Financial Management

In June 2000, the House Committee on Science identified a significant discrepancy between an amount reported in the National Aeronautic and Space Administration's (NASA) audited financial statements for fiscal year 1999 and its submission in the President's Budget for fiscal year 2001. NASA's 1999 financial statement was misstated by a reported $644 million. The misstatement was in the "Recoveries of Prior Year Obligations" line of the statement. NASA had relied on an ad hoc process that included a data call from the reporting units' (nine centers and headquarters) separate systems and a compilation of reported amounts using a spreadsheet. In addition, when compiling these data, NASA headquarters mistakenly added amounts that were not relevant to the recoveries line. Headquarters officials said that the error resulted from their misinterpretation of the Office of Management and Budget (OMB) guidance on what to include in the recoveries line. NASA is now acquiring and implementing a single, commercial off-the-shelf core accounting system that it believes will solve the problem. In its audit of NASA's financial statements for fiscal year 1999, Arthur Andersen did not detect the error in NASA's Statement of Budgetary Resources (SBR). Evidence in Arthur Andersen's working papers was not adequate to support unqualified opinions on NASA's SBR and Statement of Financing in accordance with generally accepted government auditing standards (GAGAS). Arthur Andersen's working papers did not adequately document the evaluation of the internal controls related to the two budgetary statements or the independent validation of key amounts in the statements for fiscal year 1999. The NASA Inspector General (IG) did a quality control review of the audit by Arthur Andersen using a detailed checklist based on GAGAS. According to the checklist, the objectives of the NASA IG quality control review were to (1) ensure that the independent public accountant conducted the audit in accordance with applicable auditing standards and OMB bulletin requirements, (2) identify any follow-up work that needs to be done by the independent public accountant, and (3) identify issues that may require management attention.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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