JULY 20, 2007 

AUDIT REPORT

REPORT NO. IG-07-022 (ASSIGNMENT NO. A-06-019-00) 

OFFICE OF AUDITS

INTERNAL CONTROLS OVER NASA’S TRANSIT 

SUBSIDY PROGRAM AT HEADQUARTERS AND 

GODDARD SPACE FLIGHT CENTER NEEDED 

IMPROVEMENT

OFFICE OF INSPECTOR GENERAL

National Aeronautics and 

Space Administration 

 
REPORT NO. IG-07-022 

Final report released by:

 

 signed 

Evelyn R. Klemstine 

Assistant Inspector General for Auditing 

Acronyms 

DoD Department of Defense 

GEWA Goddard Employees’ Welfare Association 

GPR Goddard Procedural Requirement 

HRMD Human Resources Management Division 

IRS Internal Revenue Service 

NHQ NASA Headquarters 

NPD NASA Policy Directive 

OMB Office of Management and Budget 

SOP Standard Operating Procedure 

PFSS Parking and Fare Subsidy System 
JULY 20, 2007 

REPORT NO. IG-07-022 

OVERVIEW

INTERNAL CONTROLS OVER NASA’S TRANSIT SUBSIDY 

PROGRAM AT HEADQUARTERS AND GODDARD SPACE FLIGHT 

CENTER NEEDED IMPROVEMENT

The Issue 

The National Aeronautics and Space Administration (NASA) Office of Inspector General 

initiated the audit of NASA’s Transit Subsidy Program because we received information 

that NASA was providing transit subsidies to individuals who were not eligible to receive 

them. We conducted audit work at NASA Headquarters and at Goddard Space Flight 

Center (Goddard) to determine whether NASA had adequate internal controls over the 

transit subsidies distributed to employees in the National Capital Region. Details of the 

audit’s scope and methodology are in Appendix A. 

Results 

The NASA Headquarters Human Resources Management Division (HRMD) needed to 

improve internal controls as well as establish additional internal controls over the transit 

subsidies that it distributes. HRMD’s Standard Operating Procedure (SOP) provides 

guidance on eligibility requirements for the Transit Subsidy Program; however, the 

controls used to ensure compliance with eligibility requirements needed improvement. 

Specifically, for the period that we reviewed, April through June 15, 2006, we found that 

428 of the 1,058 Transit Subsidy Program participants were not eligible to receive the 

subsidy. Those 428 participants consisted of 235 Center employees detailed to 

Headquarters, 4 individuals working at NASA under the Intergovernmental Personnel 

Act, 7 Department of Defense employees, 147 personnel no longer employed at NASA 

Headquarters, 28 personnel who were listed as eligible to receive both transit and parking 

subsidies, 4 NASA Headquarters personnel detailed to Centers, and 3 contractors. 

Of the 428 ineligible participants, 62 received transit subsidies totaling $16,122 during 

the April through June 2006 distribution period. Specifically, 

• 49 of the 235 Center employees detailed to Headquarters received transit 

subsidies totaling $13,502; 

• 8 of the 147 personnel no longer employed at NASA Headquarters received 

transit subsidies totaling $1,345; 
OVERVIEW

ii REPORT NO. IG-07-022 

• 3 of the 4 individuals working at NASA under the Intergovernmental Personnel 

Act received transit subsidies totaling $675; and 

• 2 of the 7 Department of Defense employees received transit subsidies totaling 

$600. 

The Transit Subsidy Program included ineligible participants because HRMD did not 

apply the eligibility requirements in accordance with its SOP. 

HRMD also did not have internal controls to account for fare cards purchased, on hand, 

and distributed or to account for Smart Cards. Specifically, HRMD did not have 

procedures in place requiring the reconciliation of fare cards ordered to those received; 

the amount of fare cards on hand to the amount distributed and signed for; or the physical 

distribution (fare cards) to electronic distribution (Smart Cards). Internal controls for 

reconciliation are required in order to verify inventory, determine whether fare cards 

were accurately distributed, and ensure participants are not receiving duplicate subsidies 

(through both physical and electronic distribution). (See Finding A.) 

Overall, the internal controls that Goddard established were effective; however, we found 

instances where controls for reconciling fare cards, updating the Transit Subsidy Program 

database, and safeguarding the fare cards either were nonexistent or could be improved. 

Specifically, Goddard’s Transit Subsidy Program administrator did not reconcile the fare 

cards after each monthly distribution and Goddard had not established written procedures 

for reconciling undistributed fare cards. The net effect of not reconciling the fare cards 

for the 6-month period that we reviewed, January through June 2006, was a loss of $995 

in fare cards. Monthly reconciliations could ensure that Goddard identifies errors, theft, 

or abuse. Goddard also needed to implement a procedure to ensure that the program 

administrator is aware of all personnel departures in order to remove participants from 

the database. Finally, we found that Goddard was not adequately safeguarding the fare 

cards. Because fare cards can be used on the public transportation system or sold by 

anyone who possesses them, they need to be safeguarded and protected as if they were 

cash. 

During the audit, Goddard’s Management Operations Directorate, which administers the 

Transit Subsidy Program at Goddard, took immediate corrective actions to resolve the 

issues that we identified. Specifically, Goddard implemented reconciliation processes, 

established procedures for notifying the program administrator when program 

participants leave Goddard and for removing them from the database, and installed a safe 

to secure the fare cards. (See Finding B.) 

Management Action 

We recommended that HRMD recover the $16,122 in erroneous transit subsidy 

distributions, ensure that participants comply with existing eligibility requirements, 
OVERVIEW

REPORT NO. IG-07-022 iii 

correct the subsidy database, and develop a Headquarters directive for the Transit 

Subsidy Program. 

In response to a draft of this report, the Assistant Administrator for Infrastructure and 

Administration nonconcurred with the recommendation to recover the $16,122 in 

erroneous transit subsidy distributions, stating that it would not be cost-effective to 

recover the debt, and has directed HRMD to request a waiver. The Assistant 

Administrator concurred with the recommendations to ensure that participants comply 

with existing eligibility requirements, correct the subsidy database, and develop a 

Headquarters directive. See Finding A for our evaluation and disposition of 

management’s comments on the draft report and Appendix B for the full text of 

management’s comments. 

We consider management’s comments to be responsive to the intent of our 

recommendations, and they are resolved. The recommendation to correct the subsidy 

database is closed, and we will close the others upon verification that the corrective 

actions have been completed. 

JULY 20, 2007 

REPORT NO. IG-07-022 

CONTENTS

INTRODUCTION

Background __________________________________________ 1 

Internal Control Requirements ___________________________ 1 

Objective ____________________________________________ 2 

Other Matters of Interest _______________________________ 2 

RESULTS

Finding A: Internal Controls at NASA Headquarters Needed 

Improvement_______________________________ 4 

Finding B: Internal Controls at Goddard Needed Improvement _ 14 

APPENDIX A 

Scope and Methodology _______________________________ 19 

Review of Internal Controls _____________________________ 20 

Prior Coverage_______________________________________ 21 

APPENDIX B 

Management Comments _______________________________ 22 

APPENDIX C 

Report Distribution ___________________________________ 25 

JULY 20, 2007 

REPORT NO. IG-07-022 1 

INTRODUCTION

Background 

Executive Order. The President issued Executive Order 13150, “Federal Workforce 

Transportation,” on April 21, 2000, to expand Federal employees’ commuting alternatives 

in an effort to reduce employees’ contribution to traffic congestion and air pollution. The 

Executive Order requires that Federal agencies implement a Transportation Fringe Benefit 

Program (Transit Subsidy Program) for their qualified Federal employees in the National 

Capital Region.1

 The Transit Subsidy Program encourages the use of mass transportation 

and vanpools by providing transit passes up to the amount of an employee’s commuting 

costs, not to exceed the maximum level allowed by the Internal Revenue Service (IRS). As 

of October 2006, the maximum amount allowed was $105 a month. 

NASA Transit Subsidy Program. NASA established a Transit Subsidy Program and 

related policy in 1991 based on General Services Administration Bulletin FPMR D-227, 

issued on July 11, 1991. NASA updated its policy in 1995 to incorporate requirements in 

Public Law 103-172, “Federal Employees Clean Air Incentives Act,” and again in 2000 to 

implement Executive Order 13150. NASA’s Transit Subsidy Program for the National 

Capital Region allows qualified civil service employees at NASA Headquarters and 

Goddard Space Flight Center (Goddard) to receive transit subsidies up to the equivalent of 

their commuting costs, not to exceed the IRS-established limit. At Headquarters, the 

Human Resources Management Division (HRMD), under the Associate Administrator for 

Institutions and Management, administers the Transit Subsidy Program. Goddard’s 

Information and Logistics Management Division, within the Management Operations 

Directorate, administers the Transit Subsidy Program at Goddard. 

In March 2007, NASA Headquarters reported 760 participants in the Transit Subsidy 

Program at a monthly cost of about $76,151 and Goddard reported 107 participants at a 

monthly cost of about $11,125. NASA procures the transit passes at cost from the 

Washington Metropolitan Area Transit Authority (Metro). 

Internal Control Requirements 

The Office of Management and Budget (OMB) Circular No. A-123, “Management’s 

Responsibility for Internal Control,” December 21, 2004, paragraph 4, states that Federal 

 

1

 The Executive Order defines the National Capital Region as the District of Columbia; the Maryland Counties 

of Prince George’s and Frederick; the Virginia Counties of Arlington, Fairfax, Loudoun, and Prince 

William; “and all cities now or hereafter existing in Maryland or Virginia within the geographic area 

bounded by the outer boundaries of the combined area of said counties.” 
INTRODUCTION

2 REPORT NO. IG-07-022 

agency management must take systematic and proactive measures for establishing, 

assessing, correcting, and reporting on internal controls to improve the accountability and 

effectiveness of programs. In addition, paragraphs I, II, and III of the Circular state that 

management is responsible for establishing and maintaining internal controls such as 

approvals, authorizations, verifications, reconciliations, performance reviews, and 

maintaining records and documentation. 

NASA Policy Directive (NPD) 1200.1D, “NASA Internal Control and Accountability,” 

May 15, 2006, paragraph 1.a, states that NASA management will establish controls to 

provide reasonable assurance that 

• managed activities achieve their intended results; 

• managed activities are protected from waste, fraud, unauthorized use, 

misappropriation, and mismanagement; 

• resources are used consistent with NASA’s mission; 

• laws and regulations are followed; and 

• reliable and timely information is obtained, maintained, reported, and used for 

decision-making. 

Paragraph 1.d(5) states that managers will periodically evaluate the effectiveness of existing 

controls over operations and processes using internal and external audits. 

Objective 

Our objective was to determine whether NASA Headquarters and Goddard had adequate 

internal controls over the transit subsidies they distribute in the National Capital Region. 

See Appendix A for details of the audit’s scope and methodology and a list of prior 

coverage. 

Other Matters of Interest 

During our audit, we performed a review of the NASA Headquarters Parking Subsidy 

Program to ensure that employees were not participating in both programs. We found that a 

contractor had received a parking subsidy. According to NPD 1541.2J, “Criteria for the 

Assignment of Parking Permits and Parking Procedures,” July 29, 2003, Attachment A, 

paragraphs 1.a and 2, NASA-subsidized parking is limited to qualified Headquarters civil 

service employees only. Initially, a qualified civil service employee signed up to receive 

subsidized parking and included a contractor as a participating carpooler. The qualified 

employee departed NASA on March 18, 2006, but did not return the parking pass to NASA. 
INTRODUCTION

REPORT NO. IG-07-022 3 

The contractor continued using the parking pass for the remainder of March 2006 and from 

April until August 10, 2006, when she turned the parking pass over to NASA. 

NASA Parking Subsidy Program participants pay for a subsidized parking pass on a 

quarterly basis. For two quarters (April through June 2006 and July through September 

2006), the contractor paid the subsidized parking fee of $120 per quarter. However, the 

contractor should have paid the $12 daily rate. 

In August 2006, we notified the Director, Facilities and Administrative Services Division, 

that the contractor should be removed from the Parking Subsidy Program, that NASA 

should seek reimbursement for the time period that the contractor improperly received 

subsidized parking, and that the Division should implement internal controls to prevent this 

from occurring in the future. The Director took immediate action by removing the 

contractor from the Parking Subsidy Program and recovered $1,068 from the contractor. 
RESULTS

4 REPORT NO. IG-07-022 

FINDING A: INTERNAL CONTROLS 

AT NASA HEADQUARTERS 

NEEDED IMPROVEMENT

HRMD did not establish adequate internal controls over the Transit Subsidy 

Program. Specifically, for the period that we reviewed, the April through June 2006 

distribution period, 428 of the 1,058 participants (40 percent) were not eligible to 

receive transit subsidies but were included in the program because HRMD did not 

comply with NASA Headquarters (NHQ) Standard Operating Procedure (SOP), 

“Fare Subsidy,” October 30, 2003. In addition, HRMD did not 

• reconcile fare cards and tokens HRMD received to the vendor invoices, 

• reconcile physical distribution (fare cards) to electronic distribution (Smart 

Cards), 

• adequately reconcile the quarterly physical distribution, and 

• adequately account for Smart Cards. 

HRDM did not perform those internal controls because they were not included in the 

SOP. As a result, HRMD distributed $16,122 in transit subsidies to 62 ineligible 

participants during the distribution period. 

Headquarters Transit Subsidy Program Guidance 

The SOP describes the Transit Subsidy Program, defines eligibility requirements, and 

specifies program limitations. Specifically, the SOP includes the following guidelines: 

• Appropriated funds may be used, if available, and if the subsidy does not exceed 

the IRS limit. 

• The program is open to NASA Headquarters civil service employees. Detailees, 

Center employees participating in training programs at Headquarters, consultants, 

contractors, and other personnel who are not on NASA Headquarters’ payroll are 

not considered Headquarters employees. However, Center employees whose duty 

station is NASA Headquarters may receive the subsidy. 

• Eligible personnel must use the approved means of transportation to and from 

work at least 10 days during the month. 

• Personnel cannot receive subsidized parking as well as the transit subsidy. 
RESULTS

REPORT NO. IG-07-022 5 

Headquarters Transit Subsidy Program 

HRMD administers the Transit Subsidy Program at Headquarters. For the period that we 

reviewed, April through June 15, 2006, HRMD reported 1,058 participants in the Transit 

Subsidy Program. 

Participants in the program can receive their transit subsidy through physical distribution 

or electronic distribution. If the participant chooses physical distribution, then the 

participant receives transit subsidies in the form of fare cards and tokens, which HRMD 

personnel distribute in the NASA Headquarters lobby each quarter. For electronic 

distribution, the participant chooses the Smart Benefits Option. HRMD implemented the 

Smart Benefits Option in December 2005 and provided each participant choosing 

electronic distribution with a Smart Card. Participants download their authorized transit 

subsidy directly from a Metro kiosk each month. Of the 1,058 participants in the 

Headquarters Transit Subsidy Program, 199 (18.8 percent) chose the Smart Benefits 

Option. 

To enroll in the Transit Subsidy Program, an employee must complete NHQ Form 201, 

“Application for Transit Benefit.” For the Smart Benefits Option, the employee must 

also complete NHQ Form 300, “NASA HQ Transit SmartBenefit Enrollment/Change 

Application.” HRMD personnel review submitted applications for completeness; accept 

completed applications; and, if approved, enter the information into the Parking and Fare 

Subsidy System (PFSS) database. Both Transit Subsidy Program and Parking Subsidy 

Program personnel can access the PFSS database (read access); however, they can make 

changes only in their respective program area (write access). If an employee chooses the 

Smart Benefits Option, HRMD personnel input the participant’s name, Smart Card 

number, and authorized monthly amount into Metro’s Smart Benefits Program database. 

Although Metro owns and maintains that database, HRMD has access to NASA’s 

information within the database and can generate reports as needed. 

In September 2004, Goddard2

 awarded a firm-fixed-price, indefinite-quantity contract to 

Metro for $718,000. Under that contract, NASA Headquarters purchases, at cost, fare 

cards, tokens, and Smart Cards from Metro. The contract has a performance period of 

5 years and a ceiling of $8 million. As of January 2007, the contract totaled 

$2.59 million ($1.13 million was added in September 2005 and $742,000 was added in 

January 2007). 

 

2

 Goddard issued the contract for NASA Headquarters. 
RESULTS

6 REPORT NO. IG-07-022 

Ineligible Personnel Were Included in the Transit 

Subsidy Program 

HRMD did not have adequate internal controls over the Transit Subsidy Program at 

NASA Headquarters. Specifically, HRMD allowed ineligible employees to participate in 

the Transit Subsidy Program. During the April through June 2006 distribution period, 

428 of the 1,058 participants (40 percent) were not eligible. As a result, HRMD 

distributed transit subsidies totaling $16,122 to 62 individuals who were not eligible to 

participate in the program, as shown in Table 1. 

Table 1. Distribution of Transit Subsidies to Ineligible Participants 

During the April through June 2006 Distribution Period 

Ineligible Participants In Database

Number Who 

Received Subsidy Subsidy Distributed

Center employees detailed to 

Headquarters 235 49 $13,502 

Individuals under the 

Intergovernmental Personnel Acta

 4 3 675 

Department of Defense (DoD) 

employees under a reimbursable 

agreementb 6 1 300 

DoD employees under a 

non-reimbursable agreementc 1 1 300 

Employees no longer employed at 

Headquarters 147 8 1,345 

Employees in both Transit Program 

and Parking Program 28 0 0 

Headquarters detailees 4 0 0 

Contractors 3 0 0 

 Total 428 62 $16,122 

a The Intergovernmental Personnel Act allows for the assignment of personnel between the Federal 

Government and non-Federal entities. Personnel at NASA under this program are not on the Headquarters’ 

payroll and, therefore, are not eligible for the subsidy.

b

 DoD continues to pay the employee’s salary, and NASA reimburses DoD. 

c

 DoD continues to pay the employee’s salary, and NASA does not reimburse DoD. 

Distribution of subsidies to ineligible participants occurred because HRMD did not 

comply with the eligibility requirements in the NHQ SOP and did not coordinate 

requirements for the Transit Subsidy Program with other Headquarters offices. 

Specifically, HRMD did not ensure that applicants were civil service employees 

officially assigned to Headquarters and did not update the PFSS database to reflect 

personnel actions in a timely manner. 
RESULTS

REPORT NO. IG-07-022 7 

Center Employees Detailed to Headquarters. We identified 235 employees listed in 

the PFSS database that had duty stations other than Headquarters and, therefore, were not 

eligible for the Transit Subsidy Program. Of the 235 employees, 49 (20.9 percent) 

received benefits totaling $13,502 during the April through June 2006 distribution period. 

The SOP states that the Transit Subsidy Program is only available to Headquarters civil 

service employees and that detailees are not eligible, with the following exception: 

Employees of other NASA Centers who are duty stationed at NASA Headquarters 

may also receive the fare subsidy. These employees will be required to furnish the 

Headquarters Human Resources Management Division with a copy of their Standard 

Form 50 (Notification of Personnel Action) documenting their official duty station in 

order to be eligible.

The SOP does not define a detailee. However, the Office of Personnel Management 

Operating Manual Update 45, “The Guide to Processing Personnel Actions,” August 6, 

2006, Chapter 14, section 2(f), describes a detailee as an employee who is considered for 

pay and strength count purposes to be permanently occupying his or her regular position. 

The Manual also states, “Unless the agency chooses to use a Standard Form 50 

(Notification of Personnel Action), a detail . . . is documented with a Standard Form 52, 

Request for Personnel Action.” 

HRMD did not request copies of either Standard Form (50 or 52) to document 

Headquarters as the employees’ official duty station; documentation is required by the 

SOP. In addition, HRMD did not have procedures in place to receive notification when 

the official duty station of a Headquarters employee changes. According to the SOP, if a 

participant does not pick up his or her transit subsidy for more than two consecutive 

quarters, HRMD is required to remove the participant from the database. 

Participants Not NASA Civil Service Employees. HRMD approved 11 participants 

who were not NASA civil service employees and, therefore, were not eligible to receive 

transit subsidies. The ineligible participants were approved because HRMD personnel 

did not properly apply the eligibility requirements of the SOP, which states that the 

Transit Subsidy Program is open only to NASA Headquarters civil service employees. 

Consultants, contractors, and other personnel who are not on NASA Headquarters’ 

payroll are not considered Headquarters employees. Of the 11 ineligible participants, 

7 were Department of Defense (DoD) employees on detail to NASA. The SOP does not 

address transit subsidies for military detailees, and we were unable to identify any policy 

or procedure that did. 

Of the seven DoD employees, six were military officers temporarily assigned to 

Headquarters. These officers were officially detailed to the astronaut program at Johnson 

Space Center, Texas, on a reimbursable basis. One of the six received transit subsidies 

from NASA totaling $300. Because the six military officers’ official duty station is 

Texas, they do not meet the eligibility requirements as stated in the SOP. The seventh 

DoD employee, a military liaison officer, was assigned to NASA Headquarters and the 

Pentagon on a non-reimbursable basis. He also received transit subsidies from NASA 
RESULTS

8 REPORT NO. IG-07-022 

totaling $300. The Executive order allows military personnel within the National Capital 

Region to receive transit subsidies. However, the officer was not entitled to receive 

NASA transit subsidies because he was not a NASA employee nor was he working on a 

reimbursable basis. As of March 21, 2007, HRMD had not removed the DoD employees 

from the database because HRMD was still assessing whether a policy change was 

needed. 

Of the four individuals working at NASA under the Intergovernmental Personnel Act, 

three received subsidies, for a combined total of $675, during the April through June 

2006 distribution period. In November 2006, HRMD removed the four 

Intergovernmental Personnel Act employees from the PFSS database. 

Ineligible Participants Included in PFSS Database. The PFSS database listed 

182 participants who should not have been in the database because they were not eligible 

to receive transit subsidies: 

• 147 were no longer employed at Headquarters. As of March 21, 2007, HRMD 

was in the process of removing their names from the database. 

• 28 were listed as eligible to receive both transit and parking subsidies. As of 

March 21, 2007, HRMD was in the process of contacting each of the participants 

to verify which program they had chosen. 

• 4 were listed as NASA Headquarters personnel, but had been detailed to a NASA 

Center. 

• 3 were contractors. HRMD removed their names from the PFSS database in 

November 2006. 

None of these 182 participants received transit subsidies during the April through 

June 2006 distribution period. 

The SOP states that failure to pick up the transit subsidy for two consecutive quarters will 

result in termination of eligibility, unless HRMD approves an exception. In addition, 

NASA Headquarters requires each departing employee to complete an NHQ Form 60, 

“Final Checkout Record.” NHQ Form 60 requires an HRMD sign-off showing that the 

employee turned in unused fare cards, tokens, or Smart Cards. HRMD received the NHQ 

Form 60 for the 147 participants who departed NASA; however, HRMD did not remove 

them from the PFSS database in a timely manner. 

In addition, the SOP states that an employee who is receiving another form of 

transportation subsidy, such as subsidized parking at Headquarters or any other Federal 

agency’s garage, is not eligible to receive the transit subsidy. HRMD has an internal 

control in place within the PFSS database that flags any participant listed in one of the 

programs who attempts to participate in the other. HRMD can override this internal 
RESULTS

REPORT NO. IG-07-022 9 

control to facilitate changing a participant from one program to the other. However, both 

Transit Subsidy Program personnel and Parking Subsidy Program personnel allowed 

participants to change between the two programs without completing the proper NHQ 

Form 202, “Request for Change in Commuting Status,” and without removing 

participants from the database of the program that they were leaving. 

Transit Subsidy Program Assets Were Not Adequately 

Accounted For 

HRMD did not properly implement internal controls to reconcile and account for Transit 

Subsidy Program assets. The Transit Subsidy Program provides fare cards and tokens; 

anyone who possesses them can use the cards or tokens on public transportation or can 

sell them. Therefore, HRMD should account for and safeguard fare cards and tokens in 

the same manner as cash. Paragraphs C and E of OMB Circular A-123 state that 

management should have controls in place to help ensure that agency objectives are met 

and should monitor the effectiveness of internal controls in the normal course of 

business. In addition, OMB calls for periodic reviews and reconciliations of data to be 

included as part of the regular assigned duties of program personnel. The NHQ SOP, 

however, does not require that the program manager perform any reconciliations or 

physical inventories. To supplement the SOP, HRMD developed internal procedures, the 

“Process to Manage the Fare Subsidy Program,” describing responsibilities under the 

Transit Subsidy Program. Those internal procedures established the following positions: 

• recordkeeper, to input information into the PFSS database. 

• distributor, to issue fare cards and tokens during physical distribution. 

• reconciler, to be responsible for inventory and preparing reconciliation 

memorandums. 

However, HRMD did not implement adequate reconciliation procedures as described by 

OMB Circular A-123 to safeguard Transit Subsidy Program assets. 

Reconciliations To Metro Invoices Not Performed. HRMD did not adequately 

reconcile the fare cards and tokens actually received from Metro to the purchase orders or 

invoices. When the fare cards and tokens ordered from Metro arrive, the reconciler 

compares the invoices to the bill of lading, but not to the inventory by counting the fare 

cards and tokens actually received. HRMD should reconcile the fare cards and tokens 

actually received to the invoices and report any discrepancies. 

This deficiency was previously identified in an HRMD internal risk assessment, “Fare 

Subsidy Program Controls, Risk Assessment, Recommendations, and Management 

Response,” November 3, 2004. The risk assessment recommended that the recordkeeper 

and reconciler jointly receive the transit subsidies and jointly count them. Once the count 
RESULTS

10 REPORT NO. IG-07-022 

is complete, the reconciler should place the fare cards and tokens in the safe. HRMD 

partially implemented that recommendation. The internal procedures only require the 

reconciler to receive and approve all invoices from Metro before placing them in the safe. 

The reconciler’s responsibilities do not include verifying that the fare cards and tokens 

actually received match the invoice. As a result, NASA had no assurance that the 

inventory reported on the invoices was actually received. 

Reconciliations of Quarterly Distributions Not Adequately Performed. HRMD did 

not reconcile the amount of distributed fare cards and tokens with the amount signed for 

by participants. Specifically, the distributor did not maintain a running total of fare cards 

and tokens distributed to reconcile with the signature sheet. Such a control is required in 

order to determine whether fare cards and tokens were accurately distributed and also is 

needed to determine whether a variance exists. 

This deficiency was also identified in the HRMD internal risk assessment. The risk 

assessment recommended that HRMD appoint a reconciler who would be responsible for 

determining whether the distributed subsidies corresponded to the amount signed for. In 

addition, the assessment recommended that the reconciler be responsible for preparing a 

quarterly memorandum to provide documentation of fare cards and tokens on hand, the 

dollar value of cards and tokens distributed, and an ending balance. HRMD partially 

implemented that recommendation. Specifically, the reconciler prepares a quarterly 

reconciliation certification memorandum. However, HRMD does not reconcile the 

number and dollar value of fare cards and tokens distributed to the dollar value signed 

for. Instead, the memorandums simply show the ending balance from the previous period 

and the balance on hand, noting orders placed when applicable. Information on amounts 

distributed is arrived at through those numbers, not by any documentation of actual 

distribution. In addition, the reconciler’s certification memorandum for the April through 

June 2006 distribution period does not include the number of fare cards and tokens 

distributed. Because HRMD does not maintain documentation that shows the dollar 

value of fare cards and tokens actually distributed, we could not perform a reconciliation 

to determine whether differences existed. This occurred because the SOP does not 

include a requirement for the distributor and reconciler to perform those tasks. As a 

result, HRMD was not fully accounting for transit subsidies. 

Reconciliations of Physical and Electronic Distribution and Databases. HRMD did 

not reconcile the physical distribution (fare cards) to the electronic distribution (Smart 

Cards) to ensure that individuals did not receive duplicate subsidies. As a result, six 

participants received a physical distribution and an electronic distribution, totaling 

$1,330, during the April through June 2006 distribution period. HRMD could not 

provide documentation to support either the physical or the electronic subsidies. 

In addition, HRMD did not reconcile the databases used for the Smart Benefits Option. 

Specifically, our comparison of Metro’s Smart Benefits Program database with the PFSS 

database showed that 34 participants’ subsidy amount was higher in the Metro database 

than in PFSS, with a combined difference of $290 per month. Also, 14 participants listed 
RESULTS

REPORT NO. IG-07-022 11 

in the Metro’s Smart Benefits Program database were not listed in the PFSS database. 

HRMD personnel could not explain the differences between the databases. As of 

January 31, 2007, HRMD had not corrected the PFSS database for the 34 participants’ 

electronic distribution or added the 14 participants to the PFSS database. 

Accountability of Smart Cards Not Maintained. HRMD did not maintain full 

accountability of Smart Cards. Specifically, HRMD did not have records documenting 

the number of Smart Cards initially purchased from Metro, the number distributed, or the 

number in the safe. Although HRMD maintained a listing of damaged or returned Smart 

Cards, the listing was incomplete because HRMD did not always collect and maintain 

complete information for Smart Cards that were reissued, such as who the card was 

reissued to, the justification, or the date of each transaction. We identified three Smart 

Cards that HRMD recorded as reissued from one person to another; however, those cards 

were not included in the active Smart Card lists generated by Metro’s database for the 

April through June 2006 distribution period. Therefore, HRMD did not know whether 

any of the Smart Cards were missing. 

HRMD Policy Is Out of Date 

HRMD had not updated its October 2003 SOP to reflect subsequent changes in the 

Transit Subsidy Program. Specifically, the SOP addresses the physical distribution of 

fare cards and tokens but does not include guidance on the Smart Benefits Option, which 

was implemented in December 2005. In addition, the internal procedures HRMD 

developed in 2005 had not been incorporated in the SOP. Also, the SOP does not include 

HRMD roles and responsibilities; guidance for the periodic and timely updating of the 

PFSS database; or inventory and reconciliation procedures. 

Recommendations, Management’s Response, and Evaluation of 

Management’s Response 

Recommendation 1. The Director, HRMD, should recover from the 62 ineligible 

participants the $16,122 they received as transit subsidies. 

Management’s Response. The Assistant Administrator for Infrastructure and 

Administration nonconcurred, stating that HRMD agreed that it had made an 

administrative error when it erroneously provided transit subsidy payments to ineligible 

personnel, but that HRMD planned to request a waiver from collecting the funds. The 

Assistant Administrator stated that it may not be possible to locate all 62 individuals and 

that it would be very labor intensive and not cost-effective to recover the debt. The debt 

collection costs for NASA Headquarters range from $400 to $500 per case and would 

cost NASA anywhere from $24,800 to $31,000 to collect the $16,122. HRMD plans to 

implement proper checks and balances to ensure future integrity of the program. 
RESULTS

12 REPORT NO. IG-07-022 

Evaluation of Management’s Response. Management’s comments are responsive. We 

agree that it would be difficult and may not be cost-effective to seek reimbursement from 

the 62 ineligible personnel. In addition, since funding may have been authorized under 

travel orders and our audit work did not extend to reviewing travel vouchers, we surmise 

that the subsidies may have defrayed NASA travel costs. Therefore, we consider that the 

implementation of controls to prevent erroneous distribution of transit subsidies is 

sufficient to resolve the recommendation. We will close it upon receipt of the approved 

waiver and verification that checks and balances have been put into place. We request 

that management provide us with an estimated completion date for the proposed 

corrective action. 

Recommendation 2. The Director, HRMD, should verify that all Transit Subsidy Program 

participants are NASA Headquarters civil service employees or have an SF-50 showing 

Headquarters as their official duty station. 

Management’s Response. The Associate Administrator concurred, stating that HRMD 

recognized that its internal controls needed improvement. HRMD will update the NHQ 

SOP to clarify eligibility requirements. In addition, HRMD will ensure that enrollment 

forms are prepared in compliance with Headquarters policy and verification of employee 

status is conducted when HRMD receives an NHQ Form 201 or NHQ Form 300. 

Evaluation of Management’s Response. Management’s comments are responsive. We 

consider the recommendation to be resolved and will close it upon verification that the 

SOP has been updated or incorporated into the Headquarters policy directive addressed in 

Recommendation 4. We request that management provide us with an estimated 

completion date for the proposed corrective action. 

Recommendation 3. The Director, HRMD, should correct the PFSS database to include all 

current participants and the accurate dollar value of transit subsidies received. 

Management’s Response. The Assistant Administration concurred, stating that, 

subsequent to the audit, HRMD conducted a 100 percent review of the PFSS database 

and updated it to ensure that all active participants met eligibility requirements and the 

correct dollar amounts were recorded. 

Evaluation of Management’s Response. Management’s comments are responsive. We 

consider the recommendation to be resolved and closed. 

Recommendation 4. The Director, HRMD, should develop a Headquarters policy directive 

for the Transit Subsidy Program, which 

a. incorporates guidance relating to military detailees; 

b. defines the process, including internal controls, for administering and monitoring 

the Transit Subsidy Program, including the Smart Benefits Option; and 
RESULTS

REPORT NO. IG-07-022 13 

c. establishes a monitoring or review process. 

Management’s Response. The Assistant Administrator concurred, stating that HRMD 

is in the process of reviewing its current process and policies to ensure that adequate 

internal controls are in place, management and administration of the program is sound, 

and inventory is accounted for. 

Evaluation of Management’s Response. Management’s comments are responsive. The 

recommendation is resolved but will remain open until the revised guidance is issued. 

We request that management provide us with an estimated completion date for the 

proposed corrective action. 
RESULTS

14 REPORT NO. IG-07-022 

FINDING B: INTERNAL CONTROLS 

AT GODDARD NEEDED 

IMPROVEMENT

Goddard officials had established effective internal controls over the Transit Subsidy 

Program; however, additional controls were needed. Specifically, we determined 

that Goddard officials 

• did not reconcile fare cards after each distribution period to the beginning 

and ending balances because there was no requirement to do so, 

• did not remove ineligible employees from the PFSS database because the 

program administrator was not notified when employees left Goddard, and 

• did not adequately safeguard the fare cards. 

As a result of the inadequate or missing controls, Goddard had an increased risk that 

ineligible participants could obtain transit subsidies and that fare cards could be lost. 

During the audit, Goddard took immediate corrective actions to reduce the risk. 

Goddard Guidance on the Transit Subsidy Program 

Goddard Procedural Requirement (GPR) 9730.1A, “Transportation Fringe Benefit 

Program for Employees Utilizing Public Mass Transportation,” January 10, 2005, is the 

Goddard implementing guidance for the Transit Subsidy Program. The GPR states that 

the Transit Subsidy Program is open to Goddard civil service employees, including 

employees who are part-time, term, temporary assignment group, temporary, and in the 

Cooperative Education Program. Detailees, consultants, contractors, and other 

employees who are not on Goddard’s payroll are not considered Goddard employees and 

are not eligible for the subsidy. Although GPR 9730.1A expired on February 28, 2006, 

Goddard considered it applicable until GPR 9730.1B, “Transportation Fringe Benefit 

Program,” was issued on January 8, 2007. 

Goddard Transit Subsidy Program Summary 

Goddard’s Information and Logistics Management Division, within the Management 

Operations Directorate, administers the Transit Subsidy Program at Goddard. Goddard 

issued $115,000 in fare cards from August 1, 2005, through July 31, 2006. Goddard 

procures the fare cards at cost from Metro. The Transit Subsidy Program administrator 

provides the fare cards to the Goddard Employees’ Welfare Association (GEWA) 

Exchange store. Exchange store personnel distribute the fare cards each month to 
RESULTS

REPORT NO. IG-07-022 15 

participating employees and maintain the certification logs and undistributed fare cards. 

The program administrator instituted various internal controls, to include 

• using the Goddard badging database to verify that applicants are Goddard civil 

service employees, 

• counting the fare cards received from Metro and reconciling inventory to the 

number and dollar value of fare cards ordered, 

• obtaining a receipt for the number and dollar value of the fare cards provided to 

GEWA, and 

• requiring participants to show their Goddard badge and sign a certification sheet 

showing that the subsidy was received. 

Overall, the internal controls that Goddard established were effective; however, we found 

instances where controls for reconciling fare cards, updating the Transit Subsidy Program 

database, and safeguarding the fare cards either were nonexistent or could be improved. 

Fare Card Reconciliation Not Performed 

The Transit Subsidy Program administrator did not reconcile the fare cards after each 

monthly distribution because there was no requirement to do so. GPR 9730.1A did not 

require that reconciliations be performed after every distribution period. In addition, 

neither the Information and Logistics Management Division nor GEWA had written 

procedures for GEWA’s processes for reconciling undistributed fare cards. We 

performed the reconciliations for January through June 2006 using existing Goddard 

documentation, as shown in Table 2. 

Table 2. Reconciliation of Subsidy Distributions 

for January through June 2006

Month 

Beginning 

 Balance 

Less Value 

Distributed Ending Balance

Actual 

Ending Balance Difference

January $10,990 $8,055 $2,935 $2,625 ($ 310) 

February 10,630 7,635 2,995 2,860 (135) 

March 11,100 8,265 2,835 2,835 0 

April 10,890 7,895 2,995 2,695 (300) 

May 10,940 7,790 3,150 3,255 105 

June 10,940 8,105 2,835 2,480 (355) 

 Total $65,490 $47,745 $17,745 $16,750 ($995) 

The net effect of the 6-month period was a loss of $995 in fare cards. Internal controls 

were needed to safeguard Goddard assets and to ensure that fare cards were properly 
RESULTS

16 REPORT NO. IG-07-022 

accounted for. Monthly reconciliations would help ensure that Goddard identifies errors, 

theft, and abuse. 

Management Action. Goddard took corrective action and began performing monthly 

reconciliations in July 2006. In addition, Goddard issued a new “Transit Subsidy 

Program Desk Guide” on November 16, 2006, which included reconciliation procedures. 

Because Goddard took corrective actions, we are not making a recommendation. 

Transit Subsidy Database Not Updated 

The program administrator did not update the PFSS database to remove employees who 

were no longer eligible for the benefit. GPR 9730.1A, paragraph 4.c(2), states that 

failure to pick up a transit subsidy for 3 consecutive months results in termination of 

eligibility. If a participant does not pick up a subsidy for 3 consecutive months, then the 

administrator’s practice was to contact the person to determine whether the person should 

remain in the Transit Subsidy Program. If warranted, the program administrator removed 

the person from the PFSS database. However, the program administrator was not 

performing that function. 

As of July 10, 2006, the database contained 108 Goddard participants. We determined 

that 4 (3.7 percent) no longer worked at Goddard and that 3 of the 4 participants had been 

inactive for five consecutive distribution periods. Although Goddard’s Human 

Resources Office does not notify the program administrator when a civil service 

employee leaves Goddard, the program administrator should have identified them by 

reviewing the certification logs and removed them from the PFSS database. 

Goddard needed to implement a procedure to ensure that the program administrator is 

aware of all departures and can remove departing participants from the PFSS database. 

Removing participants from the database is important to ensure that ineligible personnel 

do not receive transit subsidies. 

Management Action. Goddard took corrective action by including procedures for 

removing personnel from the PFSS database in the Desk Guide. Specifically, the Desk 

Guide now requires the program administrator to provide a PFSS database listing to the 

Passport Agent each month and the Passport Agent to notify the program administrator if 

anyone on the list leaves Goddard. Because Goddard took appropriate corrective action, 

we are not making a recommendation. 

Fare Cards Not Adequately Safeguarded 

The Information and Logistics Management Division was not adequately safeguarding 

the fare cards. GPR 9730.1A, paragraph 2.a.(2), requires the Division to “develop and 

implement a procedure to ensure that funds, property, and other program assets are 
RESULTS

REPORT NO. IG-07-022 17 

properly accounted for and safeguarded against fraud, waste, abuse, mismanagement, or 

misappropriation.” In addition, the Government Accountability Office, “Standards for 

Internal Control in the Federal Government,” November 1999, states that an agency must 

establish physical control to secure and safeguard vulnerable assets—for example, 

security for and limited access to assets such as cash—which might be vulnerable to risk 

of loss or unauthorized use. At the time of our audit, the Transit Subsidy Program 

administrator locked the fare cards in a desk drawer. The dollar value of undistributed 

fare cards can range from about $2,500 to $11,000. Since fare cards can be used on the 

public transportation system or sold by anyone who possesses them, they needed to be 

safeguarded and protected as if they were cash. 

Management Action. In November 2006, the Information and Logistics Management 

Division took the corrective action of installing a safe to store the fare cards. In addition, 

the Desk Guide was updated to include procedures on safeguarding fare cards. Because 

Goddard took appropriate corrective actions, we are not making a recommendation. 

APPENDIXES

REPORT NO. IG-07-022 19 

APPENDIX A 

Scope and Methodology 

We performed this audit at NASA Headquarters and Goddard from June 2006 through 

April 2007 in accordance with generally accepted government auditing standards. We 

reviewed and evaluated the internal controls associated with the Transit Subsidy Program 

at Headquarters and Goddard. We reviewed documentation dated from December 1991 

through February 2007. To understand the requirements for the Transit Subsidy Program 

and internal controls, we reviewed applicable documents, including the following: 

• Executive Order 13150; 

• IRS requirements in section 132, “Certain Fringe Benefits,” title 26, United States 

Code; 

• IRS requirements in the Code of Federal Regulations, title 26, parts 1 and 602, 

“Qualified Transportation Fringe Benefits”; 

• OMB Circular A-123; 

• Government Accountability Office publications: “Internal Control Management 

and Evaluation Tool,” August 2001, and “Standards for Internal Control in the 

Federal Government,” November 1999; 

• NPD 1200.1B3

 and NPD 1200.1D; 

• NASA Policy Memorandum, “Policy on Fare Subsidy for NASA Employees 

Using Public Mass Transportation,” July, 7, 1995; 

• NASA Policy Memorandum, “Transportation Fringe Benefit Program,” July 3, 

2000; 

• Headquarters Policy Directive 9730.1A; 

• HRMD’s NHQ SOP; and 

• Goddard’s GPR 9730.1A, GPR 9730.1B, and Desk Guide. 

 

3

 NPD 1200.1B was in effect for the distribution period that we reviewed. However, the criteria we used 

for our review remained the same in NPD 1200.1D. 
APPENDIX A 

20 REPORT NO. IG-07-022 

At Headquarters, we interviewed personnel and obtained documentation from HRMD, 

the Facilities and Administrative Services Division, and the Procurement Operations 

Division. In addition, we met with the NASA DoD Affairs Manager concerning detailed 

military personnel and with the Integrated Enterprise Management Program Business 

Process and Application Support Office at Marshall Space Flight Center concerning the 

Federal Personnel/Payroll System. We observed the physical distribution of subsidies at 

Headquarters in September and December 2006. 

At Goddard, we interviewed personnel and obtained documentation from the Information 

and Logistics Management Division and the GEWA Exchange store. We visited the 

GEWA Exchange store to assess safeguards for the distribution of the transit subsidies. 

We also interviewed Goddard Procurement Operations Division personnel regarding the 

contract with Metro. 

Use of Computer-Processed Data. We used data generated from the PFSS database 

related to program participation. We assessed the reliability of the PFSS database by 

comparing the database’s listing of Transit Subsidy Program participants as of June 15, 

2006, with the Department of Interior’s Federal Personnel/Payroll System listing of 

NASA Headquarters employees as of June 15, 2006, and Goddard employees as of 

July 10, 2006. We performed this comparison to determine whether the PFSS database 

contained only NASA Headquarters and Goddard civil service employees. Our findings 

address issues regarding the accuracy of the PFSS database. 

In addition, we used information from Metro’s Smart Benefits Program database to 

compare with the PFSS database’s information on participants in NASA’s Smart Benefits 

Option. We compared information from the two databases to determine whether all 

participants shown by Metro as receiving benefits were in the PFSS database and 

whether electronic distribution values matched that recorded in PFSS. Finding A 

addresses issues related to the electronic distribution of transit subsidies. 

We did not perform tests to validate the accuracy of the information from the Federal 

Personnel/Payroll System database or Metro’s Smart Benefits Program database. We do 

not believe that omissions of such tests had a material effect on our findings and 

conclusions. 

Review of Internal Controls 

We reviewed NASA Headquarters and Goddard policies, procedures, and internal 

controls related to the Transit Subsidy Program. We identified internal control 

weaknesses, which are discussed in Findings A and B of this report. For the internal 

control weaknesses identified at Headquarters (Finding A), our recommendations, if 

implemented, will improve controls over the Transit Subsidy Program. Goddard took 

immediate corrective actions to correct the internal control weaknesses we identified at 

Goddard (Finding B). 
APPENDIX A 

REPORT NO. IG-07-022 21 

Prior Coverage 

During the last 5 years, we found only one report applicable to the subject audit. HRMD 

issued an internal risk assessment, “Fare Subsidy Program Controls, Risk Assessment, 

Recommendations, and Management Response,” November 3, 2004. 
APPENDIX B 

22 REPORT NO. IG-07-022 

MANAGEMENT COMMENTS
APPENDIX B 

REPORT NO. IG-07-022 23 
APPENDIX B 

24 REPORT NO. IG-07-022 
APPENDIX C 

REPORT NO. IG-07-022 25 

REPORT DISTRIBUTION

National Aeronautics and Space Administration 

Administrator 

Deputy Administrator 

Chief of Staff 

Assistant Administrator for Infrastructure and Administration 

Director, Human Resources Management Division 

Director, Goddard Space Flight Center 

Director, Management Operations Directorate 

Chief, Goddard Information and Logistics Management Division 

Non-NASA Organizations and Individuals 

Office of Management and Budget 

Deputy Associate Director, Energy and Science Division 

Branch Chief, Science and Space Programs Branch 

Government Accountability Office 

Director, Defense, State, and NASA Financial Management, Office of Financial 

Management and Assurance 

Director, NASA Issues, Office of Acquisition and Sourcing Management 

Congressional Committees and Subcommittees, Chairman and 

Ranking Member 

Senate Committee on Appropriations 

Senate Subcommittee on Commerce, Justice, Science, and Related Agencies 

Senate Committee on Commerce, Science, and Transportation 

Senate Subcommittee on Space, Aeronautics, and Related Sciences 

Senate Committee on Homeland Security and Governmental Affairs 

House Committee on Appropriations 

House Subcommittee on Commerce, Justice, Science, and Related Agencies 

House Committee on Oversight and Government Reform 

House Subcommittee on Government Management, Organization, and Procurement 

House Committee on Science and Technology 

House Subcommittee on Investigations and Oversight 

House Subcommittee on Space and Aeronautics 

REPORT NO. IG-07-022 27 

Major Contributors to the Report: 

Catherine Schneiter, Director, Financial and Institutional Management Directorate 

Ashton Coleman, Project Manager 

Lynette Westfall, Auditor 
JULY 20, 2007 

REPORT No. IG-07-022 

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