ML20141F402

Accountability Report Fiscal Year 1996

ML20141F402
Person / Time
Issue date:	04/30/1997
From:	Connelly S NRC OFFICE OF THE CONTROLLER
To:
References
NUREG-1542, NUREG-1542-V02, NUREG-1542-V2, NUDOCS 9705210298
Download: ML20141F402 (92)

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. Availability Notice Availability of Reference Materials Cited in NRC Publications Most documents cited in NRC publications will be available from one of the following sources:

1. The NRC Public Document Room,2120 L Street, NW., Lower Level, Washington, DC 20555-0001 2.The Superintendent of Documents, U.S. Government Printing Office, P. O. Box 37082, Washington, DC 20402-9328 3.The National Technical Information Service Springfield, VA 22161-0002

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Although the listing that follows represents the majority of documents cited in NRC publications, it is not intended to be exhaustive.

Referenced documents available for inspection and copying for a fee from the NRC Public Document Room include NRC correspondence and internal NRC memoranda; NRC bulletins, circulars, information notices, inspection and investigation notices; licensee event reports; vendor reports and correspondence; Commission papers; and applicant and licensee documents and correspondence.

The following documents in the NUREG series are available for purchase from the Government Printing Office: formal NRC staff and contractor reports, NRC-sponsored conference proceedings, international agreement reports, grantee reports, and NRC booklets and brochures. Also available are regulatory guides, NRC regulations in the Code of Federal Regulations, and Nuclear Regulatory Commission issuances.

Documents available from the National Technical Information Service include NUREG-series reports and technical reports prepared by other Federal agencies and reports prepared by the Atomic Energy Com-mission, forerunner agency to the Nuclear Regulatory Conunission.

Documents available from public and special technical libraries include all open literature items, such as books, journal articles, and transactions. Federal Register notices Federal and State legislation, and con-gressional reports can usually be obtained from these libraries.

l l Documents such as theses, dissertations, foreign reports and translations, and non-NRC conference proceedings are available for purchase from the organization sponsoring the publication cited.

Single copies of NRC draft reports are available free, to the extent of supply, upon written request to the 00 ice of Administration, Distribution and Mail Services Section, U.S. Nuclear Regulatory Commission, Washington DC 20555-0001.

Copics ofindustry codes and standards used in a substantive manner in the NRC regulatory process are maintained at the NRC Library, Two White Flint North,11545 Rockville Pike, Rockville, MD 20852-2738, for use by the public. Codes and standards are usually copyrighted and may be purchased from the originat-ing organization or, if they are American National Standards, from the American National Standards Insti-tute,1430 Broadway, New York, NY 10018-3308,

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NRC Principles of Good Financial Management l

hose who handle public resources have a special responsibility to safeguard the resources entrusted to Tthem and to use them properly. Poor financial management by NRC can underm we are effectively accomplishing our health and cafety mission. NRC managers must ensure that public funds are used for authorized purposes only and that they are used economically, efficiently, and within established limits. Toward these ends, the NRC uses the following Principles of Good Financial Manage-ment.

Pi,ANNING. Good financial management begins with good planning. NRC's strategic planning should be based on sound assumptions and accurate information and should provide the foundation for the entire fiscal process. Resource requests must be consistent with program goals, guidance, and planning assumptions, and must consider current financial status. Plans should be developed for commitment and obligation of funds based on program needs, procurement lead times, and the need for continuity of funding.

CONTROL.. Good fir.ancial management requires good financial control. Appropriate effective cost controls throughout the financial management process ensure adequate accounting of funds expended,  :

I prevent over-obligation of funds and inappropriate expenditures, identify early instances where funds nhould be reallocated, and produce valuable infonnation for the planning process.

COMMUNICATION. Good financial management requires good communication among those in-volved in the financial management process. Complete, accurate, and timely financial information must be readily available, and financial implications must be considered in decision making. Financial systems should be integrated and meet both agency and office data needs. New information and ideas must be shared throughout the organization.

COST EFFECTIVENESS. Good financial management balances expenditures and results. Managers at all levels must ensure that NRC gets what it pays for and that the results are what NRC needs to accom-plish its mission. Ongoing projects should be evaluated to ensure results justify continued funding. Appro-priate precautions ensure that waste is avoided. To ensure maximum utility of available resources, funds l should be obligated as early as practicable during the fiscal year, and excess funds should be deobligated as

! soon as practical after project completion.

EVAL.UATION. Good financial management requires periodic evaluation of performance against meaningful financial and program performance measures. Such performance assessment should evaluate planned versus actual program results as well as the comparison of program costs with program accom-plishments.

PERSONNEL.. Good financial management is the product of competent and motivated people. Those who are given financial management responsibility must have integrity, dedication and be well trained and qualified. They must have authority commensurate with their responsibility, and they must be recognized when they achieve superior performance.

Table of Contents

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Foreword..................................................................................................................v The N R C 's M i s s i o n . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

M e s sage Fro m th e Chai rm a n . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi; Message From the Chief Financial Officer ............................................................. ix M a n a ge m e n t S u m m a ry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x i About the U.S. Nuclear Regulatory Commission. . .. ..... .. . .. . . . . . . ........1 O rg a n i za t i o n . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... . . . . . . . . . . . I Regulatory Responsibility .. . .. . . . . . . . . . . . . . . . . . . . . . . ... ...........................................2 Sources of Funds . . ... . . ...... .. . ... . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . ........2 U se s o f Fu n d s by Fu n c t i o n . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Financial Condition of NRC .............. . .... ......... . .. . ..........................................4 Prog ra m Pe rfo rm a n ec . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 R e a c t o r Prog ra m . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 5 Lice nsee S afety Performance . . . .. . . . . .. .. . . . . . .. . . . . . .. . . . . .. . .. . . . . . . . . . . . .. . . .. .. . . . . . ... . .. . . . . .. . 7 Licensing Actions for Operating Power Reactors .. ...... . ... . .. .. .... ....... . .......... ... .. 8 Inspection Activitics .. ... .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...........10 Nuclear Materials and Nuclear Waste Program...... ... ...... .. ...... . ... ...........I2 Materials Licensing . .. .. .......... ... .. . .. ........... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Materials Inspections . .... . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........................16 Site Decommissior;ng Management Plan . ... . ... ... . ............ ... ... .. ... ....... .. . ..... ... 16 1ligh-Level Nuclear Waste Regulation .. . .. .. ................. .......... .......... . . . . . . . . . . . . . . . . . 17 Regulatory Research Program .. .. . ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Generic Safety issues. .. . .. . ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...................20 N R C Regulations .. . ..... .. ..... .......... .. . ...... .. . . . . ..................................20 Responsiveness to the Public's Safety Concerns . .. ......... . ..... .... . .... .... .......... ......... .. 21 M a n ag e m e n t A ecou n t ability . .. .. .. ... . . .. .. . .... .. .... .. . ... .. . . . . . . ... .. ....... . .. . .. . . . . ... . . . . . . . . .. . .. . .. 23 The NRC's Management Control Program .. ... . .................. .... . . ... ... .. ..... .. . .. 23 Status of Management Controls and Report on Material Weaknesses and Non-Conformances . ... .. .............. ... ... ................ ...............................23 Financial Management Systems . . ... ... ...... .. . .... .. . . . . . . . . . . . ..........................23 i

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Tame of Contents (continuedt Management Decisions and Final Actions on OIG Audit Recommendations. . . . .. . . . . . . 24 Management Decisions Not Implemented Within One Year... ...... ... ... . . .. .. . ... .... 26 Debt Collection. . . .......................................................... .........28 Pro.mpt Payment ..... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........................28 Civil Penalties .................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 FY 1996 Audited Financial Statement ................................................................... 31 Appendix...............................................................................................................75 Figures Figure 1: Sourees of NRC Funds . ....... .. .. ... ................................................3 Figure 2: Uses of Funds by Function .. .. .... . . . . . . . . . . . . . . . . . .............................3 Figure 3: U.S. Commercial Reactors ..... .... ... ..... ..... . .. ... . . . . . . . . . . ...........6 Figure 4: Performance Indicators.. .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .................7  ;

Figure 5: Licensing Action Completions . ... .. . ... . ........ .... ..... ... . . . . . . . . . . . . . . .8 Figure 6: Licensing Actions Inventory ... . .. ... . ..... ... . . . . . . . . ... ...........9 l

Figure 7: Age of Licensing Actions ....... ... .. . .. .. . ... .. ..........................9 Figur. 8: Licensing Actions--Median Age of Inventory ... .. . .... . . . . . ............10 Figure 9: Direct Region Onsite Inspection Hours Per Unit ... . ... . . . . . . . . . . . .. . 11 Direct inspection liours .. .. ....... .. .. ..... . ....... 12 l Figure 10: . . . . . . . . . . . . . . . . . . . . . . . .

1 Figure 11: Materials Licensing Action Completions . ....... .. .......... ................14 J Figure 12: Materials Licensing Reviews: Timeliness of Reviews 5

Completed Each Fiscal Year ............. . . . . ..... .... . ...... ...... ..... . . . . . . . . . I5 Figure 13: Materials Licensing Reviews: Backlog .. . ..... .... .. ... . .... ... . .......... . 15 Figure 14: Materials Inspection Completions . . . . . . . . . . . . . . . . . . . . . . . . . . ..............16 Figure 15: Mean Time to Close Allegations .. .......... .... ..... .. .... . ... ... . .... . . . . . . . . 22 Figure 16: Delinquent Debt . . . . . . .... .... . . . . . . . . . . . . . . . . . . . ...........................28 Figure 17: Prom pt Payment .. . .. . . .. .. . . . . . . .. . . . . . ... .. . . . . . .. . . . . . . . . . . . . . . . . .. . 29 Figure 18: NRC Organization Chart September 3 0. 19 96 . . . . . . . . . . . . . . . . . .. . . . . . . . . .. . 7 6 Figu e 19: NRC Organization Chart January 5,1997.......... ........... . .. ................77 Tables Table 1: SDMP Comaminated Sites ...... . ... .. . . . ... . . . . . . . . . . ................17 Table 2: Management Report on Office of Inspector General Audits wit h Di sallowed Costs . . ... . .. ..... ... . . . . .. .... .. . . . . . ... . . . . .. .. . .. .............24 Table 3: Management Report on Office of Inspector General Audits with Recommendations That Funds Be Put to Better Use .. . . . . . . . . . . . . . . . 25 Table 4: Amount of Fiscal Year Civil Penalties Collected Versus Fiscal Year

Penalty Dollars Assessed . ..... ... . ..... .. ... . .. ... .... ... . .... . ...........29 e -s d-

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Foreword l T' his in a is the pilot second project, along year that other with several the U.S.

Federal Nuclear agencies,Regulatory Commission to streamline financial manage- (NRC) has ment reporting. The goal of this pilot is to consolidate performance-related reporting into a single accountability report. The project, which is being carried out under the guidance of the Chief Financial Officers Council, was undertaken in accordance with the Government Manage-ment Reform Act (GMRA) of 1994. The GMRA permits the streamlining of financial manage-ment reports in consultation with the appropriate congressional committees through a liaison in the U.S. Office of Management and Budget (OMB).

This report consolidates the information previously reported in the following documents:

• NRC's annual financial statement, required by the Chief Financial Officers Act of 1990

• Chairman's annual report to the President and the Congress, required by the Federal Managers' Financial Integrity Act of 1982 ,

• Chairman's semiannual report to the Congress on management decision' and final actions on Office of Inspector General audit recommendations, required by the inspector General Act of 1978, as amended This report also contains performance measures, as required by the Chief Financial Officers Act of 1990.

Comments on the content and presentation of this report are welcome, and may be addressed as follows:

I Office of the Chief Financial Officer Mail Stop T-9 F6 U.S. Nuclear Regulatory Commission Washington, DC 20555-0001 l'W6 Wt (,e VI tiill.1 I Y kl 14 IR I

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Message From the Chairman f" 9j am pleased to present the U.S. Nuclear Regulatory Commission's t 7 accountability report for Fiscal Year (FY) 1996. This is the second th year that the NRC has produced an accountability report in an effort to h p^l streamline statutory performance-related reporting in accordance with

<Y , the Government Management Reform Act of 1994.

e , 'y Mg" 4 The NRC evaluated its management control and financial manage-ment systems for FY 1996, as required by the Federal Managers' Finan-cial Integrity Act of 1982. The results of this evaluation provided reasonable assurance that the NRC achieved the objectives of the Act.

The evaluation disclosed no material weaknesses in the NRC's programs or administrative activities and no material non-conformances with goernmentwide require-ments in the NRC's financial management systems.

For the past 12 years, the overall U.S. nuclear power reactor industry's safety performance has shown continuing improvement as measured by the use of performance indicators. There are some plants. however, that have exhibited adverse performance that warrants increased attention.

To strengthen our ability to perfonn our mission of protecting public health and safety, the Commission realigned our top management structure, after carefully examining the current organi-zational structure and the insights gained from the various self-assessment efforts that the NRC has conducted over the past year. The new organization became effective on January 5,1997.

In September 1995, I initiated a strategic assessment and rebaselining of the agency to analyze where the NRC currently stands and outline a path to take it where the Commission believes it should be in the future. This initiative was necessary to position us to meet effectively the chal-lenges we face and to guide our activities and decision making in the future. The strategic assess-ment and rebaselining effort will enable the NRC to develop a strategic plan that is the basis for the agency's budgeting and performance plan. We sought the views and comments of our stakeholders as part of the decision making process before making final decisions on the agency's key strategic  :

issues. A strategic plan and performance plan, which will meet the requirements of the Govem-ment P:rformance and Results Act of 1993, will be issued in FY 1997.

We continue to work to improve our financial management and management controls to achieve the best possible support for our regulatory responsibilities. The issuance of this second j annual report confirms our commitment to provide accountability for the agency's programs and i financial management, j

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AA Shirley Ann Jackson l Chairman i U.S. Nuclear Regulatory Commission l 19% M TOINI U111.111 RI 14)R I' i

Message From the Chief Financial Officer

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., y he U.S. Nuclear Regulatory Commission issued its first audited a financial statement in fiscal year (FY) 1992 and received unquali-L fled audit opinions in FYs 1994 and 1995. For FY 1996, I am pleased to report that the NRC again received an unqualified audit opinion. This opinion, finding no material weaknesses and a reduction in reportable conditions, reflects the continuing high priority the NRC places on sound financial management and public accountability.

We are continuing to enhance financial management at the NRC.

't sg e We implemented a new strategy for debt collection. We have reduced delinquent debt each year since FY 1993, and as of the end of FY 1995, delinquent debt was less than 1 percent of total receivables. On-time payments for amounts subject to the Prompt Payment Act have increased and the amount ofinterest penalties in-curred have decreased. We continue to work toward significantly reducing the amount of imprest funds through the use of third-party drafts, travelers checks, and automatic teller machine and BankCards. We have maintained a high percentage of employees who are paid by direct deposit / electronic funds transfer. More emphasis has been placed on electronic payments to vendors with the passage of the Debt Collection Improvement Act of 1996, which has resulted in an increase in the percentage of dollar value of vendor payments made by electronic funds transfer.

We also are continuing to seek improvements in our financial management systems. We are in the process of implementing an integrated payroll and personnel system and property account-ability system We are developing an agency-wide financial management system that will integrate financial planning data with financial management performance data. An overarching goal of the new agency-wide financial management system will be to eliminate the need for multiple financial tracking systems in the agency.

Adherence to sound financial management practices is more critical than ever to accomplish our mission and to meet new challenges presented by our changing environment. Our goals are to maintain the standards we have achieved, and to seek improved methods to carry out and account for our financial management responsibilities.

Ronald M. Scroggins l Acting Chief Financial Officer l U.S. Nuclear Regulatory Commission l

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Management Summary

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Program Performance Reactor Program

• Licensee Safety Performance On the basis of NRC-approved indicators of industry safety performance, operating experi-ence in recent years shows that, overall, the performance at reactors has been improving; how-ever, the NRC continues to identify individual plants with marginal performance and significant operational problems.

Licensing Actions -

The NRC issued one operating license in FY 1996. At the end of FY 1996,110 commercial nuclear power reactors were licensed to operate in 32 States. The NRC received no new applica-tions for operating licenses or construction permits, and issued no new construction permits in FY 1996.

In FY 1996, the NRC exceeded the goal for licensing actions less than 2 years old (96 percent versus goal of 95 percent); 77 percent of the licensing actions were 1 year old or less (compared to a goal of 80 percent) and more than 98 percent were 3 years old or less (compared to a goal of 100 percent). Some licensing actions are not being processed as quickly because resources are being used to actively address the recently identified design and licensing basis problems that are discussed below and because the NRC's program for amending licenses to convert to standard technical specifications has increased the number and complexity of licensing actions being submitted.

• Inspections in FY 1996, the overall direct inspection effort totaled approximately 283,000 hours0 days <br />0 hours <br />0 weeks <br />0 months <br /> for all plants in operation versus the planned 295,000 hours0 days <br />0 hours <br />0 weeks <br />0 months <br />. A primary contributor to the 4-percent variance from hours planned was the conduct of large reactor team inspections, which resulted in fewer direct inspection hours.

Insights gained from recent design and licensing basis problems at Millstone Unit 1, lladdam Neck, and Maine Yankee nuclear power plants have indicated that the nuclear industry's level of voluntary compliance may have decreased following the Commission policy decision to accept a voluntary program in 1992. Subsequent NRC followup activity was not .

oriented toward identifying design and licensing basis deficiencies. We believe that appropriate corrective actions are now in place. In an effort to determine the extent of the problem, the NRC has requested information from all nuclear power plants. The evaluation of the results of the licensee responses will aid NRC's assessment of the extent and magnitude of the problem and (continurd)

IW6 ACCOIW r \lill IT) Ill l'Ol<T

i the need for additional genetic followup actions. Based on the evaluation of NRC inspection results, industry submittals, and utility corrective action programs, the agenef . current effort will be adjusted accordingly. I Nuclear Materials and Nuclear Waste Program l

• Licensing Actions During FY 1996, the NRC completed the review of approximately 4,350 applications for new licenses, li:ense amendments, and license renewals (sealed source and device designs are excluded). The number of licensing actmns completed for materials users exceeded the NRC's projections by 12 percent. Also, the l NRC reduced the number of pending licensing actions from 1,445 at the end of FY 1995 to 852 at the end of FY 1996. Of these pending licensing actions,275 reviews at the end of FY 1996 did not meet the NRC's timeliness goals. I

• Materials Inspections

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During FY 1996, the NRC completed approximately 2,200 inspections of materials facilities, exceeding  ;

the planned number of inspections by approximately 15 percent.

• Site Decommissioning Management Plan

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There are currently 45 sites on the Site Decommissioning Management Plan list; 3 sites were planned for remediation, and 3 sites were removed from the list in FY 1996. )

• High-Level Nuclear Waste Regulation In FY 1996, the NRC refocused its repository program on resolving ten Key Technical Issues (KTIs) l most important to repository performance. Activities were reprioritized and organizations restructured to  !

support issue resolution and improve integration of technical work. Other work important to licensing was deferred. Agreement was reached with the Department of Energy (DOE) on the potential significance to repository performance of eight of the ten KTIs.

l Regulatory Research Program During FY 1996, the NRC completed 14 rules and resolved three generic safety issues involving (1) automatic emergency core cooling system switchover to recirculatic a,(2) embrittlement of reactor pressure  ;

vessel supports, and (3) monitoring of fatigue transient limits for reactor coolant systems, j i

Responsiveness to the Public's Safoty Concerns In FY 1996, the NRC met its goals to close allegations pertaining to technical issues where wrongdoing j is not suspected in an average of 6 months from receipt and allegations pertaining to wrongdoing by an l NRC licensee in an average of 18 months from receipt.

Management Accountability Management Controls The NRC's annual evaluation of management controls and financial management systems disclosed no material weaknesses in NRC programs or administrative activities and no material non-conformanc.'s with governmentwide requirements in the NRC's financial management systems.

Audits At the end of FY 1996, the NRC had four audits with outstanding actions in excess of 1 year old.

FY 1996 Audited Financial Statement For the third successive year the NRC received an unqualified audit opinion on its financial statement.

Three reportable conditions were carried over from FY 1995. Two of these were removed in FY 1996, leaving one carryover reportable condition, which pertains to the need for a payroll system that is integrated with the general ledger and that possesses labor distribution capabilities. The Office of Inspector General (OlG) noted one new reportable condition in FY 1996, involving the need to improve procedures for capitalizing automated data processing software.

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- N.R N1'Off.AR REGUI.A10RY C041%il%10N i I

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About the U.S. Nuclear Regulatory Commission 1

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i j 5 ** "" % y he U.S. Nuclear Regulatory man, to serve as the principal executive officer j es .kE Commission (NRC)is an and official spokesman for the Commission. In i  !* ] independent regulatory agency FY 1996, the Executive Director for Operations

! g  ! of the Federal Government that (EDO), as the chief operating and administrative l  %, -

1. was created by the U.S. Con- officer of the NRC, carried out the policies and j gress to regulate the Nation's decisions made by the Commission. The EDO

! civilian use of byproduct, source, and special had also been designated as the NRC's Chief i nuclear materials to ensure adequate protection of Financial Oiricer (CFO). In order to strengthen the public health and safety, to promote the com- the agency's ability to perform its mission of s

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, mon defense and security, and to protect the envi- protecting public health and safety, the Commis-I ronment. Its purposes are defined by the Energy sion realigned the NRC's top management in a i Reorganization Act of 1974, as amended, along reorganization that became effective on January 5,

with the Atomic Energy Act of 1954, as amended, 1997. In the new organization, the CFO became a  !

which provide the foundation for regulating the separate position reporting to the Chairman along  !

Nation's civilian uses of nuclear materials. with the EDO and the Chief Information Officer l (CIO). An Executive Council was established l

comprised of the EDO. CFO, and CIO. Respon- l i

% ankahn sibilities under the EDO also were realigned j The NRC is headed by five Commissioners under three Deputy EDOs - (1) the Deputy Ex-

appointed by the President and confirmed by the ecutive Director for Regulatory Effectiveness, Senate for 5-year terms. The President also )

designates one of these Commissioners as Chair- (continued on page 23 l 2

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--- j, Chairinun Shirfry Ann Jackson.

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Conuni.uioners Kenneth C. Rogers, Nih J. Dia Edward AlcGaBigan, Jr.

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and Greta J. Dicus 6 .; ,

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About the l'.% Nuclear Regulatory Comminion (wntinued] j Program Oversight, Investigations and Enforce. The NRC and its licensees share a common ment, (2) the Deputy Executive Director for responsibility te protect the health and safety of ;

Regulatory Programs, and (3) the Deputy Execu. the public. The NRC regulatory program is an tive Director for Management Services. Charts important contributor in achieving this shared showing the organization in effect in FY 1996 and responsibility. NRC licensees, however, have the primary responsibility for the safe u.se of the realigned organization effective January 5, nuclear matenals.

1997, are in the appendix.

Regulatory Responsibility S urces of Funds The NRC has two appropriations, and funds The NRC's scope of responsibility entails regu-lating civilian nuclear reactors; fuel cycle facilities; fg both are available until expended. One appro-pnation is for agency salaries and expenses, and medical, academic, and industrial uses of nuclear the other is earmarked for the Ofhee of the In-materials; and the transport, storage, and disposal spector General (OIG). The NRC's total new 4 of nuclear materials and wastes. The NRC carries budget authority (excluding allocation account out its mission through a licensing and regulatory transfers from others) for fiscal year (FY) 1996 system comprising the following activities:

was $472.6 m,llion:

i including $467.6 m,llion i

• licensing the design, construction, operation, from the Salaries and Expenses appropriation, and i and decommissioning of nuclear reactors and $5.0 million from the OlG appropriation. Addi-other nuclear facilities (such as nuclear fuel tionally, available to expend in FY 1996 were  !

cycle facilities, uranium emichment facilities, $67.5 million from prior year appropriations, $9.2 i and test and research reactors) million from prior year reimbursable work, $2.7

• licensing the possession, use, processing, million from prior year direct transfer funds, and handling, and exporting of nuclear materials new reimbursable work to be performed for others totaling $5.2 million. The sum of all funds 1

• licensing the siting, design, construction, available to expend for FY 1996 was $557.2 I operation, and closure of low-level radioac- million. (See Figure 1.) l tive waste disposal sites under NRCjurisdic- l tion and the construction, operation, and Other than appropriated funds, the NRC has I closure of geologic repositories for high-level limited assets. Capitalized personal property is l radioactive waste limited to typical of0ce furnishings, personal  !

pr perty acquired by contractors with NRC funds, j licensing the operators of civilian nuclear nuclear reactor simulators, computer hardware,  ;

reactors and off-the-shelf and customized computer l a inspecting licensed facilities and activities software. The NRC has no real property, loan, or j I n gu r nte pr gr ms.

• conducting research to gain independent expertise and information for making timely  !

regulatoryjudgments and for anticipating Uses of Funds by Function problems of potential safety significance As stated above, the total budget authority

• developing and implementing rules and reg- available (excluding allocation account transfers ulations that govern licensed nuclear activities from others) for use by the NRC in FY 1996 was

• collecting, analyzing, and disseminating $557.2 million. Of that amount, the NRC in-information about the operational safety of curred obligations of $520.3 million, with ap-commercial nuclear power reactors and proximately 50 percent used for salaries and certain nonreactor activities benefits. An additional 50 percent was used to t A stm w wua i.vioat costsitwins

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Figure 1 l Sources of NRC Funds I ,

i -Total Funds Available $557.2M1 -  ;

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[ New Budget Authority  ;

$472.6M c Reimbursable Work l

. $17.1M Budget Authority from Prior Years $67.5M j 8 Total funds available reflects NRC appropriated budget authority and reimbursable work. It excludes transfer appropriations from the General Services Administration

, (GSA), $.4M, and the Agency for International Development (A.I.D.), $7.8M. ,

1 I

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. 1 i obtain technical assistance for the NRC's princi- ($29.6 million from appropriations, $6.3 million  !

! pal regulatory programs, to conduct confirmatory from reimbursable work, and $1 million from i

safety research, to cover operating expenses direct transfer funds) in budget authority that was

- (e.g., building rentals, transportation, printing, not obligated in FY 1996 will be available to fund  ;

security services, supplies, office automation, and critical needs in FY 1997.

j ' training), staff travel, and reimbursable work.

[ ' (See Figure 2.)The remaining $36.9 million (nmiinuca <m page a .

i i Figure 2 l p Uses of Funds by Function )

Total Obligations $520.3M'

, Salaries and Benefits $259.0M  ;

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Reimbursable Work

$8.0M I

Travel $14.3M T l Contract Support N s . . $239.0M l

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' Total obligations reflects obligations against NRC appropriated budget authority and reimbursable work. It excludes obligations against transfer appropriations from the j General Services Administration (GSA), $.lM, and the Agency for International i Development (A.I.D.), $4.0M.

i 1 4-1996 ACCotWTAltil.lTY RiToRT

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1 bout the U.S. Nuclear Regulatory Cornminion (continued)

Financial Condition of NRC Over the past few years, the NRC has made a l concerted effort to increase the effectiveness and As of September 30,1996, the financial efficiency of program financing by eliminating condition of the NRC is sound with respect to unnecessary financial reserves pending contract j having sufficient funds to meet program needs ci se ut, rec vering funds on dormant contracts, and sufficient control of these funds to ensure that exercising closer scrutiny of the need for planned NRC obligations do not exceed budget authority. .

. projects, and more closely monitoring obligation l

.The Statement of Fm.ancial Position shows a net and expenditure rates. This prudent financial position (assets minus liabilities) of $173.6 management initiative has resulted in a 42 percent i million. Consistent with the requirements of the decrease in unobligated appropriated funds in FY  ;

Omnibus Budget Reconciliation Act of 1990, the 1996, compared to FY 1995. The NRC will NRC collected approximately 100 percent of its continue its efforts to closely monitor its financial ;

! new budget authority, excluding the amount condition and planning policies to further reduce  !

appropriated from the Nuclear Waste Fund. its unobligated balance in future years.

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O.N. \l-CI,1.tM kl CL't.\ LORY CO\lill%)ON 1 l

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l Program Performance l

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l l his section highlights key aspects of the Reactor Program j NRC's programs, including program goals The Reactor Program encompasses all NRC l and program performance measures. The pro- efforts to ensure that civilian reactor facilities are

! gram performance measures are related to such operated in a manner that gives reasonable assur-l outcomes as safety effectiveness, such outputs as ance of adequate protection of public health and inspection effort, and timeliness of actions. safety as required by the Atomic Energy Act of l Consistent with the requirements of the 1954, as amended. The program also encom-Government Performance and Results Act of passes all reactor regulatory research, as required l

i 1993, the NRC is in the process of developing a by the Energy Reorganization Act of 1974, as strategic plan which will be submitted to the amended. In addition, the program encompasses

! all other functions associated with reactors,

! Office of Management and Budget (OMB) and j Congress by the end of FY 1997. That plan will including evaluating safety concerns, assessing define the overall agency goals and objectives operational events and experience, training the l

i which will form the basis for more specific NRC technical staff, performing independent

performance goals and associated performance reviews and giving legal advice to the Commission measures that will be included in the agency's conceming safety issues, conducting adjudicatory i

) Annual Performance Plan for FY 1999. That j performance plan will also be submitted to 1 OMB in September 1997, and subsequently to troniinurd on page 6) j Congress. In future years, , _ , m. ,, .,y .,,,,. ,,,,,

the NRC's accountability i

reports will reflect the same My , [i Q j performance goals and

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! measures as are found in the r '

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! applicable performance plans . , , ,

j for those years.

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4 1996 ACCOUNTtlin.lTY HITORT 4

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/*wgram /*erformance (continued)

Figure 3 U.S. Commercial Reactors L  : .,:,,

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A Licensed to Operate (110)

Note: There are no commercial reactors in Alaska or Hawaii reviews, investigating wrongdoing by reactor construction are designed and constructed licensees, and implementing reactor enforcement properly and are ready for safe operation.

policies and actions. The Reactor Program also . .

• Ensure that adequate capabilities exist for encompasses all regulatory efforts for improving licensing of evolutionary and advanced the licensing process for the next generation of reactor designs and for reactor license re-standardized nuclear power reactors by minimiz-ing the uncertainty in the regulatory process. newal activities.

I At the end of FY 1996, a total of 110 commer-The principal goals of the NRC's Reactor Program for FY 1996, as stated in the agency's cial nuclear power reactors were licensed to j FY 1996 budget, were to: operate in 32 States. These reactors generate j approximately 22 percent of the Nation's electric-  !

Ensure that nuclear power plants and other ity. (See Figure 3.) I licensed facilities are operated safely, and that licensees are adequately prepared to The NRC received no new applications for respond to accidents. operating licenses or construction permits, and issued no new construction permits in FY 1996.

• E,nsure that nuclear power plants under The NRC issued one operating license in FY 1996.

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Ucensee Safety Performance ' Safety performance indicators reflect the collective The safety of civilian nuclear reactors is the results of the efforts of the NRC and the nuclear -

responsibility of NRC licensees. The regulatory industry. The overall trends in industry perfor-oversight oflicensee safety is the responsibility of- mance indicate that the NRC is succeeding in its ,

the NRC. The safety performance of licensees is mission of protecting public health and safety.  ;

partially a reflection of NRC performance; how- Seven NRC-approved indicators ofindustry ,

ever, it is not possible to isolate the causal relation- safety performance are shown in Figure 4.  !

l ship or a specific set of factors that directly links:  ;

' NRC's performance to licensee performance. (continued on pare s>  !

Figure 4 Performance Indicators for Operating Nuclear Power Reactors l l

Annual Industry Ascrages, 1992-1996* j 4

Equipment Forced Outage Rate Automatic Scrams While Critical Collective Radiation Exposure per 1000 Critical Hours j l' ,

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• Calendar year values are shown for 1992 through 1995, l'iscal year values are used beginning in 1996. Data for October I,1995, i

_ through December 31,1995, are included in both calendar year 1995 and fiscal year 1996 values.  !

I 1996 ACCot:NTAltit.II Y lo;IHRT l t

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Pro;; ram fyrformance O rmtinued)

Although operating experience in recent years NRC is taking corrective action, as necessary, and i shows that, overall, the performance at reactors is assessing whether there are generic implica- l

- has been improving, the NRC continues to iden- tions that could result in changes to the regulatory tify individual plants with marginal performance process. For those reasons, some licensing actions and significant operational problems, are not being processed quickly. Second, the r NRC's program for amending licenses to convert to Licens/ng Act/ons for Operating standard technical specifications has increased the

- Power Reactors number and complexity of licensing actions being Either routine activity, technical advances, or submitted.

unexpected events at a nuclear facility can result The NRC has established goals to comrol the m a need for NRC to take licensing action. Dur- '

size and age of the licensing action inventory.

mg FY 1996, the NRC completed 1,418 licensmg The goals call for 80 percent of these actions te be ,

actions for operating power reactors (I,a.gure 5).

I year old or less,95 percent to be 2 years old or More than 99 percent of the actions in inven- less, and all actions to be no more than 3 years tory are plant-specific amendments requested by old. Figure 7 shows the age and percentage of licensees, and the rest result from NRC-imposed licensing actions in the inventory at the end of  ;

requirements. The total licensing action inventory each year from FY 1994 through 1996.

has increased from 1,000 licensing actions at th cnd of FY 1995 to 1,101 under review at the end From 1989 to 1996, the percentage oflicens- ) ,

. ing actions more than 3 years old has dropped of FY 1996 (h,.gure 6). In FY 1996, the inventory i

. from 23 percent to less than 2 percent. i,he NRC

. mereased because of two primary factors. First,  !

exceeded the goal for licensing actions less than the NRC is actively addressing the recently

. . . . 2 years old (96 percent versus goal of 95 percent).

identified problem of some .meonsistencies m  ;

the compliance of the design basis and operating s k'"di"HCd 'm Page 10) l procedures at some nuclear power plants. The l Figure 5 l.icensing Action Completions l 2,500 2,000 - -- - ----- ---~~ - - -- - ~ ~ ~ ~ - - - --

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Figure 6 Licensing Actions Im entory 1,600 1,400 ----- - - - - -- --- --. - ---.- - ---- - ----- -- -- - - --- - ---- ------~ ~

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• FY 1994 and 1995 data for planned licensing actions inventory are not available. i 4

Figure 7 Age of 1.icensing Actions 1

100 Goals FY1996 Age (Years)- 01 1 -2 23 >3 ,

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l l'rogram l'erformance (continurJp Figure 8

Licensing Actions Median Age ofImentory a

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i. Fiscal Year ,

I l At the end of FY 1996,77 percent of the licensing Inspection Activities actions were 1 year old or less (compared to a Three essential components of the NRC's goal of 80 percent) and more than 98 percent reactor inspection program are to determine the l were 3 years old or less (compared to a goal of state of reactor safety, to confirm that operations j 100 percent). As Figure 8 shows, the decreasing comply with the provisions of the license, and to trend of the median age of the licensing action ascertain whether other conditions exist with

inventory did not continue in FY 1996 because of safety implications serious enough to warrant

the factors mentioned previously. corrective action. The NRC's reactor inspection l program is designed to ensure, j e, throubth selective examinations. i that the licensee identifies and resolves safety issues before they j

• h-affect safe plant operations. The p NRC inspection program is audit

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e ' oriented to verify that relevant .

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program elements: core inspections, plant- team inspections, which resulted in fewer direct specific regional initiative inspections, and ge- inspection hours. Figure 10 shows the use of neric issues inspections. allocated inspection resources in direct inspection activities, which are performed by resident and The NRC assigns at least two resident mspec-region-based staff.

tors to each operating reactor site. These res. ident inspectors concentrate on day-to-day licensee A management weakness was identified as a operations, event followup, licensee management, result of events at Millstone Unit 1, Haddam Neck, and staff performance. NRC-region based and and Maine Yankee nuclear power plants. Insights headquarters inspectors supplement the activities gained from the NRC's review of design and carried out by resident inspectors through a licensing basis problems at these plants have variety of program and technical inspections that indicated that the level ofindustry voluntary afford an indepth look at licensee operations. compliance may have decreased following the Commission policy decision to accept an industry H.istorically, NRC staff spends an annual .

voluntary program in 1992. Subsequent NRC average of approximately 2,7(X) to 2,800 hours0.00926 days <br />0.222 hours <br />0.00132 weeks <br />3.044e-4 months <br /> in .

followup activity was not onented toward identify-direct onsite mspection activities at each reactor . . .

ing des.ign and licensing basis defic.iencies. The

( h,.gure 9). Th.is overall average is used to plan NRC does not believe that this issue resulted from resource allocations for each reactor and is ad- .

a material weakness in management controls. In Justed according to licensee performance. reach.mg th.is conclusion, several factors were In 1996, the overall direct inspection effort considered, including the significance of the totaled approximately 283,000 hours0 days <br />0 hours <br />0 weeks <br />0 months <br /> for all plants weakness, the effect on fulfillment of the mission  ;

in operation versus the planned 295,000 hours0 days <br />0 hours <br />0 weeks <br />0 months <br />. A of the agency or an agency camponent, the level of primary contributor to the 4-percent variance from (coniinuca on puuc 12) hours planned was the conduct of large reactor Figure 9  ;

Direct Region Onsite inspection Ilours Per Unit 3000

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lC Planned Actual l l

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Im ACCOUNI \l0I IlV RI.l*olti i

Program Performance (continued)

Figure 10 Direct inspection flours 350 E- """

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1992 1993 1994 1995 1996 Fiscal Year lC J Planned NE Actuall risk resulting from weaknesses in controls, the will aid NRC's assessment of the extent and magni-

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effect on needed services provided to the public, tude of the problem and the need for additional whether the deficiency exists in a major program, generic followup actions. Given the actions taken and the views of the Inspector General. and ongoing, we believe that appropriate corrective While this is a management issue in a major actions am now in place. Based on the evaluation program that could have some effect on the of NRC inspection results, mdustry submittals, and mission of the agency and services provided to utility corrective action programs, the current effort the public, the extent of the problem is unclear at will be adjusted accordingly.

this time. The Inspector General (IG) has de-ferred to management's judgment on whether or not this issue constitutes a material weakness Nuclear Materials and Nuclear

~

since his staff has not performed sufficient evalu- Waste Program ation to reach an opinion. The Nuclear Materials and Nuclear Waste The agency has taken action to significantly Pmgram encompasses all NRC health and safety, augment resources and to provide a process to deal safeguards, recearch activities, operational data with the problems identified in this area. A Special analysis, technical training, adjudicatory reviews, Projects OITice was set up to focus on Millstone investigations, enforcement, and independent safety specific problems and recommend any additional and legal advice related to the licensing, inspection, lessons leamed to be incorporated into the reactor and environmental reviews for fuel cycle facilities; oversight program. In an effort to determine the the transportation of nuclear materials; the safe extent of the design basis problem, the agency sent interim storage of spent fuel; nuclear materials users; letters mquesting information regarding design and the safe management and disposal oflow-level and licensing basis programs from all nuclear power high-level radioactive wastes; and uranium recovery

. plants. The evaluation cf the licensee responses and related remedial actions. This program also

)

I includes safeguards reviews for all licensing of nuclear materials. About 30 percent of these activities involving the export of special nuclear materials licenses are administered by the NRC.

, material and the integrated agency effo t to oversee The remaining licenses are administered by the decommissionmg of facilities and sites associated 29 Agreement States that, through a formal agree-with NRC licensed activities. ment with the NRC, have assumed regulatory The principal goals of the Nuclear Materials responsibility over byproduct and source materials, i

and small quantities of special nuclear materials.

and Nuclear Waste Program for FY 1996 as stated in the agency's FY 1996 budget were to: The NRC also licenses and inspects all com-mercial nuclear fuel facilities involved in process-

= Ensure that current and future uses and trans-

. ing and fabncating uranium ore into reactor fuel.

pmtation of. nuclear and radioactive materials . .

Nine major facilities were licensed to operate in are safe and have adequate safeguards.

eight States at the end of FY 1996.

'

• Ensure that high-leve; and low-level nuclear The NRC and some Agreement States have waste and uranium mill tailings are safely the licensing and regulatory responsibility for j managed and disposed of. ensuring the safe management and disposal of'

• low-level radioactive waste. Additionally, the

! Ensure that facilities no longer in operation i

NRC has the licensing and regulatory respon-

. are adequately and safely monitored or de- ,

sibility for ensuring the safe management and commissioned.

W oBigh-level radioactive waste.

r Approximately 21,500 licenses have been

"""","""# '"' pow M1 issued for medical, academic, and industrial uses i

i Some of the Uses of Radioactise Materials i

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. \tedical Applications l Iruluurial \p;slications Rescarch Applications

~ . _ . , - _ _ . _ . _ _ _ _

a Prograin Perfurrnance (cantinurd)

Maferla/s Licensing The NRC'k timeliness goal is to complete 80 The NRC licenses and inspects approximately percent of new applications and amendment 6,400 specific licenses for use ef nuclear and requests for byproduct materials licenses within other radioactive material. T s ases include 90 calendar days of their receipt, and to complete medical diagnosis and therapy, medical and the remainder within 180 calendar days of re-biological research, academic training and re- ceipt. The goal for renewal applications is to search, industrial gauging and nondestructive complete 80 percent within 180 calendar days, testing, production of radiopharmaceuticals, and and the remainder within 1 year. Backlogged fabrication of such commercial products as smoke reviews are those that exceed the timeliness goal.

detectors and other sealed sources and devices. i The NRC reduced the number of pendm.g i Detailed health and safety reviews and inspections licensing actions from 1,445 at the end of FY 1995 of licensee procedures and facilit,es i provide to 852 at the end of FY 1996. Of these pending reasonable assurance of safe operations and the licensing actions,275 backlogged reviews at the development of safe products. The NRC com end of FY 1996 did not meet the NRC's timeli-pleted the review of approximately 4,350 applica-ness goals. For reviews completed during each of tions for new licenses, license amendments, and the last 5 years, Figure 12 shows the average time license renewals, meluding approximately 290 required to complete new, amendnient, and re-new licuses,3,040 license amendments, and newal licenses for byproduct materials. l 1,010 license renewals (sealed source and dev. ice designs are excluded). This number of comple- The materials licensing reviews backlog l tions exceeded the NRC's projections by 12 (Figure 13) presents a different perspective on the percent. (Figure 11). 7,,,,jyy,g o, ,,y, f 4; Figure 11 Materials Licensing Action Completions (Excludes Scaled Source and Device Designs) 6000 5500 - ~ ~ - - - - - - - - - - - - - - - ~ ~ - ~ ~ ~ " - - - - - - - - - - ~ ~ ~ - - - " - - - - ' - -

5000 - - - - - - - - - - - - - - - - - - ~ ~ ~ ~ ~ - - - - - - - - - - ~ ~ ~ - - - - - - ~ ~ ~ I m 4500 - - - - - - ~ ~ ~ ~ ~ - - - - ~ ~ - - - ~ ~ - ~ ~ ~ - - - - - -

=o 4000 m'

--~~~--T. w'

~~~~--- ---

y 3500 --- --~ ~ ~ - - -~~~--

en C

3000 --

i

---

~~- - ~ ~ - -

To C

2500 --

~~~-- -- ' - - - - - ~ ~ ~~~ -

.y 2000 ---

'l --- ---- -- - -- - ----

Q -----

J 1500 -- ~~~---- - - - - - ~ ~

1. g

~~~

1000 -- -- ~ ~--- -

500 ~~

g ~~------ 1 - - - - ~ ~ ~ -

~

_q -

j 1994 1995 1996 FiscalYear E'l Planned M Actual]

W

Figure 12 Materials Licensing Reviews Timeliness of Reviews Completed Each Fiscal Year

. M Co m mons., ,, _

R 200 , ,,, ,,, __,, , ,,,,,, ,,,,,,,,, , ,, ,

e 180 -* ------- -- - -- - --- -*-++------- -

O 160 --- --- - -- -- - ---- ---- --- - -- -

o 140 --- - - - - - " - - - " - " - - - " -

ci 120 --" " - --- - - - " - - - - ' " "-

2 .100 - +--- - - - - ---- -- - ------ --

$ 80 g 60 c> 40 -- ""7 '--'~ - -

d 200- --

W - -* -- *- -

1992 1993 1994 1995 1996 000 20% Completons

$ 800 O 700 --- --- --- --- -- - ---"- - ----- -" " -"

'o 600 - -- - - ---- ------- - ----- -

6 500 - - - - -- -------- ----- - --- --

Z 400 - - - - -- -- - - -- -- --- --

$ 300 - - - - -- C --- --- - - - --

~

h 200 - -- -- ---" - ---

d 100 - " ----"

0 -- -

1992 1993 1994 1995 1996 Average No. of Days lo Complete New Applications, Amendments and Renewals 4 h New Applications & Amendments M Renewalc l Figure 13 Materials Licensing Resleus llacklog 400 l- m 300 """""

i 5

.9 Q

E o 200 + -- -------- -- ------ ------- ------------- --- ----------

.C m

C

' ~

100 "-"

0-- -

1992 1993 1994 1995 1996 Fiscal Year l['] New Applications & Amendments E Renewals l 19% ACCOUNTMtH.lTY RITORT

I Program Performance (continued)

I NRC's timeliness in processing licensing actions. Site Decommissioning  ;

Management Plan l This chart measures the number of actions to be Several hundred NRC materials licenses are  !

completed at the end of each fiscal year that ex-ceeded the timeliness goals expressed ab(we. In ' terminated each year. Most of these NRC- l addition, this chart shows that the NRC has signifi- licensed operations result in little or no cantly reduced the number of backlogged reviews, contamination of buildings or soil, and decom-particularly license renewals,in the past 4 years missioning actions leading to the termination of i.

these licenses normally proceed in a routine ,

' Materlats inspections fashion. Non-routinc cases may involve sites at '

which buildings, former waste-disposal areas, During FY 1996, the NRC completed ap-large piles of tailings from metal extraction  ;

proximately 2,200 inspections of materials facili-perations, groundwater, or soil are contaminated  !

ties, exceeding the planned number ofinspections with uranium. thorium, or other radionuclides.-

by approximately 15 percent (Figure 14). Since These non-routine cases present varying degrees  ;

FY 1992, the number of materials licenses has f r dialogical hazard, remediation complexity, l declined approximately 13 percent; therefore, and associated cost. j fewer materials inspections were planned each year. The number ofinspections conducted has The Site Decommissioning Management l been about level over the past 3 to 4 years. Plan (SDMP) is used to ensure that generic and i i

i 4

Figure 14 i Materials Inspection Completions  ;

i L 3000  ;

2500 ----

i 1

-~ -- -- ---- ~~

~~

w 2000 ,

r j Vt . l *

^

U 1500 -- --

-~ -- --

-~

R C.  ?

- 1000 ~~ -- c

' 2 s i

J 500 -M -- ' -~ -~ -- ,

l

~  :

a' ' t t

1992 1993 1994 1995 1996  !

I Fiscal Year  ;

l w Planned Actual l ,

i i

k i

i

I I

case-by-case issues affecting the timely Act directs the DOE to characterize only one  !

decommissioning of these more difficult contami- candidate site, the Yucca Mountain site in the  !

nated sites receive the appropriate level of man- State of Nevada. The National Energy Policy Act l agement attention. There are currently 45 sites on directs the NRC to revise its regulations (10 CFR l the SDMP list; 3 sites were planned for Part 60) within 1 year after the Environmental I remediation, and 3 sites were removed from the Protection Agency (EPA) issues new standards.

list in FY 1996 (as shown in Table 1).

In FY 1996, the NRC refocused its repository High Level Nuclear Waste Regulation program after a thorough evaluation ofimportar.t Program external events, including budget reductions.

The High-Level Nuclear Waste Regulation OE's msed program, and q Nadonal Aca6 emyo e nces reconumndatmns for Yuaa Program includes all of the NRC's public health M untain standards. The program was refocused and safety licensing, inspection, and environmen-n res lying ten Key Techmcal Issues (KTIs) tal reviews for the safe management and disposal m st imponant to wpository performance. Ac-of high-level radioactive wastes, as well as re-tivities were reprioritized and organizations search to assess the safety of high-level waste restructured to support issue resolution and management, storage, and disposal. The NRC's improve integration of techm, cal work. Other high-level waste regulatory activities are man-w rk imp rtant to licensing was deferred.

dated by the Nuclear Waste Policy Act of 1982, the Nuclear Waste Policy Amendments Act of An initial step in the refocused program was 1987, and the National Energy Policy Act of to discuss the ten KTIs and the issue resolution 1992. The Nuclear Waste Policy Act specifies a process with DOE and other parties. As a result, detailed approach for long-range high-level waste agreement was achieved with DOE on the poten-disposcl, with DOE having operational responsi- tial significance to repository performance of bility and the NRC having regulatory responsibil- eight of the ten KTls. Overall, for most of the ity. This undertaking involves a complex, KTIs, work in FY 1996 concentrated on estab-integrated system of waste handling, transporta- lishing a sound technical basis for issues to be tion, interim and retrievable storage, and ulti- resolved during FY 1997 - 1998. FY 1996 mately deep geologic disposal of high-level activities also included field and laboratory waste, requiring the protection of public health and safety and the environment over thousands of years. The Nuclear Waste Policy Amendments <courinurs on van is; Table i SDMP Contaminated Sites (Total Sites To lie Remediated = 45)

FY 1992. FY 1993 4 FY 1994 FY 1995 - FY 1996 Total Sites To Be N/A 45 47 48 45 Remediated Sites Planned for Remediation 2 4 8 3 3 Sites Remediated 1 i 3 3 3 1996 ACrotNI \ttil.IT Y RI.I'OH1

l*remram l'erformance (centtinuedI investigations and the development of models or guides pertaining to Commission policy or techni-computer codes to represent subsystems or cal requirements. l processes of the repository. Both new and Research is generally planned and initiated in existing models were used to conduct sensitivity /

response to the needs of regulatory licensing and importance analyses of various subsystems. The inspection programs or is directed in response to l results of these analyses will help further focus Commission decisions. Research priorities are I NRC's issue resolution efforts on those factors determined by the overall value, importance, and I shown to have dominant effect on repository impact that the research findings may have in [

subsystems or processes and will provide further responding to these program needs. The follow-value when linked with the total system perfor- ing were NRC's major research accomplishments mance code. in FY 1996:

While the resolution of many KTis is depen- a Supported nuclear power plant pipe fracture dent on additional work, some important research since 1981. The work has included i progress was made in FY 1996. Interactsons , four major research programs, two with between NRC and DOE were successful in significant additional international funding, achievmg mformal agreements that will b which were performed to solve engineering documented in future issue resolution status safety issues associated with the potential reports. Another NRC and DOE interaction failure of cracked piping. The program has I identified differences between NRC and DOE . .

produced a sigmficant body of experimental total system performance assessments, the.ir root and analytical results that has been used to causes, and potential future resolution actions.

justify changes in NRC's regulations reh ted A branch technical positmn was completed to pipe failure and in the ASME Code Sec-giving an acceptable methodology for the use of tion XI concerned with evaluatinc crach expert clicitation. Interactions were conducted found during periodic inservice inspections with EPA that contributed to the development of. of reactor piping. An .independent :, view of reasonable and implementable standards for th this program has supported the statPs assess-Yucca Mountain site. Additionally, NRC devel- .

ment that this program has met its objectives.

oped and installed a Licensing Support System Thus, the results of he t research are being Test Bed on an NRC Internet computer server compiled and documented in the fomi of a site that provides access to a wide variety of regulatory guide addressing leak-before-.

NRC s techmcal documents. break evaluations, and the research area is being closed.

Regulatory Research Program - Completed tests on certain gate valve designs The primary goal of the NRC's Regulatory to determine their susceptibility to pressure I

Research Program is to ensure that research locking and thermal binding. These undesir-provides sound technical bases for timely able circumstances may occur when operat-rulemaking and decisions in support of regulatory ing conditions cause an increase in the l licensing and inspection activities. As part of this internal pressure, and the shrinkage of the i Regulatory Research Program, the NRC conducts valve body during cooldown causes interfer-research to provide independent expertise and ence between valve internals. The pressure information necessary for making timely regula- increase and the shrinkage create additional tory judgements, to anticipate problems of poten- forces on the internals and require higher tial safety significance for which new or expanded than expected extraction forces to open the i knowledge can assist the NRC in pursuing its valves. The research results show that these mission, and to develop regulations and regulatory i'.s. Nt ti l: \ R Rir,lL ViOld OO\l\li%lON

valves are susceptible to pressure locking; break loss-of-coolant accidents and opera-however, the valves show little tendency for tional transients in current generation nuclear thermal binding at the conditions tested. The reactor designs. The passive safety features findings from this research work are being of the AP600 call for extended operation used by the regulatory staff for evaluating during an event at low-pressure conditions, licensee responses to Generic Letter 95-07, thereby requiring an extension of both

" Pressure Locking and Thermal Binding of RELAP5's capabilities and its assessment Safety-Related Power-Operated Gate Valves." base. To this end, a 4-year program of code

+

development, support experiments, and Completed a compilation of techm. cal m.-

sment was undenaken to extend the sights based on the results of 75 mdividual

. . . code,s operating envelope to cover the piant examinations (IPEs). These m. sights P600 range of conditions.

focused on such items as important accident sequences in different pressurized-water

• Issued NUREG-0700, Revision 1, guidance reactor (PWR) and boiling-water reactor for the evaluation of control stations in (BWR) design types, important human nuclear power plants. Use of this guidance performance isst es, and comparisons of IPE will help minimize the opportunity for results whh goals established for the station human error caused by poorly designed blackout rule. These insights have been displays and controls. This updated guid-published for public review and comment as ance was needed because of the introduction NUREG-1560 and are being reviewed to of computer-based systems.

identify potential safety issues not obvious

• Completed development of s.ix draft regula-from the study of individual plants.

tory guides on software quality. These Followup activities will focus on the need for guides build upon industry standards, where safety improvemen:s at individual plants.

practical, and give guidance to the m. dustry

. Completed an integrated, conceptual frame- on methods acceptable to the NRC to ensure work for incorporating human errors of quality in new digital instrunentation and ,

commission into probabilistic risk analyses control systems.

(PRAs). This framework was published as . .

NUREG/CR-6265. When fully tested, use of Completed a significant portion of its evalua-tion of direct containment heating (DCH), a this framework will permit the incorporation severe accident issue that is important to of a more complete spectrum of potential human error events in PRAs. which, in tum, ""'I Y C ".tainment failure m PWRs. Resolu-can be used to support the agency's risk- tion of this issue mvolved a substantial informed regulatory improvement programs.

am unt of testing and analyses. The results of the Office of Nuclear Regulatory Research

• Completed the required modifications, (RES) evaluation, published in NUREG/CR-validation, and adequacy demonstration of 6338, concluded that for 41 Westinghouse the RELAPS thermal-hydraulic system large, dry and subatmospheric containment analysis code. T'iis accomplishment is reactors, DCil poses no tangible threat to panicularly significant since it allows the containment integrity. The resolution of this NRC to perform audit calculations to support issue for a substantial number of plants the certification of the Westinghouse AP600 eliminates this matter from further analysis.

passive reactor design. RELAP5 is a large Additional work is under way to resolve this and complex software tool developed and issue for the remaining PWR plants.

used by the NRC for the analysis of small-(continued on page 20) 1996 ACColNI Altli.IIv m PORI

Program Perjinmance (wntinard)

Generic Safety issues Although DOE has not published the ADP Generic safety issues involve safety concerns results, the NRC's independent assessment of that may affect the design, construction, or opera- the demonstration results appears to confirm i tion of all, several, or a class of reactors or facili- the engineering feasibility of thermal anneal- l ties. The resolution of such issues may involve ing for U.S. reactor designs. The regulation, I safety improvements or the issuance of new or regulatory guide, and annealing demonstra- )

revised requirements or guidance. During FY tion serve as the regulatory and technical i 1996, the NRC resolved three of these issues bases to support licensee plans to anneal dealing with (1) automatic emergency core cool- RPVs as a basis for extending the useful life ing system switchover to recirculation, (2) of these components.

embrittlement of reactor pressure vessel supports, .

. Issued a final rule incorporating by reference and (3) monitoring of fatigue transient limits for ASME Section XI, Subsections IWE and reactor coolant systems.

lWL, into 10 CFR 50.55a. Subsect. ion IWE e ntains requirements for inspecting metal NRC Regulat/ons containments and liners of concrete contam-The NRC establishes the rules that operators ments; Subsection IWL contains require- 1 of nuclear facilities and users of radioactive ments for inspecting concrete containments materials must follow. These rules are intended to and post-tensioning systems. The rate of protect persons using radioactive materials, as occurrence of corrosion and degradation of I well as the general public, from the potential containment structures has been increasing hazards of radioactivity. NRC regulations are at operating nuclear power plants. The final established or changed, as necessary, on the bas.is rule will ensure that the critical areas of of recommendations from NRC staff. Members comainments are routinely inspected to of the public and interested organizations can also detect and take corrective action on defects request changes in regulations. The views of the that could compromise a containment's public, the industry being regulated, and other structural integrity.

' interested parties are usually solicited before the Commission adopts new rules or changes. In FY

• Issued a final rule amending the criteria for 1996, the NRC completed 14 rules; 5 major rules scismic and geologic siting and earthquake are described below: engineering. A new section (100.23) has been added to the existing body of regulations

• Issued a new annealing rule,10 CFR 50.66, in 10 CFR Part 100. The revised regulation and a new Regulatory Guide !.162,"Fonnat now explicitly recognizes that there are and Content of Report forThermal Anneal- inherent uncertainties in establishing seismic ing of Reactor Pressure Vessels." These and geologic design parameters and allows provide the basis for performing a thermal for the option of using a probabilistic seismic anneal of an embrittled reactor pressure hazard methodology capable of propagating vessel (RPV) to restore the strength and uncertainties as a means to address these toughness to nearly their original condition. uncertainties. Public commenters supported Thermal annealing is the only process that the revised regulation, specifically the re-can reverse the deleterious effects of neutron moval of prescriptive guidance from the embrittlement on RPV steel. The NRC staff regulation and the relocation in segulatory has closely observed the activity of the guides or in standard review plans. Earth-DOE's Annealing Demonstration Project quake engineering criteria not associated with (ADP), which performed an engineering the selection of the site or establishment of a feasibility demonstration of the annealing safe-shutdown-earthquake (SSE) ground of a canceled U.S. nuclear power plant. motion are now located in 10 CFR Part 50 in l l'.k %1 cl .lA H I41 G11. EloRY comil% ion

I a new Appendix S. The final rule is a first ces on a case-by-case basis. As adopted, the step in decoupling siting from plant design provisions permit licensees greater flexibility and updating other site criteria. This rule is in making financial decisions in decommis-l applicable to future plants and early site sioning and reduce the regulatory burden. By permits filed under 10 CFR Part 52. eliminating the requirement for submittal of a preliminary decommissioning plan to NRC

= Issued a final rule on the environmental l and the need to wait for NRC approval before effects of license renewal for nuclear power undertaking any decommissioning activities, plants (10 CFR Part 51). This final rule .

substantial cost savings for licensees and the 4

amends the Comm.ission's regulations to NRC could be realized.

i establish new requirements for environmen-l tal revicw of applications for renewal of

nuclear power plant operating licenses. The Responsiveness to the Public's i rule defines the number and scope of envi- Safety Concerns ronmental issues that need to be addressed All allegations received by the NRC are I j as part of a license renewal application. In initially considered to have a potential effect on l addition, the rule codifies NRC positions on health and safety, and the NRC reviews each other environmental issues so that they need . . . . .

auegatmn to mmne i safety signihcancy and j not be addressed on a site-specific basis. By j adopting these provisions, the regulatory ~

the deyt on healtly and safety. If the allegation deals with a techmcal issue and wrongdoing is not i l burden will be reduced because the rule will suspected, the agency's goal for closing the provide a net saving to industry and the NRC. In addition, the rule is expected to allegation is an average of 6 months from receipt.

I contribute to regulatory stability in the if the allegation pertains to wrongdoing by an license renewal process. NRC licensee, the agency's goal for closing is an average of 18 months from receipt. . Allegations l e issued a final rule on decommissioning of l nuclear power reactors (10 CFR Part 50). wantinued on pour .?2;

i. This final rule amends the l Commission's regulations m y< ,

,.m -

5 on the decommissioning .

.. a

\.,,  !

/ [7., '

procedures that lead to the .

3 ..

termination of an operat- ,- i. .,

~

, p .

mg license for a nuclear _. *

power plant and release of , $

3 y M*

the property for unre- '^ W# . I, . ~ -w stricted use. The rule

./ [ (.,' . '

~

amendments also ciarify g 4. l

, , ' i .

ambiguities that have ~1 3 '9///% ' I g .

i (p . ' g , ' / 3. h ! ' f arisen in the past and l Q l

~

t codify practices that have s 4 -

.l5 been used for other !!cens- .

~.  : 'k ,J y .

y .L 4 __ y , .

4 -i

'o8n .

g *

,. . ,8 a

Control N00tn at it e, ^*

y' suruarscaaor g

._. - ~. - = ~ - - - - . - . ... .-

I'rogram 1*rrjurmance (c,mtinued) requiring review outside the NRC (e.g., by the continued to be less than 18 months, primarily Department of Justice or Department of Labor) because of an increased emphasis and narrowed are not subject to the se standards. The NRC's focus on management of case inventory through-mean time to close al'egations pertaining to a out the agency. ,

technical issue (and wrongdoing is not suspected) has generally continued to be less than 6 months. Figure 15 shows the mean time in months to The NRC's mean time to close allegations per- close the two types of allegations for which 1 taining to wrongdoing by an NRC licensee has standards have been established.

l l

Figure 15 i

Mean Time to Close Allegations

• 20 -

Goal. Cases R - -- ------ ---- ---------- -- - ----- --------- - -- - ------------- --

,nR"jon, 16 12 ---- -- --

E C

O 8 -- ------- ---- --- --------- - ----- -- ---- - ---

2 Goal, Cases Not Requiring 4 ---- -- -- - -- - - -

Investigations j 4 - 1 0- - "'~ "

1992 1993 1994 1995 1996 I Fiscal Year h No investigation M investigation Rehired l

• This chart reflects revised data for FYs 1992 to 1995. Mean time is reflected in the fiscal year in w hich an allegation is closed.  !

l I

i I

l SOY ,a . p

i l

Management Accountability

-a : ; . .. ; . : . .

.c - . . -

The NRC's Management the Federal Managers' Financial Integrity Act were achieved in FY 1996. The NRC has no Control Program material weaknesses in its programs or adminis-An Execut.ive Comm.ttee i for Management trative activities and no material non-conformances Controls oversees the agency's management with government-wide standards in its financial control program. In FY 1996, the Committee management systems.

was chaired by the Executive Director for Opera-tions, and Committee members were the Deputy The NRC reported no material weaknesses in Executive Directors, the Deputy Chief Financial FYs 1994,1995, and 1996. Two material weak-Officer / Controller (DCFO/ Controller), directors nesses were reported in 1993, and five material of major program and administrative offices, and weaknesses were reported in the years before FY a regional administrator. 1993. All of these material weaknesses have been corrected. No material non-conformances in finan-Individual assurance statements from NRC cial systems have ever been reported by the NRC.

office directors and regional admimstrators served as a primary basis for the Chairman's FY 1996 Financial Management Systems statement of assurance on management controls.

The NRC has six financial management These mdividual statements were based on vari- systems: the Federal Financial System, Payroll aus sources, including the managers knowledge System, Personal Property PC System, License of day-to-day operations and existing controls' Fee Bill Generator System, Allotment Financial program reviews and other management evalua-Pb System, and Budget Formulation System.

tions, Office of the Inspector General (OlG) The Chairman,s statement of assurance w.it h reports, reviews of financial management systems, mspat t<) the agency,s financ.ial management risk assessments, and management control reviews. ,

systems is supported by management evaluations Each year, regional administrators and direc- and General Accounting Office and OIG reviews.

tors of offices with the highest risk with respect to Additionally, the OIG performs an annual audit of programmatic and administrative activities submit the agency's financial statement. This audit an annual management control plan to the Chair- includes testing of transactional data in the NRC's man of the Executive Committee for Management financial management systems and general ledger Controls. These plans, combined with the indi- account balances. The OIG also reviews policies .

vidual assurance statements, provide the frame- and procedures relevant to the internal control l work for monitoring and improving the agency's structure. The OlG issued an unqualified audit management controls on an ongoing basis. opinion on the NRC's FY 1996 financial state-ment. The 010 identified two reportable condi-  ;

Status of Management Controls and Report on tions that related to the NRC's internal control Material Weaknesses and Non-Conformances structure, one of which was carried over from The NRC evaluated its management control prior years' audits. These reportable conditions and financial management systems for the fiscal do not constitute material weaknesses or material year ending September 30,1996. This evaluation non-conformances.

provides reasonable assurance that the objectives of koniinues on pou ni IW6 MTOI Wit!!.I I Y lli'l'OH I

Mtmagement Accunntability Icontinued)

The Federal Financial System (FFS) is a application at the designated backup site during system that the NRC uses through an interagency FY 1997. This non-conformance is beyond the agreement with the Department of the Treasury control of NRC and we understand FMS plans to l (Treasury). This system is reviewed annually by eliminate the deficiency by the end of FY 1997. l Treasury's Financial Management Service (FMS) l for its client agencies that utilize the system. The Management Decisions and results of this year's annual review provided reasonable assurance that FFS, as operated by F. mal Actions on OlG Audit FMS for NRC, conforms to the principles, stan. Recommendations dards, and related requirements prescribed by the The agency has established and continues to Comptroller General, except for the inability to maintain an excellent record in resolving and demonstrate data recovery and backup capability implementing open audit recommendations of FFS in the event of a disaster, which was noted presented in OIG reports. Section 5(b) of the as a material non-conformance. Additional disk Inspector General Act of 1978, as amended, storage has been installed at the designated requires the Chainnan to report on management backup site with limited testing of the funds decisions and final actions taken on OIG audit control application. FMS plans to test the FFS recommendations. Table 2 gives the dollar value Table 2 Management Report on Office of Inspector General Audits With Disallowed Costs For the Period October 1,1995 - September 30,1996 I Numberof ' Questioned - Unsupported

Categeny Audit Reportsi ' Costs Costs gi ($) ($)

A. Audit reports with management decisions Oi $0 $0 on which final action had not been taken at the beginning of this reporting period B. Audit reports on which management 12 $280,621 $0 decisions were made during this reporting period C. Audit reports on which final action 2 $ 27,702 $0 was taken during this reporting period (i) Disallowed costs that were 2 $ 27,702 $0 recovered by management through collection, offset, property in lieu of cash, or otherwise (ii) Disallowed costs that were written 0 $0 $0 off by management D. Audit reports on which no final 10 $252,919 $0 action had been taken by the end of this reporting period 8

Adjustment made as a result ofidentiliention of a mathematical error in an audit repon listed as ha>ing no final action at the end of ;

the last reponing period resulted in no questioned costs for that contract; and therefore no actions are carried over to this report. J

~

t _ __ _ l l

I i

of disallowed costs detennined through contract Table 3 gives the dollar value of funds that  ;

audits conducted by the Defense Contract Audit audits showed could be put to better use. As of '

Agencys (DCAA). " Questioned Costs" are those September 30,1996, there were no outstanding costs that are questioned as to whether they are audits recommending that funds be put to better i allowable. " Unsupported Costs" represent costs use. Four reports containing five recommenda- .

challenged because of a lack of adequate support- tions are more than a year old and are described in l ing data. Because of the sensitivity of contractual the section on the next page titled " Management i negotiations, details of these contract audits are Decisions Not implemented Within One Year."

not furnished as pan of this report. Note that the i Department of Defense also reports the cost -

savings resulting from DCAA audits. (continued an paxc 26)

Table 3 Management Report on Office ofInspector General Audits with Recommendations That Funds Ile Put to lletter Use For the Period October 1,1995, through September 30,1996 iRecommendations;thati

funds be put to better;  ;

.4

use by management agreed

'Numbe'r of; to in a managemente Catsgory : ,

l Audit Reports 1decisioni l

i

($)-:

A. Audit repons on which final 0 $0  ;

action had not been taken by the l beginning of this reporting period B. Audit reports on which manage- 0 $0 ment decisions were made during this reporting period t

C. Audit reports on which final 1 $214,598 ,

action was taken during this reporting period .

(i) Recommendations that were 1 $214,598  ;

actually completed (ii) Recommendations that manage- 0 $0 i

ment subsequently concluded should not or could not bc  ;

implemented or completed D. Audit reports on which no final 0 $0 action had been taken by the end of this reporting period 1996 AccoEN'l AlHIJrY RIPoRT

Management Accountability (continurJ6 Management Decisions Not implemented The EDO has provided an action plan to the

. Within One Year Commission to address outstar 'ng LSS issues.

Management decisions were made before Based on the Commission's response to this plan, September 1995 for the OIG audit reports dis- the LSS senior management team will submit a cussed in the following paragraphs, but as of final report to the Commission.

September 30,1996, NRC had not taken final action'on some of the issues in the reports. The Inspector Training Program

Improved  ;

OlG did not recommend that funds be put to Coordination and Communication Needed, better use for any of these reports. August 4,1995 In order to establish effective coordination, NRC Needs To Prmide Strong Direction for the communication and accountability among NRC Licensing Support System, March 17,1995 offices and management regarding inspector The Nuclear Waste Policy Act of 1982 re- training needs, requirements, and oversight, the quires that NRC approve or disapprove the con- OlG recommended that the EDO evaluate the  ;

struction of a high level nuclear waste repository merits of an integrated schedule or other measure within 3 to 4 years of receiving a DOE construe. to provide NRC offices with early notice of  ;

j tion license application. To meet this deadline, upcoming inspector training requirements. The NRC enacted a rule requiring the development of NRC has determined that the current system an electronic information management system to does not meet the needs of the agency and that ,

reduce the time needed for discovery during the the system needs to be totally redesigned. The  ;

licenc ' e ng process. The rule requires that new system is scheduled for implementation by DO ind develop the system and that December 1998.

NRCg .ae and maintain it.

Review of NRC Management of Reporting

- The OlG reported that the program had stalled Requirements Under 10 CFR Part 21, foi the past 5 years for several reasons. Many of November 30,1990 the delays were attributed to an inadequate system OIG made Gye recommendations concerning definition and agreement on the roles and respon- NRC's management of reporting requirements sibilities of DOE arn! NRC. As a result, the OIG under 10 CFR Part 21. NRC implemented four of recommended that NRC obtain a formal commit- the Gye recommendations. The finalitem in-ment from DOE in the fonn of an Interagency volved compliance with 10 CFR Part 21 by Agreement or Memorandum of Understanding nonreactor licensees.

(MOU) on key aspects of the Licensing Support l System (LSS). Part 21 establishes procedures and require-ments to ensure that licensees notify the Com-In response to the OIG report, the EDO mission of(1) equipment defects which could appointed a senior management team to reevalu- create a substantial safety hazard and (2) failures to ate the purpose of and need for the LSS, and to comply with regulatory requirements relating to address the issues affecting the LSS program. substantial safety hazards. The 01G recommended Due to Congressional budget action related to that the Commission either develop a program to  ;

DOE's high-level nuclear waste program, there implement Part 21 for nonreactor licensees or was no resumption of any LSS activities and all revise Part 21 to exclude nonreactor licensees from .

of DOE's LSS-related activities have been its scope if the program is not applicable to them.  !

delayed, including the finalization of an MOU The NRC's Office of the General Counsel subse-with DOE. quently detennined that Part 21 requirements are applicable to NRC nonreactor licensees but not to Agreement State licensees.

L'A MT1 EAR REGlLVioHV Co\t%flNStoN

l l

On June 17.1991, NRC reminded all of its - NRC's Policies and Procedures for Deferring

$1aterials Inspections and Verifying Licensee NRC materials licensees of the applicability of -

Assertions, October 26,1992 Part 21 reporting requirements (NRC Information

- Notice No. 91-39: Compliance With 10 CFR Part in 1992 OlG investigated an allegation that 21," Reporting of Defects and Noncompliance"). an NRC regional office had conducted an inad- '

The NRC also considered a rulemaking to address equate inspection and mishandled an allegation (1) whether certain types of materials licensees concerning a materials licensee. Because of that can or should be exempted from the provisions of investigation, OlG initiated a follow-up audit to Part 21 because their operations have no potential examine programmatic issues related to actions i to result in a significant safety hazard and (2) taken by regional offices. OIG concluded that whether Part 21 type reporting requirements NRC's policies and procedures for deferring should be repromulgated under the Atomic En- materials inspections and verifying licensee assertions needed improvement. The repon made ergy Act and then made a matter of compatibility for the Agreement States. (Regulations promul- four recommendations. All four recom-gated under the Energy Reorganization Act, as is mendations have been addressed. The final ,

recommendation was addressed with the approval i Part 21, cannot be made matters of Agreement State compatibility; this is only possible for and implementation of the updated management directive on " Management of Allegations."

regulations promulgated under the Atomic Energy Act). With regard to item 1, the NRC needed to This management directive, which was issued on consider whether continuing to subject all NRC May 1,1996, incorporates the topic of verifying materials licensees to Part 21 notification require. licensee assertions. ,

ments is cost effective or necessary for adequate General Ledger Controls, Alarch 15,1993 protection of public health and safety. With regard to item 2, NRC needed to consider the See the OIG audit of the FY 1996 Financial aspect of consistency in reporting between NRC Statement (page 41) for the status of the outstand-and Agreement State licensees. ing recommendation that the payroll system must be integrated with the general ledger and possess NRC considered several options to address this labor distribution capabilities.

issue and concluded that the NRC resources needed to revise Pan 21,in addition to the Agree- Review of Funds blanagement, ment State and licensee resources needed to imple- September 23,1994 '

ment any changes to Part 21, would outweigh the The OlG reviewed the agency's funds manage-benefit of reducing the number of affected NRC ment practices and specifically examined NRC's materials licensees or the potential safety benefit tmobligated budget carryover, advance procure-I from imposing the regulation on Agreement States. ment planning, allottee financial plans, and fund in e March 1996 Comnussion Paper, the EDO obligation patterns. The audit report disclosed that

.nformed the Commissioners of the NRC staff's although NRC's funds management practices mtent not to proceed with rulemaking on 10 CFR generally complied with established policies and Part 21 regarding reporting requirements for procedures, the agency's level of carryover and materials licensees. In a statT requirements memo- unliquidated obligations had increased. The 010  !

randun3 of April 12,1996, the Secretary of the .

offered three recommendations to improve funds i Commission mfonnet) the EDO that the Commis- management. Action on one recommendation, to I

sion did not object to the NRC staff's plans. The hold allottees more accountable, remains out-OlG has concurred with the agency's decision and standing, and the other two recommendations, l i

closed its recommendation. expanding the use of an ex.is ting management ictmtinued am page 28)

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19% ACcolNI AinLIIy lo'I'oHT )

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Management Accountabihty (continued) infonnation system and improving the advcoce Debt Collection procurement process, have been completed.

As shown in Figure 16, the NRC has reduced The agency's Budget Execution Repon (BER), its delinquent debt since FY 1993. The agency which is provided to agency managers monthly and has accomplished a steady decline in delinquent to the Commission quarterly, focuses on the finan. debt through a concerted debt management cial performance of the agency as a whole as well strategy. The strategy includes activities such as as on the individual allowance holders. The BER license suspensions; referral to the Department contains performance parameters such as commit- of Treasury's Debt Management Services ment, obligation, and expenditure rates, months of through a cross-servicing arrangement; credit available funding, and the amounts and trends in reporting; and referral to the Department of unliquidated obligations. This information is Justice for enforced collection.

issued throughout the year to monitor financial perfonnance and as input in annual perfonnance appraisals. A draft management directive, which Prompt Payment provides guidance on good financial management, On-time payments for amounts subject to the establishes perfonnance measures for successful Prompt Payment Act have increased as shown in f~mancial management, and describes methods to be Figure 17. The amount ofinterest penalties used for managing financial resources within the incurred have decreased from $19,000 in FY 1993 agency, was issued for comment to agency allow. to approximately $4,500 in FY 1996.

ance holders in December 1996; the directive will be issued in FY 1997.

Figure 16 Delinquent Debt 25 -

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Civil Penalties amount of civil penalties assessed and the amount

' e llected in FYs 1992 through 1996, distributed ,

The NRC imposes enforcement sanctions to ccording to the year in which the e,vil penalty

. encourage prompt identification and comprehen- was collected. The amount of each civil penalty sive correction of violations and as a deterrent to '

assessed reflects the amount that the NRC ulti-emphasize the importance of compliance with m tely decides is appropriate in each case through requirements. One enforcement sanction is the its enforcement or hearing process.

! imposition of a civil penalty. Table 4 shows the Table 4 j Fiscal Year Cisil Penalties Collected i Versus Fiscal Year Penalty I)ollars Assessed Fiscali . _ .

Percen't -

EYear. 1 Assessed ' ' Collected Collected ,

1992 $4,630,815' $4,610,815 99.57 ,

' $4,180,8752 $4,178,5573 99.94 1993 1994 $3,867,675 $3,867,675 100 1995 $2,289,285 $2,289,285 100  ;

1996 $3,106,000 $3,014,0004 97.04 .

' i

' This amount includes $20,000 for two cases that were withdrawn after further consideration following the licensees

• responses. i 8 in some cases, the amount imposed has been changed to reflect a settlement.  ;

i

- 2. This amount reflects the total amount assessed for a case for which an agreement was reached to pay in full, but in installments.

De licensee has since made full payment, i This amount reflects payments that have been made in two cases where installment payments are being made.

, 19% ACroCNrAHII.IIT RI. PORT 1

i FY 1996 Audited Financial Statement

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Limitations of Principal Statements The principal statements have been prepared to report the financial position and results of opera-tions of the NRC, pursuant to the requirements of the Chief Financial Officers Act of 1990. These statements have been prepared from the books and records of the NRC in accordance with the ,

formats prescribed by the Office of Management and Budget. liowever, these statements differ from the financial reports used to monitor and control budgetary resources that are prepared from the same books and records. The principal statements should be read with the realization that they  ;.

are for a sovereign entity, that liabilities not covered by budgetary resources cannot be liquidated without the enactment of an appropriation, and that the payment of all liabilities other than for contracts can be abrogated by the sovereign entity. Other limitations are included in the footnotes to the principal statements.

c The NRC's FY 1996 linancial statement was audited by the NRC's Office of Inspector General (OIG). This section contains the results of the OlG audit, including the financial statement.

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S WASHINGTON, DC 20555 0001 March 6,1996 -

L MEMORANDUM TO: Chairman Jackson Commissioner Rogers

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Commissioner McGaffigan Commissioner Diaz i FROM:

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Hubert T. Bell Inspector General ,

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SUBJECT:

RESULTS OF TiiE AUDIT OF U.S. NUCLEAR REGULATORY COMMISSION'S FISCAL YEAR 1996 FINANCIAL STATEMENTS

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Attached is the Office of the Inspector General's (OIG) audit report of the U.S. Nuclear Regulatory Commission's (NRC) Fiscal Year 1996 financial statements. The Chief Financial Officers (CFO)

Act requires OlG to annually audit the Principal Financial Statements of the NRC. The audit was performed to form an opinion on the Principal Financial Statements. The report contains the (1) prin-cipal statements, (2) our opinions on the principal statements and management's assertions about the effectiveness of internal controls, and (3) our report on NRC's compliance with laws and regu-lations. Written comments were obtained from the Acting CFO and are included as an appendix to our report.

Audit Results On NRC's Fiscal Year 1996 Principal Financial Statements, we issued an unqualified opinion on the Statement of Financial Position, and the Statements of Operations, Cash Flows, and Budget and Actuel Expenses.

In our opinion on management's assertions about the effectiveness of internal controls, we identi-fled one new reportable condition and one carried over from prior fiscal years. The new condition ,

concerns NRC's procedures for identifying capitalized software. The prior-year condition con-cerns NRC's lack of a system for reporting labor costs by program. Based on corrective actions taken in FY 1996, we closed two reportable conditions identified in our FY 1995 report. Those conditions related to (1) intemal controls for NRC's fee recovery system, and (2) lack of Depart-ment of Energy (DOE) audit assurance for NRC funds spent at DOE labs. We have, however, retained the DOE issue as a Matter ofEmphasis in our report.

(wntinued on page 3M L.--a -

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19% MTOUNT AILILITY REPORT ,

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p; Audst of FY 1996 linancial Statement (continued 1  ;

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Our report on NRC's compliance with laws and regulations states that with respect to the items tested, NRC was in compliance. Based on actions taken in FY 1996, we closed the compliance finding related to NRC's fee recovery system.

Under the Federal Manager's Finec:a! Integrity Act, NRC must annually evaluate its internal l controls processes. As of the date of our report, NRC management had completed its evaluation of financial controls, but was still evaluating a programmatic control issue.

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On February 27,1997, the Acting CFO responded to our draft report dated February 19,1997.

We appreciate NRC staff's cooperation and continued interest in improving financial management within NRC.

Attachments: As stated i

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PRINCIPAL STATEMENTS

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S TATEM ENT OF FIN A NCl A L POSITION . . . .. .. .. ... . . . . .. . .. . ... . .... .. . ... .. . . . .. ... ... .. . .... .... .. . .. . . . ... .. . 47 f,;:) .

STATEMENT OF OPERA 110NS AND CII ANGES IN NET POSITION .......................................... 49 [,

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STATEM ENT Of) C A SI I FEOwS ... .. .. .. . .. . . . . . . .. .. . .. ... . . .. .. .. .. . . . . . . . .. . . .. .... . . .. . . ...... . . . .. ... .. .... . ... . ... 50 h' O

S rATEMINr OF B UDGET AND ACTUAL EX PENSES ............................................................ 52 fi<

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COMMENTS OF THE ACTING CHIEF FINANCIAL OFFICER D. .

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INSPECTOR GENERAI!S REPORT In our audits of the U.S. Nuclear Regulatory Commission (NRC) for the years ended Septem-ber 30,1996 and 1995, as required by the Chief Financial Officers'(CFO) Act of1990, we found the principal financial statements were reliable in all material respects. Management fairly stated that the internal control structure in place at September 30,1996 was effective in (1) safeguarding assets from material loss,(2) assuring material compliance with laws and regulations governing the use of budgetary authority and with other relevant laws and regulations, and (3) assuring that there were no material misstatements in the Principal Statements. We found no reportable noncompli-ance with laws and regulations for the items tested.

The following sections outline our conclusions and discuss the Overview of the Reporting Entity and the scope of the audit.

OPINION ON PRINCIPAL STATEMENTS The principal statements, including the accompanying notes, present fairly in all material respects, in conformity with a comprehensive basis of accounting other than generally accepted accounting principles, as described in Note 1, NRC's-

. assets, liabilities, and net position;

- revenue, financing sources and expenses;

- cash flows; and

= budgetary resources and actual expenses.

INSPECTOR GENERAL'S REPORT ON MANAGEMENT'S ASSERTION ABOUT THE EFFECTIVENESS OF THE INTERNAL CONTROL STRUCTURE The Office of Inspector General (OlG) evaluated management's assertion that the NRC maintained an effective internal control structure designed to:

- safeguard assets against loss from unauthorized acquisition, use or disposition; a assure the execution of transactions in accordance with laws governing the use of budget authority and with other laws and regulations that have a direct and material effect on the Principal Statements or that are listed in the Office of Management and Budget (OMB) audit guidance and could have a material effect on the Principal Statements; and properly record, process, and summarize transactions to permit the preparation of reliable financial statements and to maintain accountability for assets.

NRC management fairly stated that internal controls in place on September 30,1996 provided reasonable assurance that losses, noncompliance, or misstatements material in relation to the (wntinued ton page 40) 199(. AC( OL'N I UHl I fi RIfoRT

9 1

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.1udit ofIT 1996 l'inancial Statement (continued) o 1 db Principal Statements would be prevented and detected on a timely basis. Management made this l assertion based up(m criteria established by the Federal Afanagers 'Financiallntegrity Act ofl982 (FAfFIA) and OhfB Circular A-123, Afanagement Accountability and Control.

REPORTABLE CONDITIONS AND AUDITFOLLOW-UP OlG noted two matters involving the internal control structure and its operation that are considered reportahic conditions under standards established by the American Institute of Certified Public Accountants and OMB Bulletin 93-06. Although not material in relation to the Principal State-ments, these reportable conditions involve deficiencies in the internal control structure that, in our judgment, could adversely affect the NRC's ability to ensure that it meets the objectives ofinternal controls. Management considered these conditions in making their assenion on the effectiveness of the internal controls. 1 Ct musr Yau  !

The matters listed below involve the design or operation of the internal control structure and war- ,

rant disclosure as reportable conditions. None of the reportable conditions noted are classifiable as material weaknesses.

Capitalization Procedures for Automatic Data Processing ( A1)P) Softwarv Need imprmement Our audit disclosed a need for improvements to software capitalization procedures. This latest finding represents a continuing OlG concem about NRC's financial reporting of property. While OlG has raised and the NRC has resolved similar issues over the past few years, we believe the j current issue indicates a continuing concern and must be identified as a reportable condition.  !

l The Office of the Controller's (OC) current procedure for accounting for capitalized ADP software was issued on April 26,1996. This procedure provides guidance on how relevant information should be captured within the Division of Accounting and Finance (DAF). However, it does not  !

identify specific responsibility for making capitalization decisions or for oversight of those deci-sions. OC advised us that they receive software data from NRC offices for review and possible capitalization, and that a contractor has primary responsibility for this function.

The capitalization procedure only vaguely infers that a contractor performs the review function.

One of the procedural steps states, "The documentation for additions and deletions is indepen-dently reviewed by DAF on a monthly basis to ensure accuracy and completeness of the data." To establish adequate accountability, we believe the duties and responsibilities of the specific parties in the process must be stated.

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At our initiation, OC asked NRC offices to examine a listing of capitalized software to determine accuracy and completeness, The request resulted in several additions and deletions' to the listing.

Most additions were previously reported to OC but were not included as capitalized software.

These additions totaled about one million dollars. Subsequent OIG inquiry disclosed that an OC contractor incorrectly decided against capitalizing these items. When a contractor has significant decision-making responsibilities,it is imperative that OC provide sufficient oversight to ensure that the appropriate decisions are made.

Recommendation To bring greater discipline and accountability to the software capitalization process, we recom-mend that the Acting CFO:

1. Revise the software capitalization procedure to specily the responsible NRC group, posi-tion or contractor for making capitalization decisions and oversight.

2. Reemphasize the need for adequate oversight of contractor decisions. ,

Pay roll Sy stem Alust lie Integrated With The General Ledger and Possess Labor Distribution Capabilities This issue is a carryover from the FY 1995 audit. NRC's accounting system does not include all of the necessary general accounting controls to produce timely and accurate financial information needed to prepare complete financial reports as required by OMB Bulletin 94-01, Form and Con-tent ofAgency Financial Statements. The principal weaknesses and issues ' hat remain are:

the compatibility and integration of the NRC general ledger and subsystems used by NRC for payroll.

1

• heavy reliance on manual inputs due to the use of incompatible subsystems.

NRC is in the process of replacing its payroll system with a new subsystem that is integrated into the Federal Financial System (FFS) and will eventually provide labor distribution information.

When the new payroll system is fully implemented, individual payroll transactions will be gener-ated for FFS update within the program receiving the direct benefit of the expenditure. NRC continues to reconcile the non-compatible payroll subsystem with the FFS general ledger on a monthly and year end basis. .

l Deletions were primarily the result of NRC's recent decision to expense rather than capitalize software related to analytical codes and mathematical models.

tam:inued on page m 199o \c('Ot N'l \Ull Ili R1 i OR r

V Auda ofIT 19% Financiat Statement tcontinued)

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Recommendation f None, as NRC is in the process of replacing its payroll system.

Palou Yuu - Reson En l-

1. Fee Recovery System Lacks Internal Control Based on actions taken in FY 1996, we are satisfied that OC has addressed the root causes for this problem. Further, OC is about to undertake a comprehensive review of the fee billing process. The corresponding condition reported in the compliance report for FY 1995 is resolved, as well. I i

2. Lack Of U. S. Department of Energy (DOE) Audit Assurance l l

During FY 1995, NRC took aggressive action to resolve this issue with DOE. NRC concluded its effort to implement our recommendations without success. While DOE did not believe a revision to the NRC/ DOE Memorandum of Understanding was needed, DOE forwarded reports addressing

' internal controls and costs incurred at the DOE labs. However, these reports appeared to be of questionable value in assessing the proper use of NRC funds. In the interests of full disclosure, we will continue to report this issue as a Matter of Emphasis in this report.

REPORT ON COMPLIANCE WITH LAWS AND REGULATIONS Our tests of compliance with selected provisions oflaws and regulations disclosed no instances of noncompliance that would be reportable under Government Auditing Standards or OMB Bulletin 93-06, Audit Requirementsfor Federal Financial Statements. However, the objective of our audit

was not to provide an opinion on overall compliance with laws and regulations. Accordingly, we do not express such an opinion.

MATTER OF EMPHASIS

NRC's principal statements include reimbursable expenses of the DOE's National Laboratories.

For Fiscal Year 1996 and 1995, NRC's Statements of Operations included about $89 and $110 million, respectively, of reimbursed expenses, which represent approximately 170/c and 207c, re-L spectively, of total expenses. Our audits included testing of these expenses and financing sources for compliance with laws and regulations within NRC. The work placed with DOE is under the auspices of a Memorandum of Understanding between NRC and DOE. The examination of DOE i National Laboratories for compliance with laws and reptilations is DOE's responsibility. This j responsibility was further clarified by a memorandum of the General Accounting Office's Assis-tant General Counsel, dated March 6,1995, where he opined that " .. DOE's inability to assure that its contractors' costs [ National Laboratories) are legal and proper...does not compel a conclusion

, that NRC has failed to comply with laws and regulations." DOE also has the cognizant responsi-bility to assure audit resolution and should provide the results of its audits to NRC.

U % Nt 01IAH RLG1 l AloHi Co\f \ll% ION s

.- - _ _ . ~ _ _ _ _ _ - . - _ _ . - _ _ _ _ _ - _ _ _ - _ _ - _ - _ _ - _ - - _ _ _ _ _ _ _ _ _ _ _ _ _ _ . _ _ _ _ _ _ - . _ _ _ _ - _ _ . _ _ _ _ _ _ _-

t CONSISTENCY OF OTHERINFORMATION The overview of the NRC, program performance, and other supplemental financial and manage-ment information sections contain a wide range of data, some of which is not directly related to the Principal Statements. We do not express an opinion on this information. We have, however, compared this information for consistency with the Principal Statements and discussed the mea-surement and presentation methods with NRC management. Based on this limited effort,  !

we found no material inconsistencies with the Principal Statements or nonconformance with l

OMB guidance.

OBJECTIVES, SCOPE AND METHODOLOGY l NRC management is responsible for (1) preparing the Principal Statements in conformity with the basis of accounting described in Note 1,(2) establishing, maintaining, and assessing the internal '

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control structure to provide reasonable assurance that the broad control objectives of FMFIA are met, and (3) complying with applicable laws and regulations. y We are responsible for obtaining reasonable assurance about whether (1) the Principal Statements 3 i

are free of material misstatement and presented fairly, in all material respects, in conformity with the basis of accounting described in Note 1, and (2) management's assertion about the effectiveness .i of the internal control structure is fairly stated,in all material respects, based upon criteria estab-lished by FMFIA and OMB Circular A-123, Management Accotmtability and Control. As of the  !

date of our report, NRC management had completed its evaluation of financial controls, but was still evaluating a programmatic control issue. We are also responsible for testing compliance with selected provisions of laws and regulations and for performing limited procedures with respect to certain other information in this annual financial statement. In order to fulfill these responsi-bilities, we:

e examined, on a test basis, evidence s4 porting the amounts and disclosures made in the Principal Statements;

- assessed the accounting principles used and significant estimates made by management; >

i a obtained an understanding of the internal control structure related to safeguarding of assets, ,

compliance with laws and regulations including execution of transactions in accordance 1 with budget authority, financial reporting, and performance measures reported in the annual .l financial statements; .

+ assessed control risk and tested relevant internal controls over safeguarding of assets, com- .y pliance, and financial reporting and evaluated management's assertion about the effective- l ness of internal controls;

• tested compliance with selected provisions of the following laws and regulations: j Anti-Deficiency Act (Title 31 U.S.C.), National Defense Appropriation Act (PL 101-510), .

T n ontinued on page lh 19% A(ToUN1 AltiLII"h 141st'oRl' l

W ,

Audit of FY 19% Iinancial Statement (continued)

Omnibus Budgetary Reconciliation Act of 1990, Debt Collection Act of 1982 (PL 97-365),  ;

Prompt Pay Act (PL 97-177), Civil Service Retirement Act, Civil Service Refonn Act (PL l 97-454), Federal Managers' Financial Integrity Act (PL 97-255), CFO's Act (PL 101-576),

Budget and Accounting Act; reviewed compliance with the process required by FMFI A for evaluating and reporting on internal control and accounting systems; and L.

assessed the design of selected performance measure controls and whether they had been placed in operation.

We did not evaluate all internal controls relevant to operating objectives as broadly as defined in FMFI A, such as those controls for preparing statistical reports and those for ensuring efficient and effective operations. We limited our internal control tests to those necessary to achieve the objec-  :

tive described in our opinion on management's as <ertion about the effectiveness of internal con- J trols. Because of inherent limitation in an" irnal control structure, losses, noncompliance, or misstatements may nevertheless occur - ' o, oe detected. Also, projection of any evaluation of the internal control structure over financial reporting to future periods is subject to the risk that the l internal control structure may become inadequate because of changes in conditions, or that the y degree of compliance with the policies or procedures may deteriorate.

.ll 7 We perfonned our work in accordance with Government Auditing Standards and OMB Bulletin y 93-06, Audit Requirementsfor Federal Financial Statements.

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This report is intended solely for the use of management of the U. S. Nuclear Regulatory Commis-sion. This restriction is not intended to limit the distribution of this report, which is a matter of public record. 1 1

AGENCY COMMENTS 1 On February 27,1997, the Acting CFO responded to our draft report and addressed the two recom-mendations to improve the procedures for capitalizing ADP software. We requested and received  !

additional information about the Acting CFO's corrective actions on March 3,1997. Based on our I review of this information, we are utisfied that the actions taken meet the intent of our recommen-dations. We appreciate NRC staff's cooperation and continued interest in improving financial management within NRC.

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PRINCIPAL STATEMENTS .[m*;

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FOR FISCAL YEAR 1996 pg

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y j996 ACCOUvlABil.ITY REPORT. . j-,rg '

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.C.'

.1

4 STATEMENT OF FINANCIAL POSITION September 30,1996 and 1995 e

p s

ASSETS 122fi Restated 1215

[L Entity Assets: -

3 L

intragovernmentalassets: 7 Y

Fund balances with Treasury (Note 2) $210,748,055 $258,602,386  :

Accounts receivable, net (Note 3) 5,822,652 8,231,231  ;.

Advances and prepayments (Note 4) 4,948,524 2,466,180 F Governmentalassets:

t Accounts receivable, net (Note 3) 24,079,551 28,310,335 F Advances and prepayments (Note 4) 472,592 695,961 Property and equipment, net (Note 5) 38.189.09 l 37.175.412 e

Total entity assets 284.260.465 335.481.505 ,;

' Non-Entity Assets: s ,

Governmentalassets: N F '

i Accounts receivable, net (Note 3) 312.470 692.881 l i

Total non-entity assets 312.470 692.881  ;

i: l Total assets $2&5]2,935 $336JZL38.6 E :i

(

l l ,

(continued on page 48)

The accompanying notes to the principal statements e are an integral part of this statement.

< i u

1 mlit oflY l996 Financia! Statement {ctmtinued)

A STATEMENT OF FINANCIAL POSITION (Continued)

September 30,1996 and 1995

. y,j LIABILITIES Restated g g

' Liabilities Covered by Budgetary Resources:-

Intragoverr*mentalliabilities:

, Accounts payable and advances (Note 6) $11,805,497 $12,989,462 Other intragovernmental liabilities (Note 8) 26,519,644 41,532,847 Governmentalliabilities:

Accounts payable (Note 6) 21,229,287 22,515,321 Other governmental liabilities (Note 8) 7,143,659 8,324,101 Accrued payroll and benefits (Note 7) I1.527.847 10.276.907 Total liabilities covered by budgetary 78.225.934 95.638.638 resources Liabilities Not Covered by Budgetary Resources:

o Governinentalliabilities:

! Other governmental liabilities (Note 9) 32.710.987 _31 052.458 L4 Totalliabilities not covered by 32.710.987 31.052.458 budgetary resources i.

Totalliabilities 110.936.921 126.691.096 L. NET POSITION Halance (Note 11):

l l Unexpended appropriations 168,157,910 203,360,336 L invested capital 38,189,091 37,175,412 Future funding requirements (32.710.987) (31.052.458)

Tbtal net position 173.636.014 209.483.290 Totalliabilities and net position $284.512J35 $316,ll4,3_8fi e

bj The accompanying notes to the principal statements y are an integral pan of this statement.

ti.N. Mrif.tk HIUl'lJ10Rv CO\l\tt%10N u

s STATEMENT OF OPERATIONS AND CHANGES IN NET POSITION h for the years ended September 30,1996 and 1995 Lt Restated >I L926 1225 <f y REVENUES AND FINANCING SOURCES i

Appropriated capital used (Note 12) $ 52,837,295 $ 35,558,585 Other revenues and financing sources (Note 13) 452,184,128 492,783,452 Excess current year receipts of fees over billings 14,633,020 23,015,654 Less: Receipts transferred to the Treasury or other agencies (2.925.845) (3.518.733)

Total revenues and financing sous ces 516.728.598 547.838.958

. EXPENS! L l Program Expenses (Note 14)

Salaries and expenses 505,810,836 533,794,349 Office of Inspector General 4.013.899 4.557.825 Total program expenses 509,824,735 538,352,174 Depreciation (Note 5) 8,540,608 9.129,575 .

Interest 4,683 13,143 Othei expenses (Note 16) 17.101 287.045 Total expenses 518.387.127 547.781.937 Excess or (Shortage) of revenues and financing l-sources over total expenses (Note 17) $ (1.658.522) $ 57.021 l

q 1

l ' Net position, ending balance $209,483,290 $219,540,854 .l l

Prior period adjustment (Note 19) -

(5.456.000)

H Net position, beginning balance, as restated 209,483,290 214,084,854 '1 Excess (Shortage) of revenues and financing  ;

I sources over expenses (1,658,529) 57,021 j Plus non-operating changes (Note 18) (34.188.747) (4.658.585)

Net position, ending balance $173.636.014 $_209.483.229

'l 1

(continued on page 30)

The accompanying notes to the principal statements ,

)

are an integral part of this statement.

IP)6 A(TOUN'I ABil llT Hl:l' ORT i

7 A udit of IT 1996 Iinancial hiatement (continued)

STATEMENT OF CASH FLOWS for the years ended September 30,1996 and 1995 Restated 19_2fi 1291 CASH PROVIDED (USED) B Y OPERATING A CTIVITIES  ;

I Cash Provided:

j Fees for licensing and inspection and other '

services (Note 12) $454,049,512 $501,871,0(X)

Other operating cash provided 8.45023 16.852.614 Total cash provided 462.499.870 518.723.614 Cash Used:

Personnel services and benefits D.59,816,269) (266.399,073)

Travel and transportation (16,275,698) (16,238,339)

Rent, communications and utilities (26,342,185) (25.804,325)

Printing and reproduction (1,554,538) (2,132,047)

Other contractual services (193,678,520) (224,466,951)

Supplies and materials (11,162,708) (11,372,953)

Insurance claims and indemnities (98,271) (131,742)

Grants, subsidies and contributions (1,527,452) (1,378,879)

Other operating cash used (6.867.038) (5.406.662)

Total cash used (517.322.679) (553.3301)_72)

Net cash provided (used) by operating activities __L54.822.809) (34.607.364) j CASil PROVIDED (USED) HY INVESTING ACTIVITIES I Purchase of property and equipment (11.680.069) (7.101.108)

Net cash used by investing activities (l1.680,069) (7.101.108)

F CASII PROVIDED (USED) HY FINANCING ACTIVITIES Appropriations 18,536,875 22,000,000 j.

Add: Transfers of cash from others 111.672 8.900.000 Net appropriations 18.648.547 30.900.0()0 Fee collections not used to offset current year's appropriation -

7.218.611 Net cash provided (used) by finnneing activities _1 &648.547 38,1L8,fitt L

7. ,

The accompanying notes to the principal statements 4

are na integral part of this statement, t - 8 4

4 STATEMENT OF CASH FLOWS (Continued) for the years ended September 30,1996 and 1995 7 Restated l. .

1996 1995 Net cash provided (used) by operating, investing and financing activities (47,854,331) (3,589,861)

Fund balances with Treasury, beginning 258.602.386 _262.102.247 {

Fund balances with Treasury, ending $210.748.055 $258.602 3_8_fi  ;

Reconciliation of Shortage of Revenues and Financing Sources Over Total Expenses i Excess or (Shortage) of Revenue and Financing Sources Over Total Expenses $ (1,658,529) $ 57,021 Adjustments to Reconcile Shortage of Revenues and Financing Sources Over Total Expenses to Net Cash Provided by Operating Activities:

Appropriated Capital Used (52,837,295) (35,558,585)

Decrease (Increase)in Accounts Receivable (2,823,343) (254,047)

Decrease (Increase) in Other Assets (2,258,975) 370.145  ;

increase (Decrease)in Accounts Payable (887,331) (6,227,518)

Increase (Decrease) in Other Liabilities (6,682,254) (3,980,949)

Depreciation and Amortization 8,540,608 9,129,575 Other Unfunded Expenses 1,658,529 (57,021)

Other Adjustments 2.125.781 1.914.015 Total adjustments (53.164.2fD) (34.664.385)

Net Cash Provided (Used) by Operating

' Actirities $(54.822.809) $(34.607.364) i (continued on page 52)

The accompanying notes to the principal statements

- are an integral part of this statement.

, . . - = -

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$. STATE 31ENT OF ITUDGET AND ACTUAL EXPENSES 5 g for the years ended September 30,1996 and 1995 }s 5

h Budget Actual Restated Actual f y Obligations 1996 1995 . $.

E

.3 q Program Name Resources Direct Reimbursement Expenses Expenses [

3 3 5 Salaries and expenses $559,321,035 5512,113,674 $7,860.985 $514,373,228 $543,224,112 $

$ Office of Inspector T 7 General 6.068.881 4.319.768 88.156 4.013.899 4.557.825 l-

$565.389.916 $516.433.442 $7.949.141 $518.387.127 $547.781.937

{

Buket ReconcWanon Total expenses $518,387,127 $547,781,937 Add:

Capital acquisition i1,680,069 7,101,108 Other expended budget authority (2,105,885) (1,914,015)

Less: Expenses not covered by available budgetary resources:

Depreciation (8,540,608) (9,129,575)

Unfunded annual leave expense (795,701) (140,435)

Unfunded Workers' Compensation expense (862.828) 197.456 Accrued expenditures 517,762,174 543,896,476 Less reimbursements (9.842.179) (10.409.373)

Accrued expenditures, direct $507.919.995 $533.487.103 The accompanying notes to the principal statements are an integral pan of this statement.

l

y +.

y NOTES TO PRINCIPAL STATEMENTS September 30,1996 and 1995 9

y NOTE 1. SUMM ARY OF SIGNIFICANT ACCOUNTING POLICIES A. Basis ofPresentation h These principal statements were prepared to report the financial position and results of . <

operations of the U.S. Nuclear Regulatory Commission (NRC) as required by the Chief  ;

Financial Officers Act of 1990. The principal staternents were prepared from the books and (

records of NRC in accordance with the fonn and content for entity financial statements [ '"

• specified by the Office of Management and Budget (OMB) in OMB Bulletin 94-01 and 3.x ,

NRC accounting policies summarized in this note. These statements are therefore different L.

from the financial reports, also prepared by NRC pursuant to OMB directives, which are b ""

used to monitor and control NRC's use of budgetary resources. F -

H. Reporting Entity / Program Name w n

NRC is an independent agency of the Federal Government created by the Energy Iborgas zation Act of 1974, as amended. Its purposes are defined by the Energy Reorganization Act [

of 1974, as amended, and the Atomic Energy Act of 1954, as amended. NRC was created  ;

by the U.S. Congress to ensure adequate protection of the public health and safety, common I-defense and security, and the environment in the civilian use of nuclear materials in the m United States.

1 NRC has two appropriations:

e a 31X0200 - Salaries and Expenses p

- 31 XO300 - Office of Inspector General  ; ,

The 31X0200 appropriation includes $11 million and $22 million for Fiscal Years 1996 and [' ,

1995, respectively, of funds transferred from the Department of Energy (DOE), Nuclear Waste ,

Fund to NRC in accordance with the provisions of Public Law 104-46 and Public Law ,

103-316. Public Laws 104-134 and IG4-19 rescinded $.7 million and $1.7 million from the j fiscal year 1996 and 1995 NRC Salaries and Expenses Appropriation, respectively.

in addition, in Fiscal Years 1996 and 1995, $.5 million and $8.9 million, respectively, of the l "!

appropriation received by 'N U.S. Agency for International Development was transferred r for the Nuclear Safety Assistance Program in Russia and the Ukraine which is under the control of NRC. ,

4 (continued on page 34) p

i.  ;

i- i 19% ACCotNTAl411tT Hi PORT ,

l l

'a i A

< Audit of f Y 1996 Financial Statonent (continued) y

% NOTES TO PRINCIPAL STATEMENTS

September 30,1996 and 1995 The accompanying fmancial statements of NRC include the accounts of all funds under

! NRC control.

C. Budgets and Budgetary Accounting iy.

< ci For the past 22 years, Congress has enacted no-year appropriations which are available for j obligation by NRC until expended. The Omnibus Budget Reconciliation Act (OBRA) of 1990 requires NRC to recover approximately 100 percent of its new budget authority, less the amount appropriated from Nuclear Waste Fund, by assessing fees. At the end of the g _

fiscal year, NRC's appropriations are reduced by the amount of revenues collected during (Se fiscal year.

D. Basis ofAccounting Transactions are recorded on both an accrual accounting basis and on a budgetary basis.

Under the accrual method, revenues are recognized when earned and expenses are recog-nized when a liability is incurred, without regard to receipt or payment of cash. Budget-ary accounting facilitates compliance with legal constraints and controls over the use of

~

federal funds.

s

E. Revenues and Other Financing Sources a

k Licensing fees and fees for inspections and other services assessed in accordance with OBRA

! are recognized as other financing sources when earned.

[ For reporting purposes, appropriations are recognized as revenues (Appropriated Capital Used) at the time expenses are accrued. At the end of the fiscal year, appropriations

["

n recognized are reduced by the amount of assessed fees collected during the fiscal year to the extent of new budget authority for the year. Collections which exceed the new budget

[

[, authority are held to offset subsequent years' apprcpiatians. The fees collected during P 1996 include $8.1 million billed in fiscal year 1996 for services performed in previous years. Appropriations expended for property and equipment are recognized as expenses when the asset is consumed in operations (depreciation). Appropriated Capital Used does not include appropriations used to purchase capital items or expenses incurred but

,. not yet funded by Congress, such as Workers' Compensation benefits and annual leave expenses. The differences between the accrual basis recognition of appropriations ex-g ,, pended and the budgetary basis recognition of outlays are presented in the Statement of p* Budget and Actual Expenses.

k#

y _e___

m.d

F q

i; ,

f NOTES TO PRINCHML STATEMENTS  ;

September 30.1996 and 1995 .

t n

Miscellaneous receipts collected by NRC are not available to NRC for obligation or expen- :i.

- diture. These receipts must be transferred to the U.S. Treasury when collected.

F. Funds with the Treasury and Cash .  :

, i P

NRC. cash receipts and disbursements are processed by the U.S. Treasury. The Funds with

. the Treasury and Cash are primarily appropriated funds that are available to pay current liabilities and to finance authorized puichase commitments. Cash balances held outside the U.S. Treasury are not material.  ;

G. Accounts Receivable, Net ofAllowance .

1 The amounts due for receivables are stated net of an allowance for uncollectible accounts.

The estimate of the allowance is based on an analysis of the outstanding balances and the f.

application of estimated uncollectible percentages to categories of aged receivable balances. .

Advances Y H.

! NRC makes cash payments to other Federal agencies, employees, grantees, and contractors to provide for future NRC program expenditures. These advance payments are recorded as ,

assets which are reduced when reports of expenditures are received by NRC or when accru- ,

als of cost estimates are made by NRC.

' l. Property and Equipment The land and buildings in which NRC opermes are provided by the General Services Ad-  ;

ministration (GSA), which charges NRC rent that approximates the commercial rental rates for similar propertie- ~

Property with a cost of $50,0(X) or more per unit and a useful life of two years or more are  ;

capitalized at cost and depreciated. Other property items are expensed when purchased. .

Normal repairs and maintenance are charged to expense as incurred.

Property is depreciated using the straight-line method over useful lives which range from 5 0 to 20 years. l

'i(!

l

?

(amtinued on page 56) r

.[

. 19% ACCotNI tillt.lTv RI.I'ORI 'f

, h a

h . Audit of f Y 199(s financial Statement (ctmrinued}

NOTES TO PRINCIIML STATEMENTS

, September 30,1996 and 1995 J. Prepaid and Deferred Charges ,

Payments in advance of the receipt of goods and services are recorded as prepaid charges at l the time of prepayment and are recognized as expenditures / expenses when the related goods l

. and services are received.

K. Liabilities e

Liabilities represent the amount of monies or other resources that are likely to be paid by NRC as the result of a transaction or event that has already occurred. Ilowever, no liability can be paid by NRC absent an appropriation. Liabilities for which an appropriation has not

> been enacted and for which there is no certainty that an appropriation will be enacted are  !

classified as Liabilities not Covered by Budgetary Resources. Also, liabilities of NRC arising from sources other than contracts can be abrogated by the Government acting in its sovereign capacity. l L Contingencies NRC is a party to various administrative proceedings, legal actions, environmental suits, 1 and claims brought by or against it. Based on the advice oflegal counsel concerning contin-a gencies,it is the opinion of NRC management that the ultimate resolution of these proceed-ings, actions, suits, and claims will not materially affect the financial position or results of I operations of NRC.

M. Annual, Sick, and Other Leave Annual leave is accrued as it is earned and the accrual is reduced as leave is taken. Each year, the balance in the accrued annual leave liability account is adjusted to reflect current j I

pay rates.

Sick leave and other types of nonvested leave are expensed as taken.

N. Retirement Plans t NRC employees hired after December 31,1983, are automatically covered by the Federal Employees' Retirement System (FERS), which was implemented on January 1,1987.

Employees hired prior to that date could elect tojoin FERS or to remain in the Civil Service Retirement System (CSRS) Approximately 60 percent of NRC employees belong to CSRS and 40 percent belong to FERS. For employees in FERS, NRC withholds 0.8 percent of base pay earnings in addition to Federal Insurance Contribution Act and matches the with-w 1 A WCI.E % R RI Gt'l AloR) CO\l%1tNhloN t- ,

b i

.m.

s O ,

e y-t t

t4 i NOTES TO PRINCll%L SDTEMENTS September 30,1996 and 1995 N,

p '

holding with a 11.4 percent contribution. The sum is transferred to the Frderal Employees - ,,

f-Retirement Fund. For employees covered by CSRS, NRC withholds 7 percent of their base pay earnings. This withholding is matched by NRC and the sum of the withholding and the i@'

match is transferred to the CSRS. L p .,

On April 1,1987, the Federal government initiated the Thrift Savings Plan (TSP) which is b

4

. a retirement savings and investment plan for employees covered by either FERS or CSRS. ['

For employees covered by FERS, NRC automatically contributes one percent of base pay (; ,

to their account and matches contributions up to an additional four percent. The maxi- J

mum percentage that an employee participating in FERS may contribute is 10 percent of base pay. Employees covered by CSRS may contribute up to Ave percent of their base ,

pay, but there is no NRC matching of the contribution. The maximum amount that either "

FERS or CSRS employees may contribute to the plan in a calendar year is $9,500. The ,

sum of the employee and NRC contributions is transferred to the Federal Retirement g, Thrift Investment 130ard. 7 j NRC does not report on its financial statements FERS and CSRS assets, accumulated plan ,

benefits, or unfunded liabilities, if any, applicable to its employees. Reporting such amounts E ,

is the responsibility of the Office of Personnel Management. >

L ',

0 0. Net Position f*

g ;4

, NRC's net position comprises the following components: LJ

1. Unexpended appropriations include the undelivered orders and unobligated balances 7 of NRC's funds. All appropriations remain available for obligation until expended, t .,

+9 I

2. Invested capital represents U.S. Government resources invested in NRC's property  ;

and equipment. Increases to invested capital are recorded when assets are acquired F$

3 with direct appropriations and decreases are recorded as a result of the depreciation  ;

and disposition of capital assets.  :' ,

- o

3. Future funding requirements represent (a) accumulated annual lease earned but not ,

taken as of the financial statement date and (b) actual and estimated future payments  ;

to be made for Workers Compensation pursuant to Federal Employees Compensation Ll Act (FECA). .The expense for these accruals is not funded from current appropria- ,

tions, but rather will be funded from future appropriations and assessments. ~ '!

ny *

(continued page 58)  ; i w ,

((

(L 19w. AccorNTrnu t ry REroRT h0 i a f,

r.

_ . Audit of FY 1996 Financial Statement (continued)

V NOTES TO PRINCHML STATEMENTS

. September 30, I996 and I995 l

.. . P. Department ofEnergy (DOE) Charges l

@- j j Financial transactions between DOE and NRC are fully automated through the U.S. I is" Treasury's On-Line Payment and Collection (OPAC) System. The OPAC System allows the DOE to collect amounts due from NRC directly from NRC's account at Treasury for d goods and/or services rendered. Project manager verification of goods and/or services re-ceived is subsequently accomplished through a system-generated voucher approval system.

The vouchers are returned to the Division of Accounting and Fin- documenting that the charges have been accepted. Annually, NRC makes approximately #89 million in payments to DOE in this manner for research condacted by the DOE National Laboratories.

-a  ;

Q. Reclassifications Certain amounts for 1995 have been reclassified to conform with the 1996 presentation.

)

. NOTE 2. FUND llALANCES WITII TREASUlW Fund balances with Treasury consist of the following amounts as of September 30,1996 and 1995:

122fi 1995  !

Appropriated funds:

Obligated $180,045,631 $195,094,034 Unobligated 28.682AJ2 54.738.792

~

'08,728,043 249,832,826 Other fund types 2.020.012 8.769.560 i

$210.748.055 $258.602.386 i U.S. Government cash is handled on an overall consolidated basis by Treasury. " Funds with Trea-sury" represent NRC's right to draw on Treasury for allowable expenditures. All amounts are available to NRC for current use except for $5.6 million in fiscal year 1995 which related to fees collected which are httd to offset subsequent years' appropriations. The obligated and unobligated

balances exclude amounts related to unfilled customer orders.

1

.O y

ma m. mamoammmn,sms 4

- -. w

'i 4

L D'

NOTES TO PRINCilML STATEA1ENTS September 30,1996 and 1995 L i NOTE 3. ACCOUNTS ItECEIVAllLE, NET '

.i Accounts receivable, net is composed of the following amounts as of beptember 30.1996, q and 1995:

j' Entity Assets '

Intragovernmental accounts receivable consists primarily of receivables and reimburse- .j 1

ments due from other Federal agencies which were $5,822,652 and $8,231,231 at Septem-ber 30,1996, and 1995, respectively.

i Governmental accounts receivable is comprised of the following amounts as of September p; 30,1996 and I995: .

1996 1995 Governmental:

$ 3,532,779 $ 6,982,690 Materials and facilities fees - billed 22,667,134 24,388,455 i Materials and facilities - unbilled Other 103.295 132.035 j 26,303.208 31,503,180  :

Total accounts receivable Less: Allowance for uncollectible accounts (2.223.657) (3.192.845) ,

r

$24.079.551 $28.310.335 , ,;

Accounts receivable, net a

'~,, a t

Governmental accounts receivable represents primarily amounts due for fees assessed for licensing and inspections of nuclear facilities and radioactive materials and other services.

In the year collected, the amounts will be used to offset NRC's appropriations. l t ,

!' .r Non Entity Assets  :

Governmental accounts receivable, net, represents miscellaneous amounts due from the  ;

public ($312,470 and $692,881 at September 30,1996, and 1995, respectively ) which when ,

collected, inust be transferred to the U.S. Treasury. ,

t NRC's methodology to estimate the allowance for uncollectible accounts is based on an analysis of the outstanding balances and the application of estimated uncollectible percentages to categories of aged receivable balances, r

k[00l$llll0C fill f A&' bNh _

Iv*86 MTolWTtBil.IIT HI'I' ORT W',

R

gg-

.A ,

Audit of Fl' IV96 linancial Atatement (continued)

)

l NOTES TO PRINCIPAL STAIEAfEN7'S  !

September 30,1996 and 1995 NOTE 4. ADVANCES AND PREPAYh1ENTS i Advances and prepayments as of September 30,1996, and 1995, consist primarily of the following:

1996 1995

Entity Assets intragovernmental

Advances - other Federal agencies $4.948.524 $2.466.180 Governmental:

Travel advances $ 472.592 S 695.961 Advances and prepayments are recorded as assets until receipt of the goods or services involved or until contract terms are met. When goods or services are received or contract terms are met, the advance or prepayment is reduced and the expense or acquired asset is recognized. There were no outstanding prepayments as of September 30,1996 and 1995.

NOTE 5, PROPERTY AND EQUIPhiENT, NET Property and equipment, net, consists of the following as of September 30,1996, and 1995:

1996 1995 Service Acquisition Accumulated Net Hook Net Hook ElmlAsstLClass Xcars Yahte Drnttdallen Value Valur Equipment 5-8 $ 29,015,324 $20,933,828 $ 8,081,496 $ 9,958,283 ADP software 5 45,798,876 40,883,323 4,915,553 8,065,383 ADP software  !

l under development 9,002,437 - 9,002,437 3,632,345 1

Leasehold improve- 5-20 17,230,286 2,604,692 14,625,594 15,519,401 1 ments H- Leaschold improve- 1.564.011 -

_L564.011 -

ments in progress

$102.610.934 $64.421.843 $31119.091 $37.175.412

Total p

4 I

.,J u

t NOTES TO PRINCIPAL STATEAfENTS q September 30,1996 and 1995 V

' e The straight line depreciation method is used for all classes of fixed assets. Depreciation expense for fiscal years 1996 and 1995 was $8,540,608 and $9,129,575 respectively. .

m i - In fiscal year 1995, NRC increased the capitalization dollar amount on property and equipment '

from $5,000 to $50,000. All property items previously capitalized ($5,000 to $49,999.99) will ,

5' 1

continue to be depreciated over the remaining useful lives.

The land and buildings occupied by NRC are provided by the GSA. For fiscal years 1996 and ,

1995, the GSA charged NRC $18,446,487 and $18,580,348, respectively, for the use of these fa- i cilities based on a rental fee which is to approximate the commercial rates for similar properties. F A-( I $

4 2

4 NOTE 6. ACCOUNTS PAYAltl.E AND ADVANCES 4

Accounts payable and advances consist of the following as of September 30,1996 and 1995: [

t 1996 1995 _.

6

Intragovernmental:

5 Accounts payable l $ 9,368,752 $ 9,826,949 >

Department of Energy Other Federal agencies 2.282.932 2.994.531 j

, i l1,651,684 12,821,480  :

Advances 153.813 167.982 q.

{

$11.805.497 $.12.989.462 [ '

Governmental: ,

i Accounts payable 1

Vendors payable $ 19,743,864 $20,855,270 .;

Contract holdbacks ._L4j!5.423 1.660.051

$2L229.287 $22.515.321 1

(,;

. The vendors payable are all current. Current payables represent amounts which are expected to be paid within the fiscal year following the reporting date  ;

L (wntinued on page 62)

I i ' h

r etunit ofi 1' 1996 linancial Statunent (contitcued)

NOTES TO l'RINCIl%I. STAl'IDIENTS September 30, I996 and I995 NOTE 7 ACCRUEI) PAYROLL ANI)llENEFITS Accrued payroll and - efits as of September 30,1996 and 1995 consists of:

1996 1995  ;

Accrued personnel services $ 9,824,164 $ 8,699,085 Accrued benefits _L703.683 1.577.822

$11.527 8_4_7 $10.276.902 i

Accrued payroll and benefits represent wages and benefits which have been earned but not paid as of the financial statement date.

NOTE 8. OTilER LI AllILITIES COVERED llY 1;UDGETARY RESOURCES Other liabilities as of September 30,1996 and 1995 include:

1996 1995 Governmental:

l Liability for deposit funds $ 1,554,395 $ 1,550,759 Advances from others 5.589.264 6.773.342

$7.143.659 $8_,124 JJ01 I

The liability for deposit funds consists primarily of liabilities arising from payroll deductions and tax withholdings. Advances from others consists of funds primarily from foreign governments for the participation in cooperative research programs.

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. NOTES TO PRINCil%L STATEMENTS h September 30,1996 and 1995 6 U,'

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,' 1996 1995 4

Intragovernmental: .y;;

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' Liability to offset net accounts b" receivable for fees assessed. $26,206,946 - $35,204,023

$l i, Liability related to fees collected P e

which will offset subsequent 5,635,943 p:

(

years' appropriations . .

4 i,

o y Liability to offset net miscellaneous . g' accounts receivable 312.698 692.881 p ll ~

i $26.519.644 $41.532.847 E

'b -

E The liability to offset the net accounts receivable for fees assessed represents amounts which, N" :

when collected, will be transferred to the U.S. Treasury to offset NRC's appropriations in [,

' the year collected. p.

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s:

y .,

f$n2 The liability related to fees collected which will be used to offset subsequent years' appro- .

priation represents amounts which will be transferred to the U.S. Treasury to offset subse- k>

- quent years' appropriation. hj w

0 The liability to offset net miscellaneous accounts receivable represents amounts which will a

' be reverted to the U.S. Treasury when collected. pg b

~

All Other Liabilities except Advances from others are current. Current liabilities represent amounts ['*,

f

] which are expected to be paid within the fiscal year following the reporting date. Advances from others may not be liquidated in the fiscal year following the reporting date. O" t y .,;

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Auda of FY 1996 Financial Sta!cment tcontinued)

NOTES TO PRINCHML STATEMENTS September 30,1996 and 1995 NOTE 9. OTilER LIAllII,lTIES NOT COVERED llY llODGETARY RESOURCES Unfunded liabilities as of September 30,1996 and 1995 include:

Restated 1996 1995 Governmental:

Accrued annualleave $25,359,485 $24,563,784 Accrued Workers' Compensation:

Benefits Paid 1,476,502 1,261,674 Estimated Future Benefits .5.875.000 5.227.000

$32.710.987 $31.052.458 Accrued annual leave represents the amount of annual leave earned by NRC employees but not yet taken. Accrued Workers' Compensation includes: (1) Federal Employees Compensation Act (FECA) benefits paid by the Department of Labor (DOL) on NRC's behalf which had not been '

billed to or paid by NRC as of September 30,1996 and 1995 and (2) an actuarial estimate for future disability benefits. The 1996 future workers' compensation estimate was generated by DOL from an application of actuarial procedures developed to estimate the liability for FECA which includes the expected liability for death, disability, medical and miscellaneous costs for approved compensation cases. The liability is determined using the paid losses extrapolation method calcu-lated over the next 23-year period. This method utilizes historical benefit payment patterns related to a specific incurred period to predict the ultimate payments related to that period. These annual benefit payments were discounted to present value. The interest rates utilized for discounting l ranged between 6.21 percent for year one to 5.10 percent for years six and beyond.

Accrued annual leave and accrued workers' compensation are not funded by current or prior years' appropriations and assessments. Funding will be provided from future years' appropriations and assessments (see Note 11).

8

-__ _ _ m t e. StTIT \R RH;t'l AIORv COT 1\llWlON

NOl'ES TO l'RINCHM L STATEMENTS September 30,1996 and 1995 NOTE 10. INTRAGOVERNMENTAL ACTIVITIES The NRC reporting entity's financial activities interact with and are dependent upon those of the Federal government as a whole. Other Federal agencies make financial decisions and report cer-tain financial matters on behalf of all Federal agencies. The practice of having Federal agencies record or report only those government wide financial matters for which they are directly respon-sible is consistent with generally accepted accounting principles for Federal agencies which seek to identify financial matters of the department or agency that has been granted budget authority and resources to manage them. Activities which are performed or reported by other Federal agencies in which NRC is indirectly involved are as follows:

• NRC funds a portion ofits employee pension benefits under the CSRS and the FERS but does not disclose actuarial data with respect to accumulated plan benefits, plan assets, or the unfunded pension liability relative to its employees. Reporting of these amounts is the responsibility of the Office of Personnel Management.

In addition, NRC makes contributions to the TSP on behalf ofits employees. NRC does not has e control over the plan's assets. The TSP is administered by the National Finance Center of the Department of Agriculture.

• Certain legal matters to which NRC may be a named party are administered, and in some cases, litigated by other Federal agencies. Amounts paid under any decision, settlement, or award pertaining thereto are generally funded through the Treasury, in most cases, claims (including personal injury claims) are administered and resolved by the Department of Justice and any amounts necessary for resolution are obtained from a special fund maintained by the Treasury. Any legal actions for Workers' Compensation claims brought by NRC employees fall under FECA, which is administered by the Em-ployment Standards Administration of the U.S. Department of Labor. The cost of admin-istering, litigating, and settling these legal matters has not been allocated to individual Federal agencies.

Interest on bor,owings of the U.S. Treasury is not included as a cost to NRC's programs and is not included in the accompanying financial statements.

(continued on page 66i IWfi MTot XI MilLIIT RI'PoHT

g1 ,

Anda ofIT I996 l'inancial Statement kontinurJ1

( ,

NOTES TO PRINCil%L STATEh!ENTS September.w, I996 and 1995 NOTE 11. NET POSITION p The net position consists of the following as of September 30,1996 and 1995: {

I L 1996 Restated l'L95

[ Unexpended appropriations:

$ 34,765,076 $ 62,857,857

l. Unobligated t

Undelivered orders 133.392.834 140.502.479 (l 168,157,910 203,360,336 invested capital 38,189,091 37,175,412 L

Future funding requirements (Note 9) _(22110.987) (31.052.458)

$173.636.0L4 $209.483.290 i

Unexpended appropriations include (1) unobligated appropriation balances and (2) undelivered l orders, which are amounts which have been obligated but not yet expended. The unobligated appropriations balance does not include $6,262,153 and $8,911,666 in unfilled customer orders -

unobligated as of September 30,1996 and 1995, respectively. The undelivered orders balance does not include $6,082,665 and $8,119,066 in unfilled customer orders - obligated as of September 30, 1996 and 1995, respectively, f Invested capital represents the net investment of the U.S. Government appropriations expended for L NRC's capitalized property and equipment.

p Future funding requirements represent the amount of future funding needed to pay the accrued unfunded expenses as of September 30,1996 and 1995. These accruals are not funded from cur-rent or prior appropriations and assessments, but rather should be funded from future appropria-tions and assessments. Accordingly, future funding requirements have been recognized for these expenses that will be paid from future appropriations (see Note 9).

1, .

I

NOTES TO l'RINCll'AL STA TEMENTS September 30,1996 and 1995 ,

NOTE 12. APPROPRIATED CAPITAL USED Appropriated Capital Used, a financing source, is recognized to the extent that appropriated funds have been consumed less the amount collected from fees assessed for licensing, inspections, and 'e other services. During fiscal years 1996 and 1995, $454.0 million and $509.1 million, respec-tively, were collected from fees assessed for licensing, inspections and other services. OBRA requires NRC to recover approximately 100 percent of its new budget authority, less the amount appropriated from the Nuclear Waste Fund, by assessing fees. At the end of the fiscal year, appro-priations recognized are reduced by the amount of assessed fees collected during the fiscal year to ,

the extent of new budget authority for the year. Collections which exceed the new budget authority are held to offset subsequent years' appropriations.

For fiscal years 1996 and 1995, $454.0 million and $501.9 million, respectively, of collections were used to reduce the fiscal year's appropriations recognized:

1996 1995 Appropriated funds consumed $506,886,420 $537,429,585 Less: Collection from fees assessed (454.049.125) (50L871.000) l

$ 52.837.2.25 $ 35.558.585 The appropriated capital used for fiscal years 1996 and 1995 includes $34,188,747 and $4,658,585, respectively, of available funds from prior years (see Note 18).

NOTE 13. OTIIER REVENUES AND FINANCING SOURCES Other revenues and financing sources for September 30,1996 and 1995 were:

1996 1925 Fees for licensing, inspection and other services $439,416,105 $478,855,346 Other miscellaneous receipts 2,925,844 3,518,733 Appropriation reimbursements 9.842.179 10.409.373 54i2.184.128 $492.783.452 (continan d on page fdJ 1996 WCol AT \101.1IT RI lDRI

a -. . ... .. -- -~ - . - - . - .. .-

]

B.. d :

Q Audd of IT 199611nancial Statement (continued) pd g' NOTES TO PRINCil%L STATEMENTS September 30,1996 and 1995 i

W,t  !

3 . NOTE 14.' OPERATING EXPENSES 1 d i

[ Operating expenses by object class are as follows

Restated

%. g y 122f! 1995 l

0 j

~

Personnel services and benefits . $263,043,067 $263,462,136 l j

Travel and transportation 16,174,764 16,139,326 Rent, communication, and utilities 25,240,443 25,581,602

.z.g {

Printing and reproduction 1,579,151 2,005,287 l 189,329,595 216,219,114 -!

Contractual services Supplies and materials 12,868,778 13,353,246 .:

y Grants, subsidies, and contributions 1,486,946 1,456,333 -l-r i

Insurance claims and indemnities 101,896 131,477  !

i t: Other 95 3.653 I

g 3 O $509.824.735 $538.352.174 4

t,;  !

) ,

3 NOTE 15. EMPl.OYEE RETIREMENT Pl,ANS '

A i y Total NRC contributions for employee retirement plans for fiscal years 1996 and 1995 were l d ~ as follows:  ;

q

<\ l996 1995 a- 1, .ivil Services Retirement System (CSRS) $ 9,022,093 $ 9.226,610

.f'

~

Federal Employees' Retirement 1 System (FERS) 9,476,956 9,115,078 Feacral Insurance Contribution Act (FICA) 6,078,868 5,923,317

, u 3 . Thrift Savings Plan (TSP) 3.754.354 3.580.292 Q

a $28.332.271 $27.845291 g

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NOTES TO PRINCH%L STATEMENTS f, September 30,1996 and 1995  ;

b.

Data on the actuarial present value of accumulated benefits, assets available for benefits, and un- k' funded pension liability are maintained by other Federal agencies and are not allocated to indi- b J vidual departments and agencies. Y k"

NOTE 16. OTilEit EXPENSES p:

Other expenses as of September 30,1996 and 1995 consist of: [

V 1996 1995 p' 11 e'

te Loss on disposal of property $41,403 $281,951 [ l.

11ad debt expense (24.302) 5.094 ,

h . ..

$_l7.101 $287.045 U* .

p p,

NOTE 17. EXCESS OR (SIIOllTAGE) OF REVENUES AND FINANCING SOUllCES  ! ,

OVEtt TOTA 1 EXPENSES  ;:

[.

O The excess or (shortage) of revenues and financing sources over total expenses represents ex-penses not covered by budgetary resources for the years ended September 30,1996 and 1995, and consists of:

C Restated -

1996 1995 i Accrued annual leave $ (795,701) $(140,435) "l Accrued Workers' Compensation (862.828) 197.456 t- q i

$(1.658.529) $ 57.021 -j l 1

I Expenses not covered by budgetary resources are not funded from current appropriations but are to be funded from future appropriations and assessments.

I t

i f(U$l$ $$$4C 00f0ff 0h gi 1996 ACrol'NTAllit.lTY RI PORT fl ,

m-J

>jy Q'J'). Audit of FY 1996 Financial 5tatensent ' (continucds '

l}

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f-- ' NOTES TO PRINCil%L STATEMENTS I

Q September 30,1996 and 1995

.2 ,

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i NOTC 18.' NON OPERAflNG CIIANGES  !

l

, 4 i

' i Non-operating changes for the' fiscal years ended September 30,1996 and 1995, consist of  ;

i the following:

1996 1995 l

s n.

r Change in unexpended appropriations $(35,202,426) $ (716,103) -l 3; i

1. Change in invested capital 1.013.679 (3.942.482) ll 1

y

1 j

$(34.188.747) $(4.658.585)  ;

yd i 4

i NOTij 19. PitI()lt PEltIOD AI)JUSTMENT l s

< Beginning in 1996, DOL, the agency which administers the Federal Employees' Compensation j f; ~

Act (FECA) program, began reporting NRC's estimated actuarial liability for future Workers' Com-  !

pensation benefits. The estimated liability as of October 1,1994, was $5.5 million. The impact of  !

' this adjustment on the Statement of Operations and Changes in Net Position was to decrease Fiscal j sa

"', Year 1995 beginning net position by $5.5 million. The effect on program expenses was nominal.

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COMMENTS OF (:E n,

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q' Audit ofIT 1996 l'inancial Statement (continued) i e "uu p k UNITED STATES

!  ! 2 NUCLEAR REGULATORY COMMISSION k  % WASHINGTOH, DC 20555-0001

({

[

F

%, * *i***g i- February 27,1996 MEMORANDUM TO: Thomas J. Barchi Assistant Inspector General for Audits p

L L

FROM: Ronald M. Scroggins Acting Chief Financial Officer d p

SUBJECT:

RESULTS OF THE AUDIT OF U.S. NUCLEAR REGULATORY l COMMISSION'S FISCAL YEAR 1996 FINANCIAL STATEMENTS We have reviewed the draft audit report of the U.S. Nuclear Regulatory Commission's fiscal year p 1996 financial statements. We appreciate your assistance with the Department of Energy in our effort to obtain audit assurance and your recognition that we have accomplished all that is possible L, to satisfy this issue.

The reportable condition " Capitalization Procedure for Automated Data Processing (ADP)

Software Need Improvement" contains two recommendations. Our comments are:

I Recommendation 1: Revise the software capitalization procedure to specify the respen-p sible NRC group, position, or contractor for making capitalization decisions and oversight.

! Response: The current Division of Accounting and Finance (DAF) capitalization E procedures are written to apply to whomever is assigned the task of reviewing ADP software purchases to determine the applicability of capitalization. When this assignment is made, the person designated is advised of the agency policy and procedural requirements. While a 4

contractor may be assigned certain duties associated with capitaliza-tion, it is not appropriate to assign a contractor the responsibility of making agency capitalization decisions as the ultimate responsibility for software capitalization rests with the Office of the Controller.

Therefore, we believe the current procedures are adequate to define the process required to identify capitalized software. However, ADP software capitalization by its very nature often requires sub-jective judgements to be made when determining capitalization m

g. .

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g. - 0 (i.e., identifying the difference between enhancements and mainte- e >

nance) therefore, our emphasis in correcting this condition has been 8; t

placed on your second recommendation.

Recommendation 2: Reemphasize the need for adequate oversight of contractor decisions. ,

Response: Upon discovery of this oversight OC reemphasized with its internal [

project management staff the need for adequate oversight of all con- {',

tractor produced work products. Software capitalization will continue  :. .

to be maintained as a matter of management emphasis for future finan- E, cial statements. [J ts V.

. The carryover reponable condition " Payroll System Must Be Integrated With The General Ledger B and Possess Latx>r Distribution Capabilities" did not contain any recommendation as it was recog- [

nized that we are continuing our implementation of a new payroll system. We would like to point p out that we are currently in the process of developing a plan for an agency-wide integrated financial !f.

management system. It is anticipated that consideration of a labor cost distribution system will be [g_.

part of that plan.This process and the related priorities will influence the time frame for the institu- [

tion of a labor cost distribution system. p r

We appreciate the opportunity to respond to the draft audit report. h'

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h CONTACT: John Bird, OC/DAF/ GAB I;

415-7343 (JEB1)

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-,- - .. , - - , - , , , , r --+- - . , - - , --

p U.S. Nuclear Regulatory Commission Organizama Charts s \

q September 30.1996 5

g . - - - -

5 Chairh

2 Shirley Ar Jr-t; a - ,

H

$ Commissioner Commissioner Con missioner j Kenneth C. Rogers Greta J. Dieus Commissioner Nils J. Diaz Edward McGaffigan, Jr.

O I E

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? _ _ , , 0*ia et :he i 3 Advm 3 'I Als c Savy a Wat

1. " U" Conwntee on anc tsensmg Nuclear Waste Board Panel Executive Director 3

for Operations l

I I I I Of*ce of @"d Commission

• 0"ce of the Cmgressional Off'ce of Pubic A'ta:rs intermbonai I N General ilde Secreta y M Adiudcation Counse!

I I I I I Othce of Officeof the

@"# * * *3 Assrstant for Operabons I Personnel Connerer Smail Business and Civil Richts arn1 Evaluabon of Onwatimal Data I I Deputy Executive Director for Deputy Executive Director for Nuclear Materials SaMty, Nuclear Reactor Regulation, Safeguards and Operations Regional Operations and Support Research l

I I I I I I O N I I g Omce of Ofhce of Othce es OfSce of in :rdt g9 State Prograrns Enforcemera invesbgations Administration Resources 3 Of' ice of Nuclear Othce of Nuclear f.bugM Reador Regulatory Regulahan Research I I I I Dned Supervision Region i Region !! R=gion I!! Region IV

- - - Coordinahon Phila@phia At:a7. ta Chicago Dallas

Agency Reorganization Effective January 5,1997 Chairman ShMey Ann Jackson I I CIO EDO CFO l (Anttnny Galante) (Leonans J. Caltan) (Vacant) )

IRM OC toseem crannwe anonsw scroggenen l I Deputy Executive Director For Deputy Executive Director Deputy Executive Director Regulatory Effectivenets, For For Program Owight, Regulatory Programs Management Services Investigations & Enforcement N D*'"#**") (PeWich Nany)

(Edward Jensen)

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