IG-02-015

AUDIT 

REPORT MANAGEMENT OF FORWARD FUNDING 

AND UNDISBURSED COSTS 

March 29, 2002 

 National Aeronautics and 

Space Administration

OFFICE OF INSPECTOR GENERAL
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Acronyms 

CFO Chief Financial Officer 

FAR Federal Acquisition Regulation 

FY Fiscal Year 

GAO General Accounting Office 
March 29, 2002 

W 

TO: A/Administrator 

FROM: W/Counsel to the Inspector General 

SUBJECT: INFORMATION: Management of Forward Funding and Undisbursed Costs 

 Report Number IG-02-015 

The NASA Office of Inspector General has completed an audit of Management of Forward 

Funding and Undisbursed Costs.1

 The Agency uses forward funding as a tool of the Federal 

budget process to allow continuing operations and to avoid funding shortfalls. Forward funding, 

consisting of unobligated budget authority and uncosted obligations,2 sets aside funds for future 

Agency 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. We 

evaluated NASA's management of forward funding and undisbursed costs.3 Specifically, we 

determined whether NASA complied with the Agency-recommended thresholds4 for unobligated 

budget authority, uncosted obligations, and undisbursed costs and whether those thresholds were 

still appropriate. 

NASA provided adequate management of unobligated budget authority and undisbursed costs; 

however, management of uncosted obligations needs greater emphasis. NASA had more than 

$800 million in uncosted obligations that exceeded the 2-month threshold. Limiting the 

uncosted obligations could have resulted in alternative beneficial uses of Agency funds.5

 

Although we determined that the recommended thresholds were still appropriate, we believe 

NASA should apply the thresholds at the program or project level rather than at the Center level 

for the reasons discussed in the finding section of the report. 

 

1

We performed the audit at NASA Headquarters and three NASA Centers. 

2

Unobligated budget authority consists of funds available but not yet obligated for contract and program 

requirements. Uncosted obligations are funds already allocated to a program or contract for work not yet 

performed. 

3

Undisbursed costs are funds set aside for expenses recognized but not yet paid. 

4

In 1996, the Agency recommended thresholds to assist NASA in managing forward funding. Thresholds stated 

that unobligated budget authority should consist of 1 month of available funds for new obligations or existing 

contract actions, uncosted obligations should consist of 2 months of average costs for forward funding, and 

undisbursed costs should consist of 2 months of average disbursements. 

5

Congressional and Office of Management and Budget notifications/approvals may be required before NASA can 

reallocate program funds. 
2 

Background 

Forward funding first became a concern for the Agency when a House Subcommittee raised 

concerns about forward funding balances to the General Accounting Office (GAO) in 1996.6

 

Both the GAO and an internal NASA steering group reviewed forward funding.7

 The steering 

group recommended that NASA (1) establish Center thresholds for unobligated budget authority, 

uncosted obligations, and undisbursed costs and (2) study the thresholds over time. The GAO 

recommended that NASA measure the thresholds at the program or project level.

Recommendations 

We recommended that the NASA establish and implement a forward funding management 

policy and incorporate the policy into the Agency’s Federal Acquisition Regulation (FAR) 

Supplement. These actions will help to ensure effective use of Agency funds. 

Management’s Response and OIG Evaluation

NASA concurred with the report recommendations but expressed concerns about some of the 

premises in the report. Management stated that uncosted obligations may not always indicate 

underutilized funds and that the report minimized the role of Agency strategic plans and 

congressional approvals needed to redistribute Agency funds. Despite those concerns, the 

Agency plans to issue a forward funding management policy as part of the Agency Financial 

Management Manual. The Agency will disseminate the policy by issuing a Procurement 

Information Circular to Agency procurement personnel. 

We consider management’s planned actions responsive to the recommendations. Details on the 

status of the recommendations are in the recommendations section of the report. 

[original signed by] 

Francis P. LaRocca 

Enclosure 

Final Report on Audit of Management of Forward Funding and Undisbursed Costs

 6

In March 1996, the Chairman of the House of Representatives Subcommittee on Space and Aeronautics raised 

concerns to the GAO about excessive forward funding balances in some NASA programs. 7

GAO issued the results of its work in audit report, GAO/NSIAD 96-206, “NASA Budget: Carryover Balances for 

Selected Programs.” The NASA steering group published its results in “The Management and Liquidation of 

Budget Authority: Issues and Recommendations Associated with Recent Growth in Unliquidated Budget 

Authority,” in June 1996. 
FINAL REPORT ON AUDIT OF MANAGEMENT OF FORWARD 

FUNDING AND UNDISBURSED COSTS 
March 29, 2002 

W 

TO: B/Acting Chief Financial Officer 

H/Assistant Administrator for Procurement 

FROM: W/Assistant Inspector General for Audits 

SUBJECT: Final Report on Management of Forward Funding and Undisbursed Costs 

Assignment Number A-01-016-00 

Report Number IG-01-015 

Enclosed please find the subject final report. Our evaluation of your response has been 

incorporated into the body of the report. We consider management’s proposed, 

corrective actions responsive for the recommendations. The recommendations will 

remain open for reporting purposes until corrective actions are completed. Please notify 

us when actions have been completed on the recommendations, including the extent of 

testing performed to ensure corrective actions are effective. The final report distribution 

is in Appendix E. 

We appreciate the courtesies extended to the audit staff. If you have questions 

concerning the report, please contact Mr. Chester A. Sipsock, Program Director, 

Financial Management Audits, Quality and Oversight (216) 433-8960, or Ms. Linda 

Wagner Anderson, Auditor-in-Charge, at (757) 864-3745. 

[original signed by] 

Alan J. Lamoreaux 

Enclosure 
2 

cc: 

AA/Chief of Staff 

AB/Associate Deputy Administrator for Institutions 

B/Comptroller 

G/General Counsel 

BF/Director, Financial Management Division 

JM/Director, Management Assessment Division 

AA/Director, Kennedy Space Center 

106/Director, Langley Research Center 

DA01/Director, Marshall Space Flight Center 
NASA Office of Inspector General 

IG-02-015 March 29, 2002 

A-01-016-00 

Management of Forward Funding 

 and Undisbursed Costs 

Introduction 

The Federal Government’s ongoing operations are contingent on the annual 

congressional appropriations;8

 therefore, NASA faces certain budgeting challenges. One 

such challenge is to continue funding operations during the period when the Congress 

and President have not finalized the Agency’s appropriations. NASA uses a fundamental 

tool of the Federal budget process, known as forward funding, to safeguard against 

funding shortfalls during those periods. Forward funding (1) sets aside certain funds for 

new obligations and/or planned Agency expenses and (2) consists of the total of 

unobligated budget authority and uncosted obligations. Forward funding can also 

decrease the amount of administrative and procurement actions related to incremental 

funding, thereby decreasing the potential for delays in contract/procurement activities. 

It is important that management monitor forward funding balances to fully understand the 

status of a program or project. Large forward funding balances can indicate that research 

and development efforts, such as grants9

 and cooperative agreements,10 have required 

more time to actually start work. Large forward funding balances can also give the 

appearance that NASA is carrying over excessive balances from one fiscal year to the 

next. As a result of a House subcommittee concern about excessive forward funding 

balances in some NASA programs, the GAO issued a report11 on its review of NASA’s 

forward funding balances. In response to the GAO report, NASA issued the Draper 

 8

Congress appropriates funds to NASA on a fiscal year (FY) basis. NASA allocates and distributes those 

funds by appropriation to its programs and Centers. NASA Headquarters and Center officials subsequently

obligate the funds to meet program and contract requirements for the year. The Agency expenses (costs) 

funds as work or services are performed and disburses funds against expensed amounts upon receipt of an 

invoice or other payment request. 9

NASA awards grants and cooperative agreements to universities and non-profit entities to fund basic and 

applied research. NASA Procedures and Guidelines 5800.1, “Grant and Cooperative Agreement

Handbook,” states that a research grant shall be used (1) to accomplish a NASA objective through 

stimulating the acquisition of knowledge of the subject under study or attempting to determine the potential

of scientific discoveries or improvements in technology, materials, processes, methods, devices, or 

techniques and (2) to advance the state of the art. The recipient will generally conduct the research without 

assistance from NASA and will provide a final product, usually a report. 10NASA Procedures and Guidelines 5800.1, “Grant and Cooperative Agreement Handbook,” states that a 

cooperative agreement shall be used when the principal purpose is to transfer something of value to the 

recipient to accomplish a public purpose of support or stimulation authorized by Federal statute, where 

substantial involvement is anticipated between NASA and the recipient. 11Details on the GAO findings are in Appendix B of our report. 
report, which discusses the results of an internal Agency study12 of forward funding 

balances. The report states that when NASA’s budget decreased slightly in the 1990’s, 

managers maintained larger forward funding balances to soften the impact of budget 

reductions in future years. The Draper report recommended the following thresholds to 

assist NASA in managing forward funding: 

• unobligated budget authority should consist of 1 month of available funds for new 

obligations or existing contract actions, 

• uncosted obligations should consist of 2 months of average costs for forward 

funding, and 

• undisbursed costs should consist of 2 months of average disbursements.

The Draper report also recommended that NASA study the thresholds over time to 

determine whether they should be revised. 

Our overall audit objective was to evaluate NASA's management of forward funding 

(unobligated budget authority and uncosted obligations) and undisbursed costs. 

Specifically, we determined whether NASA complied with the recommended thresholds 

for unobligated budget authority, uncosted obligations, and undisbursed costs and 

whether those thresholds were still appropriate. Details on the audit objectives, scope, 

and methodology are in Appendix A. 

Results in Brief 

NASA’s management of forward funding needs improvement. The Agency complied 

with the 1-month threshold for unobligated budget authority. However, NASA 

Headquarters and the three Centers we reviewed13 did not comply with the 2-month 

threshold for uncosted obligations. NASA had more than $800 million in uncosted 

obligations as of September 30, 2000, which exceeded the 2-month threshold. If NASA 

had limited forward funding balances for uncosted obligations as recommended, the 

Agency could have found alternative beneficial uses for those funds. 

In relation to NASA’s management of undisbursed costs, we determined that the Agency 

did not always comply with the 2-month threshold for undisbursed costs. Specifically, 

NASA had not disbursed funds because contractors had not completed required contract 

milestones.14 However, we determined that the withholding of contract payments 

pending the completion of work or services was in the Agency’s best financial interest. 

Therefore, no action is required for improving management of undisbursed costs and, 

accordingly, we did not address the excess balances in this report. 

 12Additional details on the study are in Appendix B. 13We reviewed forward funding information on 35 contracts at 3 Centers: John F. Kennedy Space Center, 

Langley Research Center, and George C. Marshall Space Flight Center. 14Of the 35 contracts we reviewed, 25 contracts had excess undisbursed costs totaling about $212 million. 

2
Regarding whether the recommended thresholds were still appropriate, we determined 

that some level of forward funding is necessary to carry out Government programs. We

considered the 2-month threshold for uncosted obligations to prevent work stoppages and 

the 1-month threshold for unobligated budget authority to maintain program reserves 

sufficient to sustain NASA operations during periods between Agency appropriations. 

However, we believe NASA should apply the thresholds at the program or project level 

rather than at the Center level for the reasons discussed in the finding section below.15 

We also considered the 2-month threshold for undisbursed costs reasonable to allow for 

the various factors16 contributing to the lag time between cost accruals and payments. 

Funds in Uncosted Obligations 

Finding. Agencywide, uncosted obligations exceeded the recommended threshold by 

more than a total of $800 million for program years17 1998 through 2000. The primary 

reasons for the excess uncosted obligations balances were that: 

• the Chief Financial Officer (CFO) had not issued a forward funding policy to 

assist NASA in assuring sound funds management, 

• Agency procurement regulations did not address forward funding management, 

and 

• Center personnel did not always perform resource reviews during the fiscal year 

to identify and reallocate excess uncosted obligations. 

If NASA personnel had monitored the forward funding balances more closely during the 

fiscal year to identify potential excess uncosted obligations, the Agency may have been 

able to realize greater benefit from available appropriations.18

Federal and NASA Guidance for Using Appropriated Funds

The FAR and NASA FAR Supplement require adequate funding of programs to avoid 

anti-deficiency violations.19 Specifically, the FAR requires that agencies adequately fund 

 15The Draper report recommended that each Center use a total measurement or Center composite to 

evaluate forward funding. The Center composite is a total of all Center financial transactions for each 

appropriation including contracts, grants, cooperative agreements, purchase orders, travel, salaries, etc. 16Various factors, such as type of contractual agreement, determine the proper time for disbursement of 

funds. However, NASA must accrue costs as incurred to reflect current liabilities, even though the Agency 

may not make actual disbursements until some later period. 17A program year identifies the fiscal year in which Congress appropriated funds. 18Congressional and Office of Management and Budget notifications/approvals may be required before 

NASA can reallocate program funds. 

19FAR, Part 32, Contract Financing, states that adequate funding should be available to prevent antideficiency violations. The Anti-Deficiency Act prohibits a Government employee from obligating or 

expending funds in excess of the amount available in an appropriation. 

3
programs to cover contract costs. Most NASA contracts are awarded for multiple years 

and are incrementally funded;20 however, there is no Federal funds management guidance 

for those types of contracts. 

For our audit, we relied on the GAO and Draper reports as guidance to evaluate sound 

funds management of NASA’s programs. The GAO report recommended that NASA 

measure forward funding on individual programs because reviewing only Agency and 

Center totals would not detect large forward funding balances in specific programs (see 

Appendix B). As discussed earlier, the Draper report recommended specific thresholds 

for unobligated budget authority, uncosted obligations, and undisbursed costs for each 

Center. 

Status of Uncosted Obligations 

Agency Composite of Uncosted Obligations. NASA personnel did not always comply 

with the recommended 2-month threshold for uncosted obligations. We reviewed the 

Agency composite21 of uncosted obligations balances for program years 1998 through 

2000. The balances of the excess uncosted obligations for the 3 years totaled more than 

$800 million as shown in the table below (Appendix C contains detailed calculations of 

the uncosted obligations): 

Net Uncosted Obligations Amounts in Excess of 2 Months 

NASA 

Appropriation 

Balance of Excess Uncosted 

Obligations at 

September 30, 2000

Mission Support $133,297,041 

Human Space Flight 6,150,156 

Science, Aerospace, and Technology 666,544,605

Total $805,991,802

It should be noted that when we used the Agency composite to analyze uncosted 

obligations, we could not detect excess balances in individual programs or projects 

within each appropriation. For example, some programs or projects may have been under 

the 2-month threshold, while others may have been over the threshold. Because NASA 

would not be able to detect excess uncosted obligations when reviewing Agency funds as 

a whole, we agree with the GAO recommendation that NASA should measure forward 

funding on individual programs and projects rather than Agency composite totals. 

 20Incremental funding is a method to fund contracts over time through successive monetary increases. 21The Agency composite is a total of all NASA financial transactions for each appropriation. 

4
Uncosted Obligations Related to Grants and Cooperative Agreements. Excess 

uncosted obligations may be justified in some cases. We determined that excess 

uncosted obligations for grants and cooperative agreements totaled about $227 million 

(or 28 percent of the total uncosted obligations)22 for program years 1998 through 2000. 

Financial management officials informed us that uncosted obligations for grants and 

cooperative agreements exceeded the 2-month threshold because NASA generally fully 

funded the grants and cooperative agreements at award, regardless of when the work was 

performed. The NASA Grant and Cooperative Agreement Handbook states that NASA 

reserves the right to either fully or incrementally fund grants based on program

considerations. The Handbook further states that grants with anticipated annual funding 

that exceeds $50,000 may be incrementally funded for less than the amount stated in the 

proposal. NASA’s Office of Aerospace Technology established a policy to incrementally 

fund grants valued at more than $50,000 to make better use of that office’s excess 

uncosted obligations balances. While we agree that some of the $227 million in forward 

funding for grants and cooperative agreements may have been justified, NASA 

management should consider alternatives, such as incremental funding, to fund grants 

and cooperative agreements. 

Reasons for Uncosted Obligations Balances 

NASA may not have realized the full benefit from appropriated funds because the 

Agency’s CFO did not establish a funds management policy and personnel were not 

required to identify excess uncosted obligations during the year. 

Funds Management Policy. Although the GAO and NASA financial management 

officials agreed in 1996 that forward funding thresholds should be established, the NASA 

CFO has not yet included the thresholds in a forward funding policy. In addition, NASA 

did not perform additional studies of forward funding to determine whether the 

thresholds were still appropriate. 

In the absence of an Agency forward funding management policy, personnel 

appropriately followed procurement regulations and obligated the maximum amount of 

funding available to cover contract performance without considering whether actual 

costing would occur in the current fiscal year. Federal and Agency procurement 

regulations allow the Agency to fully fund contracts, which may result in excess uncosted 

obligations. However, those regulations do not address funds management or forward 

funding thresholds and, therefore, do not ensure the best use of available resources. 

NASA should include a forward funding policy in the Agency’s procurement regulation, 

the NASA FAR Supplement. 

Reviews of Uncosted Obligations Balances. Early identification of excess uncosted 

obligations is vital to ensure that excess funds are reallocated before the end of the fiscal 

 22NASA also administered many of its congressional earmarks (funds set aside within an appropriation for 

a specified purpose) through grants. Although financial data for congressional earmarks was not readily

available, earmarks are reflected in the $227 million. 

5
year. Performing periodic reviews during the fiscal year would allow NASA personnel 

to determine whether excess uncosted obligations could be put to better use. However, 

procurement, program, and project personnel were not required or trained to identify 

excess uncosted obligations balances during the year. Because the Draper report 

addressed forward funding thresholds only at the fiscal year end, personnel reviewed 

funds balances and reallocated obligations and costs at the year end to meet Agency 

financial management goals. For example, NASA personnel stated that they forward 

funded a Center computer maintenance contract over 6 months into 2001 to use expiring 

funds at the end of FY 2000. Reviews of uncosted obligations during the fiscal year 

could have resulted in earlier detection of excess balances and greater opportunity for 

alternative uses for the available funds. 

Benefits of Improved Management of Uncosted Obligations Balances 

Effective management of appropriated funds becomes more critical as NASA’s budgetary 

resources continue to decrease. Performing reviews of uncosted obligations balances is 

one way NASA could improve funds management by identifying alternative uses for 

available funds. For example, in March 1996, the Space Shuttle Program used $70 

million of uncosted obligations balances in the Shuttle program to fund Space Shuttle 

upgrades to improve Shuttle safety. 

If NASA Headquarters and Center financial and program personnel had monitored the 

forward funding balances more closely, NASA could have found alternative uses for 

some of the $800 million in excess uncosted obligations. Further, if the Agency 

improves forward funding practices on future programs, projects, and contracts, NASA 

could realize greater benefit from available appropriations. 

We commend the Agency CFO for establishing a performance goal23 for forward 

funding. However, formal Agency policy is needed to emphasize the importance of 

funds management, specifically management of unobligated budget authority and 

uncosted obligations, throughout the fiscal year. 

Recommendations, Management’s Response, and Evaluation of 

Response 

1. The NASA CFO, in conjunction with the Assistant Administrator for 

Procurement, should establish and implement a forward funding management 

policy. At a minimum, the policy should address the following requirements: 

 23NASA’s 2001, 2002, and 2003 Performance Plans provide a performance goal (3 months) for forward 

funding, which represents the total of unobligated budget authority and uncosted obligations. However, 

the Performance Plans do not address specific goals for unobligated budget authority or uncosted 

obligations. For example, NASA could forward fund uncosted obligations for 3 months and not forward 

fund unobligated budget authority, and the Agency would still meet the performance goal. 

6
• Review forward funding balances and justify them if they exceed established 

thresholds. 

• Measure future uncosted obligations at the program or project level at a 

minimum. 

• Evaluate forward funding thresholds periodically to determine whether they 

continue to be appropriate. 

• Conduct budgetary resource reviews during the fiscal year to identify 

uncosted obligations balances in excess of established thresholds so that the 

Agency can reallocate funds whenever possible in accordance with 

appropriate funding review and approval policies. 

• Emphasize funds management throughout NASA. 

2. The Assistant Administrator for Procurement should incorporate the NASA 

CFO’s forward funding management policy into the NASA FAR Supplement. 

Management's Response. Concur. NASA agreed to establish and implement a forward 

funding management policy and plans to publish the policy in the Agency’s Financial 

Management Manual by October 1, 2002. Also, the Associate Administrator for 

Procurement will emphasize the forward funding policy to Agency procurement 

personnel by issuing a Procurement Information Circular rather than making a regulatory 

change to the NASA FAR Supplement. The estimated completion date for issuing the 

Circular is October 1, 2002. 

Although the CFO agreed to establish a forward funding management policy, financial 

management officials expressed concerns about some of the premises associated with the 

report’s findings. Management stated that uncosted obligations may not be a sign of 

underutilized funds and that using forward funding to continue operations at the 

beginning of the fiscal year in the absence of a signed appropriation is not the primary 

purpose of uncosted obligations. Further, the report underestimated the redistribution of 

uncosted obligations, and management is concerned that the $800 million identified in 

the report minimized the role of the Agency’s strategic plans and the approval of 

Congress. Despite these concerns, NASA will determine appropriate targets to use and 

will base the targets on the type of work being conducted. Finally, the Agency will 

establish a regular review of unobligated funds and uncosted obligations to determine 

whether balances are reasonable and redistributions are warranted. The complete text of 

management's response is in Appendix D. 

Evaluation of Response. NASA’s planned actions are responsive to the 

recommendations. The recommendations are considered resolved but will remain 

undispositioned and open until the agreed-to corrective actions are completed. 

With regard to management’s concerns, we agree that excess uncosted obligations may 

be justified in some cases, and we included examples in our report. The report discusses 

the use of forward funding at the beginning of the fiscal year to continue operations as an 

example of budget challenges facing NASA and does not state that this is the primary 

7
purpose of uncosted obligations. The report also recognizes the NASA Office of 

Aerospace Technology for its effective management of grants and cooperative 

agreements and that approval outside of NASA may be needed in certain cases to 

redistribute funds. It was not our intent to advise funding of programs or projects without 

considering Agency priorities. We commend the CFO’s approach and planned corrective 

actions to provide greater emphasis Agencywide for forward funding management. 

8
Appendix A. Objectives, Scope, and Methodology 

Objectives 

Our overall audit objective was to evaluate NASA's management of forward funding 

(unobligated budget authority and uncosted obligations) and undisbursed costs. 

Specifically, we evaluated whether NASA complied with the recommended thresholds 

for forward funding and undisbursed costs and whether those thresholds were 

appropriate.

Scope and Methodology 

We obtained Agencywide financial balances, by appropriation, as of September 30, 2000, 

as reported in NASA’s Financial and Contractual Status system. We calculated 

unobligated budget authority, uncosted obligations, and undisbursed costs using average 

monthly obligations, costs, and disbursements from fiscal year (FY) 2000 financial data. 

We divided (1) the unobligated budget authority at fiscal year end 2000 by average 

monthly obligations, (2) the uncosted obligations by average monthly costs, and (3) 

undisbursed costs by average monthly disbursements. To identify balances in excess of 

recommended thresholds, we subtracted 1 month of average obligations from the 

unobligated budget authority, 2 months of average costs from the uncosted obligations, 

and 2 months of average disbursements from the undisbursed costs. We reviewed 

forward funding information on 35 contracts at 3 Centers: John F. Kennedy Space 

Center (Kennedy), Langley Research Center (Langley), and George C. Marshall Space 

Flight Center (Marshall). 

We assessed the reliability of computer-processed data contained in NASA’s Financial 

and Contractual Status system and Center-unique financial systems and found them to be 

adequate. As a result, we concluded that the computer-processed data were sufficiently 

reliable to meet the audit objectives. 

Management Controls Reviewed 

We reviewed the processes for recording obligations, costs, and disbursements at each of 

three Centers, and we considered controls for those processes to be adequate. We also 

reviewed Federal appropriations and procurement laws as follows: 

• Department of Veterans Affairs and Housing and Urban Development 

Appropriations Acts for FY’s 1993 through 2000, 

• Cash Management Improvement Act of 1992 and Amendments, 

• Federal Acquisition Regulation, and 

• Federal Acquisition and Streamlining Act of 1994. 

9
Appendix A 

We also reviewed Office of Management and Budget Circulars, the U.S. Treasury 

Financial Manual, and Federal cash management initiatives. We reviewed applicable 

NASA regulations and documents to include the: 

• NASA Federal Acquisition Regulation Supplement, 

• NASA Procedures and Guidelines for program and project management, 

• NASA Financial Management Manual, 

• NASA Performance Plans for FY’s 2000 and 2001, 

• Chief Financial Officer’s Functional Leadership Plan, and 

• NASA’s budget instructions for the program years reviewed. 

We considered the lack of an Agency policy for forward funding a management control 

weakness as discussed in the report. 

Audit Field Work 

We conducted field work from January 2001 through February 2002 at NASA 

Headquarters, Kennedy, Langley, and Marshall. We performed the audit in accordance 

with generally accepted government auditing standards. 

10
Appendix B. Agency Forward Funding Thresholds 

In March 1996, the Chairman of the House of Representatives Subcommittee on Space 

and Aeronautics raised concerns to the General Accounting Office (GAO) regarding 

excessive forward funding balances in some of NASA’s programs. As a result, the GAO 

reviewed forward funding balances in 11 Agency programs at the end of fiscal year (FY) 

1995 and identified excess forward funding balances of $3.6 billion ($.9 billion in 

unobligated budget authority and $2.7 billion in uncosted obligations).24 The GAO 

reported that NASA’s forward funding balances consisted of about 4 months of the 

unobligated budget authority provided to those programs in FY 1995 to cover costs that 

would accrue in FY 1996 or later. The GAO recommended that NASA measure forward 

funding on individual programs because reviewing only Agency and Center uncosted 

obligations totals would not detect large forward funding balances in specific programs. 

In response to the GAO’s findings, NASA established a steering group to review forward 

funding. The steering group published its results in "The Management and Liquidation 

of Budget Authority: Issues and Recommendations Associated with Recent Growth in 

Unliquidated Budget Authority," also known as the Draper Report. The steering group 

recommended specific thresholds for unobligated budget authority, uncosted obligations, 

and undisbursed costs for each Center. These thresholds are provided earlier in the 

Introduction section of the report. 

The NASA steering group applied the thresholds to the Center composite25 of all types of 

contracts, programs, and projects and based the thresholds on FY 1995 average monthly 

obligations, costs, and disbursements. The steering group recommended that NASA 

study the thresholds over time to determine whether they should be revised. The NASA 

Chief Financial Officer (CFO) concurred with the recommended thresholds and in 1996 

and 1997, directed the Agency’s program managers to scrutinize and justify uncosted 

balances in excess of 2 months. The CFO’s direction did not address subsequent years. 

However, NASA’s 2000 Performance Plan and the CFO Functional Leadership Plan 

required the Agency to cost 70 percent of available resources by the end of each fiscal 

year.26

 24The GAO reported its findings in its July 16, 1996, audit report (GAO/NSIAD 96-206), "NASA Budget:

Carryover Balances for Selected Programs." 25The Draper report recommended that each Center use a total measurement or Center composite to 

evaluate forward funding. The Center composite is a total of all Center financial transactions for each 

appropriation including contracts, grants, cooperative agreements, purchase orders, travel, salaries, etc. 26The NASA 2001 and 2002 Performance Plans require that the Agency cost 75 percent (the sum of 

unobligated budget authority and uncosted obligations) or more of available resources by the end of the 

fiscal year. 

11
Appendix C. NASA’s Uncosted Obligations1

 at 

End of Fiscal Year 2000

Mission Support 

Appropriation 

Program Years 

1998 – 2000

Uncosted 

Obligations at 

September 30, 2000 

Monthly Average 

Costs 

Number of 

Months 

Uncosted 

Amounts in

Excess of 2 

Months2

Available until 

Expended3 $113,998,877 $10,161,450 11.2 $93,675,977 

2-year funding4 $150,452,186 $55,415,561 2.7 $39,621,064

Total 

 

$133,297,041 

Human Space Flight 

Appropriation 

Available until 

Expended3 $8,484,899 $1,167,372 7.3 $6,150,156 

Science, Aerospace, 

And Technology 

Appropriation 

Available Until 

Expended3 $23,438,644 $1,199,710 19.5 $21,039,224

2-year funding4 $1,629,518,018 $492,006,319 3.3 $645,505,381

Total $666,544,605 

Grand Total $1,925,892,624 $559,950,412 3.4 $805,991,802 

Source: NASA’s Financial and Contractual Status system as of September 30, 2000. 

1

Uncosted obligations are funds allocated to a program or contract for work not yet performed. 2

“The Management and Liquidation of Budget Authority: Issues and Recommendations Associated with

Recent Growth in Unliquidated Budget Authority” (also known as the Draper report) recommended that 

the Center’s limit uncosted obligations to 2 months of average costs for forward funding. 3

The available until expended funding includes all funds obligated for construction of facilities including 

minor repairs, minor revitalization, minor rehabilitation and modifications, planning and design including

final design, minor construction and additions, preliminary designs, master planning and facilities 

engineering functional leadership, discrete projects, and environmental compliance. 4

The 2-year funding is available for obligation by NASA for 2 fiscal years. 

12
Appendix D. Management’s Response

13
Appendix D

14
Appendix D

15
Appendix E. Report Distribution 

National Aeronautics and Space Administration (NASA) Headquarters 

A/Administrator 

AI/Associate Deputy Administrator 

AA/Chief of Staff 

AB/Associate Deputy Administrator for Institutions 

B/Acting Chief Financial Officer 

B/Comptroller 

BF/Director, Financial Management Division 

C/Acting Director for Headquarters Operations 

G/General Counsel 

H/Assistant Administrator for Procurement 

HK/Director, Contract Management Division 

HS/Director, Program Operations Division 

J/Assistant Administrator for Management Systems 

JM/Director, Management Assessment Division 

L/Assistant Administrator for Legislative Affairs 

M/Associate Administrator for Space Flight 

R/Associate Administrator for Aerospace Technology 

S/Associate Administrator for Space Science 

U/Associate Administrator for Biological and Physical Science 

Y/Associate Administrator for Earth Science 

NASA Centers 

Director, John F. Kennedy Space Center 

 Chief Counsel, John F. Kennedy Space Center 

 Chief Financial Officer, John F. Kennedy Space Center 

Director, Langley Research Center 

 Chief Financial Officer, Langley Research Center 

Director, George C. Marshall Space Flight Center 

 Chief Financial Officer, George C. Marshall Space Flight Center 

16
Appendix E

Non-NASA Federal Organizations and Individuals 

Assistant to the President for Science and Technology Policy 

Deputy Associate Director, Energy and Science Division, Office of Management and 

 Budget 

Branch Chief, Science and Space Programs Branch, Energy and Science Division, Office 

 of Management and Budget 

Managing Director, Acquisition and Sourcing Management Team, General Accounting 

 Office 

Senior Professional Staff Member, Senate Subcommittee on Science, Technology, and 

 Space 

Chairman and Ranking Minority Member – Congressional Committees and 

Subcommittees 

Senate Committee on Appropriations 

Senate Subcommittee on VA, HUD, and Independent Agencies 

Senate Committee on Commerce, Science, and Transportation 

Senate Subcommittee on Science, Technology, and Space 

Senate Committee on Governmental Affairs 

House Committee on Appropriations 

House Subcommittee on VA, HUD, and Independent Agencies 

House Committee on Government Reform 

House Subcommittee on Government Efficiency, Financial Management and 

 Intergovernmental Relations 

House Subcommittee on Technology and Procurement Policy 

House Committee on Science 

House Subcommittee on Space and Aeronautics, Committee on Science 

Congressional Member 

Honorable Pete Sessions, U.S. House of Representatives 

17
NASA Assistant Inspector General for Audits 

Reader Survey 

The NASA Office of Inspector General has a continuing interest in improving the 

usefulness of our reports. We wish to make our reports responsive to our customers’ 

interests, consistent with our statutory responsibility. Could you help us by completing 

our reader survey? For your convenience, the questionnaire can be completed 

electronically through our homepage at http://www.hq.nasa.gov/office/oig/hq/audits.html

or can be mailed to the Assistant Inspector General for Audits; NASA Headquarters, 

Code W, Washington, DC 20546-0001. 

Report Title: Management of Forward Funding and Undisbursed Costs

Report Number: Report Date: 

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organized. 

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3. We effectively communicated the audit 

objectives, scope, and methodology. 

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support the finding(s) in a balanced and 

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If you have any additional comments or wish to elaborate on any of the above 

responses, please write them here. Use additional paper if necessary. 

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1
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Thank you for your cooperation in completing this survey. 

2
Major Contributors to the Report 

Chester A. Sipsock, Program Director, Financial Management Audits, Quality and 

 Oversight 

Sandra A. Massey, Program Manager 

Linda Wagner Anderson, Auditor-in-Charge 

William R. Lester, Auditor 

Phillip H. Dearth, Auditor 

Nancy C. Cipolla, Report Process Manager 

Janice K. Bullard, Attorney Advisor 

Annette Huffman, Program Assistant 

Patricia C. Reid, Program Assistant