very detailed and labor intensive.
It has 18 been shaped over the years by the implementation of 19 new federal regulations and court decisions.
20 Substantial effort is expended in attempting to make 21 the process equitable and the costs reasonable.
22 However, these efforts are severely hampered by the 23 requirement for NRC to recover approximately 100 24 percent of its annual budget through fee collection.
25 If one category of licensees is exempted from paying NEAL R. GROSS COURT F.EPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE, N W.
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41 i
the fees, a burden is created in the form of higher 2
fees which must be borne by other licensees.
As an 3
alternative to the current process, NRC could consider.
3 4
adopting an approach to fee development that we 5
identified during our work.
6 As part of our review, we conducted 7
discussions with several other federal regulatory 8
agencies that possess fee systems.
Of particular 9
interest is the system used by the Federal Energy 10 Regulatory Commission, otherwise known as FERC.
FERC 11 has been required to collect 100 percent of its annual 12 costs since fisca] year 1987.
FERC assesses two types 13 of fees to recover its costs, as does NRC.
The first 14 type of fee is called a filing fee, which is a user 15 fee established under the authority of the Independent 16 Offices Appropriation Act of 1952, similar to NRC's 17 Part 170 fees.
18 The other type of fee is an annual fee, 19 which was originally established to recover those r
20 costs not collected through the filing fees, similar 21 to NRC's Part 171 fees.
The amount of the annual fee 22 assessed to an FERC-regulated entity is based upon the 23 size of that entity.
From the inception of the 100 24 percent cos,t collection requirement until fiscal year 25 1993,:FERC recovered approximately 15 percent of its NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE. N W.
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'(202) 2344433
42 1
annual costs from filing fees and the remaining 85 2
percent from annual fees.
This resembles NRC's 3
current situation in that approximately 20 percent of 4
the annual budget is recovered from Part 170 fees and 5
the remaining 80 percent from annual fees.
6 Starting in fiscal year.1993, in an effort 7
to simplify their fee schedule, FERC eliminated filing 8
fees for those entities who are required to pay annual 9
fees. This action was completed through a rule change 10 promulgated by their commission.
Since the vast 11 majority of regulated entities are assessed annual 12 fees, the percentage of FERC's costs recovered from 13 annual fees rose to 99 percent.
Since annual fees are 14 billed only once per year and are not as difficult to 15 calculate, versus filing fees which are billed more 16 frequently and require more detailed calculations, 17 FERC succeeded in simplifying their fee schedule with 18 minimal negative feedback-from their regulated 19
- entities, while maintaining a
100 percent cost 20 recovery rate.
21 NRC could reduce the resources devoted to -
22 license fee development and recognize potential cost 23 savings by adopting a fee schedule similar to that 24 used by FERC.
The Part 170 fees could be eliminated 25 completely or at least to the maximum extent NEAL R. GROSS 3
COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE. N W.
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8 43 3
1 practicable.
2 Secondly, the determination of the Part 3
171 fees could be simplified by eliminating much of 4
the detailed analyses performed as part of the 5
process.
We believe that less time and effort could
-i 6
be devoted to determining Part 171 fees while still 7
ensuring that these fees bear a
reasonable f
8 relationship to the cost of-providing regulatory 9
services in accordance with the requirements of OBRA 10
'90.
11 Eliminating Part 170 fees and simplifying l
12 the calculation. of Part 171 fees would reduce the 13 volume of quarterly fee billings, lessen the burden of i
14 tracking direct labor hours and contract support 15 dollars, reduce the number of automated systems needed i
16 to process fee-related data and decrease the time 17 needed to-calculate annual fees.
Legislative relief 18 may be required to implement this fee schedule change.
19 This streamlining effort would also remedy i
20 the material management control weakness associated i
21 with the lack of timely billing of license fees.
NRC l
22 currently requires approximately 90 days after 23 completion of inspection activity to issue an invoice 24 to licensees for payment of Part 170 fees.
Although 25 significant improvements have been made to this NEAL R. GROSS COURT HEPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE, N.W.
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44 1
billing process in recent years, -NRC remains in
{
2 violation of Department of the Treasury regulations 3
which require that federal agencies issue invoices to 4
non-federal entities within five business days after 5
services have been rendered.
The adoption of a fee 6
schedule composed entirely of Part 171 fees would 7
remedy this material weakness, since annual fees can 8
be billed in advance.
9 Th concludes our presentation.
10 CHAIRMAN SELIN:
Before tre go to more 11 general questions, we also have a third set of. people 12 fcr whom we're doing certifications or other work that 13 are not -- vendors who are not licensees in the normal 14 sense.
Is that a significant amount of money that we 15 collect from them, General Electric and Combustion 16 Engineering, et cetera?
Not for their license work, 17 but for processing their certifications.
f 18 MR. JANOSKO:
In my understanding, it's i
19 not a very significant amount in relation to the 20 total.
21 CHAIRMAN SELIN:
Okay.
22 Commissioner Rogers?
.3 23 COMMISSIONER ROGERS:
I don't have any 24 questions.
l 25 CHAIRMAN SELIN:
Commissioner Remick?
f NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE, N W.
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45 1
COMMISSIONER REMICK:
On the FERC 2
question, do they charge fees to any really small
)
3 entities, the nom and pop industry that we might have, 4
the individual doctor, small hospital?
Do they have.
5 any entitles like that that th.y deal with or are i
6 these mostly utilities of some sort?
7 MR. JANOSKO: The size ranges considerably 8
and in discussing this with them they use the same 9
term, mom and pop.
They have some of those too, as 10 well.
11 COMMISSIONER REMICK: They do? What would 12 be the category, do you happen to know, of mom and pop i
13 industries that FERC would --
14 MR. JANOSKO:
One of the examples they I
15 gave me is hydroelectric power.
i 16 COMMISSIONER REMICK:
It wouldn't be an i
17 individual though?
18 MR. JANOSKO:
I think in some cases it 19 might be, but I'm surmising.
20 COMMISSIONER REMICK:
Is that right?
A
[
21 municipality I can understand.
L 22 COMMISSIONER ROGERS:
Small dams.
23 COMMISSIONER REMICK:
Yes.
24 MR. BARCHI:
We can't give you precision
'25 though in terms of how small small is, frankly.
L i
NEAL R. GROSS COURT REPORTERS AND TRANSCRIDERS 1323 RHODE ISLAND AVENUE, N W.
(202) 234-4433 WASHINGTON. O C. 20005 9 02) 234-4433
46 1
COMMISSIONER REMICK: Yes. And do they in 2
any way regulate things like non-profit universities, 3
hospitals and those type of entities?
I don't think 4
they do.
5 MR. JANOSKO: I don't think <- to the best 6
of my knowledge, they regulata utilities, intrastate 7
utilities typically.
8 COMMISSIONER REMICK:
Yes.
Okay.
9 I found the presentation very interesting 10 and enlightening.
Some things I didn't know about are 11 how we determine fees.
Thank you very much.
12 CHAIRMAN SELIN: Commissioner de Planque?
13 COMMISSIONER de PLANOUE:
I have no 14 additional questions.
15 CHAIRMAN SELIN: I know it's tough for you -
16 guys to give any praise, but let me tell you what I 17
- heard, that the Controllers Office' really does a 18 pretty good job, given the difficult statutes that 19 they work with and the fact that management hasn't 20 really looked at the figures the way you have and say, 21 "Is this a pretty efficient thing?"
But they have a 22 cumbersome system, but you said they showed some 23 common sense in not trying to. duplicate it for 24 elegance.
The financial performance is really pretty 25 good.
The cost of the system -- you did say it's NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE, N W.
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47 1
cmnbersome and used a lot of resources, but I didn't 2
see that it used a lot of resources.
I did see that 3
it was cumbersome.
The performance problems, the 90 4
days, et cetera, are more inherent either in the 5
legislation or the guidance that the management gives 6
to the operation.
7 Now, is that unfair or did they come off 8
pretty well-from the point of view of the way the 9
system is actually operated as opposed to conceived?
10 MR. BARCHI:
Given the constraints that 11 they work under, we'd say yes, that tney've struggled 12 long and hard and produced a meaningful approach to a 13 very, very difficult series of variables.
Frankly 14 though, that's what does worry us though, because -~
15 CHAIRMAN SELIN:
Well, that's the next 16 point.
You've pointed out some places where 17 management has just not been paying much attention to 18 this where we could make life somewhat simpler if we 19 were able to take on some of these pieces.
In 20 addition to a mega recommendation there's some small 21 recommendations in here as well.
It's really more the 22 higher level management that has to concentrate on 23 this more than operational improvements given the 24 structure that we've given them to operate.
25 MR. BARCHI:
Right.
NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE, N W.
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48 l
1 CHAIRMAN SELIN:
As has Commissioner 2
Remick, I found this quite interesting.
When the 3
Commission put these questions to you, of. course we 4
expected some illumination, but I
think you've 5
exceeded our expectations for what we expected in 6
information, but in some of the thought and ideas that 7
you've allied to them.
8 So, we thank you very rauch for the effort.
9 MR. WILLIAMS:
Thank you.
i 10 CHAIRMAN SELIN:
Thank you.
11 MR. WILLIAMS:
Appreciate it.
12 (Whereupon, at 10:28 a.m.,
the above-13 entitled matter was concluded.)
14 15 16 17 t
18 19 20 s
21 22 23 24 25 NEAL R. GROSS COURT REPORTERS AND TRANSCRIBERS 1323 RHODE ISLAND AVENUE, N W (202) 234 4433 WASHINGTON, D C 20005 (202) 2344433
i CERTIFICATE OF TRANSCRIBER
+
l This is to certify that the attached events of a meeting i
i of the United States Nuclear Regulatory Commission entitled:
TITLE OF MEETING: BRIEFING BY IG ON FEE AUDIT i
PLACE OF MEETING: ROCKVILLE, MARYLAND DATE OF MEETING:
DECEMBER 10, 1993 were transcribed by me. I further certify that said' transcription is accurate and complete, to the best of my ability, and that the transcript is a true and accurate record of the foregoing events.
l t
i f'
/
l r
(
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v s
i Reporter's name:
Peter Lynch
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HEAL R. GROSS e
count nWooerens me taaMscamens 1323 SMoDE ISLAND AYBMUE, M.W.
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COMMISSION BRIEFING DECEMBER 10,1993 f
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REVIEW OF FEES FOR LICENSEES i
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l PURPOSE OF BRIEFING e TO PROVIDE THE RESULTS OF OUR REVIEW OF FEES FOR LICENSEES e TO PROVIDE ADDITIONAL INFORMATlON GAINED DURING OUR ASSESSMENT OF THE LICENSE FEE BILLING PROCESS e TO PROVIDE OBSERVATIONS ON NRC'S LICENSE FEE PROCESS OIG REVIEW OF FEES FOR LICENSEES PAGE 1 OF 22
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'NORK PERFORMED DURING OlG REVIEW OF FEES FOR LICENSEES e OVERHEAD COSTS AND FEES L
e DIRECT COSTS AND FEES e DETERMINATION OF DIRECT HOURS e EFFECTIVENESS OF SMALL ENTITY FEE e INCREASES IN ANNUAL FEES FOR MATERIALS LICENSEES e CONCLUSION OIG REVIEW OF FEES FOR LICENSEES PAGE 2 OF 22'
\\
BACKGROUND-e NRC ASSESSES TWO TYPES OF FEES:
l e PART 170:
e DIRECT RELATIONSHIP TO SERVICES l
PROVIDED eIOAA e RECOVERS 20% OF BUDGET e PART 171:
e REASONABLE RELATIONSHIP TO SERVICES PROVIDED e DESIGNED TO COLLECT REMAINDER OF BUDGET OlG REVIEW OF FEES FOR LICENSEES PAGE 3 OF 22 i
OVERHEAD COSTS AND FEES
- LICENSE ZEES BASED ON BUDGETARY DATA e ADMINISTRATIVE SUPPORT AND TRAVEL CLASSIFIED AS OVERHEAD e SALARIES / BENEFITS AND PROGRAM SUPPORT CONTAIN BOTH OVERHEAD AND DIRECT OIG REVIEW OF FEES FOR LICENSEES PAGE 4 OF 22
OVERHEAD COSTS AND FEES l
1
- ALL OVERHEAD COSTS FACTORED INTO l
PROFESSIONAL HOURLY RATE 1
- UNLESS NUMBER OF LICENSEES CHANGES DRAMATICALLY, OVERHEAD WILL NOT VARY SIGNIFICANTLY l
OIG REVIEW OF FEES FOR LICENSEES PAGE 5 OF 22 p
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DIRECT COSTS AND FEES
- IF NUMBER OF LICENSEES DECREASES, D! RECT COSTS SHOULD DECREASE e BUT, AS PRIORITIES CHANGE, RESOURCE SHIFT MAY NEGATE COST DECREASE OIG REVIEW OF FEES FOR LICENSEES PAGE 6 OF 22
r DETERMINATION OF DIRECT HOURS
- DIRECT HOURS DETERMINED DIFFERENTLY FOR PARTS 170 AND 171 FEES
- TWO METHODS FOR PART 170:
- AVERAGE HOURS (FLAT FEES) e ACTUAL HOURS (FULL COST FEES)
OIG REVIEW OF FEES FOR LICENSEES PAGE 7 OF 22 6
6
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DETERMINATION OF DIRECT HOURS
- FOR PART 171:
k r
e ACTIVITIES /SUBACTIVITIES BROKEN DOWN BY CLASSES OF LICENSEES l
- DIRECT FTE'S MULTIPLIED BY ANNUAL PRODUCTIVE HOURS i
l l
l OIG' REVIEW OF FEES FOR LICENSEES PAGE 8 OF 22
- u......
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4 1
i EFFECTIVENESS OF SMALL ENTITY FEE 4
4
- SIGNIFICANT EFFORT EXPENDED IN l
DEVELOPING DEFINITION:
1
- ACHIEVES " MIDDLE GROUND" BETWEEN u
l OBRA '90 AND REGULATORY FLEXIBILITY ACT
- LOWER TIER ESTABLISHED IN FY 1992 r
OIG REVIEW OF FEES FOR LICENSEES PAGE 9 OF 22 e
6 8
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EFFECTIVENESS OF SMALL ENTITY FEE
- EFFECTIVENESS DEPENDS UPON PERSPECTIVE:
- DEMONSTRATES NRC RESPONSIVENESS
- SIGNIFICANT SURCHARGES ASSESSED TO OTHER LICENSEES OIG REVIEW OF FEES FOR LICENSEES PAGE 10 OF 22
EFFECTIVENESS OF SMALL ENTITY FEE e SURVEY OF MATERIALS LICENSEES RECENTLY COMPLETED:
o RESULTS WILL BE USED TO DETERMINE WHETHER QUALIFIED SMALL ENTITIES ARE TAKING ADVANTAGE i
OIG REVIEW OF FEES FOR LICENSEES PAGE 11 OF 22 1
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EFFECTIVENESS OF SMALL ENTITY FEE i
-r
- SBA RECENTLY SOLICITED COMMENTS ON-1 PROPOSED CHANGES TO SIZE STANDARDS:
- MAY AFFECT NRC'S DEFINITION OF-SMALL ENTITY-l l
l OIG REVIEW OF FEES FOR LICENSEES
- PAGE 12 OF 22 h
... _. _ -....... - _ ~ _. - _.. _ - - _,.....
i
b INCREASES IN ANNUAL FEES i
FOR MATERIALS LICENSEES e SIGNIFICANT INCREASES FOR SOME 1
LICENSEES DUE TO TWO OCCURRENCES:
e INSPECTION FEES INCREASED BECAUSE MAJOR SAFETY-RELATED CHANGES MADE SINCE LAST REVIEWED (1984?
- INCREASE IN BUDGET DUE TO INCREASES IN LICENSE / INSPECTION EFFORTS AND GENERAL GOVERNMENT COSTS l
i OIG REVIEW OF FEES FOR LICENSEES PAGE 13 OF 22
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CONCLUSION
- NRC UNABLE TO DETERMINE WHETHER SMALL ENTITIES ARE TAKING ADVANTAGE:
e FINANCIAL PROFILES ARE NOT CURRENT
- RESULTS OF RECENT SURVEY WILL BE USED FOR THIS DETERMINATION OIG REVIEW OF FEES FOR LICENSEES PAGE 14 OF 22 i
i-4 ASSESSMENT OF LICENSE FEE BILLING PROCESS j
l e PROCESS FOR ASSESSING AND i
COLLECTING LICENSE FEES IS RESOURCE INTENSIVE AND CUMBERSOME l
- COST DATA RELATED TO ASSESSING h
FEES b
- AUTOMATED SYSTEMS THAT PROVIDE FEE DATA
- CORRESPONDENCE BETWEEN NRC AND LICENSEES OIG REVIEW OF FEES FOR LICENSEES PAGE 15 OF 22
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PART 170 FEES AND RELATED PROCESSING COSTS
- APPROXIMATELY $1 MILLION AND 11 FTE TO GENERATE $105 MlLLION IN FEES:
e $498,000 - LICENSE FEE AND DEBT COLLECTIOl\\ BRANCH e $225,000 AND 2 FTE - OFFICE OF INFORMATION RESOURCES MANAGEMENT OIG REVIEW OF FEES FOR LICENSEES PAGE 16 OF 22
L PART 170 FEES AND RELATED PROCESSING COSTS e RITS MAINTENANCE COSTS
- 9.25-FTE l
- $313,000 ANNUAL CONTRACT COSTS
- RITS IS THE PRIMARY ' SYSTEM SUPPORTING PART 170 FEE DETERMINATION--NOT ALL RITS COSTS RELATE DIRECTLY TO FEES' OlG REVIEW OF FEES FOR LICENSEES PAGE 17 OF 22
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PART 171 FEES AND RELATED PROCESSING COSTS
- APPROXIMATELY $813,000 EXPENDED TO GENERATE $415 MILLION IN FEES:
- $ 788,000 -- LICENSE FEE AND DEBT COLLECTION -BRANCH.
4
- $25,000 - OFFICE OF INFORMATION RESOUP.CES MANAGEMENT OIG REVIEW OF FEES FOR LICENSEES PAGE 18 OF 22
{
AUTOMATED SYSTEMS FEEDING i
PART 170 FEE DETERMINATION / BILLING i
l TAPSS-NRR Contract Data i
Tracking System Facilities Licensing Billing System t
Facilities inspection COLLECT -
WISP - NRR RITS - Agency Billing System Tracking System Tracking System Agency Debt
- Fuel Cycle Collection s
Billing System System c
-a Materials Inspection /y-,
Billing System
- 1 P 1 P-U Manual Feed:
l Federal Financial
~
Automated Feed System (FFS).
~ ~ ~ ~ ~ _ - -
OlG REVIEW OF FEES FOR LICENSEES PAGE 19 OF 22 erv..
-,ws,. -. - - < -.. - +
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AUTOMATED SYSTEMS FEEDING PART 171 FEE DETERMINATION / BILLING 4
4 LicenseTracking System Materials Annual Fee Billing System
> COLLECT -
Agency Debt Sealed Source Device Collection System Tracking System
" ~ " "
Transportation Approval 3 r Package Information System Federal Financial 1 i
Facilities Annual System (FFS) i
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Fee Billing System r
3 Manual Feed 6
Automated Feed
{
OlG REVIEW OF FEES FOR LICENSEES PAGE 20 OF 22
..___;.u_-_.
~.. - -. -
CORRESPONDENCE REVIEW e OUTSTANDING ACCOUNTS RECEIVABLE BALANCES
- ABOUT 700 ACCOUNTS OUTSTANDING FOR MORE THAN 180 DAYS
- RELATED TO REQUESTS FOR CHANGES IN LICENSING STATUS Al\\ D RELIEF FROM AGENCY e ARE NOT DUE TO PROCESSING ERRORS OIG REVIEW OF FEES FOR LICENSEES PAGE 21 OF 22 r
SUMMARY
- DECLINE IN NUMBER OF LICENSEES
- EFFECT ON AGENCY BUDGET e EFFECT ON OTHER LICENSEES e CURRENT FEE SYSTEM e ONE FEE SYSTEM
- DECREASE RESOURCE COSTS OIG REVIEW OF FEES FOR LICENSEES PAGE 22 OF 22
.