Business Modernization:

NASA's Integrated Financial Management Program Does Not Fully Address Agency's External Reporting Issues

GAO-04-151: Published: Nov 21, 2003. Publicly Released: Dec 22, 2003.

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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.

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.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: The NASA Administrator should 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 accounts payable and accrued costs. This plan should include time frames and details on how any changes will be monitored, tested, and documented.

    Agency Affected: National Aeronautics and Space Administration

    Status: Closed - Implemented

    Comments: The plan NASA prepared in fiscal year 2006 and actions taken by NASA since 2006 to address problems associated with accounts payable and accrued costs, are consistent with the intent of our recommendation. If fully and effectively implemented, the Core Financial System software upgrade NASA began in November 2006 combined with its continued efforts to refine the functionality of its financial systems should help produce systems that comply substantially with the requirements of FFMIA.

    Recommendation: The NASA Administrator should 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 budgetary information including adjustments to prior year obligations. This plan should include time frames and details on how any changes will be monitored, tested, and documented.

    Agency Affected: National Aeronautics and Space Administration

    Status: Closed - Implemented

    Comments: The plan NASA prepared in fiscal year 2006 and actions taken by NASA since 2006 to address problems associated with upward and downward adjustments of prior year obligations are consistent with the intent of our recommendation. If fully and effectively implemented, the Core Financial System software upgrade NASA began in November 2006 combined with its continued efforts to refine the functionality of its financial systems should help produce systems that comply substantially with the requirements of FFMIA.

    Recommendation: The NASA Administrator should 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. This plan should include time frames and details on how any changes will be monitored, tested, and documented.

    Agency Affected: National Aeronautics and Space Administration

    Status: Closed - Implemented

    Comments: NASA's independent auditors found NASA to be compliant with FFMIA for the first time for fiscal year 2010, and they found it to be compliant for the two audits since then as well. Therefore, the intent of our recommendation has been implemented.

    Recommendation: The NASA Administrator should 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 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 Affected: National Aeronautics and Space Administration

    Status: Closed - Implemented

    Comments: NASA's fiscal year 2006 plan to produce financial management systems that comply substantially with the requirements of FFMIA included planned actions related to developing cost data for financial reporting. If fully and effectively implemented to provide full program cost data not only for external financial reporting, but also to meet SSFAS No. 4 related to managerial cost accounting, should help NASA to produce systems that comply substantially with the requirements of FFMIA in this area.

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