Mission Impossible? Fixing NASA’s Financial Management

Washington, May 18 – The Government Reform Subcommittee on Efficiency and
Financial Management will hold an oversight hearing to look at problems
with financial management at NASA, where recent audits have revealed
serious problems.

PricewaterhouseCoopers, NASA’s auditor for the past three fiscal years, was
unable provide assurance as to the reliability of information on the fiscal
year 2003 financial statements, pointing to:

• more than $560 billion in undocumented year-end adjustments;
• a $2 billion discrepancy in its Fund Balance with Treasury (theequivalent of balancing its Federal checkbook);
• failure to adhere to accounting standards; and
• problems with the way NASA accounts for property in the hands of contractors.

NASA is in the process of a major systems overhaul, known as the Integrated
Financial Management Program. The IFMP is NASA’s third attempt to modernize
financial and administrative systems ? some of which were still programmed
using COBOL. Having spent $180 million on its two prior failed efforts,
NASA is likely to spend nearly $1 billion on the IFMP according to the
General Accounting Office.

Two years into IFMP’s development, NASA accelerated the implementation
schedule, and according to GAO, deferred testing of many key capabilities.
NASA managers cited conversion to the new system as the reason for the high
number of year-end accounting adjustments, and GAO has expressed several
concerns about the new system, including questionable cost estimates and an
overly optimistic implementation schedule. NASA’s current estimate of
$982.7 million is 14% or $121.8 million over the previous estimate.

In a review of the IFMP, GAO stated that the system “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.”

While many of the problems identified in the audit point to system failure,
PricewaterhouseCoopers “noted inconsistencies that should have been
identified and corrected by NASA management through its internal quality
control review,” including procedures that did not follow generally
accepted accounting standards.

NASA’s budget request for FY2005 is $16.2 billion, nearly $900 million more
than FY2004. Increases during the following four years would bring the
annual budget to about $18 billion. In times of growing budget deficits,
sound financial management is imperative. This Subcommittee will continue
to exercise its oversight authority at NASA to ensure that it meets the
challenges ahead and successfully implements management reforms.

Witnesses

• The Honorable Gwendolyn Brown, Chief Financial Officer, NASA
• The Honorable Robert W. Cobb, Inspector General, NASA
• Mr. Greg Kutz, Director of Financial Management and Assurance, GAO