ML20087A512

Office of the Inspector General.Semiannual Report.April- September 1991

ML20087A512
Person / Time
Issue date:	10/31/1991
From:	Glenn W, Huber D, Watkins R NRC OFFICE OF THE INSPECTOR GENERAL (OIG)
To:
References
NUREG-1415, NUREG-1415-V04-N01, NUREG-1415-V4-N1, NUDOCS 9201090191
Download: ML20087A512 (36)

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1 am pleased to submit to you this semiannual report on the activities of the Office of the Inspector General for the reporting period beginning April 1,1991, through September 30,1991. This report is submitted to you in accordance with Section 5 of the Inspector General Act of 1978, as amended.

During these months, my office reviewed 143 contract audits, performed 1 contract audit, and completed 7 internal audits. These audits resulted in 14 rec-ommendations to improve the efficiency and effectiveness of NRC operations, with over $2 million identified as funds that could be put to better use. An addi-tional $73.1 thousand was identified as questioned costs. We also closed 38 investigations, referring 5 of these cases to the Department of Justice.

It is encouraging to report that consistent agreement exists between this office and NRC management concerning the acceptance and implementation of our recommendations. We appreciate the agency's support and continue to look forward to a working relationship that ensures the integrity and improvement of NRC's operations and programs.

Sincerely, hawk C Lh David C. Williams Inspector General

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(M EXECUTIVE

SUMMARY

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THE U.S. NUCLEAR REGULATOR Y COMMISSION 7

THE OFFICE OF THE INSPECTOR GENERAL 10 EMERGING NUCLEAR' ISSUES 11 THE FEDERAL MANAGERS' FINANCIAL INTEGRITYACT 13 l

REGULATORYREVIEIV 14 AUDITACTIVIT)ES 15 INVESTIGATIVE ACTIVITIES 25 SPECIAL FEATURE ARTICLE:

NRC'S OFFICE OFINVESTIGATIONS 29 APPENDICES 30 AUDIT LISTINGS 30 ABBREVIATIONS 34 GLOSSARY 35

1 Execonva summy AUDITS During the past 6 months, the Office of the Inspector General (OlG) issued 7 reports addressing the NRC's programmatic and administrative functions, per-formed 1 contract audit, and reviewed 143 contract audit reports issued by the Defense Contract Audit Agency. This work resulted in identifying over $2 mil-tion of funds that could be put to better use and $73.1 thousand of questioned costs. Below is a summary of selected findings.

E The 01G reviewed NRC's handling of allegations made by the Employees Legal Project concerning the safe operation of the Seabrook Nuclear Station in New llampshire.The OIG concluded that the NRC staff resolved these allega-tions in accordance with agency policies and procedures.

E The OlG conducted a review to determine whether NRC staff had con-firmed that the Boston Edison Company (BECo) had resolved issues involving the operation of the Pilgrim Nuclear Power Station as required b the NRC in a 3

confirmatory action letter (CAL).Th_ OIG determined that the NRC had con-firmed BECo's completion of the requirements in the CAL.

11ae Pilgrim Nuclear Power Station in Ply-

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O An audit was conducted to determine the adequacy of NRC's billing proce-dures and related internal controls for the processing of license fees as specified in Part 170, Tide 10, of the Code of Federal Regulations. From the audit, OlG determined that NRC's lengthy billing cycle was costing the Treasuiy Depart-ment. over $2 million annually.

O The OlG audited the NRC's debt collection process for delinquent ac-counts to determine whether the agency complied with the followup provisions of the Debt Collection Act and the Office of Management and Budget (OMB)

Circular A-129.The audit disclosed that the NRC was not in full compliance with this act or the circular.

O The OlG audited NRC's invoice payment practices to assess the timeliness of its payments to vendors and to evaluate the agency's compliance with the Prompt Payment Act of 1982, as amended. The OlG found that the N RC was not in full compliance with this act.

O The OIG reviewed the procurement practices of NRC's Advisory Commit-tee on Reactor Safeguards (ACRS). The audit revealed that the procurement practices of the ACRS do not fully comply with es.tablished NRC procedures and procurement regulations.

INVESTIGA TIONS From April 1,1991, through September 30,1991, the OlG initiated 39 new m-vestigations and closed 38 cases. As of September 30,1991,48 investigations were in progress. OIG investigations led to 5 referrals to the Departmem of J us-tice and 33 referrals to NRC management for corrective action. Brief summaries of selected allegations investigated by the OlG during the reporting period are as follows.

E The OlG received allegations that an investigation, as conducted by the for-mer Office of Inspector and Auditor, was not carried out in a fair and impartial manner. The OlG's investigation substantiated some of the allegations.

E The OIG investigated a concern tnat NRC regional staff failed to properly record and investigate allegations of wrrngdoing by a licensee. The OIG's inves-tigation showed that the allegations of wrongdoing were not properly recorded and investigated.

j E The OlG received r' allegation that a subcontractor had falsely billed the NRC for labor charges. ine allegation was substantiated.

I 5

E The OlG investigated allegations that certain NRC managers had possible conflicts of interest in their contacts with private contractors. The allegations were unfounded.

E The OlG investigated an allegation that three former NRC supervisors were involved in possible post-employment conflicts of interest. The allegation was substantiated in part.

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1

Tun u.S. nuassa nuoutarOav COMMISSION The U.S. Nuclear Regulatory Commission (NRC) was created as an independ-ent agency by the Energy Reorganization Act of 1974. This act, along with the Atomic Energy Act of 1954, as amended, provides the foundation for the regula-tion of the Nation's commercial nuclear power industry.

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The NRC's scope of responsibilityis varied and complex. Its mission is to ensure g

that civilian uses of r.uclear materialsin the United States are carried out in a way that will adequately protect the public health and safety, the environment, and the national security. The NRC fulfills these responsibilities through a system of licensmg and regulatory activities. Some of its major activities include-M licensing the construction and operation of nuclear reactors and other nu-clear facilities, such as nuclear fuel cycle facilities, medical use facilities, and nonpower test and research reactors:

7

E licensing the operators of nuclear power and nonpower test and research reactors; E licensing the siting, design, ecastruction, operation, and closure of low-level radioactive waste disposal sites under NRC jurisdiction, and the construction, operation, and closure of the geologic repository for high-level radioactive waste; E inspecting licensed facilities and activities; E investigating nuclear incidents and allegations concerning any matter r egu-lated by the NRC; and E conducting the principal U.S. Government research program on ligh:-water reacter safety.

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To carry out its mission, the NRC is headed by five Commissioners s o are ap-pointed by the President and confirmed by the Senate for 5-year te One Commissioner is designated by the President to be the Chairman and serves as the official spokesperson for the Commission. The staff, headed by the Execu-tive Directm for Operations, carries out the policies and decisions made by the Commission. The Nuclear Regulatory Commission has approximately 3300 8

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full-time employees in the Washington, D.C., commuting area and the five re-gional offices loca'ed near Philadelphia, Atlanta, Chicago, Dallas, and San Francisco. During fiscal year 1991, the age _ncy operated with a budget of ap-

- proximately $485 million. The proposed budget for fiscal year 1992 is approxi-mately $513 million.

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l Tus arrics av rusinsescroa asusaat The NP.C's Office of the Inspector General was established as a statutory entity on April 15,1989, in accordance with the Inspector General Act of 1978, as amended in 1988. It is one of 26 such entities within the Executive llranch.The Inspector General is appointed by the President of the United States with the advice and consent of the Senate. To assure the independence of the office, the Inspector General may only be removed by the President, with the reasons com-municated to both the llouse and the Senate. NRC's Inspector General reports to and is under the general supervision of the NRC Chairman but operates with independent budget authority.

One of the primary goals of the OlG is to assist the NRC in operatmg more effec-tively and efficiently by identifying wa, I to improve the NRC's programs. To ac-complish this objective, the OlG conducts agency audits, inspections, and inves-tigations and makes recommendations to NRC management as appropriate.

The Inspector General has oversight responsibilities for the efficient and effec-tive operation of agency programs and for the conduct of NRC employees and contractor personnel.The OlG generally does not have oversight responsibili-ties for the conduct of N RC licensees and applicants. or their vendors or contrac-tors. The NRC administers this program through its Office of Investigations.

The NRC Office of the inspector General was authorized 32 positions during fiscal year 91. Pending congressional approval, the OlG will increase its staff to 37 during fiscal year 1992, operating with a budget of approximately $3.7 mil-lion.

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Euencino nuctuan issues Now, possibly more than during any pi evious time in the NltC's history, the NitC and the nuclear industry are facing issues that will affect their future operation and, possibly, the Nation's energy supply as well. The current generation of 112 commercial nuclear power reactors is aging and the expiration of their licensing authority is fast approaching " These reactors generate approximately 19 per-cent of the Nation's net electricity. Six States rely on nuclear power for more than 50 percent of their supply of electricity, while nuclear power provides more than 25 percent of the energy supply of 11 other States. [3y the year 2000, the first two reactor operating licenses will expire, and 64 other reactors will be more than 20 years old. Issues such as license renewal, decommissioning, and the standardiza-tion of future reactor designs need to be resolved.

U.S. Commercial Nuclear Power Reactor Operating Licenses Expiration Date by Year NtiMBER OF LICENSES EXPIRED 18 18 r

16 14 12 g

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2000 05 06 07 08 09 10 11 12 13 14 15 16 r 1B 20 21 22 23 24 25 27630 YEAR Source flads Regulatxy Comrmssion Ily statute, the OlG is responsible for recommending pohcies to piomo'e the effective and efficient administration of these plogran s. The OlG must ensure j

that these and other important programs t,uch as nuclear wa.;te managemtent.

1 statistical Source: "NRC Information Dynt: IW1 %hton "

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l agency research, and financial m:magement are optimally administered. To gain a better mutual understanding of these programs and issues, the O10 hosted a 2 day executive planning conference in August 1991 that was attended by senior managers from industry, NRC staff, and the Congress. Each group presented their perspectives on the issues confronting the NRC and industry and the chal-lenges of resolving them.

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Tus esosaat uanaGens, vinanCiat 1NTEGRnYACT Continuing disclosures of Federal waste, loss, unauthorized use, and misappro-priation of funds or assets associated with weak internal controls and accounting systems resulted in the passage of the Federal Managers' Financial Integrity Act (Fh1FI A)in September 1982. The act requires Federal managers to establish a continuous process for evaluating, improving, and reporting on the internal con-trols and accounting systems for which they are responsible.

A 1990 01G review of the NRC's internal controls and accounting system deter-mined that the NRC has not complied entirely with the FM FI A.The OlG found that the NRC met the internal control system requirements of the FMFI A but was not in full compliance with the financial management system review require-ments. The Office of Management and 13udget (OMil) established guidelines that require detailed reviews of all financial system components and subsystems at least once every 3 years. The N RC has identified eight financial management systems that require detailed reviews to conform with the FMFI A and with the OMil guidelines. In December 1990, the OlG reported that the NRC had not conducted a detailed evaluation for six of these eight systems and had failed to follow OM B guidelines for the remaining two. Recommendations were made to ensure compliance with OM13 guidelines. In addition, the OlG and the NRC

~

identified significant problems with the NRC's travel accounting system. NRC developed pians to correct the deficiencies. Progress on implementing OIG rec-ommendations and agency coirective actions is being monit< ed by the OlG.

In 1987, the NRC disclosed its license fee management system as a material weakness in its Federal Managers' FinancialIntegrity Act report to the Pi esident and the Congress.The OlG conducted a review of the license fee system in July 1991 and i" monitoring the NRC's actions to correct the deficiencies.

The OIG is continuing to provide oversight of these and other programs operat-ing under the requirements of the FMFI A. A separate report will be issned in December 1991 that will address OIG fmdings on NRC's compliance with the FM FI A.

13

Raoutsroaraeview During this reporting period, the OlG provided comments on various Federal legislative proposals, as well as Commission policy initiatives. The OIG com-ments on the most notable issues are summarized below.

The OlG provided comments on proposed legislation to establish performance standards and goals for Federal programs. The purpose of this legislation is to strengthen Government accountability, uncover waste and mismanagement, and reform or eliminate ineffective programs through the establishment and use of measurable performance standards and goals. The OlG reviewed the pro-posed legislation and provided cemments to both the NRC's Office of the Gen-eral Counsel and the President's Council on Integrity and Efficiency.These com-ments primarily addressed two key aspects of the proposal.The OlG described the difficulty that would be encountered in attempting to establish " measurable performance standards c'id goals" for NRC programs, given the inherent subjec-tivity of methods available to measure success in fulfilling the agency's mission of protecting public heanh and safety. The OlG also observed that the reporting requirements contained in the proposed legislation should be clarified, espe-cially as to how they relate to the reporting requirements imposed by the Chief Financial Officer Act of 1990.

With OIG participation, the NRC's Office of the General Counsel developed the final rule implementing the Program Fraud Civil Remedies Act for issuance by the Commission. The act, which became applicable to the NRC when NRC's Office of the Inspector General was established by Congress in 1989,in general authorizes the NRC to impose, through administrative adjudication, civil penal-ties and assessments against any person who makes, submits, or presents a false, fictitious, or fraudulent claim or written statement to the agency. The regulations designate the Inspector General or the Assistant Inspector General for Investi-gations as the investigating official.The effective date of the final rule is October 18,1991.

14

UDITACTIVITIES During the past 6 months, OIG completed 7 audits addressing the NRC's admin-istrative and programmatic functions. Two of these audits resulted in identifying over $2 million as funds that could be put to better use. OlG also performed 1 contract audit and reviewed 143 contract audit reports issued by the Defense Contract Audit Agency (DCAA).These audits resulted in $73,098 of questioned costs and an additional $30,431 as funds that could be put to better use.

In addition to OIG's routine audit activities, the office is also participating with Inspectors General from the Treasury Department, the General Services Ad-ministration (GSA), and the Office of Personnel Management (OPM)in a peer review of their respective audit operations.These reviews are being performed to assess OIG compliance with the audit standards established by the Comptrol-ler General of the United States. During this reporting period, OIG auditors from NRC and OPM worked in tandem reviewing the Treasury Department's audit operations. A report summarizing their findings is expected to be com-pleted in October 1991.

AUDIT TABLES The NRC's dependence on commercial contract activity is relatively limited.

Thus, questioned costs and savings are inherently smaller than those reported by most other agencies.

During the reporting period, the OlG reviewed 143 contract audit reports and performed 1 contract audit. The following tables depict the cost savings from the contract audits and two internal audits.

15

Table i Office of the Inspector General Reports Containing Questioned Costs (Dollar Value)

Number of Questioned Unsupported Reports Reports Costs Costs O

A. For which no management 2

decision had been made by the commencement of the reporting period B. Which were issued during 7**

73,098 0

the reporting period Subtotals (A + B) 9 73,098 0

C. For which a management 6

57,240 0

i decision was made during the reporting period:

(i) dollar value of disallowed 6

57,240 0

CoSth (ii) dollar value of costs not 0

0 0

disallowed D. For which no management 1

15.858 0

decision had been made by the end of the reporting period

- E. Reports for which no manage-2 O

ment decision was made within six months of issuance

• Questioned costs for the reports from the last period are currently under review. The agency with piedominant inter?st (on the basis of unliquidated dollar amounts) is responsible for nc- --

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gotiating finalindirect rates. which will be binding on all agencies.The agency expects to com-Yi plete the review during the next reporting cycle.

"The figure differs from number of reports reviewed because 118 reports had no questioned -

costs.

41 16 I

Table 11 Office of the Inspector General iteports issued With llecommendations That l'unds lie Put to lletter Use Dollar Number of Value Reports Reports of Funds A. For which no manacement decision had 1

61.030' been made by the commencement of the reporting per'iod B. Which were issued during the reporting period 4

2,037 631 Subtotals (A + B) 5 2,098,661 C. For which a management decision was made 4

2,026,284 during the reporting period:

(i) dollar value of recommendations that v ere 4

2,026,284 "

agreed to by management (ii) dollar value of recommendations that were 0

0 not agreed to by management D. For which no manacement decision had been I

11,347 made by the end of'the reporting period E. Reports for which no management decision was 0

0 made within 6 months of issuance

• The beginning figure of funds put to better use (Shl,tBO)was revised during the current report-ing period 100. Negotiations with the contractors and further discussion with DC AA resulted in agreement with the method useJ in computing labor costs.The difference in the original dollar amount and the final figure is the result of using wages for specific employees as opposed to an average wage rate.

• *$2 million of amount reported is au estimate of the impact on Treasury's borrowing costs as a result of NitC's untimely collection of Part 170 license fees.

l

AUDIT SUAIAIARIES NRC flandles Seabrook Allegations Appropriately The OlG reviewed how the NRC handled allegations made by the Employees Legal Project (ELP) concerning the safe operation of the New llampshire Seabrook Nuclear Station. The E LP is an independent entity whose mission is to provide legal assistance and anonymity to employees and former employees who make allegations concerning nuclear power plants located in New England.

The review was to determine whether the NRC staff addressed the ELP allega-tions in accordance with agencv policy and procedures. The review also focused on whether the Commission adhered to established procedures in resolving these allegations before voting on a full-power operating license for Seabrook.

To complete its investigation of the ELP allecations, the NRC expended over 1000 technical inspection and managerial hours. TI:e staff concluded that the allegations were not material to the licensing of Seabrook and reported its find-ings to the Commission. The OlG analysis of the allegations and the manner in which the staff handled them revealed that the staff received, evaluated, and re-solved the allegations in accordance with agency policies and procedures. OlG also found that the Commission followed established agency procedures in reviewing the allegations and resolved them before voting on the full-power licensing of Seabrook.

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1 OIG Reviews Restart issues Involving Pilgrim Station in 1972, the NRC issued a license to the Iloston Edison Company (BECo) to operate the Pilgrim Nuclear Power Station in Plymouth, Massachusetts. Pilgrim remained in commercial operation until April 1986 when BECo shut it down be-cause of equipment and operational problems. The NRC responded to the shut-down by issuing a confirmatory action letter (CAL) requiring BECo to take spe-cific corrective actions before the NRC would authorize restart of the plant. In December 1988, the NRC authorized BECo to restart the Pilgrim facility with several restrictions.The N RC lifted these restrictions in February 1990 based on BECo's completion of the CAL requirements. From the time BECo resumed operation until late 1990 Pilgrim experienced a number of operational prob-

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lems that caused forced outages or " unplanned shutdowns."

In October 1990, a representative of the Citizens United for Responsible Energy (CURE) alleged that the frequency and repetitive nature of Pilgrim's operational problems demonstrated that the issues contained in the CAL were not resolved. In response to these allegations, the OlG conducted a review to determine (1)whether the NRC staff had confirmed that BECo had resolved the CAL issues and (2) whether the unplanned shutdowns wSe related to them.

The OlG's review did not substantiate CURE'S allegation. The NRC deter-mined that BECo had met the requirements in the CAL. Although the Pilgrim plant experienced a number of operational problems following the plant restart in 1990, the OlG found no apparent correlation between the operational events and the CAL issues.

19

1989 U.S. Electric Net Generation by Energy Source

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and sotar), which represents less than 1 percent of totalgeneration. Percentagesrcundedtothe nearest who!e number.

Source DOE /EIA Electnc Power Annua l1989(00E/EIA-0348(89))

1989 Net Electricity Generated in Each State by Nuclear Power Percent of Percent of Percent of Net Nuclear Net Nuclear Het Nuclear State Generation State Generation State Generation Alabama 15 louisiana 24 North Carchna 34 Arizona 14 Maine 60 Ohio 10 Arkansas 27 Maryland 8

Oregon 12 Cahfornia 25 Massachusetts 8

Pennsylvania 25

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Michigan 23 South Carchna 61 Connecticut -

57 Minnesota 28 Tennessee 21 Fionda 17 M:ssissippi 37 Texas 4

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Kansas 28 New York 17 Wisconsin 25 Note: Percentages rounded to the nearest whole numbei.

Source: DOE /EIA Report an Electnc Power Generatin<

20

NRC'S Liiense Fee Billing Process is Castimely The NkC is one of the few agencies required by law to collect approximately 100 percent of its budgeted authority from fees for senices rendered. The NRC col-lects fees for sersices such as review of applications for new licensees and inspec-tion of licensee operations.

In fiscal year 1987, the NRC hired a contractor for an internal control and sys-tems review of the license fee management progra n. The resiew showed that excessive delays existed at all processing stages beca use of incomplete automa-tion and inefficient practices,which cost the Treasury Department more than $2 million annually in interest expense. 'Ine NRC responded to these findings by initiating actions to fully automate the license fee billing system. This system is expected to be completed in fiscal year 1992.

The OlG reviewed the NRC's Part 170 license fee processing to determine the adequacy of NRC's billing procedures and the related internal controls for these fees. The OlG examined the costs of sersices to determine their accuracy and whether they were billed in a timely manner.

The OlG found that although the NRC is taking steps to improve its billing op-erations through increased automation, additional corrective actions are needed to achieve full compliance with Treasury Ikpartment requirements. The time frames established by the N RC for its billing processes significantly exceed those specified by the Treasury Department. The OlG found that fundamental defi-ciencies exist in the accumulating, editing, and processing of cost data. These de-ficiencies increase the time required to produce an accurate bill. The program managers concurred with OlG's recommendations to correct these and other billing inadequacies.

NRC'S Debt Collection Process Needs improvement In 1982, Congress enacted the Debt Collection Act to improve debt collection within the Federal Government. Under the authority of the act, the Office of Management and Budget (OMB) issued Circular A-129, entitled " Managing Federal Credit Programs,"which prescribes policies for collecting Federalloans and oti. r debts.

The NRC is required to collect fees for services provided to its licensees in accor-dance with Title V of the Independent Offices Appropriation Act (IOAA) of 1952. The OIG reviewed the NRC's debt collection process for delinquent accounts to determine whether the agency complied with the followup provi-sions of the Debt Collection Act and Circular A-129 and discovered that the 21

NRC is not in full compliance with the act or the OM 13 circular. The N RC has not co nputerized its system for collecting debts and does not routinely compute and at: ply to accounts interest accruals, penalties, and other administrative charges.

The NRC's practice of manual bookkeeping and collection of delinquent accounts is not adequate to achieve full compliance with the act or the OMll circular.The OIG recommended that the NRC develop an automated system for ensuring adequate followup on oveutue accounts and for computing all applica-ble interest and other charges.

NRC Slow To Pay invoices The OlG assessed the timeliness of NRC's payments to vendors and evaluued the agency's compliance with the Prompt Payment Act of 1982, as amended.

Congress enacted this legislation to give mcentives to the Federal Government to payits bills promptly and to ensure that the G overnment paysits contractors in a predictable and timely manner.

In its review, the OlG found that the NRC is not fully complying with this act.The NRC failed to take advantage of available discounts. OlG recommended that NRC fully automate its payment system, provide its staff with proper training, and document procedures to implement the act. The NRC program managers agreed to implement these recommendations.

Review of the Procurement Practices of The Advisory Committec On Reactor Safeguards The OlG reviewed the procurement practices of NRC's Advisory Committee on Reactor Safeguards (ACRS). Among other things, this committee advises the NRC on the possible hazards of proposed or existing reactor facilities and the adequacy of proposed reactor safety standards. The review was to determine whether ACRS officials were complying with the procurement requirements as contained in the Federal Acquisition Regulation and with established NRC pro-cedures.

OlG concluded that the ACRS is not in full compliance with these regulations and established NRC procedures. Indications were found that the ACRS staff sometimes engaged in activities that bordered on negotiating contracts. Regulit-tions require that negotiations be performed solely by the agency's contracting officers. In addition, ACRS officials failed to justify the selection of the Depart-ment of Energy (DOE) for contracted services and failed to establish appropri- -

ate bases for certifying cost claims. As a result of this audit, OIG made several recommendations to NRC management to strengthen internal controis and to increase NRC cversight of ACRS procurement practices.

22

A UDITS IN PROGRESS The following audits were in progress at th' end of the reporting period.

O Review of NRC's Reporting of Consultant Senices-This audit, an annual statutory requirement, was initiated to evaluate N RC's progress in (1) improving the accuracy and completeness ofinformation provided to the Federal Procure-ment Data System for contracts on consulting se nices and (2) establishing effec-Ove management controls for consulting services.

R Review of the Facilities hianagement Contract for One White Flint North (OWFN)-The NRC is one of the first Federal agencies permitted by the Gen-eral Services Administration (GSA) to manage its own office space.The OlG is reviewing the performance of the contractor that NRC chose to manage the OWFN building. OlG's review will also include an evaluation of NRC's internal controls for requesting senices, acceptir.g the work performed, and assessing the reasonableness of the charges levied by the contractor.

M Review of NRC's Allegation hianagement System (Ah1S)-The ANIS is a computerized tracking system used to manage allegations the NRC receives about agency-regulated activities. The objective of this review is 'o determine the adequacy of established AhtS policies and procedures and to assess whether the Ahls is operating according to the purposes and goals defined by the Com-mission.

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E Review of the Safety Issues h1anagement System (SIh1S)-SIh1S is a track-ing and monitoring system designed to manage nuclear pla'nt safety issues, including generic safety issues associated with the accident at the Three htile Island facility. OlG is examining the system to determine the accuracy ofits data-base.

E Review of Lessons Learned on Use of Waste Encapsulation and Storage Facility (WESF) Sources at Commercial Irradiators-This review was initiated i

to determine if the NRC has identified and adequately addressed " lessons learned" from its licensing of Radiation Stabilizers, Inc. (RSI) to use WESF capsules in a large irradiator. The " lessons learned" resulted from the investiga-tion of events surrounding an incident at RSI's facility in Decatur, Georgia,in June 1988.

E Review of Healthplus Claim-Healthplus of hiaryland, a Federal Employ-ees Health Benefit Program participant, submitted a claim to the Office of Per-sonnel hianagement (OPht) alleging that the Federal Government owed

$2.4 million in unpaid premiums. NRC's share of the alleged $2.4 mi!! ion is

$1550. At the request of OPhl, the OlG is nerforming an audit to determine the validity of the claim insofar as NRC is concerned and to identify the causes of any nonpayment.

B 24

NVESTIGATIVE ACTI14 TIES During t. reporting period, th, OlG received 127 allegations, which repre-h sents a 9.5 percent increase over he lad period.The offic.: completed 38 investi-gations,icterred 5 cases to the 1:epartment of Justice, and made 33 referrals to NRC management for correctiv* rtion. During this period, the OlG dso initi-ated an effort to establish a confidentialinformant fund consistent with ottu/r offices within the Inspector General conununity. Sunuuaries of the OlG's most siysficant investigations loilow.

INl'ESTIGATIl'E SUMalARiliS Alleged hnproper Action Hy NRC Security inspectors The OlG reviewed an investigation conducted by its piedecessor, the former Of-fice ofInspector and Auditor (OI A). The OI A investigation focused primarily on the activities of certain N RC security insoectors. 010 initiated this review after it received allegations 'l) that cor clusions in the OIA report were improperly changed,(2) that certain NRC personnel may not have testified truthfully at an arbitration hearing on the matter, and (3) that disciplinary action was taken again ;t an NRC inspector in reprisal for his congressional testimony. As this re-view progressed, administrative reprimands imposed on each of the NRC secu-rity inspectors also became an isnue.

In its review, the 010 for d that the OI A investigation did not involve a fair and impartial procen. Furthermore, disciplinary action administered to the security inspectors would likely have been less severe had it not been for the substantial ineolvement of NRC headquarters personnel. Investigative conclusions drawn by Ol A concerning the inspectors' actions were incorrect and were based on an inadequate investigation in which principal witnesses were not asked pertinent questions. This case was referred to the Department of Justice, whien declined prosecution in favor of administrative action.

NRC l' ails To investigate Allegations Of Licensee 11'rongdoing L aring an investigation at a nuclear power station, the OlG received informa-tion that NRC regional staff.may have been informed of possible licensee wrong-doing but failed to properly record and investigate the allegation.

The OlO conducted an investigation and de' ' n 3d that the allegation was not u

entered into the NRC management tracking sy.. em because the staff failed to follow procedures. Consequently, the allegation concerning licensee wrong-doing was not controlled, evaluated, or resolved by the staff. An investigation of the licensee wrongdoing was subsequently conducted.

I 1

25

i.

01G Investigates False Labor Charges NRC managers advised the OlG that a subcontractor appeared to have submit-ted false labor charges to the NitC during a 3-month period. The OlG's investi-gation revealed that the owner and an employee of a subcontracting firm had billed the NRC for more than $40.000 for hours not worked. The case was re-ferred to the U.S. Attorney's office, which declined prosecution in favor of ad-ministrative action by the NRC.

Allegations OfNRC Conflicts ofInterest Unfounded The 010 received allegations that certain NRC managers may have been in-volved in a conflict of-interest or preferential treatment situation involving the award of nuclear research contracts. Although the allegations were not substan-tiated, the investigative findings did reveal several instances in which closer at-tention to procedures and more emphasis on coordinating procurement-related matters with the Division of Contracts and Property Management, as required by NRC regulations, would have eliminated any suggestion of impropriety by NRC managers.

Former NRC Supervisors 11olate Confliet-of interest Laws The OlG received an allegation that two former NRC supervisors were involved in a matter possibly involving a conniet of interest. The OIG investigation ie-vealed that following their termination of emp!oyment with the NRC, the super.

visors provided an affidavit supporting an electric utility's rebuttal of an enforce-ment action proposed by the NRC. Portions of the former employees' affidavit dealt with issues that they supervised while working at the NRC. This post-employment activity is prohibited by Title 18, Section 207, of the United States r'ot'e.The OlG presented the case to the U.S. Attorney's Office, but the office declined prosecution.

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l 26

INl'ESTIGATIiE STATISTICS ALLEGATIONS Souree Number NitC emplovce 23 NI(C management 34 Congress 1

Other Government agencies 6

Intervenor 6

General publie 23 Media 1

010 investigation / audit 1

Contt actor 1

llegulated industry (licensee / utility) 16 Anonymous

__15 Total 127'

'Of the 127 allegations. 25 resulted from hotline calk.

Allegations Number Carried fonvard from previous period 1

Reecived during this period 12.2 Total 128 Disposition Number Closed administratisely 24 liefeited for 010 investigation / inspection 62 lleferred for OlG audit I

lieferred to NitC management / staff 33 lleferred to external agency 3

Pending review or action

_5 Total 12S 27

INVESTIGATIONS Status cf Investigations Number Continuing from previous period 47 Opened during this period 39 Closed during this period 38 Nuniber in progress as of 9/30/91 48 Continuing from previous in Classification of Investigations period Opened Closed Progtess A - Conflict of interest 5

5 3

7 11 - Internal fraud 5

5 5

5 C - Contract / contractor-related 6

3 4

5 misconduct D - 1:alsification of records or 3

4 3

4 statements li

'lheft-related offenses 1

3 2

2 1 - Misuse of Government 0

5 2

3 property G - Actions affecting safety or 11 7

S 10 NitC programs 11 - Management misconduct 15 2

8 9

and abuse 1 - Other 1

5 3

3 Total 47 39 38 48 C.

REFERRALS Sent to the Department of Justice (DOJ)

Number Pending DOJ decision as of 4/1/91 3

Sent to DOJ during reporting period 5

Pending DOJ decision as of 9/30/91 2

Total 10 Disposition of DOJ Referrals Number Subjects accepted for prosecution 0

Declinations 6

Indictments 0

Convictions 0

Total 6

28

PECIAL FEATURE ARTICLE NitC'S OFFICE OF INVESTIGA TIONS NitC's Office of Investigations (01) has the important responsibility of investi-gating allegations of wrongdoing involving entities and individuals falling under the NitC regulatory jurisdiction and those providing services to them. These re-sponsibilities include investigating allegations concerning owners and operators of nuclear facilities, their vendors, contractors, and subcontractors, it is Ol's re-sponsibility to apprise the NitC Commission of matters under investigation that may affect the public health and safety, the comumn defense and security of our Nation, and of any matters that may affect our environmental quality.To carry out this mission, the NitC has staffed its Office of Investigations with 36 investi-gators and 10 support personnel.

Since 1984, violations involving " willful material false statements" to the NitC have dominat~i Ol's caseload. A violation of this type is defined, in part, as any statement, ora or written, provided to the NltC that is interded to conceal a material fact. During '1990,69 percent of the cases closed by 01 involved " willful material false statements." Other 01 investigations generally involve violations of NitC license conditions NitC rules and regulations, and the Atomic Energy Act. In contrast, the OlG generally investigates allegations intrinsic to NitC's programs and operations, and the organizations or individuals funded by the agency.

In addition to Ol's normal investigative duties, the office is woiking with an interagency group investigating suppliers suspected of selling defective puducts to 1 ederal entities. Other participants of the group are from the 1 ederal Ilureau ofInvestigation,the U.S. Customs Service,and from inembers of the IG commu-nity, including the Department of Defense and the National Aeronautics md Space Administration.

29

PPENDICES A UDIT 1.lSTINGS INTERNAL AUDIT REPORTS Date Title Number 04/30/91 Revic,w of NRC's invoice payment OlG-89A-17 practices 05/28/91 Review of NRC's debt collection OlG-89A-17 process 06/04/91 OlG review of NRC staff actions in OIG-91 A-01 resolving the confirmatory action letter issues for Pilgrim Station 06/28/91 Review of NRC's handling of the OlG-90A-18 Employees Legal Project allegations OlG 90A-21 about Seabrook Nuclear Station 07/03/91 Review of NRC's license fee OlG-90A-10 processmg program 09'17/91 Review of the procutement practices OlG-90A-19 of the Advisory Committee on Reactor Safeguards 09/18/91 Review of expenses associated with OlG-91A-1 i furnishing, decorating. and renovating Chairman Selin's office 30

CONTRACTAUDIT REPORTS Funds OlO Ouestioned Put to issue -

Costs Hetter Use Date Contractor (Dollars)

(Dollars) 04/17/91 Pararneter. Inc.

0 NRC-05-80-251 05/29/91 BDM Corp, 1,254 NRC-02-77-155 j

. 05/24/91 Golder Assoc.,Inc.

4,787 NRC-02-81-027; 037: 045 06/07/91.

Engineering Science & Analysis 0

NRC-04-86-126 06/19/91 Itasca Consulting Group, Inc.

O N RC-02-85-002.

_.06/07/91-Golder Assoc., Inc.

1,653 NRC-02-85-002 08/26/91 Technassociates, Inc.

457 NRC-25-81-315; 33-85-322:

33-86-266; 10-84-21; 10-86-251 08/26/91 Woodward Clyde Consultants 0

NRC-04-80-192 08/26/91 Woodward Clyde Consultants 0

l NRC-04-80-192 08/26/91-Woodward Clyde Consultants 0

NRC-04-80-192 08/26/91 Woodward Clyde Consultants 0

NRC-04-80-D2

-08/26/91

.Itasca Consultm;; Group. Inc.

15.858 NRC-02-88-4102 08/28/91 Advanced Systems Technology 35.794 NRC-04-87-OSO

-08/28/91 Advanced Systerns Technology 13.295 NRC-04-87-080 08/28/91-Sonalyst, Inc.--

0 NRC-03-86-054

.(Includes 110 reports) 07/24/91--

Control Data Corp,(Proser) 0 N RC-04-81-201 -

04/17/91 MCSI Technologies, Inc.

O RS-IRM-91-203 31

...._.,.-w-

l Funds OlG Ouestioned Put to issue Costs lletter Use Date Contractor (Dollars)

(Dollars) 05/24/91 The Delphi Groupe, Inc.

O RS-RES-91-054 05/24/91 Accident Prevention Group 0

RS-RES-91-069 05/24/91 Stackig Sanderson, & White O

RS-PER-91-322 05/24/91 Concord & Assoc., Inc.

O RS-RES-91-069 05/05/91 S. Cohen & Assoc., Inc.

O RS-RES-91-054 05/06/91 Sonalyst, Inc.

O RS-RES-91-054 05/06/91 1-N ET, Inc.

O RFP-33-89-166 05/01/91 Nhli Systems, Inc.

O RS-IRht-91-186 05/01/91 S. Cohen & Asr.oc., Inc.

11,347 RS-RES-91-051 04/17/91 sal Corp.

O RE-RERS-91-054 44/17/91 Ruland Assoc., Inc.

O RS-IRht-91-205 04/17/91 Battelle hiernorial Institute O

RS-RES-91-205 07/24/91 Southwest Research Institute O

RS-RES-90-10S 09/09/91

-Technow, Inc.

O RS-RES-91-054 08/26/91 Alltech, Inc.

O RS-ADhi-91-141 07/23/91 Online Computer Systems 19,084 NRC-33-91-192 05/24/91 The Child Care Group, Inc.

O RS-PER-91-323 32

l Funds 010 Questioned l'ut to issue Costs lletter Use Date Contractor (Dollars)

(Dollars) 08/26/91 Ogden Allied 0

RS-ADM-91-141 Subtotal 573,093 530,431 INTERNAL AUDIT REI' ORTS 07/03/91 Review of NRC's Part 170 0

$2,(KXIEX)

License Fee Processing 05/28/91 Review of NRC's Debt 0

7,200 Collection Process Subtotal Ii 52.007.200 TOTAL

$73,098

$2,037,631 M

33

AilllRiiVIATIONS ACRS Advisory Committee on Reactor Safeguards AMS Allegation Management System 13ECo lloston Edison Company CAL confirmatory action letter CFO Chief Financial Officer CURE Citizens United for Responsible Energy DCAA U.S. Defense Contract Audit Agency DOE U.S. Department of Energy c

DOJ U.S. Department of Justice ELP Employees Legal Project FMFIA Federal Managers

• Financial Integrity Act FY fiscal year GSA U.S. General Services Administration IG Inspector General IOAA Independent Offices Appropriation Act NRC U.S. Nuclear Regulatory Commission 01 Office of Investigation OIA Office of Inspector and Auditor OlG Office of the Inspector Oeneral OMll U.S. Office of Management and lludget OPM U.S. Office of Personnel Management OWFN One White int North RSI Radiation Stabilizers, Inc.

SIMS Safety issues Management System WESF waste encapsulation and storage facility

-34

GLOSSARl' CONFIRhlA TORYA CTION LETTER (CA L). A letter from the N RC to a licen-see confirming a licensee's agreement to take certain immediate, short-term ac-tions that also specifies the actions to be taken.

FlNAL AC7'lON. The completion of all management actions discussed in man-ageme nt decisions concerning audit recommendations and findings. Final action occurs when management issues a decision.

FUNDS PUT TO BE7TER 11SE. Funds identified in audit recommendations that could be used more efficiently by avoiding unnecessary expenses.

AfANAGEA/ENT DECISION. Management evaluation of audit recommenda-tions and findings. A final decision is issued that is based on management's re-sponse to recommendations and findings.

DUESTIONED COS7'. A cost questioned as a result of an alleged violation of saw, regulation, contract, or agreement governing the expenditure of funds (costs unsupported by adequate documentation or funds r a particular purpose that are unnecessary or unreasonable).

UNSUPPORTED COST. Acost questioned because of a lack of adequate docu-mentation at the time of the audit.

SAFETYISSUES MANAGEh!ENT SYSTEM. A tracking and monitoring sys-tem designed to manage nuclear plant safety issues, including generic safety issues associated with the accident at the Three Mile Island facility.

35

THE INSPECTOR GENEIML HOTLINE A toll-free number (1-800-233-3497) was established by the Office of the in-spector General to provide NRC employees, contractors, and others with direct access to OlG's liotline Program. Ilotline procedures and guidelines were care-fully developed to ensure the confidendality of NRC employees wishing to re-port incidents of possible fraud, waste, and abuse within the NRC. Trained OlG staff are available to anr.ver calls Monday through Friday, between 10:00 a.m.

and 4:00 p.nt. (Eastern Standard Time). Individuals may also provide informa-tion to hotline personnel by writing to the address below, U.S. Nuclear Regulatory Commission The Office of the Inspector General lloiline Progratn Mail Stop EW/W 542 Washington D.C. 20555 HOTLINE NUMBER:

l-800-233-3497 36'

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