Nuclear Nonproliferation: IAEA Has Strengthened Its Safeguards	 
and Nuclear Security Programs, but Weaknesses Need to Be	 
Addressed (07-OCT-05, GAO-06-93).				 
                                                                 
The International Atomic Energy Agency's (IAEA) safeguards system
has been a cornerstone of U.S. efforts to prevent nuclear weapons
proliferation since the Treaty on the Non-Proliferation of	 
Nuclear Weapons (NPT) was adopted in 1970. IAEA has strengthened 
its safeguards system and increased efforts to combat nuclear	 
terrorism by helping countries secure nuclear and radioactive	 
material and facilities. This report (1) identifies the steps	 
IAEA has taken to strengthen safeguards, (2) assesses the	 
challenges in implementing strengthened safeguards, (3) 	 
identifies U.S. financial support for safeguards, and (4)	 
describes IAEA's efforts to help secure nuclear material and	 
facilities.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-93						        
    ACCNO:   A39217						        
  TITLE:     Nuclear Nonproliferation: IAEA Has Strengthened Its      
Safeguards and Nuclear Security Programs, but Weaknesses Need to 
Be Addressed							 
     DATE:   10/07/2005 
  SUBJECT:   Arms control agreements				 
	     Inspection 					 
	     International organizations			 
	     International relations				 
	     Nuclear facilities 				 
	     Nuclear facility safety				 
	     Nuclear facility security				 
	     Nuclear proliferation				 
	     Nuclear weapons					 
	     Program evaluation 				 
	     Protocols						 
	     Safeguards 					 

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GAO-06-93

                 United States Government Accountability Office

                     GAO Report to Congressional Requesters

October 2005

NUCLEAR NONPROLIFERATION

    IAEA Has Strengthened Its Safeguards and Nuclear Security Programs, but
                        Weaknesses Need to Be Addressed

                                       a

GAO-06-93

[IMG]

October 2005

NUCLEAR NONPROLIFERATION

IAEA Has Strengthened Its Safeguards and Nuclear Security Programs, but
Weaknesses Need to Be Addressed

  What GAO Found

IAEA has taken steps to strengthen safeguards, including conducting more
intrusive inspections, to seek assurances that countries are not
developing clandestine weapons programs. IAEA has begun to develop the
capability to independently evaluate all aspects of a country's nuclear
activities rather than only verifying the peaceful use of a country's
declared nuclear material. IAEA is also taking steps to improve the
management of the safeguards program. However, despite successes in
uncovering some countries' undeclared nuclear activities, safeguards
experts cautioned that a determined country can still conceal a nuclear
weapons program.

IAEA faces challenges that limit its ability to implement strengthened
safeguards. First, about two-thirds of NPT signatories have not brought
the Additional Protocol, which is designed to give the agency new
authority to search for clandestine nuclear activities, into force.
Second, safeguards are significantly limited or not applied to many NPT
signatories because they possess small quantities of nuclear material or
they have not concluded a comprehensive safeguards agreement. Third, IAEA
faces a looming human capital crisis caused by the large number of
inspectors and safeguards management personnel expected to retire in the
next 5 years. Finally, IAEA does not have a system in place to measure how
effective its strengthened safeguards system is in detecting undeclared
nuclear activities.

For 2004, the United States is providing $45.3 million to support IAEA
safeguards in assessed and voluntary cash contributions-over 34 percent of
IAEA's safeguards budget. In addition, various U.S. agencies provided an
estimated $27.2 million in technical support. IAEA's reliance on voluntary
contributions, particularly from the United States, will continue despite
the agency's recent budget increase. Finally, the agency does not have a
process in place to systematically evaluate long-term resource
requirements.

IAEA has increased its efforts to help countries improve the physical
protection of nuclear materials and facilities, secure other radioactive
materials, and respond to acts of terrorism. In 2002, IAEA established a
Nuclear Security Fund to which countries have voluntarily contributed
$36.7 million. However, IAEA's reliance on these voluntary funds creates
budgetary challenges, and State Department officials raised concerns about
the agency's inability to measure the results of its efforts.

IAEA Inspectors Performing Safeguards Duties

Source: IAEA.

United States Government Accountability Office

Contents

  Letter

Results in Brief
Background
IAEA Has Taken Steps to Strengthen Safeguards, but Detecting

Clandestine Nuclear Weapons Programs Is Not Assured IAEA Faces Challenges
That Impede Its Ability to Effectively Implement Strengthened Safeguards
IAEA Depends Heavily on U.S. Financial Support to Meet Its Safeguards
Obligations

IAEA Has Increased Efforts to Help Countries Protect Their Nuclear
Material and Facilities, but Reliance on Voluntary Contributions Poses a
Challenge

Conclusions
Recommendations for Executive Action
Agency Comments and Our Evaluation

1 4 7

9

22

34

47 56 58 59

Appendixes                                                              
                Appendix I:             Scope and Methodology              62 
                              Countries' Safeguards Agreements with IAEA   
               Appendix II:                  That Are In                   
                                        Force, as of July 2005             67 
              Appendix III:     Comments from the Department of State      73 
              Appendix IV:      GAO Contact and Staff Acknowledgments      79 
                             Table 1: Contributions to IAEA's Safeguards   
     Tables                                Budget from 1998                
                                             through 2004                  36 
                                 Table 2: U.S. Nuclear Security Fund       51 
                                       Contributions, 2002-2004            
                            Figure 1: Types of Information Used by IAEA to    
    Figures                    Verify Countries' Compliance with Their     
                                        Safeguards Obligations             15
                            Figure 2: Status of the Additional Protocol by 24 
                                               Country                     
                                Figure 3: U.S. Contributions to IAEA's     
                                        Safeguards Program for             
                                                 2004                      35 

Contents

Abbreviations

DOD Department of Defense
DOE Department of Energy
EURATOMEuropean Atomic Energy Community
IAEA International Atomic Energy Agency
NPT Treaty on the Non-Proliferation of Nuclear Weapons
NRC Nuclear Regulatory Commission
MOX Mixed plutonium/uranium oxide fuel
POTAS U.S. Program of Technical Assistance to IAEA Safeguards

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separately.

A

United States Government Accountability Office Washington, D.C. 20548

October 7, 2005

The Honorable Norm Coleman
Chairman
Permanent Subcommittee on Investigations
Committee on Homeland Security and Governmental Affairs
United States Senate

The Honorable Bennie Thompson
Ranking Member
Committee on Homeland Security
House of Representatives

Revelations about the clandestine nuclear programs of North Korea, Iran,
and Libya, as well as clandestine nuclear trafficking networks, have
significantly increased international concerns about the spread of weapons
of mass destruction. In February 2004, President Bush highlighted the
proliferation dangers of nuclear weapons and called on the international
community to support the International Atomic Energy Agency's (IAEA)
strengthened safeguards measures.1 Since the Treaty on the Non-
Proliferation of Nuclear Weapons (NPT) came into force in 1970, IAEA's
safeguards system has been a cornerstone of U.S. and international efforts
to prevent nuclear weapons proliferation. The NPT expanded IAEA's
original inspection responsibilities by requiring signatory non- nuclear
weapons states-countries that had not manufactured and detonated a
nuclear device before January 1, 1967-to agree not to acquire nuclear
weapons and to accept IAEA safeguards on all nuclear material used in
peaceful activities.2

Safeguards allow the agency to independently verify that non-nuclear
weapons states that signed the NPT are complying with its requirements.
Under the safeguards system, IAEA, among other things, inspects all

1IAEA, an autonomous international organization affiliated with the United
Nations, was established in Vienna, Austria, in 1957. The agency has the
dual role of promoting the peaceful uses of nuclear energy by transferring
nuclear science and technology through its nuclear science and
applications and technical cooperation programs, and verifying, through
its safeguards program, that nuclear materials subject to safeguards are
not diverted to nuclear weapons or other proscribed purposes.

2Under the NPT, nuclear weapons states pledged to facilitate the transfer
of peaceful nuclear technology to non-nuclear weapons states, but not to
assist them in acquiring nuclear weapons.

facilities and locations containing nuclear material declared by countries
to verify its peaceful use. Inspectors from IAEA's Department of
Safeguards verify that the quantities of nuclear material that these
non-nuclear weapons states declared to the agency have not been diverted
for other uses. In addition, the agency installs containment and
surveillance measures, such as video cameras, to detect movement of
nuclear material and tampering with agency equipment. As of December 2004,
923 facilities and other locations containing about 164,000 metric tons of
nuclear material were under safeguards. In 2004, IAEA's safeguards budget
was approximately $115.2 million, or about 38 percent of IAEA's total
budget.

The discovery in 1991 of a clandestine nuclear weapons program in Iraq
confirmed the need for a broader and more effective approach to
safeguards. As a result, IAEA began a two-stage process of strengthening
its safeguards system to provide assurance that non-nuclear weapons states
were not engaged in undeclared nuclear activities. First, in the early
1990s, IAEA began using its existing authority under safeguards agreements
with individual countries to obtain additional information about states'
nuclear and nuclear-related activities. Most countries have negotiated an
agreement with IAEA, known as a comprehensive safeguards agreement.
Second, in 1997, IAEA's Board of Governors approved what it called the
"Model Additional Protocol," which, when brought into force, requires
countries to provide the agency with a broader range of information on its
nuclear and nuclear-related activities. It also gives the agency's
inspectors access to an expanded range of declared activities and
locations, including buildings at nuclear sites, and locations where
undeclared activities are suspected. The Additional Protocol is a separate
agreement, which supplements each country's existing safeguards agreement
with IAEA.

In addition to its safeguards activities, IAEA has been called upon by its
member states to confront the threat of nuclear terrorism. For example,
since 1995, IAEA's nuclear security program has helped member states
improve the security of their nuclear material by assessing the
vulnerability of their nuclear facilities. Additionally, IAEA has helped
states to meet their responsibilities under the Convention on the Physical
Protection of Nuclear Material, which entered into force in 1987 and,
among other things, binds its signatories to ensure certain levels of
physical protection while transporting nuclear materials internationally.
In light of the September 11, 2001 attacks, IAEA increased its nuclear
security efforts by developing and updating physical protection guidelines
and recommendations to help countries improve the security of their
nuclear facilities and helping

countries install radiation detection equipment at their borders to try
and prevent illicit trafficking of nuclear materials.

As the largest contributor to IAEA, the United States has a strong
interest in supporting and improving IAEA's safeguards system and nuclear
security activities to curb the spread of weapons of mass destruction. In
July 1998, we reported that IAEA had tested and started to implement
strengthened safeguards measures, but that it was too early to assess
IAEA's progress.3 In this context, you asked us to review IAEA's
safeguards and nuclear security activities. This report (1) identifies the
steps IAEA has taken to strengthen its safeguards system, (2) assesses the
challenges IAEA faces in implementing its strengthened safeguards
measures, (3) identifies the extent to which IAEA relies on the United
States for safeguards budgetary support, and (4) describes how IAEA is
helping its member states secure their nuclear material and facilities and
identifies challenges to implementing the program.

To address these objectives, we collected and analyzed documentation
related to IAEA's safeguards and nuclear security programs from IAEA and
U.S. agencies, including the Departments of Commerce, Defense (DOD),
Energy (DOE), and State and the Nuclear Regulatory Commission (NRC). We
also interviewed key IAEA and U.S. agency officials. In addition, we
conducted structured interviews based on a nonprobability sample to obtain
the views of representatives of nine IAEA member states-Canada, China,
Germany, Hungary, Israel, Japan, Russia, the United Kingdom, and the
United States-on IAEA's safeguards and nuclear security programs.4 This
sample included states that belonged to IAEA's Board of Governors, both
nuclear and non-nuclear weapons states, and states with special safeguards
agreements with IAEA. We also analyzed budgetary information, performed a
data reliability assessment of the data we obtained, and interviewed
knowledgeable IAEA and U.S. officials on the reliability of the data. We
determined that these data were sufficiently reliable for the purposes of
this report. We conducted our work from October 2004 to August 2005 in
accordance with generally accepted

3GAO, Nuclear Nonproliferation: Uncertainties With Implementing IAEA's
Strengthened Safeguards System, GAO/NSIAD/RCED-98-184 (Washington, D.C.:
July 9, 1998).

4Results from nonprobability samples cannot be used to make inferences
about a population, because in a nonprobability sample some elements of
the population being studied have no chance or an unknown chance of being
selected as part of the sample.

government auditing standards. Appendix I provides a more detailed
discussion of our methodology.

Results in Brief	IAEA has taken steps to strengthen safeguards by more
aggressively seeking assurances that countries have not engaged in
clandestine nuclear activities, but the agency still cannot be certain
that countries are not developing secret weapons programs. In a radical
departure from the past practice of only verifying the peaceful use of a
country's declared nuclear material at declared facilities, IAEA has begun
to develop the capability to independently evaluate all aspects of a
country's nuclear activities by, among other things, conducting more
intrusive inspections and collecting and analyzing environmental samples
to detect traces of nuclear material at facilities and other locations. In
addition, IAEA is trying to improve the efficiency of its efforts by
applying integrated safeguards, which could result in a reduction in the
number of inspections in certain countries. IAEA is also taking a number
of steps to strengthen its management of the safeguards program. For
example, current initiatives include developing multiyear strategic plans
and modernizing the agency's safeguards information management system.
Finally, although Department of State and IAEA officials told us that
IAEA's strengthened safeguards measures have successfully revealed
previously undisclosed nuclear activities in Iran, South Korea, and Egypt,
IAEA's former Deputy Director General for Safeguards and a group of
safeguards experts cautioned that a determined country can still conceal a
nuclear weapons program.

IAEA faces a number of challenges that hamper its ability to effectively
implement strengthened safeguards. First, about two-thirds, or 120 out of
189, of the NPT signatories have not yet brought the Additional Protocol
into force, including the United States. Impediments to expanding adoption
of the Additional Protocol include, among other things, the financial
costs associated with implementing it. A second challenge to implementing
strengthened safeguards is that safeguards are significantly limited or
not applied in about 60 percent, or 113 out of 189, of the NPT signatory
countries-either because they have an agreement (known as a small
quantities protocol) with IAEA, and are not subject to most safeguards
measures, or because they have not concluded a comprehensive safeguards
agreement with IAEA. IAEA cannot verify that these countries are not
diverting nuclear material for non-peaceful purposes or engaging in secret
nuclear activities. Third, while IAEA is increasingly relying on the
analytical skills of its staff to detect countries' undeclared nuclear
activities, the agency is facing a looming human capital crisis. In the
next 5

years, IAEA will experience a large turnover of senior safeguards
inspectors and high-level management officials. Delays in filling critical
safeguards positions and a shrinking pool of nuclear experts limit IAEA's
ability to implement strengthened safeguards. Further, personnel policies,
such as a mandatory retirement age, impede IAEA's ability to hire and
retain staff with critical safeguards skills. For example, IAEA would not
hire one expert with unique skills in environmental sample analysis
because he was over the agency's retirement age. Consequently, to retain
his skills, the United States hired him as a part-time consultant to IAEA.
Finally, IAEA does not have a system in place to measure how effective its
strengthened safeguards system is in detecting undeclared nuclear
activities.

IAEA relies heavily on the United States to meet its safeguards
obligations, and this situation is likely to continue despite IAEA's
recent budget increase. For 2004, the United States is providing $45.3
million to support IAEA's safeguards program in assessed and voluntary
cash contributions- over 34 percent of IAEA's total safeguards budget. In
addition, in 2004, the U.S. Departments of State, Energy, and Defense and
the Nuclear Regulatory Commission provided an estimated $27.2 million in
technical support for activities such as analyzing environmental samples
to detect the presence of nuclear material. In 2004, IAEA's safeguards
budget was increased for the first time in 20 years (beyond adjustments
for inflation and staff salaries) by about $19 million to be phased in
over a 4-year period. However, despite this increase, U.S. and IAEA
officials said that IAEA is likely to continue to rely on voluntary
contributions-in particular, those from the United States-to meet critical
needs because of the agency's growing responsibilities under strengthened
safeguards. Finally, IAEA does not have a process to systematically
evaluate resource requirements more than 2 years into the future or
develop reliable estimates of the costs of all its safeguards activities.
Without a systematic process to evaluate requirements and their costs over
the long term, IAEA cannot make a convincing case to its member states
that the agency requires additional resources.

In the aftermath of September 11, 2001, IAEA increased its efforts to help
countries improve the physical protection of nuclear material and
facilities, secure other radioactive materials, and respond to malicious
acts or threats. However, IAEA's reliance on voluntary funds for these
efforts creates challenges, and Department of State officials raised
concerns about the agency's inability to measure the results of its
efforts. Specifically, to help countries improve their nuclear security,
IAEA, among other things,

assesses the vulnerability of facilities to better protect them against
sabotage and helps provide radiation detection equipment to prevent
illicit trafficking in nuclear and radioactive materials. In 2002, IAEA
established a Nuclear Security Fund to support these activities, and
countries provided about $36.7 million as of mid-May 2005. However, IAEA
relies on this voluntary support for about 89 percent of its nuclear
security funding, which creates a budgetary challenge to long-term
planning because funding levels vary from year to year. Furthermore, in
2003, over 94 percent of these funds were earmarked by donors for specific
activities. As a result, IAEA does not have the flexibility to allocate
contributions to meet its highest priority needs. In addition, Department
of State officials raised concerns about IAEA's inability to track the use
of nuclear security funds and measure achievements in a systematic way. In
response, IAEA developed a system to monitor and report on program
expenditures. However, IAEA still does not systematically measure the
impact of its nuclear security activities.

To help strengthen IAEA's safeguards system and nuclear security program,
this report makes several recommendations. We recommend, among other
things, that the Secretary of State, working with IAEA and its member
states through the Board of Governors, consider (1) eliminating, or at a
minimum, reducing the number of agreements, which limit IAEA's authority
to implement strengthened safeguards activities in countries with small
quantities of nuclear material; (2) establishing clear and meaningful
measures to better evaluate the effectiveness of safeguards and nuclear
security activities; and (3) rectifying human capital practices that
negatively impact IAEA's ability to recruit and retain critical safeguards
staff.

We provided the Department of State and IAEA with draft copies of this
report for their review and comment. IAEA provided technical comments,
which we incorporated as appropriate. In its written comments, the
Department of State generally agreed with our findings, conclusions, and
recommendations and noted that our recommendations offered reasonable ways
that the administration can continue to work with IAEA to improve its
effectiveness. State also noted that the draft report fairly recognized
the significant progress IAEA has made, with support from the United
States and other member states, in strengthening the safeguards system and
in supporting international efforts to improve the physical protection and
security of nuclear materials. State also provided technical comments,
which we incorporated in the report as appropriate.

Background	IAEA is an independent organization affiliated with the United
Nations. Its governing bodies include the General Conference, composed of
representatives of the 138 IAEA member states, and the 35-member Board of
Governors, which provides overall policy direction and oversight. A
Secretariat, headed by the Director General, is responsible for
implementing the policies and programs of the General Conference and Board
of Governors. The United States is a permanent member of the Board of
Governors. IAEA funds its programs through its regular budget, for which
all members are assessed, and by voluntary cash contributions and
technical support from member states, including the United States. U.S.
policy regarding the agency is developed by an interagency process chaired
by the Department of State. The U.S. Mission to the U.N. System
Organizations in Vienna, Austria, works closely with the department in
Washington, D.C., to promote the effective function of the agency,
including management reform.

IAEA derives its authority to establish and administer safeguards from its
statute, the Treaty on the Non-Proliferation of Nuclear Weapons and
regional nonproliferation treaties, bilateral commitments between states,
and project agreements with states.5 Since the NPT came into force in
1970, it has been subject to review by signatory states every 5 years. The
1995 NPT Review and Extension conference extended the life of the treaty
indefinitely, and the latest review conference occurred in May 2005.
Article III of the NPT binds each of the treaty's 184 signatory states
that had not manufactured and exploded a nuclear device prior to January
1, 1967 (referred to in the treaty as non-nuclear weapon states) to
conclude an agreement with IAEA that applies safeguards to all source and
special nuclear material in all peaceful nuclear activities within the
state's territory, under its jurisdiction, or carried out anywhere under
its control.6

5Regional treaties, including the Treaty for the Prohibition of Nuclear
Weapons in Latin America (the 1967 Treaty of Tlatelolco), the South
Pacific Nuclear Free Zone Treaty (the 1985 Treaty of Rarotonga), the
African Nuclear-Weapon-Free Zone Treaty (the 1995 Treaty of Pelindaba),
and the Southeast Asia Nuclear-Weapon-Free Treaty (the 1995 Bangkok
Treaty) require each participating country to conclude a comprehensive
safeguards agreement with IAEA. Additionally, in February 2005, five
Central Asian states announced that they had reached agreement on the text
of a treaty to establish a nuclear-weapon-free zone.

6Nuclear materials include source materials, such as natural uranium,
depleted uranium, and thorium, and special fissionable materials, such as
enriched uranium and plutonium.

The five nuclear weapons states that are parties to the NPT-China, France,
the Russian Federation, the United Kingdom, and the United States-are not
obligated by the NPT to accept IAEA safeguards. However, each nuclear
weapons state has voluntarily entered into legally binding safeguards
agreements with IAEA, and have submitted designated nuclear materials and
facilities to IAEA safeguards to demonstrate to the nonnuclear weapon
states their willingness to share in the administrative and commercial
costs of safeguards. (App. II lists states that are subject to safeguards,
as of July 2005.)

As of July 2005, all but four countries with significant nuclear
activities had comprehensive safeguards agreements with IAEA in force.
India, Israel, and Pakistan are not parties to the NPT or other regional
nonproliferation treaties.7 As a result, they do not have comprehensive
safeguards agreements with IAEA. Instead, these three states have IAEA
safeguards agreements that limit the scope of the agency's safeguards
activities to specific material, equipment, and facilities. India and
Pakistan are known to have nuclear weapons programs and to have detonated
several nuclear devices during May 1998. Israel is also believed to have
produced nuclear weapons. Additionally, North Korea joined the NPT in 1985
and briefly accepted safeguards in 1992 and 1993, but expelled inspectors
and threatened to withdraw from the NPT when IAEA inspections uncovered
evidence of undeclared plutonium production. North Korea announced its
withdrawal from the NPT in early 2003, which under the terms of the
treaty, terminated its comprehensive safeguards agreement.

IAEA's safeguards objectives, as traditionally applied under comprehensive
safeguards agreements, are to account for the amount of a specific type of
material necessary to produce a nuclear weapon, and the time it would take
a state to divert this material from peaceful use and produce a nuclear
weapon. IAEA attempts to meet these objectives by using a set of
activities by which it seeks to verify that nuclear material subject to
safeguards is not diverted to nuclear weapons or other proscribed
purposes. For example, IAEA inspectors visit a facility at certain
intervals to ensure that any diversion of nuclear material is detected
before a state has had time to produce a nuclear weapon. IAEA also uses
material-accounting measures

7Previously, Cuba was included in this group of states; however, Cuba
acceded to the NPT, effective November 4, 2002, and to the Tlatelolco
Treaty, effective October 23, 2002. Cuba signed a comprehensive safeguards
agreement on September 18, 2003, which was brought into force June 3,
2004.

to verify quantities of nuclear material declared to the agency and any
changes in the quantities over time. Additionally, containment measures
are used to control access to and the movement of nuclear material.
Finally, IAEA deploys surveillance devices, such as video cameras, to
detect the movements of nuclear material and discourage tampering with
IAEA's containment measures.

In addition to IAEA's long-standing role in safeguarding nuclear
materials, it has undertaken efforts to assist states in better securing
their nuclear materials. In 1972, IAEA issued a set of guidelines that
outlined the minimum standards for ensuring the physical protection of
nuclear materials. Following the breakup of the Soviet Union, concern
about smuggling nuclear and other radioactive materials increased. In
1992, IAEA started assisting former Soviet states to enhance the security
of their nuclear materials. IAEA also established a database to
systematically collect information on reported incidents of trafficking in
radioactive materials. Additionally, in 1994, the Board of Governors
agreed to enhance the services that IAEA could offer countries to improve
the protection of nuclear material and to detect and suppress trafficking
of nuclear materials. For example, in 1996, IAEA started conducting
advisory missions at states' request that involved assessing the physical
protection of nuclear materials at a facility.

  IAEA Has Taken Steps to Strengthen Safeguards, but Detecting Clandestine
  Nuclear Weapons Programs Is Not Assured

IAEA has taken steps to strengthen safeguards by more aggressively seeking
assurances that a country is not pursuing a clandestine nuclear program.
In a radical departure from past practices of only verifying the peaceful
use of a country's declared nuclear material at declared facilities, IAEA
has begun to develop the capability to independently evaluate all aspects
of a country's nuclear activities. IAEA is trying to improve the
efficiency of its efforts by applying integrated safeguards which could
result in a reduction in the number of inspections in countries that have
a proven record of complying with safeguards. In addition, the agency is
taking a number of steps to strengthen its management of the safeguards
program. Finally, Department of State and IAEA officials told us that
strengthened safeguards measures have successfully revealed previously
undisclosed nuclear activities in Iran, South Korea, and Egypt. However, a
group of safeguards experts recently cautioned that a determined country
can still conceal a nuclear weapons program.

    Strengthened Safeguards Have Broadened IAEA's Focus to Examine All Nuclear
    Activities in a Country

Over the past decade, IAEA has taken steps to strengthen its safeguards
system to detect clandestine nuclear activities. These strengthened
safeguards are a radical departure from the agency's traditional
safeguards approach, which focused on verifying that declared nuclear
material at specific facilities or locations in a country had not been
diverted for nuclear weapons. While the strengthened safeguards system
continues to rely on traditional nuclear material accountancy, and
containment and surveillance measures to ensure declared material is not
diverted, IAEA has broadened its focus from declared nuclear materials to
a more comprehensive assessment of a country's nuclear activities. The
first strengthened safeguards steps, which began in the early 1990s,
increased the agency's ability to monitor declared and undeclared
activities at nuclear facilities. These measures were implemented under
the agency's existing legal authority under comprehensive safeguards
agreements at declared nuclear facilities and include (1) conducting short
notice and unannounced inspections, (2) taking location-specific
environmental samples inside facilities to detect traces of nuclear
material, and (3) using measurement and surveillance systems that operate
unattended and can be used to transmit data about the status of nuclear
materials directly to IAEA headquarters. IAEA reported that in 2004 it
performed 2,302 inspections at 598 facilities and other locations and took
590 environmental samples at 90 facilities. In addition, by June 2004, it
had installed 91 unattended monitoring systems in 44 nuclear facilities.

The second series of steps under strengthened safeguards began in 1997
when IAEA's Board of Governors approved the Additional Protocol.8 The
Additional Protocol is designed to supplement countries' safeguards
agreements by requiring countries to provide IAEA with broader information
on and access to nuclear and nuclear-related activities. Because the
Additional Protocol broadens IAEA's authority and the requirements on
countries under existing comprehensive safeguards agreements, each country
must take certain actions to bring it into force. Under the Additional
Protocol, IAEA has the right to

8Model Protocol Additional to the Agreement(s) Between State(s) and the
International Atomic Energy Agency for the Application of Safeguards.

o 	receive more comprehensive information from a country about all aspects
of its nuclear fuel cycle,9 including information about research and
development on the fuel cycle, the manufacturing and exporting of
sensitive and other key nuclear-related equipment, and all buildings on a
nuclear site, and compare this information with information from other
sources;

o 	conduct "complementary access," which enables IAEA to expand its
inspection rights for the purpose of ensuring the absence of undeclared
nuclear material and activities; and

o 	collect environmental samples beyond declared nuclear facilities, when
deemed necessary.

When IAEA can use the full range of strengthened safeguards measures
(under a comprehensive safeguards agreement and the Additional Protocol),
the agency can provide assurances that all declared nuclear material is
being used for peaceful purposes and that a country has declared all of
its nuclear material or activities, as required. In 2004, the agency
reported that comprehensive safeguards agreements with the Additional
Protocol were implemented in 61 countries and Taiwan,10 and that

o 	for 21 countries, there was no indication of the diversion of nuclear
material placed under safeguards and no indication of undeclared nuclear
material or activities for the country as a whole. On this basis, IAEA
concluded that all nuclear material in these countries remained in
peaceful use or was otherwise adequately accounted for;

o 	for an additional 37 countries (plus Taiwan), there was no indication
of the diversion of nuclear material placed under safeguards, and
evaluations aimed at drawing conclusions about the absence of undeclared
nuclear material and activities had not been completed; and

9There are several steps in the nuclear fuel cycle. The front end of the
fuel cycle includes uranium mining and milling, conversion, enrichment,
and fuel fabrication. Once uranium becomes spent fuel (after being used to
produce electricity), the back end of the cycle follows. This may include
temporary storage, reprocessing, recycling, and waste disposal.

10Although IAEA does not officially recognize Taiwan, the agency applies
safeguards there, including measures under a comprehensive safeguards
agreement and the Additional Protocol.

o 	three countries (Iran, Libya, and South Korea) were engaged in
previously undisclosed nuclear activities and therefore were not complying
with their respective safeguards agreements. Although Iran and Libya have
not formally brought the Additional Protocol into force, they have
informed IAEA that they are acting as if the agreement has been
implemented.

For each country with a safeguards agreement, IAEA independently evaluates
all information available about the country's nuclear activities and draws
conclusions regarding a country's compliance with its safeguards
commitments. Major sources of information available to the agency include
data submitted by countries to IAEA under their safeguards
agreements-referred to as state declarations-and information from internal
IAEA databases, open sources, third parties, and IAEA inspections.
Countries are required to provide an expanded declaration of their nuclear
activities under the Additional Protocol within 180 days of bringing the
Additional Protocol into force. Examples of information provided in an
Additional Protocol declaration include the manufacturing of key
nuclearrelated equipment; research and development activities related to
the nuclear fuel cycle; the use and contents of buildings on a nuclear
site; the location and operational status of uranium mines; and the
quantities, uses, and locations of nuclear material exempted from
safeguards. The agency uses the state declarations as a starting point to
determine if the information provided by the country is consistent and
accurate with all other information available based on its own review. A
confidential document, known as a state evaluation report, serves as the
basis of IAEA's assessment of a country's compliance with its safeguards
commitments.

State evaluations are central to the process by which safeguards
conclusions are drawn. For a state with an Additional Protocol in force,
drawing the initial broader conclusion regarding the absence of undeclared
nuclear material and activities for the country as a whole can take
several years to complete depending on (1) the size of a country's nuclear
program, (2) whether there are gaps in the data submitted by the country,
and (3) whether there are inconsistencies between the country's
declaration and IAEA's independent evaluation of that country's nuclear
program. IAEA officials told us that the agency took 5 years to draw the
initial broader safeguards conclusion for Japan because of the volume of
information contained in Japan's declaration and the magnitude of its
nuclear

program.11 Drawing the initial broader safeguards conclusion for Canada is
also expected to take a similar amount of time because of the size of its
nuclear program. State evaluation reports are updated annually for a
country after the Additional Protocol is in force. In 2004, 76 evaluation
reports were completed and reviewed, including 55 for countries that had
additional protocols in force or were acting as if they did.

IAEA uses various types of information to verify the state declaration.
Inspections of nuclear facilities and other locations with nuclear
material are the cornerstone of the agency's data collection efforts.
Under an Additional Protocol, IAEA has the authority to conduct
complementary access at any place on a site or other location with nuclear
material in order to ensure the absence of undeclared nuclear material and
activities, confirm the decommissioned status of facilities where nuclear
material was used or stored, and resolve questions or inconsistencies
related to the correctness and completeness of the information provided by
a country on activities at other declared or undeclared locations. During
complementary access, IAEA inspectors may carry out a number of
activities, including (1) making visual observations, (2) collecting
environmental samples, (3) using radiation detection equipment and
measurement devices, and (4) applying seals. In 2004, IAEA conducted 124
complementary access in 27 countries.

In addition to its verification activities, IAEA uses other sources of
information to evaluate countries' declarations. These sources include
information from the agency's internal databases, open sources, satellite
imagery, and outside groups. The agency established two new offices within
the Department of Safeguards to focus primarily on open source and
satellite imagery data collection. Analysts use Internet searches to
acquire information generally available to the public from open sources
such as scientific literature, trade and export publications, commercial
companies, and the news media. In addition, the agency uses commercially
available satellite imagery to supplement the information it receives
through its open source information. Satellite imagery is used to monitor
the status and condition of declared nuclear facilities and verify state
declarations of

11About one-third of Japan's electricity is generated by nuclear power.
Japan has been engaged in fuel reprocessing and the recycling of plutonium
in mixed plutonium/uranium oxide (MOX) fuel for approximately 20 years to
develop its nuclear fuel cycle. Japan is expanding this capability with
the construction and commissioning of the commercial-scale Rokkashomura
reprocessing plant in northern Japan. This fully integrated nuclear fuel
cycle center will perform spent fuel receipt, storage, reprocessing,
high-level waste treatment and MOX-fuel fabrication. Uranium enrichment is
carried out at the same site.

certain sites. The agency also uses its own databases, such as those for
nuclear safety, nuclear waste, and technical cooperation to expand its
general knowledge about countries' nuclear and nuclear-related activities.
In some cases, IAEA receives information from third parties such as other
countries.

Figure 1 shows the types of information IAEA uses to verify a country's
compliance with its safeguards obligations.

To further enhance its capability to detect undeclared nuclear material
and activities, IAEA collects information about clandestine networks that
are engaged in the illicit trafficking of nuclear material and equipment.
In 2004, the agency established the Nuclear Trade Analysis Unit that is
responsible for investigating and obtaining information about clandestine
networks. The unit's mission includes maintaining institutional memory of
nuclear supply networks, centralizing the analysis of covert nuclear
technology networks, and supporting IAEA's reviews of state evaluations.
Some information used by the unit is derived from safeguards reports
routinely submitted to the agency, such as state declarations.

IAEA is seeking to streamline and make the safeguards system more
efficient by applying integrated safeguards. Integrated safeguards are
applied in countries (1) that have brought the Additional Protocol into
force and complied with all its requirements; (2) where IAEA, through
complementary access and other means, has resolved any questions or
inconsistencies regarding nuclear activity in these countries; and (3)
where IAEA has concluded that there has been no diversion of nuclear
material and no indication of undeclared nuclear material or activities.
As of July 2005, IAEA was applying integrated safeguards in eight
countries- Australia, Bulgaria, Hungary, Indonesia, Japan, Norway, Peru,
and Uzbekistan. For these countries, IAEA has reduced the number of
routine, scheduled inspections at certain types of facilities, such as
light water reactors and low enriched uranium conversion plants. Agency
officials told us that they anticipate cost-savings resulting from the
implementation of integrated safeguards, which will free up resources for
increased activities in countries where significant questions and
inconsistencies arise.

Although the U.S. government supports the introduction of integrated
safeguards, some concerns have been raised about its implementation.
According to Department of State officials, it is essential that
integrated safeguards not compromise the underlying foundation of
safeguards- routine inspections of nuclear facilities. Verifying that
declared quantities of nuclear material are accounted for and remain under
safeguards continues to be the fundamental basis for reaching safeguards
conclusions that countries are not diverting nuclear material for
clandestine activities. Department of State officials said that integrated
safeguards should be applied slowly and systematically to ensure that the
safeguards system remains credible.

    IAEA Is Taking Steps to Improve the Management of the Safeguards System

IAEA has several management initiatives under way to support the
strengthened safeguards system, including (1) developing multi-year
strategic plans, (2) modernizing the agency's safeguards information
management system, (3) improving the agency's coordination of efforts to
develop and procure equipment and technology, and (4) expanding the
inspector training program. IAEA has developed 5-year medium-term
strategies that identify specific goals and objectives for critical agency
missions, including safeguards. IAEA's strategy for 2006-2011 calls for
the agency's safeguards system to be further strengthened and its
capability to detect undeclared nuclear material and activities increased.
In addition, the strategy calls for IAEA to continue to utilize new
sources of information to help ensure that countries are not engaged in
clandestine nuclear activities. According to IAEA officials, the strategy
requires safeguards program managers to identify how their specific
activities fit into the agency's overall strategic objectives and medium
term plan. These managers are required to plan and request funding based
on the objectives identified in the medium-term strategies.

Another important initiative is IAEA's efforts to re-engineer the agency's
information management system. This system serves as the central
repository for all safeguards information, and it is used to generate
reports for safeguards inspectors and IAEA management. According to U.S.
and IAEA officials, the information management system, which started
operation in the late 1970s, is outdated and needs to be modernized. As
currently configured, IAEA inspectors and safeguards personnel cannot
easily use the system for analytical purposes because there is no
centralized database. With data stored in over 40 different databases, the
agency dedicates significant amounts of time and funds to train staff on
how to store and retrieve information. The project to modernize the
safeguards information management system is expected to take about 3-1/2
years to complete and cost over $30 million. IAEA plans to finance the
project through its regular budget and member states' voluntary
contributions. However, sustained U.S. support for the project, which IAEA
expects to amount to at least 50 percent of the total planned voluntary
cash contributions, is uncertain. In May 2004, the former U.S. ambassador
to the U.S. Mission to the U.N. Systems Organization in Vienna said that
the United States could not commit to pledging continued support for the
project due to, among other things, the lack of contributions by other
countries. He noted that nuclear nonproliferation is a global problem and
that the United States expects IAEA to work with other member states to
secure funding for the project. However, at the time of our review, only
the

United States, Germany, the Czech Republic, and the United Kingdom had
pledged voluntary contributions to fund the project.

In 2001, the Department of Safeguards took steps to improve its equipment
management process. As part of this initiative, IAEA's equipment
coordination committee was reorganized to improve its effectiveness. The
committee reviews, prioritizes, and approves equipment and technology
needs for all divisions within the department. The committee also reviews
and approves any equipment-related research and development projects. IAEA
and U.S. government officials told us that the equipment management
process has helped the agency improve coordination among member states to
better plan for the more efficient use of funds. In addition, IAEA has
generated 2-year program plans to help coordinate funding to implement
projects and develop equipment. For example, in its most recent plan, IAEA
identified major priorities, including developing technology that detects
undeclared nuclear activities and re-engineering its safeguards
information management system.

Finally, IAEA officials told us they recognize that the expansion of
inspectors' responsibilities under strengthened safeguards, in combination
with advanced safeguards equipment and new technology, significantly
increases the amount of training inspectors need. IAEA's goal is to
provide the best training possible to ensure that inspectors' skills are
continuously improved to maintain high standards of performance, enhance
credibility, and promote a sense of professionalism among the staff.
Inspectors must develop expertise in many new areas while maintaining
competence in the application of material accountancy measures. As a
result, IAEA has updated its training curriculum and continued the
development and implementation of advanced and refresher training on
strengthened and integrated safeguards measures, the Additional Protocol,
and the use of new and upgraded containment and surveillance equipment. In
2005, the agency introduced a qualification process to ensure that all
inspectors have the necessary knowledge and skills to perform their jobs
at an acceptable level. Training also includes courses to strengthen
analytical skills, including enhanced communication, observation, and
writing skills. Initially, a new inspector performs verification duties in
the field under the supervision of a more experienced inspector. Once an
inspector becomes fully qualified to independently conduct inspections,
additional training is required to maintain skills.

Despite IAEA's recent efforts to strengthen its training program, it is
uncertain the extent to which training alone will adequately prepare

inspectors for their expanding responsibilities under strengthened
safeguards. For example, U.S. safeguards experts, including a former IAEA
inspector, raised concerns about the adequacy of training. One former
inspector told us that all "in-house" training is done in English, the
official working language of the agency. However, she noted that this
makes it difficult for some inspectors who do not have a good grasp of
English to fully absorb and understand the training materials and oral
presentations. In addition, this official said that IAEA has not
implemented a good system to provide mentors to new inspectors who need
practical hands-on experience when they are in the field performing
inspections. Brookhaven National Laboratory officials, who are responsible
for managing the U.S. Program of Technical Assistance to IAEA Safeguards
(POTAS), told us that many of the best qualified training instructors are
leaving IAEA either through retirement or attrition. In addition, many of
these instructors, who are also full-time inspectors, are facing increased
workloads under strengthened safeguards and have less time to teach.
Instructor staffing difficulty combined with expanding inspector
responsibilities has created a gap in the effective transfer of knowledge
and experience provided to entry-level inspectors.

    Strengthened Safeguards Result in Discoveries of Some Countries' Undisclosed
    Activities but System Has Limitations

IAEA's strengthened safeguards system has produced tangible benefits as
some countries' previously undeclared nuclear activities have been
disclosed. In particular, U.S. and IAEA officials noted that in the cases
of Iran, South Korea, and Egypt, strengthened safeguards has surfaced
undeclared activities requiring further investigation and clarification by
the agency. Specifically:

o 	IAEA and Department of State officials noted that strengthened
safeguards have helped the agency verify Iran's nuclear activities,
although many questions about that country's nuclear program have not been
resolved. In late 2003, Iran agreed to act as if the Additional Protocol
were in force. Iran's acceptance of the Additional Protocol has enabled
the agency to gain increased access to Iran's nuclear activities. Iran
subsequently submitted a declaration of its nuclear activities, and IAEA
has undertaken numerous inspections, conducted complementary access on
numerous occasions, and prepared several status reports of its findings
and concerns for its Board of Governors. In 2004, the agency completed
four reports on the status of its efforts in Iran. IAEA noted that Iran
had been providing information in response to the agency's requests, but
in some cases, the information was presented too slowly and did not fully
meet the agency's needs. IAEA noted that it is not yet

prepared to draw definitive conclusions regarding the correctness and
completeness of Iran's declarations, but the agency continues to make
steady progress in understanding the program. IAEA also noted that it had
been able to verify Iran's suspension of enrichment-related activities at
specific facilities and sites, but key issues still remained regarding the
extent and nature of Iran's enrichment program. Further, the agency stated
in its report to the board that it was important for Iran to support the
agency's efforts to gain a full understanding of all remaining issues by
continuing to provide access to locations, personnel, and relevant
information in order to meet its safeguards obligations.

o 	In August 2004, as a result of preparations to submit its initial
declaration under the Additional Protocol, South Korea notified IAEA that
it had not previously disclosed nuclear experiments involving the
enrichment of uranium and plutonium separation. Specifically, South Korea
told the agency that the experiments had been on a laboratory scale,
involved the production of only milligram quantities of enriched uranium,
and that these activities had been terminated. Subsequently, IAEA sent a
team of inspectors to South Korea to investigate this case. In November
2004, IAEA's Director General reported to the Board of Governors that
although the quantities of nuclear material involved were not significant,
the nature of the activities and South Korea's failure to report these
activities in a timely manner posed a serious concern. IAEA is continuing
to verify the correctness and completeness of South Korea's declarations.

o 	IAEA inspectors have investigated evidence of past undeclared nuclear
activities in Egypt based on the agency's review of open source
information that had been published by current and former Egyptian nuclear
officials. Specifically, in late 2004, the agency found evidence that
Egypt had engaged in undeclared activities involving uranium extraction,
conversion, and reprocessing at least 20 years ago. According to available
reports, Egypt used small amounts of nuclear material to conduct
experiments related to producing plutonium and highly enriched uranium. In
January 2005, the Egyptian government announced that it was fully
cooperating with IAEA and that the matter was limited in scope. IAEA
inspectors have made several visits to Egypt to investigate this matter.
IAEA's Secretariat reported to its Board of Governors on these activities
in February 2005, but has not drawn any final conclusions or made
recommendations.

Although the strengthened safeguards system has helped IAEA obtain
information about some countries' previously undisclosed nuclear
activities, and provided assurances that other countries are not engaged
in clandestine activities, the system has limitations. These limitations
impact the agency's ability to draw conclusions-with absolute
assurance-about whether a country is developing a clandestine nuclear
weapons program. For example, IAEA does not have unfettered inspection
rights and cannot make visits to suspected sites anywhere at any time.
According to the Additional Protocol, complementary access to resolve
questions related to the correctness and completeness of the information
provided by the country or to resolve inconsistencies must usually be
arranged with at least 24 hours advanced notice. Complementary access to
buildings on sites where IAEA inspectors are already present are usually
conducted with a 2hour advanced notice. Furthermore, IAEA officials told
us that there are practical problems that restrict access. For example,
inspectors must be issued a visa to visit certain countries that cannot
normally be arranged in less than 24 hours. In some cases, nuclear sites
are in remote locations and IAEA inspectors need to make travel
arrangements, such as helicopter transportation, in advance, which
requires that the country be notified prior to the visit.

IAEA's environmental sampling activities, which play a key role in
detecting undeclared nuclear material and activities, are limited as well
in two main areas. First, IAEA relies on a consortium of laboratories
located in eight countries, including the United States, known as the
Network of Analytical Laboratories, to analyze environmental samples it
obtains. However, according to IAEA and U.S. officials, the network is
being used beyond its capacity to analyze the significant increase in the
number of samples collected from Iran and Libya. IAEA noted that the
number of samples collected from those two countries from 2003 to 2004
increased by about 100 samples during the year. The strain on the
network's capacity has had a negative impact on the timely processing and
reporting of results from environmental samples being collected. Officials
from the Department of Defense and the U.S. Air Force Technical
Applications Laboratory, which is responsible for analyzing the majority
of environmental samples, told us that some samples received from IAEA
have taken as long as 6 months to analyze. Even if a sample is a high
priority, it takes at least 3 weeks, and the average time to analyze a
sample is 2 to 3 months. As a result, critical, time sensitive analyses
are not being completed on a consistent basis. According to IAEA
officials, IAEA needs to increase the capacity of the network to analyze
more samples as more states bring the Additional Protocol into force.

Second, an environmental sampling technique, which is known as wide area
sampling, can only be used when approved by the Board of Governors. Wide
area sampling, if implemented, would enable the agency to collect
environmental data from soil, rivers, and streams outside of declared
nuclear facilities. However, it has not been approved by the board
because, among other reasons, wide area sampling requires reductions in
cost before it would be practical, according to U.S. and international
experts.

Finally, a November 2004 study by a group of safeguards experts appointed
by IAEA's Director General evaluated the agency's safeguards program to
examine how effectively and efficiently strengthened safeguards measures
were being implemented. Specifically, the group's mission was to evaluate
the progress, effectiveness, and impact of implementing measures to
enhance the agency's ability to draw conclusions about the nondiversion of
nuclear material placed under safeguards and, for relevant countries, the
absence of undeclared nuclear material and activities. The group concluded
that generally IAEA had done a very good job implementing strengthened
safeguards despite budgetary and other constraints. However, the group
noted that IAEA's ability to detect undeclared activities remains largely
untested. If a country decides to divert nuclear material or conduct
undeclared activities, it will deliberately work to prevent IAEA from
discovering this. Furthermore, IAEA and member states should be clear that
the conclusions drawn by the agency cannot be regarded as absolute. This
view has been reinforced by the former Deputy Director General for
Safeguards who has stated that even for countries with strengthened
safeguards in force, there are limitations on the types of information and
locations accessible to IAEA inspectors.

  IAEA Faces Challenges That Impede Its Ability to Effectively Implement
  Strengthened Safeguards

IAEA faces a number of challenges that hamper its ability to effectively
implement strengthened safeguards. First, about two-thirds, or 120 out of
189, of the NPT signatories have not yet brought the Additional Protocol
into force, including the United States. A second challenge is that
safeguards are significantly limited or not applied in about 60 percent,
or 113 out of 189, of the NPT signatory countries either because they
possess small quantities of nuclear material-and are not subject to most
safeguards measures-or they have not concluded a comprehensive safeguards
agreement with IAEA. IAEA cannot verify that these countries are not
diverting nuclear material for nonpeaceful purposes or engaging in secret
nuclear activities. Third, IAEA faces a looming human capital crisis. In
the next 5 years, IAEA will experience a large turnover of senior
safeguards inspectors and high-level management officials. Delays in
filling

critical safeguards positions, a shrinking pool of nuclear experts, and
restrictive personnel policies, such as a mandatory retirement age, impede
IAEA's ability to hire and retain staff with critical skills. Finally,
IAEA does not have a system in place to measure how effective its
strengthened safeguards system is in detecting undeclared activities.

    IAEA's Ability to Detect Clandestine Nuclear Activities Is Limited because
    Many Countries Have Not Adopted the Additional Protocol

One of the major challenges IAEA faces in implementing strengthened
safeguards is increasing the number of countries that bring the Additional
Protocol into force, which would greatly expand the agency's access to
countries' nuclear programs. Without the Additional Protocol in force,
IAEA has limited ability to detect clandestine nuclear programs, and its
inspection efforts remain focused on declared nuclear material and
facilities. Of the 189 countries that have signed the NPT, 120 (or 63
percent) have not brought the Additional Protocol into force, including
two of the five nuclear weapons states-the United States and Russia.
Figure 2 shows the countries that have brought the Additional Protocol
into force worldwide.

Protocol into force, U.S. officials said that many of these countries do
not pose a significant nuclear proliferation risk.

IAEA has recognized that progress in getting countries to adopt the
Additional Protocol since it was approved by the Board of Governors in
1997 has been slow. In response, the agency has increased its efforts to
encourage countries to adopt the Additional Protocol. In 2001, IAEA
developed and began to implement a strategy to promote the implementation
of the Additional Protocol through a number of outreach efforts, which
included providing experts to assist countries in preparing their state
declarations of nuclear activities and sponsoring technical workshops and
seminars. For example, in 2004, IAEA sponsored seven training events at
the national, regional, and international levels to improve countries'
nuclear material accounting and to explain what countries' obligations
would be under the Additional Protocol. Since IAEA implemented its
strategy, 51 countries have brought the Additional Protocol into force.
Further, in 2004, the United States, with support from the other G-8 group
of countries, the European Union, and IAEA, sent demarches (or official
requests) to 72 countries to urge them to bring the Additional Protocol
into force and provide information on their efforts to bring it into
force. The Department of State received responses from 47 countries.
Finally, in an effort to draw attention to countries that have not brought
the Additional Protocol into force, IAEA has begun to list their names in
its yearly safeguards report to the Board of Governors.

Despite these efforts, the agency faces a number of challenges in getting
more countries to adopt the Additional Protocol. According to responses to
the Department of State's demarches and discussions with U.S. and IAEA
officials, some member states are hesitant to implement the Additional
Protocol because of (1) concerns about the financial costs associated with
it; (2) an unwillingness to submit to an intrusive inspection regime; (3)
their inadequate regulatory systems to collect information on all
nuclear-related activities; and (4) political factors, such as the time
needed for national legislatures to approve the Additional Protocol. For
example:

o 	Brazil has delayed signing, stating that the measures under the
Additional Protocol do not need to be universally applied to all countries
and that inspections and IAEA requests for information are overly
intrusive;

o 	Egypt will not bring the Additional Protocol into force until Israel
signs the NPT, concludes a comprehensive safeguards agreement, and
implements the Additional Protocol; and

o 	Serbia and Montenegro's national legislature has to approve the
Additional Protocol before it can proceed with developing an adequate
nuclear regulatory system.

In addition, the United States has been slow to bring its Additional
Protocol into force. According to IAEA officials, this presents a
challenge because it weakens U.S. efforts to encourage other countries to
bring their additional protocols into force. Although the United States
signed its Additional Protocol in June 1998, the U.S. Senate did not
provide its advice and consent until March 2004-a first step toward U.S.
ratification of the Protocol.13 As a condition for ratifying the Protocol
to make it legally binding on the United States, the Senate directed the
President to meet certain conditions, including completing vulnerability
assessments of U.S. nuclear facilities and developing regulations that
limit or exempt certain nuclear facilities from IAEA inspections where
those inspections could compromise sensitive proprietary or national
security information.

Since March 2004, the Departments of State, Energy, Commerce, and Defense
and the Nuclear Regulatory Commission have been involved in outreach, data
collection, and other tasks, such as developing regulations for commercial
nuclear facilities and completing vulnerability assessments, to meet the
Senate's conditions for ratification. Once the conditions are met, the
President must ratify the Protocol in order to bring it into force. In
addition, before the regulations to implement the Protocol can be
published, U.S. officials said that Congress must pass legislation that
establishes the legal framework for U.S. agencies to collect information
on commercial nuclear activities and facilities, and grant access to IAEA
inspectors. U.S. officials told us that adopting the Additional Protocol
would underscore U.S. support for IAEA's strengthened safeguards system
and make U.S. efforts to encourage more countries to adopt the Additional
Protocol more effective and credible. However, according to officials from
the Departments of Commerce, Defense, Energy, and State and the Nuclear
Regulatory Commission, there is no specific time frame for meeting the
Senate's conditions for ratification.

13The U.S. Senate must consent to all international treaties before they
enter into force.

    IAEA Safeguards Are Significantly Limited or Not Applied in More than Half
    of the NPT Signatories

Countries with Small Quantities of Nuclear Material Pose a Weakness to the
Safeguards System

A second major challenge hampering IAEA's ability to implement
strengthened safeguards is that safeguards are significantly limited or
not applied to about 60 percent, or 113 out of 189, of the NPT
signatories: 76 countries with agreements (known as small quantities
protocols) in force that limit the agency's ability to implement most
strengthened safeguards measures and 37 countries that have not concluded
a comprehensive safeguards agreement with the agency. As a result, IAEA
cannot conduct inspections and independently verify that nuclear material
has been placed under safeguards and is not being diverted to clandestine
nuclear activities. In addition, IAEA has limited information and
authority concerning nuclear activities in countries that are not
signatories to the NPT-India, Israel, and Pakistan-and in North Korea,
which recently withdrew from the NPT.

Countries with small quantities of nuclear material make up about 40
percent of the NPT signatories and almost one-third of the countries that
have the Additional Protocol in force.14 Since 1971, IAEA's Board of
Governors has authorized the Director General to conclude an agreement,
known as a small quantities protocol, with 90 countries and 76 of these
agreements were in force, as of July 2005. IAEA's Board of Governors has
approved the protocols for these countries without having IAEA verify that
they met the requirements for it. Even if these countries bring the
Additional Protocol into force, IAEA does not have the right to conduct
inspections or install surveillance equipment at certain nuclear
facilities. According to IAEA and Department of State officials, this is a
weakness in the agency's ability to detect clandestine nuclear activities
or transshipments of nuclear material and equipment through the country.
In February 2005, IAEA's Director General stated that these small
quantities protocols pose a challenge to the safeguards program. In
response, IAEA submitted a proposal to the Board of Governors recommending
that the board stop approving small quantities protocols and give IAEA the
authority to negotiate with countries to rescind them. At the very
minimum, the proposal recommended that IAEA be allowed to conduct
inspections and limit the protocols to countries without any nuclear
facilities. In September 2005, the Board of Governors endorsed IAEA's view
that small quantities protocols constituted a weakness of the safeguards
system and

14IAEA refers to a small quantity of nuclear material as being, among
other things, less than one kilogram of plutonium or uranium with an
enrichment of greater than 20 percent Uranium-235.

Some Countries Do Not Have Comprehensive Safeguards Agreements with IAEA

IAEA Has Limited Ability to Assess Nuclear Activities of Countries That
Are Not Members of the NPT

directed IAEA to negotiate with countries to make changes to the
protocols, including reinstating the agency's right to conduct
inspections.

The application of safeguards is further limited because 37 countries that
have signed the NPT have not brought into force a comprehensive safeguards
agreement with IAEA. The NPT requires non-nuclear weapons states to
conclude comprehensive safeguards agreements with IAEA within 18 months of
becoming a party to the Treaty. However, IAEA's Director General has
stated that these 37 countries have failed to fulfill their legal
obligations. Moreover, 28 of the 37 have not yet brought comprehensive
safeguards agreements into force more than 10 years after becoming party
to the NPT, including Kenya, Niger, and Turkmenistan. In 2005, IAEA
reported that some countries do not have comprehensive safeguards
agreements with the agency because they (1) consider concluding an
agreement a low priority compared with other national priorities, (2) have
an insufficient understanding of the legal requirements to implement
safeguards, and (3) lack a nuclear regulatory system to implement
safeguards. As part of its strategy to help countries better understand
and prepare for implementation of comprehensive safeguards agreements,
IAEA is involved in a number of outreach efforts, such as seminars and
workshops. However, according to IAEA officials, the agency is limited in
its ability to encourage countries to conclude a comprehensive safeguards
agreement because the agency is not responsible for enforcing compliance.

Another weakness in the strengthened safeguards system is that IAEA has
only limited information about the nuclear activities of India, Israel,
and Pakistan, which are not members of the NPT. Since these three
countries are not signatories to the NPT, they do not have comprehensive
safeguards agreements with IAEA, and are not required to declare all of
their nuclear material to the agency. Instead, they have special
safeguards agreements that limit the scope of the agency's safeguards
activities to monitoring only specific material, equipment, and
facilities. In addition, under their special safeguards agreements, these
countries are required to declare only exports of safeguarded nuclear
material. With the recent revelations of the illicit international trade
in nuclear material and equipment, IAEA officials told us that they would
like more information, in particular, on these countries' nuclear exports.

IAEA also has limited information on the nuclear activities of North
Korea. North Korea signed the NPT in 1985 and concluded a comprehensive
safeguards agreement with IAEA in 1992. IAEA inspections conducted between
1992 and 1994 uncovered numerous discrepancies in North

Korea's nuclear material declarations. For example, when IAEA inspectors
conducted environmental sampling tests of equipment at the declared
facilities, they discovered a discrepancy between what North Korea
reported and what the inspectors' independent analysis revealed. Based on
the analysis of these samples, IAEA determined that North Korea might have
continued to reprocess plutonium much later than stated in its declaration
and in much larger quantities than reported. In 1993, North Korea
restricted IAEA's inspection activities and never allowed the agency to
resolve the discrepancies. Beginning in 1994, IAEA's activities in North
Korea were limited to verifying the stoppage, or freeze, of North Korea's
nuclear activities, as called for in an agreement negotiated between the
United States and North Korea. In December 2002, North Korea expelled IAEA
inspectors; removed surveillance equipment and seals at nuclear
facilities; and, in January 2003, announced its withdrawal from the NPT.
These actions have raised widespread concern that North Korea diverted
some of its nuclear material to produce nuclear weapons.

    IAEA May Lose Critical Skills and Knowledge because of Difficulties in
    Filling Key Positions and Restrictive Personnel Policies

Another major challenge facing IAEA is a looming human capital crisis that
may hamper the agency's ability to meet its safeguards mission. About 51
percent, or 38 out of 75, of IAEA's senior safeguards inspectors and
highlevel management officials, such as the head of the Department of
Safeguards and the directors responsible for overseeing all inspection
activities of nuclear programs, are retiring in the next 5 years.15
According to U.S. officials, this significant loss of knowledge and
expertise could compromise the quality of analysis of countries' nuclear
programs. For example, several inspectors with expertise in uranium
enrichment techniques, which is a primary means to produce nuclear weapons
material, are retiring at a time when demand for their skills in detecting
clandestine nuclear activities is growing.

15In 2004, the Department of Safeguards had 552 staff members. Of these,
251 were safeguards inspectors.

The loss of this expertise raises concerns for IAEA and U.S. officials
because IAEA is finding it increasingly difficult to recruit qualified
inspectors. In 2004, less than 10 percent of the applicants applying for
inspector positions at IAEA were considered well qualified. IAEA's
recruiting difficulties arise because of, among other things, a shrinking
pool of people pursuing careers in the nuclear field in most countries and
intense competition from the private industry for their services. For
example, in 2000, a group of experts from U.S. national laboratories and
the Organization for Economic Cooperation and Development's Nuclear Energy
Agency warned that an alarmingly sharp downward trend in enrollment in
nuclear engineering programs in most countries, and in particular in the
United States, placed the availability of future nuclear expertise at
risk. This downward trend has continued. As we reported in February 2005,
fewer U.S. students were seeking advanced degrees or technical training in
areas such as science and engineering.16 In addition, according to IAEA
officials, the pool of qualified candidates that would meet all of the
agency's requirements, such as 6 years of experience in the nuclear field
and knowledge of uranium enrichment or fuel reprocessing, can be found in
only a limited number of countries worldwide.

IAEA officials told us that it is also difficult to hire analysts for
critical Department of Safeguards positions. For example, hiring satellite
imagery analysts can be complicated because it may require approval by the
candidates' national governments because of the sensitive nature of these
positions. In addition, in some cases, IAEA cannot provide competitive
salaries for analyst positions. To help meet certain critical needs, such
as open source analysis, the agency hires consultants, cost-free experts,
and interns, primarily from the United States.

While IAEA has taken a number of steps to address these human capital
issues, officials from the Department of State and the U.S. Mission to the
U.N. System Organizations in Vienna have expressed concern that IAEA is
not adequately planning to replace staff with critical skills needed to
fulfill its strengthened safeguards mission. In 2004, IAEA began to
develop a plan that includes (1) determining skills and competencies
needed to meet strengthened safeguards objectives, (2) identifying gaps in
skills and competencies, (3) implementing human capital strategies that
are targeted

16GAO, National Nuclear Security Administration: Contractors' Strategies
to Recruit and Retain a Critically Skilled Workforce Are Generally
Effective, GAO-05-164 (Washington, D.C.: February 2005).

toward addressing the gaps, and (4) evaluating the success of these
strategies. According to IAEA officials, implementing this plan will allow
the agency to determine the number of inspectors and support staff needed,
and to develop better policies and practices to recruit and retain
critical staff. However, at the time of our review, this plan was not in
place because it had not yet been reviewed or approved by the Department
of Safeguards' management. IAEA has also begun to enhance its recruiting
efforts by targeting employees with experience in enrichment and
reprocessing activities at nuclear facilities in five countries with major
nuclear programs. IAEA officials hope that this new approach will improve
the agency's chances of recruiting highly qualified candidates in an
increasingly competitive job market. Despite these recruitment efforts,
Department of State and U.S. Mission officials expressed concern that IAEA
is not acting quickly enough to address the agency's high turnover rate.

Compounding a likely shortage of staff with critical skills, U.S. and IAEA
officials identified a number of IAEA personnel policies and practices
that hamper the Department of Safeguards' ability to recruit and retain
these highly specialized experts, including (1) a mandatory retirement
age, (2) limits on the number of support staff who contribute to the
analysis of safeguards-related information, and (3) delays in filling
critical positions. First, IAEA's mandatory retirement age of 62 has
hindered the agency's ability to fill critical skills.17 For example,
former IAEA personnel, now with the Los Alamos National Laboratory, said
that the agency is losing senior safeguards inspectors with unique
expertise and knowledge about countries' nuclear fuel cycles because of
mandatory retirements. In one case, an individual who had worked for IAEA
for 25 years and had been a section head in each of the Department of
Safeguards' three operations divisions was forced to retire. According to
Department of State officials, this policy may be misguided at a time when
the agency is having difficulty finding qualified staff. U.S. officials
also told us that IAEA's mandatory retirement policy is negatively
impacting the United States' ability to provide IAEA with critical
technical support. For example, in 2003, IAEA asked the United States to
provide an expert with a unique expertise in environmental sample
analysis-a critical tool in detecting undeclared nuclear activities-but
would not hire him because he was 62 years old. To

17IAEA's mandatory retirement age is based on the United Nations Joint
Staff Pension Fund. The normal retirement age is 60, but 62 for personnel
that were hired or rehired on or after January 1, 1990.

prevent losing this expertise, the United States hired him as a part-time
consultant to IAEA but at a higher cost. Although Department of State
officials have raised these concerns with IAEA officials, IAEA officials
have stated that they follow the United Nations retirement policy, which
was approved by IAEA's Board of Governors, and generally do not make
exceptions, even to hire or retain highly skilled staff.

Second, in 2004, Department of Safeguards officials reported that there
was pressure across the agency to reduce the number of support staff. They
found that this practice was shortsighted because support staff in the
Department of Safeguards include not only secretaries and clerks in
administrative positions, but also technicians who install unattended
remote monitoring equipment and open source information analysts.
According to Department of Safeguards officials who manage support staff,
they do not have enough staff to meet growing strengthened safeguards
requirements, such as technicians and engineers to test and install new
surveillance and remote monitoring equipment. For example, in 2003, IAEA
officials reported that they could not adequately test and install new
surveillance and unattended monitoring systems at Chernobyl and a facility
in Switzerland because of the lack of staff. This shortage increased the
risk of failure of agency equipment because of accelerated testing and
assembly.18 IAEA continues to rely heavily on the United States to supply
experts and short-term contractors to meet growing demand for these
technical services.

Lastly, according to U.S. and IAEA officials, delays in filling critical
safeguards positions limit IAEA's ability to implement strengthened
safeguards measures and detect clandestine activities. In many cases, a
new inspector or support staff member is hired after a position becomes
vacant, and since it takes, on average, 6 months to hire new staff, the
position is vacant for at least that amount of time. For example, it took
more than 2 years to fill a senior technician position to analyze
environmental samples at the Safeguards Analytical Laboratory. U.S.
Mission officials told us that they are concerned that there may not be

18In an October 2003 internal written assessment regarding IAEA equipment
testing, IAEA officials expressed concern that monitoring systems at a
third site-the Iranian enrichment facility at Natanz-was also not
thoroughly tested. In reviewing a draft of this report, IAEA officials
clarified that there are currently no unattended monitoring systems at the
Natanz facility in Iran and that the inclusion of Iran in this written
assessment was a mistake. According to these officials, IAEA has installed
standard surveillance cameras that were thoroughly tested before
deployment at the Natanz facility.

sufficient time to pass on the knowledge and skills of senior safeguards
inspectors and other nuclear experts to new recruits before these more
experienced safeguards personnel retire. While new staff have advanced
degrees and previous work experience, they require additional,
job-specific training and mentoring because of IAEA's specialized work.
According to IAEA officials, it usually takes 1 to 2 years for inspectors,
technicians, and engineers to be fully comfortable and capable on the job.
Furthermore, if experienced staff retire before new inspectors are
prepared to meet all mission requirements, there may be a gap in skills.

    IAEA Lacks a System to Evaluate the Results of Strengthened Safeguards

IAEA does not have a system in place to measure how effective its
strengthened safeguards system is in detecting undeclared activities. The
performance measures IAEA has in place are output-driven and directed at
measuring the agency's ability to detect the diversion of nuclear material
at declared facilities. For example, in its annual report to the Board of
Governors, IAEA, among other things, reports on the declared quantities of
nuclear material it accounted for and whether it met its goal of
conducting routine inspections at declared facilities. According to Los
Alamos National Laboratory officials, these indicators may be appropriate
for measuring progress in detecting the diversion of nuclear material at
declared facilities, but are not adequate to measure the effectiveness of
strengthened safeguards activities to detect undeclared activities or
nuclear material. These officials told us that IAEA should assess the
extent to which its strengthened safeguards activities, such as
environmental sampling and complementary access, are sufficient to detect
clandestine activities and establish specific performance measures to
evaluate these efforts. IAEA officials recognized the difficulties of
measuring the effectiveness and impact of the agency's strengthened
safeguards activities.

In June 2005, IAEA's Board of Governors established an advisory committee,
based on a proposal by President Bush in 2004, to consider ways to
strengthen IAEA's safeguards system. According to Department of State
officials, this committee would, among other things, systematically
evaluate lessons learned from strengthened safeguards implementation and
illicit trafficking of nuclear material, and then provide recommendations
to the Board of Governors to further strengthen the safeguards system by
2007. The committee will have an initial 2-year mandate, which will be
reviewed for extension after 2 years.

  IAEA Depends Heavily on U.S. Financial Support to Meet Its Safeguards
  Obligations

The United States is the largest financial contributor to IAEA's
safeguards program, and for 2004, is providing over 34 percent of the
agency's total safeguards budget through assessed and voluntary cash
contributions. IAEA's reliance on U.S. financial support is likely to
continue despite the agency's recent budget increase because, among other
reasons, the agency's budget has not kept pace with its increased workload
under strengthened safeguards, and cost-savings expected from the
application of integrated safeguards have not yet materialized. Further,
because the agency's budget has not kept pace with its increased workload,
IAEA depends on voluntary annual contributions from the United States and
other countries to meet critical safeguards needs, such as equipment and
funding for staff with specialized skills. In addition, IAEA's ability to
successfully negotiate future budget increases from member states is
hampered by the absence of systematic evaluations of long-term resource
needs, and its lack of reliable estimates of the costs of its strengthened
safeguards activities.

    The United States Is the Largest Financial Contributor to IAEA Safeguards

IAEA is heavily dependent on U.S. financial support to meet its safeguards
obligations, and historically the United States has been IAEA's primary
supporter and its largest contributor. For 2004, the United States is
providing $72.5 million to support IAEA's strengthened safeguards program:
$33.0 million in assessed contributions, $12.3 million in voluntary cash
contributions, and $27.2 million from various U.S. agencies in technical
support, such as analyzing environmental samples to detect the presence of
nuclear material.19 Figure 3 provides a breakdown of U.S. contributions to
IAEA's safeguards program for 2004 by funding category.

19Roughly $4.1 million of U.S. assessed contributions to IAEA for calendar
year 2004 had not been provided as of July 2005.

Figure 3: U.S. Contributions to IAEA's Safeguards Program for 2004

Voluntary cash contributions ($12.3M)

Technical support ($27.2M)

Assessed contributions ($33.0M)

Source: GAO analysis of data provided by IAEA, the Departments of Defense,
Energy, and State, and the Nuclear Regulatory Commission.

For 2004, U.S. assessed and voluntary cash contributions represent over 34
percent of IAEA's total safeguards budget. These and other assessed and
voluntary contributions provided by the United States to IAEA's safeguards
budget since 1998 are shown in table 1.

Table 1: Contributions to IAEA's Safeguards Budget from 1998 through 2004

Dollars in millions

                                          U.S. assessed               
                                          contributions               
                                          to                          
                 U.S.                            IAEA's               
                 contributions                                        
                     to IAEA's     IAEA's                   Voluntary 
                         total              safeguard's          cash 
          IAEA's  safeguards     assessed  budgetd (and contributions U.S. voluntary 
           total    budget                                         to           cash 
                     (and                               IAEA's        contributionse 
      safeguards percentage of safeguards percentage of safeguards              (and 
Yeara    budgetb        total)    budgetc        total)        budget  percentage of 
                                                                              total) 
           $90.6 $30.8 (34.0%)      $80.5 $23.1 (28.7%)         $10.2   $7.7 (75.7%) 
            89.8   29.5 (32.9)       79.3   20.7 (26.2)          10.5     8.8 (83.4) 
            84.2   29.5 (35.0)       70.9   17.9 (25.3)          13.3    11.6 (86.8) 
            88.9   35.3 (39.8)       70.1   18.6 (26.6)          18.7    16.7 (89.2) 
            95.5   37.7 (39.5)       77.9   22.5 (28.9)          17.6    15.2 (86.2) 
           111.8   42.7 (38.2)       92.9   26.5 (28.6)          19.0    16.1 (85.2) 
           132.6   45.3 (34.2)      115.2   33.0 (28.6)          17.4    12.3 (71.0) 

Source: GAO analysis of data provided by IAEA and the Department of State.

Note: Numbers may not add due to rounding.

aIAEA is one of 10 international organizations that the United States
makes payments to on a deferred basis. In some cases, U.S. assessed
payments to IAEA's budget are not made in the same year for which they are
assessed. Table 1 shows U.S. contributions to IAEA's budget based on the
year for which they were assessed, not the year in which the funds were
actually paid.

bIAEA's total safeguards budget is calculated using actual exchange rates,
rather than IAEA's fixed exchange rate. As a result, changes in IAEA's
total safeguards budget, reflected in the table, largely represent
inflationary cost increases and fluctuations in exchange rates rather than
an actual change in IAEA's budget. The exception is in 2004, when IAEA
received the first part of a 4-year increase to its budget.

cIAEA's budget includes both dollar and non-dollar contributions.
Non-dollar contributions are calculated using the annual average exchange
rate based on the International Monetary Fund's International Financial
Statistics.

dA portion of the U.S. contribution to IAEA's budget is made in dollars,
while a portion is made in euros. Prior to the introduction of the euro in
2002, U.S. non-dollar contributions to IAEA's budget were made in Austrian
schillings. The U.S. contribution to IAEA's budget is calculated using the
average monthly exchange rate for the month in which the euro/Austrian
schilling payment was made to IAEA. Exchange rates are based on the
International Monetary Fund's International Financial Statistics.

eFor purposes of this report, U.S. voluntary contributions to IAEA include
only cash contributions, and do not include technical assistance, which is
also provided on a voluntary basis.

For 2004, the U.S. assessed contribution to IAEA's safeguards budget is
about $33.0 million, which IAEA uses to fund safeguards inspections, staff
salaries, training, and other costs directly related to the operation of
IAEA's safeguards program. The U.S. assessment to IAEA's budget is based
on a scale used by the United Nations to assess contributions for its
members.20 The U.S. assessed safeguards contribution for 2004 is about 35
percent more than IAEA's second largest financial supporter, Japan.

The United States has also been the largest contributor of voluntary funds
to IAEA's safeguards program. Our analysis shows that from 1998 through
2004, U.S. voluntary cash contributions, on average, were 83 percent of
the total of all such member states' contributions. Other countries making
voluntary contributions included Canada, France, Germany, Japan, and the
United Kingdom. In 2004, the United States provided over $12.3 million in
voluntary funds to IAEA's safeguards program. These funds were provided by
the Department of State and included

o  $4.36 million for the purchase of safeguards equipment;

o 	$4 million for the U.S. Program of Technical Assistance to IAEA
Safeguards (POTAS)-managed by Brookhaven National Laboratory- to fund
safeguards equipment at a nuclear facility in Japan, and paying travel
costs for IAEA staff associated with POTAS-funded projects;

o 	$2 million to assist IAEA in re-engineering the Department of
Safeguards' information management system;

o 	$1.2 million to cover IAEA's costs of applying safeguards to excess
nuclear material at U.S. facilities; and

20The U.S. assessment is 25 percent of IAEA's budget-the maximum
assessment for IAEA member states. IAEA retained this ceiling despite a
United Nations' decision in 2000 to reduce its maximum assessment to 22
percent. However, the United States, along with 31 other countries,
contributes slightly more than 25 percent of the safeguards budget to
compensate for some countries that are assessed at a lower rate. In July
2003, IAEA's Board of Governors decided to require some countries that pay
less to contribute more as of January 1, 2006. The remaining countries
that pay less will be required to begin contributing more as of January 1,
2008.

o  $770,500 for high priority safeguards projects.21

In addition to U.S. assessed and voluntary safeguards contributions, we
estimated that, in 2004, the Departments of State, Energy, and Defense and
the Nuclear Regulatory Commission provided IAEA with $27.2 million in
technical support. For example:

o 	DOE spent almost $12.7 million on various activities, including
applying safeguards at nuclear facilities in other countries, developing
technologies to detect and characterize the isotopic composition of
uranium and plutonium, and providing training on nuclear material
accounting and control;

o 	the Department of State provided over $9.2 million for POTAS activities
such as funding U.S. national laboratories to develop and implement
safeguards technologies and funding Brookhaven National Laboratory
officials to support IAEA's safeguards activities, interns and consultants
to IAEA, and other high priority safeguards projects;

o 	the Departments of Energy, State, and Defense spent over $5.2 million
analyzing environmental samples taken by IAEA to detect and characterize
the types of nuclear material present at selected locations; and

o 	NRC spent $29,500 in staff costs to assist IAEA in developing IAEA
safeguards procedures and practices.

For 2005, the United States is expected to contribute almost $34.3 million
to IAEA's regular safeguards budget, or about 33 percent more than Japan.
Also, we estimate that for 2005, the Department of State will provide
$11.4 million in voluntary cash contributions to IAEA's safeguards
program, and that various U.S. agencies will provide $23.3 million in
technical support.

21The U.S. contribution for high priority safeguards projects had not been
expended as of September 2005.

    IAEA Will Continue to Rely on U.S. Voluntary Support, Despite an Increase in
    Its Regular Budget

In 2004, IAEA's safeguards budget was increased by $11.1 million-the first
part of a 4-year, $19.4 million increase agreed to by member states. For
almost two decades prior to 2004, member states generally limited growth
in IAEA's budget to adjustments for inflation and staff salaries.
Additionally, the agency's ability to increase funding for safeguards
activities has been limited by some member states' desire to maintain a
balance of funding between IAEA's safeguards and technical cooperation
programs. As a result, Department of State officials said that a shortfall
developed between the growing demands on IAEA from strengthened safeguards
activities and its available budget. For example, IAEA was not able to
hire additional staff (inspectors and equipment technicians) as its
safeguards responsibilities increased. To address this shortfall, the
United States led a successful effort to increase IAEA's budget.22
According to Department of State and IAEA officials, the agency has used
its budget increase to hire additional staff and purchase new safeguards
equipment, such as unattended monitoring systems.

Despite the increase in the agency's safeguards budget, IAEA will continue
to rely on U.S. voluntary contributions. Department of State officials
said that even with the budget increase, IAEA's safeguards program remains
underfunded because its budget has not kept pace with increases in its
workload and responsibilities. As part of the U.S.-led effort to increase
IAEA's regular budget, a Department of State analysis found that the
agency would need around $30 million-$10.6 million more than the actual
increase-to meet its strengthened safeguards responsibilities. Brookhaven
National Laboratory officials also questioned whether the safeguards
budget increase will be sufficient to meet future needs because of the
agency's growing responsibilities under strengthened safeguards. For
example, the officials said it is unclear how IAEA will finance increased
activities stemming from the Additional Protocol, such as analyzing
environmental samples, or fund improvements to the agency's safeguards
information management system.

22Department of State officials said that the department's policy has
been, and continues to be, restricted growth in the budgets of
international organizations. The department has made exceptions for
substantive policy reasons, such as security-related interests. However,
Department of State officials also said that they have tried to maintain
pressure on IAEA to identify efficiencies to allow the reallocation of
resources to high priority activities such as safeguards.

In addition, IAEA officials said the agency will continue to rely on
voluntary funding, primarily from the United States, to purchase equipment
and maintain a research and development program. One IAEA official told us
that the purpose of the agency's budget increase was, in part, to ensure
that the budget covers most of the agency's equipment needs by 2007.
However, agency officials responsible for managing and maintaining
safeguards equipment told us that while the safeguards budget increase
gave IAEA the ability to meet 70 percent of its equipment needs beginning
in 2004, the remaining 30 percent will be met almost exclusively using
voluntary contributions from the United States. Furthermore, additional
equipment requirements resulting from the implementation of strengthened
safeguards are likely to increase the agency's reliance on voluntary
funds. Finally, IAEA officials stated that the agency cannot maintain a
research and development program without member states' voluntary support
because it does not have the financial resources or technical expertise.

Country-specific events could also require increased resource commitments
by IAEA that may strain the agency's safeguards budget. IAEA officials
said that demands on the agency's budget are driven by events in
individual countries. For example, IAEA officials said that Japan's new
reprocessing plant at Rokkashomura-the largest under agency
safeguards-will require a significant investment of safeguards resources,
including an on-site laboratory to analyze nuclear material samples and an
increase in inspection activity roughly equal to the efforts of 10
inspectors.23 IAEA indicated that funds for these new inspectors were
included in the budget increase, as well as $727,000 for the on-site
laboratory. Further, in the July 2005 agreement between the United States
and India, India agreed to place its civilian nuclear facilities under
IAEA safeguards. Department of State officials said that the agreement
could increase IAEA's resource commitments because of the additional
nuclear material that IAEA could be required to safeguard. Also, recent
events in Iran and Libya have forced IAEA to commit more safeguards
resources for inspections and analyzing an increased quantity of
environmental samples.

23IAEA attempts to quantify the costs of anticipated increased resource
commitments in its budget. In part, these estimates are presented as core
activities for which the agency expects to receive voluntary
contributions, or for which the agency has not identified a funding
source.

Additionally, according to IAEA, Department of State, and Brookhaven
National Laboratory officials, a change in the European Atomic Energy
Community's (EURATOM) participation in safeguards activities could place
an additional financial burden on IAEA. In the past, EURATOM has shared
the costs of safeguards activities by participating in inspections and
maintaining safeguards equipment at its members' facilities. However, in
December 2004, EURATOM informed IAEA of its intention to reduce its
participation in inspections and the sharing of equipment costs. While
EURATOM's decision had not been finalized as of May 2005, an IAEA official
estimated EURATOM's withdrawal from safeguards activities could require
the agency to hire 5 to 9 additional inspectors and 6 or 7 technicians to
conduct inspections and maintain equipment at European Union nuclear
facilities. Additionally, Department of State officials said that reduced
participation in safeguards by EURATOM would require IAEA to replace
safeguards equipment at European Union facilities, and estimated that this
would cost around $1.5 million per year over the next 4 to 5 years.

At the same time, cost-savings that IAEA expected to achieve from
integrated safeguards have not yet materialized. In our 1998 report, we
questioned IAEA's assumptions about cost-savings from integrated
safeguards because at that time, the agency did not know the extent to
which its new measures would allow it to reduce inspections. Further, we
stated that savings in cost and inspector effort from applying integrated
safeguards might not be fully realized. While IAEA has reduced inspection
activities in some countries where it has applied integrated safeguards,
there has been an increase in headquarters staff needed to analyze data
received from unattended monitoring systems installed at nuclear
facilities and collected from open source information. Moreover, the time
it takes for IAEA staff to prepare for complementary access is double the
preparation time for routine inspection activities. For example, IAEA
officials estimated that complementary access requires 4 days of
preparation and analysis at headquarters for every day of inspection, as
opposed to 2 days of preparation and analysis for routine inspections. In
addition, even though advanced technologies have reduced the need for
physical inspections at certain facilities, IAEA officials told us that
the purchase, installation, and maintenance costs of this equipment may
exceed savings from fewer inspections. Lastly, under integrated
safeguards, IAEA may increase inspection activities at certain locations
to ensure that a country is not engaged in clandestine nuclear activities.

IAEA told us that the first few countries where integrated safeguards were
being applied had small nuclear programs, which limited the potential
cost-

savings. IAEA officials told us that the agency expects to achieve more
cost-savings as more countries, such as Canada, Germany, and Japan, apply
integrated safeguards. However, a former high-ranking Department of
Safeguards official told us that thus far, the increasing costs of
complementary access to verify the accuracy and completeness of
information contained in countries' declarations, among other factors,
have offset cost-savings from reduced inspection activities in countries
with integrated safeguards.

We also found that in some instances, IAEA does not make the most
efficient use of its safeguards resources. For example:

o 	Brookhaven National Laboratory officials were concerned that IAEA's use
of U.S. voluntary contributions to pay for business class travel, instead
of taking advantage of economy class fares, is not cost effective. One
Brookhaven official said that this takes resources away from other
safeguards priorities such as paying for equipment or training. For
example, the official said that for trips from Vienna, Austria, to
Albuquerque, New Mexico (near Los Alamos National Laboratory where some
training courses are held for IAEA staff), IAEA obtains business class
tickets costing $3,300 or less. However, the official said that these
tickets, when purchased in advance at economy class rates, rarely cost
more than $2,000 and are often less. Further, we estimate that economy
class rates for these tickets currently average $1,235.24 IAEA officials
acknowledged that in some cases business class tickets are more costly
than economy class, but said that most often the difference between
business class and economy class tickets is paid by IAEA, not by U.S.
voluntary contributions. In reviewing a draft of this report, IAEA
officials stated that the agency's policy is to fly economy class whenever
practicable. However, the officials said that IAEA's travel regulations
allow the agency to use business class travel for trips over 7 hours in
duration. IAEA officials emphasized that in such cases, the agency tries
to take advantage of reduced business class fares whenever possible.

o 	In some cases, IAEA's restrictive personnel policies cause agency
resources to be used inefficiently. As was mentioned previously, IAEA
could not hire an individual as a cost-free expert despite his critical

24Estimates are from SatoTravel, the leading provider of travel services
for the U.S. government. Rates are for July through September 2005. The
economy class estimate is an average of the government and civilian rates.

expertise in detecting traces of nuclear material contained in
environmental samples because he was 62-IAEA's mandatory retirement age.
Cost-free experts are hired by IAEA using countries' voluntary
contributions to provide short-term skills that IAEA lacks among its
regular staff. To retain his expertise, the United States hired and paid
this individual as a consultant to IAEA. However, as a consultant, this
individual is only working on a part-time basis, and the United States is
required to pay him $56,000 more than his position would cost as a
cost-free expert over a 2-year period.

o 	IAEA's policy of rotating technical staff causes the agency to incur
additional costs related to training replacement staff. Although IAEA
officials could not quantify these costs, they said that the agency's
policy of rotating technical staff every 7 years causes many technicians
and engineers to leave early to pursue careers elsewhere. As a result,
IAEA is continually faced with having to train new staff to operate and
maintain its specialized equipment. In addition, because of the difficulty
it has in maintaining sufficient numbers of trained technical staff, IAEA
has less time for testing and installing equipment, which increases the
risk of failures. A former head of IAEA's unit for unattended monitoring
systems said that if this equipment fails, IAEA would have to expend a
significant amount of resources to go back and verify all of the nuclear
material in that facility.

    IAEA Does Not Systematically Evaluate Long-Term Resource Requirements or
    Reliably Estimate Safeguards Costs

IAEA does not have a process in place to systematically evaluate its
longterm resource requirements. Given member states' reluctance over the
past 2 decades to increase IAEA's budget, future increases may depend upon
the agency's ability to make a convincing case that additional resources
are required to meet safeguards obligations. Good strategic planning
practices, which would help to make such a case, include describing the
relationship between long-term goals and budgetary needs. However, while
IAEA has developed 5-year medium-term strategies for its activities, these
plans are not linked to longer-term budgetary requirements because IAEA's
budget process and research and development plan are only designed to
forecast resource needs on a 2-year basis. In 2004, a group of safeguards
experts found that IAEA needed to increase linkages between its
medium-term strategy, the strategic objectives of the Department of
Safeguards, and the agency's program and budget. Department of State
officials also stated that although IAEA has substantially improved its
planning, the agency could still have better assessments of its long-term
budgetary needs. Additionally, Brookhaven National Laboratory officials
said that IAEA needs to develop

a long-term plan to better prioritize tasks and tie goals and timeframes
to financial resources. Furthermore, a February 2005 report by IAEA's
Office of Internal Oversight Services that evaluated the agency's
management of member states' voluntary contributions, found that while the
Department of Safeguards' biennial research and development plan provides
adequate planning for activities 2 to 3 years into the future, IAEA lacks
an effective process for identifying and investigating new safeguards
technologies for the detection of undeclared nuclear material and
activities beyond the 2 to 3 year-timeframe. As a result, the office
recommended that IAEA develop a long-term plan for research and
development activities.

IAEA has taken steps to improve its short-term budget and planning
process. For example, IAEA has implemented results-based budgeting that
links objectives, outcomes, and performance indicators to estimates of
resource needs in the agency's biennial budget. Furthermore, IAEA
officials said that they did detailed resource planning as part of the
agency's efforts to negotiate the 2004 budget increase. Specifically, IAEA
developed a document that identified each project in the safeguards
program, provided information on the project's needs over the 2004-2005
budget period, and indicated how these needs were reflected in the
requested budget increase. However, IAEA officials said that this was an
effort that required a significant amount of planning and negotiating.

Another impediment to systematically evaluating long-term resource
requirements is that IAEA does not have reliable estimates on the costs of
all of its strengthened safeguards activities-particularly those costs
related to increased activity levels at IAEA headquarters, such as
analyses of countries' declarations of their nuclear activities. For
example, a 2004 review of the safeguards program by a group of safeguards
experts found that one measure of costs IAEA used in the past-person days
of inspection-actually accounted for only 30 percent of the safeguards
budget in 2003. Therefore, attempting to use this measure to represent the
costs of all IAEA's safeguards activities was problematic because the
majority of safeguards activities are unrelated to the costs of person
days of inspection. Department of State officials also said that IAEA's
measures of safeguards costs are inadequate. In particular, they said that
the person days of inspection measure does not account for differences in
the type of inspection performed and the costs of equipment and
technologies used. Additionally, they said that this measure represents
the number of 8-hour days spent inspecting a facility. However, even if
the inspection lasts less than 8 hours, it still counts as a full day of
inspection. Furthermore, without good measures of the costs of all its
safeguards activities, IAEA has

difficulty setting benchmarks, which it could use to measure whether
alternative approaches to safeguarding nuclear material, such as
integrated safeguards, actually result in cost-savings. For example, the
2004 review of the safeguards program found that IAEA's lack of accurate
cost information was an impediment in assessing the efficiency of its
operations.

One high-ranking Department of Safeguards official told us that the agency
has difficulty estimating the costs of safeguards activities. The official
noted that while IAEA's Department of Safeguards has introduced a new
measure-calendar days in the field-which helps to estimate travel and
labor costs, it still does not capture the costs related to other
safeguards activities, such as complementary access. The official said
that the agency has assigned a staff member and requested a French expert
to work on developing a new methodology to calculate the costs of
safeguards activities. Additionally, IAEA incorporated a project into its
2004-2005 budget to use statistical information, including the cost of
activities related to the Additional Protocol, to achieve more efficient
and effective program planning, monitoring, and resource management.

According to Department of State officials, Congress authorizes voluntary
funding for IAEA's safeguards program to meet requirements that cannot be
met from its assessed budget. The officials said that the purpose of this
funding is not to pay for normal agency operating costs. However, without
adequate measures of the costs of all its strengthened safeguards
activities and a systematic process to use these measures to identify
long-term resource needs, IAEA may be unable to convince member states of
its budgetary needs. As a result, IAEA will continue to rely on some
member states' voluntary contributions-provided in large part by the
United States-for recurring and critical costs. For example:

o 	IAEA's 2004-2005 budget identified a number of core activities for
which no budgetary funds were available, including almost 11 percent of
the costs of safeguarding nuclear material in countries with safeguards
agreements. IAEA anticipated that member states would provide about $10.9
million in voluntary support for these activities. However, IAEA's
2004-2005 budget also identified an estimated $5.75 million in potential
safeguards activities, such as applying safeguards at nuclear facilities
in North Korea should it agree to resume IAEA inspections, for which the
agency did not have budgetary funding and did not anticipate receiving
voluntary support.25

o 	A 2004 independent review of IAEA's Safeguards Analytical Laboratory
found that in some cases, supplies needed for routine maintenance of
safeguards equipment were not funded by IAEA's safeguards budget, but
instead were included in agency requests for voluntary support. As a
result, some instruments were inoperable for up to a year because
necessary spare parts were funded through voluntary contributions. The
review also found that IAEA's voluntary requests included funding to
maintain its laboratory facilities, and recommended that routine
maintenance needs of laboratory equipment and facilities should be
included in IAEA's budget. IAEA said that all essential and routine
equipment needs have been included in the agency's current budget.

o 	Department of State officials said that the United States is concerned
that in some cases IAEA is relying on cost-free experts-many of which are
funded by U.S. voluntary support-on a long-term basis when it should
really be creating permanent positions and filling them. According to
Brookhaven National Laboratory officials, cost-free experts are intended
to provide short-term specialized skills that are not available among IAEA
staff. These positions are not intended to be an extension of IAEA's
regular staff. As a result, the officials said that the United States is
generally reluctant to extend funding for cost-free experts beyond four
years. However, without the cost-free experts provided by the United
States and other countries, IAEA would have difficulty finding staff to
perform key strengthened safeguards activities, such as analyzing open
source information and maintaining unattended

25These unfunded core activities primarily represent safeguards activities
that IAEA was unsure of implementing. Other unfunded core activities
included applying safeguards at a reprocessing plant in India and
additional efforts required as a result of EURATOM's final decision.

surveillance equipment. IAEA noted that the agency has taken steps, such
as developing a policy and an approval process, to ensure that costfree
experts are not being relied on for routine services.

  IAEA Has Increased Efforts to Help Countries Protect Their Nuclear Material
  and Facilities, but Reliance on Voluntary Contributions Poses a Challenge

Following September 11, 2001, IAEA increased its efforts to assist
countries in protecting their nuclear and radiological materials and
facilities. To support these activities, IAEA established a Nuclear
Security Fund to which countries can provide voluntary budget
contributions. However, IAEA's heavy reliance on these voluntary
contributions creates challenges in planning and implementing nuclear
security activities. Increasing demands on the agency to provide nuclear
security assistance could provide further challenges as well.
Additionally, the United States has raised concerns about IAEA's ability
to track the use of nuclear security funds and measure the results of its
activities in a systematic way. In response to these concerns, IAEA
developed a system to track the use of Nuclear Security Fund
contributions. However, the agency still does not systematically measure
the results of its nuclear security efforts.

    IAEA Has Increased Its Efforts to Help Countries Secure Their Nuclear
    Material and Facilities

In March 2002, IAEA's Board of Governors approved an action plan to
increase the agency's assistance to prevent, detect, and respond to acts
of terrorism against nuclear and radiological materials and facilities.
IAEA's nuclear security action plan consisted of eight areas encompassing
efforts undertaken by IAEA prior to September 11, 2001, as well as new
efforts developed in response to countries' concerns about the potential
for nuclear terrorism. These areas included enhancing the physical
protection of nuclear material and facilities, improving countries'
ability to secure other types of radioactive material, and ensuring that
measures are in place to detect and prohibit the illicit trafficking of
materials. In order to better manage the implementation of its action
plan, IAEA created an Office of Nuclear Security within a new Department
of Nuclear Safety and Security.

IAEA's nuclear security action plan has guided the agency's efforts to
help countries improve their security by, for example, developing
guidance, facilitating advisory missions, providing training, improving
response to illicit trafficking and emergencies, and coordinating security
assistance. Specifically, since September 11, 2001, IAEA has published a
variety of updated or newly drafted security guidelines and
recommendations. For example, IAEA developed guidance on securing
radioactive materials in transport and a handbook on combating illicit
trafficking. In addition, in

January 2004, IAEA published a revised Code of Conduct on the Safety and
Security of Radioactive Sources to guide countries in developing policies,
laws, and regulations on maintaining the safety and security of
radioactive sources. The revised code includes, among other things,
enhanced requirements for securing radioactive sources. As of June 2005,
73 countries had committed to implementing the code. Further, in September
2004, IAEA's Board of Governors and General Conference approved new
guidance on the import and export of radioactive sources, which is
designed to help countries ensure that high-risk radioactive sources are
supplied only to authorized end-users.

Furthermore, IAEA increased the types of advisory missions it offers
countries upon their request, and facilitated over 100 missions to 43
countries, including Argentina, Iran, Mexico, Nigeria, and Ukraine,
between 2001 and March 2005. To conduct these advisory missions, IAEA
organizes teams of international experts to assess and make
recommendations for improving countries' nuclear security measures, such
as the physical protection of their nuclear material and facilities, or
their regulatory infrastructures. Since 2001, IAEA has also introduced
advisory missions that go beyond the physical protection of material and
facilities to look at the security of the entire country-including border
controls-and assess countries' systems of accounting and control of
nuclear material.

In addition, IAEA provided nuclear security training for countries and
individual country representatives and conducted almost 80 training
courses for about 1,500 participants between 2001 and March 2005. IAEA's
training courses include instruction on general topics, such as the
fundamental principles and objectives of physical protection, as well as
more focused national training opportunities that cover countries'
programs and facility-specific needs, such as physical protection system
design and the use of radiation detection instruments. IAEA targets some
training on a regional basis to meet specific requirements, such as
combating illicit trafficking and promoting regional cooperation. IAEA
also offers training courses for nuclear operators and government and law
enforcement officials on topics such as nuclear security awareness,
combating illicit trafficking, and nuclear forensics.

IAEA also increased its efforts to assist countries in improving their
capabilities to respond to incidents of illicit trafficking in materials
and to nuclear and radiological emergencies. For example, IAEA encouraged
countries to contribute data to its Illicit Trafficking Database to help
identify trends in illicit trafficking through increased information
exchange

on incidents involving unauthorized acquisition, provision, possession,
use, transfer, or disposal of nuclear and other radioactive materials. As
a result of its outreach efforts, IAEA had increased the number of
countries participating in the database from 25 to 81, as of June 2005.
Furthermore, IAEA worked to improve countries' abilities to respond to
nuclear and radiological emergencies. In June 2004, IAEA's Board of
Governors approved efforts to assist countries to develop an international
communication system for information on nuclear and radiological
emergencies, provide international assistance for emergency response, and
establish a sustainable international response infrastructure.

Finally, IAEA worked to improve coordination with member states that
provide nuclear security assistance. For example, IAEA began to develop
country-specific integrated nuclear security support plans to prioritize
measures the agency identifies as necessary to assist countries to
strengthen their nuclear security. According to an August 2004 status
report on IAEA's nuclear security efforts, these plans will help the
agency to coordinate assistance provided by other countries-an important
part of IAEA's efforts to improve physical protection measures at
facilities and illicit trafficking detection capabilities at international
borders. As of December 2004, IAEA was developing integrated nuclear
security support plans for 16 countries.

    Heavy Reliance on Voluntary Contributions Has Created Challenges for IAEA's
    Nuclear Security Efforts

In 2002, IAEA established a Nuclear Security Fund to support its nuclear
security program, and countries had voluntarily contributed about $36.7
million through mid-May 2005. However, IAEA's heavy reliance on these
voluntary contributions for about 89 percent of its nuclear security
funding creates challenges for the agency in planning and implementing its
activities. For example, the conditions most donors place on the use of
their funds limit IAEA's ability to direct resources to meet program
needs. Given IAEA's reliance on voluntary contributions, its ability to
plan and implement nuclear security activities could be further challenged
by, for instance, changes in the scope of an international security
agreement that could increase countries' requests for assistance.

IAEA Established the Nuclear Security Fund to Support Its Efforts

To implement its nuclear security action plan, in 2002, IAEA created the
Nuclear Security Fund to which countries could provide voluntary
contributions for the agency's nuclear security activities. From 2002
through mid-May 2005, 26 countries, the European Union, and one
nongovernmental organization made voluntary contributions totaling about
$36.7 million.26 In addition, a number of countries have contributed to
IAEA's nuclear security efforts by providing services, equipment, and the
use of facilities.

The United States has made significant contributions to the Nuclear
Security Fund. From 2002 through 2004, as shown in table 2, the U.S.
Departments of State and Energy contributed approximately $21.6
million-almost 61 percent of all contributions-to the Nuclear Security
Fund. For example:

o  DOE provided $9.95 million for radioactive material security;

o 	the Department of State provided $2.1 million to support advisory
missions, training courses, and other efforts to improve the physical
protection of nuclear materials;

o 	the Department of State contributed around $2.25 million to support
illicit trafficking advisory missions, training courses, and other efforts
to detect malicious activities involving nuclear and radiological
materials;

o 	the Department of State provided $1.6 million to improve the
coordination and management of nuclear security information by, for
example, increasing the utility of IAEA's Illicit Trafficking Database;
and

o 	the Department of State also contributed $5.65 million for such efforts
as improving countries' systems of nuclear material accounting and
control, providing a cost-free expert, and establishing a reserve fund for
unanticipated expenses.

26Countries contributing to the Nuclear Security Fund included Australia,
Austria, Bulgaria, Canada, the Czech Republic, Finland, France, Germany,
Greece, Hungary, Iran, Ireland, Israel, Italy, Japan, the Republic of
Korea, the Netherlands, New Zealand, Norway, Romania, Slovenia, Spain,
Sweden, Ukraine, the United Kingdom, and the United States. The
nongovernmental organization was the Nuclear Threat Initiative.

Table 2: U.S. Nuclear Security Fund Contributions, 2002-2004

    Source of contribution         2002        2003        2004         Total 
     Department of State     $3,199,700 $4,200,300  $4,200,000    $11,600,000 
     Department of Energy     3,001,209  2,500,000   4,450,000      9,951,209 
            Total            $6,200,909 $6,700,300  $8,650,000   $21,551,209a 

Source: GAO presentation of IAEA data.

aThis total does not include interest on U.S. contributions to the Nuclear
Security Fund. Also, it does not include $1.7 million pledged to the fund
in 2003, but which IAEA did not receive before December 31, 2004.

The Department of State estimated that it would provide $4.2 million to
the Nuclear Security Fund in 2005, while DOE officials indicated that the
Department will not provide direct contributions to the fund in 2005.

Furthermore, in 2004, DOE and NRC provided an estimated $3.3 million of
other technical support for IAEA's nuclear security activities. For
example, DOE provided about $1.4 million for nuclear security experts to
participate in IAEA's advisory missions to improve the physical protection
of nuclear materials and facilities, and $1.8 million for training courses
for foreign nationals on the physical protection and accounting and
control of nuclear materials. In addition, NRC contributed $59,000 in
staff costs to assist IAEA with enhancing radioactive material security
and the physical protection of nuclear materials in transit. For 2005,
U.S. agencies estimated that they will provide $2.89 million in technical
support for IAEA's nuclear security activities.

IAEA's Heavy Reliance on IAEA depends on voluntary contributions for about
89 percent of its

Voluntary Funding Creates nuclear security funding, which creates
challenges for planning and

Challenges	implementing nuclear security activities because almost all
donors place conditions on how their Nuclear Security Fund contributions
are to be spent. In 2002 and 2003, respectively, only 2 and 5 percent of
the contributions to the fund were provided without conditions. For
example, a number of countries contribute to the fund specifically to help
secure nuclear and radioactive materials in Russia and other countries of
the former Soviet Union. IAEA does not have the flexibility to shift these
funds to support activities in other regions with nuclear security
concerns and for which limited resources are available, such as Southeast
Asia and Latin America. IAEA officials said that as a result, some
activity areas have received funding well in excess of levels proposed in
the 2002 nuclear security action plan, while other areas have remained
under-funded.

According to IAEA's August 2004 report on the status of its nuclear
security efforts, this may hamper the comprehensive approach necessary for
effective nuclear security.

Another challenge related to IAEA's heavy reliance on voluntary
contributions is its restricted ability to recruit and maintain sufficient
staff to meet growing obligations. While donors have increased funding for
nuclear security activities, IAEA has limited budgetary funds to pay for
staff to meet its increased obligations. Only about 11 percent of IAEA's
nuclear security resources, or $1.35 million, comes from its budget.
However, DOE officials told us that the agency's financial regulations
prohibit voluntary funds from being used to pay for permanent staff costs.
The officials said that while these voluntary funds could be used to pay
for cost-free experts, this increases IAEA's reliance on cost-free
experts, which are funded primarily by the United States. IAEA officials
acknowledged that the agency's inability to use voluntary funds to pay for
staff costs has been the largest administrative challenge to implementing
its nuclear security program. However, according to IAEA's August 2004
nuclear security status report, the agency's administrative procedures are
not designed for programs where the majority of funds come from voluntary
contributions.

Further, IAEA indicated that the agency has not received sufficient
funding to meet the needs of all of its nuclear security efforts. In April
2002, IAEA estimated that annual funding needs for its nuclear security
program would be about $32 million-$12 million to support advisory
missions and other program activities, and $20 million for security
equipment procurements and upgrades such as installing radiation detection
equipment at countries' borders. However, IAEA's Board of Governors only
approved voluntary funding for the advisory missions and other program
activities, not for equipment procurements and upgrades. As a result, IAEA
indicated that it has had to ask other countries for assistance in order
to provide equipment urgently needed to respond to security problems
identified through the agency's advisory missions. IAEA officials said
that coordinating assistance between countries has been one of the
challenges the agency has faced in improving states' nuclear security
because some countries have been unwilling to share information with IAEA
regarding the assistance they have received from, or given to, other
countries. However, according to DOE officials, the U.S. position is that
assistance to procure and upgrade security equipment should be provided on
a bilateral basis, not by IAEA. Further, they questioned whether IAEA,
through the development of

Increased Assistance Demands Could Further Challenge IAEA's Ability to
Plan and Implement Nuclear Security Activities

integrated nuclear security support plans and other initiatives, has
effectively coordinated this assistance.

Finally, according to IAEA's 2004 nuclear security report and Department
of State officials, unpredictable voluntary contributions by member states
restrict the agency's ability to plan nuclear security activities. For
example, IAEA data on Nuclear Security Fund pledges and receipts from 2002
through 2004 showed that 30 percent of the funds pledged to the agency
were not provided in the same year they were pledged.27 Furthermore, data
for 2002 and 2003 indicated that funds were often not provided until later
in the year. However, IAEA's financial regulations do not allow it to make
expenditures based on pledges and, thus, contributions must be received
before expenditures can be approved. One IAEA official said that this
restriction prevents the agency from implementing certain activities
according to its plan. The official told us that if nuclear security
funding were more predictable and received in a more timely fashion, IAEA
could hire staff sooner, and that activities such as conducting advisory
missions and providing border monitoring equipment could be better planned
and delivered. Further, participants at a December 2003 coordination
meeting of Nuclear Security Fund donors recognized that IAEA faces a
challenge in managing its nuclear security program without predictable
resource levels. In an effort to ensure a more systematic approach, IAEA
officials said that the agency develops multi-year activity plans as a
basis for requesting contributions to the Nuclear Security Fund. However,
the officials said that the timing of voluntary contributions still
presents a challenge to implementing the nuclear security program.

Future increases in demands for IAEA to provide assistance could further
challenge the agency's ability to plan and implement nuclear security
activities. For example, in July 2005, 88 countries and EURATOM adopted
amendments to the Convention on the Physical Protection of Nuclear
Material,28 which could increase requests for IAEA assistance to enhance
the security of countries' nuclear material and facilities. The existing
convention requires countries who are party to it to protect nuclear

27The United States was more timely with its contributions than other
Nuclear Security Fund donors, with almost 74 percent of U.S. contributions
arriving in the same year they were pledged, as opposed to about 63
percent of non-U.S. contributions.

28The IAEA Director General, the depositary of the convention, was
responsible for convening the group of experts that drafted the amendments
and for coordinating the conference for countries to consider the
amendments.

material used for peaceful purposes while in international transport, and
to criminalize certain acts involving nuclear material. When in force, the
adopted amendments will, among other things, expand the scope of the
convention to include requirements for securing nuclear materials in
peaceful domestic use, storage, and transport and for protecting domestic
nuclear facilities against acts of sabotage. IAEA officials stated that
the agency may experience a significant increase in requests for security
assistance, particularly for advisory missions to assess the vulnerability
of countries' material and facilities as a result of the amendments to the
convention. Also, according to a Department of State official, IAEA will
be responsible for providing leadership, training, and technical
assistance, such as guidance in establishing legislative and regulatory
infrastructures, to help countries to comply with their obligations under
the amended convention. However, IAEA officials questioned whether the
agency is planning sufficiently for the potential increase in its
activities. Moreover, the officials stated that Nuclear Security Fund
resources would be inadequate to meet countries' additional requests for
advisory missions and for associated preparatory and follow-up actions.

In addition, IAEA could experience an increase in demand for its nuclear
security assistance as a result of agency plans to implement a more
comprehensive nuclear security program. According to IAEA's August 2004
nuclear security status report, the agency is developing a new plan of
activities to be presented to the Board of Governors for approval in 2005.
A primary objective of the plan would be the worldwide application of the
agency's services and assistance to comprehensively improve countries'
nuclear security. However, IAEA's reliance on voluntary contributions to
fund its nuclear security program could create challenges in implementing
this plan. For example, countries' conditions on the use of their funds
could make it difficult for IAEA to achieve worldwide application of its
comprehensive nuclear security approach. Further, IAEA's Deputy Director
General of the Department of Nuclear Safety and Security said that for
IAEA to meet its nuclear security goals, higher and more predictable
resource levels will be required in the future.

IAEA Does Not In addition to the challenges resulting from the agency's
reliance on Systematically Measure the voluntary contributions, the United
States has raised concerns about Results of Its Nuclear IAEA's ability to
track the use of nuclear security funds and measure results

in a systematic way. For example, according to Department of StateSecurity
Efforts officials, as a result of concerns over the planning and
coordination of IAEA's nuclear security efforts, the United States
requested that the Office

of Nuclear Security provide more results-oriented reporting on a
systematic basis. In response, the agency created an information
management system to track projects financed by the Nuclear Security Fund.
According to IAEA officials, this system became operational at the
beginning of 2004 and allows IAEA to report to donors on the use of their
contributions. A Department of State official said that the United States
received its first report in March 2005, and that this report contained
adequate information on the use of U.S. contributions to the fund.

However, IAEA still does not systematically measure the results of its
nuclear security activities. For example, while the agency is required to
report periodically to the Board of Governors and the General Conference
on its progress in implementing nuclear security activities, these reports
do not indicate the extent to which the agency's efforts have helped to
improve the security of nuclear material and facilities. For example,
IAEA's 2004 nuclear security status report provided information on the
countries for which it conducted physical protection advisory missions
since July 2003 but did not report on the extent to which these missions
actually improved security at nuclear facilities. Similarly, IAEA reported
on its efforts to train member state representatives involved in combating
illicit trafficking in materials. However, IAEA's report did not include
an assessment of the extent to which the detection capabilities of
personnel who attended these training sessions had increased.

Furthermore, while IAEA's 2004-2005 budget identified program objectives,
outcomes, and performance indicators for the agency's nuclear security
activities, the 2004 nuclear security status report did not always use
these performance indicators to measure the agency's results. For example,
two performance indicators identified in IAEA's 2004-2005 budget for
meeting outcomes related to improving nuclear security and the capability
of countries to detect and respond to malicious acts were (1) the number
of people trained in agency-sponsored training courses and (2) the number
of countries implementing agency-developed nuclear security guidelines and
recommendations. However, the 2004 nuclear security report did not provide
information on the numbers of country representatives trained, or
countries implementing agency-developed guidelines and recommendations.
IAEA officials said that the agency will soon begin work to assess program
results based on the performance indicators identified in the budget, and
that information on the number of country representatives trained will be
included in a report to the Board of Governors in September 2005.

IAEA officials said that it is difficult for the agency to link nuclear
security efforts, such as recommendations stemming from advisory missions,
to results, such as whether recommendations were implemented. Other IAEA
officials attributed this difficulty to the agency's limited advisory
role, noting that states are not obligated to follow its guidelines or
implement its recommendations. Moreover, IAEA officials said that while
follow-up advisory missions can help to identify whether previous
recommendations were implemented, IAEA has focused on generating new
requests for advisory missions, not following up on past activities.

A DOE official who is responsible for developing and tracking nuclear
security performance measures stated that it is possible to measure the
performance of security activities even where explicit authority to
require action does not exist. DOE and other U.S. agencies have
implemented programs to improve the security of nuclear material both in
the United States and in other countries. For example, DOE's National
Nuclear Security Administration directs efforts to secure international
borders against illicit trafficking, assist countries in improving the
physical protection of their nuclear material and facilities, and enhance
the security of radioactive material. The DOE official said that a first
step to measure performance would be to develop data on output measures
that IAEA can influence and that affect the achievement of outcomes. Such
output measures could include the number of facilities where advisory
missions are conducted, the number of people trained, or the amount of
equipment provided. Subsequently, outcome-oriented measures could be
created, such as the percentage of facilities IAEA assessed as having
adequate security arrangements based on international standards.

Conclusions	IAEA is being called upon by its member states to assume a
greater role in reducing the risks of nuclear proliferation. However, as
its responsibilities continue to expand, IAEA faces a broad array of
challenges that hamper its ability to fully implement strengthened
safeguards measures and nuclear security activities. In order to maximize
the impact and effectiveness of strengthened safeguards, most experts we
talked to believe that universal compliance with and adherence to the
Additional Protocol is needed. Although the United States is in the
process of bringing the Protocol into force, the fact that it has not yet
done so may provide other countries with an excuse not to do so as well.
Progress towards increasing the number of countries that have brought the
Additional Protocol into force should increase the political pressure on
the remaining countries to do so and could make it more difficult to hide
proliferation activities.

Even with the Additional Protocol in force, IAEA's ability to verify
compliance with safeguards is limited in 76 countries that have small
quantities of nuclear material. The small quantities protocols that IAEA's
Board of Governors approves for these countries may increase the risk that
nuclear proliferation activities could go undetected. Moreover, IAEA's
human capital practices reduce the agency's effectiveness because, in some
cases, they are rigidly applied regardless of the agency's overall needs.
In light of the looming human capital crisis resulting from the upcoming
turnover of senior safeguards staff and a shrinking pool of nuclear
experts, ensuring that the agency hires, trains, and retains the most
talented staff is critical to meet growing strengthened safeguards
requirements.

Further, IAEA's system for funding its safeguards and nuclear security
programs faces a number of challenges. Although the agency's recent
emergence from a zero real growth budget for its safeguards system is a
positive step, it may not be adequate to meet future needs. To make a
convincing case to member states of its future resource requirements and
ensure that its safeguards budget keeps pace with its changing workload,
IAEA will need reliable cost estimates that are linked to resource needs
for all its strengthened safeguards activities and a process to
systematically evaluate these costs and resources over the long term. In
addition, even with IAEA's recent safeguards budget increase, the agency
will continue to rely heavily on voluntary contributions, particularly
from the United States. While U.S. funding is essential for the program's
continued viability, supporting safeguards is a shared responsibility, and
the financial burden should be distributed more equitably among as many
IAEA member states as possible. At the same time, we are concerned that
the agency's reliance on countries' yearly voluntary contributions for the
nuclear security program does not provide enough flexibility to
effectively plan and implement nuclear security activities. While we
recognize that this program is still evolving, member states may need to
consider a different approach to funding these efforts so that the agency
can plan its activities in a more systematic manner and meet its highest
priority needs. Finally, we are concerned that in some instances IAEA may
not be using safeguards resources in the most efficient manner given the
agency's limited funds and growing responsibilities.

Another major challenge facing IAEA is its limited ability to assess the
effectiveness of its strengthened safeguards system and nuclear security
activities. The agency does not have systems in place to measure the
impact of its strengthened safeguards or nuclear security activities. For
example, IAEA reports on the number of inspections performed and the

countries where nuclear security advisory missions are conducted. While
these measures are useful in reporting on IAEA's efforts, they do not
assess the impact and effectiveness of its safeguards and nuclear security
activities. As a result, the agency cannot provide member states assurance
that its activities are detecting clandestine nuclear weapons programs or
helping to secure nuclear and radioactive materials against sabotage and
terrorist threats.

  Recommendations for Executive Action

Because safeguards are a cornerstone of U.S. nonproliferation efforts, it
is important that strengthened safeguards measures be applied in as many
countries as possible. Therefore, we recommend that the Secretary of
State, working with IAEA and its member states through the agency's Board
of Governors, consider eliminating, or at a minimum, reducing the number
of agreements that limit IAEA's authority to implement strengthened
safeguards activities in countries with small quantities of nuclear
material.

To help ensure that IAEA's safeguards and nuclear security programs are
effective, the agency needs to systematically evaluate the results of its
efforts. Therefore, we also recommend that the Secretary of State, working
with IAEA and its member states through the agency's Board of Governors,
consider developing clear and meaningful measures to better evaluate the
effectiveness of IAEA's strengthened safeguards program and nuclear
security activities.

Furthermore, to improve IAEA's personnel practices and its ability to
determine resource requirements over the long term, we also recommend that
the Secretary of State, working with IAEA and its member states through
the agency's Board of Governors, consider:

o 	rectifying human capital practices that negatively impact IAEA's
ability to recruit and retain the critical staff needed to implement
strengthened safeguards and make changes as appropriate;

o 	developing a systematic process that forecasts safeguards budgetary
requirements for the long term-beyond the current 2-year cycle;

o 	increasing efforts to encourage more member states to provide voluntary
contributions to support IAEA's safeguards activities; and

o 	determining whether the nuclear security program receives adequate
regular budget funds, and ensure that voluntary contributions are provided
with enough flexibility to plan and accomplish priority program
objectives.

Finally, to maximize the benefits for safeguards-related activities, we
recommend that the Secretary of State, in consultation with the managers
of the U.S. safeguards technical support program, work with IAEA to
consider ways to ensure that safeguards resources are allocated and spent
in the most efficient manner. In particular, these efforts should focus
on, among other things, encouraging IAEA to use the most cost effective
means of travel, whenever possible.

  Agency Comments and Our Evaluation

We provided the Department of State and IAEA with draft copies of this
report for their review and comment. IAEA provided technical comments,
which we incorporated as appropriate. The Department of State provided
written comments, which are presented as appendix III. State also provided
technical comments, which we incorporated in the report. The Department of
State generally agreed with our findings, conclusions, and recommendations
and noted that our recommendations offered reasonable ways that the
administration can continue to work with IAEA to improve its
effectiveness. The department also noted that the draft report fairly
recognized the significant progress IAEA has made, with support from the
United States and other member states, in strengthening the safeguards
system and in supporting international efforts to improve the physical
protection and security of nuclear materials.

In its written comments, the Department of State noted that countries with
small quantities of nuclear material and countries without comprehensive
safeguards agreements have very limited nuclear activities and therefore
they are unlikely to compromise the effectiveness of the safeguards
system. In addition, while agreeing that IAEA has a limited ability to
measure the effectiveness of its strengthened safeguards activities, State
indicated that the problem cannot be fully solved because of the
difficulty in detecting undeclared activities. State also noted that our
conclusion that IAEA cannot provide member states assurance that its
activities are detecting undeclared nuclear weapons programs or helping
secure nuclear and radioactive material is not fully consistent with the
report's contents, which depict IAEA's successes in uncovering undeclared
nuclear activities and the extent of its work in advising states on
nuclear security.

In our view, the report provides an accurate and reasonable view of the
challenges facing IAEA's safeguards program, including the challenges
posed by countries that have small quantities of nuclear material and are
subject to limited safeguards measures as well as countries that are
outside of the safeguards system entirely. A goal of the safeguards
program is to ensure that all countries comply with and adhere to their
safeguards obligations. By not applying the full scope of safeguards
measures to over 100 countries IAEA's ability to detect secret nuclear
activities is significantly limited. In fact, in response to IAEA's
concerns regarding countries with small quantities of nuclear material,
the agency's Board of Governors took the first steps to strengthen
safeguards measures in countries with small quantities of nuclear material
in September 2005. IAEA's Director General noted that these recent actions
address some important limitations in the safeguards system.

We concur with the Department of State's belief that IAEA's limited
ability to measure the impact of strengthened safeguards cannot be fully
solved. In our report, we recognize the difficulty in developing
performance measures for IAEA's strengthened safeguards activities, but we
believe that it is important that IAEA continue to develop and refine such
measures. Assessing the effectiveness of strengthened safeguards in
detecting clandestine nuclear weapons programs is an essential element in
evaluating the agency's overall performance.

Finally, the Department of State commented that our conclusion-that IAEA
cannot provide assurance that it is detecting clandestine nuclear weapons
programs or helping to secure nuclear and radioactive materials-is not
fully consistent with the body of the report. We noted in the report that
IAEA has achieved success in disclosing clandestine nuclear activities in
certain countries, particularly in Iran, South Korea, and Egypt. We also
noted that IAEA has increased its efforts to help countries secure their
nuclear material. However, since IAEA has not developed a systematic
approach to measure the impact and effectiveness of its strengthened
safeguards and nuclear security programs, the agency cannot track its
progress in improving its ability to detect clandestine nuclear programs
or ensuring that the nuclear security of member states' nuclear material
has improved. A systematic approach to measuring performance would add a
greater degree of transparency to IAEA's safeguards and nuclear security
programs, and would also provide member states' with a clearer
understanding of how the agency reaches conclusions about countries'
compliance with their safeguards obligations.

As agreed with your offices, unless you publicly release the contents of
this report earlier, we plan no further distribution until 30 days from
the report date. We will then send copies of this report to the Secretary
of Energy; the Administrator, National Nuclear Security Administration;
the Secretary of State; the Secretary of Defense; the Chairman, Nuclear
Regulatory Commission; the Director, Office of Management and Budget; and
interested congressional committees. We are also providing IAEA's Deputy
Directors General for Safeguards and Nuclear Safety and Security with
copies of this report. We will also make copies available to others upon
request. In addition, this report will be available at no charge on the
GAO Web site at http://www.gao.gov.

If you or your staff have any questions concerning this report, I can be
reached at 202-512-3841 or [email protected]. Contact points for our Offices
of Congressional Relations and Public Affairs may be found on the last
page of this report. GAO staff who made major contributions to this report
are listed in appendix IV.

Gene Aloise Director, Natural Resources

and Environment

Appendix I

Scope and Methodology

To identify the steps IAEA has taken to strengthen its safeguards system
and assess the challenges IAEA faces in implementing strengthened
safeguards, we obtained and analyzed documentation on IAEA's strengthened
safeguards activities, including reports to IAEA's Board of Governors,
such as the agency's annual reports on safeguards implementation,
strategic planning documents, and internal briefings. In December 2004 and
March 2005 we visited IAEA Headquarters in Vienna, Austria, to meet with
IAEA officials from the Department of Safeguards, including the Deputy
Director General and the directors and staff responsible for managing
inspection activities, collecting and analyzing satellite imagery and open
source information, and purchasing safeguards equipment, and from the
Office of External Relations. We observed a demonstration of remote
monitoring and other surveillance equipment at IAEA Headquarters, and we
toured IAEA's Seibersdorf Analytical and Clean Laboratories, where
environmental samples are analyzed. Further, we obtained the views of
officials from the U.S. Mission to the U.N. System Organizations in Vienna
on the progress IAEA had made in implementing strengthened safeguards
measures since we last reported on safeguards in 1998. While in Vienna, we
also conducted structured interviews with a nonprobability sample1 of
representatives from IAEA member states in March 2005 to obtain their
views on IAEA's strengthened safeguards system and nuclear security
activities.

We developed the structured interview guide for interviewing
representatives from IAEA member states by identifying the issues related
to the effectiveness and progress of IAEA's safeguards and nuclear
security programs and drafting questions to address these issues. Because
the practical difficulties of developing and administering a structured
interview guide may introduce errors-resulting from how a particular
question is interpreted, for example, or from differences in the sources
of information available to respondents in answering a question-we
included steps in the development and administration of the structured
interview guide for the purpose of minimizing such errors. After initial
drafting, internal GAO review, and pretesting and modification of the
structured interview guide, we further modified the structured interview
protocol on the basis of pretesting and comments from two Department of
State officials with extensive experience with IAEA's safeguards and
nuclear security

1Results from nonprobability samples cannot be used to make inferences
about a population, because in a nonprobability sample some elements of
the population being studied have no chance or an unknown chance of being
selected as part of the sample.

Appendix I Scope and Methodology

activities. We finalized the structured interview guide after conducting
pretests with a member of the U.S. Mission and an IAEA representative from
the Czech Republic.

We identified a nonprobability sample of 25 IAEA member states to respond
to our structured interview guide, designed to ensure the inclusion of a
range of views across different types of member states. Our sample
included states that belong to IAEA's 35-member Board of Governors, which
provides overall policy direction and oversight to IAEA; both nuclear and
non-nuclear weapons states; states that differ with respect to bringing
into force new strengthened safeguards measures; states that do not belong
to the Board of Governors, but offer valuable insights into the challenges
IAEA faces in detecting undeclared activities and strengthening its
safeguards program; and states with special safeguards agreements with
IAEA. Of the 25 IAEA member states selected for interviews, we completed
interviews with representatives from 9 member states. We completed
inperson interviews with Canada, China, Germany, Hungary, Israel, Russia,
the United Kingdom, and the United States. We obtained written responses
to the structured interview guide from Japan. We were unable to complete
interviews with the other 16 member states because representatives from
those countries were unwilling to respond to our questions in the absence
of official government approval of their responses. However, the nine
responses we received reflect a broad range of views of member state
representatives from the selection categories listed above, including
states that differ with respect to bringing into force new strengthened
safeguards measures and states with special safeguards agreement with
IAEA.

In addition, to assess IAEA's progress in strengthening safeguards and the
challenges it faces, we met with and gathered data from U.S. officials
from the Department of State's Office of Multilateral Nuclear Affairs, the
Department of Energy's Office of International Safeguards, the Department
of Defense's Air Force Technical Applications Center, the Department of
Commerce in Washington, D.C.; the Nuclear Regulatory Commission in
Rockville, Maryland; Brookhaven National Laboratory in New York; and
Sandia and Los Alamos National Laboratories in New Mexico. We also
obtained independent assessments and reports on IAEA safeguards from the
Departments of State and Energy. Further, we met with experts
knowledgeable about safeguards and nonproliferation issues, including from
the Monterey Institute of International Studies and the Massachusetts
Institute of Technology. We also interviewed former IAEA inspectors,
costfree experts, and the head of IAEA's unattended remote monitoring
systems unit to discuss the agency's personnel policies. Lastly, we met
with

Appendix I Scope and Methodology

representatives from Aquila Technologies, which provides IAEA with the
majority of its surveillance equipment, and toured its production
facility.

To identify the extent of IAEA's reliance on the United States to finance
safeguards activities, we met with officials from IAEA's Departments of
Management and Safeguards, including the Director of the Division for
Budget and Finance and other staff involved in safeguards budgeting, and
the Departments of State, Energy, and Defense and the Nuclear Regulatory
Commission, and Brookhaven, Los Alamos, and Sandia National Laboratories.
We gathered financial data from these sources on U.S. and other member
states' assessed, voluntary, and technical support contributions to IAEA's
safeguards program from 1998 through 2004. We chose 1998 as the starting
year for our analysis to continue the data presented in our 1998 report on
U.S. contributions to IAEA's safeguards program. While 2004 was the last
year for which complete data on IAEA's safeguards budget and U.S.
contributions were available, we present some 2005 estimates where
possible. Based on our discussions with U.S. and IAEA officials, we
defined voluntary contributions as cash contributions to IAEA, while
technical support contributions are defined as funding used to assist
IAEA's efforts but not directly provided to IAEA. Further, we analyzed
documentation, such as reports from the Office of Internal Oversight
Services, an independent group of safeguards experts, and IAEA's Board of
Governors, as well as budget and strategic planning documents. We also
held discussions with IAEA and U.S. officials to determine the extent to
which IAEA evaluates long-term resource requirements.

In our analysis of assessed, voluntary, and technical support
contributions to IAEA's safeguards budget we used (1) IAEA data on its
assessed safeguards budget; (2) IAEA data on U.S. payments towards its
safeguards assessment; (3) IAEA data on voluntary contributions from
countries other than the United States; (4) Department of State data on
U.S. voluntary contributions to IAEA's safeguards program; and (5) data
from the Departments of State, Energy, and Defense and the Nuclear
Regulatory Commission to estimate U.S. technical support to IAEA's
safeguards program. Since a portion of member states' assessed
contributions to IAEA's budget is made in euros (prior to 2002 non-dollar
contributions were made in Austrian schillings), we used exchange rates
based on the International Monetary Fund's International Financial
Statistics to show the dollar value of the non-dollar portion of IAEA's
assessed safeguards budget and U.S. contributions. We calculated the
non-dollar portion of IAEA's assessed safeguards budget using an average
annual exchange rate.

Appendix I Scope and Methodology

We calculated the non-dollar portion of U.S. payments towards its
safeguards assessment using an average monthly exchange rate for the month
in which the payments were made to IAEA.2 Also, we used the average
monthly exchange rates from January through July 2005 to estimate the
dollar value of the non-dollar portions of the 2005 IAEA safeguards budget
and U.S. safeguards assessment. Additionally, IAEA data on U.S. payments
did not indicate the portion applicable to safeguards versus other IAEA
programs. To identify the safeguards portion of U.S. nondollar payments,
we used the percentage of the total U.S. non-dollar assessment for each
year that IAEA data indicated was for safeguards. Finally, in some cases
it was not possible to obtain a complete breakdown of U.S. support that
was provided as voluntary contributions versus technical support. In such
instances, we characterized U.S. support as voluntary contributions for
purposes of consistency.

To describe how IAEA is helping its member states better secure their
nuclear material and facilities from nuclear terrorism and identify
impediments to implementing the program, we collected and analyzed
documentation, including IAEA's yearly reports to its Board of Governors
on its nuclear security program. We also met with officials from IAEA's
Offices of Nuclear Security and Legal Affairs, and the Departments of
State and Energy, the Nuclear Regulatory Commission, and Sandia National
Laboratory. Moreover, we also toured IAEA's Nuclear Security Equipment
Laboratory at IAEA Headquarters and observed a demonstration of hand held
radiation detection equipment. We obtained IAEA, Department of State, and
Department of Energy financial data on contributions to the Nuclear
Security Fund in order to describe the extent to which IAEA relies on U.S.
support for its nuclear security program, and to analyze the timing of
contributions to the fund.3 Further, we gathered data from the Department
of Energy and the Nuclear Regulatory Commission to estimate U.S. technical
support to IAEA's nuclear security program. Similar to our

2U.S. assessed payments to IAEA's budget are not always made in the same
year for which they are assessed. Our analysis used exchange rates at the
actual time of payment to identify the dollar value of these
contributions. However, we present U.S. contributions according to the
year for which they were assessed, not the year in which they were
actually paid. Additionally, in some cases, previous years' surpluses are
credited to member states' assessed contribution balances. We calculated
the value of the non-dollar portion of these credits using an average of
the September and October exchange rates because an IAEA official
indicated that cash surpluses are made available to member states to
credit towards their budget assessment during these months.

3We did not include interest paid on Nuclear Security Fund contributions
in our analysis.

Appendix I Scope and Methodology

analysis of contributions to IAEA's safeguards program, we defined
technical support as funding used to assist IAEA's efforts but not
directly provided to IAEA.

To assess the reliability of all these data we received-the safeguards and
nuclear security budget and contribution data-we met with IAEA and U.S.
officials to discuss these data in detail, and we compared data from
different sources to identify any discrepancies. We also obtained and
reviewed responses from key officials with IAEA and each of the U.S.
agencies to a series of data reliability questions that addressed such
areas as data entry, data access, quality control procedures, and data
accuracy and completeness. Follow-up questions were added as necessary. In
addition, we obtained written responses from the Department of Safeguards
and U.S. officials to clarify discrepancies in the data we received. Based
on this work, we determined that the data were sufficiently reliable for
the purposes of this report.

We conducted our review from October 2004 through August 2005 in
accordance with generally accepted government auditing standards.

Appendix II

Countries' Safeguards Agreements with IAEA That Are In Force, as of July 2005

Comprehensive Small quantities State safeguards agreement Additional
protocol protocol Integrated safeguards

                           Non-nuclear weapons states

Afghanistan X X X

Albania X

Algeria X

Andorra

Angola

Antigua and Barbuda X X

Argentina X

Armenia X X

Australia X X X

Austria X X

Azerbaijan X X X

Bahamas X X

Bahrain

Bangladesh X X

Barbados X X

Belarus X
Belgium X X
Belize X X
Benin
Bhutan X X
Bolivia X X
Bosnia and Herzegovina X
Botswana
Brazil X
Brunei Darussalam X X
Bulgaria X X X
Burkina Faso X X X
Burundi
Cambodia X X
Cameroon X X
Canada X X
Cape Verde
Central African Republic

                                  Appendix II
                     Countries' Safeguards Agreements with
                    IAEA That Are In Force, as of July 2005

                         (Continued From Previous Page)

Comprehensive Small quantities State safeguards agreement Additional
protocol protocol Integrated safeguards

Chad

Chile X X

Colombia X

Comoros

                             Congo, Republic of the

Cost Rica X X

Cote d'Ivoire X

Croatia X X X

Cuba XX

Cyprus X XX

Czech Republic X X

Democratic People's X
Republic of Koreaa

Democratic Republic of X X
the Congo

Denmark X X

Djibouti

Dominica X X

Dominican Republic X X
Ecuador X X X
Egypt X
El Salvador X X X
Equatorial Guinea
Eritrea
Estonia X X
Ethiopia X X
FijiX X
Finland X X
Gabon
Gambia X X
Georgia X X
Germany X X
Ghana X X
Greece X X
Grenada X X
Guatemala X X
Guinea

                                  Appendix II
                     Countries' Safeguards Agreements with
                    IAEA That Are In Force, as of July 2005

                         (Continued From Previous Page)

Comprehensive Small quantities State safeguards agreement Additional
protocol protocol Integrated safeguards

Guinea-Bissau

Guyana X X

Haiti

Holy See X X X

Honduras X X

Hungary X X X

Iceland X X X

Indonesia X X X

Iranb X

Iraq X

Ireland X X

Italy X X

Jamaica X X

Japan XX X

Jordan X XX

Kazakhstan X

Kenya
Kiribati X X
Korea, Republic of X X
Kuwait X XX
Kyrgyzstan X X
LaosX X
Latvia X X
Lebanon X X
Lesotho X X
Liberia
Libyac X
Liechtenstein X
Lithuania X X
Luxembourg X X
Madagascar X X X
Malawi X X
Malaysia X
Maldives X X
Mali X XX
Malta X XX

                                  Appendix II
                     Countries' Safeguards Agreements with
                    IAEA That Are In Force, as of July 2005

                         (Continued From Previous Page)

Comprehensive Small quantities State safeguards agreement Additional
protocol protocol Integrated safeguards

Marshall Islands X X

Mauritania

Mauritius X X

Mexico X

Micronesia

Monaco X XX

Mongolia X X X

Morocco X X

Mozambique

Myanmar X X

Namibia X X

Nauru X X

Nepal X X

Netherlands X X

New Zealand X X X

Nicaragua X X X

Niger

Nigeria X

Norway XX X

Oman

Palau X X

Panama X XX

Papua New Guinea X X

Paraguay X X X

Peru XX X

Philippines X

Poland X X

Portugal X X

Qatar

Republic of Molodova

Romania X X

Rwanda

St. Kitts and Nevis X X

St. Lucia X X

St. Vincent and the X X
Grenadines

Samoa X X

                                  Appendix II
                     Countries' Safeguards Agreements with
                    IAEA That Are In Force, as of July 2005

                         (Continued From Previous Page)

Comprehensive Small quantities State safeguards agreement Additional
protocol protocol Integrated safeguards

San Marino X X

                             Sao Tome and Principe

Saudi Arabia

Senegal X X

Serbia and Montenegro X

Seychelles X X X

Sierra Leone

Singapore X X

Slovakia X

Slovenia X X

Solomon Islands X X

Somalia

South Africa X X

Spain X X

Sri Lanka X

Sudan X X

Suriname X X

Swaziland X X

Sweden X X

Switzerland X X

Syria X

Tajikistan X X X

Thailand X

The Former Yugoslav X X
Republic of Macedonia

Timor-Leste

Togo

Tonga X X

Trinidad and Tobago X X

Tunisia X

Turkey X X

Turkmenistan

Tuvalu X X

Uganda

Ukraine X

United Arab Emirates X X

                                  Appendix II
                     Countries' Safeguards Agreements with
                    IAEA That Are In Force, as of July 2005

                         (Continued From Previous Page)

Comprehensive Small quantities State safeguards agreement Additional
protocol protocol Integrated safeguards

United Republic of X X X
Tanzania

Uruguay X X

Uzbekistan X X X

Vanuatu

Venezuela X

Vietnam X

Yemen X X

Zambia X X

Zimbabwe X X

Nuclear weapons states with voluntary safeguards agreements in force

China X X

France X X

Russia Federation X

United Kingdom X X

United States X

                   States with special safeguards agreements

India Israel Pakistan

Source: GAO analysis of IAEA data.

aAlthough North Korea concluded a comprehensive safeguards agreement with
IAEA in 1992, it announced its withdrawal from the NPT in January 2003.

bAlthough Iran has not ratified the Additional Protocol, it is acting as
if the Additional Protocol was in force.

cAlthough Libya has not ratified the Additional Protocol, it is acting as
if the Additional Protocol was in force.

                                  Appendix III

                     Comments from the Department of State

Appendix III
Comments from the Department of State

Appendix III
Comments from the Department of State

Appendix III
Comments from the Department of State

Appendix III
Comments from the Department of State

Appendix III
Comments from the Department of State

Appendix IV

                     GAO Contact and Staff Acknowledgments

                     GAO Contact Gene Aloise (202) 512-3841

Staff 	In addition to the contact named above, Virginia Chanley; Leland
Cogliani; Nancy Crothers; Glen Levis; Christopher Murray; Judy Pagano;
Keith

Acknowledgments	Rhodes (GAO's Chief Technologist); and F. James Shafer,
Jr., made key contributions to this report.

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