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Highlights

The National Aeronautics and Space Administration (NASA) has struggled to implement a fully integrated financial management system. The lack of such a system has affected the agency's ability to control program costs, raising concerns about the management of its most costly programs, including the space shuttle program and the International Space Station. In April 2000 NASA initiated the Integrated Financial Management Program (IFMP)--its third effort to improve the agencywide management of its resources. Implementation is expected by fiscal year 2006 with an estimated life-cycle cost of nearly $1 billion. This report (1) assesses NASA's methodology for preparing the current life-cycle cost estimate for implementing IFMP, (2) determines whether NASA's current schedule is reasonable, and (3) evaluates NASA's processes for ensuring adequate cost contingencies.

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
National Aeronautics and Space Administration 1. To ensure that IFMP's life-cycle cost estimate conforms to NASA guidance and best practices, the NASA Administrator should direct IFMP to prepare cost estimates by the current Work Breakdown Structure for the remaining modules.
Closed - Implemented
In February 2006, NASA submitted an updated life-cycle cost estimate along with supporting documentation to GAO for review. Upon reviewing the information, we found that NASA had prepared Work Breakdown Structure (WBS) estimates using the current WBS for the remaining modules. Using the WBS as a structured approach to prepare the cost estimate will help ensure that all costs are accounted for and should help improve the reliability of the estimate and help control program costs.
National Aeronautics and Space Administration 2. To ensure that IFMP's life-cycle cost estimate conforms to NASA guidance and best practices, the NASA Administrator should direct IFMP to provide a clear audit trail between detailed WBS estimates and the program's cost estimate for the remaining modules.
Closed - Implemented
In February 2006, NASA submitted an updated life-cycle cost estimate along with supporting documentation to GAO for review. Upon reviewing the information, we found that NASA had established a clear audit trail from the detailed Work Breakdown Structure (WBS) estimates to the life-cycle cost estimate. NASA's action should help improve the reliability of the cost estimate by facilitating a comparison between detailed WBS estimates and the official program cost estimate and help control program costs.
National Aeronautics and Space Administration 3. To ensure that IFMP's life-cycle cost estimate conforms to NASA guidance and best practices, the NASA Administrator should direct IFMP to prepare a full life-cycle cost estimate for the entire IFMP that meets NASA's life-cycle cost and full cost guidance.
Closed - Implemented
In February 2006, NASA submitted an updated life-cycle cost estimate along with supporting documentation to GAO for review. Upon reviewing the information, we found that NASA had prepared a full-cost life-cycle cost estimate, in accordance with NASA's life-cycle cost and full-cost guidance. NASA's action should help decision makers better assess all the costs associated with operating and implementing the program and help control program costs.
National Aeronautics and Space Administration 4. To ensure that contingencies are funded in accordance with NASA guidance and best practices, the NASA Administrator should direct IFMP to utilize a systematic, logical, and comprehensive tool, such as Probabilistic Risk Assessment, in establishing the level of financial reserves for the remaining module projects and tailor the analysis to risks specific to IFMP.
Closed - Implemented
During its NASA IFMP Follow-up assignment (code 192159), GAO found that NASA had made progress toward implementing this recommendation. NASA had established a comprehensive risk evaluation methodology which is used to facilitate the estimation and allocation of financial reserves. A key part of the methodology employs a probabilistic risk assessment (PRA) tool--CrystalBall--for setting IFMP-specific risk-based reserves. Although the new methodology and PRA tool had been used to set reserve levels for the program office, the PRA tool had not been used in setting reserves for the remaining module projects. According to IFMP officials, the tool would be used in setting reserves for all projects during the fiscal year 2007 budget cycle. Our recent analyses of NASA IFMP "project reserves templates" and "reserves by fiscal year templates" show that NASA has used the PRA tool in setting risk reserves for the individual module projects for its fiscal year 2007 budget cycle.
National Aeronautics and Space Administration 5. To ensure that contingencies are funded in accordance with NASA guidance and best practices, the NASA Administrator should direct IFMP to quantify the cost impact of at least all risks with a high likelihood of occurrence and a high magnitude of impact to facilitate the continuing analysis necessary to maintain adequate reserve levels.
Closed - Implemented
During its NASA IFMP Follow-up assignment (code 192159), GAO found that NASA had made progress in implementing this recommendation. Specifically, NASA now requires that the cost impact of high severity risks be analyzed more consistently through the use of standardized risk reserves templates and quantified through the use of a more rigorous methodology and probabilistic risk assessment (PRA) tool. However, NASA had only used the PRA tool in calculating reserves for the program office, and not for the individual module projects. IFMP officials stated that NASA planned to use the PRA tool along with the new risk methodology in establishing reserve levels for the individual project modules, as well, during the fiscal year 2007 budget cycle. Our recent analyses of NASA IFMP "project reserves templates" and "reserves by fiscal year templates" show that NASA has used the PRA tool in establishing reserve levels for the individual project modules for its fiscal year 2007 budget cycle.
National Aeronautics and Space Administration 6. To ensure that contingencies are funded in accordance with NASA guidance and best practices, the NASA Administrator should direct IFMP to establish a clear link between the program's risk database and financial reserves.
Closed - Implemented
During its NASA IFMP Follow-up assignment (code 192159), GAO found that NASA has successfully established the linkage between the program's risk database and financial reserves. Specifically, NASA's new risk/reserves methodology ensures that traceability is maintained through the use of the risk reserve templates that assist the program and projects in determining the high severity risks and the direct relationship between risks and reserves. GAO also observed this relationship in the IFMP office's reserve template, which included the estimated costs of high severity risks and then NASA's reflection of the estimated costs in the program office's budget submission for the fiscal year 2006 budget cycle.

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