ML21237A033

NEIMA Report to Congress - Enclosure

ML21237A033
Person / Time
Issue date:	10/04/2021
From:	Christopher Hanson NRC/Chairman
To:	Carper T, Delauro R, Leahy P, Pallone F US Congress
smh
References
CORR-21-0066
Download: ML21237A033 (11)

Text

NUCLEAR ENERGY INNOVATION AND MODERNIZATION ACT (NEIMA)

IMPLEMENTATION, IMPACTS, AND RECOMMENDATIONS FOR IMPROVEMENT OF THE U.S. NUCLEAR REGULATORY COMMISSIONS ANNUAL BUDGET JUSTIFICATION; FEES AND CHARGES; PERFORMANCE AND REPORTING; AND ACCURATE INVOICING

A Report for the U.S. Senate Committee on Appropriations U.S. Senate Committee on Environment and Public Works U.S. House of Representatives Committee on Appropriations U.S. House of Representatives Committee on Energy and Commerce

U.S. Nuclear Regulatory Commission October 2021

Enclosure EXECUTIVE

SUMMARY

The U.S. Nuclear Regulatory Commission (NRC) developed this rep ort as required by Section 102(e) of the Nuclear Energy Innovation and Modernization Act ( NEIMA or the Act), which requires the NRC to submit a report to specific congressional c ommittees on the implementation of NEIMA Section 102, including any impacts and recommendations for improvement. The NRC has implemented Section 102 of the Act. The NRC identified and implemented improvements to invoicing, the fee recovery framework, and perf ormance reporting to reflect changes required by NEIMA, and complied with the specified corp orate support percentage to the maximum extent practicable. The NRC experienced difficulties achieving the corporate support cap and anticipates significant challenges in future ye ars due to three main factors.

First, the corporate cap decreases over time, yet the NRC must still fund fixed costs and meet inflationary cost increases. Second, other federal mandates ch allenge the NRCs ability to comply with NEIMAs Section 102 requirements. Third, the defin ition of corporate support costs is tied to the fiscal year (FY) 2018 Congressional Budget Justi fication (CBJ), and the NRC is unable to make any adjustments based on further benchmarking or operational experience. As a result, the NRC reduced or postponed critical investments or services solely to meet the corporate support cap and anticipates substantial difficulties in the future years with the declining percentage. The NRC also anticipates challenges asso ciated with the cap on operating reactors annual fees. The NRC identified the followi ng recommendations for improvement that could be made to address the challenges identi fied:

• Alleviating the constraints imposed by the corporate support cap and NEIMAs definition of corporate support costs.

• Alleviating the constraints imposed by the methodology for calculating the operating reactor annual fee cap.

DISCUSSION

The NRC complied with the requirements of NEIMA and encountered significant challenges, particularly in the case of the corporate support cap requireme nt. Below is a high-level discussion of each requirement and the NRCs experience impleme nting it, followed by a discussion of the most significant challenges and recommendatio ns for improvement.

1. Implementation As required by Section 102(e), below is a report on the impleme ntation of Section 102.

Requested Activities of the Commission

The NRC developed a new budget execution and reporting structur e starting in FY 2021, to implement Section 102(a)s requirement to expressly identify an ticipated expenditures necessary for completion of the requested activities of the Com mission in the annual budget justification. NRC staff analyzed approximately 2,000 existing data elements and created several new unique identifiers within its financial systems to map costs and accurately track resources directly in support of NEIMA requested activities. A s a result of this effort, the NRC can now track and report NEIMA requested activity execution dat a and will continue to formulate and execute the budget using the updated budget structure to pr ovide greater accuracy and transparency.

Limitation on Corporate Support Costs

As discussed in the challenges section below, the NRC implement ed the requirements in NEIMA, but experienced significant challenges. Section 3(7) of NEIMA defines corporate support costs for purposes of the Act to mean, expenditures for acquisitions, administrative services, financial management, human resource management, information management, information technology, policy support, outreach, and training, as those categories are described and calculated in Appendix A of the Congressional Budget Justification for Fiscal Year 2018 of the Commission.

Prior to the enactment of NEIMA, between FY 2014 and FY 2020, t he NRC reduced corporate support resources by $104.6 million, including 194 FTE. As par t of the NRCs NEIMA implementation, corporate support resources were further reduce d by $13.0 million, including 31 FTE, between FY 2020 and FY 2022. The largest resource reducti ons were $3.6 million, including 3 FTE in acquisitions, and $15 million, including 8 F TE in administrative services.

These reductions were partially offset by increases to salaries and benefits (S&Bs). The reductions in administrative services included reduced support for security guards, personnel security investigations, and logistics management. Additionall y, funding was eliminated for general building alterations and upkeep, furniture and workspac e modifications, and future planned renovation, modernization, and consolidation efforts. The subsidized rent payment for non-NRC occupants in 3WFN also falls within corporate support under administrative services, and accounts for approximately 1.6 percent of all corporate sup port costs.

In the area of financial management, the NRC reduced 4 FTE and resources for multiple agency financial management systems, as well as resources to support i nternal controls. These reductions were offset by increases to S&Bs.

With respect to human resource management, the NRC reduced $0.4 million between FY 2020 and FY 2022, which followed a $5.5 million, including 32 FTE re duction over the previous six fiscal years. The NRC reduced contract funding and centralized some human resource functions to gain efficiencies.

The NRC took several actions to reduce IT/IM resources. To mee t the corporate support cap, the NRC cut 9 FTE from this area between FY 2020 and FY 2022, 1 which followed a reduction of $24.8 million and 33 FTE in the previous six years. The NRC instituted a more rigorous review process for IT budget requests to enhance the management of IT/IM spending and achieve additional reductions. The NRC has also been proactive in identifying and implementing opportunities to gain cost efficiencies. However, the NRC had to reduce Development, Modernization, and Enhancement (DME) to fund the f ixed costs that equate to 96 percent of the corporate support IT/IM budget.

Finally, the policy support area includes activities associated with the Commission. To comply with the corporate support caps, the NRC reduced 6 FTE between FY 2020 and FY 2022.

These reductions related to advice and assistance to the Commis sion on legal matters, adjudicatory matters, and public affairs.

Even after taking these and other actions to meet the corporate support caps, the NRC did not achieve the specified percentage of 30 percent for corporate su pport costs in its FY 2021 CBJ;

1 Despite these cuts, there was an increase of $4.9M, primarily due to S&B increases.

instead, the NRCs budget submission for corporate was 31 perce nt. The NRC considered this to meet the to the maximum extent practicable provision in Se ction 102(a)(3). The NRC met the specified percentage of 30 percent in its FY 2022 CBJ.

New Fee Recovery Framework

The NRC implemented the new fee-recovery framework in the FY 20 21 Final Fee Rule.2 This included a modification to the budget formulation process and a ssociated systems to reflect the changes required by NEIMA in Section 102(b). Several additiona l data fields were added to the budget formulation system to track fee data as part of the budg et formulation process. The additional fields allowed for both the calculation of net budge t authority and the estimated operating reactor annual fee. These changes were reflected in the budget starting with the FY 2021 CBJ.

Operating Reactor Cap

NEIMA Section 102(b) places a cap on the annual fee that may be charged to an operating reactor licensee. The cap is set at the amount charged in FY 2 015, $4.8 million, not including the separate spent fuel and decommissioning annual fee and may be adjusted to reflect changes in the consumer price index. The NRC included an estim ate of the operating power reactors annual fee in the FY 2021 CBJ, with the intent of incr easing transparency for stakeholders. The operating power reactors annual fee was esti mated to be $4.8 million. The NRC developed this estimate based on the allocation of the FY 2 021 budget request to fee classes and certain data assumptions and historical information available during the FY 2021 budget formulation process.

Consistent with NEIMA, when developing the annual fee rule, the NRC took into account changes that occurred in the 2-year interval between the develo pment of the FY 2021 budget request, which began in FY 2019, and the enactment of the FY 20 21 appropriation in December 2020. As part of the development of the annual fee rule, the N RC estimates the amount of 10 CFR Part 170 service fees by analyzing billing data and the actual cost of contract work that was charged to licensees and applicants for the previous four q uarters. The estimate, therefore, reflects any recent changes in the NRCs regulatory activities. The operating power reactors annual fee included in the FY 2021 Final Fee Rule, $4.749 milli on, was approximately

$0.6 million below the FY 2015 operating power reactors annual fee amount adjusted for inflation based on the consumer price index and complied with N EIMA requirements.

Performance Reporting and Milestone Schedules

NEIMA Section 102(c) required the NRC to develop performance me trics3 and milestone schedules for the requested activities of the Commission by Jul y 13, 2019, and requires reporting of delays associated with certain final safety evalua tions related to these activities.

Below is a high-level summary of the performance metrics and mi lestone schedules that the NRC issued by the July 2019 deadline. 4

2 Final Fee Rule: Revision of Fee Schedules; Fee Recovery for Fiscal Year 2021 (86 FR 32146; June 16, 2021).

Change in effective date: Revision of Fee Schedules; Fee Recovery for Fiscal Year 2021 (86 FR 44594; August 13, 2021).

3 While NEIMA uses the term performance metric, the NRC uses the term performance indicator. Therefore, the terms performance indicator and performance metric are used synonymously in this report.

4 See Generic Milestone Schedules of the Requested Activities of the Commission.

Milestone Schedules

The requested activities of the Commission have been categorize d into 13 activities that are further refined by different activity types (e.g., light-water reactor, uranium recovery). The milestone schedules for each activity type are considered gene ric and are largely based on historical data for each activity type. The generic milestone schedules provide transparency into the expected timeframes for the issuance of the NRCs final saf ety evaluation for requested activities.

For certain generic milestone schedules, such as licensing of a dvanced reactors (non-light-water reactors), data does not yet exist to develop these timel ines. For such instances, data and insights from reviews of new reactors were used. As the NR C gathers more data for each activity type, there will be opportunities to further refine th ese schedules for the NRC staffs preparation and issuance of a final safety evaluation after the acceptance review of an application is completed. A specific schedule may be shorter o r longer than the generic milestone schedule based on the complexity of the review, infor mation provided by the licensee or applicant, and agency resource availability.

Performance Indicators

The NRC has established NEIMA performance indicators for each N RC business line that performs requested activities of the Commission, to track the i ssuance of final safety evaluations5 against the generic milestone schedule. The NEIMA performance indicators provide an increased level of transparency into the NRCs timel iness for issuing final safety evaluations.

The performance indicator is 100 percent timely issuance of fin al safety evaluations by the issuance date set in the generic milestone schedule for all the requested activities of the Commission, as identified by NEIMA, for each business line. Th e results of the NEIMA performance indicators are tracked in a database and reported o n a quarterly basis to senior management at an internal agencywide Quarterly Performance Revi ew meeting and are also included annually in the NRCs CBJ. If a NEIMA performance ind icator is not met, the Commission is notified consistent with the reporting requiremen t in NEIMA Section 102(c)(2). In addition, a risk report is prepared consistent with the NRCs process for Enterprise Risk Management,6 which includes a mitigating strategy to reduce the likelihood of exceeding the 180-day congressional reporting requirement in NEIMA Section 10 2(c)(3). The NEIMA performance indicators are also included in a quarterly status report provided to the Congressional Committees with oversight of the agency. 7

The NRC will continue benchmarking against prior tracking resul ts to determine whether the generic milestone schedules can be adjusted to account for reco gnized efficiencies. The generic milestone schedules will also be reviewed as part of a planned evaluation in FY 2023, as part of the NRCs implementat ion of the Foundations for Evidence-Based Policymaking Act of 2018.

5 This tracking applies to requested activities of the Commission for which the acceptance review has been completed after July 13, 2019.

6 See Management Directive (MD) 4.4, Enterprise Risk Management and Internal Control.

7 See section 1.1 of the quarterly Status Report on the Licensing Activities and Regulatory Duties of the U.S. Nuclear Regulatory Commission (ADAMS accession number ML21201A254).

Accurate Invoicing

NEIMA Section 102(d) requires the NRC to complete three sets of actions relating to accurate invoicing: (1) ensure appropriate review and approval prior to issuance of invoices; (2) develop and implement processes to audit i nvoices to ensure accuracy, t ransparency, and fairness; and (3) modify regulations to ensure fair and appropriate processes to provide licensees and applicants an opportunity to efficiently dispute or otherwise s eek review and correction of errors in invoices. The NRC has completed all three actions.

The NRC leveraged process improvements it developed and impleme nted as part of its fee transformation effort to address the first two actions. These process improvements included redesigning NRC invoices to add clarity and transparency for re cipients. New features included an invoice legend of NRC acronyms and the names of individual N RC staff members or contractors, as applicable, who performed the work. In additio n, the NRCs staff hours and contractor costs are listed separately on invoices so the recip ient can view the subtotals for the two different categories of costs. The NRC also implemented a new data structure to more effectively account for and track all billable work at the proj ect level. In July 2019, the NRC implemented a new agencywide process to standardize the validat ion of fees. The new standardized process improved accountability and oversight with in the NRC to ensure that fee billing data are correct before an invoice is issued.

The second action concerns the accuracy, transparency, and fair ness of the overall billing process. In October 2019, the NRC implemented an electronic bi lling (eBilling) system. This public-facing, web-based application provides the immediate del ivery of NRC invoices, customizable e-mail notifications, the capability to view and a nalyze invoice details, and access to the U.S. Department of the Treasury systems to pay invoices. The eBilling application provides increased billing process transparency and has boosted applicant and licensee confidence in the assessed fees and charges. The NRCs new pro cess will lead to improved internal and external auditing of service fee invoices to ensur e the accuracy, transparency, and fairness of invoices. The process requires offices with fee bi llable charges to regularly review and certify hours and costs to validate the charges before the NRC sends an invoice for service fees. Annually, external financial statement auditors conduct an audit of a sample of invoices.

As such, the NRCs invoices are now reviewed and audited by bot h internal and external parties.

To address the third action, the NRC modified the regulations u nder 10 CFR Chapter I in the FY 2021 Final Fee Rule to provide a standard process for licens ees and applicants to efficiently dispute or otherwise seek review and correction of errors in in voices. These regulations outline the interactions between the submitter and the NRC and enhance clarity regarding the dispute process by setting out the process for submitting a fee dispute, the stages of the decision-making process while the dispute is under review, and the manne r by which the NRC will notify the submitter after it makes a final determination on the dispu te.

2. Challenges

Section 102(a)(3) limits the amount of corporate support costs in the annual budget justification submitted to Congress, to the maximum extent practicable, to 30 percent in FY 2021 and FY 2022, 29 percent in FY 2023 and FY 2024, and 28 percent in F Y 2025 and beyond. The NRC was unable to meet the 30 percent in its FY 2021 CBJ and me eting future years is a very high enterprise risk. The NRC identified major efficiencies an d areas for cost savings within corporate support just prior to, and within the initial impleme ntation of NEIMA, and has prioritized spending that is integral to the success of the age ncys mission. Continued

reductions to meet the corporate support cap are not sustainabl e, are already negatively impacting the agency, and will hav e an even greater impact as t he corporate support cap declines in future years.

Fixed Costs and Inflationary Increases

The NRC has experienced challenges in implementing certain sect ions of NEIMA that, due to fixed costs and inflationary increases that the agency cannot c ontrol, impact the ability of the agency to support activities tha t will enable the NRC to carry out its safety and security mission.

Salaries and Benefits

Approximately 67 percent of the NRCs budget consists of S&Bs, which have been increasing by an average of 4 percent per year due to inflation. While th e NRC has made significant efforts to reduce FTE, increases to S&Bs due to annual pay raises and f ederal contributions to health care and retirement plans have outpaced the workload reductions. As a result, the increase in S&Bs coupled with the declining number of power reactor license es has narrowed the gap between the estimated annual operating power reactor fee and th e operating power reactor fee cap, adjusted for inflation.

Workforce and Agency Support

To meet the NEIMA corporate support cap, the NRC reduced corpor ate support FTE and contract funding. These reductions have affected the NRCs abi lity to provide necessary support to the agency, and with NEIMAs incremental corporate s upport cap reductions in future budget years, agencywide support will continue to decline. Thi s includes a reduction to human resources staff, which in turn hinders the agencys ability to hire and train the workforce for today and the future. Additionally, the FTE cuts across the co rporate support enterprise have resulted in current corporate employees taking on additional du ties that were previously performed by multiple people and therefore have resulted in inc reasing workloads. The NRCs bench-strength in this area is now limited, and the risk of att rition in these positions continues to increase over time.

Facilities

Although the NRC has strategically identified and prioritized t he most vital physical facility expenditures, building rent and renovations are challenging to adequately fund while still accommodating the NEIMA corporate support cap. The NRC has out lined the agencys long-term space needs and developed a roadmap that identifies reloca tion and renovation opportunities for the NRCs headquarters and regional locations, which would yield future efficiencies in rent; however, the realization of such efficien cies is contingent upon near term investments. Funding for these efforts would allow the agency to ensure working environments that benefit from current technology and space-related moderniz ation, including the flexibility to support the upcoming hybrid wor king environment and reduced footprint that would yield future savings. Most of the NRCs One White Flint North (OWFN) buildi ng has not been renovated in over 25 years. Renovations in OW FN are necessary to modernize the space and make it possible for new technologies to be used, but are difficult to accomplish under the NEIMA cap.

To meet the corporate cap, the agency has also made significant reductions to the Administrative Services Product Line. Reductions to this area challenge the agencys ability to meet personnel-security-related mandates, address routine house keeping and groundskeeping needs, plan for future campus infrastructure repairs and improv ements, and provide necessary

support to NRC facilities.

Information Technology/Information Management

The NRC classifies 69 percent of its total agency IT/IM resourc es as corporate support, with the rest reflected in the NRCs Nuclear Reactor Safety and Nuclear Materials and Waste Safety programs. Significant annual cuts to the IT/IM corporate suppo rt budget due to the NEIMA corporate support cap present substantial challenges.

First, it has decreased the NRCs ability to invest in IT/IM in novation and modernization that could support program/business processes and functions througho ut the agency. Although overall Federal IT spending is reported to have increased by 8. 8 percent across the Federal Government since FY 2018, the NRCs IT/IM spending decreased by 3 percent since 2018. To meet the NEIMA cap, the agency reduced investments in IT/IM cor porate support DME to fund ongoing operations and maintenance costs. Between FY 2020 and FY 2022, on average, only 2.4 percent of corporate support funding was budgeted for DME. In FY 2022, 95.6 percent of the corporate support IT/IM budget request is categorized as fi xed costs, leaving only a small percentage available for corporate IT DME activities that suppo rt all agency programs. These constraints have resulted in an increase to the IT/IM costs nee ded to operate existing infrastructure and platforms, which the NRC cannot replace due to the same constraints. If the agencys IT infrastructure, largely defined as corporate suppor t costs under NEIMA, cannot be modernized, the result will be the continued slowing or deferri ng of IT modernization efforts funded in programmatic areas. The significant disparity betwee n the amount of corporate DME compared to programmatic DME limits the NRCs ability to rapidl y streamline and modernize corporate infrastructure and platforms, making it difficult to meet agency business goals supported with programmatic IT DME funding. For example, the i nability to fully implement the NRCs Cloud First Strategy makes it difficult to support moving program applications to the cloud.

Additionally, while the NRC has reduced its number of FTE signi ficantly in recent years, IT costs do not have a linear relationship to agency staffing numbers. A certain baseline of IT/IM infrastructure and support services is required to support the agency regardless of staffing levels. For example, regardless of the number of staff in each of the NRCs various locations, the connectivity of the agencys geographic sites still require s a fully operational wide area network, and regardless of staff usage, the connectivity to the Internet still requires implementation of a Trusted Internet Connection. Moreover, ann ual contract escalation costs are standard, and staff S&B costs have increased. Continuing c uts to the IT/IM budgets will necessitate reducing modernization efforts and lowering service levels, impacting agency staff support and productivity.

Finally, the agency is leveraging insights from its ongoing IT strategic roadmap development to inform and align on future strategic IT priorities. The priori ties will be used to identify enterprise-wide IT modernization investments needed to support agency tran sformation. Implementation of the strategic investments in this roadmap are at risk becaus e of fiscal constraints placed on corporate support resources/investments.

Federal Mandates

The NEIMA corporate support cap poses a challenge to implementi ng Federal mandates, particularly those involving IT/IM investments such as the Exec utive Orders for Cybersecurity and Supply Chain Risk Management. With the significant fixed c osts in the IT/IM budget and

the declining percentage of the NEIMA corporate support cap, th is restraint also impacts the NRCs ability to alter or update critical infrastructure and to meet federal mandates of IT applications that support the agency, such as updates to the NR Cs financial systems Invoice Processing Platform; shared Federal services like NewPay; and F ederal reporting systems to submit Capital Planning and Investment Control data. Reduction s to the budget for administrative services may also affect the ability to meet personnel security mandates for the agencys background investigation and security clearance reques ts.

Another challenge relates to the 3WFN building at NRC headquart ers. On December 4, 2013, with resolution PMD-04-WA11, the House Committee on Transportat ion and Infrastructure authorized the succeeding lease for the Two White Flint North b uilding at NRC headquarters.

The resolution also directed the NRC to relinquish eight floors of space in the 3WFN building, to be backfilled by the Food and Drug Administration (FDA), Provi ded that, the Nuclear Regulatory Commission shall be responsible for the rental costs for Three White Flint North, which exceed the rental rate paid by the Food and Drug Administ ration, or any subsequent backfill tenant, for the term of the lease for Three White Flin t North. The agency has paid approximately $21 million in rent subsidy for 3WFN since FY 201 4 and is expected to pay an additional estimated $27 million through FY 2027. In FY 2021, the NRC occupied two floors of the 3WFN building and paid approximately $1.5 million in rent a nd $4.3 million in subsidies annually. The subsidy represents approximately 13 percent of t he agencys total rent, does not support the NRCs mission, and direct ly impacts our licensees as their fees include the cost of subsidizing the rent of the FDA and the National Institutes of Health. Since the 3WFN subsidy is included within NEIMAs current definition for corporate sup port costs and is therefore subject to the corporate support cap, it limits the NRCs ability to in vest in other corporate support areas with an expenditure that does not support the agencys mission and that continues to escalate over time.

Corporate Support Costs Definition

As discussed above, Section 3(7) of NEIMA defines corporate sup port costs for purposes of the Act to mean expenditures for acquisitions, administrative services, financial management, human resource management, information management, information technology, policy support, outreach, and training, as those categories are described and calculated in Appendix A of the Congressional Budget Justification for Fiscal Year 2018 of the Commission. That current definition of corporate support has presented challenges to the NRC, and adjustments would make sense based on operational experience and benchmarking 8 of other similar agencies. A few key examples include the Permanent Change of Station (PCS) budget for the resident inspectors that move after they reach their 7-year term limit at a particular site to ensure no one inspector becomes embedded into the workings of one specific re actor, which could impact objectivity; the IT/IM budget that is specific to a particular program; and portions of the budget for funding the five-member Commission itself.

The NRCs PCS budget and the Commissions budget are currently included in their entirety

8 The NRC conducted a brief benchmarking study with similar agencies to identify best practices, possible inconsistencies within the agencys business processes, and any unique requirements that apply to budget formulation, budget execution, or fee recovery. The study identified that while there is not a standard governmentwide definition of corporate support, the agencies the NRC benchmarked are generally structured in a similar way in terms of activities that are considered corporate support. The review highlighted differences with respect to the treatment of permanent change of station moves, resources for the Office of the Commission, and IT/IM resources, whereby these costs can be categorized as programmatic and not corporate support.

within NEIMAs definition for corporate support costs. A large portion of the PCS budget and the Commissions work is directly tied to the mission of the NR C and would be more appropriately allocated proportionately across all NRC business lines. Additionally, a portion of the NRCs IT/IM resources are included within NEIMAs definitio n for corporate support, however, these resources directly support the agencys mission through programmatic business lines. Given the direct nexus to programmatic activities, reca tegorizing portions of the PCS budget for resident inspectors, the Commission budget, and IT/I M would make sense, and would allow for increased investment in other critical agency c orporate support activities.

3. Recommendations For Improvement

This section responds to the requirement in section 102(e) for the NRC to provide recommendations for improvement.

Corporate Support

The NRC recommends alleviating the constraints im posed by the corporate cap and definition of corporate support.

As mentioned, the NRC has initiated efforts to address the corp orate support concerns noted within NEIMA that resulted in a decrease to the overall corpora te support budget percentage of 37 percent in FY 2014 to 30 percent in FY 2022. As a result of these reductions and the other items noted within this report, such as fixed costs, emergent a nd competing federal mandates, and strategic IT and space investment needs, the continuation o f a reduction to the corporate support cap is expected to negatively impact the agencys abili ty to directly support its safety and security mission.

Second, inclusion of certain costs that are programmatic in nat ure into the definition of corporate support costs inhibits the ability of the NRC to directly suppo rt its safety and security mission.

For example, the PCS budget that directly supports the movement of NRC resident inspectors, the IT/IM budget specific to program support, and a portion of the Commission budget are programmatic in nature but are all currently defined in NEIMA a s corporate support. Removing programmatic costs such as these from NEIMAs definition of cor porate support would allow the NRC to more fairly, accurately, and transparently budget for or ganization-wide corporate functions and ensure the NRC can responsibly budget for fixed c osts and critical investments.

Based on limited benchmarking, this approach appears consistent with how other agencies categorize corporate support costs.

Finally, the annual subsidy for 3WFN to GSA does not directly s upport the mission of the agency and continues to increase annually. The inclusion of th e subsidy for 3WFN within the corporate support cap adds to the challenge in meeting the cap and limits the necessary funding on other needed investments.

Operating Reactor Annual Fee Cap

The NRC recommends alleviating the constraints imposed by the methodology for calculating the operating reactor annual fee cap.

Approximately 67 percent of the NRCs budget consists of S&Bs a nd recently, the federal cost of living adjustment has outpaced the consumer price index. As a result, the methodology for calculating the operating reactor annual fee cap, which is adju sted to reflect changes in the

consumer price index, could present challenges in the future be cause it does not take into consideration the difference between increases in the consumer price index and the federal cost of living adjustment, both of which affect agency budgets.

CONCLUSION

The NRC worked diligently to implement Section 102 of NEIMA. A s a result, the agency made major improvements to the budget and fee structure, invoicing, performance metrics, and milestone schedules. However, the NRC experienced considerable challenges, particularly with the corporate support cap, and anticipates significant enterpri se risks in future years as the decreasing percentage continues to further constrain corporate support spending. The NRC has considerable fixed costs and must still meet new mandates a nd inflationary cost increases, within a declining corporate support cap and the definition of corporate support costs in the Act.

These factors are adversely impacting the agencys ability to i nvest in needed modernization, innovation and human capital, and going forward will challenge the efficiency and effectiveness of the agency. The NRC appreciates the opportunity provided in NEIMA to report on its implementation of Section 102, including any impacts and recomm endations for improvement.

The NRC would welcome the opportunity to further discuss the co ntents of this Report.