NASA OIG: Independent Audit of the National Aeronautics and Space Administration
Chairman Miller and Chairwoman Giffords, Ranking Members, and Members of the Subcommittees:
Thank you for the opportunity to discuss the fiscal year (FY) 2009 audit of the National Aeronautics and Space Administration’s (NASA) financial statements. The independent public accounting firm Ernst & Young LLP (E&Y) conducted the audit under a contract with the Office of Inspector General (OIG).
As requested, this statement describes the OIG’s views of the issues identified by E&Y, NASA’s progress in remediating its financial management problems, and E&Y’s recommendations to address continuing issues.
The OIG has identified the need to improve financial management at NASA as one of the most serious performance and management challenges facing Agency leadership for most of this decade. Over the years, NASA implemented a variety of corrective actions to address long-standing weaknesses in its financial management processes and systems. While the Agency has made significant improvements, several challenges remain to be addressed.
For example, in its most recent report, E&Y disclaimed an opinion on NASA’s financial statements for FY 2009. The disclaimer indicates that E&Y was unable to obtain sufficient evidentiary support for the amounts presented in the Agency’s financial statements and resulted primarily because of continued weaknesses in NASA’s internal controls over accounting for legacy assets–specifically, the Space Shuttle and International Space Station (ISS). Although the auditor’s report recognizes that the Agency has made significant progress in improving its financial processes and systems, the report identified three significant deficiencies1in internal controls with one considered a material weakness.
Specifically, E&Y reported a material weakness in NASA’s controls for assuring that the value of legacy property, plant, and equipment (PP&E) and materials presented in the financial statements is fairly stated. E&Y’s identification of internal controls over legacy assets as a material weakness means there was a reasonable possibility that the controls were not sufficient to prevent a material misstatement in the financial statements. The other two internal control deficiencies cited by E&Y involved NASA’s processes for estimating environmental liabilities and its compliance with the Federal Financial Management Improvement Act of 1996 (FFMIA).
E&Y’s report contains specific recommendations to assist the Agency in remediating existing weaknesses during FY 2010. For example, E&Y identified areas for particular focus in improving the Agency’s implementation of recent guidance permitting the use of estimates in establishing the value of legacy assets.
Through its own initiatives and as a result of discussions with our office and E&Y, NASA’s Office of the Chief Financial Officer is pursuing actions intended to improve financial management and address specific weaknesses in internal controls. Most notably, the Agency made improvements to and revised its Continuous Monitoring Program, which assesses financial management processes and internal controls for compliance with generally accepted accounting principles (GAAP) and ensures that balances and activities reported in the financial statements are accurate and complete. The Agency is also conducting specific remediation efforts to address the valuation of legacy assets, improve the process for estimating environmental liabilities, and ensure compliance with FFMIA.
Through effective implementation of E&Y’s most recent recommendations and a continued focus on its ongoing monitoring and remediation efforts, the Agency should be able to correct existing weaknesses in financial management during FY 2010.
