Financial Management:

NASA's Financial Reports Are Based on Unreliable Data

AFMD-93-3: Published: Oct 29, 1992. Publicly Released: Oct 29, 1992.

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GAO reviewed the National Aeronautics and Space Administration's (NASA) accounting and financial management systems and operations.

GAO found that: (1) NASA managers use contractor-reported cost data as a primary source of information to manage billions of dollars in contractor-operated programs and projects, establish and update accounts payable, and determine budget needs; (2) NASA did not ensure that the reports from contractors were timely and accurate, or that they provided the detail needed for management decisions; (3) center-level analysts inappropriately adjusted contractors' cost data and did not enter costs into centers' accounting systems; (4) NASA internal financial controls did not ensure that government-owned, contractor-held property was properly accounted for or that the reported value was accurate; (5) NASA did not timely receive contractors' property reports for updating NASA accounts at year-end; (6) reports on property disposals were late and erroneous; (7) NASA officials did not consistently observe and enforce spending limits because they did not have current information on funds available and controls were not adequate to prevent the recording of obligations in excess of funding limits; and (8) NASA accounting and reporting systems had fundamental deficiencies that impaired accurate reporting which included nonintegrated systems, improper accounting practices, and numerous weaknesses in accounting and reporting over NASA reimbursable activity.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: NASA's 1994 FMFIA report disclosed that contractor cost reporting is no longer material nonconformance due to July 1994 revisions. Contractor-held property accounting and reporting problems, which contributed to the IG's disclaimers of opinion on NASA's 1992 and 1993 agencywide financial statements, was corrected by September 1994. As a result, the NASA OIG completed its 1994 agencywide financial audit in June 1995, which resulted in NASA's first unqualified opinion.

    Recommendation: The Inspector General should assess NASA controls for ensuring the receipt of accurate, timely, and useful contractor cost report information as part of its planned audit of NASA fiscal year 1992 financial statements.

    Agency Affected: National Aeronautics and Space Administration: Office of the Inspector General

  2. Status: Closed - Implemented

    Comments: NASA has increased its oversight of the property disposal function. NASA headquarters has continued to monitor the substantial backlog at the Kennedy Center and the property disposal area on an agencywide basis. NASA HQ verified Kennedy's corrective action in August 1993 and determined that Kennedy's backlog had been reduced substantially. In March 1994, NASA HQ verified that Kennedy's backlog was fully resolved and validated, that Kennedy's redesigned property disposal system, which is based on GSA's online net system for property disposal, was implemented, and that disposals are proceeding on the required 120-day cycles with additional excess property entering the disposal cycle each month.

    Recommendation: The Administrator, NASA, should direct the Logistics, Aircraft, and Security Division to increase oversight of the property disposal function to ensure that reports of excess inventories are verified and disposal documents are processed within specified time limits.

    Agency Affected: National Aeronautics and Space Administration

  3. Status: Closed - Implemented

    Comments: NASA headquarters has reemphasized the need for its field centers to monitor the receipt of property system survey reports. Each center's property officer has been directed to monitor DOD performance of the surveys and to notify NASA headquarters of any delinquent reports, which are then provided to DOD agencies for followup. NASA property officers emphasized to DOD the importance of performing property systems surveys. NASA created two process action teams to develop plans, monitor functions, and recommend improvements in DCMC and DCAA property management services.

    Recommendation: The Administrator, NASA, should direct the Logistics, Aircraft, and Security Division to direct NASA centers' Industrial Property Officers to identify the required property system surveys that have not been performed by Department of Defense (DOD) agencies and request that the contracting officers follow up with the DOD property administrators to ensure that surveys are performed and reports are received.

    Agency Affected: National Aeronautics and Space Administration

  4. Status: Closed - Implemented

    Comments: The NASA Headquarters Accounting Branch prepares a yearend journal voucher to include all JPL property report data in the fiscal yearend consolidated general ledger maintained by the Agency Accounts and Reports Branch. JPL property data are no longer manually penciled in on the fiscal yearend general ledger reports.

    Recommendation: The Administrator, NASA, should direct the NASA Comptroller to direct the Headquarters Accounting Branch to include all Jet Propulsion Laboratory (JPL) contractor property report data in the general ledger.

    Agency Affected: National Aeronautics and Space Administration

  5. Status: Closed - Implemented

    Comments: NASA's IG expressed disclaimers of opinions on NASA's financial statements for the fiscal years ended September 30, 1993 and 1992, because NASA's records on NASA-owned contractor-held property were incomplete, inconsistent, and inaccurate and did not support a material portion of NASA's property, plant, and equipment. NASA's CFO, its field offices, and the IG worked closely with contractors to ensure timely and accurate property reporting, which enabled NASA to obtain an unqualified opinion on its 1994 financial statements.

    Recommendation: The Administrator, NASA, should direct the NASA Comptroller to enforce reporting requirements to ensure that annual contractor-generated property reports are timely and accurate.

    Agency Affected: National Aeronautics and Space Administration

  6. Status: Closed - Implemented

    Comments: In June 1994, NASA notified contractors holding government-owned property that NASA was revising its reporting policy for this property to make the reporting period consistent with the government's fiscal year and also to facilitate financial statement preparation. Contractors submitted reports as of September 30, 1995, which, along with other actions, enabled NASA to receive its first unqualified opinion on its agencywide financial statements. NASA's 1994 financial statements had received a disclaimer of opinion because of NASA-owned, contractor-held property.

    Recommendation: The Administrator, NASA, should direct the NASA Comptroller to require its contractors to report property on the federal fiscal year basis, and until such time as this requirement can be implemented, footnote fiscal year-end financial statements to indicate that the value of contractor-held property is based on the July 1 to June 30 time frame.

    Agency Affected: National Aeronautics and Space Administration

  7. Status: Closed - Implemented

    Comments: NASA has instructed its centers to contact DCAA to determine when the most recent contractor estimating system reviews were performed and if significant deficiencies were identified. If reviews were over 1 year old or significant weaknesses were identified in the prior reviews, centers are to determine: (1) what the status of corrective actions was; or (2) if new deficiencies have arisen. If no review was performed during the past 3 years, a review is to be requested. NASA has established two process action teams that monitor DCAA and Defense Contract Management Command reporting and recommend improvements.

    Recommendation: The Administrator, NASA, should direct the Office of Procurement to monitor Defense Contract Audit Agency (DCAA) audit reports to NASA to ensure they clearly demonstrate the need to correct identified contractor estimating system deficiencies.

    Agency Affected: National Aeronautics and Space Administration

  8. Status: Closed - Implemented

    Comments: NASA Center-level financial management officers have final authority over accruals to be entered into the accounting system. The NASA Comptroller has reiterated this authority, and NASA's 1993 CFO Plan proposes establishment of performance measures for evaluating the accuracy of analysis adjustments. NASA's 1993 and 1994 functional and cost review processes have not disclosed continuing problems in this area, according to NASA's Chief, Contractor Finance and Accounting Branch.

    Recommendation: The Administrator, NASA, should direct the centers' program offices to require supervisory approval of adjustments to contractor-reported costs to help ensure that such adjustments are appropriate and adequately documented.

    Agency Affected: National Aeronautics and Space Administration

  9. Status: Closed - Implemented

    Comments: The NASA Comptroller has instructed NASA's financial management officers to routinely notify contracting officers when contractor cost reports are late and work with the Procurement Office to ensure that all contracting officers are aware of their responsibilities. NASA's Procurement Office has reiterated the need to strengthen efforts to improve cost reporting to its contracting officers. NASA developed a contractor cost-reporting course at the Johnson Space Center which has been adopted NASA-wide to educate its contractors as to the importance of timely cost reporting and has established performance measures to evaluate the timeliness of contractor cost reports. NASA's revised Financial Management Manual section 9060 requires centers' financial management officers to track receipt of 533 reports. NASA has also issued a policy statement which addresses contractors' repetitively delinquent reports or failure to report and provides for NASA to withhold payment.

    Recommendation: The Administrator, NASA, should direct the Centers' program offices to establish procedures to: (1) identify contractors' non-reporting; and (2) follow up with contractors to ensure that all required contractor cost reports are received.

    Agency Affected: National Aeronautics and Space Administration

  10. Status: Closed - Implemented

    Comments: The NASA Comptroller requires that accruals that vary significantly from the contractor's cost estimates be explained to the financial officer's satisfaction and documented before accruals are recorded in NASA systems. The amounts accrued are compared with actual costs subsequently reported by the contractor to assess their accuracy and to ensure better future cost estimates. The NASA Comptroller has also proposed the establishment of performance measures in the 1993 Chief Financial Officer (CFO) Plan for reviewing the number of imbalances between cost accruals in accounting records and the contractor cost reports. NASA revised and reissued its Financial Management section on accrual accounting, which requires that changes to contractor cost reports be documented in writing and approved by the centers' financial managers. According to the Chief of NASA's Finance and Accounting Branch, NASA internal functional reviews for 1993 and 1994 found that the centers were generally complying.

    Recommendation: The Administrator, NASA, should direct the Comptroller to require that the review and adjustment and the recording of contractor cost data in NASA centers' accounting systems be separated so that program analysts who review and revise contractor cost reports will not also enter the adjustments into NASA accounting systems.

    Agency Affected: National Aeronautics and Space Administration

  11. Status: Closed - Implemented

    Comments: NASA has established two process action teams to review the centers' property and procurement management. In addition, a NASA property official is working on a team with DOD officials to rewrite the Federal Procurement Regulations for Property (Part 45), and to standardize contractor property reporting governmentwide. Contractors now identify equipment cost information in their cost reports and on invoices as suggested in NASA's Procedures for Contractor Reporting of Correlated Cost and Performance Data.

    Recommendation: The Administrator, NASA, should direct the Office of Procurement to ensure that contracts require contractors to identify equipment cost information in their cost reports to NASA as suggested in NASA Procedures for Contractor Reporting of Correlated Cost and Performance Data and on their invoices submitted to NASA for payment to support NASA verification of contractors' annual property reports.

    Agency Affected: National Aeronautics and Space Administration

  12. Status: Closed - Implemented

    Comments: NASA headquarters established a property action team to examine the process of providing NASA property to contractors working on or near NASA installations. The Goddard Center has also adopted a policy of using the IPGP clause only when it is clearly in the best interests of the government and when delegating property administration for those contracts to DOD. The process action team, consisting of NASA headquarters property and procurement officials, has reviewed and verified Goddard's progress in correcting identified weaknesses. A large number of contracts using the IPGP clause have been closed out, and delegations have been made to DOD on active contracts.

    Recommendation: The Administrator, NASA, should direct the Goddard Center Director to: (1) modify contracts to make the contractors accountable for property provided under the Installation-Provided Government Property (IPGP) clause to ensure that all existing government-owned, contractor-held property is properly accounted for and reported, by the Center and the contractor; and (2) direct the procurement office to delegate property administration responsibility to DOD agencies in the future when Goddard staff cannot carry out property administration duties.

    Agency Affected: National Aeronautics and Space Administration

  13. Status: Closed - Implemented

    Comments: The NASA OIG completed its 1994 agencywide financial audit of NASA in June 1995, which resulted in the agency's first unqualified opinion. The IG examined budget formulation and execution in a budget cycle and performed dual control testing with the expenditures cycle. The IG found no internal control weaknesses or violations of the Anti-Deficiency Act.

    Recommendation: The Inspector General should perform periodic reviews of the NASA Agency Accounts and Reports Branch and the Budget Operations Office to determine; (1) controls have been implemented to ensure that agencywide financial reports are accurate and reliable; and (2) adjustments made to agency accounting data, including contractor cost data, are proper.

    Agency Affected: National Aeronautics and Space Administration: Office of the Inspector General

  14. Status: Closed - Implemented

    Comments: NASA's 1994 FMFIA report disclosed that: (1) contractor cost reporting is no longer material nonconformance due to July 1994 revisions; (2) budgetary funds control is still material nonconformance, with revisions to be completed by September 1996; (3) contractor-held property accounting and reporting was corrected by September 1994; and (4) accounting systems remain high-risk until implementation of a new off-the-shelf system. These items were also included in NASA's 1994 5-Year CFO Plan.

    Recommendation: In future Federal Managers' Financial Integrity Act (FMFIA) reports, the Administrator, NASA, should disclose the material weaknesses identified, along with planned corrective actions, in the areas of: (1) contractor cost reporting; (2) budgetary funds control; (3) contractor-held property; and (4) accounting systems and financial reporting. These weaknesses and related corrective action plans should also be included in the NASA 5-year financial management plan required by the Chief Financial Officers Act.

    Agency Affected: National Aeronautics and Space Administration

  15. Status: Closed - Implemented

    Comments: The NASA CFO has been monitoring uncollected reimbursable receivables and now requires a monthly report on billed and unbilled and collected and uncollected reimbursable transactions. NASA has also implemented a receivables system at its Goddard Center. The validity and collectability of reimbursables was audited by the NASA IG as part of its 1994 agencywide financial audit, which resulted in NASA's first unqualified opinion.

    Recommendation: To ensure accurate and reliable fiscal year-end financial reporting, the Administrator, NASA, should direct the Comptroller to require that uncollected reimbursable receivables identified at NASA centers be properly settled and reported.

    Agency Affected: National Aeronautics and Space Administration

  16. Status: Closed - Implemented

    Comments: The NASA headquarters Comptroller staff has been working with the centers to: (1) emphasize subsidiary account requirements; (2) document subsidiary account usage and records maintenance; and (3) certify that subsidiary account balances agreed with general ledger control accounts as of each fiscal yearend.

    Recommendation: To ensure accurate and reliable fiscal year-end financial reporting, the Administrator, NASA, should direct the Comptroller to require that headquarters and center-level accounting systems maintain subsidiary ledgers to facilitate account reconciliations and that supporting documentation be maintained for all accounting adjustments.

    Agency Affected: National Aeronautics and Space Administration

  17. Status: Closed - Implemented

    Comments: The NASA Comptroller has emphasized to headquarters and center personnel that unreconciled data are not acceptable for input into the accounting system. The reconciliation of accounting data between and within the headquarters and centers' accounting systems will continue until the NAFIS implementation. NASA is also providing additional training to financial personnel at all centers and headquarters. In addition, center-level financial management officers are providing NASA's Chief Financial Officer with an annual certification that subsidiary account balances agree with control account balances at the end of the fiscal year.

    Recommendation: To ensure accurate and reliable fiscal year-end financial reporting, the Administrator, NASA, should direct the Comptroller to investigate and resolve agency-level accounting discrepancies, including improper general ledger balances.

    Agency Affected: National Aeronautics and Space Administration

  18. Status: Closed - Implemented

    Comments: The NASA CFO has been working with the field centers to ensure reconciliation of account balances, particularly for yearend closing. NASA headquarters has also required Center Comptrollers to certify to the NASA CFO that subsidiary account balances agree with control account balances at the end of the fiscal year. As a result, NASA received its first unqualified opinion on its agencywide financial statements for 1994.

    Recommendation: To ensure accurate and reliable fiscal year-end financial reporting, the Administrator, NASA, should direct the Comptroller to require centers to research and correct improper general ledger account balances and review the results of the Centers' reconciliations between general ledger control accounts and subsidiary accounts to ensure that discrepancies are resolved and that general ledger and subsidiary balances agree, as required by the NASA Financial Management Manual.

    Agency Affected: National Aeronautics and Space Administration

  19. Status: Closed - Implemented

    Comments: In November 1994, the Goddard Center implemented an electronic interface between its installation-level Fiscal Accounting System (FAS) and its general ledger function to include all budget data and to ensure that reports on funds available for obligation are timely and reliable. The Center also developed an Online Reporting and Budgetary Information Tracking System (ORBITS) to improve financial and budgetary reporting for cost centers within Goddard. However, implementation of ORBITS is on hold pending the results of procurement of an agencywide commercial off-the-shelf system.

    Recommendation: Pending NASA Accounting and Financial Information System implementation, the Administrator, NASA, should direct the Comptroller to require interim system improvements at Goddard to ensure that reports on funds available for obligation are timely and reliable.

    Agency Affected: National Aeronautics and Space Administration

  20. Status: Closed - Implemented

    Comments: NASA has developed agencywide allotment ledger reports to help monitor and control obligations and expenditures and to detect potential Anti-Deficiency Act violations. NASA's September 1, 1994 5-Year CFO Plan provides for interfacing NASA's Agency Funds Control System (AFCS) with NAFIS by September 30, 1996. However, NAFIS was cancelled on February 1, 1995, and further integration of budget and accounting will be dependent on procurement of a commercial off-the-shelf system.

    Recommendation: The Administrator, NASA, should direct the Comptroller to require the NASA Agency Accounts and Reports Branch to develop agencywide reports which provide timely information on the status of funds so that NASA agency-level financial managers have a means of: (1) monitoring obligations and expenditures to avoid potential deficiencies; (2) detecting over-obligations and correcting the control weaknesses that allow them to occur; and (3) identifying and reporting any Anti-deficiency Act violations.

    Agency Affected: National Aeronautics and Space Administration

  21. Status: Closed - Implemented

    Comments: The NASA Comptroller outlined to headquarters and center management changes in issuance of allotment authorizations to reinforce control limitations for allotments and resource authority, including a policy to issue allotments quarterly. NASA also developed an Interface Definition Agreement to be implemented between the Agency Funds Control System (AFCS) and its accounting system (NAFIS). However, NAFIS was cancelled on February 1, 1995, and NASA now plans to accomplish further integration of budget and accounting through a commercial off-the-shelf system.

    Recommendation: The Administrator, NASA, should direct the Comptroller to enforce allotment and resource authority limitations. In this regard, it should consider adopting a policy for issuing allotments quarterly.

    Agency Affected: National Aeronautics and Space Administration

  22. Status: Closed - Implemented

    Comments: The NASA Procurement Office has been directed to ensure that solicitations are reviewed before release to confirm that necessary clauses are included. The Procurement Office has, in turn, directed NASA's contracting officers to ensure that contracts require cost reporting consistent with NASA policy. Center financial management must coordinate on procurement requests for contracts obligating funds that exceed reporting thresholds. Each NASA Center Financial Management Instruction (FMI) includes a requirement that solicitations include reporting requirements. NASA also issued a Federal Acquisition Regulation (FAR) Supplement on May 9, 1994, requiring that the contractor cost reporting categories be coordinated with the centers' financial managers. Further, NASA has revised the NASA Management Instruction (NMI) to address these requirements. The NMI is undergoing final review and should be issued by the end of 1994.

    Recommendation: The Administrator, NASA, should direct the Comptroller to establish a procedure whereby centers' financial management officials review all solicitations prior to their release to ensure that they include cost reporting requirements in accordance with the NASA Handbook, including language stipulating additional reporting requirements when contract value increases beyond the original reporting threshold. These requirements should also be stipulated in the contracts.

    Agency Affected: National Aeronautics and Space Administration

 

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