GAO-05-492R NASA: Compliance with Cost Limits 

United States Government Accountability Office

Washington, DC 20548 

April 8, 2005 

The Honorable Ted Stevens 

Chairman 

The Honorable Daniel K. Inouye 

Co-Chairman 

Committee on Commerce, Science, 

 and Transportation 

United States Senate 

The Honorable Sherwood L. Boehlert 

Chairman 

The Honorable Bart Gordon 

Ranking Minority Member 

Committee on Science 

House of Representatives 

Subject: NASA: Compliance with Cost Limits

Section 202 of the National Aeronautics and Space Administration (NASA) 

Authorization Act of 2000, Pub. L. No. 106-391, § 202, 114 Stat. 1577, 1587 (Oct. 30, 

2000) requires that GAO verify NASA’s accounting for amounts obligated against 

established limits for the space station and related space shuttle support. Under the 

act, obligations are limited to $25 billion for the International Space Station’s (ISS) 

development and $17.7 billion for shuttle launches in connection with the space 

station’s assembly. In the past, we have advised your committees that NASA was 

unable to provide detailed support for the amounts obligated against the limits. Thus, 

we could not verify the amounts that NASA reported in its budget requests to 

Congress. 

As part of its fiscal year 2006 budget request, NASA reported that of the $23.7 billion 

that had been appropriated for ISS and related activities from fiscal year 1994 through 

fiscal year 2004, approximately $23.5 billion was obligated as of September 30, 2004. 

NASA did not report the amounts obligated for shuttle launch costs. Furthermore, 

NASA is still unable to provide detailed support for the amounts obligated against the 

limits. Thus, we could not verify the amounts NASA reported to Congress in its 

budget requests for fiscal years 2002 through 2006. NASA has acknowledged the 

financial reporting challenges it faces and recently implemented a new integrated 

financial management system. Although NASA is still working through some 

significant systems implementation issues, the goal of the new system is to improve 

the availability and reliability of NASA’s financial data. 
Page 2 GAO-05-492R NASA: Compliance with Cost Limits 

As discussed with your staff, the enclosed briefing slides provide a summary of past 

and current issues related to NASA’s compliance with the ISS and shuttle support 

spending limits as well as our assessment of NASA’s financial reporting challenges 

going forward. We conducted our work to develop the attached briefing slides from 

March through April 2005 in accordance with U.S. generally accepted government 

auditing standards. We provided a copy of the enclosed briefing slides to NASA 

officials, who agreed with our observations and conclusions. 

- - - - - 

We are sending copies of this report to other interested congressional committees as 

well as to NASA’s Administrator and Chief Financial Officer. We will also make 

copies available to others upon request. In addition, the report will be available at no 

charge on the GAO Web site at http://www.gao.gov. 

If you or your staff have any questions about this report, please contact me at (202) 

512-9095 or by e-mail at kutzg@gao.gov or Diane Handley, Assistant Director, at (404) 

679-1986 or by e-mail at handleyd@gao.gov. 

Gregory D. Kutz 

Director, Financial Management and Assurance 

Enclosure 
Page 3 GAO-05-492R NASA: Compliance with Cost Limits 

GAO-05-492R NASA: Compliance with Cost Limits 1

Enclosure I

International Space Station and 

Shuttle Support Cost Limits

Briefing to the Senate Committee on Commerce, 

Science, and Transportation and the House 

Committee on Science

April 8, 2005
Page 4 GAO-05-492R NASA: Compliance with Cost Limits 

GAO-05-492R NASA: Compliance with Cost Limits 2

Enclosure I

Briefing Contents

• NASA Authorization Act of 2000 Requirements 

• Objective

• Summary of Past and Current Reporting

• Issues Affecting Reporting of Reliable Financial 

Information 

• Issues Affecting Cost Limits Going Forward

• Related Audit Issues

• Conclusions
Page 5 GAO-05-492R NASA: Compliance with Cost Limits 

 

GAO-05-492R NASA: Compliance with Cost Limits 3

Enclosure I

NASA Authorization Act of 2000 

Requirements

The act establishes general limitations for NASA on the development 

cost associated with the International Space Station (ISS) and shuttle 

launches in connection with the ISS’s assembly:

• ISS obligations limited to $25 billion.

• Shuttle launch obligations limited to $17.7 billion.

As part of the annual budget request to Congress, the National 

Aeronautics and Space Administration (NASA) is required to update 

Congress on its progress by:

• Accounting for the amounts obligated against the ISS and 

shuttle limitations to date.

• Arrange for GAO to verify the accounting within 60 days of 

budget submission.
Page 6 GAO-05-492R NASA: Compliance with Cost Limits 

GAO-05-492R NASA: Compliance with Cost Limits 4

Enclosure I

Objective

• To provide updated information regarding NASA’s ability to 

account for amounts charged against the ISS and shuttle launch 

spending limits included in section 202 of the National Aeronautics 

and Space Administration Authorization Act of 2000 (Pub. L. No. 

106-391, § 202, 114 Stat. 1577, 1587 [Oct. 30, 2000]). 

• We conducted our work to develop the briefing slides from March 

through April 2005 in accordance with U.S. generally accepted 

government auditing standards. 
Page 7 GAO-05-492R NASA: Compliance with Cost Limits 

GAO-05-492R NASA: Compliance with Cost Limits 5

Enclosure I

Summary of Past and Current Reporting

• NASA’s fiscal year 2002 budget:

• NASA’s first report to Congress 

under the act.

• NASA reported that

• it had received about $15.8 

billion of budget authority 

through fiscal year 2000 related 

to the ISS limit and 

• it had charged $1.5 billion 

against the shuttle limit through 

fiscal year 2000 (calculated 

based on $380 million per 

launch, the maximum allowed 

by the act).

• GAO’s August 2001 report:

• We found that NASA was unable to 

provide detailed support for the 

amounts obligated in all years against 

the spending limits. 

(See GAO, NASA: International 

Space Station and Shuttle Cost Limits, 

GAO-01-1000R [Washington, D. C.: 

Aug. 31, 2001].)
Page 8 GAO-05-492R NASA: Compliance with Cost Limits 

GAO-05-492R NASA: Compliance with Cost Limits 6

Enclosure I

Summary of Past and Current Reporting 

(Continued)

• NASA’s fiscal year 2003 budget:

• NASA reported budget authority of 

$17.9 billion received for the ISS limit 

through fiscal year 2001. NASA did 

not report amounts obligated for the 

shuttle limit through fiscal year 2001. 

However, it did report that the 32 

planned shuttle missions required to 

assemble the ISS were projected to 

cost $12.2 billion, based on $380 

million per launch.

• GAO’s April 2002 report:

• No change from our August 2001 

report. (See GAO-01-1000R and 

GAO, NASA: Compliance with 

Cost Limits Cannot Be Verified, 

GAO-02-504R [Washington, D.C.: 

Apr. 10, 2002].)
Page 9 GAO-05-492R NASA: Compliance with Cost Limits 

GAO-05-492R NASA: Compliance with Cost Limits 7

Enclosure I

Summary of Past and Current Reporting 

(Continued)

• NASA’s fiscal year 2004 budget:

• NASA reported budget authority of $19.8 

billion received for the ISS limit through 

fiscal year 2002 and did not report 

amounts obligated for the shuttle.

February 1, 2003: Space Shuttle 

Columbia Accident–Shuttle Fleet 

Grounded.

• NASA’s fiscal year 2005 budget: 

• NASA did not comply with the 

requirements of section 202 of the National 

Aeronautics and Space Administration 

Authorization Act of 2000. 

• NASA did not report amounts obligated 

against the cost limits as part of its fiscal 

year 2005 budget request to Congress.

• GAO’s briefing of April 2003:

• No change from our August 2001 

report. (See GAO-01-1000R.)

• GAO’s results as of March 2004:

• No basis for validating amounts 

charged against the limits.

• No change from our August 2001 

report. (See GAO, NASA: Compliance 

with Cost Limits, GAO-04-648R 

[Washington, D. C.: Apr. 2, 2004] and 

GAO-01-1000R.) 
Page 10 GAO-05-492R NASA: Compliance with Cost Limits 

GAO-05-492R NASA: Compliance with Cost Limits 8

Enclosure I

Summary of Past and Current Reporting 

(Continued)

• NASA’s fiscal year 2006 budget:

• NASA reported that, of the $23.7 billion 

appropriated for the ISS and related 

activities from fiscal year 1994 through 

fiscal year 2004, approximately $23.5 

billion had been obligated as of September 

30, 2004. NASA did not report amounts 

obligated for shuttle launch costs. 

• NASA reported that ISS development costs 

may exceed the $25 billion cost cap in 

fiscal year 2005. NASA projected 

cumulative costs through fiscal year 2005 

to total $25.8 billion. NASA attributed the 

increase to the continued grounding of the 

shuttle fleet and reductions in the ISS 

operations and research budgets. 

• GAO’s results as of April 2005:

• No change from our August 2001 

report. (See GAO-01-1000R.) 
Page 11 GAO-05-492R NASA: Compliance with Cost Limits 

GAO-05-492R NASA: Compliance with Cost Limits 9

Enclosure I

Issues Affecting Reporting of Reliable 

Financial Information

• NASA’s newly implemented financial management system continues to 

face serious data integrity issues and is currently unable to generate 

reliable and accurate financial data. 

• GAO reported that NASA’s new system did not provide complete 

and accurate cost and obligation data. (See GAO, Business 

Modernization: NASA’s Integrated Financial Management 

Program Does Not Fully Address Agency’s External Reporting 

Issues, GAO-04-151 [Washington, D. C.: Nov. 21, 2003], and 

GAO, NASA: Significant Actions Needed to Address Longstanding Financial Management Problems, GAO-04-754T 

[Washington, D. C.: May 19, 2004].) 
Page 12 GAO-05-492R NASA: Compliance with Cost Limits 

GAO-05-492R NASA: Compliance with Cost Limits 10

Enclosure I

Issues Affecting Reporting of Reliable 

Financial Information (Continued)

• NASA’s independent auditor, Ernst and Young, reported serious errors in 

the amounts reported in the agency’s fiscal year 2004 financial statements 

and was unable to render an opinion on the statements. 

• NASA’s opening balances for many of its budgetary accounts were 

misstated. 

• NASA was unable to provide subsidiary listings to support budgetary 

outlays during the fiscal year. 

• GAO previously reported that NASA faces major challenges in resolving 

many of its long-standing financial management problems. (See GAO-04-

151 and GAO-04-754T.) Until such issues as data reliability and accurate 

reporting are addressed, NASA may fall short in providing complete and 

reliable accounting of its assets and how funds were spent. 
Page 13 GAO-05-492R NASA: Compliance with Cost Limits 

GAO-05-492R NASA: Compliance with Cost Limits 11

Enclosure I

Issues Affecting Cost Limits Going 

Forward 

• Although NASA’s fiscal year 2006 budget request is based on the 

assumption that the shuttle fleet will return to flight in the late spring 

of 2005, uncertainties about the timing of the fleet’s return to flight 

pose challenges for NASA in managing ISS costs. 

• NASA’s Office of Inspector General (OIG) reported that the ISS 

program schedule is currently off track by 2 years. In addition, 

NASA has substantial work to perform in addressing technical 

issues raised by the Columbia Accident Investigation Board (CAIB). 

As of January 2005, the Return-to-Flight (RTF) Task Force closed 

or conditionally closed only 7 of the 15 RTF recommendations 

made by CAIB. 
Page 14 GAO-05-492R NASA: Compliance with Cost Limits 

GAO-05-492R NASA: Compliance with Cost Limits 12

Enclosure I

Issues Affecting Cost Limits Going 

Forward (Continued)

• Continued grounding of the U.S. shuttle fleet will delay completion of 

the ISS and increase costs. Factors increasing costs include the 

following:

• Continued maintenance and storage of ISS components at the 

Kennedy Space Center. In August 2004, NASA reported that 

almost all of the hardware required for the completion of the ISS 

had been delivered to the Kennedy Space Center.

• Testing and recertification of some of the ISS’s components.

• Extending contracts for the retention of critical skills longer than 

planned to complete development and assembly of the ISS.
Page 15 GAO-05-492R NASA: Compliance with Cost Limits 

GAO-05-492R NASA: Compliance with Cost Limits 13

Enclosure I

Issues Affecting Cost Limits Going 

Forward (Continued)

• NASA reported that, upon returning to flight, the shuttle fleet will be 

dedicated to assembling the ISS and is to be retired upon 

completion of that work. However, until the shuttle’s return-to-flight 

date is known, it will be difficult for NASA to provide reliable

estimates of the increase in costs and the ISS’s completion date.
Page 16 GAO-05-492R NASA: Compliance with Cost Limits 

GAO-05-492R NASA: Compliance with Cost Limits 14

Enclosure I

Related Audit Issues

• As part of our audit of NASA’s implementation of its new financial 

management system, we reported that the new system does not 

yet provide reliable and timely cost information for program 

management and external reporting purposes, such as validating 

obligations as set forth in the National Aeronautics and Space 

Administration Authorization Act of 2000. (See GAO, Business 

Modernization: Improvements Needed in Management of 

NASA’s Integrated Financial Management Program, GAO-03-

507 [Washington, D.C.: Apr. 30, 2003], GAO-04-151, and 

GAO-04-754T.)
Page 17 GAO-05-492R NASA: Compliance with Cost Limits 

GAO-05-492R NASA: Compliance with Cost Limits 15

Enclosure I

Related Audit Issues (Continued)

• NASA’s independent auditor, Ernst and Young, disclaimed an 

opinion on NASA’s fiscal year 2004 financial statements primarily 

because of pervasive errors in the financial statements and data

integrity issues. As such, NASA’s independent auditor reported that 

NASA’s financial management system does not comply with the 

requirements of the Federal Financial Management Improvement 

Act of 1996.

• In October 2004, NASA’s OIG reported that two of the most serious 

management and performance challenges facing NASA are (1) 

completing the ISS and (2) the new integrated financial 

management system.
Page 18 GAO-05-492R NASA: Compliance with Cost Limits 

GAO-05-492R NASA: Compliance with Cost Limits 16

Enclosure I

Conclusions

• NASA remains unable to provide reliable and accurate detailed 

support for the amounts obligated in all years against the spending 

limits. As such, GAO is unable to verify the amounts charged 

against the ISS and shuttle spending limits included in section 202 

of the National Aeronautics and Space Administration Authorization 

Act of 2000 (Pub. L. No. 106-391, § 202). 

• NASA has acknowledged the financial reporting challenges it faces 

and recently implemented a new integrated financial management 

system. Although NASA is still working through some significant

systems implementation issues, the goal of the new system is to 

improve the availability and reliability of NASA’s financial data.

(192161)

(192161) 
The Government Accountability Office, the audit, evaluation and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and policies; 

and provides analyses, recommendations, and other assistance to help 

Congress make informed oversight, policy, and funding decisions. GAO’s 

commitment to good government is reflected in its core values of 

accountability, integrity, and reliability. 

The fastest and easiest way to obtain copies of GAO documents at no cost 

is through GAO’s Web site (www.gao.gov). Each weekday, GAO posts 

newly released reports, testimony, and correspondence on its Web site. To 

have GAO e-mail you a list of newly posted products every afternoon, go 

to www.gao.gov and select “Subscribe to Updates.” 

The first copy of each printed report is free. Additional copies are $2 each. 

A check or money order should be made out to the Superintendent of 

Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 

more copies mailed to a single address are discounted 25 percent. Orders 

should be sent to: 

U.S. Government Accountability Office 

441 G Street NW, Room LM 

Washington, D.C. 20548 

To order by Phone: Voice: (202) 512-6000 

TDD: (202) 512-2537 

Fax: (202) 512-6061 

Contact: 

Web site: www.gao.gov/fraudnet/fraudnet.htm 

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470 

Gloria Jarmon, Managing Director, JarmonG@gao.gov (202) 512-4400 

U.S. Government Accountability Office, 441 G Street NW, Room 7125 

Washington, D.C. 20548 

Paul Anderson, Managing Director, AndersonP1@gao.gov (202) 512-4800 

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, D.C. 20548 

GAO’s Mission 

Obtaining Copies of 

GAO Reports and 

Testimony 

Order by Mail or Phone 

To Report Fraud, 

Waste, and Abuse in 

Federal Programs 

Congressional 

Relations 

Public Affairs 

PRINTED ON RECYCLED PAPER
This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately.