From: NASA Office of Inspector General
Posted: Friday, May 15, 2015
WHY WE PERFORMED THIS AUDIT
In fiscal year (FY) 2014, the Federal Government made an estimated $125 billion in improper payments to individuals, organizations, and contractors, an increase of approximately $19 billion from FY 2013. An improper payment is any payment an agency should not have made; made in an incorrect amount, to an ineligible recipient, for ineligible goods or services, or for goods or services not received; was duplicative; or lacked adequate supporting documentation.
To help identify and reduce improper payments, Congress passed the Improper Payments Information Act of 2002 (IPIA). IPIA requires heads of Federal agencies to annually identify programs and activities susceptible to improper payments and report certain information about those payments. The Improper Payments Elimination and Recovery Act of 2010 and the Improper Payments Elimination and Recovery Improvement Act of 2012 expanded IPIA's scope beyond commercial payments, required Inspectors General to evaluate agency compliance with IPIA, and required agencies to conduct payment recapture audits and report on improper payments in annual agency financial reports (AFR).
Our overall objective was to determine whether NASA complied with IPIA in FY 2014. We also evaluated the completeness and accuracy of the Agency's IPIA reporting and its implementation of recommendations made in prior IPIA reports.
WHAT WE FOUND
We concluded that although NASA complied with IPIA, it can improve its risk assessment process, payment recapture audits, and annual reporting. According to the Office of Management and Budget (OMB), which issues implementing guidance for IPIA, an agency must meet six criteria to comply with the Act, including conducting a program-specific risk assessment for each program or activity and publishing and posting on its website an AFR each year. NASA met all applicable OMB criteria for FY 2014.
However, as discussed in our previous IPIA reports, we continue to believe NASA can improve its risk assessment process to increase the likelihood of identifying improper payments. To conduct the risk assessment for 2014, NASA's contractor identified and weighted seven risk conditions using a 100-point scale based on relevance and significance. The contractor reviewed FY 2013 disbursements recorded in the Agency's financial management system, identified 93 programs, and analyzed these programs for risk of improper payments. NASA rated certain risk conditions the same for all programs, not fully considering what we believe are significant distinctions between programs that merit different ratings. Further, NASA considered only the risk factors listed in IPIA and OMB guidance, and not other relevant factors such as the substantial backlog of Defense Contract Audit Agency incurred cost audits of Agency contracts, which assess the costs contractors charge to the Government and are a key control for detecting improper payments. In addition, NASA used unclear scoring criteria and conducted incomplete research for one of the risk conditions.
We also found NASA limited its annual payment recapture audits to fixed-price contracts, which, of the various procurement vehicles, have the lowest risk of improper payments. By failing to consider cost-type contracts, grants, and cooperative agreements, NASA increased the risk improper payments may go undetected. Further, NASA did not notify OMB of its decision to exclude grants and cooperative agreements or provide OMB with its supporting analysis.
Finally, we found inaccuracies in NASA's FY 2014 AFR, including errors in the tables concerning payment recapture audits, disposition of recaptured funds, and overpayments recaptured from other sources. As a result, NASA's AFR does not provide an accurate picture of NASA's payment recapture efforts.
WHAT WE RECOMMENDED
To assist NASA in improving its risk assessment process and recapture audit program, we made six recommendations to the Chief Financial Officer, including that he modify NASA's risk assessment methodology, include cost-type contract payments in the Agency's recapture audit efforts, and develop a comprehensive justification explaining NASA's determination to exclude grants and cooperative agreements. We also made four recommendations to the Chief Financial Officer to improve the accuracy and completeness of NASA's reporting of its payment recapture efforts.
In response to a draft of this report, the Chief Financial Officer concurred or partially concurred with our recommendations and proposed corrective actions to address them. We find the proposed corrective actions responsive to our recommendations and will close the recommendations upon verification and completion of those actions.
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