ML20106C037

Chief Financial Officers Annual Report -- 1992

ML20106C037
Person / Time
Issue date:	09/30/1992
From:	NRC OFFICE OF THE CONTROLLER
To:
References
NUREG-1470, NUREG-1470-V01, NUREG-1470-V1, NUDOCS 9210060022
Download: ML20106C037 (28)

Text

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Nuclear Rcgulatory Commission Chief Financial O[ficer's Annual Report -- 1992 MiiSSAGli FROM Ulli ClllliF FINANCIAL OFFICliR 1 am pleased to submit my first Annual lleport to the Chairman of the U.S. Nuclear llegulatory Connnksion (NitC) and to the Director of the Office of Management and lludget (OMil) as required by the Chief Financial Officers (CFOs) Act of W90.This first report sununari/es a number ofinitia-tives that have been tmder taken to improve financial management at the NltC. Financial statements and audit seport me not included since tne OMil waived the requirement for this year.

The NitC is cormnitted to ensuring adequate protection foi the public health and safety, com-mon defense and security, and the environment in the civilian use of nuclear materials in the United States The passage of the CFOs Act of 1990,icemphasizes the importance of financial managernent in accomplishing this mission. It is my belief that this new emphasis on financial management will improve the efficiency and effectiveness with which we carry out our regulatmy mission.

Since assuming iesponsibility as CFO,I have become aware of the need to im : vc NttC's finan-cial systems, pmcedt:res, and operations, but more importanty to inercase moi. geme.

mphasis and attention to souno financial management. Although improvements have been made, additional huprovements are necessary to crovide the kvel of financial management at the NitC that is envi-sinned by the CFOs Act. The Office of the inspector General audits and internal financial manage-ment assessments, have indicated a need for inercased awaneness of the importance of financial man-agement,impmved financial manage" nt processes, and improved accountability. I am committed to a continuing examination of financia,.nanagement at the NitC to determine financial risks and vul-nerabilities and appropriate actions to corteet weaknesses. A key element of this continuing examin-ation is the preparation and audit of future financial statements; this effort should pmvide further insight into financial management m cas wher e the agency is Joingwell and those aieas requiring addi-Honal attention.

The actions taken and planned ue tied to the NitC financial man.gement goals to:

m Pmvide fot c.icetive general and financial management practices for the NltC by ensuring that financial information is consideied in its decismns and day to-day operations at.d that resources are properly used and safeguarded; E

Pr ovide for systems of accounting, financial management, and internal control to assure the issu-ance of timely and reliable information so as to deter fraud, waste, and abuse of government icsources; and u

Provide f or the production of complete, reliabw, timely, and consistent financial information for use by NitC managers, the Fiesident, and the Congress in the financing, m magement, and evaluation of NitC activities.

Achievement of the above goals and associated improvements is a high priority of mine, as well as of

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senior management thmughout the agency.

James M. Taylor Chief Finncial Officer

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Nuclear Regulatory Contrnission Chief Financial Oficer's Annual Report-1992 CONTENTS IN TP OD UCTION....................................

NRC Alission and Progrants.......................

1 FillallCial AfanagenlCitt Ent'ironinent...

2 FinallCial Afanagentent Planning....................

4 STA TUS OF FINANCIAL AIANAGEh1ENT..............

5 Financial Afanagentent Organization.................

5 Financial Afanagentent Personnel..................

5 A cconnting Standards............................

6 Financial Systeins................................

7 Internal Cantrol................................

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Asset A fanagenient...............................

8 Andited Financial Reporting and Perfonnance Infcnwation..........................

9 FEDERAL AIANAGERS' FINANCIAL INTEGRITY ACT R EPOR T S UA IA 1A R Y......'...........................

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Nuclear Regulatory Cominission ChitfIinancial ODicer's Annual Report -- 1992 i

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INTRODUCTION i

'I he Chief Financiai O!9mrs(CFW) Act of 1990 requires the CFO of the U.S.

Nuclear Regulatory Conuninico(NRC) to prepare and submit an annual report to the agency head and the Director of the Office of Management and Budget (OMll) that includes a description and analysis of the status of financial manag9-ment, audited financial staiements and an audit report, a sununaiy of the reports on internal accounting and administrative control systems, and other informa-tion the agency head considers appropriate.This first annual report addresses all of these elements except the audited financial statements and the audit report, since the NRC received a waiver from OMil for the preparation of the fiscal year (FY) 1991 financial statements and audits. Ilowever, during FY 1992, the NRC has taken necessaiy actions to prepare and audit the FY 1992 financial state-ments, which will be included in next year's annual report. When completed, the preparation and audit of the financial statements will provide additional input to I

NRC-plans for further finaacial management improvements.

NRC Mission and Programs The NRC is an independent regulatory agency of the Federal Government established by the linergy Reorganization Act of 1974. Its purposes are defined by the Energy Reorganization Act of 1974, as amended, and the Atornic finergy Act of l954, as amended. The NRC is headed by five commissioners nominated by the President and confirmed by the Senate.

The mission of the NRC is to ensure adequate protection for the public health and safety, commor Jefense and security, and the environment in the civilian use

- of nuclear materials in the United States. The NRC carries out its mission by setting requirements and stendards,in the form of rules, license conditions, and regulatory guidance, that licensees must meet to design, construct, and operate safe facilities; inspecting facilitiu, and taking enforcement action as necessary to ensure that such requirements and standards are followed; and conducting research to support, assess, or refine judgments used in regulaterv decisions.

in carrying out its mission, the NRC issues licenses for the civilian use of nuclear materials in two broad program areas-reactors and nonreactors. There are 110 licensed commercial nuclear power reactors, which generate about 2b percent of the nation's electricity, and 11 major commercial nuclear facilities involved in the processing and fabrication of uranium ore into reactor fuel. Approximately a

23,000 licenses are issued for medical, academic, and industrial uses of nuclear

' material. Approximately one third of these material licenns are administered by the NRC; the remaining two-thirds are administered by States that have signed an agreement with the NRC allowing each State to regulate the use of radioactive material within that State.

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Nacicar Regulatory Commission Chkf Financial Qlliccr's Annual Report -- 1992 Central to NI(C's planning, progranuning, and budgeting is the NRC Five Year Plan, which is updated annually.The purpose of this plan is lo catablish the direc-tion for the agency, to provide the basis for future budget submissions to the OM11 and the Congress, and to assess the agency's progress in achieving agency goals. The NRC has established the following major goals to carry out its mis-sion M

linsure that nuclear power plants and other licensed facilitics are operated safely and that licenr.ees are adequately prepared to respond to accidents.

E linsure that nuclear power plants under construction are designed and con-structed properly and are ready for safe operation.

N Prepare for future standard reactor design licensing and reactor license re-newal activities, including revisions to regulatory guidance and standard review plans.

E linsure that research provides the technical bases for timely and sound rulemaking and regulatory decisions in support of NRC licensing and inspection activities.

E linsure it'it current and future uses and transportation of nuclear.and ra-dioactive materials are safe and have adequate safeguards.

E linsure that high-level and low-level nuclear waste and uranium mill tail-ings are safely managed and disposed of.

E Continue to maintain special and indvendent reviews and investigations-of NRC activities.

E Allocate N RC's human and capital resources and direct the agency's affairs so that they contribute most effectively to the mission of protecting the public health and safety.

E linsure that the NRC has effective communications and relations with out-side organizations.

Financial Managernent Environment The NRC has two appropriations; funds for both are available until expended.

One appropriation is for agency salaries and expenses and the other for the Of-fice of the inspector General (OlG).The total NRC new budget authority for FY 1992 is $5:2.5 million, which consists of $508.8 million from the Salaries and

' lixpenses Appropriation and $3.7 million from th 01G Appropriation. Of the 2

Nuclear Regulatory Cominission ChidFinancial Officer's itnnual Report - - 1992 I

total agency obligations, nearly 50 percent are for the salaries and benefits for the authori7ed staff of 3,335 full time-equivalent (FTE) positions (70 percent in headquarters and 30 percent in regional offices). The remaining 50 percent of the obligations are for contractual support and travel, Within the contractual support area, about 60 percent of the obligations are fo work performed by other Federal agencies, primarily the Department of Energy (DOE), through interagency agreements. Approximately 1 percent of agency obligations are for grants and cooperative agreements v ith universities, nonprofit organizations, and State and local governments.

11 is estimated that additional revenues of $4.0 million will be received for reim-bursable work performed for other Federal agencies. Revenues derived from enforcement actions are estimated to be $3.5 million for FY 1992 and are depos-ited to miscellaneous receipts of the Department of the Treasury.

The NRC assets, other than appropriated funds, are limited. Cap;talized personal property is limited to typical office furnishings, personal property ac-t quired by contractors with NRC funds, computer simulators which model nu-a clear reactors, computer hardware, and off-the shelf as well as customized com-puter software.The NRC has no real property. It has no loan or loan guarantec programs The Omnibus lludget Reconciliation Act (OI3RA) of 1990 requires the NRC to recover approximately 100 percent ofits new budget authority,less the amount appropriated frem the Nuclerr Waste Fund, by assessing fees.The following fig-ure shows the sources of FY 1992 new budget authority of $512,5 million.

Sources of NRC 1992 Budget Authority-REACTOR F EES

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Nucicar Rct;ulatory Cmnonisshm Chit] Financial Uilicer's Annual Report - - IM2 Financial blanagement I'lanning The NitC has established a financial management plan, g process to wpport the goals for entrying out the agency mission. The finan al mana; ment goals established to guide financial management planning are dso consistent with the purposes of the CI:Os Act. To achieve its financial management goals, the NitC has prepared a Financial Management 5-Year Plan that reflects the act;on plans for improving financial management. The three agency financial management goals at e:

M Provide for effective general and financial management practices for the N1(C by ensuring that financial information is considered in its decisions and day-to day operations and that resources are properly used and safeguarded.

M Provide for systems of accounting. financial management, and internal con-trol to assure the issuance of timely and reliable infor mation so as to deter fraud, waste and abuse of Government iesources.

N Provide for the production of complete reliable, timely, and consistent fi-nancial information for use by NI(C managers, the President, and the Congress in the financing, inanagement, and evaluatioa of NI(C activities.

To address curient financial management weaknesses and to achieve the above f;nancial inanagement goals, the N1(C pursues the following financial manage-ment strategies:

E 1mprove 'he compeiencJ of human resonrees applied to financial manage-ment functions by increasing the training of the current staff, recruiting highly qualified financial management professionals, and obtaining contractor suppon in areas where specific expertise is needed.

M Automate and integrate systems critical to the support of financial manage-ment functions.

E Develop mutual recognition of and appreciation for program and financial management roles in NitC financial management.

E listablish and implement sound financial management practices that con-form to accounting and financialsystem standards and issue clear financial man-agement directives and guidance.

B Use measuresof performance in the program and financial management of the NitC N Address the control and management of resources to accomplish the N!(C's programs in each audit performed by the 010.

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Nucicar Regulatory Connnis.slon Chicf Financial Ullicer's Annual Report -- 1992 STATUS OF FINANChiL MANAGliMiiNT Enactment of the CFOs Act of 1990 and the actions of the OMil to implement the Cl Os Act have previded additionalimpetus for improved financial manage-ment at the NI(C. Major initiatives are under way or planned to address identi-fied problems and to strengthen overall financial management consistent with the intent of the CFOs Act. During FY 1992, the N1(C has pursued these major initiatives and has made stsides toward meeting its financial management goals.

Financial management, account'ng systems, and internal controls have been im-proved to better assure the issuance of reliable financial information for decisionmaking and to deter fraud, waste, and abuse of NI(C icsources. In addi-tion, the capabilities of the financial management staf f have been enhanced.

Although imptovemeats have been made, additionalimprovements are needed to provide the level of financial management envisioned by the CFO's Act.The Office of the inspector Gene 4al audits and internal financial manrgement as-sessments, have indicated a need for increased awareness of the importance of financial management, improved financial management processes, and im-proved accountability. There is a continuing examination of financial manage-ment at the NI(C to determine financial risks and vulnerabilities and appropriate actions to conect weaknesses. A key element of this cominuing examination is the preparation and audit of future financial statements; this effort should pro-vide further insight into financial management areas where the agency is doing well and those arcas requiring : dditional attention.

The specific actions taken in FY 1992 are described under the following seven -

financial management functional areas.

Financial Managernent Organiwtion The NI(C's CFO organizational proposal was apph.ved by OMllin IT 1991.

The CFO was appointed in June 1991, and the Deputy CFO (DCFO) was ap-pointed in December 1991. The appropriate responsibilities and authorities of the CFO and DCFO were incorporated into management directives by October 199 h Progress is being made to review and revise management directives to fully conform to the requirements of the CFOs Act and associated OMil guidance.

This includes the issuance of management diiectives on both financial systems and the resoluuon of audit findings.

Financial Management Personnel

- In FY 1992, the authorized staffing leve! for the N1(C Office of the Controller, the primary agency financial management organization, was increased from 86 to 93 FIEs. 'rhe seven F1'Es were added to prepare auditable financial t

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Nucicar Regulatory Commission Chief Financial OBicer's Annual Report -- 1992 statements and to augment the staff capabilities for financial systems develop-ment, budget execution, and financial accounting.The CFO also filled a position to assist him in implementing his responsibilities under the CFOs Act.To enable the 010 to carry out its responsibilities, including the audit of contracts and agency financial statements, the 010 staffing level was increased from 32 to 37 lTlis in FY 1992.

Not only was the authorized staffing level increased, but staff capabilities were increased through additional training. For example, auditors received special-ized training on the audits of financial statements required by the CFOs Act.

Some financial management personnel in program and regional offices have had rotational assignments in the Office of the Controller to increase their under-standing of financial.anagemer.t.

Development of two courses was initiated for allotment financial managers and fu:.Js certifying officials in program and regional offices.The first course," Intro-duction to Financial Management," includes the fundamentals of appmpriatien law, Federal and N RC budget processes, funds comrol, accounting, and internal controls. The second course, " Administrative Control of Funds--Ilandbook,"

supplies the knowledge to use the handbook effectively.

To stress the importance and develop an appreciation of financial management -

' for all NRC managers, financial management was made a mandatory subele.

ment of the management effectiveness element for all Senior lixecutive Service (Sl%; performance plans.This subelement states that an SliS manager is respon-sible for the authorized obligation and costing of provided funds: sound manage-ment of contracts and DOII National Iaboratory agreements; proper function-ing ofinternal comrol systems; prevention of waste, fraud, and abuse of allotted funds; and appropriate activities under the CFOs Act.

Accounting Standards The NRC remains current with technical developments in accounting and pre-pares for the implementation of changes in accounting standards on a timely ba-sis, it reviews and provides comments on issuances of the Financial Accounting Standards Advisory 130ard, in preparation for the audit of the FY 1992 financial statements, the NRC is reviewing its accounting practices to determine if they conform to applicable accounting principles, standards, and other requirements; this effort will be completed by the end of FY 1992.

As required by the CFOs Act, d.e N RC has established a process for the biennial review of fees and other charges imposed by the N RC lo assure that such fe.es and -

other charges accurately reflect costs incurred.The reviews are being perfrrmed by the offices responsib!c for establishing the fees ano other charges, it is

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i Nuclear Regulatory Commission Chief Financial 0][icer's Annual Report - 1992 expected that the cmrent rimJ of reviews will be completed by the first quarter of FY 1993.

Financial Systems Significant ef fort has been expended on improving financial systems during FY 1992, h1uch of this effort has been associated with the replacement of existing systems.

The NitC entered into a crosy-servicing arrangement with the Financial hian-agement Service of the Department of the Treasmy toimplement a proprietaty financial system, the Federal Financial System (FFS). The current core financial management system will be replaced by the FFS in the first quarter of FY 1993.

This system will provide for the integration of budget and accounting data and for the implementation of the Standard Generalledger at the transaction level.

6 It will also automate use of commitment accounting, permit queries about pay-ments and accounting transactions, and consolidate accounting components into one system. The system conforms to the Government-wide system standards for coe. unancial systems. The implementation milestones completed in FY 1992 include the installation analysis, the pilot test and production simulation, and the definition of initial custom repoits.

The NRC recognizes that its Payroll System will have to be replaced within the next few years because it is becoming increasingly difficult to make changes to the system. A study was completed during FY 1992 to assess the feasibility of implementing an integrated payroll / personnel system.The accepted recommen-dation of the study is for the NRC to enter into a cross-servicing arrangement-with another Federal atency for an integrated payroll /pmsonnel system.

Improvementswere made to the Accounts Receivable System to automate such functions as the identification of delinquent accounts, aging of receivables, and calculation of interest and other charges.

- Improvements were made to the License Fee Ilill Generator System to automate to a greater extent audit trails and detailed listings for fee billings. lifforts are under way to provide an automated interface with the systems supplying data to the 1.icense Fee Ilill Generator System so as to provide a direct link with rather than data re-entry from the other spiems.

In addition to improvements made to the financial systems, the use of the mfe,r-mation in these systems was increased. The CFO submitted to the NRC Com-missioners quarterly financial reports on the agency budget execution as re-quired by the CFOs Act. In addition, the CFO re views a monthly financial report on agency budget execution The CFO staff has begun an analysis of data in the

. financial systems to identify and correct financial management problems before they become critical.

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Nucicar Regulatory Commission Chief Financial Officer's Annual Report -- 1992 t

Internal Control Actions are underway to correct weaknesses associated with the management of work performed at the DOE National I;ibor ; tories.The NRC has identified the types of cost information that are available from the DOE National laboratories: this will serve as a basis for requesting meaningful cost informa-tion of these laboratories. This cost information will allow the NRC to better manage the work perfarmed by the DOE Nationa! laboratories. Also, a model has been developed for negotiating work statements for wor k to be performed at -

DOE National 12boratolics. Timeliness criteria for the clescout and deobliga-tion e funds for work at the DOE National laboratories will be developed by r

the end of FY 1992. A revised management directive on the placement and monitoring of work performed at the DOE National l2boratoriesis expected to be issued by the cod of FY 1992.

During FY 1992, a quality assurance and monitoring program was established to ensure that annual financial system reviews are performed as required by OMC guidance, results are evaluated, and corrective actions are taken Additionally, a new agencywide audit followup tracking system was put in place and a program was established to review the implementation of corrective actions on audit find-ings.

Management has resolved all audit recommendations made in 01G audit re-ports issued through July 31,1992. It has either completed final action or is pur-suing completion of final action on all such audit recommendations.

The timeliness and quality of critical accounting reconciliations have improved significantly during FY 1992; this has allowed more timely identification and cor-rection of discrepancies in accounting records.

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The process for preparing and auditing the FY 1992 financial statements will-provide additional information on the adequacy of NRC internal contials and NRC's conformance with the financial policies and objectives set forth in OME Circular A 127, " Financial Systems."

Asset Management M ost of NRC's efforts to improve asset management in FY 1992 were directed at improving the management of both casi Mflows and outflows.

Efforts to improve the timely payment ofinvoices subject to the Prompt Payment Act have consistently resulted in over 90 percenfof payments being made on time, as compared with the FY 1991 Government-wide average of just under 88.

percent. The percentage of payments made on time reported in FY 1992 has decreased from that in FY 1991: the primary reason for this decrease is more P

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FIcicar llegulutary Commission.

Chicf Financial Qlliccr*s Annual Itcport - - l992 accurate collection of prompt payment data in FY 1992 resulting from an im-proved quality control program.

The NRC imprest funds were reduced by approximately 50 percent in FY 1992 because of the increased t.se of third-party drafts, rather than imprest funds,for the payment of travel vouchers.

Outstanding t ravel advance balances over 60 days old, for other than permanent change of station, have been reduced from $325,000 at the beginningof FY 1992 to $69,000 as of June 30,1992, primarily because of more effective followup and collection of outstanding travel advance balances.

The use of electronic collections and payments has been expanded in order to improve cash management.The NRC has consistently paid a high percentage of its employees by Direct Deposit / Electronic Funds Transfer (DD/E17f): cur-rently about 90 percent of NRC employees receive their net salaiy payment by DD/ EFT, compared with the Government-wide average of 79 percent.

%;nificant actions have been taken to improve the management and status of uecounf3 receivable as a result of the statutmy requirement that the NRC collect 100 percent ofits appropriations thrsunh fees. Ae of July 31,1992, the number of fee-related delinquent debts over 90 days old has been reduced in FY 1992 by over 65 percent to a balance ofless than $5 million. A process was formalized in FY 1992 to handle delinquent fee-related debts, and a debt-collection contrac-tor has recently been 'r etained to assist in the collection of such debts. Cases have been referred to this contractor. License revocation orders have; been issued.

During FY 1992 the NRC modified its billing cycle for license fees so that all such fees are billed at least quarterly; previously some of these fees were billed semiannually.

Audited Financial Reporting and Performance Infonnation The NRC retcived a waiver from OM B for the preparation of the FY 1991 finan-cial statements and audits.110 wever, during FY 1992, the NRC has taken neces-saiy <>ctions to prepare and audit the FY 1992 fmancial statements in confor-mance with OMB Bulletins 91-14," Audit Requirements for Federal Financh!

Statements," and 91-15," Guidance on Form and Content of Financial State-mentson F.Y '991 Financial Activity." Contractorsupport has been obtained to assist both in the preparation and the audit of the financial statements., An

-- auditability survey of FY 1991 financial statements was completed. The OlG is-sued guidelines to_ be used in the preparation of the FY 1992 financial state-ments. An outline for the overview section as well as a draft of an implementa-tion schedule and major milestones has been completed.

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Nuclear Regulvory Corntnission Chicf Financud 0.[ficer's Annual Rcport -- 1992 Ily Septernber 30,1992, the NitC will submit to OMil and congressional over-sight conunittees a lit t of the program and financial performance measures that will be reported in site NitC's FY 1992 financial statements.These performance measures are intended to permit program tuanagers, agency officials, the Con-gress, and the public to better understaad the effectiveness and efficiency of N1(C prograins.

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Nuclear Regulatory Cominission CNef Financial Qllicer's <1nnual Report - - 1992

. FEDERif L MitNi1GERS' FINi1NCML INTEGRITYstCT REPORT SUMMilRY On December 31,1991, the Chairman o' the NltC submitted a report to the President on the agency's internal accounting and administrative controls. The report, prepared pursuant to the Federal Managers' Financial Integrity Act of 1982 (FM FI A), provided reasonable assurance that the agency, as a whole. com.

plied with Sections 2 and 4 of the FMFI A: this assurance was based on an evalu.

ation of the NitC's management controls and financial management s stems, t

The report indicated that there were neither pending materialinternal control weaknesses nor material nonconformances with OM 11 financial policies and ob-jectives. Ilowever, the repo ' indicated that actions to improve controls had been identified and that financial system improvements were under way to allevi.

ate problems identified in the financial system reviews.

On May 29,1954, the N RC advise 6 0 Mil that, c.n the basis of fuither evaluation, it wdlidentify the wcakness associated with the management of agreements with the DOli as a material weakness in the 1992 FM FIA report.The NRC will also examine nonc(mformances identified in 1991 to determine if they should be identitled as material. Specific actions taken in FY 1992 on internal control I

weaknesses and nonconicrmances are described in the preceding sections.

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Is. sert A Since annuming renponcibility au CEO, 1 have become aware of the need to improve, 11RC's financial nystem2, proceduren, and operations, but more importantly to increace management emphacio and attention to nound financial management.

Insert D The Office el the Inspector General audito and internal financial

.oagement annensmen.s, have indicated a need for increased awareness of the importance of firancial management, improved 1inancit

.oanagement processes, and improved accountability.

I am committed to a continuing examination o# financial management at the !!RC to determine financial ricks and vulnerabilities and appropriate actions to correct weaknesses.

A key element of thin o

continuing examination is the preparation and audit of future Iinancial ntatemento; this offort should provide further insight into financia' management areac where the agency is doing well and thoon areas rerluiring additional attention.

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Achievement of the above goa]n and annociated improvements is a high priority of minc, as well as of senior management throughout the agency.

Insert D The 011 ice of the Inspector Genera 1 audits and internal financial management ancecaments, have indicated a need for increased awareness of the importance of financial management, improved financial management procences, and improved accountability.

There in a ~'ontinuing examination of financial management at the 11RC to determine financial risks and vulnerabilities and appropriate actions to correct weaknesses.

A key element of this continuing examination is the preparation and audit of future financial statements; this effort should p:. vide further insight into financial management area" wher the aj.ncy is doing well and those areas requiring additional attention.

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Nuclear Regulatory Ccinmission Chief Financial Ollicer's Annual Report - - 1992

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AIESSMiE FROA1 Tile CillEF FINithClitL OFFICER p ' ' ( #p. I,p y,

I am pleased to submit my first Annual iteport to the Chairman of the U.S.

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Nuclear llegulatory Commission (NitC) and to the Director of the Office of s

Management and fludget (OMI)) as required by the Chief Financial Officers z{y#,#j}/

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't he NitC is committed to ensuring adequate protection for the p. Slic f..)

health and safety, common defense and security, and the environment in the ci-vilian use of nuclear materialsin the United States.The passage of the Cl Os Act i

of m90, seemphasizes the importance af financial rnanagement in accomplish-jilg Fins mission. It is my belief that this new einphasis on financial management

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will improve the cf ficiency and effectiveness with which we carry out our regula-

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e 1his lirs' report summarizes a r.unber ofinitiatives that have been under-X taken to imp /c financial management at the NitC, Financial statements and

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audit report are not included since_ th. e_OMil waived _the re_quirement for this gg,$lthough improvements have been made, additional improvements are riE cessary to provide the level of financial management at the NitC that is envi-W sioned by the CFOs Act.fih thisend lexpet.uhe preparatiorrand audit of futtn c, h

financial statements to pr ovi,de additional input.to our pla ns fo~r furIher financial -

manage 2nenLunprovemonid (?

. tot A r (y The actions taken and planntd are tied to the NitC financial manapment goals to:

W l'rovide for effective general and financial management practices for the NitC by ensuring that financial information is considered in its decisions and day-to day operations and that resources are properly used and safeguarded:

M Provide forsystemn of accounting, financial management, and internal e(

trol to assure the issuance of timely and reliable information so as to deter fraud, waste, and abuse of government resources; and M

Provide for the production of complete, reliable, timely. and consistent fi-nancialinformation for use by NitC managers, the President,and the Congress in the financing, management, and eva'uation of NitC activities.

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l Nucicar Res;ulatory Corntnission Chief Financial Officer's Annual Report -- 1992 CONTENTS INTR OD I)CTION..................................

I NRC Alission and Programs..............

I Financial Afanayensent Environinent.........

- 2 Financial hianagement Planning....................

4 STA TUS OF HNA NCIAL hlANAGEAIENT :.............

. 5 Financial Afanagement Oryanization.................

5 Financial blanagement Personnel...................

5 A ccounting Standards............................

6 Financial Systems.........

'~f In t ern al Con trol..................................

]

Asset Afanagement S

Audited Financial Reporting and Perfonnance Infonnation.........................

9 FEDERAL AIANAGERS' FINANCIAL INTEGRITY ACT REPOR T S UA IA 1A R Y.................................

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Nuclear Regulatory Comrnission Chief Financial 0][icer's Annual Report - - 1992

- i INTRODUCTION The Chief Financial Officers (CFOs) Act of 1990 requires the CFO of the U.S.

Nuclear Regulatory Commission (NRC) to prepare and submit an annual report to the agency head and the Directc.r of the Office of Management and Budget (OMil) that includes a description and analysis of the status of financial manage-ment, audited financial statements and an audit report, a summary of the reports on internal accounting and administrative control systems, and other infortaa-tion the agency head considers appropriate.This first annual report addresses all of these elements except the audited financial statements and the audit report, since the NRC received a waiver from OM B for the preparation of the fiscal year (FY) 1991 financial statements and audits. Ilowever. during FY 1992, the NRC has taken necessary actions to prepare and audit the FY 1992 financial state-ments, which will be included in next year's annual report. When completed, the preparation and audit of the financial statementswill provide additional input to NRC plans for further financial management improvements.

NRC Mission and Programs The NRC is an independent regulatory agency of the Federal Government estaHished by the Energy Reorganization Act of 1974. Its purposes are defined by the Energy Reorganization Act of 1974, as amended, and the Atomic Energy Act of 1954, as amended. The NRC is headed by five Commissioners nominated by the President and confirmed by the Senate.

The mission of the NRC is to ensure adequate protection for the public health and safety, comr..on defense and security, and the environment in the civilian use of nuclear materials in the United States. The NRC carries out its mission by setting requirements and standards,in the form of rules, license conditions, and regulatory guidance, that licensees n'ust meet to design, construct, and operate safe facilities; inspecting facilities and taking enforcement action as necessary to ensure that such requirements and standards are followed; and conducting research to support, assess, or refine judgments used in regulatoiy decisions.

In carrying out its mission, the NRC issues licenses for the e ilian use of nuclear materials in two broad program areas-reactors and nonreactors.There are 110 licensed commercial nuclean power reactors, which generate about 20 percent of the nation's electricity, and 11 major commercial nuclear facilities involved in the processir.g and fabrication of unacium ore into reactor fuel. Approximately 23,000 licenses are issued for medical, academic, and industrial uses of nuclear material. Approximately one third of these material licenses are administered by the NRC; the remaining two-thirds are. administered by States that have

. signed an agreement with the NRC ullowing each State to regulate the use of

' radioactive material within that State.

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Nucicar llegulatory Commission Chief Financial OBiccr's Annual Report - - 1992 Central to NitC's planning, programming, and budgeting is the NitC Five-Year Plan. which is updated annually.The purpose of this plan is to establish e ditee-t tion for the agency, to provide the basis for future budget submissi

to the OM 11 and the Congress, and to assess the agency's progress in achies

, agency goals. The NltC has established the following major goals to carry its mis-sion:

M I!nsure that nuclear power plants and other licensed facilities are operated safely and that licensees are adequately prepared to respond to accidents.

3 linsure that auclear power plants under construction are designed and con-structed properly and are ready for safe operation.

E l>repare for future standaid reactor design licensing and reactor license re-newal activities, including revisions to regulatory guidance and standard review plans.

M linsure that research provides the technical bases for timely and sound rulemaking and regulatory decisionsin support of NitC licensing and inspection activities.

E Ensure that current and future uses and tranrportation of nuclear and ra-dioactive materials are safe and have adequate safeguards.

E linsure that high-level and low-level nuclear waste and uranium mill tail-ings are safely managed imd disposed of.

M Continue to maintain spccial and independent reviews and investi,ations of NitC activities.

M Allocate NltC's human and capital resources and direct the agency's affairs so that they contribute most effectively to the mission of protecting the public health and safety.

M Ensure that the NitC has effective communications and relations with out-side organizations.

Financial Management Environtnent The NRC has two appropriations; funds for both are available until expended.

One appropriation is for agency salaries and expenses and the other for the Of-fice of the inspector General (OlG).The total N RC new budget authority far 1 Y 1992 is $512.5 million, which consists of $508.8 million from the Salaries anel Expenses Appropriation and $3.7 million from the OlG Appropriation. Of the 2

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i Nuclear Regulatory C<nnmission Chltf19nancial Oficer's Annual Report - - 1992 total agency obligations, nearly 50 percent are for the salaries and benefits for the authorized staff of 3,135 full time equivalent (1-TE) positions (70 percent in headquarters and 30 percent in regional offices). The remaining 50 percent of the ob:igations are for contractual support and travel. Within the contractual support area, about 60 percent of the obligations are for work performed by other Federal agencies, pu aarily he Department of Energy (DOE), through interagency agreements. Approximately 1 percent of agency obligations are for gr mts and cooperative agreements with universities, nonprofit organizations, i

anu State and local governments.

l It is estimated that additionul revenues of 54.0 million will be received for reim-bursable work performed for other Federal agencies. Revenues derived from enforcement actions are estimated to be $3.5 million for IN 1992 and are depos-ited to miscellaneous receipts of the Department of the Treasury.

The NRC assets, other than appropriated funds, are limited Capitalized

+

personal property is limited to typical office furnishings, personal property ae-quired by contractors with NRC funds, computer simulators which model nu-clear reactors, computer hardware, and off the shelf as well as customized com-puter software. The NRC has no re d property. It has no loan or loan guarantee programs.

The Chnnibus liudget Reconciliation Act (OllR A) of 1990 requires the NRC to recover approximately 100 percent ofits new budget authority,less the amount appropriated from the Nuclear Waste Fund, by assessing fees.The following fig-ure shows the sources of FY 1992 uew budget authority of $512.5 million.

Sources of NRC 1992 Budget Authority HEACTOR FEES

($425.6) 83%

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1

4 Nuclear thxulatory Commission Chief Financial Officer's Annual Rcport - - l992 Financial A!anagernent Planning The NRC has established a financial management planning process to support the goals for carrying out the agency mission. The financial management goals established to guide financial management planning are also consistent with the purposes of the CFOs Act. To achieve its financial management goals, the NRC has prepared a Financial Management 5-Year Plan that reflects the action plans for improving financial management.The three agency financial management goals are:

E Provide for effective general and financial management practices for the NRC by ensuring that financial information is considered in its decisions and day to-day operations and mat resources are properly used and safeguarded.

M Provide for systems of accounting, financial management, and internal con-trol to assure the issuance of timely and reliable information so as to deter fraud, waste, and abuse of Government resources.

E Provide for the production of complete, reliable, timely, and consis;ent fi-nancialinformation for use by NRC managers, the President, and the Congress in the financing, management, and evaluation of NRC activities.

To address current financial management weaknesses and to achieve the above financial management goals, the NRC pursues the following financial manage-ment soategies:

E 1mprove the competence of human resources applied to financial manage-ment functions by increasing the training of the current staf f, recruiting highly qualified financial management professionals, and obtaining contractor support in areas where specific expertise is needed.

E Automate and integrate systems critical to the support of financial manage-ment functions.

M Develop mutual recognition of and appre..iation for program and financial management roles in NRC financial management.

E Establish and implement sound financial management practices that con-form to accounting and financial system standards, and issue clear financial man-agement directives and guidance, M

Use measures of performance in the program and financial management of the NRC.

M Address the control and management of resources to accomplish the NRC's programs in each audit performed by the 010.

4

m. - _ _ _ _ _ _--_ _ _ _.

i Nuclear Regulatory Commission Chief Financial Ollicer's Annual Report -- 1992 STATUS OF FINANCIAL hlANAGEAIENT Enactment of the CFOs Act of 1990 and the actions of the OMll to implement the CFOs Act have provided additionalimpetus for improved financial manage-ment at the NRC. Major initiatives are under way or planned to address identi-fied problems and to strengthen overall financial management consistent with the intent of the CFOs Act. During FY 1992, the NitC has pursued these major initiativcs and has made strides toward meeting its financial management goals.

Financial management, accounting systems, and internal contr ols have been im-proved to better assure the issuance of re. able financial information for decisionmaking and to deter fraud, waste, and abuse of NRC r esources. In addi-c//-

tion, the capabilities of the financial management staff have been enhanced.'Al-though Qhese3 improvements have been made, additional improvements are needed to provide the level of financial management envisioned by the CFO's ActMorexamplerthapieparation and alitlifof the FY-1992 financial statements- --

HTc mpected to identify additional areas for improvement]

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T/p'" The specific actions taken in FY 1992 are descdbed under the following seven financial management functional areas.

Financial Afanagement Organization The NRC's CFO organizational proposal was approved by OMilin FY 1991.

The Cl O was appointed in June 1991. and the Deputy CFO (DCFO) was ap-pointed in December 1991. The appropriate responsibilities and authorities of the CFO and DCFO were incorporated into management directives by October 1991. Progress is being made to review and revise management directives to fully conform to the requirements of the CFOs Act and associated OMil guidance.

This includes the issuance of management directives on both financial systems and the resolution of audit findings.

Financial Afanagement Personnel in FY 1992, the authorized staffing level for the NRC Office of the Controller, the primary agency financial management organization, was increased from 86 to 93 ITE's. The seven FTIIs were added to prepare auditable financial state-ments and to augment the staff capabilhies for financial systems development, budget execution, and financial accounting, The CFO also filled a position to assist him in implementing his responsibilities under the CFOs Act. To enable the OIG to carry out its respensibilities, including the audit of contracts and agency financial statements, the OlG staffing level was increased from 32 to 37 FI'Es in FY 1992.

5

Nuc! car Regulatory Commission Chief Financial OBicer's Annual Report - - 1992 Not only was the authorized staffing level increased, but staff capabilities were increased through additional training. For example, auditors received special-ired training on the audits of financial statements required by the CFOs Act, Some financial management personnel in program and regional offices have had rotational assignments in the Office of the Controller to increase their under-standing of financial management.

Development of two courses was initiated for allotmeat financial managers and f

funds certifying officials in program and regional offices.The first course," Intro-duction to Financial Management," includes the fundamentals of appropriation law, Federal and NRC budget processes, funds control, accounting, and internal--

controls. The second course, " Administrative Control of Funds--Ilandbook "

supplies the knowledge to use the handbook effectively.

3 To stress the importance and develop an appreciation of financial management for all NRC managers, financial management was made a mandatory subele-ment of the management effectiveness element for all Senior Executive Service (SES) performance pla s.This subelement states that an SES manager is respon-sible for the authorized obligation and costing of provided funds: sound manage-ment of contracts and DOE National Laboratory agreements: proper function-ing ofinternal control systems; prevention of waste, fraud, and abuse of allotted funds; and appropriate activities under the CFOs Act.

Accounting Standards The NitC remains current with technical developments in accounting and pre-pares for the implementation of changes in accountmg standards on a timely ba-sis, it reviews and provides comments on issuances of the Financial A; counting

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Standards Advisory lloard. In preparation for the audit of the FY 1992 financial statements, the NitC is reviewing its accounting practices to determine if they i

conform to applicable accounting principles, standards, and other requirements; this effort will be completed by the emt of FY 1992.

As required by the CFOs Act, the NRC has established a process for the biennial c

revMw of fees and other charges imposed by the N RC to assure that such fees and other charges accurately reflect costs incurred. The reviews are being performed by the offices responsible for establishing the fees and other charges. It is ex-pected that the current round of reviews will be completed by the first quarter of FY 1993.

Financial Systems Significant effort has been expen& d on improving financial systems during FY 1992. Much of this effort has been associated with the replacement of existing systems.

6 l

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4 Nuclear llegulatory Commission Chief Financial OBicer's Annual Iterort - - 1992 The NRC entued into a cross-senicing arrangement with the Financial Man-agement Senice of the r epartment of the Treasury to implement a proprietary financial system, the Federal Financial System (FFS). The current core financial management system will be replaced by the FFS in the first quarter of FY 1993.

This system will proside for the integration of budget and accounting data and for the implementation of the Standard General Lxdger at the transaction level.

It will also automate use cf commitment accounting, permit queries about pay-ments and accounting tra nsactions, a nd consolidate accounting components into one system. The system conforms to the Governtnent wide system standards for core f;nancial systems. The implementation milestones completed in FY 1992 include the installation analysis, the pilot test and production simulation, and the definition of initial custom reports.

'I he NRC recognizes that its Payroll System will have to be replaced within the next few years because it is becoming increasingly difficult to make changes to the system. A study was completed during a 1992 to assess the feasibility of implementing an integrated payroll / personnel system.The accepted recommen-dation of the study is for the NRC to enter into a cross-servicing arrangement with another Federal agency for an integrated payroll / personnel system.

Improvements were made to the Accounts Receivable Syst"rc to automate such functions as the identification of delinquent accounts, ag:ng of receivables, and calculation of interest and other charges.

Improvementswere made to the License Fee Bill Generator System to automate to a greater extent audit trails and detailed listings for fee billings. Efforts are under way to provide an automated interf ace with the systems supplying data to the License Fee Bill Generator System so as to provide a direct link with rather than data re-entry from the other systems.

In addition to improvements made to the financial systems, the use of the infor-mation in these systems was increased. The CEO submitted to the NRC Com-missioners quarterly financial reports on the agency budget execution as re-quired by the Ci Os Act. In addition, the CEO reviews a monthly financial report on agency budget execution.The CFO staff has begun an analysis of data in the financial systems to identifv and correct fini u nanagement problems before they become critical.

Intcrnal Control Actions are undenvay to correct weaknesses associated with the management of work performed at the DOli Nrtional labo.atories.The NRC has identified the types of cost information that are available from the DOli National l2boratories: this will serve as a basis for requesting meaningful cost informa-tion of these labmatories. This cost information will allow the NRC to better l'

7

Nucicar Regulatory Ca~tmission Chief Financial UBicer's.bnual Report - - 1992 i

manage the work performed by the DOli Nationallaboratories. Also, a model has been developed for negotiating wor k statements for wot k to be performed at dol! National laboratories. Timeliness criteria for the closcout and d robliga-tion of funds far work at the DOli National laboratories will be developed by l

the end of FY 1992. A revised management directive on the placement and inonitoring of work performed at the DOE National 1.2boratories is expected to be issued by the end of 1 Y 1992.

During FY 1992, a quality assurance and monitoring program was established to ensure that annual financial system reviews are performed as required by OMil guidance, results are evaluated,and corrective actions are taken. Additionally, a new agencywide audit followup tracking system was put in place and a program was established to review the implementation of cor rective actions on audit fital-ings.

Managernent has teholved all audit recoliunendations made in 010 audit re-poris issued through July 31,1992. It has either completed final action or is pur-suing completion of final action on all such audit reconunendations.

4 The timeliness and quality of critical accounting reconciliations have improved significantly during FY 1992; this has allowed more timely identification and car-rection of discrepancies in accounting records.

The process for preparing and auditing the ! Y 1992 financial statements will provide additional information on the adequac; of NitC internal controls and NitC's conformance with the financial policies and objectives ut for th in OMil Circular A-127, " Financial Systems "

Asset Management Most of NitC's efforts to improve asset management in FY 1992 were directed at improving the management of both cash inflows and outflows.

litforts to improve the timely payment ofinvoices subject to the Pron.

"ayment Act have consistently resulted in over 90 percent of payments beinh ade on time, as compared with the FY 1991 Government-wide average of just under 88 percent.The percentage of paym nts made on time reported in FY 1992 has de-creased from that in FY 1991: th; jimary reason for tiiis decrease is more accu-rate collection of piompt payment data in FY 1992 resulting from n improved quality control program.

The NitC imprest funds were reduced by approximately 50 percent in l~.1992 because of the increased use of third pat ty drafts, rather than imprest funds, for the payment of travel vouchers.

Nudcar Regulatory Commission ChiefIinancial Ollicer's Annual Report -- 1992 Outstanding travel advance balances over 60 days old, for other than permanent change of station, have been reduced from $325,000 at the beginning of FY 1992 to $69,000 as of June 30,1992, primarily because of more effective followup and collection of outstanding travel advance balances.

The use of electronic collections and payments has been expanded in order to improve cash management.The NRC has consistently paid a _high percentage of its employees by Direct Deposit / Electronic Funds Transfer (DD/EFr); cur-rently about 90 percent of NRC employees receive their net salary payment by DD/EFF, compared with the Government-wide average of 79 percem.

Significant actions have been taken to improve the management and status of accounts receivable as a result of the statutory requirement that the NRC collect 100 percent ofits appropriations tbrough fees. As of July 31,1992, the number of fee-related delinquent debts over 90 days old has been reduced in FY 1992 by over 65 percent to a balance ofless than $5 million. A process was formalized in FY 1992 to handle delinquent fee-related debts. and a debt collection contrac tor has recently been retained to assist in the collection of such debts. Cases have been referred to this contractor. License revocation orders have been issued.

1)uring FY 1992 the NRC modified its billing cycle for license fees so that all such fees are billed at least quarterly; previously some of these fees were billed semiannually.

Audited Financial Reporting and Performance Information The NRC received a waiver from OM B for the preparation of the FY 1991 finan-cial statements and audits. Ilowever, during FY 1992, the NRC has taken neces-sary actions to prepare and audit the FY 1992 financial statements in confor-mance with OMB 13ulletins 91-14, ' Audit Requiremenu for Federal Financial Statements," and 91-15 " Guidance on Form and Content of Financial State-ments on FY 1991 Financial Activity." Contractor support has been obtained to assist both in the preparation and the audit of the financial statements. An auditability survey of FY 1991 financial statements was completed.The OIG is-sued guidelines to be used in the preparation of the FY 1992 financial state-

+

ments. An outline for the overview section as well as a draft of an implementc-tion schedule and major milestones has been completed.

By September 30,1992, the NRC will submit to OM B and congressional over-

- sight committees a list of the program and financial performance measures that will be reported in the NRC's FY 1992 financial statements. These performance measures are intended to permit program managers, agency officials, the Con-gress, and the public to better understand the effectiveness and efficiency of NRC programs.

9

i Nuclear Regulatory Corninission Chief Financial Ullicer's Annual Report -- 1992 l

FEDERitL AlifNi1GERS' FINANCML INTEGR11YitCT REl' ORT SUA1AlilRl' On December 31,1991, the Chairrnan of the NRC submitted a report to the President on the agency's internal accounting and administrative controls. The report, prepared pursuant to the Federal Managers' Fmancial Integrity Act of 1982 (FM FI A), provided reasonable assurance that the agency, as a whole, com-plied with Sections 2 and 4 of the FMFIA: this assurance was based on an evalu-ation of the NRC's management contralr, and financial management systems.

The report indicated that there v 're neither pending material internal control weaknesses nor material nonconf urmances with OM Il financial policies and ob-jectives. Ilowever, the report indicated that actions to improve controls had beenidentified and that financial system improvements were under way to allevi-ate problems identuied in the financial system reviews.

On May 29,1992, the NRC advised OMil that, on the basis of further evaluation, it willidentify the weaknessassociated with the management of agreements with the DOli as a material weakness in the 1992 FM FIA report. The NRC will also examine nonconformances identified in 1991 to determine if they should be identified as material. Specific actions taken in FY 1992 on internal control weaknesses and nonconformances are descrined in the precedini; sections.

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