# Presentation: 324352

## NASA Advisory Council Meeting

**	****Report of Audit and Finance Committee **
***October 16, 2008***** **
**Members:****	****	****	****	****NASA:**
*Mr. Robert Hanisee, Chairman **	** **	**Mr. Ron Spoehel  **	**	*
*Hon. Ted McPherson**	**	**	**Mr. Terry Bowie*
*Hon. Michael Montelongo*
*Mr. Howard Stanislawski*

- Audit & Finance Committee
- Kennedy Space Center Meeting
-  Bldg: OSB II, Room:  4130
- October 14 & 15, 2008
- FINAL Agenda
_**October 14, 2008**_
**Presentation # 1****	****Opening Remarks****	****	****	****Terry Bowie**
**Presentation # 2****	****Presentation from KSC CFO****	****	****Susan Kroskey**
**Presentation # 3****	****FY08 Financial Statement Audit Update  ****	****Frank Petersen**
**	****	****	****Break**
**Presentation # 4****	****Unfunded Environmental Liability**
**	****	****	**** ****- Audit Status ****	****	****                Olga Dominquez**
**Presentation # 5****	****GAO High Risk List – Status of **
**	****	****	****Corrective Action Plan ****	****	****Rita Svarcas**
**Presentation # 6****	****NSSC Transition Recap/Benchmarking****	****Joyce Short **
**	****	****	****Administrative Session****	****	****A&F Members    **
_**October 15, 2008**_
**Presentation # 1****	****Update on Phasing Plan/Dashboard****	****John Scholtz **
**Presentation # 2****	****CMP Results & Trends for FY08****	****	****Leslie Hyland**
**	****	****	****Break **
**Presentation # 3****	****Shuttle Transition – Property Disposition **
**	****	****	****    ****And Financial Accounting****	****	****Leslie Hyland**
**	****	****	****Pick-Up Lunch**
**Presentation # 4****	****Earned Value Management****	****	****Dorothy Tiffany**
**	****	****	****Administrative Session ****	****	****A&F Members**

## Kennedy Space Center (KSC)

- Briefing to NASA Advisory Council
- (Audit & Finance Committee)
- Susan Kroskey
- Chief Financial Officer
- October 14, 2008

## 	Kennedy Space Center (Cont.)

- Challenge:  	Shuttle Wind-down
- 			Constellation Ramp-up
- 				_**Employment**_
- 					KSC		CFO Office
- Civil Servants		            2,117			119
- Contractor/Tenants                   _13,000_			  28
- 			                       ~15,000

## 	Kennedy Space Center (Cont.)

- 2009 Budget - $1.5B
- CFO Office – Strategic Plan and Initiative
- Center CFO Vision **– “Making $ Make Sense”**
- _Center CFO Goal Categories_			      _ Initiatives_
- Financial						6
- Systems & Processes					6
- Customer						3
- Team & Culture					3
- Audit Status – E&Y reported no findings in PP&E audit of internal control in FY2007 or 2008

## *Includes Space Program Operation Contract (SPOC)

**KSC FY 2009 President’s Budget by Major Program***

- *Includes Space Program Operation Contract (SPOC)

- $ Millions

**Agency FY 2009 President’s Budget per N2 (Feb 08)**

## Unfunded Environmental Liabilities

- Future cost of completing environmental closure of known contaminated sites and facilities
- FY08 Year-End Unfunded Environmental Liability - $943M
- 134 projects at 15 NASA Sites
- Estimates range from $12K to $168M
- White Sands Test Facility cleanup (39% of total) will take over 50 years to complete (two other cleanup estimates to take more than 100 years)

## Unfunded Environmental Liabilities (cont.) 

- _E&Y Finding_ – Management review of estimate not functioning adequately to identify inconsistencies and mistakes – No audit trail
- Integrated Data Evaluation and Analysis Library (IDEAL)
- Lacks Software Assurance
- Lacks IV&V
- Lacks formal controls and audit trail
- _OCFO Action_
- Completed Software Assurance self assessment – 7/08
- Configuration management plan being prepared -
-        (Complete 12/08)
- Conducting Parametric model calibration
- IDEAL mod to include controls White Sands Test Facility cleanup (39% of total) will take over 50 years to complete (two other cleanup estimates to take more than 100 years)

## Unfunded Environmental Liabilities (cont.) 

- _Future Issue – Asbestos_
- After 9/00/09 NASA must survey and record liability associated with asbestos in NASA property
- Center surveys are incomplete – not required by environmental safety laws and regs
- Agency has proposed using statistical estimating techniques
- E&Y wants surveys which would cost $5M to $10M
- NASA spends $45M per year on clean-up

## NASA AND GOVERNMENT ACCOUNTABILITY OFFICE (GAO) HIGH RISK LIST

_**Issue:**_**  **    	NASA has been designated as a High Risk 			 	agency since 1990 due to concerns relating to:
- Post award contract administration
- Financial management
- Program/project management
- Cost estimating and analysis
_**Solution:**_**  ****	**** **Corrective action plan now prepared with input from 	    	 	 Office of Management and Budget (OMB) with clear 	  	 	 definition of results required.
_**Results:**_	   	For major development projects with a life-cycle cost of 	  	  	$250 million or more:
- _Cost_ within 110% of baseline
- _Scheduled_ slippage within 110% of baseline
- _Mission Success_ by meeting requirements by 90% of its portfolio of major deployment missions

## NASA	UNOBLIGATED FUNDS CARRYOVER

_**Issue:**_		Each year during Fiscal Years 2003 through 2007, NASA 		has had $1.5 billion  to $2.1 billion in unobligated funds 		carryover at the end of the year.  (“uninvested money”)
_**Solution:**_	In April 2008 NASA’s Chief Financial Officer, 			Ron Spoehel implemented a “Phasing Planning and 			Reporting Process” to enable NASA’s resource 			managers to invest NASA’s appropriated funds more 			effectively, with a specific goal of cutting year-end 			unobligated funds in half to $1 billion.
_**Result:**_		For Fiscal Year 2008 just completed, NASA’s 			Unobligated Funds Carryover was reduced from $2.1 			billion in 2007 to $535 million in 2008.

## Agency Unobligated EOY Carryover History FY 2003 through FY 2008

## NASA UNOBLIGATED FUNDS CARRYOVER (CONTINUED)

_**Business Benefits**_
- Enhanced the _**pace**_ of investment by providing insight as to the timing of the deployment of financial resources, thereby better aligning and balancing budget formulation and execution.
- Improved effectiveness and financial flexibility of investments, for example:
- Facilitated the reprogramming of $31 million cost of facility, two-year funds into another current purpose in NASA’s Third Operations Plan, approved by Congressional Appropriations Committee during FY 2008.
- Instilled routine management reporting (“dashboards”) by cost element, centers, projects, programs, themes, and missions for NASA’s “investment portfolio.”

## CMP Results and Trends for FY08 

- Refresher
-     	- Continuous Monitoring Program (CMP) is NASA’s Internal Control
-         platform
-     	- Implemented February 2008
-     	- Designed to assess, coordinate and address
-         	- Internal Controls for accounting, financial management, and
-                 stewardship
-         	- Compliance with Generally Accepted Accounting Principles
-                  (GAAP)
- Status
-         - Monthly tracking of center by center transaction performance for
-            accounting and control activities (e.g. fund balance,
-            A/R, A/P, inventory, status of funds, etc.)
-         - Exceptions or deficiencies are improving
- 	              - 17% total exception rate in May 2008
- 	       	     - 9% total exception rate in Sept 2008

## CMP Results and Trends for FY08 

- Status (Cont)
- - Specific areas of progress
- 	      - A/R
- 	      - Other Liabilities
- 	      - Resources
- 	      - Purchase Order/Obligations
- 	      - Review of Blank funds
- 	- Areas still needing attention
- 	     - Prepaid Expenses
- 	     - Financial Analysis

## CMP Results and Trends for FY08 

- Status (Cont)
-         - Key Areas of Concern
-         - Status of Funds (budgetary and proprietary
-        synchronization)
-   - Intra-center transactions resulting in high suspense account
-         balances
-  Next Steps
- Continue “clean-up”
- Reduce Exception Rate
- Streamline Process

## 		 Shuttle Transition 

- Property  Disposition and Financial Accounting
- One third of Shuttle Property identified will be applied to Constellation
**	****	****	****	**_**Two Types of Sales**_
_**Property Sales (Not Land) **_-  Proceeds go to Treasury
_**Exchange Sale**_** - **NASA keeps proceeds and applies to Constellation after 10% fee to GSA
- Hundreds of thousands of items – No reliable estimate of salvage value
**Accounting Treatment**
- NO gain on sale
- Treated as a refund (reduction of cost) on Center identified contract;
- Money received will have no effect on Constellation budget

## Earned Value Management 

- A corporate management imperative
-     - Facilitates management control of projects
-     - Requires managing performance against plan
- An OMB (and NASA) imperative
-     - OMB Circular A-11 requires EVM consistent with ANSI/EIA-748 for in-house and contractor work
-    - NPR 7120.5D, NASA Space Flight Program and Project Management Requirements
- Strategy/Status
-      - “Bottoms Up” approach to “sell” an enterprise solution and affect culture change
-      -  Build EVM competency through EVM training courses (665 in FY08; 1080 in
-         FY09)
-       - Develop an agency-wide EVM system/solution
- 		- Build for Constellation
- 		- Secure DCMA validation
- 		- Offer it to Mission/Centers for single solution adoption

## FY2008 Financial Statement Audit Update 

- _Audit Milestones/Schedule_
- FY07 Lessons Learned w/OIG & E&Y 	         	      Jan. 29, 2008
- FY08 Agency-wide Kick-Off Meeting 		      Mar. 13, 2008
- FY08 Walkthrough (Center)
- 		LaRC			        Mar. 31 – Apr. 4, 2008
- 		GSFC	               	                              Apr. 14 – 25, 2008
- HQ Walkthrough Meetings		      Mar. 10 – Apr. 11, 2008
- FY08 Internal Control Testing
-     at Centers			Jun. 2, 2008 – Jul. 18, 2008
- General Audit
- Information Technology
- Environmental
- Property, Plant and Equipment
- FY08 Substantive Testing – New Milestone	 Aug – Sept 2008
- FY08 Field Work Completed	                                            Oct. 2008
- FY08 Opinion Rendered - Agency Financial
-   Report Completed	                                                      Nov. 14, 2008

## FY2008 Financial Statement Audit Update 

- FY 2008 Financial Statements due October 17th.
- _Testing_
- Internal Control Testing (June – August)
- Interim Testing of June 30th balances
- 	(July – October)
- Substantive Testing of September 30 Balances (October – Early November)
- _Results to Date:_
- 32 Findings and Recommendations (NFR’s) for example:
- Insufficient completion, review, and resolution of control activities and exceptions
- Untimely resolution of transactions in budget clearing accounts (inter-agency eliminations)
- Property
- Environmental Liabilities
- Delayed close-out of grants, contracts, purchase orders, etc.
- Material weaknesses and reportable conditions

## Summary of Material Weaknesses and Reportable Conditions Issued during the past Five Years

| Material Weakness/
Reportable Condition | FY2003
Disclaimer
(PWC) | FY2004
Disclaimer
(EY) | FY2005
Disclaimer
(EY)
 | FY2006
Disclaimer
(EY)
 | FY2007
Disclaimer
(EY)
 | Anticipated
FY2008
(EY) |
| --- | --- | --- | --- | --- | --- | --- |
| Financial, Systems, Analysis, and Oversight (MW) |  | X | X | X | X | X |
| Property, Plant, and Equipment (MW) | X | X | X | X | X | X |
| Fund Balance with Treasury (MW)
Rolled into FSAO FY06 | X | X | X |  |  |  |
| Unfunded Environmental Liabilities (RC)
Dropped as a RC and
rolled into FSAO FY06 | X | X | X |  |  |  |
| IFMP (SAP) control environment 
(RC 03) ((MW 04)
Dropped FY05
 | X | X |  |  |  |  |
| Financial Stmt. Preparation (MW)
Identified as part of FSAO FY04 | X |  |  |  |  |  |
| Lack sufficient audit trail (MW)
Dropped FY04 | X |  |  |  |  |  |

## Old Business – Update  

- PP&E – No change in E&Y position
- Terry Bowie will meet with OIG, FASAB and E&Y to seek resolution by treating ISS as R&D (Approx $13.2B)
- IAM tool was implemented in May

## Old Business – Update  

- _Financial Staff Personnel_
- 	Authorized FTE – 103  - No Change
- 	Current FTE 			           93
- 	New hires 				   _ 3_
- 	FTE’s with New Hires                96
-    Shortfall					    7
-     (spread over several functions)

## Old Business – Update  

- _NSSC_
- August 08 – All centers on line
- On time payments  96%  (98% required for passing grade)
- Interest Payments per $1M - $41 (under $200 for passing grade)
- Transactions processed – 45K per month following Wave 4
- Customer call center – 92 - 93% handled within center to increase transaction volume requires additional capital investment