This is the accessible text file for GAO report number GAO-04-255 
entitled 'Business Modernization: NASA's Challenges in Managing Its 
Integrated Financial Management Program' which was released on December 
22, 2003.

This text file was formatted by the U.S. General Accounting Office 
(GAO) to be accessible to users with visual impairments, as part of a 
longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the printed 
version. The portable document format (PDF) file is an exact electronic 
replica of the printed version. We welcome your feedback. Please E-mail 
your comments regarding the contents or accessibility features of this 
document to Webmaster@gao.gov.

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately.

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.

GAO's Mission:

The General Accounting Office, the investigative arm of Congress, 
exists to support Congress in meeting its constitutional 
responsibilities and to help improve the performance and accountability 
of the federal government for the American people. GAO examines the use 
of public funds; evaluates federal programs and policies; and provides 
analyses, recommendations, and other assistance to help Congress make 
informed oversight, policy, and funding decisions. GAO's commitment to 
good government is reflected in its core values of accountability, 
integrity, and reliability.

Obtaining Copies of GAO Reports and Testimony:

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through the Internet. GAO's Web site ( www.gao.gov ) contains 
abstracts and full-text files of current reports and testimony and an 
expanding archive of older products. The Web site features a search 
engine to help you locate documents using key words and phrases. You 
can print these documents in their entirety, including charts and other 
graphics.

Each day, GAO issues a list of newly released reports, testimony, and 
correspondence. GAO posts this list, known as "Today's Reports," on its 
Web site daily. The list contains links to the full-text document 
files. To have GAO e-mail this list to you every afternoon, go to 
www.gao.gov and select "Subscribe to e-mail alerts" under the "Order 
GAO Products" heading.

Order by Mail or Phone:

The first copy of each printed report is free. Additional copies are $2 
each. A check or money order should be made out to the Superintendent 
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 
more copies mailed to a single address are discounted 25 percent. 
Orders should be sent to:

U.S. General Accounting Office

441 G Street NW,

Room LM Washington,

D.C. 20548:

To order by Phone: 	

	Voice: (202) 512-6000:

	TDD: (202) 512-2537:

	Fax: (202) 512-6061:

To Report Fraud, Waste, and Abuse in Federal Programs:

Contact:

Web site: www.gao.gov/fraudnet/fraudnet.htm E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470:

Public Affairs:

Jeff Nelligan, managing director, NelliganJ@gao.gov (202) 512-4800 U.S.

General Accounting Office, 441 G Street NW, Room 7149 Washington, D.C.

20548: