NASA OIG: Integrated Financial Management Program Core Financial Module Conversion to Full Cost Accounting

Full Report: Integrated Financial Management Program Core Financial Module Conversion to Full Cost Accounting, audit report issued, PDF

IG-03-015 May 30, 2003 A-01-061-00 Integrated Financial Management Program Core Financial Module Conversion to Full Cost Accounting

In conducting this audit, we found that the Core Financial Module software, which has
been implemented at six NASA Centers, has the capability to implement full cost
accounting. Before implementation can take place, NASA must resolve several
extraordinarily complex accounting and costing issues. These involve how to allocate
service and general and administrative (G&A) costs, civil service costs, and unassigned
costs. These issues incorporate NASA’s conspicuous inability to provide full cost
accounting data for the International Space Station (ISS) and the Space Shuttle. Once the
accounting and costing issues are resolved, NASA has to configure the Integrated
Financial Management Program (IFMP) software to reflect the changes.

According to NASA’s plans for full cost accounting, IFMP, and the Core Financial
Module, the Agency will begin configuring the IFMP software after the last NASA
Center has implemented the Core Financial Module (currently scheduled for June 23,
2003). NASA will have to resolve the cost accounting issues in slightly over 3 months
following June 23, 2003, and then configure the Core Financial Module software in order
for NASA to meet its targeted implementation date of October 1, 2003. As noted in
NASA’s Core Financial Project Full Cost Configuration Strategy, if full cost procedures
are not implemented by October 1, 2003, the Agency faces a high risk that it will be
unable to use IFMP to report full cost accounting data until fiscal year (FY) 2005. A
substantial delay in the availability of full cost accounting data could extend the
implementation date of the Agency’s overall Full Cost Initiative.

Converting Core Financial Module Software To Accommodate Full Cost Accounting

Although NASA’s Full Cost Initiative Agencywide Implementation Guide (Full Cost
Guide) establishes Agencywide service and G&A cost pools, it does not establish Centerunique
cost pools and does not address how the Core Financial Module will allocate
service and G&A costs, civil service personnel costs, and unassigned costs required to
implement full cost accounting. Pools are used to accumulate similar costs and are
distributed to projects based on an allocation methodology that best represent the types of
costs that are in the pools. For example, wind tunnel costs can be accumulated in a wind
tunnel service pool and allocated to programs based on hours of usage. NASA will need
to (1) establish the appropriate cost pools, (2) configure the Core Financial Module
software to accommodate the cost pool structure, and (3) properly test the new
configuration.

Accounting and Costing Issues

G&A Cost Allocation. NASA’s Full Cost Guide states that each Center will be
responsible for managing its respective G&A costs and requires the Centers to allocate
these costs to specific projects. Currently, NASA does not tie G&A costs to specific
projects. Examples of G&A costs are costs associated with financial management,
procurement, security, and legal activities. To successfully allocate these costs to
projects, Agency and Center management should (1) determine the content of the G&A
cost pool, (2) determine the G&A levels required to support operations, (3) determine the
rate at which G&A costs will be allocated, and (4) establish the appropriate structure
within the Core Financial Module to ensure accurate allocations of G&A costs to all
projects.

Space Shuttle Program. Determining which costs should be allocated to programs
(such as the ISS) that benefit from Space Shuttle services is a vital component of
NASA’s efforts to establish the full cost of its programs. NASA has recently addressed
the issue of allocating Space Shuttle costs to the ISS. However, the Agency needs to
decide whether and how Space Shuttle Program costs will be allocated to other benefiting
NASA programs and projects and must then determine how the Core Financial Module
will accommodate that decision.

Civil Service Personnel Costs. Civil service personnel costs must be directly associated
with the project to which they relate. Currently, NASA does not have a standardized
Agencywide methodology for associating civil service personnel costs to projects.
Establishing this methodology could be challenging in identifying personnel who work in
more than one project, G&A cost area, or service cost area.

Unassigned Costs. NASA has five Strategic Enterprises that cover the major areas of
the Agency’s research and development efforts. In NASA’s FY 2001 Consolidated
Statement of Net Cost, the Agency reported costs of more than $1 billion that were not
assigned to specific Enterprises. To achieve full cost accounting, NASA should
determine a methodology for allocating those costs to benefiting programs.

Recommendation

We recommended that the Deputy Chief Financial Officer for Financial Management
revise the IFMP plans to include:

• Timeframes and milestones for completing steps implementing full cost accounting, including addressing and resolving the cost issues identified above.
• Identification of the personnel and other resources necessary to perform the steps within the established timeframes.
• Senior management approval and support of these additional procedures.

Management’s Response

Management concurs with the recommendation. NASA has formed the Full Cost Policy
and Operations Team, comprised of members from the Centers, the IFMP Core Financial
Team, and Headquarters enterprise/functional offices. The Team has identified
timeframes, milestones, and resources for completing the steps necessary to implement
full cost accounting and to address those cost issues identified in the report. The Team
will brief and make recommendations to the NASA Full Cost Committee and update the
Full Cost Initiative Agencywide Implementation Guide. In addition, NASA has
appointed a full-time Director of Full Cost to manage the full cost implementation
process. The Agency plans to have all phases of full cost accounting implemented by
October 1, 2003.

Evaluation of Management’s Response

Based on management’s response; further discussion with the NASA Program Executive
for IFMP, Deputy Chief Financial Officer, and Director of Full Cost; and review of
NASA’s full cost planning documentation, we consider management’s action responsive
to the recommendation, which is now closed.

Appendices

Among the appendices, note Appendix D, in particular, which discusses NASA’s history
of implementing a financial management system, and Appendix E on full cost
management.

Full Report: Integrated Financial Management Program Core Financial Module Conversion to Full Cost Accounting, audit report issued, PDF