OIG/95A-17 - Results of the Audit of U.S. Nuclear Regulatory Commission's Fiscal Year 1995 Financial Statements
- Synopsis of Fiscal Year 1995 Audit of NRC's Principal Financial Statements
- Inspector General's Report on Principal Statements
- Statement of Financial Position - September 30, 1995 and 1994
- Note 1. Summary of Significant Accounting Policies
- Note 2. Fund Balances with Treasury
- Note 3. Accounts Receivable, Net
- Note 4. Advances and Prepayments
- Inspector General's Opinion on Management's Assertion About the Effectiveness of Internal Controls
- Reportable Conditions and Recommendations Current Year
- Reportable Conditions Closed from Previous Year
- Inspector General's Report on Compliance with Laws and Regulations
- Compliance Finding
- Compliance Finding Closed from Previous Year
Office of The Inspector General
U.S. Nuclear Regulatory Commission
Washington, DC 20555-0001
Results of The Audit of U.S. Nuclear Regulatory Commission's Fiscal Year 1995 Financial Statements
March 1, 1996
|Memorandum To:||Chairman Jackson
|From:||Leo J. Norton
Acting Inspector General
|Subject:||Results of the Audit of U.S. Nuclear Regulatory Commission's Fiscal Year 1995 Financial Statements|
Attached is the Office of the Inspector General's audit report of the U.S. Nuclear Regulatory Commission's (NRC) Fiscal Year 1995 financial statements. The report consists of five sections: a synopsis of the various individual audit reports which comprise the overall report; the report on the principal statements; the principal statements; the opinion on management's assertions about the effectiveness of internal controls; structure; and, the report on compliance with laws and regulations. Written comments were obtained from the Chief Financial Officer (CFO) and are included as an appendix to our reports.
In the report on the NRC's Fiscal Year 1995 Principal Financial Statements, we issued an unqualified opinion on the Statement of Financial Position, and the Statements of Operations, Cash Flows, and Budget and Actual Expenses.
In the opinion on management's assertions about the effectiveness of internal controls, we identified a condition related to NRC's fee recovery system that existed during Fiscal Year 1995. In addition to NRC's planned corrective actions, we made one recommendation for improvement. This same issue is reported in the Report on Compliance with Laws and Regulations.
On February 23, 1996, the Chief Financial Officer (CFO) responded to our draft report dated February 15, 1996. The CFO noted that corrective action was underway to remedy the deficiencies and agreed with our recommendation for a root cause determination. He also stated his appreciation for our support on the Department of Energy audit issue. We appreciate NRC staff's cooperation and continued interest in improving financial management within NRC.
|cc: H. Thompson, EDO||C. Paperiello, NMSS|
|J. Milhoan, EDO||J. Funches, ICC|
|K. Cyr, OGC||W. Beecher, OPA|
|J. Hoyle, SECY||T. Martin, RI|
|D. Rathbun, OCA||S. Ebneter, RII|
|J. Blaha, EDO||H. Miller, RIII|
|R. Scroggins, OC||L. Callan, RIV|
|P. Norry, ADM||OPA-RI|
|G. Cranford, IRM||OPA-RII|
|R. Bangart, OSP||OPA-RIII|
|W. Russell, NRR||OPA-RIV|
|E. Jordan, AEOD||OPA-RIV: Walnut Creek|
|D. Morrison, RES|
Synopsis of Fiscal Year 1995 Audit of NRC's Principal Financial Statements
The Office of the Inspector General (OIG) is required by the Chief Financial Officers Act to annually audit the Principal Financial Statements of the U.S. Nuclear Regulatory Commission (NRC). OIG audited the principal statements for the fiscal year (FY) ended September 30, 1995, including assessing the agency's internal control structure and compliance with applicable laws and regulations. The audit was performed for the purpose of forming an opinion on the Principal Financial Statements. The information in the Overview of NRC's Financial Statements and the Supplemental Information sections is not a required part of the Principal Financial Statements, but is supplementary information required by the Office of Management and Budget Bulletin 94-01. Although we reviewed this information, it was not subjected to the auditing procedures applied in the audit of the Principal Financial Statements, and accordingly, we express no opinion on it.
The results of the audit of each major area are summarized as follows:
- OIG issued an unqualified opinion on NRC's Principal Financial Statements as of September 30, 1995.
- OIG found three reportable conditions. These concerned (1) inadequate internal controls in the fee recovery system to ensure that the licensees are billed for work performed on their behalf; (2) the lack of audit assurance from DOE concerning the DOE's National Laboratories compliance with laws and regulations for the expenditure of NRC funds, and (3) the need for an integrated payroll system with labor distribution capabilities.
- Based on corrective actions taken in FY 1995, OIG closed the prior reportable conditions concerning (1) the timeliness of NRC's billing practices, and (2) the need to formalize NRC's property system.
- OIG found that inadequate internal control resulted in instances where licensees were not billed for specific services performed for their benefit. Therefore, the charges for the services were being billed to all reactor licensees under the authority of 10 CFR Part 171, "Annual Fees ...", instead of under the authority of 10 CFR Part 170, "Fees ... for Regulatory Services ....".
- Based on the corrective actions taken in FY 1995, OIG closed the FY 1994 compliance finding concerning billing issues related to NRR's Technical Assistance Program Support System (TAPPS).
Inspector General's Report on Principal Statements
The Office of the Inspector General (OIG) has audited the accompanying principal statements of financial position of the U.S. Nuclear Regulatory Commission (NRC), as of September 30, 1995, and the related principal statements of operations and changes in net position, cash flows, and budget and actual expenses for the fiscal year then ended. NRC management is responsible for preparing these financial statements. Our responsibility is to express an opinion on the financial statements based on our audits. The financial statements of the U.S. Nuclear Regulatory Commission as of September 30, 1994, were audited by other auditors, whose report dated March 10, 1995, expressed an unqualified opinion on those statements.
OIG conducted its audits in accordance with generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, and Office of Management and Budget Bulletin 93-06, Audit Requirements for Federal Financial Statements. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the principal statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in these statements, including the notes attached thereto. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall statement presentation.
The Federal Accounting Standards Advisory Board is currently studying accounting principles. Generally accepted accounting principles for Federal entities will be issued by the Comptroller General and the Director of the Office of Management and Budget based on advice from the Board. In the interim, Federal agencies follow the applicable accounting standards contained in agency accounting policy, procedures manuals, and/or related guidance. The summary of significant accounting principles included in the Notes to Principal Statements, Note 1, describes the accounting principles used by the U.S. Nuclear Regulatory Commission to prepare the principal statements.
Matter of Emphasis
NRC's principal statements include reimbursable expenses of the U.S. Department of Energy's (DOE) National Laboratories. For Fiscal Year 1995, NRC's Statement of Operations included about $110 million of reimbursable expenses, which represents approximately 20 percent of the NRC's total expenses. Our 1995 audit included testing of these expenses and financing sources for compliance with laws and regulations within NRC. The work placed with DOE is under the auspices of a Memorandum of Understanding between NRC and DOE. The examination of the DOE National Laboratories for compliance with laws and regulations is DOE's responsibility. This responsibility was further clarified by a memorandum of the General Accounting Office's Assistant General Counsel, dated March 6, 1995, where he opined that "...DOE's inability to assure that its contractors' costs [National Laboratories] are legal and proper...does not compel a conclusion that the NRC has failed to comply with laws and regulations." DOE also has the cognizant responsibility to assure audit resolution and should provide the results of its audits to NRC. (See our reports on Management's Assertion About The Effectiveness of Internal Controls and on Compliance with Laws and Regulations).
In our opinion, the principal statements present fairly, in all material respects, the financial position of the U.S. Nuclear Regulatory Commission on September 30, 1995, the results of its operations and changes in net position, the cash flows, and the status of budget to actual expenses for the fiscal year then ended in conformity with the accounting principles described in Note 1.Our audits were conducted for the purpose of forming an opinion on the principal statements previously described.
Statement of Financial Position - September 30, 1995 and 1994
|Fund balances with Treasury (Note 2)||$258,602,386||262,192,247|
|Accounts receivable, net (Note 3)||8,231,231||5,802,642|
|Advances and prepayments (Note 4)||2,466,180||2,672,160|
|Accounts receivable, net (Note 3)||28,310,335||59,136,473|
|Advances and prepayments (Note 4)||695,961||860,126|
|Inventory not held for sale:||630,517|
|Property and equipment, net (Note 5)||37,175,412||40,487,377|
|Total entity assets:||$335,481,505||371,781,542|
|Accounts receivable, net (Note 3)||692,881||856,102|
|Total non-entity assets||692,881||856,102|
|Accounts payable and advances (Note 6)||$12,989,462||$14,636,020|
|Other intragovernmental liabilities (Note 8)||41,532,847||64,711,721|
|Accounts payable (Note 6)||22,515,321||25,513,612|
|Other governmental liabilities (Note 8)||8,324,101||12,898,358|
|Accrued payroll and benefits (Note 7)||10,276,907||9,683,599|
|Total liabilities covered by budgetary resources||95,638,638||127,443,310|
|Other governmental liabilities (Note 9)||25,825,458||25,653,480|
|Total liabilities not covered by budgetary resources||25,825,458||25,653,480|
|Future funding requirements||(25,825,458)||(25,653,480)|
|Total net position:||214,710,290||219,540,854|
|Total liabilities and net position:||$336,174,386||$372,637,644|
|Appropriated capital used (Note 12)||$ 35,558,585||$48,228,503|
|Other revenues and financing sources (Note 13)||492,783,452||502,577,448|
|Excess current year receipts of fees over billings||23,015,654||4,975,171|
|Less: Receipts transferred to the Treasury or other agencies||(3,518,733)||(5,316,616)|
|Total revenues and financing sources:||547,838,958||550,464,506|
|Program Expenses (Note 14)|
|Salaries and expenses||534,023,349||527,572,456|
|Office of Inspector General||4,557,825||4,673,069|
|Total program expenses (Note 14)||538,581,174||532,245,525|
|Depreciation (Note 5)||9,129,575||16,541,573|
|Other expenses (Note 16)||287,045||1,679,729|
|Total expenses :||548,010,937||550,485,285|
|Shortage of revenues and financing sources over total expenses (Note 17)||$(171,979)||$(20,779)|
|Excess (shortage) of revenues and financing sources over expenses||(171,979)||(20,779)|
|Plus non-operating changes (Note 18)||(4,658,585)||(2,891,842)|
|Net position, ending balance||$ 214,710,290||$219,540,854|
|Fees for licensing and inspection and other services (Note 12)||$501,871,000||$ 499,575,640|
|Other operating cash provided||16,852,614||14,998,142|
|Total cash provided||$518,723,614||514,573,782|
|Personnel services and benefits||(266,399,073)||(260,441,540)|
|Travel and transportation||(16,238,339)||(17,458,136)|
|Rent, communications and utilities||(25,804,325)||(22,668,680)|
|Printing and reproduction||(2,132,047)||(1,921,611)|
|Other contractual services||(224,466,951)||(216,426,480)|
|Supplies and materials||(11,372,953)||(15,431,525)|
|Insurance claims and indemnities||(131,742)||(40,416)|
|Grants, subsidies and contributions||(1,378,879)||(1,110,957)|
|Other operating cash used||(5,406,669)||(5,940,601)|
|Total cash used||(553,330,978)||(541,439,946)|
|Net cash provided (used) by operating activities||(34,607,364)||(26,866,164)|
|CASH PROVIDED (USED) BY INVESTING
|Purchase of property and equipment||(7,101,108)||(19,763,758)|
|Net cash used by investing activities||(7,101,108)||(19,763,758)|
|CASH PROVIDED (USED) BY FINANCING
|Add: Transfers of cash from others||8,900,000||9,912,300|
|Fee collections not used to offset current year's appropriation||7,218,611||-|
|Net cash provided (used) by financing activities||38,118,611||45,251,147|
|Net cash provided (used) by operating, investing and financing activities||(3,589,861)||(1,378,775)|
|Fund balances with Treasury, beginning||262,192,247||263,571,022|
|Fund balances with Treasury, ending||$258,602,386||$ 262,192,247|
|Excess (Shortage) of Revenue and Financing|
|Sources Over Total Expenses||$(171,979)||$(20,779)|
|Adjustments to Reconcile Shortage Of Revenues
Financing Sources Over Total Expenses to Net
|Cash Provided by Operating Activities:|
|Appropriated Capital Used||(35,558,585)||(48,228,503)|
|Decrease (Increase) in Accounts Receivable||(254,047)||76,513|
|Decrease (Increase) in Other Assets||370,145||(1,394,091)|
|Increase (Decrease) in Accounts Payable||(6,227,518)||1,566,781|
|Increase (Decrease) in Other Liabilities||(3,980,949)||6,151,142|
|Depreciation and Amortization||9,129,575||16,541,573|
|Other Unfunded Expenses||171,979||20,779|
|Supplemental Schedule of Financing and Investing Activity:|
|Property and Equipment Acquired Under Capital Lease Obligations||$ 0||$894,856|
|Program Name||Resources||Direct||Reimbursements||Actual 1995||Actual 1994|
|Salaries and expenses||$625,685,531||$538,923,062||$15,892,958||$543,453,112||$545,812,216|
|Office of Inspector General||5,573,272||4,655,345||24,000||4,557,825||4,673,069|
|Other expended budget authority||(1,914,015)||(2,011,258)|
|Expenses not covered by available budgetary resources:|
|Unfunded annual leave expense||(140,435)||66,910|
|Unfunded Workers' Compensation expense||(31,544)||(87,689)|
|Less reimbursements (Acct 5200)||(10,409,373)||(2,660,362)|
|Accrued expenditures, direct||$533,487,103||$552,975,288|
Note 1. Summary of Significant Accounting Policies
A. Basis of Presentation
These principal statements were prepared to report the financial position and results of operations of the U.S. Nuclear Regulatory Commission (NRC) as required by the Chief Financial Officers Act of 1990. The principal statements were prepared from the books and records of NRC in accordance with the form and content for entity financial statements specified by the Office of Management and Budget (OMB) in OMB Bulletin 94-01 and NRC accounting policies summarized in this note. These statements are therefore different from the financial reports, also prepared by NRC pursuant to OMB directives, which are used to monitor and control NRC's use of budgetary resources.
B. Reporting Entity/Program Name
NRC is an independent agency of the Federal Government created by the Energy Reorganization Act of 1974, as amended. Its purposes are defined by the Energy Reorganization Act of 1974, as amended, and the Atomic Energy Act of 1954, as amended. NRC was created by the U.S. Congress to ensure adequate protection of the public health and safety, common defense and security, and the environment in the civilian use of nuclear materials in the United States.
NRC has two appropriations:
- 31X0200 - Salaries and Expenses
- 31X0300 - Office of Inspector General
The 31X0200 appropriation includes approximately $22 million for both Fiscal Year 1995 and 1994, respectively, of funds transferred from the Department of Energy, Nuclear Waste Fund to NRC in accordance with the provisions of PL 103-316 and PL 103-126. Public Law 104-19 rescinded $1.7 million from the Fiscal Year 1995 NRC Salaries and Expenses Appropriation.
In addition, in Fiscal Years 1995 and 1994, $8.9 million and $5.5 million, respectively, of the appropriation received by the U.S. Agency for International Development was transferred for the Nuclear Safety Assistance Program in Russia and the Ukraine which is under the control of NRC.
Additionally, approximately $4.4 million of the appropriation received by the General Services Administration (GSA), were transferred to NRC for the operation and repair of certain buildings occupied by NRC for Fiscal Year 1994.
The accompanying financial statements of NRC include the accounts of all funds under NRC control.
C. Budgets and Budgetary Accounting
For the past 21 years, Congress has adopted no-year appropriations which are available for obligation by NRC until expended. The Omnibus Budget Reconciliation Act (OBRA) of 1990 requires NRC to recover approximately 100 percent of its new budget authority, less the amount appropriated from Nuclear Waste Fund, by assessing fees. At the end of the fiscal year, NRC's appropriations are reduced by the amount of revenues collected during the fiscal year.
D. Basis of Accounting
Transactions are recorded on both an accrual accounting basis and on a budgetary basis. Under the accrual method, revenues are recognized when earned and expenses are recognized when a liability is incurred, without regard to receipt or payment of cash. Budgetary accounting facilitates compliance with legal constraints and controls over the use of federal funds.
E. Revenues and Other Financing Sources
Licensing fees and fees for inspections and other services assessed in accordance with OBRA are recognized as other financing sources when earned.
For reporting purposes, appropriations are recognized as revenues (Appropriated Capital Used) at the time expenses are accrued. At the end of the fiscal year, appropriations recognized are reduced by the amount of assessed fees collected during the fiscal year to the extent of new budget authority for the year. Collections which exceed the new budget authority are held to offset subsequent years' appropriations. Appropriations expended for property and equipment are recognized as expenses when the asset is consumed in operations (depreciation). Appropriated Capital Used does not include appropriations used to purchase capital items or expenses incurred but not yet funded by Congress, such as Workers' Compensation benefits and annual leave expenses. The differences between the accrual basis recognition of appropriations expensed and the budgetary basis recognition of outlays are presented in the Statement of Budget and Actual Expenses.
Miscellaneous receipts collected by NRC are not available to NRC for obligation or expenditure. These receipts must be transferred to the U.S. Treasury when collected.
F. Funds with the Treasury and Cash
NRC cash receipts and disbursements are processed by the U.S. Treasury. The Funds with the U.S. Treasury and Cash are primarily appropriated funds that are available to pay current liabilities and to finance authorized purchase commitments. Cash balances held outside the U.S. Treasury are not material.
G. Accounts Receivable, Net of Allowance
The amounts due for receivables are stated net of an allowance for uncollectible accounts. The estimate of the allowance is based on an analysis of the outstanding balances and the application of estimated uncollectible percentages to categories of aged receivable balances.
NRC makes cash payments to other Federal agencies, employees, grantees, and contractors to provide for future NRC program expenditures. These advance payments are recorded as assets which are reduced when reports of expenditures are received by NRC or when accruals of cost estimates are made by NRC.
I. Property and Equipment
The land and buildings in which NRC operates are provided by the GSA, which charges NRC rent that approximates the commercial rental rates for similar properties.
Property with a cost of $50,000 or more per unit and a useful life of two years or more are capitalized at cost and depreciated. Other property items are expensed when purchased. Normal repairs and maintenance are charged to expense as incurred.
At the beginning of Fiscal Year 1995, NRC increased the dollar value threshold of capitalized property from $5,000 to $50,000. Items acquired costing less than $50,000 are expensed in the year of purchase. All items of property capitalized in previous years ($5,000 to $49,999.99) will continue to be depreciated over the remaining lives.
Property is depreciated using the straight-line method over useful lives which range from 5 to 8 years.
J. Prepaid and Deferred Charges
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 goods and services are received.
Liabilities represent the amount of monies or other resources that are likely to be paid by NRC as the result of a transaction or event that has already occurred. However, no liability can be paid by NRC absent an appropriation. Liabilities for which an appropriation has not been enacted and for which there is no certainty that an appropriation will be enacted are classified as Liabilities not Covered by Budgetary Resources. Also, liabilities of NRC arising from sources other than contracts can be abrogated by the Government acting in its sovereign capacity.
NRC is a party to various administrative proceedings, legal actions, environmental suits, and claims brought by or against it. Based on the advice of legal counsel concerning contingencies, it is the opinion of NRC management that the ultimate resolution of these proceedings, actions, suits, and claims will not materially affect the financial position or results of operations of NRC.
M. Annual, Sick, and Other Leave
Annual leave is accrued as it is earned and the accrual is reduced as leave is taken. Each year, the balance in the accrued annual leave liability account is adjusted to reflect current pay rates. To the extent current or prior year appropriations are not available to fund annual leave earned but not taken, funding will be obtained from future appropriations and assessments.
Sick leave and other types of nonvested leave are expensed as taken.
N. Retirement Plans
NRC employees hired after December 31, 1983 are automatically covered by the Federal Employees' Retirement System (FERS), which was implemented on January 1, 1987. Employees hired prior to that date could elect to join FERS or to remain in the Civil Service Retirement System (CSRS). Approximately 60 percent of NRC employees belong to CSRS and 40 percent belong to FERS. For employees in FERS, NRC withholds .80 percent of base pay earnings in addition to Federal Insurance Contribution Act (FICA) and matches the withholding with a 11.4 percent contribution. The sum is transferred to the Federal Employees Retirement Fund. For employees covered by CSRS, NRC withholds 7.00 percent of their base pay earnings. This withholding is matched by NRC and the sum of the withholding and the match is transferred to the CSRS.
On April 1, 1987, the Federal Government initiated the Thrift Savings Plan (TSP) which is a retirement savings and investment plan for employees covered by either FERS or CSRS. For employees covered by FERS, NRC automatically contributes 1 percent of base pay to their account and matches contributions up to an additional 4 percent. The maximum percentage that an employee participating in FERS may contribute is 10 percent of base pay. Employees covered by CSRS may contribute up to 5 percent of their base pay, but there is no NRC matching of the contribution. The maximum amount that either FERS or CSRS employees may contribute to the plan in a calendar year is $9,240. The sum of the employee and NRC contributions is transferred to the Federal Retirement Thrift Investment Board.
NRC does not report on its financial statements FERS and CSRS assets, accumulated plan benefits, or unfunded liabilities, if any, applicable to its employees. Reporting such amounts is the responsibility of the Office of Personnel Management.
O. Net Position
NRC's net position comprises the following components:
- Unexpended appropriations include the undelivered orders and unobligated balances of NRC's funds. All appropriations remain available for obligation until expended.
- Invested capital represents U.S. Government resources invested in NRC's property and equipment and inventory not held for sale. Increases to invested capital are recorded when assets are acquired with direct appropriations, and decreases are recorded as a result of the depreciation, disposition of capital assets, or consumption of inventory.
- Future funding requirements represent (a) accumulated annual leave earned but not taken as of the financial statement date and (b) accrued Workers' Compensation. The expense for these accruals is not funded from current appropriations, but rather will be funded from future appropriations and assessments.
P. Department of Energy (DOE) Charges
Financial transactions between the DOE and NRC are fully automated through the U.S. Treasury's On-Line Payment and Collection (OPAC) System. The OPAC System allows the DOE to collect amounts due from NRC directly from NRC's account at Treasury for goods and/or services rendered. Project manager verification of goods and/or services received is subsequently accomplished through system generated voucher approval system. The vouchers are returned to the Division of Accounting and Finance documenting that the charges have been accepted. Annually, NRC makes approximately $110 million in payments to the DOE in this manner for research conducted by the DOE National Laboratories.
Certain amounts for 1994 have been reclassified to conform with the 1995 presentation.
Note 2. Fund Balances with Treasury
Fund balances with Treasury consist of the following amounts as of September 30, 1995 and 1994:
|Other fund types||8,769,560||12,897,866|
U.S. Government cash is handled on an overall consolidated basis by Treasury. "Funds with Treasury" represents NRC's right to draw on Treasury for allowable expenditures. All amounts are available to NRC for current use except for $5.6 million related to fees collected which are held to offset subsequent years' appropriations. The obligated and unobligated balances exclude amounts related to unfilled customers orders.
Note 3. Accounts Receivable, Net
Accounts receivable, net is composed of the following amounts as of September 30, 1995 and 1994:
Intragovernmental accounts receivable consists primarily of receivables and reimbursements due from other Federal agencies ($8,231,231 and $5,802,642 at September 30, 1995 and 1994, respectively).
Governmental accounts receivable is comprised of the following amounts as of September 30, 1995 and 1994:
|Materials and facilities fees - billed||$ 6,982,690||$17,689,190|
|Materials and facilities fees - unbilled||24,388,455||46,535,157|
|Total accounts receivable||31,503,180||64,418,851|
|Less: Allowance for uncollectible accounts||(3,192,845)||(5,282,378)|
|Accounts receivable, net||$28,310,335||$59,136,473|
Governmental accounts receivable represents primarily amounts due for fees assessed for licensing and inspections of nuclear facilities and radioactive materials and other services. In the year collected, the amounts will be used to offset NRC's appropriations.
Governmental accounts receivable, net represents miscellaneous amounts due from the public ($692,881 and $856,102 at September 30, 1995 and 1994, respectively), which when collected, must be transferred to the U.S. Treasury.
NRC's methodology to estimate the allowance for uncollectible accounts is based on an analysis of the outstanding balances and the application of estimated uncollectible percentages to categories of aged receivable balances.
Note 4. Advances and Prepayments
Advances and prepayment as of September 30, 1995 and 1994, consists primarily of the following:
|Advances - other Federal agencies||$2,466,180||$2,672,160|
|Advances - other||7,193|
Advances and prepayments are recorded as assets until receipt of the goods or services involved or until contract terms are met. When goods or services are received or contract terms are met, the advance or prepayment is reduced and the expense or acquired asset is recognized. There were no outstanding prepayments as of September 30, 1995 and 1994.
Note 5. Property and Equipment, Net
Property and equipment, net consists of the following as of September 30, 1995 and 1994:
|Service Years||Acquisition Value||Accumulated Depreciation||1995 Net Book Value||1994 Net Book Value|
|Fixed Assets Class|
|Equipment 5-8||$28,481,712||$18,523,429||$ 9,958,283||$13,080,567|
|ADP software||5 44,845,297||36,779,914||8,065,383||11,386,812|
|Leasehold improvements 5-20||17,288,105||1,768,704||15,519,401||14,405,994|
|ADP software under development||3,632,345||3,632,345||1,614,004|
The straight-line depreciation method is used for all classes of fixed assets. Depreciation expense for Fiscal Years 1995 and 1994 was $9,129,575 and $16,541,573, respectively.
In 1994, the NRC revised the useful life of the majority of its equipment to better reflect NRC's experience which has shown that the majority of equipment had a useful life of five to eight years. As a result of revising the service lives and salvage values of its equipment, the NRC recalculated the depreciation on its equipment, resulting in $4.95 million of additional depreciation expense in 1994. Had the NRC not revised the useful lives of its equipment, the total depreciation expense in 1994 would have been approximately $11.59 million. The remaining book value of the equipment was depreciated over the remaining service lives of the equipment. The additional depreciation is approximately $1.65 million in Fiscal Year 1995 and will be $1.25 million in Fiscal Year 1996, $.75 million in Fiscal Year 1997 and $.42 million in Fiscal Year 1998.
In 1995, NRC increased the capitalization dollar amount on property and equipment from $5,000 to $50,000. All property items previously capitalized ($5,000 to $49,999.99) will continue to be depreciated over the remaining useful lives.
The land and buildings occupied by NRC are provided by the GSA. For Fiscal Years 1995 and 1994, the GSA charged NRC $18,580,348 and $18,594,586, respectively, for the use of these facilities based on a rental fee which is to approximate the commercial rates for similar properties.
Note 6. Accounts Payable and Advances
Accounts payable and advances consists of the following as of September 30, 1995 and 1994:
|Department of Energy||$ 9,826,949||$ 8,072,650|
|Other Federal agencies||2,994,531||6,174,148|
The account payables are all current. Current account payables represent amounts which are expected to be paid within the fiscal year following the reporting date.
Note 7. Accrued Payroll and Benefits
Accrued payroll and benefits as of September 30, 1995 and 1994 consists of:
|Accrued personnel services||$ 8,699,085||$8,200,211|
Accrued payroll and benefits represent wages and benefits which have been earned but not paid as of the financial statement date.
Note 8. Other Liabilities Covered by Budgetary Resources
Other liabilities as of September 30, 1995 and 1994 include:
|Liability for deposit funds||$1,550,759||$3,151,105|
|Advances from others||6,773,342||9,747,253|
The liability for deposit funds consists primarily of liabilities arising from payroll deductions and tax withholdings. Advances from others consists of funds primarily from foreign governments for the participation in cooperative research programs.
|Liability to offset net accounts receivable for fees assessed||$35,204,023||$63,855,619|
|Liability related to fees collected which will offset subsequent years' appropriations||5,635,943|
|Liability to offset net miscellaneous accounts receivable||692,881||856,102|
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 year collected.
The liability related to fees collected which will be used to offset subsequent years' appropriation represents amounts which will be transferred to the U.S. Treasury to offset subsequent years' appropriation.
The liability to offset net miscellaneous 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 amounts which are expected to be paid within the fiscal year following the reporting date. Advances from others may not be liquidated in the fiscal year following the reporting date.
Note 9. Other Liabilities Not Covered by Budgetary Resources
Unfunded liabilities as of September 30, 1995 and 1994 include:
|Accrued annual leave||$24,563,784||$24,423,350|
|Accrued Workers' Compensation||1,261,674||1,230,130|
Accrued annual leave represents the amount of annual leave earned by NRC employees but not yet taken. Accrued Workers' Compensation represents Federal Employees Compensation Act (FECA) benefits paid by the Department of Labor on NRC's behalf which had not been billed to or paid by NRC as of September 30, 1995 and 1994. The actuarial amounts for future disability benefits are not included in the principal statements.
Accrued annual leave and accrued Workers' Compensation are not funded by current or prior years' appropriations and assessments. Funding will be provided from future years' appropriations and assessments (see Note 11).
Note 10. Intragovernmental Activities
The NRC reporting entity's financial activities interact with and are dependent upon those of the Federal Government as a whole. Other Federal agencies make financial decisions and report certain financial matters on behalf of all Federal agencies. The practice of having Federal agencies record or report only those government-wide financial matters for which they are directly responsible is consistent with generally accepted accounting principles for Federal agencies which seek to identify financial matters to the department or agency that has been granted budget authority and resources to manage them. Activities which are performed or reported by other Federal agencies in which NRC is indirectly involved are as follows:
- NRC funds a portion of its employee pension benefits under the CSRS and the FERS but does not disclose actuarial data with respect to accumulated plan benefits, plan assets, or the unfunded pension liability relative to its employees. Reporting of these amounts is the responsibility of the Office of Personnel Management.
In addition, NRC makes contributions to the TSP on behalf of its employees. NRC does not have control over the plan's assets. The TSP is administered by the National Finance Center of the Department of Agriculture.
- Certain legal matters to which NRC may be a named party are administered, and in some cases, litigated by other Federal agencies. Amounts paid under any decision, settlement, or award pertaining thereto are generally funded through the Treasury.
In most cases, claims (including personal injury claims) are administered and resolved by the Department of Justice and any amounts necessary for resolution are obtained from a special fund maintained by the Treasury. Any legal actions for Workers' Compensation claims brought by NRC employees fall under FECA, which is administered by the Employment Standards Administration of the U.S. Department of Labor. The cost of administering, litigating, and settling these legal matters has not been allocated to individual Federal agencies.
- Interest on borrowings of the U.S. Treasury is not included as a cost to NRC's programs and is not included in the accompanying financial statements.
Note 11. Net Position
The net position consists of the following as of September 30, 1995 and 1994:
|Future funding requirements (Note 9)||(25,825,458)||(25,653,480)|
Unexpended appropriations include (1) unobligated appropriation balances and (2) undelivered orders, which are amounts which have been obligated but not yet expended. The unobligated appropriations balance does not include $8,911,666 and $7,929,695 in unfilled customer orders - unobligated as of September 30, 1995 and 1994, respectively. The undelivered orders balance does not include $8,119,066 and $2,688,440 in unfilled customer orders - obligated as of September 30, 1995 and 1994, respectively.
Invested capital represents the net investment of the U.S. Government appropriations expended for NRC's capitalized property and equipment.
Future funding requirements represent the amount of future funding needed to pay the accrued unfunded expenses as of September 30, 1995 and 1994. These accruals are not funded from current or prior appropriations and assessments, but rather should be funded from future appropriations and assessments. Accordingly, future funding requirements have been recognized for these expenses that will be paid from future appropriations (See Note 9).
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 other services. During Fiscal Years 1995 and 1994, $509.1 million and $499.6 million, respectively, were collected from fees assessed for licensing, inspections and other services. OBRA requires NRC to recover approximately 100 percent of its new budget authority, less the amount appropriated from the Nuclear Waste Fund, by assessing fees. At the end of the fiscal year, 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 appropriations.
For Fiscal Years 1995 and 1994, $501.9 and $499.6 respectively, of collections were used to reduce the fiscal year's appropriations recognized:
|Appropriated funds consumed||$ 537,429,585||$ 547,804,143|
|Less: Collection from fees assessed||(501,871,000)||(499,575,640)|
|$ 35,558,585||$ 48,228,503|
Note 13. Other Revenues and Financing Sources
Other revenues and financing sources for September 30, 1995 and 1994 were:
|Fees for licensing, inspection and other services||$478,855,346||$494,600,470|
|Other miscellaneous receipts||3,518,733||5,316,616|
Note 14. Operating Expenses
Operating expenses by object class are as follows:
|Personnel services and benefits||$263,691,136||$260,529,990|
|Travel and transportation||16,139,326||17,472,506|
|Rent, communication and utilities||25,581,602||23,082,990|
|Printing and reproduction||2,005,287||1,903,611|
|Supplies and materials||13,353,246||13,115,150|
|Grants, subsidies and contributions||1,456,333||1,110,957|
|Insurance claims and indemnities||131,477||40,416|
Note 15. Employee Retirement Plans
Total NRC contributions for employee retirement plans for Fiscal Years 1995 and 1994 were as follows:
|Civil Service Retirement System (CSRS)||$ 9,226,610||$ 9,410,751|
|Federal Employees' Retirement System (FERS)||9,115,078||9,844,803|
|Federal Insurance Contribution Act (FICA)||5,923,317||5,753,528|
|Thrift Savings Plan (TSP)||3,580,292||3,361,939|
Data on the actuarial present value of accumulated benefits, assets available for benefits, and unfunded pension liability are maintained by other Federal agencies and are not allocated to individual departments and agencies.
Note 16. Other Expenses
Other expenses as of September 30, 1995 and 1994 consist of:
|Loss on disposal of property||$281,951||$1,679,729|
|Bad Debt Expense||5,094||-|
Note 17. Shortage of Revenues and Financing Sources over Total Expense
The shortage of revenues and financing sources over total expenses represents expenses not covered by budgetary resources for the years ended September 30, 1995 and 1994, and consists of:
|Accrued annual leave||$140,435||$(66,910)|
|Accrued Workers' Compensation||31,544||87,689|
Expenses not covered by Budgetary Resources are not funded from current appropriations but are to be funded from future appropriations and assessments.
Note 18. Non-operating Changes
Non-operating changes for the fiscal years ended September 30, 1995 and 1994 consist of the following:
|Change in unexpended appropriations||$(716,103)||$(8,059,480)|
|Change in invested capital||(3,942,482)||5,167,638|
Inspector General's Opinion on Management's Assertion About the Effectiveness of Internal Controls
OIG evaluated management's assertion about the effectiveness of its internal controls designed to (1) safeguard assets against loss from unauthorized acquisition, use or disposition, (2) assure the execution of transactions in accordance with laws governing the use of budget authority and with other laws and regulations that have a direct and material effect on the Principal Statement or that are listed in OMB audit guidance and could have a material effect on the Principal Statements, and (3) properly record, process, and summarize transactions to permit the preparation of reliable financial statements and to maintain accountability for assets.
In planning and performing our audit of the principal financial statements of NRC for the year ended September 30, 1995, OIG assessed the agency's internal control structure in order to determine our auditing procedures for the purpose of expressing our opinion on the principal statements and to determine whether the internal control structure meets the objectives stated above. This work included obtaining an understanding of the internal control policies and procedures and assessing the level of control risk relevant to all significant cycles, classes of transactions, or account balances. Additionally, OIG performed sufficient tests to provide reasonable assurance that significant control policies and procedures, as implemented, were effective and working as designed.
For the purpose of this report, OIG classified NRC's significant internal control structure cycles in the following categories:
- Funds with U.S. Treasury
- Fee Revenue
- Commercial Payments - Non-Department of Energy
- Commercial Payments - Department of Energy
For all the internal control cycles listed above, OIG obtained an understanding of the design of relevant policies and procedures and whether they have been placed in operation, and we assessed control risk. OIG considered NRC's Federal Managers' Financial Integrity Act (FMFIA) reports, as well as the Office of the Inspector General's (OIG) reports on financial matters and internal accounting control policies and procedures, in making our risk assessment.
OIG noted certain matters involving the internal control structure and its operation that we considered reportable conditions under standards established by the American Institute of Certified Public Accountants and Office of Management and Budget (OMB) Bulletin 93-06. 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 entity's ability to ensure the objectives of internal controls are met.
In our opinion, NRC management fairly stated that those controls, in place on September 30, 1995, provided reasonable assurance that losses, noncompliance, or misstatements material in relation to the Principal Statements would be prevented or detected on a timely basis. Management made this assertion based upon criteria established under the Federal Managers' Financial Integrity Act of 1982 and the OMB Circular A-123, Internal Control Systems.
The matters listed below involve the design or operation of the internal control structure and warrant disclosure as reportable conditions in this report. The first issue listed is new, but is similar to a FY 1994 condition. The remaining reportable conditions are carryovers from FY 1994.
- Fee Recovery System Lacks Internal Controls
- Lack of DOE Audit Assurance
- Payroll System Must Be Integrated With The General Ledger and Possess Labor Distribution Capabilities(1)
Our consideration of the internal control structure would not necessarily disclose all matters in the internal control structure that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that could be considered to be material weaknesses. In our opinion, none of the reportable conditions noted are classifiable as material weaknesses. The reportable conditions noted are detailed in the Reportable Conditions and Recommendations section immediately following this report.
This report is intended solely for the use of NRC management and should not be used for any other purpose. This restriction is not intended to limit the distribution of this report, which is a matter of public record.
Reportable Conditions and Recommendations Current Year
1. Fee Recovery System Lacks Internal Control
The internal control review of the license fee and debt collection process disclosed a lack of controls for billing inspection costs (Part 170 fees) to licensees. This issue is similar to the reportable condition involving the Technical Assistance Program Support System in the FY 1994 report on internal control, and represents the need for additional management attention to this area.
10 CFR Part 170 fees consist of license and inspection fees, established under the authority of the Independent Offices Appropriation Act (IOAA) (31 U.S.C. 9701), to recover the NRC's costs of providing individually identifiable services to specific applicants and licensees. NRC's fees for these services are assessed generally for the review of new licenses applicants, amendments to or renewal of licenses, and inspection of licensed activities.
During our audit we noted that hours associated with two types of completed inspections were not billed to the licensees that received the services. One type included inspection reports that had been closed and data entered into the Inspection Report Tracking System (IRTS) after the end of the billing cycle. The other type involved inspection reports where the completion date was not entered into the IRTS system. In both cases, fees associated with the completed inspections were not billed.
While we were pursuing billing issues and the reliability of billing data, the Office of the Controller (OC) assessed the scope and magnitude of this issue and developed a five-part corrective action plan. The plan, however, generally focuses on screening data after it has been processed and does not appear to address (1) why completion dates were not entered, or (2) why the system did not process reports entered after the close of the billing cycle. To provide complete corrective action, we believe these root causes must be determined and addressed.
The Office of the Controller estimates between $4-6 million in unbilled inspections occurred during the FY 1991 - 1995 period, and believes that about $1.6 million is attributable to FY 1995. Until OC completes its review, we have deferred further audit effort on this internal control weakness.
We believe that normally it is more efficient and possibly more effective to prevent a problem from occurring, than putting in place actions to address the effects of the problem. Therefore, if OC's planned actions do not address the root cause, we recommend that the Chief Financial Officer should direct OC to:
1. Expand the plan to identify the root cause for the billing deficiencies, and take additional action as needed.
2. Lack of DOE Audit Assurance
This reportable condition is a carryover from the FY 1994 audit of NRC's principal statements, and concerns the lack of audit assurance for interagency reimbursable work performed by the DOE national laboratories. Approximately 20 percent of NRC's annual budget is expended for work at these laboratories. Prior to FY 1994, this condition was reported as a scope restriction on NRC's principal statements for FY 1992 and 1993. As a result of actions taken by the NRC and the GAO, the issue was downgraded to a reportable condition for FY 1994.
In its FY 1994 report, the independent auditor recommended NRC actions to remedy this issue. During FY 1995 and continuing to date, NRC aggressively pursued a solution to this issue. In particular, NRC has explored several alternatives, including a revision to its Memorandum of Understanding with DOE to provide needed information. Although a satisfactory solution has not yet been achieved, we commend NRC for its continuing efforts to resolve this issue, and we will work with the Agency in this effort.
3. Payroll System must Be Integrated with the General Ledger and Possess Labor Distribution Capabilities
This issue is a carryover from the FY 1994 audit, and combines two issues previously reported separately, those being General Accounting Controls at the General Ledger Level Not Maintained(2) and Accounting System Does Not Provide Object Class and Program Information(3). The remaining concerns with these issues relate to the adequacy of NRC's Payroll System. We have, therefore, chosen to report the separate issues as a single payroll related issue.
NRC's accounting system does not include all of the necessary general accounting controls to produce timely and accurate financial information needed to prepare complete financial reports as required by OMB Bulletin 94-01. The principal weaknesses and issues that remain are:
- The compatibility and integration of the NRC general ledger and subsystems used by NRC for payroll.
- Heavy reliance on manual inputs due to the use of incompatible subsystems.
NRC is in the process of replacing its payroll system with a new subsystem that is integrated into the Federal Financial System (FFS) and will eventually provide labor distribution information. When the new payroll system is fully implemented, individual payroll transactions will be generated for FFS update within the program receiving the direct benefit of the expenditure. NRC continues to reconcile the non-compatible payroll subsystem with the FFS general ledger on a monthly and year end basis.
None, as NRC is in the process of replacing its payroll system.
Reportable Conditions Closed from Previous Year
1. Billing Practices Need Improvement
Based on the corrective actions taken by NRC in FY 1995, we are satisfied billing and collections for 10 CFR Part 170 are now made timely. Therefore, this reportable condition is closed. As stated in our current year reportable condition, Fee Recovery System Lacks Internal Control, we have new concerns about the reliability of the 10 CFR 170 data.
2. Property System Should Be Formalized
As stated in Note 5 to the Principal Statements, NRC increased the capitalization dollar amount on property and equipment from $5,000 to $50,000. All property previously capitalized ($5,000 to $49,999) will continue to be depreciated over the remaining useful lives. NRC estimates that the effect of this change significantly decreases the number of items capitalized and depreciated. In FY 1995, only 11 capital equipment items were added to the existing inventory.
NRC has also implemented control procedures to ensure that capitalized property is recorded in the general ledger on a monthly basis. Based on the actions taken by NRC in FY 1995, we are satisfied adequate corrective action has been taken. Therefore, this reportable condition is closed.
Inspector General's Report on Compliance with Laws and Regulations
The Office of the Inspector General (OIG) has audited the Principal Financial Statements of the U.S. Nuclear Regulatory Commission (NRC), as of and for the year ended September 30, 1995, and issued our report thereon dated March 1, 1996. As part of our audit, we tested the NRC's compliance with certain laws and regulations that, if not followed, could have a direct and material effect on the financial statements. This report pertains only to our consideration of compliance with laws and regulations for the year ended September 30, 1995. The financial statements of the U.S. Nuclear Regulatory Commission as of September 30, 1994, were audited by other auditors, whose report dated March 10, 1995, expressed an unqualified opinion on those statements.
OIG conducted its audit in accordance with generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, and Office of Management and Budget Bulletin 93-06, Audit Requirements for Federal Financial Statements. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the principal financial statements are free of material misstatements.
NRC's principal financial statements for the fiscal year ended September 30, 1995, includes about $110 million of reimbursable expenses incurred by the Department of Energy (DOE), which represents approximately 20 percent of the agency's total expenses. The funds were transferred under the provisions of the Energy Reorganization Act (P.L. 95-91) which are embodied in a Memorandum of Understanding (MOU) between NRC and DOE dated February 24, 1978. The MOU establishes guidelines for the program planning, implementation, control, funding, and management of NRC funds. The responsibility to design, implement, and evaluate the system of controls to assure compliance with laws and regulations rests with the Department of Energy.
OIG's assessment of compliance with laws and regulations which could have a material and direct effect on the NRC financial statements did not provide for a review of DOE's extent of compliance with laws and regulations for the NRC funds they expended. Our assessment of compliance with laws and regulations over the funds transferred to DOE was limited to testing the controls maintained at NRC over the disbursing and recording of these funds.
Compliance with laws and regulations applicable to NRC is the responsibility of agency management. As part of obtaining reasonable assurance as to whether the principal financial statements are free of material misstatement, we tested NRC's compliance with laws and regulations that may directly affect the financial statements and certain other laws and regulations designated by OMB as listed below. However, our primary objective was not to provide an opinion on overall compliance with such provisions. Accordingly, we do not express such an opinion.
- Anti-Deficiency Act (Title 31 U.S.C.),
- National Defense Appropriations Act (PL 101-510),
- Omnibus Budget Reconciliation Act of 1990
- Debt Collection Act of 1982 (PL 97-365),
- Prompt Pay Act (PL 97-177),
- Civil Service Retirement Act,
- Civil Service Reform Act (PL 95-454),
- Federal Managers' Financial Integrity Act (PL 97-255),
- Chief Financial Officers' Act (PL 101-576), and
- Budget and Accounting Act.
As part of our audit, we reviewed management's reporting of internal control and accounting systems as required by the Federal Managers' Financial Integrity Act (FMFIA) and compared the agency's most recent FMFIA reports with the evaluations we conducted of NRC's internal control system.
The results of our tests indicate that with respect to the items tested, NRC complied in all material respects with the provisions referred to above. With respect to the items not tested, nothing came to our attention that caused us to believe that NRC had not complied, in all material respects, with those provisions.
This report is intended solely for the use of management of the U.S. Nuclear Regulatory Commission. This restriction is not intended to limit the distribution of this report, which is a matter of public record.
NRC's lack of effective internal controls over the billing of fee recoverable activities results in non-compliance with 10 CFR Part 170.
10 CFR Part 170, under the authority of the Independent Offices Appropriation Act (IOAA) (31 U.S.C. 9701), requires NRC to assess fees to recover the NRC's costs of providing individually identifiable services to specific applicants and licensees. The services provided by the NRC for which these fees are assessed include the review of new licensee applicants or approvals, amendments to or renewal of licenses or approvals, and inspection of licensed activities.
The License Fee and Accounts Receivable Branch (LFARB) is responsible for billing and collecting Part 170 and 171 fees. LFARB prepares invoices for licensees from data received from the regions, the Office of Nuclear Reactor Regulation (NRR) and the Office of Nuclear Materials Safety and Safeguards (NMSS). LFARB relies on regional, NRR and NMSS controls to prepare complete and reliable billings.
As stated in our report on NRC's internal control structure, we noted that hours associated with certain classes of completed inspections were not billed to the licensees that received the services. As a result, the Part 170 fees reported to LFARB were incomplete and understated, and the unrecorded fee recoverable costs were inappropriately included in Part 171 reactor annual fees that are allocated to all licensees. For example, any facility fees that are not identifiable to a specific licensee are considered "generic" and are divided equally among all licensees without regard to the benefit gained by each licensee. The Part 171 reactor annual fees represent approximately 86 percent of all Part 171 fees.
The Office of the Controller (OC) identified about 30,000 unbilled hours for inspection data entered after the end of the billing cycle, and about 26,000 hours that may have been associated with completed inspection reports. These two situations resulted in about 56,000 inspection hours that may have not been billed to the licensees that received the services.
OC estimates a total of $4-6 million in unbilled inspections over the five year period, and believes that about $1.6 million is attributable to FY 1995. Its work on this issue is continuing and they plan to take corrective actions as stated in our report on NRC's internal control structure.
NRC's lack of controls results in a non-compliance with 10 CFR Part 170. Part 170 fees are inappropriately billed and allocated among all reactor licensees instead of being charged to the specific licensee receiving the services.
None. As stated in our report on Management's Assertion About the Effectiveness of Internal Controls, NRC is aggressively pursuing resolution of this issue.
Compliance Finding Closed from Previous Year
The 1994 compliance finding concerned controls to ensure that NRR's Technical Assistance Program Support System (TAPPS) reported all Part 170 fee recoverable costs to the LFARB. Such controls were determined to be inadequate and resulted in all reactor licensees sharing in fees that should have been charged to specific licensees. This situation was similar to the current year's compliance finding.
We reviewed the corrective actions taken to address this deficiency, and are satisfied that the additional controls established should provide an effective remedy. Therefore, this compliance finding is closed.
United States Nuclear Regulatory Commission
Washington, DC 20555-0001
February 23, 1996
|Memorandum to:||Leo J. Norton
Acting Inspector General
|From:||James M. Taylor
Chief Financial Officer
|Subject:||Draft Reports - Report on Principal Statements, Opinion on Management's Assertion About The Effectiveness of Internal Controls, And Compliance With Laws And Regulations - Fiscal Year 1995 Financial Statement Audit|
We appreciate the opportunity to respond to the draft audit of the financial statement and are providing comments to the recommendation.
I am pleased that again this year we received an unqualified opinion, with no material weaknesses. It was also gratifying that the number of reportable conditions were reduced from 6 to 3. I appreciate your continued support of our efforts to resolve the reportable condition concerning the "Lack of DOE Audit Assurance."
As you know, the staff has been working to resolve the reportable condition on "Fee Recovery System Lacks Internal Control" since it was first identified in the Deputy CFO's December 20, 1995, reasonable assurance letter. I agree with your recommendation to expand the corrective actions already underway, to include identification of the root cause for the billing deficiencies.
1. This reportable condition combines two issues previously reported separately, those being General Accounting Controls at the General Ledger Level Not Maintained and Accounting System Does Not Provide Object Class and Program Information.
2. This issue previously included payroll, travel and property. The travel issue was closed last year and the property issue was closed this year.
3. This issue was partially resolved when NRC installed the Federal Financial System general ledger system. However, to fully resolve the issue, the payroll system must possess labor distribution capabilities.