NUREG-1542, Forwards NUREG-1542,Vol 3, USNRC Accountability Rept for Fy 1997

Forwards NUREG-1542,Vol 3, USNRC Accountability Rept for Fy 1997

ML20217M772
Person / Time
Issue date:	03/31/1998
From:	Shirley Ann Jackson, The Chairman NRC COMMISSION (OCM)
To:	Burton D, Domenici P, Gingrich N, Gore A, Inhofe J, Mcdade J, Raines F, Schaefer D, Thompson F HOUSE OF REP., HOUSE OF REP., ENERGY & COMMERCE, HOUSE OF REP., SPEAKER OF THE HOUSE, OFFICE OF MANAGEMENT & BUDGET, SENATE, APPROPRIATIONS, SENATE, ENVIRONMENT & PUBLIC WORKS, SENATE, GOVERNMENTAL AFFAIRS, SENATE, PRESIDENT OF THE SENATE
References
RTR-NUREG-1542 NUDOCS 9804080196
Download: ML20217M772 (99)

Text

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UNITED STATES NUCLEAR REGULATORY COMMISSION WASHINGTON, D.C. 20666 4 001 p(E f

ff March 31, 1998 cHAmum The Honorable Albert Gore, Jr.

President of the United States Senate Washington, D.C. 20510

Dear Mr. President:

Enclosed is a copy of the Nuclear Regulatory Coramission's (NRC) Fiscal Year 1997 Accountability Report. This is the third year that the NRC has participated in a pilot project to consolidate performance-related reporting into a single accountability report.

The pilct project, which is being carried out under the guidance of the Chief Financial Officers (CFO) Council, was undertaken in accordance with the Government Management Reform Act -

(GMRA) of 1994. The GMRA permits the streamlining of financial management reports in consultaten with the appropriate Congressional Committees, and the Office of Management and Budget (OMB) is the contact with these Committees for this project.

Included in the report are the FY 1997 audited financial statement required by the Chief Financial Officers Act of 1990, the annual report to the President and the Congress required by -  !

the Federal Managers' Financial integrity Act of 1982, and the report to Congress on -

management decisions ar'd final schons on the Office of the inspector General's audit recommendations required by the inspector General Act of 1978, as amended.

As the Accountability Report is still in its pilot phase, the CFO Council has requested that we solicit comments for future improvements. If your staff desires to comment on the report, an ,

evaluation form has been enclosed for use in providing feedback to the CFO Council.  !

Sincerely, Q1r .,

j j Shirley Ann Jackson

/

Enclosures:

As stated g. l i

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PDR COMMS NRCC '

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I j# 4 ' UNITED STATES 7' g *g NUCLEAR REGULATORY COMMISSION WASHINGTON, D.C. 20614 0001

'o,,,,,+ March 31, 1998 CHARMAN The Honorable Newt Gingrich Speaker of the United States House of Representatives Washington, D.C. 20515

Dear Mr. Speaker:

Enclosed is a copy of the Nuclear Regulatory Commission's (NRC) Fiscal Year 1997 Accountability Report. This is the third year that the NRC has participated in a pilot project to consolidate performance-related reporting into a single accountability report.

The pilot project, which is'being carried out under the guidance of the Chief Financial Officers (CFO) Council, was undertaken in accordance with the Govemment Management Reform Act (GMRA) of 1994. The GMRA permits the streamlining of financial management reports in consultation with the appropriate Congressional Committees, and the Office of Management and Budget (OMB) is the contact with these Committees for this project.  ;

included in the report are the FY 1997 audited financial statement required by the Chief Financial Officers Act of 1990, the annual report to the President and the Congress required by i the Federal Managers' Financial Integrity Act of 1982, and the report to Congress on management decisions and final actions on the Office of the inspector General's audit recommendations required by the Inspector General Act of 1978, as amended.  ;

As the Accountability Report is still in its pilot phase, the CFO Council has requested that we  ;

i solicit comments for future improvements, if your staff desires to comment on the report, an evaluation form has been enclosed for use in providing feedback to the CFO Council.

1 Sincerely, b i Shirley Ann Jackson

Enclosures:

As stated

j #*g UNITED STATES

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-> g NUCLEAR REGULATORY COMMISSION WASHINGTON, D.C. 20555-0001 E f

%, * * * * * / j March 31, 1998 CHAIRMAN The Honorable Fred Thompson, Chairman Committee on Govemmental Affairs United States Senate Washington, D.C. 20510

Dear Mr. Chairman:

Enclosed is a copy of the Nuclear Regulatory Commission's (NRC) Fiscal Year 1997 Accountability Report. This is the third year that the NRC has participated in a pilot project to consolidate performance-related reporting into a single accountability report.

The pilot project, which is being carried out under the guidance of the Chief Financial Officers (CFO) Council, was undertaken in accordance with the Government Management Reform Act (GMRA) of 1994. The GMRA permits the streamlining of financial management reports in consultation with the appropriate Congressional Committees, and the Office of Management and Budget (OMB) is the contact with these Committees for this project.

Included in the report are the FY 1997 audited fir.ancial statement required by the Chief Financial Officers Act of 1990, the annual report to the President and the Congress required by ,

the Federal Managers' Financial Integrity Act of 1982, and the report to Congress on management decisions and final actions on the Office of the inspector General's audit recommendations required by the inspector General Act of 1978, as amended.

As the Accountability Report is still in its pilot phase, the CFO Council has requested that we solicit comments for future improvements, if your staff desires to comment on the report, an evaluation form has been enclosed for use in providing feedback to the CFO Council.

Sincerely, l

) & 6-_-

Shirley Ann Jackson

Enclosures:

As stated cc: Senator John Glenn l

j6 UNITED STATES

l. p p g NUCLEAR REGULATORY COMMISSION WASHINGTON, D.C. 20066 4 001

• t,o. g / March 31, 1998

. CHAMMAN l

l The Honorable Dan Burton, Chairman Committee on Govemment Reform and Oversight United States House of Representatives

. Washington, D.C.' 20515

Dear Mr. Chairman:

Enclosed is a copy of the Nuclear Regulatory Commission's (NRC) Fiscal Year 1997 -

Accountability Report. This is the third year that the NRC has participated in a pilot project to consohdate performance-related reporting into a single accountability report.

The pilot project, which is being carried out under the guidance of the Chief Financial Officers (CFO) Council, was undertaken in accordance with the Govemment Management Reform Act (GMRA) of 1994. The GMRA permits the streamlining of financial management reports in consultation with the appropriate Congressional Committees, and the Office of Management and

' Budget (OMB) is the contact with these Committees for this project.

included in the report are the FY 1997 audited financial statement required by the Chief Financial Officers Act of 1990, the annual report to the President and the Congress required by the Federal Managers' Financial Integnty Act of 1982, and the report to Congress on management decisions and final actions on the Office of the inspector General's audit recommendations required by the inspector General Act of 1978, as amended.

As the Accountability Report is still in its pilot phase, the CFO Council has requested that we solicit comments for future improvements. If your staff desires to comment on the report, an evaluation form has been enclosed for use in providing feedback to the CFO Council.

Sincerely, b

Shirley Ann Jackson

Enclosures:

As stated l

cc: Representative Henry Waxman I

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/ '%,4 UNITED STATES NUCLEAR REGULATORY COMMISSION WASHINGTON, D.C. 20M1 g

%,***** March 31, 1998 CHAMAN The Honorable James M. Inhofe, Chairman Subcommittee on Clean Air, Wetlands, Private Property and Nuclear Safety Committee on Environment and Public Works United States Senate Washington, D.C. 20510

Dear Mr. Chairman:

Enclosed is a copy of the Nuclear Regulatory Commission's (NRC) Fiscal Year 1997 Accountability Report. This is the third year that the NRC has participated in a pilot project to consolidate performance-related reporting into a single accountability report.

The pilot project, which is being carried out under the guidance of the Chief Financial Officers

' (CFO) Council, was undertaken in accordance with the Government Management Reform Act (GMRA) of 1994. The GMRA permits the streamlining of financial management reports in consultation with the appropriate Congressional Committees, and the Office of Management and Budget (OMB) is the contact with these Committees for this project. I

!ncluded in the report are the FY 1997, audited financial statement required by the Chief .

I Financial Officers Act of 1990, the annual report to the President and the Congress required by the Federal Managers' Financial Integrity Act of 1982, and the report to Congress on management decisions and final actions on the Office of the inspector General's audit recommendations required by the Inspector General Act of 1978, as amerxied.

I As the Accountability Report is still in its pilot phase, the CFO Council has rnquested inat we solicit comments for future improvements. If your staff desires to comment on the report, an evaluation form has been enclosed for use in providing feedback to the CFO Council.

4 i

Sincerely, Shirley Ann Jackson

Enclosures:

As stated cc: Senator Bob Graham

p6 UNITED STATES V p g NUCLEAR REGULATORY COMMISSION WASHINGTON, D C. 2065!H)001 e

4 9***** March 31, 1998 CHARMAN The Honorable Dan Schaefer, Chairman Subcommittee on Energy and Power Committee on Commerce United States House of Representatives Washington, D.C. 20515

Dear Mr. Chairman:

Enclosed is a copy of the Nuclear Regulatory Commission's (NRC) Fiscal Year 1997 Accountability Report. This is the third year that the NRC has participated in a pilot project to consolidate performance-related reporting into a single accountability report.

The pilot project, which is being carried out under the guidance of the Chief Financial Officers (CFO) Council, was undertaken in accordance with the Government Management Reform Act (GMRA) of 1994. The GMRA permits the streamlining of financial management reports in consultation with the appropriate Congressional Committees, and the Office of Management and Budget (OMB) is the contact with these Committees for this project. i included in the report are the FY 1997 audited financial statement required by the Chief Financial Officers Act of 1990, the annual report to the President and the Congress required by the Federal Managers' Financial integrity Act of 1982, and the report to Congress on management decisions and final actions on the Office of the Inspector General's audit recommendations required by the Inspector General Act of 1978, as amended.

As the Accountability Report is still in its pilot phase, the CFO Council has requested that we solicit comments for future improvements. If your staff desires to comment on the report, an evaluation form has been enclosed for use in providing feedback to the CFO Council.

Sincerely, b

Shirley Ann Jackson

Enclosures:

As stated cc: Representative Ralph Hall

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J'g UNITED STATES NUCLEAR REGULATORY COMMISSION WASHINGTON, D.C. 20%fr0001 9

b,,,,,+l March 31, 1998 CHAIRMAN The Honorable Joseph M. McDade, Chairman Committee on Energy and Water Development United States Hcuse of Representatives Washington, D.C. 20515

Dear Mr. Chairman:

Enclosed is a copy of the Nuclear Regulatory Commission's (NRC) Fiscal Year 1907 Accountability Report. This is the third year that the NRC has participated in a pilot project to consolidate performance-related reporting into a single accountability report.

The pilot project, which is being carried out under the guidance of the Chief Financial Officers (CFO) Council, was undertaken in accordance with the Govemment Management Reform Act (GMRA) of 1994 The GMRA permits the streamlining of financial management reports in consultation with the appropriate Congressional Committees, and the Office of Management and Budget (OMB) is the contact with these Committees for this project. 1 included in the report are the FY 1997 audited financial statement required by the Chief Financial Officers Act of 1990, the annual report to the President and the Congress required by the Federal Managers' Financial Integrity Act of 1982, and the report to Congress on management decisions and final actions on the Office of the Inspector General's audit i recommendations required by the inspector General Act of 1978, as amended.

As the Accountability Report is still in its pilot phase, the CFO Council has requested that we I solicit comments for future improvements, if your staff desires to comment on the report, an evaluation form has been enclosed for use in providing feedback to the CFO Council.  ;

Sincerely,  !

Shirley Ann Jackson

Enclosures:

As stated cc: Representative Vic Fazio

l f #'%, UNITED STATES

.q g g NUCLEAR REGULATORY COMMISSION WASHINGTON, D.C. 20056 4 001

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\,*****,/ March 31, 1998 CHAMMAN The Honorable Pete V. Domenci, Chairman Subcommittee on Energy and Water Development Committee on Appropriations United States Senate Washington, D.C. 20510

Dear Mr. Chairman:

Enclosed is a copy of the Nuclear Regu? story Commission's (NRC) Fiscal Year 1997 Accountability Report This is the third year that the NRC has participated in a pilot project to consolidate performance-related reporting into a single accountability report I

J The pilot project, which is being carried out under the guidance of the Chief Financial Officers (CFO) Council, was undertaken in accordance with the Govemment Management Reform Act (GMRA) of 1994. The GMRA permits the streamlining of financial management reports in consultation with the appropriate Congressional Committees, and the Office of Management and l J

Budgent (OMB) is the contact with these Committees for this project.

Included in the report are the FY 1997 audited financial statement required by the Chief Financial Officers Act of 1990, the annual report to the President and the Congress required by the Federal Managers' Financial Integrity Act of 1982, and the report to Congress on management decisions and final schons on the Office of the inspector General's audit recommendehons required by the Inspector General Act of 1978, as amended.

As the Accountability Report is still in its pilot phase, the CFO Council has requested that we solicit comments for future improvements. If your staff desires to comment on the report, an evaluation form has been enclosed for use in providing feedback to the CFO Council Sincerely,

]- f On Shirley Ann Jackson

Enclosures:

As stated cc: Senator Harry Reid i

jo 4 UNITED STATES

_ g '{ NUCLEAR REGULATORY COMMISSION W/.SHINGTON, D.C. 20656-0001

\***** March 31, 1998 CHANe4AN The Honorable Franklin D. Raines Director, Office of Management and Budget Washington, D.C. 20503

Dear Mr. Raines:

Enclosed is a copy of the Nucioar Regulatory Commission's (NRC) Fiscal Year 1997 Accountability Report. This is the third year that the NRC has participated in a pilot project to consolidate performance-related reporting into a single accountaoility report.

The pilot project, which is being carried out under the guWance of the Chief Financial Officers (CFO) Council, was undertaken in accordance with the Govemment Management Reform Act (GMRA) of 1994. The GMRA permits the streamlining of financial management reports in consultation with the appropriate Congressional Committees, and the Office of Management and Budget (OMB) is the contact with these Committees for this project.

l Included in the report are the FY 1997 audited financial statement required by the Chief Financial Officers Act of 1990, the annual report to the President and the Congress required by the Federal Managers' Financial integrity Act of 1982, and the report to Congress on management decisions and final actions on the Office of the Inspectnr General's audit -

recommendabons required by the Inspector General Act of 1978, as amended.

. As the Accountability Report is still in its pilot phase, the CFO Council has requested that we solicit comments for future improvements. If your' staff desires to comment on the report, an evaluation form has been enclosed for use in ;xoviding feedback to the CFO Council.

Sincerely, b

Shirley Ann Jackson

Enclosures:

As stated j l

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ACCOUNTABILITY REPORT PILOT EVALUATION FORM We ask yow opinion on whether the financial and progrom information presented is clur, concise and useful.

We solicit your ideas to make the praentaticas more effective. (Rupondmg to this request is voluntary, Public reportmg bwden for this collection ofinformation is estimated to everage 15 minuta per response, including the time for reviewing the report and completing and reviewing the survey instrument.) Please fax or mailto: Depastment of Veterans Affairs (047),310 Vermont Ase.,NW, Washington,DC 20420. Fax (202) 2734 794. We ulue your opmion and will try to improve next year's reports based on yow response Thanks for yow help.

PILOT AGENCY EVALUATED :

0 Departusent of Educetten 0 Deportament of Leber D GeneralSenices Administration 0 Nuclear Reguletory Commission 0 Department erHeakh & Human Senica O SocialSecu-ity Administration 0 Department of Heusing & L'rben Developement 0 Department erState O Deperissent of the Interior 0 Deportement of Treasury D National Aereasuties and Space Administration D Deper:ssent of Veternas Affelr Please identify yourself by checking appropnate box:

O CFO/DeputyCFO O Program Omelel 0 OMB/ TREASURY /GAO D CongrenienalSteff D IG D Other Please rate the followmg on a scale of 1 through 5 by checking appropnate box.

TOTALLY DISAOREE TOTALLY AGREE NO OPINION 1 5 X

, L OVERALL DIPRESSION:

l

1. The report is easy to read.

10 20 30 4D SD XD l 2. The report is balanced, presenting both positive and negauve results.

10 2 [] 30 40 50 x0

3. The report compares favorably with private sector corporate reports.

l 10 20 3D 40 50 XD The mformation requested is approved under OMB Control e:9004571 I

.e i .,

-s TOTALLY DISAOREE TOTALLY AGREE NO OPINTON

.1 5 X H. PROGRAM PERFORMA.%CE:

• 4.TheE:;-- ^*e musesons and goals are pronunently displayed lesvmg the reader with a view of"where the Ey _ ___ ^ is going".

10 20 30 40 50 XU

5. The Department's performance infonession gives the reader a view of Mars the Department cwrently is"in accomplishing its missions and goals. .

1 [] 2[] 30 4 [] 5 [] . X[]

6. . M : ;-- Control Weaknesses (FMFIA) are integrated with the mission perfonnance data.

10 20 30 40 50 XO  ;

7. Audit Follow-ups (10 Act Amendments) are interated with the mission performance data.

10 20 3[] 4 [] 50 XO

8. The repott leaves you with a feeling of whether the D-:;-r - " is " achieving its mission".

1 [] 20 30 4 [] 5 [] X[]

9. The Prompt Payment Act, Civil Klonetary Pensity, and Debt Managenet Data are integrated well mto the report.

X[]

1 []' 20 30 4[] 50-at resanaca

10. The graphics are easily understood.

10 20 30 40 50 -XO

11. The trends presented srephically are adequately explained in the accompanying narratin.

1 [] 2[] 3 [] 40 - 5 [] Xu IV. FLNANCIAL:

12. The sport gives you a clear understandmg of the financial condition of the E_;-_- J's appropriations and funds.

1 [] 2 [] 30 4 [] 50 XO l

13. Financial Statements and Footnotes are informative and understandable.

f

!~

.10 20 30 40 50 Xu I

TOTALLY DISAOREE TOTALLYAGREE NO OPMON The mfonnanon requessed is approved under OMB Control C900-0$71 l \

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14. W ConsolidstingCombining Stasaments cad Supplemental Dess section are useful.

10 20 30 40 5[] XD

15. The auditorf opinion is clear, concies, and understandable.

10 20 30 40 5[) XD V. BEST AND M ORST FEAT 11tES-

16. Is there anything you especially 1&ed about the report?

1 l

17. Is there anything that can be improved upon in future reports? l l

i I

Tim mformation requested is appnmd under OMB Control C900-0571 l

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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: j 1.The NRC Public Document Room,2120 L Street, NW., Lower Level, Washington, DC 20555-0001 1

2. The Superintendent of Documents, U.S. Government Printing Office, P. O. Box 37082, Washmgton, DC 20402-9328 3.The National Technical Information Service, Spring 0 eld, VA 22161-0002 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; l Commission papers; and applicant and licensee documents and correspondence.

The following documents in the NUREG series are available for purchase from the Government Printing i 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, j NRC regulations in the Code of Federal Regulations, and Nuclear Regulatory Commission Issuances.

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

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 Office of the ChiefInformation Officer, Publishing Services Branch, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001.

Copies of industry codes and standards used in a substantive manner in the NRC regulatory process are maintained at the NRC Library, Two White Flint North, i1545 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.

NUREG - 1542 Vol. 3 Fisca Year 1997 U.S. Nuclear Regulatory Commission Office of the Chief Financial Officer 4

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NRC Principles of Good Financial Management 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 under we are effectively accomplishing our health and safety 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.

PLANNING. 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 financial management requires good financial control. Appropriate effective cost controls throughout the financial management process ensure adequate accounting of funds expended, prevent over-obligation of funds and inappropriate expenditures, identify early instances where funds should be reallocated, and produce valuable information 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 should be obligated as early as practicable during the fiscal year, and excess funds should be deobligated as soon as practical after project completion.

EVALUATION. Good financial management requires periodic evaluation of performance against meaningful financial and program performance measures. Such performance assessment should evaluate l t

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.

U.S.SUCI.E AR H0GUI.AToRY CoNINilssioN

Table of Contents Foreword...................................................................................................................v Th e N R C ' s M i s s i o n . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

t M essage Fro m t he Ch ai rman ............ ....... ....... . ...... . .. .... . ..... .. ... ................ ........... .... . .. . vii Message From the Chief Financial Officer .............................................................. ix M a n age m e n t S u m m a ry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

About the U.S. Nuclear Regulatory Commission ..................................................... I organization.............................................................................................................1 R eg u lat o ry R e spo n s i bi l i ty . . . . .. . . . . . .. . . . . . . . . .. . . . . . . .. . . . . . . . . ... .. .. . .. . ..... . .. . . . . . .. . . ... .. . . . . . .. . . .. . .. .. . 2 Sou rces of Fu nds .................. ........ .... ........................................................................2 U se s o f Fu nd s by Fu nc t i on .. . . .. . .... . ... . . . . .. . . . . . .. . . ... . . . . . . . . .. . . . . ... .. . . . .. . . . . .. . . . . . ... ..... . ... . . ... . .. . .. . . . 2 l

Fi n an cial Co n di t i on of N R C .. . . . . . .. . . .. . .. . .. . ... . . ... . . .. . .. . . . . . ... . . . . . .. .. .. . . ..... . . .. .. . . . . . . . . .... . .. . .... . ....... . 4 Progra m Pe rfo rm a n ce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 S t ra t e g i c A re n a s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

M anag e m e nt Cont rol s . . . . . . . .. .. . . . .. . . . . .. .. . .. . .. . .... . . . .. . . . . . . .. .. ... . . .. . .. .. . .. .. . .... . ...... . . . .. . . . . . . .. . . . ..... 6 Nuclear Reactor Safety .................. ........................................................................6 N u cl ear M at e rial s S a fet y . . . ... . ...... . . .. . .. . .. ..... . .. . . .. .. .. ... . .. .. . . . . . . . .. . .. . . . .... . . . . . .. . . . ... . . . . . . . .. . ... . .. . . 8 N u cl ea r . Wast e S a fe t y . . .. .... .. . . . .. . . . . . . . . . .. . ... . . . . . . . . . . . . . . . . .... .. .. ... .. . ... . ... .. . . . .... ... . . . .. . . . . . . . .. . I 1 Common Defense and Security and International involvement.............................. ... ... .... 12 Prot ecti n g t he En v i ron men t . . . .. . . . .. .. . .. . . . . . . . . ... . . . . . .. .. . . . . . . . . . .. . . . . . . . . . . . . ... . ... . . .. .. . . . . . . ... .. .. .. . . . 13 Publ i c Con fid en ce . . .. . . ... . ... ... . . .. . . . . . .. .. .. . .. .. . . . ... . . .. . .. . . . . . . . . . . . . . . . . ... . ... .....................I6 Excellenee................................................................................................................:6 M a n ageme n t Accou n t ability .. . . .. . .. . . . . . . . . . . . .. . . . . . . . . . . . . .. . . . .. .. . . . . . . . . . . . .. . . . . . . . . . . . ... . . ... . . . .. . . 19 The NRC's Management Control Program .. ..............................................................19 Status of Management Controls and Report on Material Weaknesses an d N on-Co n form ance s . . .. . . . ..... . . .. .. . . . ..... . ...... ... . . .. .. . . . ... . . . . . . . . . . . . .. . . . . . . .. .. . . . . . . .. 19 Financial M anagement System s ..... .... ..... ................. .... ... ........ ... ..... ... .. ... .... .. . . 19 (continued on page iv) 1997 ACCOUNTAHil.lTY REl' ORT i ,

t

Table of Contents (continued)

Management Decisions and Final Actions on 01G Audit Recommendations .. .... . .......... 20 Management Decisions Not Implemented Within One Year...... .............. . ....... . .. . 22 D e bt Col l e c t i o n . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . .

Pro m p t Pa y m e n t . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Ci v i l Pe n al t i e s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

FY l 997 Audited Financial Statement ................................................................... 27 Appendix A N RC O rgani zat ion Ch art . . .. . . . .. . . . . . . . . . . .. .. . . . . . . .. . . . . . . . . . . . . . . . .. . . . . . . .. . . . . . . . . . . . .. . .... . . . . . . . . .. . . . . . 74 B Abnormal Occurrence Criteria and Guidelines for Other Events of Interest ............... . 75 Figures 1 S ou rce s o f N RC Fu n d s . . .. ... . . . ... . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . .. . .. . . . . .. ... .. . . . . . .. . . . . . . . . . . . 3 2 U ses o f Fu nd s by Fu nct ion .. .. .. . . .. . . .. .. . . . . . . . . ... . . . ... . . . .. . . . . .. . .. . . . . . . . . . . . . .. . . . . . .. . . . . . . . . . . .. . . . .. 3 3 U.S. Com mercial R eac tors .............................. ..... ... . ..............................................7 4 De l i n q u e n t D e b t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 5 5 Pro m p t Pay m e n t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 5 Tables 1 Significant Radiation Exposures Due to Loss or Use of Source, Byproduct, and Special Nuclear Materials .. ........ . . ... ........ .... ...........................................9 l 2 Number of Losses of Licensed Material Reported to the Congress Annually ................. 9 3 Number of Misadministration Events Which Cause Significant R ad iation Ex posu re s .. . .. .. . . . . . . . .. . . . .. . . . . . . . . . . .... . . . .. . . . . . .. . . . . . . . . . . . . .. .. . . . ... . . . . . . . .... . . . 10 l

! 4 Number of Offsite Releases From Operating Facilities of Radioactive Material That Exceed 10 CFR Part 20 Limits ........................ ......... ..................... . 14 5 Management Report on Office of the Inspector General Audits with D i s al l o w ed Co st s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 2 0 6 Management Report on Office of the Inspector General Audits with Recommendations That Funds Be Put to Better Use ................. ............. ... ... ....... 21 7 Amount of Fiscal Year Civil Penalties Collected Versus Fiscal Year Pen alty Dollars Assessed ........ .. .. .. .. . .... ... ......... .. ..... . ..... ....... ..... . . ..... 26 U.s. Nt'cll'AR HlUt'I.AloRY CON 1%11SSloN m.___.

Foreword his is the third year that the U.S. Nuclear Regulata v Commission (NRC) has participated in Ta pilot project, along with several other Federal agencies, to streaI 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 of 1994 (GMRA). 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 stutement, required by the Chief Financial Officers Act of 1990 (CFO Act)

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

• Chairmati s semiannual report to the Congress on management decisions and final actions on Office of the Inspector General audit recommendations, required by the Inspector General Act of 1978, as amended This report also contains performance goals and measures, as required by the CFO Act and the Government Performance and Results Act of 1993 (GPRA), and the Chairman's statement on the compliance of the agency's financial management systems with the Federal Financial Management improvement Act of 1996 (FFMIA).

Comments on the content and presentation of this report are welcome and may be sent to:

Office of the Chief Financial Officer Mail Stop O-17 F3 l

U.S. Nuclear Regulatory Commission Washington, DC 20555-0001 or l' Internet: src2@nrc. gov i

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am pleased to present the U.S. Nuclear Regulatory Commission (NRC) {

k accountability report for Fiscal Year (FY) 1997. This is the third year Q )

E l bq that the NRC has produced an accountability report in an effort to stream-( line statutory performance-related reporting in accordance with the  !

[ Government Management Reform Act of 1994.

] In FY 1997, we achieved our performance goals for protecting public

' " health and safety. We are continuing to strengthen the NRC by maintain- ,

ing our primary focus on safety while benefiting those we regulate  !

through the development of better requirements, guidance, and a more w

efHeient regulatory process. We are implementing strategies to make both our nuclear reactor safety and nuclear materials safety regulations more risk-informed and, where appropriate, performance-based. The NRC goal in improving the way it conducts its business is to ensure that the agency is both effective and efHeient in implementing its mission.

In reaching this goal, a key factor was the strategic assessment and rebaselining initiative that l we initiated two years ago. This broad-scope internal effort was designed to evaluate the current '

status of major NRC programs, and to outline a clect path for future progress. In addition, this initiative supported NRC implementation of the Government Performance and Results Act of 1993 and other Congressional and Administration initiatives that are demanding greater account-  !

ability for results from Federal agencies. Some recent results of this work include the NRC FY 1997-2002 Strategic Plan, FY 1999 Performance Plan, the regulatory excellence initiative, and our program-level operating plans.

The NRC evaluated its management control and financial management systems for FY 1997 ,

as required by the Federal Managers' Financial Integrity Act of 1982. The results of this evalua- (

ticn provided reasonable assurance that the NRC achieved the objectives of the Act. The evalua-tio 1 identified no material weaknesses in NRC programs or administrative activities and no n Jerial non-conformances with government-wide requirements in NRC financial management systems. ihe NRC also evaluated its financial management systems for compliance with appli-cable Federal requirements and accounting standards as required by the Federal Financial Man-agement Improvement Act of 1996. This evaluation disclosed that overall the NRC's major Gnancial management systems were in compliance with the Act except for business continuity plans which were found to be in substantial noncompliance. The audit report on the agency's financial statement, provided at the end of this report, contains a discussion of this issue and the corrective action that the NRC is taking.

The NRC continues to improve its business practices by using sound fiscal management to l accomplish the agency's critical mission. The issuance of this third annual report, which in- i cludes the results of our FY 1997 performance, confirms our commitment to provide account- l ability for agency programs and financial management.

f Shirley Ann Jackson Chairman U.S. Nuclear Regulatory Commission 1W7 AcCotNI Altfllrv REPORT

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, W""P55 am pleased to report that the NRC has again received an unqualified gy '5k audit opinion on its financial statement. The NRC issued its first pJ M* .

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'h audited financial statement in Fiscal Year (FY) 1992 and received an unqualified audit opinion for each of the four Oscal years since FY 1994.

,3 uQ At the Chainnan's request, and in coordination with the NRC's Execu-

% 'M tive Council, we are concurrently pursuing two significant efforts to 1

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improve agency processes for planning, budgeting, financial and resource management, and perform:mee management. The first efTon employs an integrated process for planning, budgeting, and performance management for the FY 2(X)0 budget cycle that will enable the agency to meet the iemands of the new results-driven Federal environment. The four major interrelated components of the new process are (l) setting strategic direction,(2) detennining resources and planned accom-plishments,(3) measuring and monitoring performance, and (4) assessing perfonnance.  ;

A second effort provides for an integrated agencywide financial and resource management system that will support the first effort. This system will serve as the agency's single authoritative source for financial and resource infonnation to carry out program and fiduciary responsibilities and to in'.egrate financial planning data with financial perfonnance data. The integrated agency i I

financial and resource management system will support the following functions: core accounting, budget fonnulation, travel management, property control, funds control, cost accounting, debt man agement/ fee billing, labor-cost distribution, payroll / personnel, and procurement.

We also continue to improve financial management in other ways. Over the past few years, the j NRC has increased the etTectiveness and efficiency of program financing by more closely monitor-ing u msed contract balances, project planning, and obligation and expenditure rates. The NRC's delinquent debt has steadily declined since FY 1993 through concerted debt management. Timely payment of amounts subject to the Prompt Payment Act has increased and the amount ofinterest penalties has decreased. We have significantly reduced the number and size ofimprest funds. We have consictently paid a high percentage of our employees by electronic funds transfer, and are increasing the amount of vendor payments made by electronic funds transfer.

Our ongoing improvements are important in effectively and efficiently accomplishing our mission and meeting new challenges presented by our changing environment. Our goals are to maintain the standards we have achieved and to continue seeking improved methods to carry out our fiscal responsibilities.

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Jesse L. Funches Chief Financial Officer U.S. Nuclear Regulatory Commission 1997 ACCOUVI AHilJIT lo:l' ORT j

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L Management Summary l

l Program Performance  ;

I In this report we are making the transition to reporting against outcome measures that have been developed in response to the GPRA-required FY 1999 Pe.-formance Plan. The following reflects our performance relative to these outcome goals. ,

l l

Nuclear Reactor Safety The general goal is to prevent radiation-related deaths or illnesses due to civilian nuclear i reactors. In FY 1997, the NRC met the associated performance goals of (1) zero civilian nuclear reactor accidents, (2) zero deaths due to radiation or radioactivity releases from civilian nuclear reactors, and (3) zero significant radiation exposures due to civilian nuclear reactors.

With respect to the NRC's fourth performance goal in this strategic arena," maintain a low frequency of events that could lead to a severe accident," the NRC is unaware of any events of this type occurring in FY 1997. However, final analyses of all events in this category during FY 1997 will not be completed until approximately 1 year after the end of the fiscal year.

Nuclear Materials Safety The general goal is to prevent radiation-related deaths or illnesses due to civilian use of source, byproduct, and special nuclear materials. In FY 1997, the NRC met the associated performance goals of(1) zero radiation-related deaths due to civilian use of source, byproduct, and special nuclear materials, (2) no increase in the number of significant radiation exposures due to loss or use of source, byproduct, and special nuclear materials, (3) no increase in the number oflosses of licensed material as reported to the Congress annually, (4) no accidental criticality involving licensed material, and (5) no increase in the number of misadministation events which cause significant radiation exposures.

Nuclear Waste Safety The general goal is to ensure treatment, storage, and disposal of wastes produced by civilian use of nuclear material in ways that do not adversely affect this or future generations.

In FY 1997, the NRC met the associated performance goals of(1) no significant accidental releases of radioactive material from storage and transportation of high-level waste (including spent fuel) or low-level waste and (2) no offsite release of radioactivity beyond regulatory limits fmm low-level waste disposal sites. The NRC's target for the FY 1999 performance goal to establish the regulatory framework for high-level waste disposal, consistent with current  !

national policy, is to issue a final rule within 1 year after promulgation of the standard (estimated j publication July 1,1999). Milestones for this initiative will be developed during FY 1998. j i

(continued on page xii) 1957 ACCotNTABil.ITv REPORT l

i

Management Summary (continued)

Common Defense and Security and InternationalInvolvement The general goal is to prevent the loss or theft of special nuclear materials regulated by the NRC and to support U.S. national interests in the safe use of nuclear materials and in non-proliferation of these materials. In FY 1997, the NRC met the associated performance goals of(1) zero loss or theft of special nuclear materials regulated by the NRC,(2) no substan-tiated cases of attempted theft or diversion of formula quantities of strategic special nuclear material, and (3) no substantiated breakdown of physical security or material control (i.e.,

access control, containment, or accountability systems) that significantly weakened the protec-tion against theft or diversion of formula quantities of strategic special nuclear material. Data will be reported in the NRC's FY 1999 Accountability Report for the goal to strengthen interna-tional nuclear safety and safeguards by participating in international safety and safeguards exchange activities, by providing assistance through international agreements, and by support-ing U.S. non-proliferation interests.

Protecting the Environment The general goal is to protect the environment in connection with civilian use of source, byproduct, and special nuclear materials through the implementation of the Atomic Energy Act and the National Environmental Policy Act (NEPA). In FY 1997, the NRC met the associated perfonnance goals of (1) zero offsite releases from operating facilities of radioactive material that have the potential to cause adverse impact on the environment and (2) no increase in the number of offsite releases fem operating facilities of radioactive material that exceed 10 CFR Part 20 limits. Data for the performance goal," environmental impacts have been identified through the NEPA process before regulatory action is takenl' will be reviewed in FY 1998 and reported for FY 1999. Data for the performance goal,"no sites will be released until satisfacto-rily remediated in accordance with NRC release criteria," will be reviewed in FV 1998 and will be reported for FY 1998.

Public Confidence 1 The general goal is to provide the public, those we regulate, and other stakeholders in the national and international community with clear and accurate information about, and a meaning-ful role in NRC's regulatory program so that there will be respect for and con 0dence in that program. Data will be reported for FY 1998 for the associated performance goal to implement the agency's plan to improve how it informs and involves the public, those we regulate, and other stakeholders in NRC's regulatory program .

ExceIIence The general goal is to carry out the NRC regulatory program ef0ciently and effectively.

Performance will be reported for FY 1998 for the associated goals to (1) implement the agency's plan for regulatory excellence and (2) evaluate and implement needed improvements for five major NRC processes by July 1,1999.

WL:.s. NtTLEAR HILL'IAToRv Co\t\t!% ion

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

The NRC's evaluation ofits financial management systems for compliance with applicable i Federal requirements and accounting standards disclosed that overall NRC's major financial management systems were in compliance, except for business continuity plans which were found to be in substantial non-compliance.

1 Audits At the end of FY 1997, the NRC had six audits with outstanding actions over 1 year old. The  ;

status of these actions are discussed on page 22 in the section titled " Management Decisions Not l Implemented Within One Year."

l FY_1997 Audited Financial Statement 1 i

i For the fourth successive year the NRC received an unqualified audit opinion on its financial

statement. Two reponable conditions carried over from FY 1996 were resolved in FY 1997. These reportable conditions involved the need for a payroll system that is integrated with the general j ledger and por ; esses labor distribution capabilities and the need to improve procedures for capital-izing automated data processing software. The auditors found two new reportable conditions

(1) the NRC's business continuity practices for its major financial management systems do not l substantially comply with the requirements of the Federal Financial Management Improvement Act of 1996 and (2) there needs to be a segregation of duties of certain employees who have access to the agency's accounting system or additional compensating controls.

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About the U.S. Nuclear Regulatory Commission

, , e o "f he U.S. Nuclear Regulatory Chainnan serves as the principal executive officer

/fa n g% 5 Commission (NRC)is an and official spokesman for the Commission.

g j independent regulatory agency of 13efore FY 1997, the Executive Director for e the Federal Government that was Ope {ations (EDO}, as the chief operating and k...../ created by the U.S. Congress to . ..

admimstrative ofheer of the NRC, carried out the regulate the Nation.s civilian use .. .

. poh. .cies and decisions made by the Comm.ission.

of byproduct, source, and special nuclear maten-The EDO had also been designated as the NRC's als to ensure adequate protection of the pubhc .

health and safety, to promote the common defense Chief F.mancial Ofh.eer (CFO). In order to strengthen the agency's abih.ty to perfomi its and security, and to protect the envirorment. Its mission of protecting public health and safety, purposes are defined by the Energy Reorgam,za- .

the Comm.ission reab.gned the NRC's top managers tion Act of 1974, as amended, along with the in a re rg n zat. ion that became effective on Atomic Energy Act of 1954, as amended, which January 5,1997. In the new organization, the provide the foundat. ion f.or regulating the Nation,s CFO became a separate posit. ion reponing to the civih.an uses of nuclear materials.

Chairman along with the EDO and the Chief Infonnation Officer (CIO). An Executive Council Organization was established composed of the EDO, CFO, and CIO. Responsibilities under the EDO were re-The NRC is headed by a Chairman and four aligned under three Deputy EDOs: (1) the Deputy Commissioners appointed by the President and confirmed by the Senate for 5-year tenns. The (continues un page 23 p-wemyewnurw w wmmmmv~emym < '

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About the U.S. Nuclear Regulatory Comminion (continued)

Executive Director for Regulatory Effectiveness, Sources of Funds (2) the Deputy Executive Director for Regulatory The NRC has two appropriations, and funds Programs, and (3) the Deputy Executive Director f r both are available until expended. One for Management Services. A chan showing the appr priation is for agency salaries and ex-realigned organization that became effective penses, and the other is earmarked for the Off_ ice January 5,1997,is in Appendix A.

of the Inspector General (OlG). The NRC's total new budget authority (excluding allocation R;gulatory Responsibility account transfers from others) for FY 1997

.. was $476.8 million, including $471.8 million The NRC regulates civih.an nuclear reactors; for the Salaries and Expenses appropriation, and fuel cycle facilities; medical, academic, and $5 million for the OIG appropriation. Addi-industrial uses of nuclear materials; and the

. tionally, available to obligate in FY 1997 were transport, storage, and disposal of nuclear maten- , $39.6 million from prior-year appropriations, als and wastes. The NRC carries out its mission $6.4 million from prior-year reimbursable work, k . ugh a licensing and regulatory system com-

, $1.2 million from prior-year transfer of funds pnsing the followmg activities: from other Federal agencies, and new reimburs- j

• licensing the design, construction, operation, able work to be performed for others totaling j and decommissioning of nuclear reactors and $4.8 million. The sum of all funds available to other nuclear facilities (such as nuclear fuel obligate (excluding transfers) for FY 1997 was cycle facilities, uranium enrichment facili- $528.8 million. (See Figure 1.)

ties, and test and reseamh reactors)

• licensing the possession, use, processing, Uses of Funds by Function handling, and exponing of nuclear materials As previously stated, the total budgetary

• licensing the siting, des,gn,i construct,on, i resources available (excluding allocation account operation, and closure of low-level radioac- transfers from others) for use by the NRC in tive waste disposal sites under NRC FY 1997 was $528.8 million. Of that amount, the jurisdiction and the construction, operation, NRC incurred obligations of $503.1 million, with and closure of geologic repositories for approximately 53 percent used for salaries and high-level radioactive waste benefits. An additional 47 percent was used to e licensing the operators of civilian nuclear obtain technical assistance for the NRC's pnnci-reactors pal regulatory programs, to conduct confirmatory s fety research, to cover operating expenses, (e.g.,

• inspecting licensed facilities and activities building rentals, transportation, printing, security

• conducting research to gain independent services, supplies, office automation, and train-expertise and information for making ing), staff travel, and reimbursable work. (See timely regulatory judgments and for Figure 2.) The remaining $25.7 million ($21.0 anticipating problems of potential safety million from appropriations, $4.3 million from sigmficance reimbursable work, and $.4 million from direct

• developing and implementing rules and transfer funds)in budget authority that was not regulations that govern licensed nuclear obligated in FY 1997 will be available to fund activities critical needs in FY 1998.

• collecting, analyzing, and disseminating information about the. operational safety of commercial nuclear power reactors and certain nonreactor activities (continued on page .t>

I!.S.N1 cl. EAR REGl 1.ATORY cO%1%1tWlON

Figurei Sources of NRC Funds i Total Funds Available $528.8M New Budget Authority

$476.8M Reimbursable Work and Direct Transfers

$12.4M N Budget Authority from Prior Years $39.6M

' Total funds available reflects NRC appropriated budget authority and reimbursable work. It excludes transfer appropriations from the General Services Administration (GSA), $.3M. and the Agency for International Development ( AID), $6.6M.

I Figure 2 Uses of Funds by Function Total Obligations $503.1M' Salaries and Benefits $266.1M Reimbursable Work and Direct Transfers

$7.6M f

'/N Travel $13.8M /CN Contract Support N-

$215.6M i

' Total obligations include NRC appropriated budget authority and reimbursable work. It excludes obligations against transfer appropriations from the General Services Administration (GSA), $.3M, and the AFency for International Development ( AID), $3.0M.

1997 ACCOl'N1 AllII.I'IT Hl;I' ORT

. About the U.S. Nuclear Regulatory Commission (continued)

Financial Condition of NRC over the past few years, the NRC has made a concerted effort to increase the effectiveness and As of September 30,1997, the financial , efficiency of program financing by eliminating condition of the NRC is sound with respect to unnecessary financial reserves pending contract having sufficient funds to meet program needs - closeout, recovering funds on dormant contracts, and sufficient control of these funds to ensure ' exercising closer scrutiny of the need for that NRC obligations do not exceed budget ' planned projects, and more closely monitoring authority. The Statement'of Financial Position _ obligation and expenditure rates. This prudent shows n' net position (assets minus liabilities) of financial management initiative has resulted in a

$128.4 million. Consistent with the requirements 26 percent decrease in unobligated appropriated of the Omnibus Budget Reconciliation Act - funds in FY 1997 compared to FY 1996 and the

. of 1990, the NRC collected 99.4 percent ofits reaching of the desired level for unobligated new budget authority, excluo 1g the amounts appropriated funds. The NRC will continue its appropriated from the Nuclear Waste Fund and efforts to closely monitor its financial condition L

for certain activities being performed in support and planning policies to ensure its unobligated of the Department of Energy, and other offset- balance does not increase to undesirable levels in ting receipts, future years.

l i

1 U.S. NUCLEAR REGULATORY CoMMI% ion -

m.. = _..

Program Performance i

)

ThisNRC's section highlights key aspects of the Strategic Arenas programs, including program goals .

and program perfonnance measures. Consistent The NRC,s strategic and performance plans with the requirements of GPRA the NRC has "'" Tanized into strategic arenas. This section is developed a strategic plan, which was submitted rganized into the same seven strategic arenas:

to OMB and the Congress in September 1997.

• NuclearReactorSafety The strategic plan defines the overall agency

• #"#### "'#""I# "IU gcis and objectives which form the basis for more specific perfonnance goals and associated a Nuclear Waste Safety performance measures that are included in the agency's annual Performance Plan for FY 1999.

Conunon DeAnse and Saun.ty and Intuna-The performance plan also was submitted to 'I"""I I""#I"###"'

OMB in September 1997 and subsequently to the . Pmtecting the Envimnment Congress. For this transitioning period, the performance goals contained within this section Public Confidence reflect the same performance goals and measures .

Excellence reflected in the FY 1999 Performance Plan. The NRC has determined that it will report on these goals for FY 1997 in an effort to support the agency's strategic and performance plans and to (continued on page 6>

develop 2 years of baseline data before the mandated FY 1999 j/, [ 3 { " T j M V 7 i ] { ?* P ' ~" 9 Q Q 7 C ?A y reporting requirement.

3 While the structure for perfor- .

mance reporting is transitioning to .-

the structure contained in NRC's .

' ~

. .. . I strategic and performance plans; .

.c -

these plans are in an evolutionary development phase. In order to

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maintain consistency in financial 1--*-  ;

reporting and to provide compara-tive financial data, the structure for i ,, .,

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.I the FY 1997 financial statement H.-:<;.1 P ^'h h g 7 'd' l reflects the current budget _.

structure, 0ver the next 2 years,

. - . I the financ,ial reporting structure will transition to the structure

~

contained in the strategic and performance plans. Limerick I and Limsick 2 Nuclear hwer Reactors 1997 ACCoCNTAIIIIlTY RI:!URT

Program Performance icontinued)

For each strategic arena that follows we state protection of public health and safety. These the general goal from the strategic plan, provide activities include reactor licensing, inspection, a brief introduction to the arena, and delineate performance assessment, identification and the performance goals for measuring results resolution of safety issues, reactor regulatory toward meeting our general goals. In reviewing research, regulation development, independent the following performance goals, one must be assessment of reactor operational events and aware that the safe and secure use of nuclear experience, investigations of alleged wrongdoing materials for civilian purposes is the responsibil- by licensees, applicants, contractors, or vendors, ity of NRC licensees and Agreement State and imposition of enforcement sanctions for licensees, and the regulatory oversight of licens- violations of NRC requirements.

ees is the responsibility of NRC and the Agree-ment States. Thus, to achieve these goals Performance goal: Zero civilian nuclear requires the collective efforts of the NRC, the reactor accidents Agreement States, and licensees. As used in this context, a " nuclear reactor accident"is as defined in the NRC Severe Acci-dent PoHey Statement (50 FR 32138, August 8, Management Controls ,

1995), that is, those accidents in which substantial The NRC identified no material management damage is done to the reactor core, whether or not control weaknesses in any of the strategic arenas serious offsite consequences result. The perfor-in FY 1997. mance indicator is the number of severe reactor l

accidents annually. The FY 1999 target is zero.

Nuclear Reactor Safety Performance General Goal: Prevent radiation-related ..

Zero civih.an nuclear reactor accidents were deaths or illnesses due to civilian nuclear i.dentified in FY 1997.

reactors A major part of the NRC's mission is to Performance goal: Maintain low frequency of ensure that its licensees design, construct, operate, events which could lead to a severe accident and decommission civilian reactor facilities safely. The Atomic Energy Act of 1954, as The performance indicator is the annual amended, and the Energy Reorganization Act number of events from the population of plants of 1974, as amended, provide the foundation that could result in a 1/l,000 (10 3) or greater for regulating the nation's commercial nuclear pr bability of occurrence of a severe accident.

The FY 1999 target is for no more than one such power industry. NRC regulates the 104 commer-event to occur in the United States.

cial nuclear power reactors which are licensed to operate and another 18 that are undergoing decommissioning .

Performance At this time, the NRC is unaware of any Reactor safety encompasses all NRC activities events in FY 1997 that had a 1/1000 (10 3) or to ensure that civilian nuclear reactor facilities are greater probability of leading to a severe accident.

operated m, a manner that provides adequate However, final analyses of all events in this period will not be completed until approximately i These figures reflect the submittal of certifications from 1 year after the end of the fiscal year. The analy-Haddam Neck, Big Rock Point. Maine Yankee, Zion 1, ses use probabilistic risk assessments to provide and Zion,2 nuclear power plants for permanent cessation estimates of operating event significance in terms of operations and removal of fuel from the reactor vessel, and exclude Browns Ferry Unit I which has no fuel of the potential for core damage (i.e., a severe loaded and requires Commission approval to restart. accident). The analyses of these events include U.s. MTI.EA R REGI IAloRY CO\t\liN%loN

Figure 3 U.S. Commercial Reactors NH MA Al A

mit DE MD A A A Ucensedto0perate(104)

Note: There are no commesial reactors in A;aska or 1lawaii review by the licensees and the NRC staff and an Performance Goal: Zero significant radiation independert review by an NRC contractor. The exposures due to civilian nuclear reactors performance data, therefore, for FY 1997 will be As used in this context, "significant radiation reported in a future Accountability Report. For exposures" are those exposures that meet the the previous fiscal year, FY 1996, there was one NRC criteria for reporting abnormal occurrences such event. This event occurred at the Catawba to the Congress2 (See Appendix B, Item I.A).

IL ' ? nuclerpower plant on February 6,1996, This goal encompasses both workers and the and had a probability of 2.1/1000 (2.1 x 10-3) of general population. The performance indicator is leading to a severe accident. The event consisted the number of significant radiation exposures of a loss of offsite power with one of two emer- annually. The FY 1999 target is zero.

gency diesci generators unavailable.

Performance Performance Goal: Zero deaths due to There were zero significant radiation expo- ,

radlation or radioactivity releases from sures due to civilian nuclear reactors identified in civilian nuclear reactors py ,997 This measure addresses actual deaths that were due to acute radiation exposure. The perfor-mance indicator is the number of deaths annually.

The FY 1999 target is zero. 2 The NRC is required by Section 208 of the Energy Reorganization Act of 1974 to report abnormal occur-rences to the Congress. The report, titled " Report to Performance Congress on Abnormal Occurrences"(NUREG-0090)is Zero deaths due to radiation or radioactivity submitted to the Congress annually, in the context of the Act, an abnormal occurrence is an unscheduled incident releases from c. .l.ivi ian nuclear reactors were or event that the Commission determines to be signifi-identified in FY 1997. cant from the standpoint of public health or safety.

IW7 ACCot'N raillt.l'IT RFI' ORT

Program Performance (continued)

Nuclear Materials Safety - - 1,4 s f ~ ~ ~,

General Goal: Prevent radiation related iJ+"-

F' deaths or illnesses due to civilian use of source, Nf M ji .

byproduct, and special nuclear materials ,f

e

10 The nuclear materials program encompasses i  % w.n -

over 20,000 specific and more than 100,000 ,

-k; "l.,  %

j general licenses that are regulated by the NRC , ,

and the existing 30 Agreement States2 . These .

s materials range from very low-risk smoke detec-  ; j,, ;. ,- ,

~- '

tors to relatively high-risk irradiators. The -

Atomic Energy Act of 1954, as amended, and the f -

Energy Reorganization Act of 1974, as amended, gM provide the foundation for regulating the nation's 7 9 ,

civilian uses of nuclear materials.

Nuclear materials safety encompasses NRC -

c ;, . g:

activities to ensure that all NRC-regulated aspects .- .$- };

of nuclear fuel cycle facilities and nuclear materials f -

p ~ / 'lC activities are handled in a manner that provides f P --- '~

adequate protection of public health and safety. j

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These activities include licensing, inspection, and '

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related regulatory activities for fuel cycle facilities [ . .

and nuclear materials users, transportation of . 'j ' ',. -*

nuclear materials, and uranium recovery.

NRCInspector inspecting a Volume Control Tank Valve Performance Goal: Zero radiation-related deaths due to civilian use of source, byproduct, and special nuclear materials Performance Goal: No increase in the number of significant radiation exposures Th.ns goal pertains to non-reactor uses of due to loss or use of source, byproduct, and nuclear materials. The measure addresses actual specialnuclear materials deaths that were due to acute radiation exposure. . .

The performance indicator is the number of.

The performance indicator is the number of radiation exposures (excluding those caused by radiation-related deaths per year. The FY 1999 ,

medical misadmimstrations) at or above the level target is zero.

for reporting abnormal occurrences to the Con-gress (See Appendix B, item I.A). The FY 1999 Performance target is that the 5-year average (FY 1995-1999)

Zero radiation deaths due to civilian use of will not exceed two per year.

source, byproduct, and special nuclear materials were identified in FY 1997. Performance The NRC 5-year average for FY 1996 was 0.6 per year. The Agreement States 5-year aver-age was 1.0 per year. For FY 1997, the NRC An Agreement State is a State that has signed an 5-year average decreased to 0.4 per year and the agreement with the NRC allowing the State to, regulate Agreement States 5-year average increased to the use of radioactive material, other than use m reactor facilities, within the State. 1.4 per year (see Table 1).

U.S. SLTILAR RLGUI.AToRv CONT %II% ion

Table 1 Significant Radiation Exposures Due to Loss or Use of Source, Ilyproduct, and Special Nuclear Materials

~ YEAR- -NRC- AGREEMENT STATES -

l .I993 0 2 1994 0 2 1995 1 1 1996 0 0 1997 1 2 TOTAL 2 7 5-YEAR AVERAGE .4 1.4 Performance Goal: No increase in the was 1.4 per year. In FY 1997, the NRC number of losses of licensed material as 5-year average remained at 0.2 per year and the reported to Congress annually Agreement States 5-yr average decreased to The performance indicator is the 5-year 1.0 per year (see Table 2).

average number of losses oflicensed material reported to the Congress annually (See Appendix Performance Goal: No accidental criticality B, item I.C.1). The FY 1999 target is that the involving licensed material 1 5-year average (FY 1995-1999) will not exceed The performance indicator is the number of  ;

two per year.

occurrences of accidental criticality annually (See Appendix B, Item I.D.1). The FY 1999 Performance target is zero.

The NRC 5-year average for FY 1996 was 0.2 per year. The Agreement States 5-year average (continura,m page los Table 2 l Numbe, cf! osses of Licensed Material Reported to the Congress Annually I

YEAR' NRC- AGREEMENT. STATES.'

1993 1 2 1994 0 1 1995 0 0 l 1996 0 2 1997 0 0 TOTAL 1 5 5-YEAR AVERAGE 0.2 1.0 1997 Acro 0NTAltnJrY IRPoRT

Program Performance (continued) c

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Performance Appendix B, item I.A). The FY 1999 target is Zero incidents of accidental criticality involv. that the 5-year average (FY 1995-1999) will not ing licensed material were identified in FY 1997. exceed six per year.

Performance Goal: Noincrease in the Performance number of misadministration events which The NRC 5-year average for FY l996 was cause significant radiation exposures. 3.2 per year. The Agreement States 5-year l The performance indicator is the number average was 2.2 per year. In FY 1997, the NRC of misadministration events that cause radiation 5-year average decreased to 2.4 per year and the exposures at or above the level for reporting Agreement States 5-year average decreased to abnormal occurrences to the Congress (See 1.4 per year (See Table 3).

Table 3 Number of Misadministration Events Which Cause Significant Radiation Exposures YEAR- NRC AGREEMENT STATES 1993 3 3 1994 4 2 1995 3 0 1996 1 0 1

l 1997 1 2 TOTAL 12 7 5-YEAR AVERAGE 2.4 1.4 l

U.S. NOCIIAR RIEL'IAloRY Co\l%11% ion

Nuclear Waste Safety The Low-Level Radioactive Waste Policy Act General Goal: Ensure treatment, storage, and .f 1980, amended in 1985, made States respon-disposal of wastes produced by civilian use of. sible for providing for the disposal of commercial I w-level waste generated withm their borders.

nuclear material in ways that do not adversely affect this or future generations The Act encouraged States to enter into compacts that would allow several States to dispose of Nuclear waste is a byproduct of the use of waste at a regional disposal facility. Most of the radioactive materials. High-level radioactive States have entered into compacts, and several waste results primarily from the fuel used by States are proceeding with plans to construct and reactors to produce energy. Low-level radioactive operate as many as 12 new disposal facilities.

waste results from reactor operations, medical, liowever, to date, no new disposal facilities have academic, industrial, and other commercial uses, been opened.

and generally contains relatively limited concen-trations of radioactivity. Performance Goal: No significant accidental releases of radioactive material from storage The NRC,s high-level waste regulatory gng g,gggpg,ggg;og og y;gy.;gygg wgggg activitnes are mandated by the Nuclear Waste (including spent fuel) or low-level waste Policy Act of 1982, the Nuclear Waste Policy Amendments Act of 1987, and the Energy Policy The performance indicator is the number of  ;

accidental releases of radioactive material that Act of 1992. The Nuclear Waste Policy Act specifies a detailed approach for the long-range meet the NRC criteria for reporting abnormal undertaking of high-level waste disposal, with the ecurrences to the Congress. (See Appendix B.

Department of Energy (DOE) having operational items I.B.1 and I.B.2). The FY 1999 target is zero.

responsibility and the NRC having regulatory responsibility. The Nuclear Waste Policy Amend-ments Act directs DOE to characterize only one candidate site, the Yucca Mountain site in the (continued on page 12)

State of Nevada. Likewise, NRC's activities are focused ,

on Yucca Mountain. I I

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1997 ACCo0NITilli.II v RI.I'oRI

l l

Program verformance < continues >

Performance Performance Zero releases of radioactive material from The NRC will develop milestones for this storage and transportation of high-level waste or initiative during FY 1998.

low-level waste were identified in FY 1997. l Performance Goal: No offsite release of Performance Goal: Establish the regulatory radioactivity beyond regulatory limits from framework for high-level waste disposal, low-level waste disposal sites consistent with current national policy, as This goal includes sites regulated by the required by law after the legislatively- Agreement States but excludes sites under the required standard is issued Environmental Protection Agency (EPA)

The performance indicator is conforming Superfund authority. The performance indicator 10 CFR Part 60 to the legislatively required is the number of offsite releases per year in excess environmental standard. The FY 1999 target of 10 CFR 20.1301 public dose limits. The t is to issue a final rule within 1 year after promul- FY 1999 target is zero.

gation of the standard (estimated publication July 1,1999). Performance Zero offsite releases of radioactivity beyond regulatory limits from low-level waste disposal

.7 JV 1 sites were identified in FY 1997.

t Common Defense and Security and International involvement ,

l General Goal: Prevent the loss or theft of j special nuclear materials regulated by the NRC, and support U.S. national interests in the safe use of nuclear materials and in non-pmliferation

. The NRC performs international activities,

, some of which support the agency's domestic 4 mission and many of which support broader U.S.

E- m : national interests. These activities include inter-E-sshM2m -

national policy and priority formulation, export-f;M import licensing for nuclear materials and

..E 5 equipment, treaty implementation, international

._ U mformation exchange activities, and international safety and safeguards assistance. Our domestic safeguards responsibility involves the control of

.: , and accounting for nuclear materials, the protec-tion of nuclear materials to prevent theft or 1

diversion, and contingency plans for responding 9g to threatening situations. The primary foundation

, ' g)_,y jf ,pp for these activities includes the Atomic Energy NS N; pus;q b.,rei Act of 1954, as amended, the Energy Reorganiza-tion Act of 1974, as amended, the Nuclear Non-NRCInspector Taling Soil Sampics at Sewage Proliferation Act of 1978. Executive orders, and Treatment Facility treaties and conventions.

U.s. NirIIAR REGI LAToRY Co%I%nsslON

.J

I l

l Performance Goal: Zero loss or theft of weakened the protection against theft or diversion i special nuclear materials regulated by of fonnula quantities of strategic special nuclear the NRC material was identified in FY 1997.

! This goal was written within the context of l the safeguards program, which is to prevent theft Performance Goal: Strengthen international

! or diversion of formula quantities of strategic nuclear safety and safeguards by special nuclear material. The performance pticipating in intemational safety and indicator is the number of losses or thefts annu- fegu rd exchangeactivities,byproviding ally that meet the NRC criteria for reporting as Istance through intemationalagreements, and by supporting U.S. non-proliferation abnormal occurrences to the Congress (See interests Appendix .B. Item I.C.1). The FY 1999 target is zero thefts or losses. Performance Data is not available for FY 1997. The NRC Performance plans to report on perfonnance for th.is goal m.

Zero incidents of loss or theft of special future years.

~

nuclear materials regulated by the NRC were identified in FY 1997.

Performance Goal: No substantiated case General Goal: Protect the environment in 1 of attempted theft or diversion of formula connectku with civilian use of source,  !

quantities of strategic special nuclear hyproduct, and special nuclear materials matenal ~

through the .implementat. ion of the Atom.ic The perfonnance indicator is the number of Energy Act and the National Environmental substantiated cases of attempted thefts or diver- Policy Act sions annually (See Appendix B, item 1.C.2). .

The NRC recognizes a continuing obligation The FY 1999 target is zero.

to conduct its civilian licensing and related regu-Performance I t ry functi ns in a manner that is both respon-sive to environmental concerns and consistent No substantiated cases of attempted theft or with the Commission's responsibility as an diversion of formula quantities of strategic special independent regulatory agency for protecting the nuclear material were identified in FY 1997. radiological health and safety of the public. The Atomic Energy Act of 1954, as amended, the Performance Goal: No substantiated National Environmental Policy Act (NEPA), and

, i breakdown of physical security or maten.a l other environmental legislation provide the control (i.e., access control, containment, or cccountability systems) that significantly statutory authority for the NRC's activities in weakened the protection against theft or pr tecting the environment.

diversion of formula quantities of strategic Protection of the environment from potential epecialnuclear material hazards associated with the civilian use of source, The performance indicator is the number of byproduct, and special nuclear materials involves

- annual substantiated breakdowns of physical actions to mitigate environmental impacts during security or material control (See Appendix B, licensed activities. Before authorizing licensed Item I.C.4). The FY 1999 target is zero. activities, the NRC ensures that potential environ-l mental impacts of such activities are assessed l Performance consistent with the requirements of NEPA as No substantiated breakdown of physical implemented by applicable NRC regulations.

security or material control that significantly (condnued on page 14) 1997 Accol3TA!!!LITY REPORT m_

Program Performance lcontinued)

Under NRC regulations, decommissioning in- Performance volves safely removing a facility from service and Zero offsite releases from operating facilities reducing residual radioactivity to a level that (including facilities in a decommissioning status) permits the propeny to be released for unre- were identified in FY 1997.

stricted use. This action is taken by a licensee before termination of the license. In some cases, Performance Goal: No increase in the nonlicensed facilities may also be required to number of offsite releases from operating reduce or stabilize contamination before sites are facilities of radioactive material that exceed released. 10 CFR Part 20 Iimits The performance indicator is the number P;rformance Goal: Zero offsite releases of offsite releases per year in excess of 10 CFR from operating facilities of radioactive Part 20 limits. The FY 1999 target is that the material that have the potential to cause 5-year average (FY 1995-1999) will not exceed cdverse Impact on the environment three releases.

The performance indicator is the number of offsite releases annually that meet the NRC Performance criteria for reporting abnormal occurrences to the The NRC 5-year average for FY 1996 was Congress (See Appendix B, item I.B.1). The zero. The Agreement States 5-year average was FY 1999 target is zero. 0.6 per year. These 5-year averages remain unchanged for FY 1997 (See Table 4).

Table 4 Number of OITsite Releases From Operating Facilities of Radioactive Material That Exceed 10 CFR Part 20 Limits

-YEAR NRC- AGREEMENT STATES -

1993 0 0 1994 0 1 1995 0 2 1996 0 0 1997 0 0 TOTAL 0 3 5-YEAR AVERAGE O 0.6 U.S. NUCilAR Hr.GUI.AToRY CONI %IIS$loN

I I

l Performance Goal: Environmentalimpacts Performance Goal: No sites will be released have been identified through the National until satisfactorily remediated in accordance Environmental Policy Act (NEPA) process with NRC release criteria before regulatory action is taken The performance indicator is the number of The performance indicator is the number of sites identified each year that were previously environmental impacts identified by external released as having met NRC release criteria, but sources each year and substantiated that were not that have subsequently been determined to have identified as part of the NRC's NEPA process- not met the applicable release criteria. The The FY 1999 target is zero. py 1999 target is zero.

Performance Performance Data for this performance goal will be Data for this performance goal will be reviewed in FY 1998 and will be reported for reviewed in FY 1998 and will be reported for FY 1999. FY 1998.

(continued on page 16)

Remediation Stages of the Habcock and Wilcox Site in Apollo, Pennsylvania

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After Remediation 1997 ACCoENTAllll.1IT Hl.PoRl'

Public Confidence .N -

General Goal: Provide the public, those we _ ~

regulate, and other stakeholders in the t r national and international community, with -

clear and accurate information about, and a yi 7g EE N meaningful role in NRC's regulatory program so that there will be respect for and  ;

confidence in that program e, l Building and maintaining public trust is critical ., ; ,

M I to carrying out our mission and achieving our ,, \ )

vision. To be an elTective steward for nuclear Q,;V- I h (( )

safety, our actions must be such that the public, those we regulate, and other stakeholders in the &4 national and international community have respect for and confidence in the NRC. Realizing the I

importance of this issue, the NRC addressed it as pan of its Strategic Assessment and Rebaselining:

Direction Setting issue (DSI) 14 - Public Commu- 2 nication Initiatives. In its final decision on DSI 14, ( y , S'fik the Commission noted that the NRC should give a c @ .__g f

high priority to early identification of public y: -,

ff concerns and methods for public interaction in J m 7~ es / i making regulatory decisions that are likely to  !

generate substantial public interest or concern. ",f [

Performance Goal: Implement the agency's plan to improve how it Informs and involves Excellence the public, those we regulate, and other stakeholders in NRC's regulatory program General Goal: Carry out the NRC regulatory

. program efficiently and effectively The NRC Executive Counc.li has established a coordinating group that is developing a plan to Striving for regulatory excellence in all NRC implement the Commission's final decision on functions is both desirable and necessary to DSI 14. That plan will include performance goals maintain an effective and efficient regulatory and measures to assess the efTectiveness of the framework in today's changing environment.

program, consideration of the experience of the The NRC can improve its internal performance private sector and other public agencies, and by ensuring that its people and processes function consideration of the comments received on DSI 14. with a goal of excellence.

The plan is scheduled to be given to the Commis- As used in this context, excellence includes sion by February 27,1998. The performance both regulatory effectiveness and efficiency, and indicators for this goal are the milestones in the applies to all NRC functions. Regulatory effec-plan. The FY 1999 targets are the milestones that tiveness denotes a regulatory framework for are due to be completed in FY 1999. ensuring public health and safety that is clear, coherent, logical, consistent, reliable, and techni-Performance cally sound. Efficiency connotes a regulatory Performance for this goal will be reported in framework which is cost effective for both the future Accountability Reports. NRC and its licensees. As stated in the NRC's 01 SUCLEAR RI GUI.ATORv COMMi% ION 1

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l Principles of Good Regulation, the American Performance Goal: Evaluate and implement taxpayer, the rate-paying consumer, and licensees needed improvements for five major NRC are all entitled to the best possible management Processesd by July 7,1999

, and administration of regulatory activities. Where The performance indicator for this goal is the several effective alternatives are available, the completion of evaluations for and the implemen-option that minimizes the use of resources should tation of improvements for major NRC processes.

l be adopted. The FY 1999 target is to complete evaluations of, and implement improvements for, five such Performance Goal: Implement the agency's processes by July 1, l999.

plan for regulatory excellence The EDO has the lead responsibility for Performance developing a plan for enhancing excellence Performance for this goal will be reported in throughout the agency. The plan is scheduled to the NRC FY 1998 Accountability Report?

be given to the Commission by March 31,1998.

The performance indicators for this goal are the

• The NRC plan for regulatory excellence is being devel-milestones in the plan. The FY 1999 targets are oped and will include specific milestones and schedules the milestones that are due to be completed in for process evaluations. The performance plan will be l py jggg, updated to be consistent with that plan.

8 The NRC's regulatory excellence activities to enhance Performance NRC effectiveness and efficiency include: evaluating the reactor inspection program to determme if it achieves its Performance for this goal will be reported in intended goals in an efficient and effective manner; cv luating the program for licensing support and repula-the NRC FY 1998 Accountabilit)' Re9 ort- .

tory oversight of operating reactors to determine ifit achieves its intended goals in an efficient and effective manner; evaluating the enhancement of safety dec,ision making through use of PRA insights; improving informa-tion systems supporting financial management; and improving information systems supporting document and records management.

I l

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Management Accountability l 1 1

i l l 1 i

The NRC's Management ture, but these reportable conditions do not consti-tute m terial weaknesses or material non-con-Control Program l fonnances. (See the OIG audit of the FY 1997 l Individual assurance statements from NRC Financial Statement, page 36.) J

office directors and regional administrators served

! as a primary basis for the Chairman's FY 1997 The NRC reported no material weaknesses

!' statement of assurance on management controls. in FYs 1994,1995, and 1996. Two material These individual statements were based on weaknesses were reported in 1993, and five various sources, including the managers' knowl- material weaknesses were reported in the years  ;

edge of day-to-day operations and existing before FY 1993. All of these material weaknesses 1 l controls, management reviews of these controls, have been corrected. No material non-conform-l program reviews and other management evalua, ances in financial systems have ever been re- q tions, OlG reports, and reviews of financial Ported by the NRC.

l L management systems.

Financial Management Systems Each year, regional administrators and direc-The NRC evaluated its financial management i tors of offices with the highest risk with respect t

, , systems for compliance with applicable Federal programmatic and admmistrative activities submit requirements and accounting standards as re-an annual management control plan to the Cha,r- i quired by the Federal Financial Management man of the NRC's Executive Committee for Improvement Act of 1996 (FFMIA). This evalua-Management Controls. These plans, combmed tion disclosed that, except for business continuity with the individual assurance statements dis ~

plans for major financial management systems, cussed above, provide the framework for monitor-NRC was in compliance with the Act. One of the ing and improving the agency's management reportable conditions identified by the auditors controls on an ongoing basis.

also disclosed this weakness.

1 Status of Management Conttvis and Report on The NRC has six financial systems: the Material Weaknesses and Non-Conformances Federal Financial System, Payroll System, Per-The NRC evaluated its management control sonal Property PC System, License Fee Bill and financial management systems for the fiscal Generator System, Allotment Financial Plan year ending September 30,1997. This evaluation System, and a Budget Formulation System.

provides reasonable assurance that the objectives The Chairman's statement of assurance with of the Federal Managers' Financial Integrity Act respect to the agency's financial systems is sup-

! of 1982 (FMFIA) were achieved in FY 1997. The ported by management evaluations. Addition-NRC identified no material weaknesses in its ally, the OIG performs an annual audit of the l- programs or administrative activities and no agency's principal statements. The OIG issued

~

material non-conformances with governmentwide an unqualified audit opinion on the NRC's F.Y standards in its financial management systems. 1997 financial statement.

The auditors identified two reportable conditions that related to the NRC's internal control struc- (conunued on page 20;

! 1997 AccoONTAlul ITv REPORT L

Management Accountability (continued)

The Federal Financial System (FFS) is a until FY 1998 because of higher priorities imposed system that the NRC uses through an interagency on the data center by FMS. Testing in FY 1998 is agreement with the Department of the Treasury contingent on the data center successfully complet-  !

(Treasury). This system is reviewed annually ing the other high priority tasks.

by Treasury's Financial Management Service (FMS) for its client agencies that utilize the system.

The results of this year's annual review provided Management Decisions and reasonable assurance that FFS, as operated by Final Actions on OlG Audit FMS for NRC, is efficient and effective, contains necessary controls, and is capable of full conform-Recommendations ance with the principles, standards, and related The agency has established and continues to requirements prescribed by the Comptroller Gen- maintain an excellent record in resolving and eral, except for the inability to demonstrate data implementing open audit recommendations recovery and backup capability of FFS in the event presented in OlG reports. Section 5(b) of the of a disaster, which was noted as a material non- Inspector General Act of 1978, as amended, confonnance. The necessary disk storage capacity requires the Chairman to report on management was acquired to perform a simulated disaster decisions and final actions taken on 01G audit i l

recovery data test, but testing has been delayed recommendations. Table 5 gives the dollar value Table 5 Management Report on Ollice of the Inspector General Audits with Disallowed Costs For the Period October 1,1996 - September 30,1997 t Number of . Questioned Unsupported Audit Reports Costs Costs Category e ~($)' '($)-

A. Audit reports with management decisions 10 $252,919 S0 on which final action had not been taken at the beginning of this reporting period B. Audit reports on which management 3 $ 64,056 $0 decisions were made during this reporting period C. Audit reports on which final action 12 $303,656 $0 was taken during this reporting period (i) Disallowed costs that were 12 $252,919' $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 1 $ 13,319 $0 action had been taken by the end of this reporting period

' Questioned costs in the amount of $50.737 previously reported under two audits were subsequently determined to be allowable costs.

(LS. NtTLEAR RI;Gl'LAlokv Co\t\1lSsloN

of disallowed costs determined through contract Table 6 gives the dollar value of funds that audits conducted by the Defense Contract Audit audits showed could be put to better use. As of Agency (DCAA). " Questioned Costs" are those September 30,1997, no outstanding audits costs that are questioned as to whether they are recommended that funds be put to better use.

allowable. " Unsupported Costs" represent costs Six reports containing seven recommendations challenged because of a lack of adequate support- are more than a year old and are described in the ing data. Because of the sensitivity of contractual next section titled " Management Decisions Not negotiations, details of these contract audits are Implemented Within One Year."

not furnished as part of this report. Note that the Department of Defense also reports the cost savings resulting from DCAA audits. (continued on paxe 26)

Table 6 Management Report on Olrice of the Inspector General Audits with Recommendations That Funds lie Put to Iletter Use For the Period October 1,1996, through September 30,1997 Recommendations that

- funds be put to better ,

a use by management agreed J

' Number of ; . to in a management Category Audit Reports' decision

=($)-

A. Audit reports on which final 0 $ 0 action had not been taken by the beginning of this reporting period B. Audit reports on which manage- 3 $41,133 ment decisions were made during this reporting period C. Audit reports on which final 3 $41,133 action was taken during this reporting period (i) Recommendations that were 3 $41,133 actually completed (ii) Recommendations that manage- 0 $ 0 ment subsequently concluded should not or could not be implemented or completed D. Audit reports on which no fm' al 0 $ 0 action had been taken by the end of this reporting period 1997 ACCOITI ABil.Il Y Hr. PORT

Management Accountability (continued)

M:nagement Decisions Not Implemented fled the main uses of technology in the agency. As Within One Year of September 30,1997, one recommendation, to Management decisions were made before develop an agencywide policy statement and September 1996 for the OIG audit reports dis- administrative procedures, remained open. In cussed in the following paragraphs, but as of November 1997, an agencywide policy statement September 30,1997, NRC had not taken final was issued to all NRC employees on video telecon-action on some of the issues in the reports. The ferencing availability. Actions on all recommenda-01G did not recommend that funds be put to tions are now complete.

better use for any of these reports. NRC's Decommissioning Financial Assurance Improvement Needed in Agency Oversight of Requirements for Federal Licensees may not be Information Resources Management Activities, Sullicient, April 3,1996 September 24,1996 The OlG report recommended that the staff The OIG recommended that the agency reevaluate the basis for allowing Federal licensees develop a process to improve NRC's oversight of who operate nuclear power reactors to use a information resources management activities, statement ofintent for decommissioning financial The Information Technology Management Re- assurance. As a result of the OIG report, the form Act of 1996 (ITMRA) required each Fed- Commission directed the staff to include some eral agency head to design and implement a questions on decommissioning funding assurance Capital Planning and Investment Control (CPIC) for a Federal Government licensee in the Advance process for evaluating information technology Notice for Proposed Rulemaking (ANPR) for (IT) projects. The NRC is developing a compre- " Financial Assurance Reil uirements for Decom-hensive approach to comply with ITMRA's missioning Nuclear Power Reactors" (April 8, requirements. During the FY 1999 budget cycle, 1996,61 FR 15427). The ANPR was published in three major proposed IT projects were reviewed, response to the potential deregulation of the using a prototype CPIC process. The CPIC power generating industry. After the Comment process has been fmalized based on lessons period for the ANPR expired, a proposed rule was learned and will be forwarded to the Commission published on September 10,1997 (62 FR 47588).

for information. This recommendation will be In the proposed rule, the NRC staff provided a closed with this action. new definition of" Federal licensee" in response to the OlG report. A final rule ori this topic is due Review of Videoconferencing Capabilities and to the Commission on March 15,1998.

Utilization, May 21,1996 NRC Needs To Provide Strong Direction for the The OlG recommended that the NRC consider Licensing Support System, March 17,1995 shifting from an office-level to an agencywide approach for implementing videoconferencing, that The Nuclear Waste Policy Act of 1982 re-it develop an agencywide policy statement and quires that NRC approve or disapprove the con-administrative procedures to address the details for struction of a high-level nuclear waste repository acquiring and providing video-conferencing within 3 to 4 years of receiving a DOE construc-services, and that it determine other potential uses tion license application. To meet this deadline, the NRC may make of video-conferencing technol- NRC enacted a rule requiring the development of ogy. In May 1997, the CIO completed a require- an electronic information management system to ments analysis for video teleconferencing use in reduce the time needed for discovery during the the agency along with a cost-benefit analysis that license hearing process. The rule requires that provided the most advantageous implementation of DOE design and develop the system and that the technology. The requirements analysis identi- NRC operate and maintain it.

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3 The OlG reported that the program iod intended to allow application of technology stalled for the past 5 years for several reasoes. advances that have occurred since the original Many of the delays were attributed to an inad- rule was adopted in 1989. The proposed rule equate system definition and agreement on the achieves the original goal of facilitating the roles and responsibilities of DOE and NRC. As Commission's ability to comply with the schedule a result, the OlG recommended that NRC obtain for decision on the construction authorization for a formal commitment from DOE in the form of the repository contained in Section 114(d) of the an Interagency Agreement or Memorandum of Nuclear Waste Policy Act. Additionally, the Understanding (MOU) on key aspects of the proposed rule provides for a thorough technical Licensing Support System (LSS). review of the license application and equitable access to infonnation for the parties to the hear-In response to the OIG report, the EDO ing. The comment period for the proposed rule appointed a senior management team to reevalu-closes on January 27,1998. The proposed rule ate the purpose of and need for the LSS, and t will restructure the LSS and alleviate the fiscal address the issues affectmg the LSS program. As pressures working against significant progress by a result of congressional budget action related t DOE. As a result,it would not be necessary for DOE's high-level nuclear waste program, LSS the NRC to establish an MOU with DOE.

activities were not resumed and all of DOE's LSS-related activities have been delayed, includ- Review of NRC's Implementation of Inspection ing the finalization of an MOU with DOE. Manual Chapter 1245 Training Requirements, Novemher 4,1994 A proposed rule that would amend the The 00 mcommended that the EDO ensure Commission's Rules of Practice for the licensing that the agency's new training tracking system proceeding on the disposal of high-level radioac-meets management needs for producing reliable tive waste at a geologic repository was published in the Federal Register on November 13,1997, inf rmation for overseeing and tracking inspector (62 FR 60789). The proposed amendments are kantnued on page m IW7 ACroONT41Hl.lly Rif0RT

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Managewnt Acev abiliiy (continued)

\

training. In a stand audit titled " Inspector Train- 1996, and the other two recommendations, ex-ing Program: Improved Coordination and Com- panding the use of an existing management munication Needed," dated August 4,1995, the information system and improving the advance OlG recommended that the EDO evaluate the procurement process, have been completed.

merits of an integrated schedule or other measur The agency's Budget Execution Report to provide NRC offices with early notice of up-(BER), which is provided to agency managers coming inspector training requirements. This monthly and to the Commission quarterly, focuses recommendation has been closed and the correc-

. on the financial performance of the agency as a tive action has been incorporated into the correc-whole as well as on the individual allowance tive action agreed to m the OIG s November 4, holders. The BER contains performance param-1994, review of. . implementation of tra. .imng eters such as commitment, obligat. ion, and expen-requirements. The NRC has determined that its diture rates, months of available funding, and the current system does not meet the needs of the

"* nts and trends ,m unhquidated obligations.

agency and that the system needs to be totally Tin.sm ". formation is issued throughout the year to redesigned. Because of budget constraints, the m nitor financial performance and as m.put m.

new system will not be operational until FY 2002.

nnu 1Perf rm nee Ppraisals. A management In the meantime, training requirements are tracked manually with reliance on the direct

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• 8" "C" "E Gnanc m n genant, establishes performance involvement of individuals and their supervisors.

measures fa successful financial management, G:neral Ledger Controls, March 15,1993 and describes methods to be used for managing financial resources within the agency, was issued The OlG recommended that the NRC's in September 1997. Action on this outstanding payroll system be integrated with the general recommendation is now completed.

ledger and possess labor distribution capabilities.

This recommendation is closed. The NRC devel-oped a year-end methodology using cost center Debt Collection data to present program costs by budgetary program. Additionally, the guidance provided by As shown in Figure 4, the NRC has reduced FFMIA no longer requires integration of financial its delinquent debt since FY 1993. The agency sy stems. See the OlG audit of the FY 1997 has accomplished a steady decline in delinquent Financial Statement page 40. debt through a concerted debt management strategy. The strategy includes activities such as Review of Funds Management. license suspensions, referral to the Department of September 23,1994 h Teg's Debt Management Services The OIG reviewed the agency's funds through a cross-servicing arrangement, credit management practices and specifically examined reporting, and referral to the Department of NRC's unobligated budget carryover, advance Justice for enforced collection.

procurement planning, allottee financial plans, and fund obligation patterns. The audit report disclosed that although NRC's funds management Prompt Payment practices generally complied with established The percentage of on-time payments sub,iect policies and procedures, the agency's level of to the Prompt Payment Act has increased as i carryover and unliquidated obligations had in- shown in Figure 5. The amount ofinterest {

creased. The OIG offered three recommendations penalties incurred has decreased from $19,000 to improve funds management. Action on one of in FY 1993 to under $3,500 in FY 1997.

! these recommendations, to hold allottees more accountable, was outstanding as of September 30, (continued on page 2o U.S. Nt: CLEAR REGl'LAToRY CON 1%il% ion

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FY 1993 FY 1994 FY 1995 FY 1996 FY 1997 l

Fiscal Year 1997 ACCOUNTAllll.ITY IRI' ORT

Civil Penalties amount or civil penalties assessed and the amount collected in FY 1993-1997, distributed according The NRC imposes enforcement sanctions t to the year in which the civil penalty was col-encourage prompt identification and comprehen- lected. The amount of each civil penalty assessed sive correction of violations and as a deterrent t reflects the amount that the NRC ultimately emphasize the imponance of compliance with decides is appropriate in each case through its requiretnents. One enforcement sanctton is the enforcement or hearing process.

imposition of a civil penalty. Table 7 shows the Table 7 Fiscal Year Civil Penalties Collected Versus Fiscal Year Penalty Dollars Assessed 8

- Fiscal ._ . .

Percent Year' Assessed - Collected Collected 1993 $4,180,8752 $4,178,5573 99.94 1994 $3,867,675 $3,867,675 1(X) 1995 $2.289,285 $2,289,285 1(X) 1996 $3,106,000 $3,014,0004 97.04 1997 $6,343,550 $5,957,736 93.92 8 There is not a direct correlation between the amount;; assessed and collected in a particular fiscal year because civil penalties may be assessed in one fiscal year and collected in another for a variety of reasons, such as an assessment made in the last month of the fiscal year which is not due for 30 days, or until the next fiscal year.

2 in some cases, the amount imposed has been changed to reflect a settlement.

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

The licensee has since made full payment.

• This amount reflects payments that have been made in two cases where installment payments are being made.

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FY 1997 Audited Financial Statement t

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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.

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These statements have been prepared from the books and records of the NRC in accordance with the formats prescribed by OMB. However, these statements differ from the financial reports I used to monitor and control budgetary resources that are prepared from the same books and 7

records. The principal statements should be read with the realization that they are for a sovereign C entity, that liabilities not covered by budgetary resources cannot be liquidated without the enact-ment of an appropriation, and that the payment of all liabilities other than for contracts can be I abrogated by the sovereign entity. Other limitations are included in the footnotes to the principal statements.

The NRC's FY 1997 financial statement was audited by R. Navarro and Associates under con- I tract to the NRC's Office of Inspector General. This section contains the results of the audit, the financial statements, and footnotes. ,

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/gRREQp p  % UNITED STATES ,

i E NUCLEAR REGULATORY COMMISSION

,,8 WASHINGTON, DC 20555-0001 February 13,1998 MEMORANDUM TO: Chairman Jackson FROM: Hubert T. Bell r--

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7 Inspector General h.

SUBJECT:

RESULTS OF THE AUDIT OF U.S. NUCLEAR REGULATORY COMMISSION'S FISCAL YEAR 1997 FINANCI AL STATEMENTS Attached is the independent auditors' report on the U.S. Nuclear Regulatory Commission's ,

(NRC) Fiscal Year 1997 financial statements. The Chief Financial Officers (CFO) Act requires the Office of the Inspector General (OIG) to annually audit NRC's Principal Financial State-  ;

ments. The report contains (1) the principal statements and the auditors' opinion on those ,

statements, (2) the auditors' opinion on management's assertion about the effectiveness of internal controls, and (3) a report on NRC's compliance with laws and regulations. Written comments were obtained from the CFO and are included as an appendix to the independent auditors' report.

Audit Results The independent auditor issued an unqualified opinion on the Statement of Financial Position, the Statements of Operations and Changes in Net Position, Cash Flows, and Budgetary Re-  ;

sources and Actual Expenses.

In the opinion on management's assertion about the effectiveness ofinternal controls, the auditor identified two new reportable conditions and closed two prior-year reportable conditions. The new conditions concern (1) business continuity (recovery) plans for financial systems, and (2) segregation of duties for certain accounting functions. The two reportable conditions closed concern (1) software capitalization procedures, and (2) payroll system integration and labor cost distribution.

The report on NRC's compliance with laws and regulations disclosed that the reportable condi-tion relating to business continuity plans is considered a substantial noncompliance with the Federal Financial Improvement Act of 1996. Tests of compliance with selected provisions of y other laws and regulations disclosed no other instances of noncompliance. j (continued on page M) 1997 ACCOLNI AHil,lTv RI.l'ORI

Audit of Fl' 1996 Financial Statement (continued)

The CFO's response to the issue relating to business continuity plans stated,"The three systems mentioned in the audit report are all scheduled for replacement within the next one to two years....The OCFO [ Office of the Chief Financial Officer] and the OCIO [ Office of the Chief Information Officer] will determine the cost effectiveness of developing continuity / contingency plans for the systems that are to be retired or replaced." Because this is a significant issue, we wish to reiterate and clarify our position.

< The Office of Management and Budget Circular A-130 clearly requires agencies to plan for reasonable continuity of support should normal operations be disrupted. Although NRC plans to L replace or retire several financial information systems, the agency should not allow its business operations to continue to be at risk. We fully understand that a strategy for cost containment is essential tc any agency decision. However, unless a system replacement or retirement is immi-nent (e.g. , the current payroll system), all systems must have some type of continuity / contin-gency recovery mechanism.

" We did not review NRC performance data this year because NRC is in a transition period for reporting this data. Further, over the five previous fiscal years, OlG has reviewed the systems and verified data from which performance information was derived. With one exception, OIG found the prior performance data to be accurate. NRC took corrective action on that one exception. In the future, we plan to review performance data reported in NRC's annual per-formance plan.

We appreciate NRC staff's cooperation and continued interest in improving financial manage-ment within NRC.

Attachment:

As stated I

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IN DEPENDENT AU DITORS ' R EPORT .. ............................. ......... . .......... ........ . .... ....... . .. .. 35 5 s e

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o S tate ment of Financial Position .. ...... ........... . ............ ... ... ... .. ................. ... .. . .. ... . .... . 47  ?

o Statement of Operations and Changes in Net Position ....... ........... .......... .... ....... ........... 49 k

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S tate m e n t o f Cash Fl ow s ... . ..... . . ... . . . .. .. .. .. . . . .. . . . . . . .. . .. . . . . . . . . . .. . . . . . . .. . . . . . .. . . . . . . . . . . . . . . . f;. ...

w Statement of Budgetary Resources and Actual Expenses ...... ..... . ........ . ..... .. ........... 52 h[

Notes to Principal Statements ....... .... ...... . . ..... ..... . ..... ................. ...... ........... . .. ...... 53 k r.

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[T Chainnan Shirley A. Jackson b U.S. NUCLEAR REGULATORY COMMISSION Washington, DC k

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INDEPENDENTAUDITORS' REPORT g

We audited the U.S. Nuclear Regulatory Commission's (NRC) principal statements at Septem-ber 30,1997 and for the year then ended, as required by the Chief Financial Officers (CFO) Act

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of1990. We found that the principal statements present fairly in all material respects. We  !;

believe that our audit provides a reasonable basis for our opinion. The principal statements of f the NRC at September 30,1996 and for the year then ended, were audited by other auditors whose report dated March 6,1997, expre d an unqualified opinion on those statements.

[p Management stated that the internal control structure in place at September 30,1997, was effec-

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tive in (1) safeguarding assets from material loss, (2) assuring material compliance with laws and y regulations governing the use o'f budgetary authority and with other relevant laws and regula-

[7 tions, and (3) assuring that there were no material misstatements in the Principal Statements. We p noted two reportable conditions in the current year. One reportable condition relating to business continuity plans is classified as a substantial noncompliance with the Federal Financial Manage-ment Impmrement Act (FFMIA), as well, E h

g The following section outlines our conclusions and discusses the Overview of the Reporting Entity and the secpe of the audit.

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V REPORTON PRINCl PAL STATEMENTS (y

m The Principal Statements, including the accompanying notes, present fairly in all material re- if spects, in conformity with a comprehensive basis of accounting other than generally accepted accounting principles, as described in Note I to the principal statements, NRC's:

h assets, liabilities, and net position; revenue, financing sources and expenses;

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• cash flows; and <

c budgetary resources and actual expenses.

r REPORT ON MANAGEMENT ASSERTION ABOUT THE EFFECTIVENESS OF THE v.

INTERNAL CONTROL STRUCTURE l We evaluated management's assertion that the NRC maintained an effective internal control l structure designed to- l;;7, (continued on page 36) 1997 AccoUNTAftILITY REl' ORT f i 5

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Audit of FI'1996 Financial Statement (continued} I R. Navarro & Associates, Inc, a safeguard assets against loss from unauthorized acquisition, use or disposition;

• assure the execution of transactions in accordance with laws governing the use of budget authority and with laws and regulations that have a direct and material effect on the Principal Statements or that are listed in the Office of Afanagement and Budget (OAfB)

Bulletin 93-06, as amended, that 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 30,1997, provided reasonable assurance that losses, noncompliance, or misstatements, material in relation to the I

Principal Statements, would be prevented and detected on a timely basis. Management made this assertion based upon criteria established by the Federal Afanagers'FinancialIntegrity Act of1982 (FAfFIA) and OAfB Circular A-123, Afanagement Accountability and Control.

s REPORTABLE CONDITIONS AND AUDITFOLLOW-UP We noted two matters involving the internal control structure and its operation that are consid-ered reportable conditions under the standards established by the American Institute of Certified Public Accountants and OMB Bulletin 93-06, as amended. Although not material in relation to the Principal Statements, 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 assertion on the effectiveness of the internal controls.

CennENT YEAR The matters listed below involve the design or operation of the internal control structure and i warrant disclosure as reportable conditions. None are classifiable as material weaknesses.

A. Business Continuity Plans Our assessment of the NRC's management control program included a review of the agency's business continuity practices for major financial management systems. The agency's major {

business systems include (1) the core general ledger - Federal Financial System (FFS) serviced by the U.S. Treasury Financial Management Service (FMS); (2) accounts receivable - billing for ,

license fees; and (3) the payroll system. These systems are critical to recording, summarizing and preparing financial information. We noted that these agency systems either did not have

= established test plans, did not have a documented recovery plan, or did not have a plan that y reflected the actual operations of the system.

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o OMB Circular A-130, Management of FedemlInformation Resources, requires agencies to plan for reasonable continuity of support should nmmal operations be disrupted in an emergency and fh assigns responsibility to the Department of Commerce for developing guidance and standards for L.

information processing systems.

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Guidance provided by the Department of Commerce states [that agencies]"... ensure IT [Infor- h mation Technology] systems shall develop and maintain, in an up-to-date state, contingency and i.

disaster recovery plans which will provide reasonable assurance that critical data processing can [

be continued, or resumed quickly, if normal operations are interrupted. The plan for large sys-  !

tems supporting essential... agency functions shall be fully documented and operationally tested at least annually...."

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a The individual circumstances for the lack of recovery plans are described. I L

General Ledger - Federal Financial System f

Prior to fiscal year (FY) 1997, FFS did not have back-up recovery capabilities, as reported by l Treasury-FMS in the annual FMFIA reports. During FY 1997, the FMS reported that additional disk storage capacity was installed at the designated FFS back-up site in Austin, Texas. How-

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T ever, due to a lack of available budget resources, the recovery plan will not be tested and vali- 0 dated until sometime in FY 1998. Consequently, the condition was reported in the FMS FY 1997 FMFI A report as: " Unable to demonstrate the ability to perform data recovery and back-up Q capabilities of the FFS application in the event of a disaster."

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Recovery Plans for Fee Systems E G

In September and December 1996, the Office ofInformation Resources Management certified 5 the major fee systems based on reviews performed by a contractor. The work included: (1) creat-ing security plans; (2) developing and executing test plans; and (3) preparing certification docu- lI ments. b E

The results of the reviews indicated that adequate security provisions were in place. However, the contractor indicated that NRC had not developed a contingency or business resumption plan }

for any of the major fee systems. As of the end of our field work no plans have been developed in response to the conditions reported. -

Recovery Plans for Payroll System  !

t There is no current recovery plan for the payroll system. A previously existing recovery plan I was not updated when the payroll Automatic Data Processing (ADP) operations were transferred from the agency's prior location about four years ago. Currently, the payroll functions are planned to move to a new payroll / personnel system in April 1998, therefore, actions planned for  :

developing a recovery plan will focus on the new system. .

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(continued on page 38) i 1997 Acco0NTAltil.ITY RI:I' ORT l h" ,

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R. Navarro & Associates, Inc.

W y Recommendation The CFO should establish, for systems within the agency's control, initiatives for designing h recovery plans for all Gnancial management systems. In providing such guidance, the CFO 3 should assess the priority of each system. Furthermore, the CFO should assure that policies

@- are issued ensuring that the design or development of any new financial management systems, d' and the related security and maintenance programs of such systems include the development h- of a plan which is documented and tested. We recognize that NRC, as a user of the FFS, does g not have the leverage to compel FMS to comply with a sound disaster recovery program.

M Therefore, no recommendation is offered other than continued monitoring of this condition

. through the user group.

A CFO's Comments N

g " Agency financial systems are currently undergoing major changes. The three systems men-y tioned in the audit report are all scheduled for replacement within the next one to two years.

N The Federal Financial System (FFS) and the accounts receivable / license fee billing system M will be replaced by the new agency-wide resource management system STARFIRE. The h Payroll System will be replaced by the Payroll / Personnel (PAY /PERS) System. The OCFO M [ Office of Chief Financial Officer] and the OCIO [ Office of Chief Information Officer] will Q determine the cost effectiveness of developing continuity / contingency plans for the systems that are to be retired or replaced. The OCFO and OCIO will then jointly prepare a plan by h

d June 1,1998 to develop the required continuity / contingency plans for continuing financial y systems. These plans will be developed in accordance with OMB Circular A-130, Manage-ment of Federal Information Resources, and NRC System Development and Life Cycle Man-N hi agement (SDLCM) Methodology."

3

} g Auditors' Position j - OMB Circular A-130 clearly requires agencies to plan for reasonable continuity of support hj should normal operations be disrupted. Although NRC plans to replace or retire several finan-cial information systems, the agency should not allow its business operations to continue to be at

@d risk. We fully understand that NRC has a variety ofinitiatives in place and that a strategy for cost containment is essential to any agency decision. The remediation plan that the CFO and the M

h Chief Information Officer (CIO) will develop and deliver to the Office of the Inspector General (OlG) by June 1,1998, must focus on managing the NRC's existing business continuity risks h and provide detailed steps and timetables that will be used as a framework to minimize such risks. Unless a system replacement or retirement is imminent (e.g. the current payroll system) h all systems must have continuity / contingency plans. We further believe that the framework j

k developed under the remediation plan should provide a basis for developing continuity / contin-gency plans for any planned financial systems.

a h

9-4 I

1. U.s.Nt:CIIAR REGt:LAToRY COMMISSION d

M M

e hs W

R. Navarro '& Associates, Inc.

(b B. Segregation ofDuties - FFS f

n NRC uses the FFS as its primary accounting system. The Division of Accounting and Finance f (DAF), OCFO is responsible for maintaining FFS, including controlling access. FFS access is 6 controlled by hierarchical access profiles that range from inquiry only access to the " system f

administrator" profile that permits unrestricted system access and updating security tables. E

!s

'At September 30,1997, there were 92 active FFS users with varying access levels depending on p their functions. At that time, eight DAF employees held a " lead accountant" access profile which E ranks just below the " system administrator" profile. The " lead accountant" profile allows hold-

'l{[

crs to enter transactions and change any existing transaction or table except for the security p

tables. At least three of these employees are also responsible for reconciling FFS output to source y documents or to output from other systems including the payroll system.

Thus, the employees holding " lead accountant" profiles and preparing reconciliations are per- [

forming incompatible functions from an internal control perspective because they are in a posi- [

tion to both commit errors and irregularities and to conceal them in the course of discharging

{p their normal duties.

The General Accounting Office's (GAO) Standardsforinternal Controls in the Federal Govern- h ment state "... key duties and responsibilities in authorizing, processing, recording, and reviewing transactions should be separated among individuals." [!

E Recommendation f

The CFO should reduce the number of persons holding the 'iead accountant' access profile and/

or implement additional compensating controls. The compensating controls could include requir-

. ing supervisory review and certification of reconciliations and their resulting journal vouchers.

g p

CFO's Comments b w?

"The OCFO will examine those persons holding the " lead accountant" access profile and deter- g mine whether it is cppropriate to make any changes to access profiles. In addition, the OCFO R will institute compensating controls con :ing of review and certification of reconciliations and p their resulting journal vouchers by the Finans! Team Leader." (p Auditors' Position V..

7 The actions described by the CFO should strengthen the design of controls over segregation of h duties; The CFO should advise the OlG when the controls have been redesigned,in order that k during a subsequent audit, controls can be tested to verify implementation of the corrective action.

{b E

g p

e h

-E (continued on page 40) f Sev s1g 1997 ACCOUNTABILITY REPORT b

hL a

4 M-h ~ Audit of FY 1996 FinancialStatement (continued) ,

&q R. Navarro & Associates, Inc. i

)

3 Pmon YEAu i

Jn j CAPITALIZATION PROCEDURES FoR ADP SoITWARE NEED IMPROVEMENT g

9 The FY 1996 audit disclosed a need for improvements to software capitalization procedures.

h This finding represented a continuing OlO concern about NRC's financial reporting of property.

While OIG raised and the NRC has resolved similar issues over the past few years, it was be-B y lieved that the issue indicated a continuing concern and must be identified as a reportable condi-4 tion.

In the current year, NRC addressed the practice used for properly identifying and classifying y software acquisitions in a memorandum dated August 19,1997. The procedures outlined in the f

g memorandum provide adequate resolution, therefore, this issue is closed.

jj PAYROLL SYSTEM MusT BE IN1TiGR ATED Wml THE GENERAL I Sr$ER AND Possess LABOR DisTRIBU-Tion CAPABILITIES.

a l! In the FY 1995 audit, OIG reported that NRC's accounting system did not include all of the necessary general accounting controls to produce timely and accurate financial information

[

hj needed to prepare complete financial reports as required by OMB Bulletin 94-01, Form and Content ofAgency Financial Statements. The principal weaknesses and issues that d remained were:

q q

• _ the compatibility and integration of the NRC general ledger and subsystems used by

/4 . NRC for payroll did not provide labor cost distribution capabilities.

a 1

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

y.

M. During the current year, NRC developed a year-end methodology using cost center data to d present program costs by budgetary program. Furthermore, the guidance provided by FFMIA no y longer requires integration of financial systems. Both these actions, presentation of costs by J program and the FFMIA, enable us to close this condition.

d s

REPORT ON COMPLIANCE WITH LAWS AND REGULATIONS

[a

{ Our tests of compliance with selected provisions of laws and regulations disclosed no instances of noncompliance, except the repoltable condition relating to business continuity plans which is 4

j considered a substantial noncompliance with FFMIA, that would be reportable under Govern-n- ment Auditing Standards or OMB Bulletin 93-06, Audit Requirementsfor Federal Financial q Statements, as amended. However, the objective of our audit was not to provide an opinion on Q overall compliance with laws and regulations. Accordingly, we do not express such an opinion. ,

Q, l d l

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U.S. NUCLEAR REGULAToRv CoMMISSloN q-

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R. Navarro & Associates, Inc. V MATTER OF EMPHASIS NRC's principal statements include reimbursable expenses of the U.S. Department of Energy (DOE) National Laboratories. For FY 1997 and 1996, NRC's Statement of Operations included approximately $79 and $89 million, respectively, of reimbursed expenses, which represent approximately 14% and 17%, respectively, of total expenses. Our audit inciuaed testing these i expenses and financing sources for compliance with laws and regulations within NRC. The d work placed with DOE is under the auspices of a Memorandum of Understanding between NRC

[

and DOE. The examination of DOE National Laboratories for compliance w"*- laws and regula- [' '

tions is DOE's responsibility. This responsibility was further clarified by a memorandum of the GAO's Assistant General Counsel, dated March 6,1995, where he opined that "... DOE's inabil-ity 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 F the cognizant responsibility to assure audit resolution and should provide the results ofits audits ,

to NRC.  !'

CONSISTENCY OF OTHER INFORMATION The overview of the NRC, program performance output measures, and other supplemental financial and management information sections contain a wide range of data, some of which is f

f not directly related to the Principal Statements. We do not express an opinion on this informa- W tion. We have, however, compared this information for consistency with the Principal State-  !'

ments and discussed the measurement and presentation methods with NRC management. Based ,

on this limited effort, we found no material inconsistencies with the Principal Statemems or

[

noncompliance with OMB guidance. p s

i:

OBJECTIVES, SCOPE AND METHODOLOGY f

NRC management is responsible for (1) preparing the Principal Statements in conformity with #

the basis of accounting described in Note 1 to the principal statements, (2) establishing, main- l taining, and assessing the internal control structure to provide reasonable assurance that the l broad control objectives of FMFIA are met, and (3) complying with applicable laws and regula- 4 tions including the requirements referred to in FFMIA. E We are responsible for expressing an opinion on whether (1) the Principal Statements are free of  ;

material misstatement and presented fairly, in all material respects, in conformity with the basis of accounting described in Note 1 to the principal statements, and (2) for obtaining reasonable

[

assurance whether management's assertion about the effectiveness of the internal control struc-

[:,

ture is fairly stated, in all material respects, based upon criteria established by FMFIA and OMB Circular A-123, Management Accountabilirf and Contml. As of the date of our report, NRC

['

management had completed its evaluation of financial controls.  ;

(continued on page 42)

L 1997 ACCoUN1AnnJrY REPORT 3

w,

g Audit of FY I996 Financial Statement 1 continued)

R. Nan v & Associates, Inc.

We are also responsible for testing compliance with selected provisions of laws and regulations b and for performing limited procedures with respect to certain other information in this annual Dnancial statement. In order to fulfill these responsibilities, we:

- examined, on a test basis, evidence supporting the amounts and disclosures made in the Principal Statements;

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

= evaluated the overall presentation of the principal statements;

- obtained an understanding of the internal control structure related to safeguarding of assets, compliance with laws and regulations including execution of transactions in accordance with budget authority and financial reporting,in the principal statements;

. assessed control risk and tested relevant internal controls over safeguarding of assets, compliance, and Gnancial reporting and evaluated management's assertion about the effectiveness of internal control;

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

Omnibus Budgetary Reconciliation Act of 1990 (PL 101-508), Debt Collection Act of 1982 (PL 97-365), Prompt Pay Act (PL 97-177), Civil Service Retirement Act of 1930, Civil Service Reform Act (PL 97-454), Federal Managers' Financial Integrity Act (PL 97-255), CFO's Act (PL 101-576), Budget and Accounting Act, Federal Financial Man-agement Improvement Act (PL 104-208); and, o

a reviewed compliance and reported in accordance with FFMIA whether the agency's financial management systems substantially comply with the Federal Gnancial manage-ment system requirements, applicable accounting standards and the U.S. Standard Gen-eral Ledger at the transaction level.

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 ef0cient and effective operations. We limited our internal control tests to those necessary to achieve the objectives described in our opinion on management's assertion about the effectiveness of inter-nal controls. Because of inherent limitations in any internal control structure, losses, noncompli-e ance, or misstatements may nevertheless occur and not be detected. Also, projection of any evaluation of the internal control structure over financial reporting to future periods is subject to the risk that the internal control structure may become inadequate because of changes in condi- j tions, or that the degree of compliance with the policies or procedures may deteriorate.

I U.S. M CllAR HI;Gl'LAToRv Co\tMissioN L

ba_______.. . . . . . . . . . . .. . _ . _ . . . . . . . . . . . . . _ . . _ _ _ _ _ _ _ . . _ .

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i R. Navarro & Associates, Inc. K We performed our work in accordance with generally accepted auditing standards, Government Auditing Standards and OMB Bulletin 93-06, Audit Requirementsfor Federal Financial State-ments, as amended. "E v

(

?

t AGENCY COMMENTS O e

l On February 6,1998, the CFO responded to the inspector General on our draft report and ad-dressed the two recommendations noted in the report. The CFO did not provide specific reme- <

l dial actions for the substantial non-compliance relating to business continuity. However, the  !

CFO has indicated that a [remediation] plan will be prepared by June 1,1998, in conjunction

with the CIO. Based on our review of the CFO's comments, we are satisfied that the actions described meet the intent of our recommendations and FFMIA guidelines. The CFO's comments p are appended to this report in their entirety. -

! Under separate cover, comments will be provided to NRC management outlining opponunities t for strengthening internal control and operating efficiency. We appreciate NRC staff's coopera- ,

tion and continued interest in improving financial management within the agency.

f-This report is intended solely for the use of management of the U.S. Nuclear Regulatory Com- l l mission and the Office of Inspector General. This restriction is not intended to limit the distribu- -

! tion of this report, which upon acceptance by the Office of Inspector General is a matter of g public record. h

,h mo (, 0 NO '

?-

1L January 23,1998 I

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[' I l 1997 ACCot:NTAIHL11T REPORT 1

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PRINCIPAL STATEMENTS is

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I 4 STATEMENT OF FINANCIAL POSITION l September 30,1997 and 1996  :

l

[

f l

ASSETS 1997 1996

[N$ihj[ssets(

Intragovernmentalassets:

Fund balances with Treasury (Note 2) $176,556,311 $210,748,055 Accounts receivable (Note 3) 3,019,507 5,822,652 Advances and prepayments (Note 4) 2,948,348 4,948,524  :

Governmentalassets:  ;

Accounts receivable, net (Note 3) 28,854,870 24,079,551 Advances and prepayments (Note 4) 512,767 472,592

• Property and equipment, net (Note 5) 35.798562 38.189.091 Total entity assets $247.690.372 $284.260.465  !

F.

u w,r, : p .vw y, ..,.f,vyg... g. e

[Non, Entity Assetsij  !'

Governmentalassets:  :

Accounts receivable, net (Note 3) 55.061 312.470  !'

Total non-entity assets 55.061 312.470 Total assets $247.745.433 $284.572.935 I

l (continued on page 48)

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

1997 ACC OUNTABil.lTY lti: Pol (T f i1 L d

$. t

-j _

+ l l Audit of FY IV96 Financial Statement (continued)

3 A

@ STATEMENT OF FINANCIAL POSITION (Continued)

September 30,1997 and 1996 q LIAHILITIES 1997 1996 L

G1 ..,._.m_,,,.m.,......, m.,,y,m,._. - ,,

j l Li,std,li_ tie. s'C_ove. r_ed_By

- m Bu,dge_tary

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7

@ Intragovernmentalliabilities:

B ij Accounts payable and advances (Note 6) S 12,775,896 S 11,805.497

]  :

Otherintragovernmentalliabilities (Note 8) 30,754,696 26,519,644 Governmentalliabilities:

3 n

Accounts payable (Note 6) 21,155,283 21,229,287 q Other governmental liabilities (Note 8) 5,525,519 7,143,659 Accrued payroll and benefits (Note 7) 12.450.388 11.527.847 Total liabilities covered by budgetary y] resources S 82.661.782 $ 78.225.934

% e-,...-.,.,,,,,.-..,,..,.,_.n,,..,,._.,. .

p Governmentalliabilities:

Other governmental liabilities (Note 9) 36.635.843 32.710.987 h

[ Totalliabilities not covered by budgetary P resources 36.635.843' 32.710.987 3

1. Totalliabilities $119.297.625 5110.936.921.

%N p NET POSITION n:4 h h 4 Unexpended appropriations 129,285,082 168,157,910 1 Invested capital 35,798,569 38,189,091 j Future funding requirements (36.635.843) _(32.710.987) y d Total net position $128.447.808 $173.636.014 Totalliabilities and net position $_247.745.433 $284.572.935 The accompanying nott s to the principal statements j; are an integral p.'rt of this statement.

U.S. NUCilAR NEGULAloRv COMMISSION yf lj Y - - - . - -

e 0

STATEMENT OF OPERATIONS AND CIIANGES IN NET POSITION ,

for the years ended September 30,1997 and 1996 L e

h g.___.,._.__..-,e_

@EVENUESANDFINANCING SOURCES lj 1997 Restated 1996 V

[

N Appropriated capital used (Note 12) $ 62,086,597 $ 52,837,295 i' '

Other revenues and financing sources (Note 14) 477,704,094 452,184,128 7 Excess (shortage) of current year receipts of fees over billings (4,707,194) 14,633,020  ?

Imputed financing (Note 13) 1 ess: Receipts transferred to the Treasury or other agencies 19,976,493 (6.055.409) 20,478,243 (2.925.845)

[

,_m,,-s, Total revenues and financing sources $549.004.581 5 137.206.841 [p (EXPENSESj V Operating Expenses b Personnel services and benefits $291,993,719 $283,521,310 (

Travel and transportation 15,451,061 16,174,764 L Rent, communication, and utilities 26,276,698 25,240,443 i Printing and reproduction 1,605,504 1,579,151  !.

Contractual services Supplies and materials 194,959,500 13,829,863 189,329,595 12,868,778 I

j.m Grants, subsidies, and contributions 1,653,680 1,486.946 Le Insurance claims and indemnities and other 40.903 10L931 if" Total operating expenses 545.810.928 530.3D? 08 b) ,

Depreciation and amortization (Note 5)

Interest 6,462,011 3,370 8,540,608 4,683

[ "

Other expenses (Note 17) 653.130 17.101 h

p. .

Total expenses $552.929.439 $538.865.370 k p

Excess or (shortage) of revenues and financing I-sources over total expenses (Note 18) $_ (3.924.858) $ (1.658.529) h,

. ,, . , s m. ~ . ,,,_, I

[ Net position, beginning halancej

^

$173,636,014 $209,483,290 fE Excess (shortage) of revenues and financing I' sources over expenses (3,924,858) (1,658,529)  ;

Plus non-operating changes (Note 19) (41.263 348) (34.188.747)  ;.

6

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[~ Net.. p,~ositi.on, en. dingvba,

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$128.447.808 $173.636.014 f (continued on page 50)

(-  !

The accompanying notes to the principal statements *i are an integral part of this statement. L

.]

1997 ACCOUNTAlnLITv REPORT h l

, ,V A J

.c

]

A~ .I of FY I996 Financial Statement tcontinued1 STATEMENT OF CASil FLOWS for the years ended September 30,1997 and 1996 g, --.. .n ,., , .~ - - ,

l w.u., . ,,, ,,

1997 1996 l [ CASH PROVIDED (USED)'BY OPERATING ACTNITI Sk s

l Cash Provided:

j Fees for licensing, inspection, and other services (Note 12) $ 458,626,753 $ 454,049,125 i

j Other operating cash provided 8.968.118 8.450.745 1

!- Total cash provided $ 467.594.871 $ 462.499.870 I

l Cash Used:

! Pen,onnel services and benefits (267,638,742) (259,816,269)

Travel and transportation (15,766,363) (16,275,698) l Rent, communications, and utilities (25,184,924) (26,342,185) l Printing and reproduction (1,670,930) (1,554,538) l Other contractual services (l88,142,460) (193,678,520) i) Supplies and materials (14,406,394)

(44,125)

(l1,162,708)

(98,271)

) Insurance claims and indemnities (1,489,740) (1,527,452) i ' rants, subsidies, and contributions 2 .ier operating cash used (1.900.841) (6.867.033)

Y}

q Total cash used $(516.244.519) 1(517.322.679) j Net cash used by operating activities $ (48.649.648) $ (54.822.809)

N 1 (bE If $5EliBWl$VESTi$G ACTIVITIES

. . ~ ~ - - -

a J Purchase of property and equipment (6365.343) (l1.680.069)

Net cash used by investing activities $ (6.365.343) $ (11.680.069) b W

a ^

'ftSiflROVIDED IBY FINANCING 4CTIVITNESI Appropriations 18,173,247 18,536,875 a Add: Transfers of cash from others 2.650.0(X) 111.672 h

2 Net appropriations $ 20.823.247 $ 18.648.547 y

Net cash provided by financing activities 5 20.823.247 $ 18.648.547 h;

!?

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

]-

r . U.s.NCCI. EAR REGUI.AToRv Co\1illSSloN (3 l n

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h STATEMENT OF CASil FLOWS (Continued) I for the years ended September 30,1997 and 1996 I 1992 1996 3 Net cash provided (used) by operating, -L investing, and financing activities $ (34,191,744) $ (47,854,331) ki; Fund balances with Treasury, beginning 210.748.055 258.602.386

}Qa Fund balances with Treasury, ending $176.556.311 $210.748.055

~

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( Reconciliation of Shortage of Revenues and : >

c . Financing Sources over Total Expenses: <

y%

l Excess (shortage) of revenue and financing h

sources over total expenses $ (3,924,858) $ (1,658,529) N Adjustments to Reconcile Shortage Of Revenues h

p and Financing Sources Over Total Expenses to Net Cash Provided by Operating Activities- f i Appropriated capital used b

(62,086,597) (52,837,295) Bj Decrease (increase) in accounts receivable 2,740,306 (2,823,343) Mi Decrease (increase) in other assets .1,960,001 (2,258,975)  %.

Increase (decrease) in accounts payable 896,395 (887,331) '*

Increase (decrease) in other liabilities (911,952) (6,682,254) R Depreciation and amortization 6,462,011 8,540,608 Other unfunded expenses 3,924,858 1,658,529 f

6 Other adjustments 2.290.188 2.125.781 ,

. Total adjustments (44.724.790) (53.164.210) k e!

Net Cash Used by Operating Activities ( $ (48.649.648) $ (54.822.809) .j s[ '

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l l (continued on page $2) b The accompanying notes to the principal statements are an integral part of this statement, h.

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! NOTES TO PRINCIPAL STATEMENTS V September 30,1997 and 1996 V o

NOTE 1.

b

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES 0 V1 g

A. Basis ofPresentation f Wl These principal statements were prepared to report the financial position and results of M operations of the U.S. Nuclear Regulatory Commission (NRC) as required by the Chief h Financial Officers Act of 1990. The principal statements were prepared from the books @

and records of NRC in accordance with the form and content for entity financial state-

[

ments specified by the Office of Management and Budget (OMB) in OMB Bulletins E 94-01 and 97-01 and NRC accounting policies summarized in this note. These state-f ments are, therefore, different from the financial reports, also prepared by the NRC pursuant to OMB directives, which are used to monitor and control NRC's use of y

d budgetary resources. P g

h B. Reporting Entity / Program Name k g

p The NRC is an independent regulatory agency of the Federal Government that was A created by the U.S. Congress to regulate the Nation's civilian use of byproduct,. source,

! and special nuclear materials to ensure adequate protection of the public health and []

f safety, to promote the common defense and security, and to protect the environment. Its purposes are defined by the Energy Reorganization Act of 1974, as amended, along with the Atomic Energy Act of 1954, as amended, which provide the foundation for regulating h

the Nation's civilian uses of nuclear materials.

$w NRC has two appropriations: (y 31X0200 - Salaries and Expenses [;

=

31X0300 - Office of Inspector General f n

1.

The 31X0200 appropriation includes approximately $11 million for FY 1997 and for p l FY 1996 of funds derived from the Nuclear Waste Fund in accordance with the provi- h

[ sions of Public Law 104-206. Public Law 104-134 rescinded $0.7 million from the [:n l FY 1996 NRC Salaries and Expenses Appropriation. I q

p In addition, $2.65 million and $0.5 million of the appropriation received by the U.S. P Agency for International Development for FY 1997 and 1996, respectively, was trans- p ferred for the Nuclear Safety Assistance Program in Russia, Armenia, Kazakhstan and the in Ukraine which is under the control of NRC. The accompanying financial statements of

' NRC include the accounts of all funds under NRC control.

f d

h K

N g -.

(coninued on page 51) 1997 AccoUNTAlnt.ITY REPoHT .i

[p, y

< a

o

? Audit of FY 1996 Financial Statement (continuedV k

) NOTES TO PRINCil%L STATEMENTS September 30,1997 and 1996 y

C. Budgets and Budgetary Accounting ,

M i g$ For the past 23 years, Congress has enacted no-year appropriations which are available )

I for obligation by NRC until expended. The Omnibus Budget Reconciliation Act (OBRA)

$p of 1990 requires NRC to recover approximately 100 percent of its new budget authority, d less the amount derived from the Nuclear Waste Fund, by assessing fees. For FY 1997,

$ Congress appropriated funds for the commercial vitrification of high-level radioactive d waste at the Hanford, Washington, site. These funds are exempt from the requirement in

? OBRA for fee recovery. At the end of the fiscal year, NRC's appropriations are reduced by the amount of revenues collected during the fiscal year.

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

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

E. Revenues and Other Financing Sources Licensing fees and fees for inspections and other services, assessed in accordance with l OBRA, are recognized as other financing sources when earned.

i For reporting purposes, appropriations are recognized as revenues (Appropriated Capital i Used) at the time expenses are accrued. At the end of the fiscal year, appropriations recognized are n duced 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 s authority are held to offset subsequent years' appropriations. Appropriations expended for property and equipment are recognized as expenses when the asset is consumed in operations (depreciation and amortization). Appropriated Capital Used does not include (a) appropriations used to purchase capital items; (b) expenses incurred but not yet funded by Congress, such as workers' compensation benefits and annual leave expenses;

$ and (c) expenses which are paid by other Federal agencies, such as retirement benefits.

The differences between the accrual basis recognition of appropriations expensed and the

$ budgetary basis recognition of outlays are presented in the Statement of Budgetary Resources and Actual Expenses.

t Miscellaneous receipts collected by NRC are not available to NRC for obligation or

]3 expenditure. These receipts must be transferred to the U.S. Treasury when collected.

g

,h U.S.NUCllAR REGl

IAToRv CoMMISNloN y

3  ;

4 g

v 0

NOTES TO PRINCIPAL STATEMENTS U September 30,1997 and 1996 l

lf w

E. Funds with the U.S. Treasury and Cash Q

te NRC cash receipts and disbursements are processed by the U.S. Treasury. The fund f balances with the Treasury and cash are primarily appropriated funds that are available to d pay current liabilities and to finance authorized purchase commitments. Cash balances h

held outside the U.S. Treasury are not material.

y G. Accounts Receivable, Net ofAllowance W p

p The amounts due for receivables, except those due from Federal agencies, are stated net y of an allowance for uncollectible accounts. Since receivables from Federal agencies are f expected to be collected, there is no allowance for uncollectible accounts. The estimate

[

of the allowance is based on an analysis of the outstanding balances and the application  %

of estimated uncollectible percentages to categories of aged receivable balances.

w II. Advances

?p 1

NRC makes cash payments to other Federal agencies, employees, grantees, and contrac-tors to provide for future NRC program expenditures. These advance payments are f recorded as assets which are reduced when NRC receives repons of expenditures or when D

accruals of cost estimates are made.

y A:

I, Property and Equipment Y The NRC's property and equipment consists primarily of typical office furnishings, k

[

nuclear reactor simulators, and computer hardware and software. The agency has no real h property and loan or loan guarantee programs.

kp R

The land and buildings in which NRC operates are provided by the General Services Administration (GSA), which charges NRC rent that approximates the commercial rental p[

rates for similar properties.

g r'

Property with a cost of $50,000 or more per unit and a useful life of 2 years or more are p capitalized at cost and depreciated. Other property items are expensed when purchased. F Normal repairs and maintenance are charged to expense as incurred.

[

Propeny is depreciated using the straight-line method over useful lives which range from 5 to 20 years, k

?

go I

p-(continued on page 56) f u

1 U]

M k Audit of FY 1996 FinancialStatement (continued) 4 9

i NOTES TO PRINCH%L STATEMENTS j September 30,1997 and 1996 d

J. Prepaid and Deferred Charges

)@

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

j goods and services are received.

s ed 3 K. Liabilitics fg j Liabilities represent the amount of monies or other resources that are likely to be paid by N NRC as the result of a transaction or event that has already occurred. However, no h liability can be paid by NRC absent an appropriation. Liabilities for which an appropria-tion has not been enacted and for which there is no certainty that ar appropriation will be d

4 enacted are classified as Liabilities not Ccvered by Budgetary Resources. Also, NRC i liabilities arising from sources other than contracts can be abrogated by the Government acting in its sovereign capacity.

]

di di L Contingencies h

d NRC is a party to various administrative proceedings, legal actions, environmental suits, and claims brought by or against it. Based on the advice oflegal counsel concerning

]}

i contingencies,it is the opinion of management that the ultimate resolution of these proceedings, actions, suits, and claims will not materially affect the agency's financial' j position or results of operations.

{g k M. Annual, Sick, and Other Leave N-Q Annual leave is accrued as it is earned and the accrual is reduced as leave is taken. Each j > year, the balance in the accrued annual leave liability account is adjusted to reflect current N pay rates.

A

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

q N, Retirement Plans

].

j NRC employees hired after December 31,1983, are aut ,matically covered by the Federal Employees' Retirement System (FERS), which was implemented on January 1,1987.

]@ Employees hired prior to that date could elect to join FERS or to remain in the Civil 9 Service Retirement System (CSRS). Approximately 60 percent of NRC employees j belong to CSRS and 40 percent belong to FERS. In FY 1997 and 1996, for employees in 4 FERS. NRC withheld 0.8 percent of base pay eamings in addition to Federal Insurance i j" - Contribution Act (FICA) withholdings and matched the withholding with an 1 L4 percent contribution. The sum was transferred to the Federal Employees Retirement Fund, a--__

nd  !

N

m s

N 3

L NOTES TO PRINCIPAL STATEMENTS b September 30,1997 and 1996 l

The FY 1997 contribution resulted in approximately $622,000 being paid in excess of  :

NRC's pension expense for the year. For employees covered by CSRS, NRC withholds 7 i percent of their base pcy earnings. This withholding is matched by NRC and the sum of the withholding and the match is transferred to the CSRS.

h p

On April 1,1987, the Federal government initiated the Thrift Savings Plan (TSP) which h is a retirement savings and investment plan for employees covered by either FERS or R CSRS. For employees covered by FERS, NRC automatically contributes one perces: ef p base pay to their account and matches contributions up to an additional four percent. The maximum percentage that an employee participating in FERS may contribute is 10 [p  :

percent of base pay. Employees covered by CSRS may contribute up to five percent of k their base pay, but there is no NRC matching of the contribution. The maximum amount f

that either FERS or CSRS employees may contribute to the plan in a calendar year is p

$9,500. The sum of the employees' and NRC's contributions is transferred to the Federal Retirement Thrift Investment Board. ,E i;;

The NRC does not report on its financial statements FERS and CSRS assets, accumulated b plan benefits, or unfunded liabilities, if any, applicable to its employees. Reponing such amounts is the responsibility of the Office of Personnel Management. The ponion of the [p current and estimated future outlays for CSRS not paid by NRC is included in NRC's financial statements as an imputed financing source (Note 13). {

~p g

O. Net Position f

p The NRC's net position consists of the following components: [

[

1. Unexpended appropriations which include the undelivered orders and unobli- i gated balances of NRC's funds. All NRC appropriations remain available for i obligation until expended. k y

2. Invested capital which represents U.S. Government resources invested in NRC's }

property and equipment. Increases to invested capital are recorded when assets are [

acquired with direct appropriations, and decreases are recorded as a result of the

[

depreciation, amonization, and disposition of capital assets. L ,

p t.

3. Future funding requirements which represent (a) accumulated annual leave L earned but not taken as of the financial statement date and (b) actual and estimated l

future payments to be made for worker's compensation pursuant to the Federal 7[

Employees Compensation Act (FECA). The expense for these accmals is not h funded from current appropriations, but rather will be funded from future appropria- h tions and assessments.

[

(continued on page 58) f

---

A a

Aadit of FY I996 Financial Statement (continued)

NOTES TO PRINCIPAL STATEMENTS

! September 30,1997 and 1996 it Department ofEnergy Charges f

g Financial transactions between the Department of Energy (DOE) and NRC are fully jj automated through the U.S. Treasury's On-Line Payment and Collection (OPAC) System.

h The OPAC System allows DOE to collect amounts due from NRC directly from NRC's account at the U.S. Treasury for goods and/or services rendered. Project manager verifi-cation of goods and/or services received is subsequently accomplished through a system-O generated voucher approval system. The vouchers are returned to the Division of d Accounting and Finance documenting that the charges have been accepted. Fon FY 1997, l} NRC made approximately $79.5 million in payments to DOE in this manner for research

]

v conducted by the DOE National Laboratories.

J 1 Q. Restatement b

] Certain amounts for FY 1996 have been restated to conform with the FY 1997 presentation.

1

]

NOTE 2. FUND HALANCES WITII TIIE U.S. TREASURY h

a- Fund balances with the U.S. Treasury consist of the following amounts as of September 30,1997

]Q e

and 1996:

4 .

>, 1997 1996

);f Approprir.ted funds:

j Obligated $153,920,505 $180,045,631 a Unobligated 21.257.563 28.682.412 175,178,068 208,728,043 Other fund types 1.378.243 2.020.012

%y $176.556.311 $210.748.055 9

U.S. Government cash is handled on an overall consolidated basis by the U.S. Treasury. " Funds j with Treasury" represent NRC's right to draw on the U.S. Treasury for allowable expenditures.

All amounts are available to NRC for current use. The obligated and unobligated balances f

tj exclude amounts related to unfilled customer orders.

I i

A

?nv j' O.S. NUCLEAR REGUI.AToRY con 1511SNION

.q:

t

. a

y:

b F'

c l:

NOTES TO PRINCII%L STATEMENTS i:\

September 30, I997 and 1996 O

NOTE 3. ACCOUNTS RECEIVABLE, NET It h

Accounts receivable, net, is composed of the following amounts as of September 30,1997 h and 1996:

[p N

Entity Assets E

p.

Intragovernmental accounts receivable consists primarily of receivables and reimburse- F ments due from other Federal agencies which were $3,019,507 and $5,822,652 at Sep-tember 30,1997 and 1996, respectively.

[I'

(

Governmental accounts receivable is comprised of the following amounts as of Septem-ber 30,1997 and 1996:

[

[

n p

1997 1996 k P

Materials and facilities fees - billed $ 4,270,361 $ 3,532,779 b Materials and facilities fees - unbilled 25,475,254 22,667,134 Other L 121.624 103.295 L Total accounts receivable $29,867,239 26,303,208 si Less: Allowance for uncollectible accounts (1.012.369) (2.223.657) ((

Accounts receivable, net $28.854.870 $24.079.551

[

Governmental accounts receivable represents primarily amounts due for fees assessed for p

f licensing and inspections of nuclear facilities and radioactive materials and other ser- t vices. In the year collected, the amounts will be used to offset NRC's appropriations. h F

Non Entity Assets Il p

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

[

public ($55,061 and $312,470 at September 30,1997 and 1996, respectively), which, k when collected, must be transferred to the U.S. Treasury. 17 The NRC's methodology to estimate the allowance for uncollectible accounts is based on an 4

L analysis of the outstanding balances and the application of estimated uncollectible percentages to b categories of aged receivable balances. k I

n k>

D p

[4

[l (continued on page 60) [_ ;

1997 ACCoCNTAltll.Irv Ri;l'URT '

I b

u

A c

Audit of FY 1996 Financial Statement (continued)

, NOTES TO PRINCIPAL STATEMENTS l September 30,1997 and 1996 NOTE 4. ADVANCES AND PREPAYMENTS 6; Advances and prepayments as of September 30,1997 and 1996, consist primarily of the following:

129_1 .12L6 Entity Assets Intragovernmental:

Advances - other Federal agencies $2,325.666 54,948,524 Prepayment - pension expenses 622.682 -

b $2.948.348 $4.948.524 4 Governmental:

Advances $ 512.767 $ 472.592

$ 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.

.]

NOTE 5. PROPERTY AND EQUIPMENT, NET h

Property and equipment, net, consists of the following as of September 30,1997 and 1996:

.' 1997 1996 Service Acqmsition . Accumulated Net Book Net Book h

J

.Yeani Value Depreciation Value Value j Fixed Assets Class 5-8 $ 26,587,156 $(20,400,890) $ 6,186,266 $ 8,081,496 k$ Equipment 45,249,731 (42,526,961) 2,722,770 4,915,553 O ADP software 5 d ADP software 11,340,853 9,002,437 y under development 11,340,853 -

y Leasehold improvements 20 19,181,964 (3,633,284) 15,548,680 14,625,594 14 3 Leasehold improve-1.564.011 1

ments in progress - -

p E

Total - $102.359.704 $(66.561.135) $35.798.569 $38.189.091

)

+

Jj U.S. NUCLEAR REGULAToRv CoMMISNioN ll h

i NOTES TO PRINCil%L STATEMENTS September 30,1997 and 1996 The straight-line depreciation method is used for all classes of 6xed assets. Depreciation ex-pense for FY 1997 and 1996 was $6,462,011 and $8,540,608, respectively.

The land anc'. buildings occupied by NRC are provided by GSA. For FY 1997 and 1996, GSA charged NRC $19,499,176 and $24,100,381, respectively, for the use of these facilities based on a rental fee which is to approximate the commercial rates for similar properties. j NOTE 6. ACCOUNTS PAYAllLE AND ADVANCES E Accounts payable and advances consist of the following as of September 30,1997 and 1996:

1997 1996 Intragovernmental:

Accounts payable Department of Energy $ 7,079,111 $ 9,368,752 Other Federal agencies 5.331.554 2.282.932 12,410,665 11,651,684 .

Advances 365.231 153.813 I'

$12.775.896 $11.805.497 Governmental:

Accounts payable Vendors payable $19,474,528 $19,743,864 .

Contract holdbacks 1.680.755 1.485.423 i.

$21.155.283 $21.229.232 The vendors payable are all current. Current payables represent amounts which are expected to be paid within the Oscal year following the reporting date.

7 NOTE 7. ACCRUED PAYROLL AND IIENEFITS Accrued payroll and benefits as of September 30,1997 and 1996, consists of:

19392 1996 Accrued personnel services $10,629,617 $ 9,824,164 Accrued benefits 1.820.771 1.703.683 -

$12.450.388 $11.527.847 e

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

g. .

(continued on page tL?)

1997 Ac00CNTAllILITv REPoRI f

3 h Audit of FY 1996 Financial Statement (continuedI ll 1 NOTES TO PRINCil%L STATEMENTS September 30, I997 and I996 f_

~q NOTE 8. OTIIER LIAHil.ITIES COVERED IlY HUDGETARY RESOURCES Other liabilities as of September 30,1997 and 1996, include:

1997 1996 O Governmental

$ 1,554,395 O Liability for deposit funds $1,126,887 Advances from others 4.398.632 5.589.264 h

p; $5.525.519 $7.143.659 l,

1 The liability for deposit funds consists primarily ofliabilities arising from payroll deductions l4 and tax withholdings. Advances from others consists of funds primarily from foreign govern-Wj ments for the participation in cooperative research programs.

1997 1996

,[! Intragovernmental:

A

1. Liability to offset net accounts 3 receivable for fees assessed $30,699,637 $26,206,946 6 Liability to offset net miscellaneous pj accounts receivable 55.059 312.698

'i $30.754.696 $26.519f>44 q

q h The liability to offset the net accounts receivable for fees assessed represents amounts which, when collected, will be transferred to the U.S. Treasury to offset NRC's appropriations in the j year collected.

j The liability to offset net miscell meous accounts receivable represents amounts which will be

] reverted to the U.S. Treasury when collected.

All other liabilities except advances from others are current. Current liabilities represent g

b amounts which are expected to be paid within the fiscal year following the reporting date.

b Advances from others may not be liquidated in the fiscal year following the reporting date.

7; NOTE 9. OTilER LI ABILITIES NOT COVERED llY llUDGETARY RESOURCES g

w gj Unfunded liabilities as of September 30,1997 and 1996, include:

p J997 1996 W

N Governmental:

$25,905,986 $25,359,485 Accrued annual leave 8 Accrued workers' compensation:

j Benefits paid 1,700,857 1,476,502 Estimated future benefits 9.029.000 5.875.000

[

$36.635.843 $32.710.987 9,

_a ad U.s. Ntet. EAR Hi:Grt.Alour cosistissios q

jf' ,

k

b r

L e

NOTES TO PRINCH%L STATEMENTS L September 30,1997 and 1996 (

Accrued annual leave represents the amount of annual leave earned by NRC employees but not I

F yet taken. Accrued workers' compensation includes: (a) 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 Septem-

[

i ber 30,1997 and 1996, and (b) an actuarial estimate for future disability benefits. The FY 1997 future workers' compensation estimate was genciated by DOL from an application of actuarial

[

procedures developed to estimate the liability for FECA, which includes the expected liability for death, disability, and medical and miscellaneous costs for approved compensation cases.

[

F The liability was calculated using historical benefit payment patterns related to a specific in- [

curred period to predict the ultimate payments related to that period. These projected annual benefit payments were discounted to present value.

[

i-s 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' appropria-f

[

tions and assessments (see Note 11).

• L

(,

L NOTE 10. INTRAGOVERNMENTAL ACTIVITIES  !

}.

The NRC's financial activities interact with and are dependent upon those of the Federal Gov- E ernment as a whole. Other Federal agencies make financial decisions and report certain finan- h cial matters on behalf of all Federal agencies. The practice of having Federal agencies record or f report only those governmentwide financial matters for which they are directly responsible is i:

consistent with generally accepted accounting principles for Federal agencies which seek to [l identify financial matters to the department or agency that has been granted budget authority and i' resources to manage them. Activities which are performed or reported by other Federal agencies [

in which NRC is indirectly involved are as follows:

[

7 The NRC funds a portion ofits employee pension benefits under the CSRS and the [

FERS (Note 16). The portion not funded by NRC is included in NRC's financial statements as an imputed financing source (Note 13). The NRC 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 respon- i sibility of the Office of Personnel Management.  ;

L in addition, the NRC makes contributicas to the TSP on behalf ofits employees. The [

NRC does not have control over the plan's assets. The TSP is administered by the  ;

National Finance Center of the Department of Agriculture.

[

o 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,

[

f-settlement, or award pertaining thereto are generally funded through the U.S. Treasury. F b

(continued on page 64)  ;,

1997 ACCoUNTABILITv REPoHT

1 Audit of FY I996 Financial Statement (coctinued)

NOTES TO PRINCIPAL STATEMENTS September 30,1997 and 1996 In most cases, claims (including personal injury claims) are administered and re-solved by the Department of Justice, and any amounts necessary for resolution are

] ~

obtained from a special fund maintained by the U.S. Treasury. Any legal actions for

workers' compensation claims brought by NRC employees fall under FECA, which is j administered by DOL's Employment Standards Administration. The cost of adminis-

! tering, litigating, and settling these legal matters has not been allocated to individual j Federal agencies.

h

• Interest on borrowings of the U.S. Treasury is not included as a cost to NRC's pro-

.2

! grams and is not included in the accompanying financial statements.

i

}

1, j NOTE 11. . NET POSITION j The net podtici.wnsists of the following as of September 30,1997 and 1996:

a g g h Unexpended appropriations:

Unobligated $ 25,683,385 $ 34,765,076 W 133.392.834 4 Undelivered orders 103.601.697 129,285,082 168,157,910 35,798,569 38,189,091 j Invested capital Future funding requirements (Note 9) (36.635.843) (32.710.987)

$128.447.808 $173.636.014 g

d Unexpended appropriations include (a) unobligated appropriation balances and (b) undelivered aj . orders, which are amounts which have been obligated but not yet expended. The unobligated sj appropriations balance does not include $4,306,364 and $6,262,153 in unfilled customer orders -

g,j unobligated as of September 30,1997 and 1996, respectively. The undelivered orders balance j does not include $4,425,821 and $6,082,665 in unfilled customer orders - obligated as of M September 30,1997 and 1996, respectively.

a h Invested capital represents the net investment of the U.S. Government appropriations expended y for NRC's capitalized property and equipment.

]bj Future funding requirements represent the amount of future funding needed to pay the accrued

' unfunded expenses as of September 30,1997 and 1996. These accruals are not funded from current or prior appropriations and assessments, but rather should be funded from future appro-G d priations and assessments. Accordingly, future funding requirements have been recognized for j these expenses that will be paid from future appropriations (See Note 9).

W q

~i g,

AM

NOTES TO PRINCIIML STATES 1ENTS September 30,1997 and 1996 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 i other services. During FY 1997 and 1996, $458.6 million and $454.0 million, respectively, were g

~

collected from fees assessed for licensing, inspections, and other services. OBRA requires NRC to recover approximately 100 percent ofits new budget authority, less the amount appropriated F from the Nuclear Waste Fund and appropriated for work at the Hanford, Washington, site, by ,

assessing fees. At the end of the fiscal year, appropriations 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' 1 appropriations.

t For FY 1997 and 1996, $458.6 million and $454.0 million, respectively, of collections were used to reduce the fiscal year's appropriations recognized:

J997 1996 Appropriated funds consumed $520,713,350 $ 506,886,420 [.

Less: Collection from fees assessed (458.626.753) (454.049.125)

$ 62.086.597 $ 52.837.295 ,

The appropriated capital used for FY 1997 and 1996 includes $41,263,348 and $34,188,747, E respectively, of available funds from prior years (Note 19).

l

[

p NOTE 13. IMPUTED FINANCING l In accordance with Statement of Federal Financial Accounting Standards (SFFAS) Number 5, Accountingfor Liabilities of the Federal Government, the Statement of Operations and Changes in Net Position includes an imputed financing source of $19,976,493 and $20,478,243 for FY 1997 and 1996, respectively. The imputed financing source represents the service costs [

related to NRC employees' post-employment benefits which are paid by the Office of Personnel Management, as follows:

f

.1992 1996 .

Civil Service Retirement System $13,156,011 $ 14,525,205  :

Federal Employee Health Benefit 6,788,439 5,921,303 '

Federal Employee Group Life Insurance 32.043 31.735 ,

$ 19.976.493 $20.478.243 (continued on page 66) ,

1997 Accot'NTABILITY REPORT

j Audit of FY I996 Financial Statement (continued) y M

Ib t

NOTES TO PRINCIIML STATEMENTS September 30,1997 and 1996 y

M NOTE 14. OTIIER REVENUES AND FINANCING SOURCES y

b Other revenues and financing sources for September 30,1997 and 1996, were:

b M

E 1997 1996 M Fees for licensing, inspection, d and other services $463,333,946 $439,416,105 m

y Appropriation reimbursements 8,311,063 9.842,179 2,925,844 g Other miscellaneous receipts 6,055,409 g Gain on disposition of assets 3.676 -

g $477.704.094 $452.184.128 h

n Ii NOTE 15. PROGRAMS The Statement of Budgetary Resources and Actual Expenses contains operating expenses by

, program for FY 1997. Comparative data for FY 1996 is not available. The description of j .

NRC's five programs is as follows:

o y, 1. Regulatory Program encompasses all NRC efforts to ensure that the operation of i commercial and nonpower nuclear reactor facilities and all NRC-regulated aspects of nuclear fuel cycle facilities; nuclear materials licensing; nuclear waste transport,

((!i f storage, and disposal; and decommissioning activities are conducted in a manner that provides reasonable assurance of adequate protection of public health and

safety, as required by the Atomic Energy Act of 1954 and other relevant laws.

2. Regulatory Effectiveness Program helps ensure adequate protection of the public g health and safety, as required by the Atomic Energy Act of 1954, by providing the d Commission with the technical bases for regulatory decisions for all regulatory j programs.

Management and Support Program encompasses NRC central policy direction, j{y 3.

legal advice for the Commission, analysis of long-term policy issues, administrative 6 proceedings review and advice, liaison with outside constituents and other govern-N ment agencies, financial management, all administrative and logistical support, i information resources management, executive management services for the Com-1 mission, personnel and training, intemational programs, and matters involving small and disadvantaged businesses and civil rights.

d ,

-)

N U.S. NUCLEAR REGULATORY CoMMisMcN

]

h pd A _ _ _ _ _ - _ _ - _ - _ _ -

r L.

!J b

NOTES TO PRINCll%L STATEnfENTS

• Septemhr 30,1997 and 1996 [

E h

4. Regulation of DOE Program involves the continued commitment of DOE and NRC to resolve issues of concern te either agency that relate to the regulation of nuclear facilities, projects, and activities in the protection of public health and

([

in safety and the environment. E y

g

5. Inspector General Program independently evaluates the agency's programs and [4 operations to ensure their efficiency and effectiveness and investigates allegations k of fraud, waste, and abuse. -

p U4 NOTE 16. EMPLOYEE RETIREMENT PLANS o

B The NRC's contributions for employee retirement plans for FY 1997 and 1996 were as follows:

{

Restated h 1997 1996 F E

o Civil Service Retirement System $ 8,963,175 $ 9,066,506 D Federal Employees' Retirement System 10,174,861 9,476,956

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FederalInsurance Contribution Act 9,850,629 6,078,868 6 Thrift Savings Plan 4.648.337 3.754.354 F

$33.637.002 $28.376.684 l 7

F Data on the actuarial present value of accumulated benefits, assets available for benefits, and L unfunded pension liability are maintained by other Federal agencies and are not allocated to I individual departments and agencies. The portion of the current and estimated future outlays p for CSRS not paid by NRC is included in NRC's financial statements as an imputed financing F source (Note 13). [y NOTE 17. OTIIER EXPENSES 6 6

Other expenses as of September 30,1997 and 1996, consist of: h n

E 1997 1996 F v

y Loss on disposal of property $613,338 $ 41,403 s Bad debt expense 39.792

$6_13M0 (24.302)

$ 17.101 h

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(continued on page 68)

[

1997 ACCoGNTAHil.lTY REPORT 1 a

h Audit of FY 1996 financial Statement (continued) f

& NOTES TO PRINCIPAL STATEMENTS b

September 30,1997 and 1996 4 '

NOTE 18. EXCESS OR (SilORTAGE) OF REVENUES AND FINANCING SOURCES OVER

TOTAL EXPENSES d The excess or (shortage) of revenues and financing sources over total expenses represents l expenses not covered by budgetary resources for the years ended September 30,1997 and 1996, Q and consists of

y 1997 1996 9

h Accrued annualleave $ (546,501) $ (795.701) n (3.378.357) (862.828) h! Accrued workers' compensation

$(3.924.858) $(1.658.529) l

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

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~j NOTE 19. NON-OPERATING CIIANGES 1

j Non-operating cht.nges for the fiscal years ended September 30,1997 and 1996, consist of 3 the following:

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1997 1996 g

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$(38,872,829) $(35,202,426) l Change in unexpended appropriation (2.390.519) 1.013.679 Change in invested capital

$(41.263.348) $(34.188.747) h Q

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COMMENTS OF I L

THE CHIEF FINANCIAL OFFICER  !?

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February 6,1998 k

MEMORANDUM TO: 11ubert T. Bell y inspector General t b:-

FROM: Jesse L. Funches r Chief Financial OfHeer

SUBJECT:

DRAFT AUDIT REPORT - AUDIT OFTHE NUCLEAR R REGULATORY COMMISSION'S FISCAL YEAR 1997 FINANCIAL STATEMENTS We have reviewed the draft audit report of the Nuclear Regulatory Commission's FY 1997 finan-

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cial statements. There are two reportable conditions and recommendations. Our comments are:

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Recommendation 1: The CFO should establish, for systems within the agency's control, initia-f j tives for designing recovery plans for all financial managements systems. In providing such g guidance, the CFO should assess the priority of each system. Furthermore, the CFO should g assure that policies are issued ensuring that the design or development of any new financial i management systems, and the related security and maintenance programs of such systems R include the development of a plan which is documented and tested. We recognize that NRC, as y a user of the FFS, does not have the leverage to compel FMS to comply with a sound disaster 4 recovery program. Therefore, no recommendation is offered other than continued monitoring of i this condition through the user group.

i Response Agency financial systems are currently undergoing major changes. The three sys-tems mentioned in the audit report are all scheduled for replacement within the next one to two years. The Federal Financial System (FFS) and the accounts receivable / license fee billing system will be replaced by the new agency-wide resource management system STARFIRE. The Payroll System will be replaced by the Payroll / Personnel (PAY /PERS) System. The OCFO and a OCIO will determine the cost effectiveness of developing continuity / contingency plans for the 3 systems that are to be retired or replaced. The OCFO and OCIO will then jointly prepare a plan by June 1,1998, to develop the required continuity / contingency plans for continuing financial systems. These plans will be developed in accordance with OMB Circular A-130, Management h, of Federal information Resources, and the NRC System Development and Life Cycle Manage-g ment (.SDLCM) Methodology.

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c Recommendation 2: The CFO should reduce the number of persons holding the " lead accoun- i tant" access profile and/or implement additional compensating controls. The compensating ,

controls could include requiring supervisory review and certification of reconciliations and their resulting journal vouchers. F I

Responset The OCFO will examine those persons holding the " lead accountant" access profile l' and determine whether it is appropriate to make any changes to access profiles. In addition, the j OCFO will institute compensating controls consisting of review and certification of reconcilia-tions and their resulting />urnal vouchers by the Financial Team leader.

We appreciate the opportunity to respond to the draft audit report. [(

CONTACT: Barbara K. Gusack, OCFO/DAF/ GAB 415-6054 ,

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APPENDIX B ABNORMAL OCCURRENCE CRITERIA AND GUIDELINES FOR OTHER EVENTS OF INTEREST An event will be considered an abnormal occurrence (AO)ifit involves a major reduction in the degree of protection of the public health or safety. This type ofincident or event would have a moderate or more severe impact on the public health or safety and could include, but need not be limited to the following:

(1) Moderate exposure to, or release of, radioactive material licensed by or otherwise regu-lated by the Commission; (2) Major degradation of essential safety-related equipment; or (3) Major deficiencies in design, construction, use of, or management controls for facilities or radioactive material licensed by or otherwise regulated by the Commission.

The following criteria for determining an AO and the guidelines for "Other Events of Inter-est" were set forth in an NRC policy statement published in the Federal Register on December 19,1996, (61 FR 67072). The policy statement was revised to include criteria for gaseous diffusion plants and was published in the Federal Register on April 17,1997 (62 FR 18820).

Note that in addition to the criteria for fuel cycle facilities (Section III of the AO criteria) that are applicable to licensees and certificate holders, such as the gaseous diffusion plants, other criteria that reference " licensees," " licensed facility" or " licensed material" also inay be applied to events at facilities of certified holders.

Abnormal Occurrence Criteria Criteria by types of events used to determine which events will be considered for reporting as AOs are as follows:

I. For All Licensees A. Human Exposure to Radiation from Licensed Material

1. Any unintended radiation exposure to an adult (any individual 18 years of age or older) resulting in an annual total effective dose equivalent (TEDE) of 250 millisievert (mSv)(25 rem) or more; or an annual sum of the deep dose equiva-lent (external dose) and committed dose equi valent (intake of radioactive mate-rial) to any individual organ or tissue other than the lens of the eye, bone marrow, and the gonads of 2500 mSv (250 rem) or more; or an annual dose equivalent to the lens of the eye of 1 Sv (100 rem) or more; or an annual sum of the deep dose equivalent cr, ' committed dose equivalent to the bone marrow, and the gonads of 1 Sv (%) Nm) or more; or an annual shallow-dose equivalent to the skin or extremities of 2500 mSv (250 rem) or more.

2. Any unintended radiation exposure to any minor (an individual less than 18 years of age) resulting in an annual TEDE of 50 mSv (5 rem) or more, or to an embryo /

fetus resulting in a dose equivalent of 50 mSv (5 rem) or more.

(continuedonpage 76)

~

1997 ACCOUNTABILITY REPORT

.-_.g............... .

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Appendix B (continued)

3. Any radiation exposure that has resulted in unintended permanent functional damage to an organ or a physiological system as determined by a physician.

B. Discharge or Dispersal of Radioactive Material from its Intended Place of Confinement i

1. The release of radioactive material to an unrestricted area in concentrations which, if averaged over a period of 24 hours2.777778e-4 days <br />0.00667 hours <br />3.968254e-5 weeks <br />9.132e-6 months <br />, exceeds 5000 times the values specified in Table 2 of Appendix B to 10 CFR Part 20, unless the licensee has demonstrated compliance with Q 20.1301 using 520.1302 (b)(1) or 20.1302 (b)(2)(ii).

2. Radiation levels in excess of the design vahies for a package or the loss of confinement of radioactive material resulting in one or more of the following:

(a) a radiation dose rate of 10 mSv (I rem) per hour or more at I meter (3.28 feet) from the accessible external surface of a package containing radioactive material; (b) a radiation dose rate of 50 mSv (5 rem) per hour or more on the accessible external surface of a package containing radioactive material and that meet the requirements for " exclusive use" as defined in 10 CFR 71.47; or (c) release of radioactive material from a package in amounts greater than the regulatory limits in 10 CFR 71.51 (a)(2).

C. Theft, Diversion, or Loss of Licensed Material, or Sabotage or Security Breach.8

1. Any lost, stolen, or abandoned sources that exceed 0.01 times the A, values, as listed in 10 CFR Part 71, Appendix A, Table A-1, for special form (sealed /

nondispersible) sources, or the smaller of the A, or 0.01 times the A, values, as listed in Table A-1, for normal form (unsealed / dispersible) sources or for sources for which the form is not known. Excluded from reporting under this criterion are those events involving sources that are lost, stolen, or abandoned under the following conditions: sources abandoned in accordance with the requirements of 10 CFR 39.77(c); sealed sources contained in labeled, rugged source housings; recovered sources with sufficient indication that doses'in excess of the reporting thresholds specified in AO criteria I.A.1 and I.A.2 did not occur during the time the source was missing; and unrecoverable sources lost under such conditions that doses in excess of the reporting thresholds specified in AO criteria I.A.1 and '

I.A.2 were not known to have occurred.

2. A substantiated case of actual or attempted theft or diversion oflicensed material or sabotage of a facility.

3. Any substantiated loss of special nuclear material or any substantiated inventory discrepancy that is judged to be significant relative to normally expected perfor-mance, and that is judged to be caused by theft or diversion or by substantial breakdown of the accountability system.

5 Information pertaining to certain incidents may be either classified or under consideration for classification because of national security implications. Classified information will be withheld when formally reporting these incidents in accordance with Section 208 of the Energy Reorganization Act of 1974, as amended. Any classified details regarding these incidents would be available to the Congress, upon request. under appropriate security arrangements, l

l'.S.$UCI.l:AR REGULNioRv Co\lMI5sloN

4. Any substantial breakdown of physical security or material control (i.e., access control containment or accountability systems) that significantly weakened the protection against theft, diversion, or sabotage.

D. Other Events (i.e., those concerning design, analysis, construction, testing, operation, use, or disposal of licensed facilities or regulated materials).

1. An accidental criticality [10 CFR 70.52(a)].

2. A major deficiency in design, construction, control, or operation having signifi-cant safety implications requiring immediate remedial action.

3. A serious deficiency in management or procedural controls in major areas.

4. Series of events (where individual events are not of major importance), recurring

' incidents, and incidents with implications for similar facilities (generic incidents) that create a major safety concern.

II. For Commercial Nuclear Power Plant Licensees.

A. Malfunction of Facility, Structures, or Equipment.

1. Exceeding a safety limit oflicense technical specincation (TS) Section 50.36(c).

2. Serious degradation of fuel integrity, primary coolant pressure boundary, or primary containment boundary.

3. Loss of plant capability to perform essential safety functions so that a release of radioactive materials, which could result in exceeding the dose limits of 10 CFR Part 100 or 5 times the dose limits of 10 CFR Part 50, Appendix A, General Design Criterion (GDC) 19, could occur from a postulated transient or accident (e.g., loss of emergency core cooling system, loss of control rod system).

B. Design or Safety Analysis Deficiency, Personnel Error, or Procedural or Administrative Inadequacy.

1. Discovery of a major condition not specifically considered in the safety analysis report (SAR) or TS that requires immediate remedial action.

2. Personnel error or procedural deficiencies that result in loss of plant capability to perform essential safety functions so that a release of radioactive materials, which could result in exceeding the dose limits of 10 CFR Part 100 or.5 times the dose limits of 10 CFR Part 50, Appendix A, GDC 19, could occur from a postulated transient or accident (e.g., loss of emergency core cooling system, loss of control rod system).

III. For Fuel Cycle Facilities A. A shutdown of the plant or portion of the plant resulting from a significant event and/or violation of a law, regulation, or a license / certificate condition.

B. A major condition or significant event not considered in the license certificate that requires immediate remedial action.

(continued on page 7H) 1997 AccoCNTAlm.ITv HIToRT

Appendix B (continued)

C. A major condition or significant event that seriously compromises the ability of a safety system to perform its designated function that requires immediate remedial action to prevent a criticality, radiological or chemical process hazard.

IV. For Medical Licensees  ;

A medical misadministration that:

A. Results in a dose that is (1) equal to or greater than 1 gray (Gy)(100 rads) to a ,

major portion of the bone marrow, to the lens of the eye, or to the gonads, m (2) equal to or greater than 10 Gy (1000 rads) to any other organ; and B. Represents either (1) a dose or dosage that is at least 50 percent greater than that prescribed in a written directive m (2) a prescribed dose or dosage that (i) is the wrong radiopharmaceutical? or (ii) is delivered by the wrong route of administration, or (iii) is delivered to the wrong treatment site, or (iv) is delivered by the wrong treatment mode, or (v) is from a leaking source (s).

Guidelines for "Other Events of Interest" The Commission may determine that events other than AOs may be ofinterest to Con-gress and the public and be included in an appendix to the AO report as "Other Events of Interest." Guidelines for events to be included in the AO report for this purpose are items that may possibly be perceived by the public to be of health or safety significance. Such items would not involve a major reduction in the level of protection provided for public health or safety; therefore, they would not be reported as abnormel occurrences. An example is an event where upon final evaluation by an NRC Incident Investigation Team, or an Agreement State equivalent response, a determination is made that the event does not meet the criteria for an abnormal occurrence.

o I.

• The wrong radiopharmaceutical as used in the AO criterion for n' . a .usadministration refers to any radio-pharmaceutical other than the one listed in the written directive t n the clinical procedures manual.

U.S. NL'CILAR REGl'1AToRY CO\t%11ssioN I

NUREG - 1542 Vol.3 ISBN 0-16-049490 7

! 90000 l

1 9 80160 494901

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