APPENDIX A

Financial Statements


Overview

Reporting Entity

The Nuclear Waste Policy Act of 1982 (Public Law 97-425) established the Office of Civilian Radioactive Waste Management (OCRWM) within the Department of Energy. OCRWM’s mission is to manage and dispose of the nation’s spent nuclear fuel and high-level radioactive waste. The Office provides leadership in developing and implementing strategies to accomplish this mission that ensure public and worker health and safety, protect the environment, merit public confidence, and are economically viable.

The Nuclear Waste Policy Amendments Act of 1987 (Title V, Public Law 100-203) directed the Secretary of Energy to characterize only the Yucca Mountain site in Nevada to determine if it is suitable for a repository for spent nuclear fuel and high-level radioactive waste.

As of September 30, 2000, OCRWM employed 2,523 people. This included 169 OCRWM Federal staff, 15 Federal full-time equivalents (FTEs) at other Headquarters offices, 6 Federal FTEs at the DOE Nevada Operations Office, 110 U.S. Geological Survey employees, and 2,223 contractor employees, including employees of national laboratories.

OCRWM carries out its mission through two business centers -- the Yucca Mountain Site Characterization Project and the Waste Acceptance, Storage and Transportation Project -- and a Program Management Center.

The Yucca Mountain Site Characterization Project, located in Las Vegas, Nevada, oversees the scientific and technical investigation of Yucca Mountain, including: The Waste Acceptance, Storage and Transportation Project, located in Washington, D.C., focuses on the development of processes for the legal and physical transfer of commercial spent nuclear fuel to the Federal Government, establishment of an acceptance process for Department-owned spent nuclear fuel, including naval spent nuclear fuel, high-level radioactive waste and immobilized surplus plutonium, creation of a national transportation capability for waste acceptance, and the resolution of institutional issues with Program stakeholders.

OCRWM’s Program Management Center provides program integration and management support to the Director, OCRWM, and to the two business centers. The Program Management Center is comprised of the Office of Quality Assurance in Las Vegas, Nevada, the Office of Program Management and Administration, and the Systems Engineering and International Division of the Office of Acceptance, Transportation and Integration, in Washington, D.C. The Center is responsible for quality assurance, program planning and administration, program management, technical and regulatory integration, international waste management activities, institutional activities, and management of the Nuclear Waste Fund and OCRWM’s investment portfolio.

Fiscal Year 2000 Technical Performance

OCRWM’s lower-than-expected appropriation for FY 2000 contributed to a cumulative shortfall of roughly $110 million over the past three years. Despite this shortfall, OCRWM accomplished all three success measures in the Secretary’s Fiscal Year 2000 Performance Agreement with the President by deferring important engineering and design activities and focusing resources on completing the scientific and technical work vital to support a possible site recommendation.

Success Measure #1: Complete public hearings on the draft environmental impact statement.

RESULTS: A draft EIS was published in August 1999. The next step was to hold public hearings and obtain comments from stakeholders and the public, as required by the National Environmental Policy Act (NEPA). A total of 21 public hearings were held across the nation between September 27, 1999, and February 22, 2000.

Success Measure #2: Select the reference design for site recommendation and license application.

RESULTS: The Office of Civilian Radioactive Waste Management developed the reference design to be used in the preliminary site suitability evaluation that will be performed in order to decide whether or not to recommend the Yucca Mountain site for development as a repository. The reference design was based on comments received from stakeholders, including oversight bodies, such as the Nuclear Waste Technical Review Board. If the site is approved, the license application design will be based on the current reference design as it evolves and may include adjustments to ensure public health and safety and cost effectiveness.

Success Measure #3: Select the reference natural systems models for site recommendation and license application.

RESULTS: The process models for use in a potential site recommendation were selected. The data were verified, and the model codes were validated. Abstractions of the models were used in a total system performance assessment of the repository. The process models, which are based on the most recently available scientific information, will be updated, as necessary, to support a possible license application, using an iterative, integrated process. This process will ensure that our performance assessment capability is fully consistent with additional confirmatory data being collected.

Fiscal Year 2001 Technical Performance Measures

The following Secretarial commitments have been identified as technical performance measures for OCRWM in FY 2001: Fiscal Year FY 2000 Financial Performance

OCRWM is required by the NWPA to recover the full cost of the Program. The Program’s total cost was estimated in Analysis of the Total Systems Life Cycle Cost of the Civilian Radioactive Waste Management Program, dated December 1998, and updated in December 1999. A second contractor draft update was received in December 2000.

Program funding comes from the Nuclear Waste Fund and the Defense Nuclear Waste Disposal Appropriation (DNWDA). The NWF consists of fees paid by the owners and generators of spent nuclear fuel from commercial reactors, in accordance with provisions of their contracts with the Department of Energy (DOE) for disposal services. NWF assets in excess of those appropriated to pay program costs are invested in U.S. Treasury securities. The DNWDA was established by the Congress in lieu of direct payment of fees by the Department into the NWF, to pay for the disposal costs of the high-level radioactive waste resulting from atomic energy defense activities and other DOE-managed nuclear materials. As of September 30, 2000, cumulative revenue from fees and the DNWDA, totaled approximately $13.282 billion, and cumulative interest earnings and other revenue totaled approximately $7.493 billion. Cumulative expenditures from appropriations, including direct appropriations to the Nuclear Regulatory Commission, the now defunct Office of the Nuclear Waste Negotiator, and the Nuclear Waste Technical Review Board, totaled approximately $6.781 billion.

As of September 30, 2000, the U.S. Treasury securities held by OCRWM had a market value of $9.777 billion, compared to $8.481 billion at the end of Fiscal Year 1999. Investment income for fiscal year 2000 was $584.5 million, including $580.8 million in interest earnings and $3.7 million in net gains on the sale of securities.

OCRWM’s primary financial goal is to ensure that future spending needs can be met. Therefore, OCRWM relies on the asset-liability matching approach to investing used by pension funds and insurance companies. By matching investments to anticipated funding requirements, OCRWM reduces the risk that changes in interest rates will adversely affect the fee adequacy balance, ensures that identified spending projections will be met, and makes investments at the most favorable rates currently available.

In its FY 1999 financial statements, OCRWM established the following two financial performance measures for FY 2000, both of which were achieved. The FY 2000 measures were: FY 2001 Financial Performance Measures

The following have been identified as financial performance measures for OCRWM in FY 2001: The accompanying financial statements were prepared to report the financial position, net cost, changes in net position, budgetary resources, and financing of the Nuclear Waste Fund and the Defense Nuclear Waste Disposal appropriation, pursuant to the NWPA, as amended. While the statements have been prepared from the books and records of the NWF and the Defense Nuclear Waste Disposal appropriation, in accordance with the formats prescribed by the Office of Management and Budget, the statements are different from the financial reports used to monitor and control budgetary resources, which are prepared from the same books and records.

The statements should be read with the realization that they relate to the Nuclear Waste Fund and the Defense Nuclear Waste Disposal appropriation; that unfunded liabilities reported in the financial statements cannot be liquidated without the enactment of an appropriation; and that the payment of all liabilities, other than those resulting from contractual obligations, can be abrogated by the Department of Energy.


Independent Auditors’ Report on Financial Statements

United States Department of Energy
Office of Civilian Radioactive Waste Management:

We have audited the accompanying balance sheets of the Office of Civilian Radioactive Waste Management (OCRWM) as of September 30, 2000 and 1999, and the related statements of net cost, changes in net position, budgetary resources, and financing for the years then ended. These financial statements are the responsibility of the OCRWM’s management. Our responsibility is to express an opinion on the financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and Office of Management and Budget (OMB) Bulletin No. 01-02, Audit Requirements for Federal Financial Statements. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures relating to the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

As discussed in note 12 to the financial statements, OCRWM is involved as a defendant in several maters of litigation relating to its inability to accept waste by the January 31, 1998, date specified in the Nuclear Waste Policy Act of 1982, as amended. The Court of Appeals for the District of Columbia Circuit has ruled that the Standard Contract (1) imposes an unconditional obligation on DOE to initiate waste acceptance by January 31, 1998, and (2) offers a potentially adequate remedy for the failure of DOE to meet this obligation. It is too early to evaluate the ultimate impact on OCRWM of claims based on the decisions in these cases and resolution of such claims will involve highly fact-specific and individualized decisions about the costs incurred by each contract holder as a result of the delay of DOE in meeting its obligation under the Standard Contract. However, DOE has estimated possible damages to be between $2 billion and $3 billion, if all utilities file claims. Some utility representatives have estimated damages totaling $50 billion. OCRWM has recorded an estimated liability of $2 billion and $500 million relating to these matters in the financial statements as of September 30, 2000 and 1999, respectively.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Office of Civilian Radioactive Waste Management as of September 30, 2000 and 1999, and its net costs, changes in net position, budgetary resources, and reconciliations of net costs to budgetary obligations for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The information in the Overview section is not a required part of the consolidated financial statements but is supplementary information required by the Federal Accounting Standards Advisory Board or OMB Bulletin No. 97-01, Form and Content of Financial Statements, as amended. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of this information. However, we did not audit the information in the Overview section, and, accordingly we express no opinion on it.

In accordance with Government Auditing Standards, we have also issued reports dated January 31, 2001, on our considerations of OCRWM’s internal control over financial reporting and its compliance with certain provisions of laws and regulations. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards, and should be read in conjunction with this report in considering the results of our audit.

KPMG Signature

January 31, 2001


Balance Sheets

As of September 30, 2000 and 1999

(Dollars in thousands)

$      2000      $      1999     
Assets
    Intragovernmental:
        Fund balance with Treasury (note 3) $ 98,355 $ 88,101
        Investments (note 4) 9,777,385 8,481,205
        Accounts receivable:
            Receivable from Department of Energy (notes 2 and 11) 1,394,889 1,486,056
            kWh fees (note 5) 10,499 11,298
            Accrued investment interest (note 4) 81,662 81,388
        Other assets             412             445
                        Total intragovernmental assets 11,363,202 10,148,493
    Accounts receivable (note 5):
        kWh fees 155,490 153,258
        One-time spent fuel fees 880,489 880,489
        Interest from one-time spent fuel fees 1,660,989 1,523,355
    General property, plant, and equipment, net (note 6) 18,574 22,367
    Other assets          1,283             808
                        Total assets $ 14,080,027 $ 12,728,770
Liabilities
    Liabilities covered by budgetary resources:
        Intragovernmental:
            Accounts payable $ 2,057 $ 5,249
            Deferred revenue (note 14)      839,914   1,142,059
                        Total intragovernmental liabilities 841,971 1,147,308
        Accounts payable 37,355 34,896
        Deferred revenue (note 14) 13,147,716 11,802,824
        Contract holdback 437 322
        Other governmental liabilities          3,761          3,462
                        Total liabilities covered by budgetary resources 14,031,240 12,988,812
    Liabilities not covered by budgetary resources:
        Intragovernmental:
            Pension and other actuarial liabilities 3,812 3,564
            Other funded governmental liabilities 4,044 1,454
        Estimated liability for waste acceptance obligation (note 12)   2,000,000      500,000
                        Total liabilities not covered by budgetary resources   2,007,856      505,018
                        Total Liabilities 16,039,096 13,493,830
Commitments and contingencies (notes 12 and 13)
Net position:
    Unexpended appropriations (note 7) 93,428 87,663
    Cumulative results of operations (2,000,000) (500,000)
                        Total net position before unrealized gain (1,906,572) (412,337)
Unrealized loss on investments available for sale (52,497) (352,723)
                        Total Net Position (1,959,069) (765,060)
                        Total Liabilities and Net Position $ 14,080,027 $ 12,728,770


Statements of Net Cost

For the years ended September 30, 2000 and 1999

(dollars in thousands)

     2000           1999     
Costs:
    First repository costs (notes 9 and 10):
        Intragovernmental $ 33,722 $ 35,015
        Within the public      364,554      335,651
                        Total first repository costs 398,276 370,666
        Less: earned revenue (note 14)   (397,194)   (369,594)
        Net first repository costs 1,082 1,072
    Cost not assigned to first repository:
        Estimated liability for waste acceptance obligation (note 12)   1,500,000        ---       
                        Net cost of operations $   1,501,082 $          1,072


Statement of Changes in Net Position

For the years ended September 30, 2000 and 1999

(Dollars in thousands)

     2000           1999     
Net cost of operations $ (1,501,082) $ (1,072)
Financing Sources (other than exchange revenues):
    Imputed financing           1,082           1,072
Net results of operations (1,500,000) ----      
Prior period adjustment (note 15)        ----           (226,085)
Net change in cumulative results of operations (1,500,000) (226,085)
Increase in obligated balances 5,765 (1,593)
Change in unrealized gain on investments       300,226 (1,246,704)
Change in net Position (1,194,009) (1,474,382)
Net position - beginning of the period     (765,060)       709,322
Net position - end of period $ (1,959,069) $    (765,060)


Statements of Budgetary Resources

For the years ended September 30, 2000 and 1999

(Dollars in thousands)

     2000           1999     
Budgetary Resources:
Budgetary authority $ 347,175 $ 353,465
Unobligated balance:
    Brought forward October 1 96,556 99,534
Adjustments:
    Temporarily restricted from FY 96 authority (note 3)     (85,000)     (85,000)
                        Total budgetary resources $      358,731 $      367,999
Status of budgetary resources
Obligations incurred $ 356,301 $ 360,439
Unobligated balances available:
    Apportioned, balances currently available 2,430 11,560
Unobligated balances not yet available:
    Other unobligated balances not yet available        ----             (4,000)
                        Total status of budgetary resources $      358,731 $      367,999
Outlays
Obligations incurred $ 356,301 $ 360,439
Obligated balance net, beginning of period 100,476 97,985
Less: obligated balance net, end of period     (83,203)   (100,476)
                        Total outlays $      373,574 $      357,948


Statements of Financing

For the years ended September 30, 2000 and 1999

(Dollars in thousands)

     2000           1999     
Resources used to finance activities
    Budgetary resources obligated for orders and delivery of goods and
        services to be received or benefits to be provided to others 		$ 356,301 $ 360,439
    Less earned revenue (397,194) (369,594)
    Appropriations transferred-out        17,746        19,600
                        Total revenues used to finance activities     (23,147)        10,445
Relationship of total resources to the net cost of operations
    Deduct resources used to fund items not part of the net cost of operations:
        Increase (or decrease) in budgetary resources obligated to order goods
            and services not yet received or benefits not yet provided 		16,868 (14,650)
        Resources that fund expenses recognized in prior periods 2,487 (1,541)
        Resources that finance the acquisition of assets or liquidation of liabilities          (809)       (2,133)
            Total resources used to fund items not part of the net cost of operations        18,546     (18,324)
                        Resources Used to Finance the Net Cost of Operations       (4,601)       (7,879)
Costs that do not generate resources
    Components of net cost of operations that do not require or generate
        resources during the reporting period:
    Expenses or exchange revenue related to the dispostion of assets or
        liabilities, or allocation of their costs over time:
            Expenses related to use of assets 4,077 8,369
            Losses (or gains) from revaluation of assets and liabilities             524          (490)
                        Subtotal 4,601 7,879
    Estimated liability for waste acceptance obligation (note 12) 1,500,000 ----      
    Other net cost components that do not require or generate resources
        during the reporting period 		         1,082          1,072
                        Total components of net cost of operations that do not
                            generate resources during the reporting period 		  1,505,683          8,951
Net cost of operations $   1,501,082 $          1,072
The accompanying notes are an integral part of these statements.        


Notes to Financial Statements

September 30, 2000 and 1999

(Dollars in thousands unless otherwise noted)

(1)        Legislative Background

(2)        Significant Accounting Policies

(3)        Fund Balance with Treasury

(4)        Investments

(5)        Receivables Due from Utilities

(6)        General Property, Plant, and Equipment, Net

(7)        Unexpended Appropriations

(8)        Financing

(9)        Costs

(10)      Pension Plan

(11)      Transactions With Other Government Agencies

(12)      Litigation

(13)      Additional Waste

(14)      Deferred and Earned Revenue

(15)      Prior Period Adjustment

Independent Auditors’ Report on Internal Controls Over Financial Reporting

Office of Civilian Radioactive Waste Management
United States Department of Energy:

We have audited the balance sheet of the Office of Civilian Radioactive Waste Management (OCRWM) as of September 30, 2000 and 1999, and the related statements of net costs, changes in net position, budgetary resources, and financing for the years then ended, and have issued our report thereon dated January 31, 2001. We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and Office of Management and Budget (OMB) Bulletin No. 01-02, Audit Requirements for Federal Financial Statements. Our audit report included a paragraph emphasizing contingencies arising from several matters of litigation.

In planning and performing our audit, we considered OCRWM’s internal control over financial reporting by obtaining an understanding of OCRWM’s internal control, determining whether internal controls had been placed in operation, assessing control risk, and performing tests of controls in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements. We limited our internal control testing to those controls necessary to achieve the objectives described in OMB Bulletin No. 01-02. We did not test all internal controls as defined by the Federal Managers’ Financial Integrity Act of 1982. The objective of our audit was not to provide assurance on OCRWM’s internal control. Consequently, we do not provide an opinion on internal control over financial reporting.

Our consideration of internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses under standards issued by the American Institute of Certified Public Accountants. Material weaknesses are conditions in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements, in amounts that would be material in relation to the financial statements being audited, may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Because of inherent limitation in any internal control, misstatements due to error or fraud may occur and not be detected. However, we noted no matters involving the internal control and its operation that we considered to be material weaknesses as defined above.

As further required by OMB Bulletin No. 01-02, with respect to internal control related to performance measures determined by management to be key and reported in the Overview to the financial statements, we obtained an understanding of the design of significant internal controls relating to the existence and completeness assertions. Our procedures were not designed to provide assurance on internal control over reported performance measures, and, accordingly, we do not provide an opinion on internal control relating to performance measures.

This report is intended solely for the information and use of the management of OCRWM and the United States Department of Energy; the United States Department of Energy, Office of Inspector General; OMB; and Congress, and is not intended to be and should not be used by anyone other than these specified parties.

KPMG Signature

January 31, 2001


Independent Auditor's Report on Compliance with Laws and Regulations

Office of Civilian Radioactive Waste Management
United States Department of Energy:

We have audited the balance sheet of the Office of Civilian Radioactive Waste Management (OCRWM) as of September 30, 2000 and 1999, and the related statements of net cost, changes in net position, budgetary resources, and financing for the years then ended, and have issued our report thereon dated January 31, 2001. We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and Office of Management and Budget (OMB) Bulletin No. 01-02, Audit Requirements for Federal Financial Statements, except for those portions of the Bulletin that relate to the Federal Financial Management Improvement Act (FFMIA) of 1996. Compliance with FFMIA is the responsibility of the auditor of the United States Department of Energy. Our audit report included a paragraph emphasizing contingencies arising from several matters of litigation.

The management of OCRWM is responsible for complying with laws and regulations applicable to the OCRWM. As part of obtaining reasonable assurance about whether OCRWM’s financial statements are free of material misstatement, we performed tests of OCRWM’s compliance with certain provisions of laws and regulations, noncompliance with which could have a direct and material effect on the determination of the financial statement amounts, and certain other laws and regulations specified in OMB Bulletin No. 01-02. We limited our tests of compliance to the provisions described in the preceding sentence and we did not test compliance with all laws and regulations applicable to OCRWM. However, providing an opinion on compliance with certain provisions of laws and regulations was not an objective of our audit, and, accordingly, we do not express such an opinion.

The results of our tests of compliance with the laws and regulations described in the preceding paragraph disclosed no instances of noncompliance that are required to be reported herein under Government Auditing Standards and OMB Bulletin No. 01-02.

This report is intended solely for the information and use of the management of OCRWM and the United States Department of Energy; the United States Department of Energy, Office of Inspector General; OMB; and Congress, and is not intended to be and should not be used by anyone other than these specified parties.

KPMG Signature

January 31, 2001