SAN FRANCISCO — Although NASA failed for the seventh year in a row to receive a passing grade from independent auditors, the U.S. space agency has made significant progress in cleaning up its financial records, Elizabeth Robinson, NASA’s newly appointed chief financial officer, told members of the House Science and Technology Committee during a Dec. 3 hearing.
“Today, using current systems and processes, NASA is able to track and control its funds, account for the costs related to individual programs and projects, and manage the agency’s day-to-day operations,” Robinson told members of the House Science investigations and oversight subcommittee who held a joint hearing with members of the space and aeronautics subcommittee.
The major problem preventing auditors from Ernst & Young LLP from approving NASA’s books is the space agency’s difficulty in calculating the value of its two largest assets: the space shuttle and international space station, said Paul Martin, NASA’s new inspector general. That problem was serious enough to be deemed a material weakness because it made it impossible for auditors to determine whether information included in the space agency’s balance sheets was accurate, said Daniel Murrin, a partner in New York-based Ernst & Young.
Space agency officials have been trying to determine the value of NASA’s largest assets for years, a task complicated by the size and scope of the programs, changes in NASA’s financial systems, revised federal accounting rules and the hiring of new teams of auditors. “This tale has gone on for so many years and has so many twists and turns,” Robinson told the panel.
The issue is likely to be resolved in the near future, however, because the agency that issues guidance in this area, the Federal Accounting Standards Advisory Board, published new rules in October designed to assist federal agencies, including NASA, in calculating the cost of extremely large assets based on estimates. “The adoption of the new rule provides a unique opportunity for NASA to address the issue,” Murrin said.
In addition, the space shuttle and space station will become less prominent features of NASA’s financial accounts because the programs are nearing completion. At the end of 2009, those two programs comprised approximately 77 percent of the total value of NASA’s property, plants and equipment as well as 38 percent of the space agency’s total assets, Robinson said. Since the shuttle program is scheduled to conclude in 2010, and the space station is on a depreciation schedule that ends in 2016, NASA will not have to account for the cost of those assets much longer, she added.
Nevertheless, NASA’s financial managers are not waiting until the completion of the space station program to clear up their financial records. Instead, NASA officials testifying at the hearing were cautiously optimistic that they would be able to calculate the value of the shuttle and space station programs and obtain a clean bill of health from auditors in 2010.
Robinson also assured the committee that NASA will be better able to evaluate the cost of major assets because the space agency is better able to track financial data. “It is now standard practice in contracts to acquire the accounting information we need,” Robinson said. “Our contractors have felt the burden of giving us all of the data and have worked very closely with us to ensure it is the right data. … We feel like we are on a strong footing.”
Still, NASA financial managers have two other issues to tackle. The Ernst & Young auditors cited deficiencies in NASA’s ability to calculate its environmental liability as well as the space agency’s failure to comply with the Federal Financial Management Act of 1996.
For 2009, NASA officials estimated the price of the space agency’s environmental liability, including cleanup costs, was $922 million. “While NASA continues to make year-to-year progress, we noted weaknesses in NASA’s ability to generate an auditable estimate on a timely basis of … environmental cleanup costs,” according to the Ernst & Young audit report issued Nov. 9. That problem is being corrected by NASA’s environmental management office, where officials are improving employee training and developing more accurate environmental cost estimates, Robinson said.
As to the general issue of compliance with financial management rules, NASA officials are moving in the right direction, according to auditors. NASA management has taken action to address deficiencies in its financial management programs that were cited in earlier audits, although additional work is needed to reconcile individual transactions and review data to confirm its accuracy, Murrin said.
“Substantial improvements have been made in managing the business of NASA,” Murrin told the House panel. “Since our audit of 2004, progress has been made, and we do note that progress.”