Business Modernization
NASA's Challenges in Managing Its Integrated Financial Management Program Gao ID: GAO-04-255 November 21, 2003The National Aeronautics and Space Administration (NASA) spends 90 percent--$13 billion--of its budget on contractors. Yet since 1990, GAO has designated NASA's contract management as a high-risk area--in part because the agency failed to implement a financial management system to provide information needed to make key program decisions. In April 2000, NASA initiated its most recent effort to implement an effective financial management system--the Integrated Financial Management Program (IFMP). Three years into the program, GAO found NASA risks building a system that will cost more and do less than planned. As a result, the Congress requested reviews of NASA's IFMP enterprise architecture and financial reporting and program cost and schedule controls.
IFMP offers NASA an opportunity to modernize its business processes and systems and improve its operations. However, NASA's acquisition strategy has created a number of challenges for IFMP. First, NASA has acquired and implemented many IFMP components--including the Core Financial module, the backbone of the system--without an enterprise architecture, or modernization blueprint, to guide and constrain the program. NASA has since recognized the need for an architecture and, after GAO completed its audit work, released one that NASA stated was incomplete. NASA has also taken steps to implement key architecture management capabilities, such as establishing an architecture program office and designating a chief architect. However, NASA has yet to establish other key architecture management capabilities, such as designating an accountable corporate entity to lead the architecture effort. Moreover, the architecture products NASA has used to date were insufficient to manage its investment in IFMP. NASA's approach of acquiring and implementing IFMP outside the context of an architecture increases the risk that the system's components will not support agencywide operations--an outcome that could cause costly system rework. Two years into IFMP's development, NASA accelerated its implementation schedule from fiscal year 2008 to fiscal year 2006, with the Core Financial module to be completed in June 2003. To meet this aggressive schedule, NASA deferred testing and configuration of many key capabilities of the Core Financial module, including the ability to report the full cost of its programs. When the module was implemented at each of NASA's 10 centers, many of the financial events or transaction types needed by program managers to carry out day-to-day operations and produce useful financial reports had not been included. As a result of these and other weaknesses, NASA cannot ensure that the system routinely provides its program managers and other key stakeholders and decision makers--including the Congress--with the financial information needed to measure program performance and ensure accountability. IFMP is further challenged by questionable cost estimates, an optimistic schedule, and insufficient processes for ensuring adequate funding reserves. IFMP's current life-cycle cost estimate does not include the full cost likely to be incurred during the life of the program. Until NASA uses more disciplined processes to prepare IFMP's life-cycle cost estimate, the program will have difficulty controlling costs. In addition, IFMP's schedule margins may be too compressed to manage program challenges--such as personnel shortages, uncertainties about software availability, and Office of Management and Budget initiatives to implement electronic systems for agency business processes governmentwide. These initiatives have already affected planning for IFMP's payroll, procurement, and travel components, an outcome that could result in schedule delays and cost growth. Finally, reserve funding for IFMP contingencies may be insufficient--particularly problematic, given the significant risks confronting the program.
GAO-04-255, Business Modernization: NASA's Challenges in Managing Its Integrated Financial Management Program
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Summary Report to the Committee on Commerce, Science, and
Transportation, U.S. Senate, and the Committee on Science, House of
Representatives:
United States General Accounting Office:
GAO:
November 2003:
BUSINESS MODERNIZATION:
NASA's Challenges in Managing Its Integrated Financial Management
Program:
Business Modernization:
GAO-04-255:
GAO Highlights:
Highlights of GAO-04-255, a summary report of GAO-04-43, GAO-04-151,
and GAO-04-118, reports to the Senate Committee on Commerce, Science,
and Transportation, and the House Committee on Science
Why GAO Did This Study:
The National Aeronautics and Space Administration (NASA) spends 90
percent”$13 billion”of its budget on contractors. Yet since 1990, GAO
has designated NASA‘s contract management as a high-risk area”in part
because the agency failed to implement a financial management system
to provide information needed to make key program decisions. In April
2000, NASA initiated its most recent effort to implement an effective
financial management system”the Integrated Financial Management
Program (IFMP). Three years into the program, GAO found NASA risks
building a system that will cost more and do less than planned. As a
result, the Congress requested reviews of NASA‘s IFMP enterprise
architecture and financial reporting and program cost and schedule
controls.
What GAO Found:
IFMP offers NASA an opportunity to modernize its business processes
and systems and improve its operations. However, NASA‘s acquisition
strategy has created a number of challenges for IFMP. First, NASA has
acquired and implemented many IFMP components”including the Core
Financial module, the backbone of the system”without an enterprise
architecture, or modernization blueprint, to guide and constrain the
program. NASA has since recognized the need for an architecture and,
after GAO completed its audit work, released one that NASA stated was
incomplete. NASA has also taken steps to implement key architecture
management capabilities, such as establishing an architecture program
office and designating a chief architect. However, NASA has yet to
establish other key architecture management capabilities, such as
designating an accountable corporate entity to lead the architecture
effort. Moreover, the architecture products NASA has used to date
were insufficient to manage its investment in IFMP. NASA‘s approach
of acquiring and implementing IFMP outside the context of an
architecture increases the risk that the system‘s components will not
support agencywide operations”an outcome that could cause costly
system rework.
Two years into IFMP‘s development, NASA accelerated its
implementation schedule from fiscal year 2008 to fiscal year 2006,
with the Core Financial module to be completed in June 2003. To meet
this aggressive schedule, NASA deferred testing and configuration of
many key capabilities of the Core Financial module, including the
ability to report the full cost of its programs. When the module was
implemented at each of NASA‘s 10 centers, many of the financial
events or transaction types needed by program managers to carry out
day-to-day operations and produce useful financial reports had not
been included. As a result of these and other weaknesses, NASA cannot
ensure that the system routinely provides its program managers and
other key stakeholders and decision makers”including the Congress”with
the financial information needed to measure program performance and
ensure accountability.
IFMP is further challenged by questionable cost estimates, an
optimistic schedule, and insufficient processes for ensuring adequate
funding reserves. IFMP‘s current life-cycle cost estimate does not
include the full cost likely to be incurred during the life of the
program. Until NASA uses more disciplined processes to prepare IFMP‘s
life-cycle cost estimate, the program will have difficulty
controlling costs. In addition, IFMP‘s schedule margins may be too
compressed to manage program challenges”such as personnel shortages,
uncertainties about software availability, and Office of Management
and Budget initiatives to implement electronic systems for agency
business processes governmentwide. These initiatives have already
affected planning for IFMP‘s payroll, procurement, and travel
components, an outcome that could result in schedule delays and cost
growth. Finally, reserve funding for IFMP contingencies may be
insufficient”particularly problematic, given the significant risks
confronting the program.
What GAO Recommends:
GAO is making recommendations in three separate reports:
* On IFMP‘s enterprise architecture, GAO recommends that NASA
establish an effective architecture to guide and constrain the
program.
* On IFMP‘s financial reporting, GAO recommends that NASA identify
and address all areas that do not comply with federal systems
requirements.
* On IFMP‘s cost and schedule control, GAO recommends that NASA
follow best practices and NASA guidance in preparing the life-cycle
cost estimate.
www.gao.gov/cgi-bin/getrpt?GAO-04-255.
To view the full product, including the scope and methodology, click
on the link above.
[End of section]
Contents:
Letter:
Appendix: NASA's Challenges in Managing Its Integrated Financial
Management Program:
Results in Brief:
IFMP Has Proceeded without an Enterprise Architecture, and NASA's
Ongoing Architecture Management Efforts Are Missing Key Elements:
Core Financial Module Lacks Capabilities to Facilitate Timely and
Accurate Reporting and Comply with Federal Law:
IFMP Further Challenged by Questionable Cost Estimates and an
Optimistic Schedule:
Conclusions:
Abbreviations:
IFMP: Integrated Financial Management Program:
FFMIA: Federal Financial Managememt Improvement Act of 1996:
NASA: National Aeronautics and Space Administration:
OMB: Office of Management and Budget:
United States General Accounting Office:
Washington, DC 20548:
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:
The National Aeronautics and Space Administration's (NASA) activities
encompasses a broad range of complex and technical endeavors--from
investigating the composition and resources of Mars to providing
satellite and aircraft observations of Earth for scientific and weather
forecasting purposes. Over the past decade, NASA has advanced space
exploration, scientific knowledge, and international cooperation, and
has accomplished unparalleled feats of engineering.
More than two-thirds of NASA's workforce is made up of contractors and
grantees, and 90 percent, or roughly $13 billion, of NASA's annual
budget is spent on work performed by its contractors. Yet since 1990,
we have identified NASA's contract management as a high-risk area--in
part because the agency has failed to implement a modern, fully
integrated financial management system. The lack of such a system has
hampered NASA's ability to oversee contracts, control program costs,
and ensure an effective human capital strategy--raising serious
concerns about NASA's management of its largest and most costly
programs, including the space shuttle program and the International
Space Station.
In April 2000, NASA initiated its third and most recent effort to
implement an effective financial management system--the Integrated
Financial Management Program (IFMP)--which NASA expects to complete in
fiscal year 2006. Through IFMP, NASA plans to replace the separate and
incompatible financial management systems used by NASA's 10 centers
with one integrated system. The new system is expected to provide
better decision data, consistent information across centers, and
improved functionality, thereby improving agencywide management of
NASA's financial, physical, and human resources.
However, 3 years into the development of IFMP--with significant
investment already made in the program--we found 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. As a
result, the Congress requested reviews of IFMP in three areas:
enterprise architecture, financial reporting, and program cost and
schedule control. This report provides a summary of the results of
these reviews, which are being reported today in the following three
separate products:
* Information Technology: Architecture Needed to Guide NASA's Financial
Management Modernization, GAO-04-43 (Washington, D.C.: Nov. 21, 2003).
For more information on this report, please contact Randolph C. Hite at
(202) 512-3439 or hiter@gao.gov.
* Business Modernization: NASA's Integrated Financial Management
Program Does Not Fully Address External Reporting Issues, GAO-04-151
(Washington, D.C.: Nov. 21, 2003). For more information on this report,
please contact Gregory D. Kutz at (202) 512-9095 or kutzg@gao.gov,
Keith A. Rhodes at (202) 512-6412 or Rhodes@gao.gov, or Diane Handley
at (404) 679-1986 or handleyd@gao.gov.
* Business Modernization: Disciplined Processes Needed to Better Manage
NASA's Integrated Financial Management Program, GAO-04-118
(Washington, D.C.: Nov. 21, 2003). For more information on this report,
please contact Allen Li at (202) 512-4841 or lia@gao.gov.
This summary report--along with our three reports--will not be further
distributed until 30 days from its date, unless you announce its
contents earlier. 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 also make copies available
to others upon request. In addition, the report will be available at no
charge on the GAO Web site at http://www.gao.gov.
Randolph C. Hite, Director Information Technology Architecture and
Systems Issues:
Gregory D. Kutz, Director Financial Management and Assurance:
Keith A. Rhodes, Chief Technologist Applied Research and Methods:
Allen Li, Director Acquisition and Sourcing Management:
Signed by Randolph C. Hite, Gregory D. Kutz, Keith A. Rhodes and
Allen Li:
[End of section]
Appendix I: NASA's Challenges in Managing Its Integrated Financial
Management Program:
For more than a decade, we have identified weak contract management and
the lack of reliable financial and performance information as posing
significant challenges to NASA's ability to effectively run its largest
and most costly programs. While NASA has made some progress in
addressing its contract management weaknesses through improved
management controls and evaluation of its procurement activities, NASA
has struggled to implement a modern integrated financial management
system. Such a system is key to efficiently producing accurate and
reliable information to oversee contracts, estimate and control program
costs, and report program financial activities to the Congress and
other stakeholders.
In April 2003, we issued a report on the agency's Integrated Financial
Management Program (IFMP)--NASA's latest effort to implement a modern
financial management system--and found that the agency has not followed
key best practices for acquiring and implementing IFMP and concluded
that the agency was at risk of implementing a system that would not
optimize mission performance.[Footnote 1] As agreed with the Congress,
we continued our review to determine (1) whether NASA has been
acquiring and implementing IFMP in the context of an enterprise
architecture; (2) the extent to which key components of IFMP will
assist NASA in meeting its external reporting requirements; and (3) the
reasonableness of NASA's life-cycle cost estimate, schedule, and
reserve funding for IFMP.
Results in Brief:
Through IFMP, NASA has committed to modernizing its business processes
and systems in a way that will introduce interoperability and thereby
improve the efficiency and effectiveness of its operations as well as
bring the agency into compliance with federal financial management
requirements. NASA has also committed to implementing IFMP within
specific cost and schedule constraints. However, earlier this year, we
reported that NASA faced considerable challenges in meeting these
commitments. Through our reviews of NASA's enterprise architecture and
IFMP's financial reporting and program cost and schedule control, we
found that NASA remains challenged in its ability to meet its IFMP
commitments in several areas--areas that continue to put the agency's
resources and programs at high risk.
First, NASA has acquired and implemented significant components of
IFMP--including the Core Financial module, the backbone of the system-
-without an enterprise architecture, or blueprint, to guide and
constrain the program. Our research has shown that attempting major
modernization programs like IFMP without having a well-defined
architecture risks, for example, implementing processes and building
supporting systems that are duplicative, lack interoperability, and do
not effectively and efficiently support mission operations and
performance. Since we completed our audit work, NASA issued an initial
version of an enterprise architecture, continuing its commitment to
pursing a complete architecture and acquiring and implementing IFMP
within the context of that architecture. However, because of the timing
of our report, we were unable to assess NASA's initial architecture.
NASA has also established some important architecture management
controls--such as establishing an enterprise architecture program
office and designating a chief architect. However, it has not yet
established others, which will make its efforts to develop, implement,
and maintain a well-defined architecture more challenging.
Second, NASA has been pursuing an aggressive IFMP implementation
schedule, to the point of delaying implementation of many system
capabilities. NASA accelerated its schedule by 2 years, with the Core
Financial module to be completed in fiscal year 2003. To meet this
compressed schedule, NASA deferred configuration and testing of many
key capabilities of the Core Financial module, including the ability to
report the full cost of its programs. When NASA announced in June 2003,
full implementation of the module at each of its 10 centers, many of
the financial events or transaction types needed by program managers to
carry out day-to-day operations and produce useful financial reports
had not been included. If these and other weaknesses are not addressed,
the Core Financial module and related systems will not comply with the
requirements of the Federal Financial Management Improvement Act
(FFMIA) of 1996.[Footnote 2] Specifically, NASA cannot ensure that the
system routinely provides NASA program managers and other key
stakeholders and decision makers--including the Congress--with
reliable, useful, and timely financial information needed to measure
program performance and ensure accountability.
Finally, questionable cost estimates, an optimistic schedule, and
insufficient processes for ensuring adequate funding reserves put IFMP
at further risk of not meeting its cost and schedule commitments. In
preparing the current cost estimate for IFMP's 10-year life cycle, NASA
did not include the full cost likely to be incurred during the life of
the program, including costs to retire the system and other direct and
indirect costs. Until NASA uses more disciplined processes in preparing
the program's cost estimate, the reliability of the life-cycle cost
estimate will be uncertain and the program will have difficulty
controlling costs. In addition, IFMP's compressed schedule margins may
be insufficient to manage program challenges--such as personnel
shortages, uncertainties about software availability, and Office of
Management and Budget (OMB) initiatives to implement electronic systems
for agency business processes governmentwide. These OMB initiatives
have put IFMP in a reactionary mode and are already affecting planning
for the payroll, procurement, and travel components of the integrated
system, further impacting the program's cost and schedule. Reserve
funding for IFMP contingencies may also be insufficient--which
is particularly problematic, given the significant risks facing the
program. The Budget Formulation module is already experiencing
shortfalls in its reserves.
We have made a number of recommendations in our three reports to
improve NASA's acquisition strategy for IFMP. NASA reviewed and
provided comments on drafts of each of the three reports and concurred
with all of our recommendations aimed at establishing and maintaining
an effective enterprise architecture and accurately estimating program
cost and predicting the impact of program challenges. However, NASA did
not concur with our recommendations aimed at ensuring compliance with
FFMIA requirements because the agency believes that it is currently in
compliance. NASA's comments and our response can be found in the full
reports. Because this summary report draws exclusively from our three
IFMP reports and previously issued reports, we did not ask NASA to
provide separate comments on a draft of the summary report.
IFMP Has Proceeded without an Enterprise Architecture, and NASA's
Ongoing Architecture Management Efforts Are Missing Key Elements:
NASA has thus far acquired and deployed system components of IFMP
without an enterprise architecture, or agencywide modernization
blueprint, to guide and constrain program investment decisions--actions
that increased the chances that these system components will require
additional time and resources to be modified and to operate effectively
and efficiently. To correct this past practice, NASA released an
initial version of a new enterprise architecture after we completed our
audit work, which NASA recognizes as not yet complete but plans to
evolve and use to guide and constrain future IFMP investment decisions.
NASA's ability to do so effectively, however, is constrained by missing
architecture management capabilities. NASA's chief technology officer
agreed that these capabilities need to be established and said that
NASA plans to do so.
More specifically, NASA's stated intention is to use an architecture as
the basis for agencywide business transformation and systems
modernization. Such an intention necessitates that its architecture
products provide considerable depth and detail as well as logical and
rational structuring and internal linkages. That is, it means that
these architecture products should contain sufficient scope and detail
so that, for example, (1) duplicative business operations and systems
are eliminated, (2) business operations are standardized and integrated
and supporting systems are interoperable, (3) use of enterprisewide
services are maximized, and (4) related shared solutions are aligned,
like OMB's e-Government initiatives.[Footnote 3] Moreover, this scope
and detail should be accomplished in a way that (1) provides
flexibility in adapting to changes in the enterprise's internal and
external environments; (2) facilitates its usefulness and comprehension
by varying perspectives, users, or stakeholders; and (3) provides for
properly sequencing investments to recognize, for example, the
investments' respective dependencies and relative business value.
The architecture artifacts that NASA's chief technology officer
provided to us and represented as those used to date in acquiring and
implementing IFMP do not contain sufficient context (depth and scope of
agencywide operational and technical requirements) to effectively guide
and constrain agencywide business transformation and systems
modernization efforts. More specifically, these artifacts do not
satisfy the most basic characteristics of architecture content, such as
clearly distinguishing between artifacts that represent the "As Is" and
the "To Be" environments. In general, these products were limited to
descriptions of (1) technology characteristics, which is one of many
enterprise architecture elements, and (2) one of nine business
operations (finance and accounting). The chief technology officer
agreed that the architecture products used to date to acquire and
implement IFMP do not provide sufficient scope and content to
constitute a well-defined enterprise architecture.
Moreover, as NASA proceeds with its enterprise architecture effort, it
is critical that it employs rigorous and disciplined management
practices. Such practices form the basis of our architecture management
maturity framework,[Footnote 4] which specifies by stages the key
architecture management controls that are embodied in federal guidance
and best practices, provides an explicit benchmark for gauging the
effectiveness of architecture management and provides a road map for
making improvements. During the course of our review of IFMP, NASA
implemented some of these key architecture management capabilities,
such as having an enterprise architecture program office, designating a
chief architect, and using an architecture development methodology,
framework, and automated tools. However, NASA has not established other
key architecture management capabilities, such as designating an
accountable corporate entity to lead the architecture effort, having an
approved policy for developing and maintaining the architecture, and
implementing an independent verification and validation function to
provide needed assurance that architecture products and architecture
management processes are effective.
The chief technology officer agreed that NASA needs an effective
enterprise architecture program and stated that efforts are under way
to establish one. The chief technology officer also provided us with an
initial version of a NASA enterprise architecture on September 24,
2003, which was after we completed our audit work. According to this
official, while this initial version of the architecture is incomplete,
it does provide some of the missing contextual information (operational
and technical) that we had identified during our review.
Based on our experience in reviewing other agencies, not having an
effective enterprise architecture program is attributable to limited
senior management understanding and commitment, and cultural resistance
to having and using one. Our experience with federal agencies has also
shown that attempting to define and build major IT systems, like IFMP,
without first completing an enterprise architecture often results in IT
systems that are duplicative, are not well integrated, are
unnecessarily costly to maintain and interface, and do not effectively
optimize mission performance.
Core Financial Module Lacks Capabilities to Facilitate Timely and
Accurate Reporting and Comply with Federal Law:
The Core Financial module, considered the backbone of IFMP,[Footnote 5]
is intended to provide NASA's financial and program managers with
timely, consistent, and reliable cost and performance data to support
management decisions and external financial reporting. However, as we
reported in April 2003, the Core Financial module was not designed to
integrate the cost and schedule data needed to oversee NASA's
contractors--primarily because NASA did not adequately define the
requirements of key stakeholders, including program managers and cost
estimators, to allow it to configure the module to address their needs.
NASA originally planned to complete implementation of IFMP in fiscal
year 2008, but in fiscal year 2002, NASA accelerated the implementation
schedule to fiscal year 2006, with the Core Financial module to be
completed in fiscal year 2003. To meet this compressed schedule, NASA
deferred configuration and testing of almost half of the financial
events or transaction types that NASA identified as critical for
carrying out day-to-day operations and for producing external financial
reports. Moreover, NASA does not plan to automate more than a third of
the critical transaction types. Rather, NASA plans to continue entering
these transactions manually, making the agency more vulnerable to
processing errors and delays. For example, the Core Financial module
does not appropriately capture and record property, plant, and
equipment and material in its general ledger at the transaction level-
-which is needed to provide independent control over these assets.
As part of its implementation strategy, NASA delayed conversion to
full-cost accounting until the Core Financial module was implemented at
all centers. After announcing in June 2003 full implementation of the
module at each of its 10 centers, NASA began designing the new cost
allocation structure and expected that the full-cost accounting
capabilities needed to provide the full cost of its programs and
projects for external reporting purposes would be available through the
Core Financial module in October 2003. Because of the timing of our
reports, we could not verify the availability of this capability.
The Core Financial module as implemented in June 2003 also lacks the
capability to automatically classify and record upward and downward
adjustments of prior year obligations to the appropriate general ledger
accounts--a federal financial management system requirement and a key
capability to providing the data needed to prepare a Statement of
Budgetary Resources.[Footnote 6] When NASA tested specific requirements
related to adjustments to prior year obligations, the Core Financial
module incorrectly posted the adjustments. Consequently, NASA deferred
implementation of these requirements and opted to rely on manual
compilations, system queries, or other work-arounds to extract these
data. This cumbersome, labor-intensive effort to gather end-of-year
information greatly increases the risk of misreporting--as we stated in
March 2001, when NASA reported a misstatement of $644 million in its
fiscal year 1999 Statement of Budgetary Resources.[Footnote 7] While
NASA had hoped to use a "patch" release or future software upgrade to
post upward and downward adjustments--and thereby eliminate manual
work-arounds--these efforts have proven unsuccessful. NASA is
continuing to work with the software vendor to reconfigure the software
as necessary to accommodate upward and downward adjustment processing.
Finally, the Core Financial module does not capture accrued costs or
record accounts payable if the cumulative costs exceed obligations for
a given contract. Yet, federal accounting standards and NASA guidance
require costs to be accrued in the period in which they are incurred
and any corresponding liability to be recorded as an account payable--
regardless of amounts obligated. Further, federal standards require
agencies to disclose unfunded accrued costs--that is, costs in excess
of obligations. As of June 30, 2003, NASA had not processed
approximately $245 million in costs that exceeded obligations or
recorded the corresponding accounts payable. Instead, these
transactions have been held outside of the general ledger in suspense
until additional money can be obligated. As a result, costs or
liabilities could be understated in its reports by the amount held in
suspense if NASA fails to adjust these amounts.
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.
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.
If NASA continues on its current track--one that has resulted in
significant limitations with regard to property accounting, full-cost
reporting capabilities, budgetary accounting, accrued costs, and
accounts payable--the Core Financial module and IFMP will fail to
comply with FFMIA requirements to build a fully integrated financial
management system that routinely provides decision makers with timely,
reliable, and useful financial information.
IFMP Further Challenged by Questionable Cost Estimates and an
Optimistic Schedule:
Questionable cost estimates, an optimistic schedule, and insufficient
processes for ensuring adequate funding reserves have put IFMP at an
even greater risk of not meeting program objectives. In preparing its
life-cycle cost estimates for IFMP,[Footnote 8] NASA did not use
disciplined cost-estimating processes as required by NASA and
recognized as best practices. For example, NASA's current IFMP life-
cycle cost estimate--which totals $982.7 million and is 14 percent, or
$121.8 million, over the previous IFMP life-cycle cost estimate--was
not prepared on a full-cost basis. The estimate includes IFMP direct
program costs, NASA enterprise support, and civil service salaries and
benefits, but it does not include the cost of retiring the system,
enterprise travel costs, the cost of nonleased NASA facilities for
housing IFMP, and other direct and indirect costs likely to be incurred
during the life of the program. In addition, NASA did not consistently
use breakdowns of work in preparing the cost estimate, although NASA
guidance calls for breaking down work into smaller units to facilitate
cost estimating and project and contract management as well as to help
ensure that relevant costs are not omitted. In cases where work
breakdowns were used, the agency did not always show the connection
between the work breakdown estimates and the official program cost
estimate. This has been a weakness since the inception of the program.
Without a reliable life-cycle cost estimate, NASA will have difficulty
controlling program costs.
In addition, NASA's schedule may not be sufficient to address program
challenges, such as personnel shortages and uncertainties about
software availability. To address personnel shortages during the
implementation of the Core Financial module, NASA paid nearly $400,000
for extra hours worked by center employees and avoided a slip in IFMP's
compressed schedule. However, the schedule for implementing the Budget
Formulation module has slipped because IFMP implemented this module
simultaneously with the Core Financial module--an action advised
against by a contractor conducting a lessons-learned study--placing
heavy demand on already scarce resources. Uncertainty regarding
software availability also puts the program at risk for completing the
integrated system on schedule. OMB's e-Government initiatives--which
aim to eliminate redundant systems governmentwide by using "best of
suite" software--could also create more difficult interface development
and a less integrated system, risking additional schedule delays and
cost growth. E-Government initiatives are already affecting planning
for IFMP's payroll-and procurement-related modules, and OMB's e-Travel
could replace IFMP's Travel Management module, which has already been
implemented. IFMP's fiscal year 2002 Independent Annual Review found
that e-Government initiatives are forcing the program into a reactive
mode, noting that (1) the benefits of a fully integrated system could
be lost under e-Government, (2) the scope of IFMP and timing of future
projects' implementation have become uncertain, and (3) cost increases
and schedule slippage to accommodate directives may occur.
Finally, the program did not consistently perform in-depth analyses of
the potential cost impact of risks and unknowns specific to IFMP, as
required by NASA guidance. Instead, the program established funding
reserves on the basis of reserve levels set by other high-risk NASA
programs. As a result, reserve funding for IFMP contingencies may be
insufficient--which is particularly problematic, given the program's
questionable cost estimates and optimistic schedule. One module--Budget
Formulation--is already experiencing shortfalls in its reserves, and
project officials expressed concern that the module's functionality may
have to be reduced. Moreover, the program did not quantify the cost
impact of high-criticality risks--risks that have a high likelihood of
occurrence and a high magnitude of impact--or link these risks to
funding reserves to help IFMP develop realistic budget estimates.
Conclusions:
NASA's latest effort to develop and implement an integrated financial
management system has been driven by an aggressive schedule--not by
requirements, available resources, and strategic planning. Without a
mature enterprise architecture to rationalize IFMP's implementation
schedule and reliable life-cycle cost estimates to ensure program
efficiency, NASA is creating a system that may lack the functionality
to achieve its intended goal: to provide accurate and timely financial
data needed to manage NASA's programs and account for the billions of
dollars the agency spends annually on work performed by its
contractors.
In our three reports being issued today, we make a number of
recommendations to the NASA Administrator, which if implemented
appropriately should help program managers get IFMP on track and,
ultimately, provide NASA with the fully integrated financial management
system that it has sought to acquire for more than a decade.
FOOTNOTES
[1] 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).
[2] 31 U.S.C. 3512 note (2000) (Federal Financial Management
Improvement).
[3] OMB has identified 24 Electronic Government--or "e-Government"--
initiatives that advocate the use of Internet-based technologies
governmentwide for agency business processes, such as payroll, travel
management, and recruiting. These initiatives are expected to support
the goal of the President's Management Agenda and ultimately provide
improved government services to citizens, businesses, and other levels
of government.
[4] U.S. General Accounting Office, Information Technology: A Framework
for Assessing and Improving Enterprise Architecture Management (Version
1.1), GAO-03-584G (Washington, D.C.: Apr. 1, 2003).
[5] Related IFMP modules will be integrated or interfaced with the Core
Financial module, where applicable.
[6] 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.
[7] U. S. General Accounting Office, Financial Management: Misstatement
of NASA's Statement of Budgetary Resources (GAO-01-438, Mar. 30, 2001).
[8] Fiscal years 2001 through 2010.
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