Business Modernization
NASA's Integrated Financial Management Program Does Not Fully Address Agency's External Reporting Issues Gao ID: GAO-04-151 November 21, 2003In April 2000, the National Aeronautics and Space Administration (NASA) began its Integrated Financial Management program (IFMP), its third attempt at modernizing its financial management processes and systems. In April 2003, GAO reported that NASA's acquisition strategy has increased the risk that the agency will implement a system that will cost more and do less than planned. This report is one of a series of reviews of NASA's acquisition and implementation of IFMP, and focuses on the core financial module's ability to provide the information necessary for external financial reporting.
The core financial module of IFMP provides NASA its first agencywide accounting system--a significant improvement over the 10 disparate systems previously used. However, to meet IFMP's aggressive implementation schedule, NASA deferred testing and implementation of many key requirements of the core financial module. Consequently, when NASA announced, in June 2003, that this module was fully operational at each of its 10 centers, about two-thirds of the financial events or transaction types needed to carry out day-to-day operations and produce external financial reports had not been implemented in the module. NASA officials acknowledged that, as part of their implementation strategy, they had not yet converted the module to support full-cost accounting. In addition, we found that NASA also deferred implementation of other key core financial module capabilities. Because NASA did not use disciplined processes for defining, managing, and testing key system requirements, or substantially reengineer its business processes prior to implementation, the core financial module, as implemented in June 2003, does not address several long-standing external reporting issues and has created some new problems. Long-standing external financial reporting issues have not been addressed. NASA has not used its implementation of the core financial module as an opportunity to drive needed changes in its management practices and business processes. Therefore, the system does little to address NASA's ability to properly account for $37 billion of reported property or certain aspects of the agency's $15 billion annual budget. New financial reporting problems have emerged. NASA went forward with its aggressive implementation plans even though agency managers knew of problems with the module's ability to properly process and record certain transactions. As a result, the module does not appropriately capture critical information on the cost of NASA's operations, such as certain accrued costs, accounts payable, and obligation transactions. In April 2003, GAO reported that the core financial module did not address key internal management information requirements. Now, GAO has found that the module cannot reliably provide key financial data needed for external financial reporting. Although NASA intends to address many of these issues, its implementation approach raises concerns over its ability to do so. These deferred external reporting capabilities, combined with the findings from our April 2003 report, indicate that NASA's June 2003 core financial module and related systems do not substantially comply with the requirements of Federal Financial Management Improvement Act (FFMIA). FFMIA addresses the need for agencies' financial systems to provide value to those who use financial data. NASA must address these issues if the core financial module and IFMP are to achieve the objective of providing reliable, timely financial information for both internal management decision-making and external reporting purposes.
RecommendationsOur 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.
Director: Team: Phone:GAO-04-151, Business Modernization: NASA's Integrated Financial Management Program Does Not Fully Address Agency's External Reporting Issues
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Report to the Committee on Commerce, Science, and Transportation,
United States Senate, and the Committee on Science, House of
Representatives:
November 2003:
BUSINESS MODERNIZATION:
NASA's Integrated Financial Management Program Does Not Fully Address
Agency's External Reporting Issues:
GAO-04-151:
GAO Highlights:
Highlights of GAO-04-151, a report to the Committee on Commerce,
Science, and Transportation, U.S. Senate, and the Committee on
Science, House of Representatives
Why GAO Did This Study:
In April 2000, the National Aeronautics and Space Administration
(NASA) began its Integrated Financial Management program (IFMP), its
third attempt at modernizing its financial management processes and
systems. In April 2003, GAO reported that NASA‘s acquisition strategy
has increased the risk that the agency will implement a system that
will cost more and do less than planned. This report is one of a
series of reviews of NASA‘s acquisition and implementation of IFMP,
and focuses on the core financial module‘s ability to provide the
information necessary for external financial reporting.
What GAO Found:
The core financial module of IFMP provides NASA its first agencywide
accounting system”a significant improvement over the 10 disparate
systems previously used. However, to meet IFMP‘s aggressive
implementation schedule, NASA deferred testing and implementation of
many key requirements of the core financial module. Consequently,
when NASA announced, in June 2003, that this module was fully
operational at each of its 10 centers, about two-thirds of the
financial events or transaction types needed to carry out day-to-day
operations and produce external financial reports had not been
implemented in the module. NASA officials acknowledged that, as part
of their implementation strategy, they had not yet converted the
module to support full-cost accounting. In addition, we found that
NASA also deferred implementation of other key core financial module
capabilities. Because NASA did not use disciplined processes for
defining, managing, and testing key system requirements, or
substantially reengineer its business processes prior to
implementation, the core financial module, as implemented in June
2003, does not address several long-standing external reporting
issues and has created some new problems.
* Long-standing external financial reporting issues have not been
addressed. NASA has not used its implementation of the core financial
module as an opportunity to drive needed changes in its management
practices and business processes. Therefore, the system does little
to address NASA‘s ability to properly account for $37 billion of
reported property or certain aspects of the agency‘s $15 billion
annual budget.
* New financial reporting problems have emerged. NASA went forward
with its aggressive implementation plans even though agency managers
knew of problems with the module‘s ability to properly process and
record certain transactions. As a result, the module does not
appropriately capture critical information on the cost of NASA‘s
operations, such as certain accrued costs, accounts payable, and
obligation transactions.
In April 2003, GAO reported that the core financial module did not
address key internal management information requirements. Now, GAO has
found that the module cannot reliably provide key financial data
needed for external financial reporting. Although NASA intends to
address many of these issues, its implementation approach raises
concerns over its ability to do so. These deferred external reporting
capabilities, combined with the findings from our April 2003 report,
indicate that NASA‘s June 2003 core financial module and related
systems do not substantially comply with the requirements of FFMIA.
FFMIA addresses the need for agencies‘ financial systems to provide
value to those who use financial data. NASA must address these issues
if the core financial module and IFMP are to achieve the objective of
providing reliable, timely financial information for both internal
management decision-making and external reporting purposes.
What GAO Recommends:
GAO is recommending that NASA (1) identify all areas that are not
compliant with the Federal Financial Management Improvement Act
(FFMIA) of 1996 and (2) develop an implementation plan for addressing
those areas and incorporating them into IFMP, including the need for
reengineering some processes, such as the cost and other information
that it requires from contractors. This plan should include time
frames and details on how any changes will be monitored, tested, and
documented. NASA disagreed with GAO‘s recommendations, saying that
the report did not reflect IFMP‘s most recent progress. GAO
considered recent IFMP progress and reaffirmed its position.
www.gao.gov GAO-04-151
To view the full product, including the scope and methodology, click
on the link above. For more information, contact Gregory D. Kutz at
(202) 512-9095 or kutzg@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Schedule-driven Approach Limits Transaction Processing Capabilities:
Long-standing External Reporting Issues Not Addressed:
NASA'S Implementation of IFMP Has Created New Reporting Problems:
Core Financial Module Does Not Substantially Comply With FFMIA:
Conclusion:
Recommendations:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Objective, Scope, and Methodology:
Appendix II: Comments From the National Aeronautics and Space
Administration:
Appendix III: GAO Contact and Staff Acknowledgments:
GAO Contact:
Acknowledgments:
FASAB: Federal Accounting Standards Advisory Board:
FFMIA: Federal Financial Management Improvement Act:
FFMSR: Federal Financial Management System Requirements:
IFMP: Integrated Financial Management Program:
JFMIP: Joint Financial Management Improvement Program:
NASA: National Aeronautics and Space Administration:
OMB: Office of Management and Budget:
PP&E: Property, Plant, and Equipment:
SFFAC: Statement of Federal Financial Accounting Concepts:
SFFAS: Statement of Federal Financial Accounting Standards:
SGL: U.S. Government Standard General Ledger:
Letter November 21, 2003:
The Honorable John McCain:
Chairman:
The Honorable Ernest F. Hollings:
Ranking Minority Member:
Committee on Commerce, Science, and Transportation:
United States Senate:
The Honorable Sherwood L. Boehlert:
Chairman:
The Honorable Ralph M. Hall:
Ranking Minority Member:
Committee on Science:
House of Representatives:
For years, the National Aeronautics and Space Administration (NASA) has
cited deficiencies with its financial management systems as a primary
reason for not having the necessary data required to oversee its
contractors, accurately account for the full cost of its operations,
and efficiently produce accurate and reliable information needed for
both management decision-making and external reporting purposes.
Recognizing the importance of successfully implementing an integrated
financial management system, in April 2000, NASA began an effort known
as the Integrated Financial Management Program (IFMP). When completed,
IFMP is planned to consist of nine modules[Footnote 1] that will
support a range of financial, administrative, and functional areas. On
June 23, 2003, NASA announced that the core financial module--
considered the backbone of IFMP--was fully operational at each of
NASA's 10 centers. The core financial module is intended to provide
NASA's financial and program managers with timely, consistent, and
reliable cost and performance information for management decisions and
external financial reporting.
NASA has made two efforts in the recent past to improve its financial
management processes and systems but both of these efforts were
eventually abandoned after spending a total of 12 years and a reported
$180 million. Given the importance of NASA's current effort, you asked
us to assess the program. In April 2003, we issued our first report on
IFMP to alert you to concerns we had, based on our work to date. In
that report, we provided you with, among other things, our assessment
of the core financial module's ability to satisfy NASA's internal
management decision-making needs.
As agreed, we continued our review of IFMP in three areas to assess:
(1) whether NASA has been acquiring and implementing IFMP in the
context of an enterprise architecture, (2) the extent to which the core
financial module will address NASA's external reporting requirements,
and (3) NASA's life-cycle cost estimate and schedule for IFMP. We are
responding to the first and third issues in separate reports,[Footnote
2] and we have summarized our findings on all three issues in a summary
report.[Footnote 3] This report addresses the second issue--the extent
to which the core financial module, as completed in June 2003, will
satisfy NASA's key external reporting requirements. Specifically, we
assessed whether the core financial module, as of June 2003, provides
the functionality needed to (1) accurately account for property, plant,
and equipment (PP&E) and material, (2) properly account for the full
cost of NASA's projects and programs, (3) capture and report certain
key budgetary information, (4) accurately record accounts payable, and
(5) comply substantially with the requirements of the Federal Financial
Management Improvement Act (FFMIA) of 1996.[Footnote 4] FFMIA
emphasizes the need for agencies to be able to provide financial
management information, including cost information, for measuring the
results of program performance on an ongoing basis. FFMIA also requires
that an agency's independent auditor report on the ability of agency
financial management systems to comply substantially with these
requirements.
We performed our work from April 2003 through September 2003 in
accordance with generally accepted government auditing standards.
Details on our objective, scope, and methodology are in appendix I.
Results in Brief:
Although NASA has met its core financial module's implementation
schedule, the system, as implemented in June 2003, does not provide
many key external financial reporting capabilities. In fact, when NASA
announced, in June 2003, that the core financial module was fully
operational at each of its 10 centers, about two-thirds of the
financial events or transaction types needed to carry out day-to-day
financial operations and produce external financial reports had not
been implemented. At that time, NASA officials acknowledged that, as
part of their implementation strategy, they had not yet converted the
system to support full-cost accounting. However, because NASA did not
use disciplined processes for defining, managing, and testing system
requirements or substantially reengineer its business processes prior
to implementation, we found that NASA also deferred implementation of
other key core financial module capabilities. Key core financial module
capabilities deferred for these reasons include (1) capturing,
recording, and accounting for PP&E and material and (2) making
adjustments to prior year obligations. In addition, NASA's
implementation approach has created new problems in recording certain
accrued costs, accounts payable, and obligation transactions. These
deferred external reporting capabilities and new problems, combined
with the findings from our April 2003 report, indicate that NASA's June
2003 core financial module and related systems do not substantially
comply with the requirements of FFMIA.
According to NASA officials, NASA plans to address most of these
problems between now and 2006 when it expects IFMP to be fully
implemented. For example, after the core financial module's
implementation in June 2003, NASA began designing the agency's new cost
allocation structure and expected that by October 1, 2003, the core
financial module would have the ability to capture the full cost of
NASA's programs and projects needed for external financial reporting
purposes. In addition, although past software upgrades, or "patch"
releases, have proven to be unsuccessful, NASA expected a new patch
release to resolve the system problems associated with budgetary
accounting by October 1, 2003.
However, even if the agency's cost allocation structure is in place and
the patch release is successful, NASA has not addressed its most
challenging external reporting issues--accurately capturing,
recording, and accounting for PP&E and materials and ensuring that its
system meets the broader objectives of federal managerial cost
accounting standards. Specifically, NASA has not reengineered the
agency's processes for capturing contract costs associated with PP&E
and material and therefore continues to update the core financial
module using periodic summary-level manual entries. Although NASA plans
to implement an integrated asset management module in 2005, this alone
will not ensure that NASA uses transaction-level detail to update the
core financial module and thereby provide independent control over its
property.
Further, as we reported in April 2003, the core financial module does
not provide agency managers or the Congress with useful cost and
related information with which to make informed decisions, manage daily
operations, and ensure accountability on an ongoing basis.
Consequently, the system does not meet the broader objectives of
federal managerial cost accounting standards, which address the need to
provide relevant and reliable information to both managers and the
Congress.
We are making recommendations that NASA develop and implement a
corrective action plan to ensure that the agency's financial management
systems comply substantially with the requirements of FFMIA. The plan
should provide a means for ensuring that all user requirements are met,
including the need to reengineer key business processes where
necessary.
In written comments, which are reprinted in appendix II, NASA disagreed
with all of our conclusions and recommendations in part because we
reviewed the status of the core financial module as of June 23, 2003
instead of September 30, 2003--the date used for FFMIA reporting. We
conducted our audit as of June 2003 because NASA represented that the
core financial module was fully operational at all of its centers at
that time, acknowledging only that they had not yet converted the
system to support full-cost accounting, but not disclosing many other
deferred capabilities.
Moreover, NASA's comments assert that for PP&E and budgetary reporting,
the manual processes or workarounds it has developed to produce year-
end balances for the agency's annual financial statements also satisfy
the requirements of FFMIA. We disagree with this assertion. The
development of significant manual workarounds in these areas masks the
fact that NASA's core financial module is not designed to and cannot
produce timely and reliable PP&E and budgetary data with traceability
to transaction-based support. The ability to produce reliable numbers
once a year for financial reporting purposes does not by itself
constitute FFMIA compliance. In its written comments, NASA indicated
that it has made changes to the module since June and that the core
financial module as implemented in October 2003 has many of the
capabilities that were lacking in the June 2003 module. However, with
the possible exception of full-cost accounting, which was planned for
October 1, 2003, NASA acknowledges that the cited changes involve
manual workarounds for producing year-end numbers. FFMIA goes well
beyond producing auditable financial statements once a year; it
requires financial systems that ensure accountability and accurate data
for managerial and reporting purposes on an ongoing basis throughout
the year.
Background:
From 1996 through 2000, NASA was one of the few agencies to be judged
by its independent auditor at that time, Arthur Andersen, as meeting
all of the federal financial reporting requirements. That is, NASA was
one of the few agencies to receive an unqualified, or "clean," opinion
on its financial statements, with no material internal control
weaknesses noted, and no indications that its financial management
systems were not in substantial compliance with the requirements of
FFMIA.[Footnote 5] FFMIA reflects the need for agencies to have systems
that produce reliable, timely, and accurate financial information
needed for day-to-day decision making by requiring agencies to
implement and maintain financial management systems that substantially
comply with (1) federal financial management systems
requirements,[Footnote 6] (2) the U.S. Government Standard General
Ledger (SGL) at the transaction level,[Footnote 7] and (3) applicable
federal accounting
standards.[Footnote 8] Thus, the auditor's report implied that NASA
could not only generate reliable information once a year for external
financial reporting purposes but also could provide the kind of
information needed for day-to-day management decision making.
However, as we and others have reported, the independent auditor's
reports did not provide an accurate picture of NASA's financial
management systems and, instead, failed to disclose pervasive financial
management problems that existed at NASA. For example, we have
identified NASA's contract management function as an area of high risk
since 1990 because of NASA's inability to (1) oversee its contractors
and their financial and program performance, and (2) implement a
modern, integrated financial management system, which is integral to
producing accurate and reliable financial information needed to support
contract management.[Footnote 9] Also, in February 2002, NASA's new
independent auditor, PricewaterhouseCoopers, further confirmed NASA's
financial management difficulties and disclaimed an opinion on the
agency's fiscal year 2001 financial statements. The audit report also
identified a number of material internal control weaknesses--primarily
regarding PP&E and materials--and stated that, contrary to previous
financial audit reports, NASA's financial management systems did not
substantially comply with FFMIA.
While NASA received an unqualified opinion for its fiscal year 2002
financial statements, these results were achieved only through heroic
efforts on the part of NASA and its auditor and again, the audit report
identified a number of material internal control weaknesses and stated
that NASA's financial management systems did not substantially comply
with FFMIA. To its credit, in April 2000, NASA began an effort known as
IFMP. The schedule for implementing IFMP was originally planned for
fiscal year 2008, but after NASA's new Administrator came on board in
fiscal year 2002, the timeline was accelerated to fiscal year 2006,
with the core financial module to be completed in fiscal year 2003.
NASA's IFMP includes nine module projects supporting a range of
financial, administrative, and functional areas. According to NASA
officials, of the nine module projects, five are in operation, one is
currently in implementation, and three are future modules. The five
modules in operation are resume management, position description
management, travel management, executive financial management
information (called Erasmus), and core financial; the one project in
implementation is budget formulation; and the three future module
projects are human resources, asset management, and contract
administration.
The core financial module, which utilizes the SAP R/3 system,[Footnote
10] is considered the backbone of IFMP and has become NASA's standard,
integrated accounting system used agencywide. The other IFMP module
projects will be integrated/interfaced with the core financial module,
where applicable. The Joint Financial Management Improvement Program
(JFMIP)[Footnote 11] defines a core financial system (or module) as the
backbone of an agency's integrated financial management system: It
should provide common processing routines, support common data for
critical financial management functions affecting the entire agency,
and maintain the required financial data integrity control over
financial transactions, resource balances, and other financial systems.
A core financial system should support an agency's general ledger,
funds management, payment, receivable, and cost management functions.
Also, the system should receive data from other financial-related
systems, such as inventory and property systems, and from direct user
input, and it should provide data for financial statement preparation
and for financial performance measurement and analysis.
The scope of NASA's core financial module includes the general ledger,
budget execution, purchasing, accounts receivable, accounts payable,
and cost management. NASA completed implementation of the core
financial module at all 10 NASA centers in June 2003. The pilot for the
core financial module--conducted at Marshall Space Flight Center--was
implemented in October 2002. NASA then deployed the core financial
module at the other 9 NASA centers in three "waves," the last of which
was completed in June 2003.
In April 2003, we issued our first report on IFMP in response to your
request.[Footnote 12] At that time, we reported that NASA was not
following key best practices for acquiring and implementing the system,
which may affect the agency's ability to fully benefit from the new
system's capabilities. Specifically, we reported that NASA (1) did not
analyze the relationships among selected and proposed IFMP components,
(2) had deferred addressing the needs of key system
stakeholders,[Footnote 13] including program managers and cost
estimators, and (3) did not properly manage and test its system
requirements prior to implementation of the core financial module. As a
result, we reported that:
* NASA has increased its risks of implementing a system that will not
optimize mission performance, and will cost more and take longer to
implement than necessary;
* the core financial module is not being designed to integrate the cost
and schedule data that program managers need to oversee the work of
NASA's contractors; and:
* costly rework will likely be required to fix requirement defects not
identified prior to implementation.
Schedule-driven Approach Limits Transaction Processing Capabilities:
Although NASA has met the core financial management module's
implementation schedule, the system as implemented in June 2003 has
limited external financial reporting capabilities. When NASA announced
in June 2003 that the core financial management module was complete,
NASA officials acknowledged that additional work remained, including
the need to develop and configure a cost-allocation structure within
the system so that it would accumulate the full cost of NASA's programs
and projects for external financial reporting purposes. However, to
meet its implementation schedule, we also found that NASA (1) deferred
requirements that require significant business process reengineering or
extensive software configuration and (2) continues to rely on manual
procedures for many transactions that should be automated in the new
system. Consequently, only about one-third of the transaction types
that NASA uses in its business processes are currently implemented and
fully automated in the core financial module.
The Full Cost of NASA's Programs Not Yet Available:
As part of its implementation strategy, NASA delayed conversion to
full-cost accounting until the core financial module was implemented at
all centers. After completing implementation of the module in June
2003, NASA began designing the agency's new cost-allocation structure
and expected that full-cost accounting capabilities needed to provide
the full cost of its programs and projects for external financial
reporting purposes would be available through the core financial module
by October 1, 2003. Properly designing, configuring, and testing the
cost-allocation structure is key to capturing the full costs of all
direct and indirect resources and allocating them to NASA's programs
and activities. However, on May 30, 2003, NASA's Inspector General
reported that NASA had not yet determined how to allocate space shuttle
program costs to programs that benefit from space shuttle services or
how to allocate civil service personnel costs to benefiting programs
and projects.[Footnote 14] Once these issues were resolved, NASA would
then have to configure the core financial module software to
accommodate the new allocation structure and properly test the new
configuration. Consequently, NASA's Inspector General expressed
concerns about NASA's ability to meet its October 1, 2003, target date.
In early October, we inquired about the status of full-cost accounting
within the core financial module and IFMP officials told us that this
capability would be fully implemented on October 26, 2003. However,
because of the timing of this report, we did not verify whether this
implementation date was met.
If NASA is successful in implementing full-cost accounting, the new
system should link all of NASA's direct and indirect costs to specific
programs and projects, and for the first time shed light on the full
cost of these programs for external financial reporting purposes. As
explained later, managerial cost accounting goes beyond providing the
full cost of programs and projects and producing external financial
reports, and is also critical for producing the type of cost
information needed to effectively manage and oversee NASA's programs.
Deferred Requirements Include Transactions Critical to NASA's Business
Operations:
NASA did not adequately test key requirements or configure the core
financial module software to satisfy these requirements prior to
implementing the module. Adequately testing and configuring a system
prior to implementation helps assure the integrity and effectiveness of
transactions that will be processed through the system, thereby
reducing the likelihood of rejected transactions, labor-intensive
manual workarounds, and inaccurate data. However, prior to
implementation, NASA tested only 120, or 53 percent, of the 225 unique
financial events or transaction types identified by NASA as critical
for carrying out day-to-day operations and producing external financial
reports. NASA deferred implementation of the remaining 105 transaction
types until after June 23, 2003, when the system would be implemented
at all centers.
Ideally, all transactions should be thoroughly tested prior to
implementing a system. However, to meet the agency's implementation
schedule, NASA identified and deferred implementation of transactions
that it determined would not have a significant or immediate impact on
operations. For example, 29 of the deferred transactions were related
to year-end closing procedures that would not be needed until September
30, 2003. However, other deferred transactions do have a significant
and immediate impact on NASA's operations throughout the year. For
example, 40 transaction types were related to upward and downward
adjustments to prior year data, many of which affected NASA's ability
to properly capture adjustments to obligations. Because NASA deferred
implementing this capability, the agency has continued to rely on ad
hoc, manual processes and "workarounds." As discussed later, these are
the same cumbersome manual processes that resulted in a $644 million
error in NASA's fiscal year 1999 financial statements.
NASA hoped to implement most of these deferred transactions by October
2003. In mid-October, NASA officials told us that 75 of the 105
deferred transaction types had been implemented, and the remaining 30
transaction types would be implemented later in fiscal year 2004. Until
the remaining transaction types are implemented, however, NASA must
continue to process them outside of the module using manual procedures.
Core Financial Module Relies Heavily on Manual Procedures:
In addition to the 105 transaction types that NASA has deferred, NASA
also uses manual accounting entries to record 43, or 36 percent, of the
120 unique transaction types NASA considers implemented. NASA considers
these 43 transaction types implemented because NASA has no current
plans to automate them in the core financial module. Although manual
accounting entries are sometimes necessary to record unusual or
infrequent events, many of NASA's manual entries are made to record
routine events that should be processed electronically. For example,
NASA uses summary-level manual processes to record all transactions
occurring throughout the year related to its reported $37 billion of
property. Such a large proportion of manual procedures runs contrary to
the purpose of an automated system and makes the agency more vulnerable
to processing errors and delays. In fact, prior to implementation,
NASA's consultant responsible for performing an independent compliance
review of the core financial module raised concerns about the excessive
number of transactions processed with manual journal voucher entries.
Despite these concerns, NASA did not alter its implementation plan for
the module.
Long-standing External Reporting Issues Not Addressed:
The core financial module may provide some improvements to NASA's
current accounting system environment by reducing the extensive amount
of time and resources currently required to consolidate NASA's 10
different reporting entities and close the books each accounting
period. However, NASA did not thoroughly test or implement key
requirements prior to implementation and has not used the new system as
an opportunity to drive needed changes in its management practices and
business processes. Therefore, the core financial module, as
implemented in June 2003, does not (1) properly capture, record, and
account for PP&E and materials balances or (2) provide key system
requirements needed to prepare the agency's Statement of Budgetary
Resources.
NASA Has Not Reengineered Processes to Properly Account for PP&E and
Materials:
The core financial module, as implemented in June 2003, does not
appropriately capture and record PP&E and material in the module's
general ledger at the transaction level. According to SGL requirements
and NASA's own accounting policy, recording PP&E and material in the
general ledger at the transaction or item level provides independent
control over these assets. However, NASA currently updates the core
financial module's general ledger using periodic summary-level manual
entries. Although NASA plans to implement an integrated asset
management module in 2005, this alone will not ensure that transaction-
level detail is used to update the core financial module.
NASA's PP&E and materials are physically located at many locations
throughout the world, including NASA centers, contractor facilities,
other private or government run facilities, and in space. NASA's most
significant challenge, with respect to property accounting, stems from
property located at contractor facilities, which accounts for almost
$11 billion, or about one-third, of NASA's reported $37 billion of PP&E
and materials and consists primarily of equipment being constructed for
NASA or items built or purchased for use in the construction process.
NASA has not reengineered the agency's processes for capturing contract
costs associated with PP&E and material, though, and therefore, does
not record these property costs in the general ledger at the
transaction level. Instead, according to NASA officials, the agency
plans to continue to (1) record the cost of PP&E and materials as
expenses when initially incurred, (2) periodically determine which of
those costs should have been capitalized, and (3) manually correct
these records at a summary level.
To illustrate, NASA's contractors provide NASA with monthly contractor
cost reports, which contain accrued cost information for any work
performed during the month. However, these reports do not contain
enough information for NASA to determine what portion of the reported
cost pertains to the construction or acquisition of property and
therefore, NASA initially records all costs reported by its contractors
as an expense. Then, on a quarterly or annual basis,[Footnote 15] NASA
receives a property report from its contractors that provides summary-
level information on the amount of property constructed or purchased
and currently in the contractor's possession. Based on these reports,
NASA records the cost of contractor-held assets in its general ledger
and reverses the expense previously recorded from the contractor cost
reports. The problem with NASA's current process for capturing,
recording, and accounting for property in the possession of contractors
is that it provides no way for NASA to ensure that the money it spends
on the construction of its property is actually recorded as discrete
property items.
Although NASA plans to implement an integrated asset management module
in 2005, the new system will not change the way NASA captures, records,
and accounts for property in the possession of contractors. As noted
above, because this problem stems from NASA's inability to link accrued
costs reported by its contractors with specific equipment items being
constructed, the problem will not be alleviated when physical custody
of the equipment is ultimately transferred to NASA and recorded in
NASA's property records.
Key Requirements Deferred for Statement of Budgetary Resources:
The core financial module does not capture and report certain key
budgetary information needed to prepare the agency's Statement of
Budgetary Resources. Although the software that NASA purchased for the
core financial module was certified by JFMIP as meeting all mandatory
system requirements, NASA may have relied too heavily on the JFMIP
certification. JFMIP has made it clear that its certification, by
itself, does not automatically ensure compliance with the goals of
FFMIA. Other important factors that affect compliance with Federal
Financial Management System Requirements (FFMSR) include how well the
software has been configured to work in the agency's environment and
the quality of transaction data in the agency's feeder systems. When
NASA later tested specific requirements related to adjustments to prior
year obligations, the core financial module failed the test.
Consequently, NASA deferred implementation of those requirements and
opted to rely on manual compilations, system queries, or other
workarounds to compensate for the system's inadequacies. These
workarounds are known to have caused reporting problems in the past.
According to FFMSR, an agency's core financial module should
automatically classify and record upward and downward adjustments of
prior year obligations to the appropriate general ledger accounts.
However, NASA's core financial module, as implemented in June 2003,
does not provide this capability. For example, if an upward adjustment
is required because an invoice includes costs not previously included
on the purchase order, such as shipping costs, the system erroneously
posts the upward adjustment to a prior year obligation instead of a
current year obligation. Because the system does not properly capture
and report these adjustments, NASA must rely on manual compilations and
system queries to extract the data needed to prepare the agency's
Statement of Budgetary Resources--just as it did using its legacy
general ledger systems. As we reported in March 2001, this cumbersome,
labor-intensive effort to gather the information needed at the end of
each fiscal year was the underlying cause of a $644 million
misstatement in NASA's fiscal year 1999 Statement of Budgetary
Resources.[Footnote 16]
During its initial test of system requirements but prior to
implementation at Marshall Space Flight Center and Glenn Research
Center in October 2002, NASA became aware of the software's limitations
regarding upward and downward adjustments to prior year obligations. In
order to meet its schedule, NASA IFMP officials deferred further system
modifications to meet these requirements and opted to rely on a manual
workaround to satisfy the federal requirement for upward and downward
adjustments. NASA's consultant responsible for performing an
independent compliance review of the core financial module raised
concerns about this approach. Despite these concerns, NASA went forward
with its plans. At the time, NASA had hoped that a "patch" release or
future software upgrade would remedy the problem and then NASA could
incorporate the fix into the phased agency rollout of the core
financial module. However, the upgrades incorporated after the initial
implementation at Marshall and Glenn did not resolve all of the issues
related to upward and downward adjustments. As a result, NASA continued
to face significant problems in this area. According to NASA officials,
the agency continued to work with the software vendor to reconfigure
the software as necessary to accommodate adjustments to prior year
obligations. NASA expected a new software patch to resolve any
remaining problems by October 1, 2003. However, in mid-October, NASA
officials acknowledged that it might be some time before this issue
would be resolved completely. Until then, NASA will continue to rely on
manual workarounds.
NASA'S Implementation of IFMP Has Created New Reporting Problems:
NASA's implementation of the core financial module has also created new
reporting issues. Specifically, the core financial module does not
appropriately capture accrued costs and record the corresponding
liabilities as accounts payable. In addition, the core financial module
records obligations to the general ledger before the obligations are
legally binding. Although NASA knew about these problems prior to
implementation, the agency went forward with its implementation plans.
Accrued Costs and Accounts Payable Not Appropriately Captured and
Reported:
The core financial module, as implemented in June 2003, does not
appropriately capture and record accrued contract costs and accounts
payable information in accordance with federal accounting standards and
NASA's own financial management manual. Specifically, the core
financial module does not capture accrued costs or record accounts
payable if cumulative costs are in excess of obligations for a given
contract. As of June 30, 2003, NASA had not processed approximately
$245 million in costs that exceeded obligations, nor recorded the
corresponding accounts payable, even though this amount represented a
legitimate liability for NASA. Instead, these transactions are held
outside of the general ledger in suspense until additional funds can be
obligated. Thus, any report containing information on NASA's costs or
liabilities would likely be understated by the amount of costs held in
suspense at the time of the report.
Federal accounting standards and NASA's own financial management manual
require costs to be accrued in the period in which they are incurred
and any corresponding liability recorded as an account payable,
regardless of amounts obligated. Further, federal standards require
that agencies must disclose unfunded accrued costs--or costs in excess
of obligations. However, NASA has designed the core financial module
such that it will not post costs to the general ledger if they exceed
the amount obligated. According to NASA officials, this is intended to
be a "red flag" or internal control that alerts agency managers to
potential cost overruns.
While we agree that NASA could benefit from information that provides
an early warning sign of possible cost or schedule problems, we
disagree with NASA's approach. Appropriately posting costs and accounts
payable to the general ledger does not preclude NASA from monitoring
unfunded accrued costs. Further, as we reported in April 2003, to
adequately oversee NASA's contracts, program managers need reliable
contract cost data--both budgeted and actual--and the ability to
integrate this data with contract schedule information to monitor
progress on the contract. However, because program managers were not
involved in defining system requirements or reengineering business
processes, the core financial module is not being designed to integrate
cost and schedule data needed by program managers.
Core Financial Software Posts Obligations to the General Ledger Before
They Are Binding:
The core financial module was intended to streamline many of NASA's
processes and eliminate the need for many paper documents. However, in
some areas, the new system has actually increased NASA's workload.
Specifically, because the core financial software allows obligations to
be posted to the general ledger before a binding agreement exists, NASA
must process purchase orders and contract documents outside the system
until they are signed, or otherwise legally binding. At that point,
NASA initiates the procurement action in the system and repeats the
steps that were manually performed outside the system previously.
Federal law requires that no amount be recorded as an obligation unless
it is supported by documentary evidence of, among other things, a
binding agreement.[Footnote 17] However, the processes that are
embedded in the core financial module for processing purchase orders
and contract documents do not accommodate this requirement. To
illustrate, authorized users create electronic purchase requests in the
system and release or forward the request to the appropriate approving
official for electronic signature. Once signed, the purchase request is
forwarded electronically to the purchasing department where purchasing
staff create an electronic purchase order, secure a vendor, and place
the order. According to federal appropriations law, a purchase order
constitutes an obligation when the order is placed and when all
relevant parties sign the purchase order. However, if a purchase order
is entered into the system before it is finalized, the module
automatically records the obligation. Similarly, if a contract or
contract modification is entered into the module before it is signed
and legally binding, the module automatically records the obligation.
According to NASA officials, they are working with the software vendor
to develop a solution and expect that the new software upgrade to be
released on October 1, 2004, will alleviate this problem. In the
meantime, they will manually process documents outside of the system
and monitor any documents that have been recorded without signatures to
ensure that obligations are not overstated at month-end.
Core Financial Module Does Not Substantially Comply With FFMIA:
The system limitations discussed previously related to full-cost
accounting, property accounting, budgetary accounting, accrued costs,
and accounts payable--combined with the findings from our April 2003
report--indicate that NASA's new core financial module and related
systems, as implemented in June 2003, do not substantially comply with
the requirements of FFMIA. This act provides agencies a blueprint for
building fully integrated financial management systems that routinely
provide decision makers with timely, reliable, and useful financial
information. FFMIA requires agencies to implement and maintain
financial management systems that substantially comply with (1) FFMSR,
(2) the SGL at the transaction level, and (3) applicable federal
accounting standards. Although NASA has made progress in addressing
some of its financial management system weaknesses, the agency's core
financial module does not yet provide all the building blocks needed to
achieve the ultimate goal of FFMIA.
Noncompliance with FFMSR:
The core financial module, as implemented in June 2003, does not comply
substantially with FFMSR. To ensure that automated federal financial
management systems comply with this standard and provide the critical
information needed for decision making, JFMIP issued specific
functional requirements that core financial systems must meet in order
to substantially comply with FFMIA. Compliance with this standard, at a
minimum, means the core financial module must be configured to (1)
ensure consistent and accurate processing, reporting, and tracking of
program expenditures and budgetary resources, and (2) ensure that
transactions are processed and recorded in accordance with laws and
regulations, and federal accounting standards. However, the core
financial module--although it uses software certified by JFMIP--does
not perform all mandatory functions. Specifically, the module:
* does not capture and record upward and downward adjustments of
obligations incurred in prior fiscal years, and:
* posts obligations to the general ledger prior to approval.
Among other things, FFMSR requires federal financial management systems
to produce accurate and reliable information for budgetary reports,
including the Statement of Budgetary Resources[Footnote 18]and the
Report on Budget Execution and Budgetary Resources (Standard Form
133).[Footnote 19] As previously discussed, the core financial module
does not capture and record upward and downward adjustments of
obligations incurred in prior fiscal years, which is essential for
producing both the Statement of Budgetary Resources and Standard Form
133 reports. In addition, FFMSR requires federal financial management
systems to process transactions in accordance with federal
appropriations law, which states that no amount may be recorded as an
obligation unless it has been approved and is supported by documentary
evidence. As a result of system limitations we have discussed, the core
financial module erroneously posts obligations to the general ledger
prior to approval.
Noncompliance with SGL:
The core financial module, as implemented in June 2003, does not
substantially comply with the SGL at the transaction level. The SGL
requirements ensure consistency in financial transaction processing and
external reporting. Compliance with this standard, at a minimum, means
that the core financial module must be configured such that (1) reports
produced by the systems containing financial information can be traced
directly to general ledger accounts, (2) transaction details supporting
general ledger account balances are available and can be directly
traced to specific general ledger accounts, and (3) the criteria (e.g.,
timing, processing rules/conditions) for recording financial events are
consistent with accounting transaction definitions and processing rules
defined in the SGL.
As discussed previously, the core financial module does not accumulate
transaction-based support for adjustments to prior year obligations,
which is essential for producing the Statement of Budgetary Resources
and Standard Form 133 reports. Instead, NASA must rely on estimates,
manual compilations, and system queries to extract the data needed to
prepare these required budgetary reports. As a result, key budgetary
information reported on the Statement of Budgetary Resources and
Standard Form 133 cannot be traced directly to NASA's general ledger
accounts. NASA also does not properly record PP&E and materials as
assets when they are first acquired. Instead, NASA initially records
these items as expenses and then later corrects these records using
manual procedures. Although this manual process provides NASA a vehicle
for reporting PP&E and material costs for financial statement
reporting, it is not sufficient for compliance with the SGL. Finally,
NASA does not maintain transaction-level detail for its contractor-held
property. Instead, it relies solely on its contractors to maintain such
records and to periodically report summary-level information on these
assets to NASA. This situation has resulted in material weaknesses over
this property, as previously reported by NASA's current independent
auditor.
Noncompliance with Federal Accounting Standards:
The core financial module and related systems, as implemented in June
2003, do not substantially comply with federal accounting standards.
Compliance with these standards is essential to providing useful and
reliable financial information to external and internal users. Federal
accounting standards[Footnote 20] are the authoritative requirements
that guide agencies in developing financial management systems, as well
as preparing financial statements. However, as discussed previously,
the core financial module did not, as of June 2003, process and report
financial information in accordance with federal accounting standards.
The major reasons for the module's noncompliance with federal
accounting standards are as follows.
* The core financial module does not comply with SFFAS No. 1,
Accounting for Selected Assets and Liabilities. This standard states
that a liability should be recognized and recorded as an account
payable when contractors construct facilities or equipment for the
government. The liability should be based on an estimate of work
completed. However, the core financial module does not capture accrued
costs or record accounts payable when the cumulative costs for a given
contract exceed obligations. Instead, these transactions are held
outside the general ledger, in suspense, until additional funds are
obligated, thus understating NASA's reported program costs and
liabilities.
* The core financial module does not yet provide full-cost accounting
capabilities in accordance with SFFAS No. 4, Managerial Cost Accounting
Standards. This standard requires agencies to report the full cost of
their programs in their general-purpose financial reports. However, as
previously discussed, NASA, as of June 2003, had not defined,
configured, or tested the appropriate cost pools and cost allocation
structure, which are critical to implementing full-cost accounting.
* The core financial module does not comply with the broader objective
of SFFAS No. 4, Managerial Cost Accounting Standards. The concepts and
standards included in SFFAS No. 4 are aimed at achieving three general
objectives: (1) providing program managers with relevant and reliable
information relating costs to program outputs, (2) providing relevant
and reliable cost information to assist the Congress and executives in
making decisions about allocating federal resources and evaluating
program performance, and (3) ensuring consistency between costs
reported in general purpose financial reports and costs reported to
program managers. However, as we reported in April 2003, the core
financial module does not provide program managers, cost estimators, or
the Congress with managerially relevant cost information that they need
to effectively manage and oversee NASA's contracts and programs. As a
result, NASA's continuing inability to provide its managers with
timely, relevant data on the cost, schedule, and performance of its
programs is a key reason that GAO continues to report NASA's contract
management as an area of high risk. Because this information is not
available through the core financial module, program managers will
continue to rely on hard copy reports, electronic spreadsheets, or
other means to monitor contractor performance. Consequently, NASA risks
operating with two sets of books--one that is used to report
information in the agency's general-purpose financial reports and
another that is used by program managers to run NASA's projects and
programs.
Compliance with federal accounting standards goes far beyond receiving
a "clean" opinion on financial statements. A key indicator that an
agency's financial management systems do not substantially comply with
federal accounting standards is the existence of material weaknesses in
the agency's internal controls. As noted earlier, NASA has not
addressed material weaknesses in its internal controls and processes
over PP&E and materials, which make up nearly 85 percent, or $37
billion, of NASA's assets. Instead, NASA plans to rely on existing
legacy systems and processes--including the extensive use of manual
accounting entries--that the agency's independent auditor has found to
be inadequate for property accounting. As a result, NASA faces serious
challenges in complying with these standards.
Although NASA plans to implement an integrated asset management module
in 2005, most of NASA's issues related to property accounting have
little to do with the lack of an integrated system. Instead, NASA faces
two key challenges with respect to property accounting: (1)
reengineering its processes for capturing and recording transaction-
level detail in the core financial module's general ledger and (2)
addressing material weaknesses in its internal controls over property
previously identified by NASA's independent auditors. To date, NASA has
yet to define specific requirements for its asset management module or
determine how it plans to overcome the previously identified material
weaknesses in NASA's internal controls over PP&E and material.
Conclusion:
If NASA continues on its current track, the core financial module and
IFMP will fail to achieve the agency's stated objective of providing
reliable, timely financial information for both internal management
decision-making and external reporting purposes. Thus far, NASA has
focused on deploying the system on its established schedule, rather
than ensuring that it satisfies the agency's internal management and
external reporting requirements. To meet its schedule, NASA has put off
addressing user requirements that would necessitate significant
business process reengineering or extensive software configuration.
While NASA is meeting its implementation milestones, it is only able to
do so because the agency has deferred critical system capabilities,
such as the ability to properly capture, record, and account for its
PP&E and material; process budgetary accounting entries; and provide
managerially relevant cost information. Until, and unless, the agency
deals with these issues, NASA risks making a substantial investment in
a system that will fall far short of its stated goal of providing
meaningful information for both internal management and external
reporting purposes.
Recommendations:
Based on the findings from this review, in conjunction with our April
2003 report, we reiterate our April 2003 recommendation that NASA:
* engage stakeholders--including program managers, cost estimators, and
the Congress--in developing a complete and correct set of user
requirements; and:
* reengineer its acquisition management processes, particularly with
respect to the consistency and detail of budget and actual cost and
schedule data provided by contractors.
We also recommend that the NASA Administrator direct the Program
Executive Officer for IFMP to implement a corrective action plan in
coordination with NASA's Chief Financial Officer that will produce
financial management systems that comply substantially with the
requirements of FFMIA, including capabilities to produce timely,
reliable, and useful financial information related to:
* property, plant, equipment, and materials;
* budgetary information including adjustments to prior year
obligations;
* accounts payable and accrued costs; and:
* the full cost of programs for financial reporting purposes.
This plan should include time frames and details on how any changes
will be monitored, tested, and documented.
Agency Comments and Our Evaluation:
In written comments, reprinted in appendix II, NASA disagreed with all
of our conclusions and recommendations in part because we reviewed the
status of the core financial module as of June 23, 2003, instead of
September 30, 2003--the date used for FFMIA reporting. Although NASA
takes issue with the date of our review, it is important to note that
we selected June 2003 because NASA represented that the core financial
module was fully operational at all of its centers at that time. In
making that representation, NASA officials acknowledged that, as part
of their implementation strategy, they had not yet converted the system
to support full-cost accounting. However, they did not disclose any
other deferred capabilities.
Moreover, NASA's comments assert that for PP&E and budgetary reporting,
the manual processes or workarounds it has developed to produce year-
end balances for the agency's annual financial statements also satisfy
the requirements of FFMIA. We disagree with this assertion. The
development of significant manual workarounds in these areas masks the
fact that NASA's core financial module is not designed to, and cannot,
produce timely and reliable PP&E and budgetary data with traceability
to transaction-based support. The ability to produce reliable numbers
once a year for financial reporting purposes does not by itself
constitute FFMIA compliance. In its written comments, NASA indicated
that it has made changes to the module since June and that the core
financial module as implemented in October 2003 has many of the
capabilities that were lacking in the June 2003 module. Although we
requested status updates between June and October to track NASA's
progress, we did not reassess the module's capabilities as of October
2003. However, with the possible exception of full-cost accounting,
which was planned for October 1, 2003, the changes NASA has cited still
involve manual workarounds for producing year-end numbers. FFMIA goes
beyond producing auditable financial statements once a year and
requires financial systems that ensure accountability on an ongoing
basis throughout the year.
Engaging Stakeholders:
In its response to our April 2003 recommendation, which we have
restated in this report, to engage stakeholders in developing a
complete and correct set of user requirements, NASA stated that it did
engage stakeholders in the design of requirements for the core
financial module. We disagree with NASA's assertion. As we reported in
April 2003, the program management staff we spoke with from NASA's
three largest space flight programs viewed the core financial module as
an "accounting system" that would be used by the accountants but was
not necessarily going to change the way they managed. With this
understanding, it is not surprising that the core financial module does
not meet the needs of program managers. Although the IFMP
implementation team made an effort to include resource management staff
from program management offices in various process teams, they did not
effectively utilize program staff to help drive the improvement effort.
Consequently, the information requirements of program managers and cost
estimators were not fully addressed. Implementing an integrated
financial management system that is intended to change the way an
organization does business is extremely complex and involves cultural,
organizational, and process improvements. It also means making
financial management an agencywide priority. Our work at leading public
and private sector organizations has shown that implementing a
financial management system that meets the organization's business
needs takes more than merely placing business or line management
representation on the implementation team.[Footnote 21] Instead, at
best practice organizations, business managers had a vested interest in
the success of the project and were actively involved in leading the
improvement effort.
Although NASA disagreed with our assessment of key stakeholder
involvement, the agency has indicated that it is in the process of
addressing, or plans to address, a number of our concerns by more
actively engaging key stakeholders. For example, NASA stated that to
develop standard, agencywide internal management reports, it is using
an enterprise-or program-led team to define the critical "decision-
support" financial information that is needed by managers. The success
of this effort is critical to ensure that NASA program managers use
IFMP rather than other stovepiped systems or manually developed data
that may or may not reconcile to the IFMP and core financial module.
Reengineering Acquisition Management:
In response to our April 2003 recommendation, which we have restated in
this report, to reengineer its acquisition management processes,
particularly with respect to the consistency and detail of budgeted and
actual cost and schedule data provided by contractors, NASA indicated
that it is in the process of addressing a number of our concerns.
Specifically, NASA stated that it (1) has extended the data structure
embedded in the core financial module to capture more detailed cost
data, (2) is currently assessing its contractor reporting requirements,
and (3) is evaluating the possibility of accommodating contract cost
and schedule data in an integrated environment. While it is too early
to assess the significance or impact of NASA's current effort, we are
encouraged that NASA is considering the possibility of reengineering
its acquisition management processes. This would be an important first
step toward ensuring that NASA's contractors provide the appropriate
level and type of cost data needed for both internal management and
external reporting purposes and that the core financial module is
properly configured to support the agency's information needs. However,
we continue to believe it would have been more effective and efficient
if NASA had conducted its assessment of contractor reporting
requirements as part of a larger reengineering effort prior to
configuration of the core financial module. Further, any effort that
falls short of end-to-end business process reengineering will likely
not result in a system that substantially improves the data available
for contract oversight or ensures consistency between costs reported in
general purpose financial reports and costs reported to program
mangers.
In its written comments, NASA also emphasized that the core financial
module alone cannot meet all of the functional requirements needed to
manage a program or to prepare cost estimates and asserts that
applications such as Erasmus, an executive-level program performance
reporting tool, will enable NASA to meet the full depth and breadth of
user requirements. We agree that the core financial module alone cannot
meet all of NASA's information needs and that an executive-level
reporting tool such as Erasmus may provide NASA executives with greater
visibility over program performance. However, Erasmus does little to
help program managers oversee contractor performance, and like the core
financial module, may contain cost data that are not consistent or
reconcilable with cost data used by program managers to manage
contracts. The underlying problem, as we reported in April 2003, is
that NASA uses one set of contractor-reported cost data to update the
core financial module while program managers use a separate set of
contractor-reported cost data that resides outside the system to
monitor contractor performance. Consequently, the cost data maintained
in the core financial module and reported in NASA's external financial
reports are not consistent or reconcilable with cost data used by
program managers to manage contracts.
Finally, NASA stated that the asset management module, scheduled for
implementation in 2005, will make a significant contribution to its
program management and cost estimating activities. This module is
primarily intended to maintain detailed property records for NASA-held
property. Thus, we do not believe an asset management module would have
any impact on the cost, schedule, and performance data needed for
program management and cost estimating.
PP&E and Materials:
NASA disagreed with our recommendation related to IFMP's ability to
produce timely, reliable, and useful information for PP&E and materials
in accordance with FFMIA requirements. NASA represented that its
current processes for capturing and recording property for financial
statement reporting purposes also meet the requirements of FFMIA
because it has begun requiring more frequent and detailed property
reporting by its 55 largest contractors. We disagree with NASA's
assertion. Because NASA's current contractor cost-reporting processes
do not provide the information needed to distinguish between capital
and non-capital expenditures, NASA currently records as expenses all
contractor costs as they are incurred and then manually adjusts
previous entries to record assets based on periodic summary-level
contractor property reports. While this process may satisfy NASA
financial statement reporting needs, the development of significant
manual workarounds in this area masks the fact that NASA's core module
is not designed to and cannot produce timely and reliable PP&E data
with traceability to transaction-based support. The ability to produce
reliable numbers once a year for financial reporting purposes does not
equate to FFMIA compliance.
In accordance with FFMSR, federal accounting standards, and the SGL,
when an agency incurs costs for the purchase or construction of PP&E
and material, those costs should be recorded in both the agency's asset
management system and its core financial management systems' general
ledger. The only difference for contractor-held property is that the
asset management system belongs to the contractor. The asset management
system, whether NASA's or its contractors', would maintain the agency's
detailed logistical property records for PP&E and materials--including
information related to asset location, date of purchase, useful life,
quantity, cost, and condition--and the core financial module's general
ledger would maintain a cumulative balance of all purchased or
constructed property based on the cost incurred for individual items.
The ability to reconcile detailed transactions in the asset management
system with amounts recorded in the general ledger provides an
efficient way to maintain independent general ledger control over these
assets. As mentioned above, NASA first expenses all PP&E in the core
financial module, and then later, makes adjustments to record the costs
of PP&E as assets at a summary level. There is currently no
traceability from the core financial module general ledger to the
detailed logistical property records of PP&E and materials.
NASA also stated that one of the objectives of the asset management
module, now in formulation, is to significantly improve reporting for
contractor-held property. While it is our understanding that NASA's new
asset management module, as planned, will maintain detailed property
records for NASA-held property and be integrated with other IFMP
modules, including the core financial module, we know of no plans to
add contractor-held property to this system. In fact, the Federal
Acquisition Regulation requires contractors to maintain the logistical
property records for government property in their possession and
prohibits government agencies from maintaining duplicate property
records. Under these circumstances, as part of an overall effort to
reengineer its acquisition management process, we believe that NASA
must capture the cost and other information it needs from its
contractors and develop traceability to contractor logistical records
to ensure accountability over its contractor-held property on an
ongoing basis.
Budgetary Information:
NASA disagreed with our recommendation regarding its ability to produce
reliable, timely, and useful budgetary information, including
adjustments to prior year obligations. NASA stated that although it
identified certain transactional reporting limitations in its initial
deployment of the core financial module, it developed alternative or
"workaround" procedures to ensure the accurate and timely reporting of
the identified transactions. However, as stated previously, we do not
believe that the manual processes or workarounds NASA uses to produce
year-end balances for the agency's annual financial statements satisfy
the requirements of FFMIA. While NASA's written comments indicate that
many of these deferred capabilities were largely enabled by September
30, 2003, they also indicate that more time will be required before the
module can process adjustments to prior year obligations. As a result,
NASA must use manual workarounds to process these transactions related
to fiscal year 2003 activity. We note that these are the same manual
procedures used to compensate for deficiencies in NASA's legacy systems
that resulted in the $644 million error in NASA's fiscal year 1999
Statement of Budgetary Resources.[Footnote 22]
Accrued Costs and Accounts Payable:
NASA disagreed with our conclusion that its overall financial
management system does not properly capture and report all accrued
costs and accounts payable. However, we did not report that the
information was not contained within the system; rather, we reported
that it was not posted to the general ledger. We recognize that NASA
records costs that exceed current obligations in the IFMP business
warehouse until additional funds are obligated and in order to
highlight or detect potential program cost overruns. While we encourage
NASA's effort to monitor costs in excess of obligations, we do not
believe its method for doing so is appropriate. We continue to believe
that these costs should be properly recorded in the general ledger in
the period in which they are incurred. The risk in NASA's method is
that when costs and liabilities are not properly recorded in the
general ledger, these balances are likely to be understated in any
financial reports produced during the year, as well as at year-end.
It is also important to note that comparing costs with obligations will
not necessarily detect a cost overrun. For example, this strategy would
not have alerted NASA to its largest cost overrun in recent years--the
$5 billion cost growth in the International Space Station program
reported in 2001. This overrun was not the result of incurring more
costs than the funds obligated. Instead, it was due to the cost growth
projected to occur in the future--i.e., growth in the estimated costs
to complete the program. This cost overrun went undetected for a long
period of time because of NASA's deeply-rooted culture of managing
programs based on current year budgets rather than total costs. As we
reported in 2002,[Footnote 23] for NASA to manage its program costs
properly, it needs to focus on the total costs of a program rather than
just annual budgets. Thus, NASA's plan to hold costs in suspense when
they exceed obligations will not make such cost overruns any easier to
detect or manage. Instead, as we reported in April 2003, to adequately
oversee NASA's contracts, program managers need reliable contract cost
data--both budgeted and actual--and the ability to integrate these data
with contract schedule information to monitor progress on the contract.
However, because program managers were not involved in defining system
requirements or reengineering business processes, the core financial
module was not designed to integrate cost and schedule data needed by
program managers.
Full-Cost Accounting:
NASA also disagreed with our recommendation concerning its system's
ability to account for the full cost of its programs and asserted that
it completed implementation of its full-cost accounting capability
within IFMP as of October 1, 2003. However, IFMP management told us in
early October that this capability would not become operational until
October 26, 2003, after NASA completed its year-end closing procedures.
Because of our reporting time frame, we did not conduct the detailed
procedures that would have been necessary to determine whether or not
this function had begun operating.
As agreed with your offices, unless you announce its contents earlier,
we will not distribute this report further until 30 days from its date.
At that time, we will send copies to interested congressional
committees, the NASA Administrator, and the Director of the Office of
Management and Budget. We will make copies available to others upon
request. In addition, the report will be available at no charge on the
GAO Web site at [Hyperlink, http://www.gao.gov] http://www.gao.gov.
If you or your staffs have any questions concerning this report,
please contact me at (202) 512-9505 or [Hyperlink, kutzg@gao.gov],
Keith Rhodes at (202) 512-6412 or [Hyperlink, rhodesk@gao.gov], or
Diane Handley at (404) 679-1986 or [Hyperlink, handleyd@gao.gov]. Key
contributors to this report are acknowledged in appendix III.
Signed by:
Gregory D. Kutz:
Director Financial Management and Assurance:
Keith A. Rhodes:
Chief Technologist:
Applied Research and Methods:
[End of section]
Appendix II: Comments From the National Aeronautics and Space
Administration:
National Aeronautics and Space Administration:
Office of the Administrator Washington, DC 20546-0001:
October 31, 2003:
Mr. Gregory D. Kutz
Director:
Financial Management and Assurance
United States General Accounting Office
Washington, DC 20548:
Dear Mr. Kutz:
Thank you for the opportunity to review and comment on the General
Accounting Office (GAO) draft report, BUSINESS MODERNIZATION NASA's
Integrated Financial Management Program Does Not Fully Address Agency's
External Reporting Issues (GAO-04-151). We appreciate the GAO's
continued interest in NASA's programs and our efforts to successfully
implement the full complement of all the project modules comprising the
Integrated Financial Management Program (IFMP).
Overall, it is important to note that your report reviews the status of
our IFM Program's Core Financials module as of June 2003. This is a key
point for several reasons, as noted in our enclosed comments, but most
importantly because it does not assess the status of the same Core
Financials functionality and FFMIA compliance at fiscal year-end -
September 30, 2003 - which is the statutory date used for FFMIA
certification.
NASA is committed to implementing the full functionality of the IFM
system over the next few years and, in doing so, is and will continue
to take advantage of the benefits brought to us by your reviews of the
IFM Program. GAO's observations and recommendations always receive
careful consideration and have been used, in many instances, to help us
enhance the functionality of our Program and used to mitigate
development and operational risks. However, in this instance, we do
respectfully disagree with your conclusions and subsequent
recommendations as they apply to a past status of IFM's Core Financials
Module implementation, which is by now significantly different from the
current application.
Cordially,
Signed by:
Frederick D. Gregory:
Deputy Administrator:
Enclosure:
Appendix I: Objective, Scope, and Methodology:
The objective of this report was to assess whether the National
Aeronautics and Space Administration (NASA) Integrated Financial
Management Program's (IFMP) core financial module, as implemented on
June 2003, would satisfy NASA's external reporting requirements, such
as reliable and auditable financial statements, congressional
information needs, and other reporting requirements. Specifically, we
assessed whether the core financial module (1) accurately accounts for
Property, Plant, and Equipment (PP&E) and materials and supplies, (2)
properly accounts for the full cost of NASA's projects and programs,
(3) captures and reports certain key budgetary information, (4)
accurately records accounts payable, and (5) complies substantially
with the requirements of the Federal Financial Management Improvement
Act (FFMIA) of 1996. We did not assess other aspects of the core
financial module's capabilities.
We interviewed officials from NASA's financial management division and
the NASA Office of Inspector General to identify various reporting
requirements and weaknesses in meeting these requirements, and to
determine how the core financial module will provide the data needed to
meet these requirements. We evaluated fiscal year 2002 internal control
weaknesses reported by PricewaterhouseCoopers, NASA's independent
auditors, related to PP&E, material and supplies, and financial
reporting. However, for the purposes of this report we did not review
the auditors' underlying work paper support. We also reviewed NASA's
process for preparing the Statement of Budgetary Resources and
reporting accounts payable, and any related issues identified by
auditors.
We reviewed applicable Treasury, Office of Management and Budget, and
NASA guidance, and related federal accounting standards as well as
federal financial management system requirements promulgated by the
Joint Financial Management Improvement Program.
At two NASA centers, we observed how transactions are recorded in the
general ledger within the core financial module and discussed these
processes with users of the system. We reviewed nonrepresentative
selections of transactions for PP&E, materials, accounts payable, and
budgetary transactions. We traced selected transactions to their source
documents, and also traced selected source documents to the general
ledger. We assessed whether transactions were recorded consistently
with the Treasury Financial Manual. We also observed and discussed how
information on contractor cost reports is recorded in the core
financial module.
We interviewed various officials from IFMP and its core financial
project design and implementation teams, including the IFMP Deputy
Program Director, the Core Financial Project Manager, and the Core
Financial Deputy Project Manager to clarify our understanding of the
core financial module's functions and obtain the most recent
information on the status of various implementation issues as of June
2003. We also reviewed relevant audit reports from the NASA IG and the
results of an independent compliance review on the core financial
module performed by NASA's consultant.
We performed our work primarily at NASA headquarters in Washington,
D.C. and the two NASA centers--Marshall Space Center in Huntsville,
Alabama and Glenn Research Center in Cleveland, Ohio--where the core
financial module was implemented first. Our work was performed from
April 2003 through September 2003 in accordance with generally accepted
government auditing standards.
We requested comments on a draft of this report from the NASA
Administrator or his designee. Written comments from the NASA Deputy
Administrator are presented and evaluated in the "Agency Comments and
Our Evaluation" section of this report and are reprinted in appendix
II.
Appendix II: Comments From the National Aeronautics and Space
Administration:
National Aeronautics and Space Administration:
Office of the Administrator Washington, DC 20546-0001:
October 31, 2003:
Mr. Gregory D. Kutz
Director:
Financial Management and Assurance
United States General Accounting Office
Washington, DC 20548:
Dear Mr. Kutz:
Thank you for the opportunity to review and comment on the General
Accounting Office (GAO) draft report, BUSINESS MODERNIZATION NASA's
Integrated Financial Management Program Does Not Fully Address Agency's
External Reporting Issues (GAO-04-151). We appreciate the GAO's
continued interest in NASA's programs and our efforts to successfully
implement the full complement of all the project modules comprising the
Integrated Financial Management Program (IFMP).
Overall, it is important to note that your report reviews the status of
our IFM Program's Core Financials module as of June 2003. This is a key
point for several reasons, as noted in our enclosed comments, but most
importantly because it does not assess the status of the same Core
Financials functionality and FFMIA compliance at fiscal year-end -
September 30, 2003 - which is the statutory date used for FFMIA
certification.
NASA is committed to implementing the full functionality of the IFM
system over the next few years and, in doing so, is and will continue
to take advantage of the benefits brought to us by your reviews of the
IFM Program. GAO's observations and recommendations always receive
careful consideration and have been used, in many instances, to help us
enhance the functionality of our Program and used to mitigate
development and operational risks. However, in this instance, we do
respectfully disagree with your conclusions and subsequent
recommendations as they apply to a past status of IFM's Core Financials
Module implementation, which is by now significantly different from the
current application.
Cordially,
Signed by:
Frederick D. Gregory:
Deputy Administrator:
Enclosure:
Enclosure:
NASA Response to Draft General Accounting Office (GAO) Report: BUSINESS
MODERNIZATION: NASA's Integrated Financial Management Program Does Not
Fully Address Agency's External Reporting Issues (GAO-04-151) Dated
October 10, 2003:
1. GAO Recommendation: Based on the findings from this review, in
conjunction with our April report, we reiterate our April
recommendation that NASA:
a. Engage stakeholders - including program managers, cost estimators,
and the Congress - in developing a complete and correct set of user
requirements;
NASA Response to GAO Recommendation la.
NASA did actively engage stakeholders, particularly program managers
and cost estimators, in the design requirements for the Core Financials
system; this focus has been consistent with the historical scope of the
project. The system does have the capability to meet their needs for
financial information although the complexity of the environment and
the realities of transition timing mean that "full benefit" realization
will take several years. The system, as designed, provides
significantly more capability and flexibility to capture financial
information across projects than has ever been previously available.
Because the system has so much data and integrates it from multiple
perspectives, there is a significant learning curve to convert the data
into useful information supporting better management decisions.
There are two current initiatives in this area. First, there is an
internal " Enterprise" led team used to define Agencywide financial
reports, which will be used to assess ongoing program and project
financial performance. Over one hundred standard reports already exist
in the Core system and the "Business Warehouse" analytical reporting
tool enhances our capability to create new reports. Our key issue lies
in defining the critical "decision-support" financial information that
managers need on an ongoing basis and to ensure that this information
also reflects the new full-cost data structure implemented in October
2003. This effort will complete its first phase in November 2003. In
parallel, the system has now been opened using the full
FY 2004 configuration which allows managers to define the level of
detail they need to support their requirements. When the system
initially went operational throughout FY 2003 this level of detail was
often constrained by legacy systems.
Even with our current focus on benefit realization, the Core Financials
module alone cannot meet all the functional needs to manage a program
or to prepare a cost estimate. This is why, within the IFM Program
scope, a number of parallel and complementary efforts are underway to
meet the full breadth of user requirements. For example, in parallel to
the Core Financials roll out, the IFM Program deployed
recently the first version of "Erasmus," an executive-level program
performance reporting capability. This is the first time that cost,
schedule, and technical performance data for all of our major programs
and projects is consistently and regularly reported in an Agencywide,
Web-based environment. Additionally, our Budget Formulation module,
scheduled for rollout in June 2004, and Asset Management module,
scheduled for a 2005 deployment, will make significant contributions to
our program management and cost estimating activities. In both cases,
there is extensive engagement from these communities in the design and
deployment phases of those forthcoming IFM modules.
b. Reengineer its acquisition management processes, particularly with
respect to the consistency and detail of budget and actual cost and
schedule data provided by contractors.
NASA Response to GAO Recommendation lb.
The Core Financials module, for the first time, provides the capability
to extract, in near real-time, financial and procurement information
from the same consistent, transparent and reliable data source NASA-
wide. In 2004, this capability will be expanded to encompass more data
elements with the objective of further eliminating potentially outdated
information available solely in paper reports. Additionally, the
configuration of the SAP system provides extensive reporting and
analytical capabilities beyond those made possible today using the
current Agencywide coding structure. The SAP system has been configured
to capture approximately 30 additional detail elements beyond those
identified in the existing Agency coding structure.
Based on the enhancement brought by the IFM system, NASA is currently
assessing its contractor-reporting requirements as its Program
Management policy and guidelines are subsequently being updated. These
decisions will drive the IFMP requirements for existing and future
analytical and reporting capabilities. In addition, the Asset
Management module, which is now in formulation, has a stated objective
to significantly improve reporting for contractor-held property. This
will build on the expanded contractor reporting requirements already
implemented by the Agency during 2003. The option of implementing SAP's
Project Systems, a "Best of Suite" tool which could be used to manage
diverse project and program costs and schedules under an integrated
environment, is also being evaluated. Those decisions should be
completed by June 2004.
2. GAO Recommendation: We also recommend that the Administrator direct
the Program Executive Officer for IFMP to implement a corrective action
plan in coordination with NASA's CFO that will produce financial
management systems
that comply substantially with the requirements of FFMIA, including
capabilities to produce timely, reliable, and useful financial
information related to:
a. Property, plant, equipment and materials:
NASA Response to GAO Recommendation 2a.
NASA respectfully disagrees that its current processes do not produce
timely, reliable and useful financial information nor meet Federal
Financial Management Improvement Act (FFMIA) requirements for Property
Plan and Equipment (PP&E.) As a result of our FY 2002 financial
statement audit, NASA has already took significant corrective action to
obtain more frequent detailed property reporting from its largest 55
contracts, accounting for $10.8 billion of the $11 billion of
contractor held property reported on the FY 2002 financial statements.
These collective actions and their effectiveness were confirmed by the
recommendation of the Office of the Inspector General to remove PP&E
and Materials as a material weakness for FFMIA reporting for FY 2003.
This is not to suggest that NASA is fully satisfied with the status of
PP&E reporting. As you know, NASA is about to begin the Integrated
Asset Management Module of IFMP. GAO's observations and insights are
considered valued input and will be used to help guide the process as
we move forward with that design and implementation.
b. Budgetary information including adjustments to prior year
obligations;
NASA Response to GAO Recommendation 2b.
NASA respectfully disagrees with the assertion that it cannot
accurately capture and report budgetary infonnation including
adjustments to prior year obligations. Based on early operational
performance, NASA identified certain transactional reporting
limitations in the initial deployment of its Core Financials module. We
subsequently developed alternative procedures to ensure the accurate
and timely reporting of the identified transactions. Furthermore, many
of the deferred capabilities cited by GAO as of June 2003 were largely
enabled by 2003 fiscal year-end.
However, it should be noted that the realities of selecting and
implementing Commercial Off-the-Shelf (COTS) software requires a "best-
fit" methodology including re-engincering and some performance
tradeoffs. NASA is clearly facing the "startup" issues associated with
a system as complex and comprehensive as the Core Financial Module. The
current limitations of the software regarding prior year obligations
may take some time to be fully updated to our satisfaction. We
recognize that we are using more manual "workaround" processes than we
would have liked, but they will be reduced over
time as SAP provides new capabilities and becomes more familiar with
NASA's specific needs. The selection of a COTS product always entails a
near-term evolutionary adaptation which includes both customer process
re-engineering and product enhancements. It should also be noted that
manual processes, as long as they produce reliable and timely
information, while not preferred, are acceptable practices under
current JFMIP system requirements.
c. Accounts payable and accrued costs; and
NASA Response to GAO Recommendation 2c.
NASA respectfully disagrees with the assertion that its overall
financial management system cannot properly capture and report all
accounts payable and accrued costs. Again, due to timing differences,
GAO may not have had the opportunity to review an integral part of the
IFMP system, the Business Warehouse (BW) application that provides NASA
managers the ability to track all costs associated with projects by
work breakdown structure (WBS), unique project number (UPN) and
individual contract. The BW application is an integral part of NASA's
overall financial management system and a very powerful analytical and
reporting tool.
Specifically, all costs, including cost over obligations, are reported
within BW. Due to previously stated concerns on hard-to-detect program
cost overruns, NASA's current budget execution and reporting
environment is structured to ensure that all cost over obligations
receive immediate managerial review. Consequently, additional
obligations are knowingly applied to critically identified activities/
tasks. Additionally, when financial statements are generated for both
internal and external reporting, a standard procedure has been set in
place to record within our general ledger the associated expenses and
corresponding other liabilities incurred resulting from cost over
obligations exceptions.
d. The full cost of programs for financial reporting purposes.
NASA Response to GAO Recommendation 2d.
NASA respectfully disagrees that the IFM system cannot properly account
for the full cost of programs for financial reporting purposes. As
discussed above, BW is an integral part of our overall financial
management system. Furthermore, as mandated, NASA has completed the
implementation of its full-cost accounting capability within IFMP as of
October 1, 2003, enabling it for all FY 2004 activity.
Finally, our full-cost implementation was staged to comply with both FY
2003 and FY 2004 reporting requirements. NASA implemented the Core
Financial Module in
FY 2003 and had to accommodate the accounting and appropriation
structure applicable to that year. As of October 1, 2003, our full-cost
structure has been defined and is configured in IFMP to support the FY
2004 accounting and appropriation structure.
[End of section]
Appendix III: GAO Contact and Staff Acknowledgments:
GAO Contact:
Diane Handley (404) 679-1986:
Acknowledgments:
Staff members who made key contributions to this report were Shawkat
Ahmed, Fannie Bivins, Kristi Karls, Chris Martin, and Maria Storts.
(192087):
:
FOOTNOTES
[1] The nine modules will consist of core financial, resume management,
travel management, position description management, human resources,
Erasmus, budget formulation, contract administration, and asset
management.
[2] See U.S. General Accounting Office, Business Modernization:
Disciplined Processes Needed to Better Manage NASA's Integrated
Financial Management Program, GAO-04-118 (Washington, D.C.: Nov. 21,
2003). Also, see U.S. General Accounting Office, Information
Technology: Architecture Needed to Guide NASA's Financial Management
Modernization, GAO-04-43 (Washington, D.C.: Nov. 21, 2003).
[3] See U.S. General Accounting Office, Business Modernization: NASA
Challenges in Managing Its Integrated Financial Management Program,
GAO-04-255 (Washington, D.C.: Nov. 21, 2003).
[4] 31 U.S.C. 3512 note (2000) (Federal Financial Management
Improvement).
[5] FFMIA requires auditors to report whether agencies' financial
management systems comply with federal financial management systems
requirements, applicable federal accounting standards (U.S. generally
accepted accounting principles), and the U.S. Standard General Ledger
at the transaction level.
[6] Policies and standards prescribed for executive agencies to follow
in developing, operating, evaluating, and reporting on financial
management systems are defined in the Office of Management and Budget
(OMB) Circular A-127, Financial Management Systems. These system
requirements provide the framework for establishing integrated
financial management systems to support the partnership between program
and financial managers, and ensure the integrity of information for
decision making and measuring performance.
[7] The SGL was established by an interagency task force under the
direction of OMB and mandated for use by agencies in OMB and Treasury
regulations in 1986. The SGL promotes consistency in financial
transaction processing and reporting by providing a uniform chart of
accounts and pro forma transactions used to standardize federal
agencies' financial information accumulation and processing throughout
the year.
[8] In October 1990, the Secretary of the Treasury, the Director of
OMB, and the Comptroller General established the Federal Accounting
Standards Advisory Board (FASAB) to develop a set of generally accepted
accounting standards for the federal government. FASAB promulgates
federal accounting standards that agency Chief Financial Officers use
in developing financial management systems and preparing financial
statements.
[9] At that time, we began a special effort to review and report on the
federal program areas that our work had identified as high risk because
of vulnerabilities to waste, fraud, abuse, and mismanagement. We first
issued our High-Risk Series in December 1992 and have continued to
include NASA's contract management as an area of high risk since. See
U.S. General Accounting Office, High-Risk Series: NASA Contract
Management, GAO/HR-93-11 (Washington, D.C.: December 1992) and Major
Management Challenges and Program Risks: National Aeronautics and Space
Administration, GAO-03-114 (Washington, D.C.: January 2003).
[10] SAP R/3 is an integrated software solution produced by software
vendor SAP, Inc.
[11] JFMIP is a joint undertaking of the U.S. Department of the
Treasury, General Accounting Office, Office of Management and Budget,
and Office of Personnel Management, working in cooperation with one
another, with other agencies, and with the private sector, to improve
financial management in the federal government. The program was given
statutory authorization in the Budget and Accounting Procedures Act of
1950 (31 U.S.C. 3511(d)). One of JFMIP's roles has been to establish
detailed requirements for agencies' financial management systems.
[12] U.S. General Accounting Office, Business Modernization:
Improvements Needed in Management of NASA's Integrated Financial
Management Program, GAO-03-507 (Washington, D.C.: Apr. 30, 2003).
[13] NASA defined those in the financial accounting arena as the
system's users who, under NASA's plan, would determine the system's
requirements, guide its implementation, and define and measure its
success. Those who would benefit from the system's new capabilities
were identified as stakeholders. Under NASA's plan, they would be the
ultimate beneficiaries of the system improvements, but would not have a
role in setting requirements or measuring and determining the success
of the system's implementation.
[14] NASA Office of Inspector General, Integrated Financial Management
Program Core Financial Module Conversion to Full Cost Accounting, IG-
03-015 (Washington, D.C.: May 30, 2003).
[15] NASA has typically required its contractors to report information
about property in their possession on an annual basis. However, NASA
began requiring quarterly reports for its 55 largest contracts as of
June 30, 2003, and plans to incrementally establish quarterly reporting
for all relevant contracts in the next couple of years.
[16] U.S. General Accounting Office, Financial Management: Misstatement
of NASA's Statement of Budgetary Resources, GAO-01-438 (Washington,
D.C.: Mar. 30, 2001).
[17] 31 U.S.C. 1501 (a) (1) (2000).
[18] The Statement of Budgetary Resources provides information on the
availability and use of budgetary resources, as well as the status of
budgetary resources at the end of the period.
[19] The Standard Form 133 is prepared quarterly and is the principal
source of information for Statement of Budgetary Resources. It also
fulfills the requirement that the President review federal expenditures
at least four times a year.
[20] FASAB promulgates Federal Accounting Standards. Currently, there
are 25 Statements of Federal Financial Accounting Standards (SFFAS) and
4 statements of federal financial accounting concepts (SFFAC). The
accounting standards are authoritative statements of how particular
types of transactions and other events should be reflected in financial
statements. SFFACs explain the objectives and ideas upon which FASAB
develops the standards. The concepts and standards provide the
authoritative references for developing systems, financial statement
reporting, and maintaining day-to-day financial records.
[21] U.S. General Accounting Office, Executive Guide: Creating Value
Through World-class Financial Management, GAO/AIMD-00-134 (Washington,
D.C.: Apr. 1, 2000).
[22] GAO-01-438.
[23] U.S. General Accounting Office, Space Station: Actions Under-way
to Manage Cost, But Significant Challenges Remain, GAO-02-735
(Washington, D.C.: July 17, 2002).
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