The audit report, “Management of Forward Funding and Undisbursed
Costs” (IG-02-015, March 29, 2002) has been posted to the NASA Office
of Inspector General Web site at:

NASA uses forward funding as a budget tool to allow continuing
operations and to avoid funding shortfalls. Forward funding, which
consists of unobligated budget authority (funds available but not yet
obligated) and uncosted obligations (funds allocated to programs and
contracts for future work), sets aside NASA funds for future
obligations and expenses. NASA must monitor forward funding balances
to fully understand the status of a program or project. Also, large
forward funding balances can give the appearance that NASA is carrying
over excessive balances from one fiscal year to the next.

In response to the House Subcommittee on Space and Aeronautics’
concerns about excessive forward funding in certain NASA programs, the
General Accounting Office (GAO) and NASA reviewed forward funding and
issued reports in 1996. To make the most effective use of Agency
funds, NASA recommended thresholds that limited unobligated budget
authority to 1 month of available funds, uncosted obligations to 2
months of average costs, and undisbursed costs to 2 months of funds
required. (Undisbursed costs set aside NASA funds for future
payments.) GAO recommended that NASA measure the thresholds at the
program or project level.

We found that although NASA adequately managed unobligated budget
authority and undisbursed costs, the Agency needs greater emphasis on
management of uncosted obligations. More than $800 million in NASA
uncosted obligations exceeded the 2-month threshold. Limiting the
uncosted obligations could have made the funds available for
alternative uses.

We recommended that NASA establish and implement a forward funding
management policy and incorporate the policy in the Agency’s Federal
Acquisition Regulation Supplement.

NASA concurred with the recommendations and will establish and
implement a forward funding management policy and publish it in NASA
financial management regulations. NASA will also issue a Procurement
Information Circular to emphasize the new policy to procurement

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