U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001

95–741 PDF 2004

MISSION IMPOSSIBLE? FIXING NASA’S FINANCIAL

MANAGEMENT

HEARING

BEFORE THE

SUBCOMMITTEE ON GOVERNMENT EFFICIENCY

AND FINANCIAL MANAGEMENT

OF THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

MAY 19, 2004

Serial No. 108–193

Printed for the use of the Committee on Government Reform

(

Available via the World Wide Web: http://www.gpo.gov/congress/house

http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

TOM DAVIS, Virginia, Chairman

DAN BURTON, Indiana

CHRISTOPHER SHAYS, Connecticut

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

MARK E. SOUDER, Indiana

STEVEN C. LATOURETTE, Ohio

DOUG OSE, California

RON LEWIS, Kentucky

JO ANN DAVIS, Virginia

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

ADAM H. PUTNAM, Florida

EDWARD L. SCHROCK, Virginia

JOHN J. DUNCAN, JR., Tennessee

NATHAN DEAL, Georgia

CANDICE S. MILLER, Michigan

TIM MURPHY, Pennsylvania

MICHAEL R. TURNER, Ohio

JOHN R. CARTER, Texas

MARSHA BLACKBURN, Tennessee

PATRICK J. TIBERI, Ohio

KATHERINE HARRIS, Florida

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

CHRIS VAN HOLLEN, Maryland

LINDA T. SANCHEZ, California

C.A. ‘‘DUTCH’’ RUPPERSBERGER, Maryland

ELEANOR HOLMES NORTON, District of

Columbia

JIM COOPER, Tennessee

——— ———

———

BERNARD SANDERS, Vermont

(Independent)

MELISSA WOJCIAK, Staff Director

DAVID MARIN, Deputy Staff Director

ROB BORDEN, Parliamentarian

TERESA AUSTIN, Chief Clerk

PHIL BARNETT, Minority Chief of Staff/Chief Counsel

SUBCOMMITTEE ON GOVERNMENT EFFICIENCY AND FINANCIAL MANAGEMENT

TODD RUSSELL PLATTS, Pennsylvania, Chairman

MARSHA BLACKBURN, Tennessee

STEVEN C. LATOURETTE, Ohio

CANDICE S. MILLER, Michigan

MICHAEL R. TURNER, Ohio

KATHERINE HARRIS, Florida

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

MAJOR R. OWENS, New York

CAROLYN B. MALONEY, New York

EX OFFICIO

TOM DAVIS, Virginia HENRY A. WAXMAN, California

MIKE HETTINGER, Staff Director

LARRY BRADY, Professional Staff Member

SARA D’ORSIE, Clerk

ADAM BORDES, Minority Professional Staff Member

(III)

C O N T E N T S

Page

Hearing held on May 19, 2004 ............................................................................... 1

Statement of:

Brown, Gwendolyn, Chief Financial Officer, National Aeronautics and

Space Administration, accompanied by Patrick Ciganer, Program Executive Officer for Integrated Financial Management, NASA; Robert

Cobb, Inspector General, National Aeronautics and Space Administration; and Greg Kutz, Director, Financial Management and Assurance,

U.S. General Accounting Office, accompanied by Allen Li, NASA Program Director ................................................................................................ 5

Letters, statements, etc., submitted for the record by:

Brown, Gwendolyn, Chief Financial Officer, National Aeronautics and

Space Administration, prepared statement of ............................................ 7

Cobb, Robert, Inspector General, National Aeronautics and Space Administration, prepared statement of .................................................................. 16

Kutz, Greg, Director, Financial Management and Assurance, U.S. General Accounting Office, prepared statement of ........................................... 30

Platts, Hon. Todd Russell, a Representative in Congress from the State

of Pennsylvania, prepared statement of ...................................................... 3

(1)

MISSION IMPOSSIBLE? FIXING NASA’S

FINANCIAL MANAGEMENT

WEDNESDAY, MAY 19, 2004

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON GOVERNMENT EFFICIENCY AND

FINANCIAL MANAGEMENT,

COMMITTEE ON GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 3 p.m., in room

2247, Rayburn House Office Building, Hon. Todd R. Platts (chairman of the subcommittee) presiding.

Present: Representatives Platts, Towns, Blackburn, Turner and

Harris.

Staff present: Mike Hettinger, staff director; Larry Brady and

Tabetha Mueller, professional staff members; Amy Laudeman, legislative assistant; Sara D’Orsie, clerk; Adam Bordes, minority professional staff member; Earley Green, minority chief clerk; and

Jean Gosa, minority assistant clerk.

Mr. PLATTS. This hearing of the Subcommittee on Government

Efficiency and Financial Management regarding NASA will come to

order.

I appreciate everyone’s attendance here today and also appreciate your patience both with the Murphy’s law of the vote schedule

delaying the start of our mark up and thus pushing back the start

of this hearing as well. I appreciate your indulgence. We are glad

to be here today and begin this hearing regarding the financial

management of NASA.

As part of our ongoing oversight of financial management at all

Federal agencies, the subcommittee will discuss today the business

and accounting processes at the National Aeronautics and Space

Administration and the findings of its fiscal year 2003 financial

audit. The audit raised some very serious concerns, but it also provided important recommendations, all of which we will discuss

today.

Administrator Sean O’Keefe has made financial management a

top priority at NASA. With his leadership, NASA has begun the

process of re-engineering the way it does business by implementing

a more effective accounting system, the Integrated Financial Management Program. The functioning of this new system will be enhanced by NASA’s plan to consolidate financial services at one center in the near future. The process of converting data from 145 different financial management systems into one core data base has

not been easy. In fact, the enormous number of adjustments that

2

had to be made, and that have been widely reported in the media,

came about largely because of this data conversion.

We have to make sure that we understand exactly what this

number represents, and, more important, we need to make sure it

does not obscure the fact that other serious problems were identified, such as a failure to comply with Federal accounting standards.

That is why this hearing today is so important. We need to get the

facts behind what the audit showed, and we need to examine the

recommendations that were made. We also need to make sure that

NASA is managing the implementation of its new system properly.

The IFMP is a huge investment, and it is our hope that it will

bring great returns.

We are honored to have before the subcommittee, Mr. Robert

Cobb, NASA’s Inspector General; Ms. Gwendolyn Brown, Chief Financial Officer for NASA; and Mr. Gregory Kutz, Director of Financial Management and Assurance at the U.S. General Accounting

Office. I certainly thank each of you for your attendance and participation here today. The written testimony you submitted ahead

of time was, as I call in my hearings, my homework that you gave

me in preparation for today’s hearing, and I look forward to our

interaction with each of you as part of this hearing.

I would now like to yield to our Vice Chair, the gentlelady from

Tennessee, Mrs. Blackburn, for purposes of making an opening

statement.

[The prepared statement of Hon. Todd Russell Platts follows:]

3

4

Mrs. BLACKBURN. Thank you, Mr. Chairman.

In your opening statement, you outlined some of the concerns

with NASA’s financial management and one specific persistent

problem that is of concern to me is that NASA fails to keep proper

records which provide the key information for auditors and investigators to track financial transactions.

First, NASA’s own financial statements cannot be supported or

varied due to lack of proper documents. As information for these

financial statements was entered through its data conversion process, NASA posted numerous adjustments as the chairman mentioned outside its financial system and could not provide documentation that would validate those adjustments.

Second, NASA is unable to support the amounts it has obligated

for the Space Station and the Space Shuttle support. Even its new

Core Financials module will not correct this problem as it cannot

provide cost information to Congress or program managers to generate reliable data for daily operations and decisionmaking. This

new financial management system does not even comply with the

requirements of FFMIA where again no audit trail will exist to

support future financial statements.

Fourth, its own internal control weaknesses continue to produce

major errors in reporting property and materials for financial statements. Mr. Chairman, I am distressed at how the agency has failed

to use best practices and has repeatedly denied the existence of

many of its financial management problems that have been reported for many years by GAO and NASA’s Inspector General.

Mr. Chairman, I believe this agency will waste billions of taxpayers’ dollars in this new financial system and until they transform its financial management organization, NASA will continue to

face the same financial management problems it has for the last

two decades.

I look forward to the hearing today and to having more information and understanding of their financial situation.

Mr. PLATTS. Thank you, Mrs. Blackburn.

I would now like to swear in our witnesses. I understand Mr.

Ciganer and Mr. Li are going to be sworn in with you as well.

[Witnesses sworn.]

Mr. PLATTS. The clerk willl note that all witnesses affirmed the

oath. The subcommittee certainly appreciates the substantive written testimonies that each of you have provided for the record. We

now move on to your oral testimony. We will try to stay to about

5 minutes, not a hard and fast rule, but if you can stay as close

to 5 minutes with your opening statement, then we will get to

questions and answers.

First, we will begin with Ms. Brown and then we will follow with

Mr. Cobb and then Mr. Kutz. Ms. Brown, if you would like to

begin.

5

STATEMENTS OF GWENDOLYN BROWN, CHIEF FINANCIAL OFFICER, NATIONAL AERONAUTICS AND SPACE ADMINISTRATION, ACCOMPANIED BY PATRICK CIGANER, PROGRAM EXECUTIVE OFFICER FOR INTEGRATED FINANCIAL MANAGEMENT, NASA; ROBERT COBB, INSPECTOR GENERAL, NATIONAL AERONAUTICS AND SPACE ADMINISTRATION; AND

GREG KUTZ, DIRECTOR, FINANCIAL MANAGEMENT AND ASSURANCE, U.S. GENERAL ACCOUNTING OFFICE, ACCOMPANIED BY ALLEN LI, NASA PROGRAM DIRECTOR

Ms. BROWN. Mr. Chairman and members of the subcommittee, I

am here this afternoon to report on the current state of NASA’s effort to improve its financial management capabilities. As stated

during my confirmation hearing last November, I accepted the appointment of Chief Financial Officer to specifically focus on enhancing NASA’s financial management operation and to help restore fiscal discipline and credibility to our agency. NASA was implementing in planned phases, the Core Financials module throughout fiscal year 2003. This is a commercial, off the shelf, agency-wide accounting module which is part of the Integrated Enterprise Resource Planning Software Suite of applications acquired from SAP.

The implementation of the Core Financials module and other related software applications is part of the agency’s Integrated Financial Management Program. In fiscal year 2000, NASA initiated a

7-year agency-wide effort aimed at providing a single integrated

suite of financial project, contract and human capital management

tool. Mr. Patrick Ciganer, NASA’s Program Executive Officer for

Integrated Financial Management, manages this effort. Mr.

Ciganer and I report directly to the NASA Administrator. I thank

you for allowing him to join me at this hearing and to provide his

insight on the deployment of the Core Financials module during

2003 and the overarching Innovative Financial Management Program.

As mentioned earlier, our Core Financials modules replaced 10

main disperate center accounting systems and over 120 ancillary

subsystems in operation through NASA for the past two decades.

This conversion effort required some very complex data cleanup, in

addition to increased adjustments and reporting work at the end

of the fiscal year 2003. These activities significantly impacted the

timeliness and the initial quality of the information required in

preparing NASA’s interim and year-end financial statements.

NASA underestimated the amount of data that had to be identified, validated and documented and adjusted during our fiscal yearend closing process. Additionally, many of NASA personnel were

faced with the task of creating and processing those adjustments

in a new environment within a very short timeframe. The result

was a $565 billion in posted adjustments to the new module. This

figure reflects a year-end, absolute dollar value adjustment to our

records which we processed and gave to the auditors. This amount

is the sum of many consequent correcting entries often for a single

posting logged by the internal tracking control function of our new

system.

In the past, the agency had been cited for failing to implement

adequate internal controls in its contract management activities.

The new system is configured not to allow direct reversal or eraVerDate 11-MAY-2000 12:49 Sep 17, 2004 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 D:\DOCS\95741.TXT HGOVREF1 PsN: HGOVREF1
6

sures on our wrongly posted entries but rather requires the usual

use of a formal accounting series of steps, e.g., credits and debits

and debits and credits for any reversal and logs for every single

step in an absolute value running total.

As has been promulgated by my colleagues here at the table,

NASA does have a significant challenge ahead. I am now leading

the financial management community in developing and implementing standardized policies, processes and procedures that will

support the financial system and improve the financial operations

of NASA for the long run. We have the NASA Financial Improvement Plan which is our overall, get well plan for charting the

course for improving financial management operations. I have a

long road to haul and I accept the challenge willingly. I appreciate

the support and the insight that I have received from the IG and

the GAO and many other entities that have provided guidance

which has been instrumental in helping NASA to get it right in financial management for the long term.

Thank you.

[The prepared statement of Ms. Brown follows:]

7

8

9

10

11

12

13

14

Mr. PLATTS. Thank you, Ms. Brown.

Mr. Cobb.

Mr. COBB. Chairman Platts, members of the subcommittee, in

the interest of time, with the committee’s permission, I will summarize my written testimony.

Mr. PLATTS. Thank you.

Mr. COBB. Thank you for the opportunity to discuss financial

management at NASA. The Office of Inspector General has identified NASA’s efforts to improve financial management as one of the

most serious management and performance challenges facing agency leadership. We think the attention this committee is giving to

the issue will help ensure the agency’s commitment to fixing its financial management problems.

As requested in your letter of April 26, my testimony addresses

the findings of NASA’s fiscal year 2003 financial audit and reviews

the efforts to improve overall financial management at the agency.

First, the fiscal year 2003 audit disclaimer. In January 2004, the

independent auditor PriceWaterhouseCoopers conducted NASA’s

audit pursuant to the Chief Financial Officer’s Act and under the

direction of the Office of Inspector General and determined that it

could not render an opinion on NASA’s financial statements for fiscal year 2003. Generally speaking, the reason for the disclaimer is

that NASA cannot produce timely and accurate financial statements. PriceWaterhouseCoopers, found that NASA lacked an audit

trail to show that its fiscal year 2003 financial statements were

presented fairly. They found that NASA made inadequately documented adjustments of $2 billion net to its fund balance with

Treasury and found that NASA still lacked adequate controls to

reasonably assure that Government-owned contractor-held property

was accurately presented.

A major factor that contributed to NASA’s inability to provide

sufficient evidence to support its statements was the agency’s conversion during fiscal year 2003 from 10 legacy accounting systems

to a single integrated financial management system called the

IFMP. The conversion led to significant problems with data quality

and accuracy that NASA was unable to resolve. NASA management has not yet demonstrated that it can produce quarterly financial statements from the Core Financial Module of the IFMP.

Another factor is NASA’s inadequate policies and procedures to

ensure accurate financial reporting such as appropriate reviews

and approvals of transactions and accounting entries. I note that

implementing agencywide internal controls is particularly difficult

where the 10 NASA Center Chief Financial Officers report to Center Directors rather than the CFO.

Now I would like to describe NASA’s efforts to improve overall

NASA financial management. This year NASA management has

taken initial steps toward improving financial management by developing an improvement plan to address internal control weaknesses. The high level goals of the NASA improvement plan appear

to be appropriate given the state of NASA’s financial systems and

underlying records. The plan is designed to improve the organization of the CFO’s office and financial policies and procedures. The

plan also calls for the establishment of an audit committee.

15

However, there are significant challenges to the success of the

improvement plan. For example, the Office of Inspector General believes NASA has insufficient Civil Service staff to carry out its

plan. Heavy use of contractor personnel is not a long-term solution

to staffing shortages. Also, without successful implementation of

NASA’s IFMP, NASA’s high level goals of its improvement plan

will be difficult, if not impossible, to achieve.

To date, there have been problems with IFMP. The data conversion problems and the inability to generate accurate financial statements impacted the financial audit. The Office of Inspector General

has found other problems with IFMP planning, testing and reporting. The results of these problems are bugs in the system and output that is not user friendly and requires significant manual manipulation.

What is the outlook for the future? The pervasiveness of NASA’s

control weaknesses and the inability to produce complete and accurate financial data will most likely result in a disclaimer of opinion

on the fiscal year 2004 audit. Because of the Government-owned,

contractor-held property issue, it may be years before NASA can

achieve an unqualified or clean audit. But getting clean audits

should not be the priority. Fixing NASA’s internal controls and getting the IFMP to fulfill its potential are critical. Fix those, and

clean audits will follow.

The Office of Inspector General is closely monitoring NASA’s efforts to improve financial management through oversight of the financial audit being conducted by NASA’s new independent public

accountant, Ernst & Young. We will be conducting other activities

to assess financial management including auditing the overall status of IFMP.

The Office of Inspector General believes it is important that

NASA get its financial management in order so that Congress and

the public can have full confidence in agency expenditure of taxpayer dollars.

Thank you.

[The prepared statement of Mr. Cobb follows:]

16

17

18

19

20

21

22

23

24

25

26

27

28

Mr. PLATTS. Thank you, Mr. Cobb.

Mr. Kutz.

Mr. KUTZ. Chairman Platts and Representative Blackburn,

thank you for the opportunity to discuss NASA financial management.

Since its inception in 1958, NASA has made incredible scientific

and technological advances that have enhanced the quality of life

on Earth. However, that same level of excellence is not evident in

NASA’s financial management, the topic of today’s hearing. My testimony has two parts, first, NASA’s history of financial management problems and second, efforts to implement a new financial

system.

First, our reports have shown that NASA’s financial management problems impact its ability to manage its contractors and

major programs. NASA has a long history of schedule problems and

cost overruns with its programs such as the space station. Our reports have highlighted NASA’s problems overseeing its contractors

and their financial performance, controlling program costs, producing credible cost estimates and supporting reports to the Congress

related to spending limits for the Space Station and related Shuttle

support. In fact, since 1990, we have reported NASA contract management as an area of high risk in part due to the financial management problems. However, a series of failed financial audits

served to mask NASA’s problems, specifically from 1996 to 2000,

Arthur Anderson issued unqualified opinions on NASA’s financial

statements, reporting no material weaknesses and systems that

complied with Federal standards. During that time, we reported

that Arthur Anderson’s 1999 audit did not meet professional standards and we questioned NASA management and its auditors’ conclusion that its systems complied with Federal standards. Recent

audit reports confirm the prior audit failures and NASA’s serious

problems. Nonetheless, the misleading prior audit reports fueled

NASA’s optimistic views of its financial operations.

My second point is that NASA is implementing a system intended to address both program management and external reporting needs. We agree with NASA’s goal for the new system, however, in 2003, we issued five reports expressing our concerns that

the new system as implemented will not meet NASA’s stated goal.

For example, the system does not fully address NASA’s external reporting needs. NASA continues to represent that the Core Financial module was fully implemented in June 2003. However, we reported that significant capabilities for external reporting were not

implemented. More importantly, we reported that the new system

is not being used to manage NASA’s programs. We found that program managers and cost estimators were not involved in developing requirements for the system. As a result, they continued to use

hard copy reports, spreadsheets and other labor intensive means to

monitor contractor performance.

Historically, finance has not been viewed as an integral part of

NASA’s program management decision process. Thus, it is not surprising that the new system was not designed or implemented with

program managers or cost estimators in mind. If program managers do not use the new system and continue using their ad hoc

systems, then NASA will continue to have two sets of books.

29

In conclusion, it is clear that NASA has significant financial

challenges. However, as noted by Representative Blackburn, NASA

in many cases has denied the existence of its problems and has attributed its difficulties to the auditors sampling methodology or the

lack of understanding of its operations. Unfortunately, GAO and

NASA have generally agreed to disagree on many of the facts.

For reform to succeed, management must acknowledge the serious nature of its problems and take action to address the people,

process and system challenges. Consistent congressional oversight

of NASA’s financial management is also needed for reform to succeed. We look forward to working with the Inspector General and

NASA management on solutions to these challenges.

Mr. Chairman, this ends my testimony. Mr. Allen Li, the Director in charge of our NASA program work is with me to answer

questions.

[The prepared statement of Mr. Kutz follows:]

30

31

32

33

34

35

36

37

38

39

40

41

42

43

44

45

46

47

48

49

Mr. PLATTS. Thank you, Mr. Kutz.

Again, I appreciate all of your testimony and if Mr. Ciganer or

Mr. Li would like to join the other three at the table as we move

forward to questions. We will again be guided by a loose 5 minute

rule and begin questions with Mrs. Blackburn and myself and Mr.

Towns who is going to be rejoining us.

I would like to start with the structure at NASA. One of the

things that came through loud and clear in the statements here

today and in the written statements and other coverage of the challenges to NASA regarding financial management is the need to

change the culture. This must be a priority, and, in reality, the programs NASA is so well known and appropriately applauded for will

be that much stronger if we do right on the financial management

side.

One of the challenges that seems to surface in the past structure

of NASA, hand in hand with the culture of leadership, is the delineation of authority in the 10 separate centers with the CFOs of

each center answering to the center director but not to the CFO for

the entire agency. Ms. Brown, if you could share with us what you

are doing to address that decentralized approach of the past and

how you are trying to better centralize it, because as we see here

today you are the one that needs to answer for the agency as the

agency CFO. How you are getting your hands around those 10

independent centers?

Ms. BROWN. Thank you for that opportunity. I would like to state

for the record too that we are working that at NASA. It is a challenge having 10 different, separate CFOs reporting to a center director but I have imparted what we call team clarity at NASA. It

is basically a group of individuals at NASA within the NASA community working toward restructuring and realigning the agency as

a total and whole in order to meet our new vision. In that effort,

we have had multiple discussions with regards to the reporting

structure that would be instrumental in my being able to resolve

this challenge we have in financial management. To that end, we

are looking at having a couple of options, one being having the center CFOs report directly to me or my being able to work with the

center directors in the hiring, firing and performance evaluation of

those center CFOs in order to strengthen that relationship. So we

are looking at a couple options and we will be providing those to

the committee once those are finalized.

Mr. PLATTS. Expand on that. I was under the belief that delineation of authority or realignment had already occurred where the

center CFOs would be reporting directly to you. That is something

you are looking at and discussing but has not taken place thus far?

Ms. BROWN. Correct.

Mr. PLATTS. That is something that concerns me, that given

what we know about the challenges in the past, even in this past

year and the 2003 audit, the 2003 numbers, that we are now halfway through 2004 and we have not actually made that change. You

are the agency CFO and the need for that information and that authority over those centers is going to be critical if you are to truly

get your hands around the challenge before you.

Ms. BROWN. Chairman Platts, you are indeed correct on that. We

have taken steps within my organization to work with the center

50

CFOs. There hasn’t been a challenge in that respect and getting

their attention to the issue. The disclaimer was a definite wake-up

call for that but we have not formally documented that in our new

organizational structure.

Mr. PLATTS. What is the timeframe for the two changes, one,

them answering to you directly, the center CFOs and two, your

having whether it is a veto role or a sign-off role in the hiring of

staff in the CFO offices in each of the centers?

Ms. BROWN. Actually we are working toward those and should

have them within the next couple of weeks.

Mr. PLATTS. I would appreciate and ask that you do share the

results of that realignment as soon as it is complete so we are

aware of how you are going to be going forward. One of the weaknesses that came forward I believe in the Inspector General’s statement was staff not understanding the requirements of the Federal

financial management laws and what was required of them. Given

that these are individuals being entrusted with oversight of management of billions of dollars, there clearly is a need for improvement in the staff knowledge and actions. I know you have only

been there 6 months or so, but you accepted that challenge and

now are responsible for each and every one of those individuals

within the financial management field. We would appreciate your

diligent efforts regarding that management aspect.

Mr. Kutz or Mr. Li could you comment on the change in culture,

the alignment and what has occurred in GAO’s opinion and what

needs to occur further?

Mr. LI. I think we can both address culture with regards to the

financial unit and the larger aspect of NASA. As you know, after

the Columbia Accident Investigation Board issued its findings, it

identified that culture was indeed an issue in the whole agency. So

while I am encouraged by what Ms. Brown talks about in terms of

the organizational improvements and the realignment in her unit,

the other thing we need to keep in mind is that culture change also

has to deal with the alignment of both the program and the financial management unit. In other words, if these people cannot talk

to one another and manage these programs, getting the financial

data to manage these programs like the spacecraft and the human

space flight programs, it is not going to work. So culture change

cannot just be one in which we fix what happens at the CFO level.

It has to be throughout the agency.

Mr. PLATTS. Is it your opinion that with the realignment, and the

shared services center up and coming would that help to address

some of that issue?

Mr. LI. I don’t believe so, sir. I think that is an issue of their trying to get more efficiencies and trying to co-locate some of the administrative functions they have, so I don’t believe that is going to

solve the cultural issue you talked about.

Mr. PLATTS. I take it the issues being discussed that direct authority of Ms. Brown over those center CFOs and input into the

hiring of the staffs in those center CFO offices, that is something

you think is important moving toward changing the mentality and

the way of operating?

Mr. LI. Yes, I do.

Mr. PLATTS. Mr. Kutz, did you want to add anything?

51

Mr. KUTZ. I would just add with respect to the other cultural

issue, making sure that the program in finance is better integrated.

That is an important issue that goes back to finance being somewhat stovepiped from the program which gets into is this IFMP

going to meet the needs of those people. I think NASA’s goal up

front was for the integrated financial management system to be

something the program managers used to manage on a day to day

basis. We don’t see that happening right now and that needs to be

one of the goals and results of this, before we spend $1 billion on

a system that is just an accounting system. I think that is a very

critical aspect to discuss in today’s hearing.

Mr. PLATTS. Mr. Cobb.

Mr. COBB. I would like to comment just because I have a slightly

different dichotomy to lay out for you. In one sense I don’t think

the CFO will have the ability to carry out her function until the

people who are the CFOs at the field centers report directly to her

and she writes their performance evaluations and is responsible for

their bonuses and fundamentally they work for her. I am not sure

that is what is being contemplated in connection with the organizational changes at NASA in the CFO shop or in the CIO shop or in

the Safety and Engineering area. I think they are contemplating

something that is more complex with dual reporting requirements

but that ultimately the employees we are talking about will be responsive to the center directors.

Mr. PLATTS. I share your belief. As a subcommittee with oversight, if those individuals aren’t reporting and answering to you,

that means I am going to have to bring all 10 of the individual center CFOs here to answer for themselves if they are not going to be

answering to you.

Ms. BROWN. And given the two comments made from the GAO

and the IG, you see my dilemma in trying to formulate what is the

best plan moving forward. The GAO, as just stated, says you need

the financial manager and the program manager working diligently

together moving the agency forward. If I take the CFOs and have

them report directly to me, they are no longer responsive to the

center director or the program managers at those different centers.

Therefore, that relationship breaks down and they will be responsive and beholding to me.

The IG feels we should have a stronger input having a direct line

to myself and that is the debate and discussion we are having

today within NASA. What is the best structure for NASA, for our

leadership in order to develop the agency not only for today to meet

the challenges I have currently for financial management, but also

moving forward and meeting the vision. This dichotomy between

the two here is the same debate we are having at NASA. Once we

finalize that, get it in written form, we will provide it to the committee, but it is not my hope to have 10 different accounting CFOs

coming to report to this committee. I am accountable for NASA’s

financial status and they report to me and they work with me.

Mr. PLATTS. Under the CFO Act, you are deemed the one accountable. Those regional, center CFOs are not under the act.

I did read it different, Mr. Kutz and Mr. Cobb, that they didn’t

necessarily disagree, Mr. Kutz and Mr. Li, that program managers

need to work hand in hand with the CFOs but I want to followup.

52

Do you object or think it is a bad idea for the center CFOs to answer directly to Ms. Brown in the chain of command?

Mr. LI. No. I was not implying that the organizational alignment

of the CFO precluded or would impact upon that closeness of working together between the program managers. Just ensuring that

the way of doing business incorporates the financial discipline of

managing a program does not require that organizational alignment.

Mr. PLATTS. I think how I took the GAO’s statement, Ms. Brown,

in your written statement you capture it well where you say ‘‘A

clean opinion should reflect a reliable, transparent and efficient set

of financial management practices.’’ It should not, in itself, be a

goal but rather a reflection of those practices; that by putting in

the good processes, including how we align the financial managers

by their work, they will generate good information that benefits

program managers because of having timely accurate information

to work with.

Ms. BROWN. Correct.

Mr. PLATTS. I want to yield to the Vice Chair, but in this first

round, I wanted to get into one of the issues that goes to the data

and the errors in basic accounting. The 2003 audit disclosed the $2

billion discrepancy between NASA’s books and the fund balance

with Treasury. In reading the various reports in preparing for this,

I think it was best captured in the GAO’s written statements how

I looked at that. I may be unusual but I am the one that writes

all the bills in our house and I balance my checkbook to the penny

every month. If I find I am off a dime, I go find the dime. It was

amazing to me as a taxpayer, the way I understand this is that

NASA’s books were off by $2 billion and there is basically just a

correction made but no effort, at least initially, and I am not sure

yet there has been a detailed explanation given of how that $2 billion discrepancy came to be. Where is it? What happened to the

money?

Ms. Brown and Mr. Ciganer, if you can expand on that issue because remember you are speaking to the guy who looks for the

dime I am missing at the end of the month in my checkbook balance and $2 billion is a heck of a lot of money from hardworking

Americans.

Mr. CIGANER. Mr. Chairman, we actually share your concern and

one of the stated objectives of the new system was to actually bring

a level of transparency to the information and a level of detail to

the individual transactions that did not exist in the previous systems. As we stated earlier not only did we consolidate 10 separate,

independent accounting systems from each center but a variety of

subsystems.

What we tried to do moving forward is not only rolling out this

new environment but also taking care of cleaning up an awful lot

of information that was residing at the level of detail that we did

not consider sufficient moving forward. We were aiming, and are

still aiming, at exactly what the GAO and the IG pointed out,

which is to develop a much closer relationship in cost and performance on the management of our major programs. We are very conscious that the stovepipes that were established individually, geographically and even by department, all have to be broken down

53

very, very quickly. We tried to actually not only convert the data

from a historical accounting standpoint, but also to look at the individual transactions and the system we selected is transaction oriented as opposed to just accounting oriented, and break down a lot

of the information that existed in a much higher level in the past

into a much lower level so you can go task by task and start doing

the analysis you require.

Mr. PLATTS. Those are issues that I do want to get into with the

new integrated financial management program and how we are

going to get more detail. I actually have some questions about the

way the system is designed and how much detail we get. I would

like to focus on the $2 billion discrepancy. As we sit here today, do

we know where that money went, why there was a discrepancy, to

ensure there wasn’t fraud, waste or misuse of funds?

Ms. BROWN. No, it was not a matter of fraud, waste, abuse or

misuse of funds. Basically, it comes down to accounting practices,

policies and procedures. Again, as Patrick said, when we implemented the new system, we had over 120 legacy systems that we

were migrating. A lot of those systems didn’t have the financial

rigor or the reconciliation. Like you said, every month you reconcile

your checkbook even down to the dime. It was not a prevailing

practice. We weren’t quite sure as we were moving through the migration and we started doing a reconciliation from pre-migration

into that area. We started seeing the differences and we are researching the differences.

What I have done in my NASA financial improvement plan because that was one of the issues raised within the audit and is a

material weakness identified. In my plan, we are doing a soup to

nuts reconciliation starting back to 2000, 2001, 2002, and 2003. Basically I am reconciling my checkbook for the last 5 years and I will

continue that until I am able to get to a point where I am comfortable in knowing where each and every dime went.

Three weeks ago we received the tapes from Treasury so that we

can begin that process. I don’t mind providing the committee with

the results of going through that process but again, it is through

years of being able to do that. We have it now in a single system.

I can identify at the transactional level down to the detail because

people had to go back and do that rework and put in that information. Not all those systems had that information in them. Now I

am beginning to process through my NASA financial management

improvement plan to do that reconciliation starting back in 2000.

Mr. PLATTS. If I understand correctly, as you are going forward

trying to best determine where that $2 billion went, you have

records from Treasury now that would be the records of who was

paid for what and what amount and you are working through that

process?

Ms. BROWN. Correct and I do have support doing that.

Mr. PLATTS. You said it was 3 weeks ago you got that information?

Ms. BROWN. I received the tapes from Treasury starting from

2000, 2001, 2002, 2003, correct. It was a little difficult for Treasury

to come up with the older records.

Mr. PLATTS. There was a request a while back?

Ms. BROWN. Correct.

54

Mr. PLATTS. And it took a while for Treasury to put together the

information?

Ms. BROWN. Correct.

Mr. PLATTS. As you move through that process and get more de- tail and try to account for all those dimes that make up that $2

billion, I would appreciate that information being shared because

one thing as I read everything is more than 6 months after the

close of the end of the fiscal year, we still don’t know, and I am

hesitant that we can say there was no misuse, there was no intentional defrauding of the public. At this point we really don’t know

where the money went. We just know it went somewhere, $2 billion

more than what NASA thought.

Ms. BROWN. It is not that the money actually went someplace,

it is a matter of whether or not the information was recorded in

our legacy systems and properly transferred into our current new

environment.

Mr. PLATTS. You don’t know at this point whether it was even

recorded in your legacy systems accurately?

Ms. BROWN. Correct.

Mr. PLATTS. So the sooner we get to that detail, I think we will

be more comfortable because it really goes to one, how taxpayer

funds are being spent but also that foundation we are trying to

build on as you are making the transformation to the new system

that we are correcting the errors of the past. The sooner we know

what those errors were, the sooner we can make sure they are corrected as we go forward.

Ms. BROWN. Correct and that is why this is one of the biggest

and most pressing priorities we have been working on the NASA

Financial Management Improvement Plan. Again, it is kind of like

going back to your bank and asking for your prior records from

many years. I had to go back to Treasury and ask for those records.

Having received those, we are beginning the effort of going back

there and doing that reconciliation. That is why we have not taken

that $2 billion lightly. That is why we are devoting the effort to do

so.

Mr. PLATTS. One followup on that and I want to get Mr. Cobb

and Mr. Kutz’s comments on this. I realize this was as you were

being sworn in as CFO but when the report was filed, there was

no mention of that $2 billion correction in the papers filed. The

auditor brought it to your attention so it should have been at least

footnoted. Is there an explanation from someone at NASA of why?

The Federal accounting requirements should have shown that we

made this correction. Is there an explanation for why it was not

noted?

Ms. BROWN. Actually that was an initial oversight at the point

in time we actually provided our financial statements to our auditors. It was literally an oversight. Of course we would have adjusted them afterwards as we went through the process but because of the timing and because of having to meet the November

15 date, we never went back. At that point in time, we also knew

we were getting a disclaimer. It is a matter of not going back and

adding the footnote.

Mr. PLATTS. I say this in a respectful way and you are the one

here and the one responsible but I think it kind of captures the culVerDate 11-MAY-2000 12:49 Sep 17, 2004 Jkt 000000 PO 00000 Frm 00058 Fmt 6633 Sfmt 6633 D:\DOCS\95741.TXT HGOVREF1 PsN: HGOVREF1
55

tural change that needs to happen that there is a $2 billion oversight and whoever is putting together those reports doesn’t understand that we have a fiduciary responsibility to disclose that. That

epitomizes a lack of appreciation for what the standard practice requires and what is needed. I appreciate that is part of what you

are seeking to change.

Ms. BROWN. Therein lies my challenge.

Mr. PLATTS. I do want to get to Mrs. Blackburn but Mr. Cobb

and Mr. Kutz, if you want to comment on this aspect of the audit

and the $2 billion and where we stand today?

Mr. COBB. Just briefly, I think the reason you have internal controls is so that you create an environment where fraud, waste and

abuse doesn’t occur. That is one comment. Second, it strikes me

that NASA should be able to get to the bottom of what happened

to the $2 billion without going to the bank to find out what happened with respect to the transactions. That seems like a work

around to a much better way of getting at it.

Mr. PLATTS. It is fair to say, Ms. Brown, that is what you are

saying, that you had to go to the bank, the Treasury, because your

data was so inappropriately maintained in the legacy systems?

Ms. BROWN. Yes.

Mr. PLATTS. Mr. Cobb, your comment about the internal controls,

I assume something looking at whether there should be an audit

of their internal controls, an audit level opinion on the internal

controls, that is something you would support?

Mr. COBB. I would agree with the notion and I have heard discussions about the idea of whether or not the independent auditors

should render an opinion on internal controls, I would agree with

that notion. I think the NASA experience alluded to in Mr. Kutz’s

testimony where there were a number of favorable unqualified

opinions, including most recently in fiscal year 2002, really hid the

ball on what the problems were at NASA. If there had been greater

focus on internal controls, to the point of rendering an opinion on

internal controls, we might not be in the situation we are in today.

Mr. PLATTS. Thank you.

Mr. Kutz, did you want to add anything?

Mr. KUTZ. Just quickly. I would say your analogy is accurate and

unfortunately, NASA is not the first agency this has happened to.

This has happened in many other agencies before. I would say it

is kind of a two-part issue. One is you have to go back and reconcile all the old stuff but the next question is what has happened

beyond September 30, 2003 with the new. I think you have to look

both ways. Some of the agencies we have dealt with on this before,

because they will never reconcile it down to the dime as you mentioned in your statement, they may have to get some write-off authority to clean up the books. Then the important part is going forward and not letting it happen again.

Mr. PLATTS. That internal control system being in place going

forward is critical too.

Mr. KUTZ. Monthly balancing, yes.

Mr. PLATTS. After her patience with me, I was about to yield. As

soon as Mrs. Blackburn comes back we will yield to her. Let me

continue on some of the audit issues.

56

Ms. Brown, in your discussion about the $582 billion or so ad- justments and explaining how one correction may be $30 billion

done three times and equals $90 billion, you sought to explain that.

Do you want to expand on that and how you are looking at what

happened in the past that we have that huge number as we go into

the 2004 end of the year audit. If there is a one-time correction

that cumulative is $582 billion because you are correcting for all

the wrongs of the past, hopefully this year we are not going to see

similar types of corrections in this year’s audits. Would you like to

expand on that?

Ms. BROWN. We are going to show you a couple charts and I am

going to have Patrick explain to you what happened last year, what

is happening this year and hopefully give you an idea of what you

can expect with what regards to what we call journal vouchers or

JB type of entries.

Mr. CIGANER. As we mentioned earlier, 2003 was the year where

we deployed the new system and it was deployed in a series of

waves. We learned from the previous failed attempt in trying to do

everything at once was just not feasible while trying to keep the

risk at a limit we could live with. Unfortunately, 2003 was the fiscal year in which the agency was gradually converting to the new

system. This created enhanced work for the auditors that went beyond anybody’s expectation. All of a sudden, our audit team had to

audit the old systems and the conversion to the new system and

then what the new system reflected. Additionally the ability to prepare financial statements following adjustments had to be done in

a manual way because the new system went live in late June for

the last centers of the agency. There was no capability, as was accurately pointed out, to prepare our financial statements right out

of the system.

The first chart basically describes, and I will not go into the detail, the number of steps that had to be taken in 2003 in order to

not only prepare the statements but also identify and post all those

adjustments. As we were at the end of the fiscal year, generating

the data in the new system, all of the adjustments had to be posted

to that new system and part of the internal controls required the

tracking of every individual step and in addition, the training that

was required to post those adjustments, had not been as efficient

as we had hoped.

Essentially, a lot of mistakes in postings were recorded and then

those postings had to be reversed. We have a specific occasion,

which is very unfortunate, where a simple $500,000 adjustment

that got posted to a wrong account was reposted over 15 times and

therefore the audit log trail we created registered that amount.

Imagine 10 centers, $15 billion, for the year worth of adjustments,

including all the open contracts, some of which cover several years

and you can see the amount of postings and adjustments that took

place. It is not optimum, but, what we are aiming to do in 2004,

is by moving completely in 2003 the agency, since October 1, has

been operating in the new system and, as you can see, we now will

have a much cleaner way of producing the statements and the adjustments.

Mr. PLATTS. When I saw that $582 billion, I thought it was a

misprint. I appreciate the explanation.

57

You diplomatically said that some of the errors or a large part

of those are mispostings that had to be corrected and one apparently 15 different times and that tells us that the training, the skill

level of some of the individuals making these postings was not adequate. I assume you are giving everyone a crash course in how to

more accurately post their data?

Ms. BROWN. An extremely correct assumption, yes, but will people still incorrectly post adjustments or incorrectly post data into

the new system? Yes. It is part of the learning curve, it is part of

what we call the adaptation phase of any new system of implementation. Will the numbers be in the billions? I definitely hope not.

We are working through these areas. I don’t think we have seen

anything at this point in time.

Mr. PLATTS. My understanding is that of the total amount of adjustments, the $565 billion roughly was related to data conversion.

That still leaves another $17 billion that is not related to data conversions. Can you expand on what that other $17 billion relates to?

Ms. BROWN. That is related to the contractor-held property which

again is outside of our system. That is the information that is reported to us or pushed to us from our contractors. It is basically

contractor-held property that is in the hands of contractors by

which they have to report back to us. Those discrepancies were in

the contractors’ information being pushed to us and we cannot manipulate change or do anything with that because it is reporting to

us.

Mr. PLATTS. But you subsequently learned it was inaccurate to

the tune of $17 billion and corrected that. That leads us to another

issue which I was going to followup later which is your contract

management practices.

Ms. BROWN. Correct.

Mr. PLATTS. As we said, the wrongful transfer of data was about

training and knowledge of making postings, and that $17 billion

tells us that even though it seems small compared to $582 billion,

it is still $17 billion in errors by contractors submitting information

because it is contractor-held but NASA-owned?

Ms. BROWN. Correct.

Mr. PLATTS. So they are inaccurately reporting to the taxpayers

what their assets are. I assume you are taking action. I don’t know

if you want to expand now on the contract management and how

you are trying to address the errors in oversight of your contractors?

Mr. CIGANER. This became a very significant issue starting 2

years ago and over time we realized the only way we were able to

accurately track our assets that were currently being developed by

the contractors is to develop a more sophisticated automation process. Currently the contractors are generating essentially year-end

reports that give us the information. That report in itself needs to

be audited. Every time we audited it, we found mistakes.

The next module of the IFM program, Integrated Asset Management which just got started right now, is specifically focused at addressing this issue which is in itself very complex from a systems

standpoint because we need to have insight into the various asset

management systems held by our contractors.

58

Mr. PLATTS. It is going to be a critical part because my understanding is 90 percent of your budget is spent on contracts. So you

need to get this aspect in order.

Ms. BROWN. About 98 percent contracted out and of the assets

on my balance sheet, it is actually 75 percent. This is a very key

element of our module that I am looking forward to as the Chief

Financial Officer in getting and it is a definite requirement that we

need.

Mr. PLATTS. Mr. Cobb and Mr. Kutz if you could comment and

then Mrs. Blackburn, I promise not to ask another question and

yield to you. On the two issues we have talked about here, one is the $582 billion in adjustments and your understanding of how that came to

be and also your assessment of the data that substantiates what

adjustments were made. Are you comfortable with your knowledge

base of how that huge sum came to be and how it is being addressed?

The second part is on the contract management side of how we

are moving forward and getting our arms around the contractors

who expend a huge sum of the funds in NASA and hold a huge portion of their assets.

Mr. COBB. Yes, I do feel as though there is a general understanding of how the large numbers came to be. I think in simple terms,

adjustments and multiple adjustments were made to bundles of

transactions because of errors in the system and then those errors

in the adjustments were grossed up and you ended up with large

numbers.

To me there were numerous in and outs that led to the gross $582 billion. To me, the number is not as important as the inadequacy of the documentation that shows what the basis was for the

various adjustments. But with respect to the difference between

the 2003 chart on how IFMP was going to work and the 2004

chart, the key is how much manual manipulation it is going to

take. Is the CFO going to be able to press a button and have accurate financial statements issued? I think if you look at the chart,

it says in effect no because there is going to be a body of corrective

activity that has to take place. In fact, I question whether or not

one can press a button and have any financial statements issued

at this point.

We understand the problems that were identified in fiscal year

2003 are not fixed. There continue to be data integrity problems,

and there continue to be questions about whether or not the system

can generate financial statements. Ultimately the policies and procedures that Gwen’s improvement plans are trying to implement

are still not firmly in place. So will there be another year with

$582 billion? The number will be different I am sure and probably

be less but my guess is there are going to be substantial problems.

Mr. PLATTS. The underlying problems still exist that generated

all those adjustments? We are not yet close to addressing that?

Mr. COBB. That is right and I have a great deal of respect for

the CFO and her team that are trying to get on top of the problems, as well as for Mr. Ciganer’s efforts to get on top of the issues

relating to IFMP, but there are still plenty of issues.

Mr. PLATTS. Mr. Kutz.

59

Mr. KUTZ. Yes. I will be quick. I am sure Representative

Blackburn would like to take her turn.

With respect to the $565 billion, I think it is a reflection of problems with following disciplined processes and system implementation, issues with respect to requirements, testing, and risk management. I am sure if they look back, they would like to have dealt

a little bit more with these things before they implemented the system. Now it is kind of a patchwork, catch-up, fix it after the fact,

so that would be my observation. I can’t add anything more to

what they have said on the other part.

On the property, I agree 100 percent with Mr. Ciganer with respect to the automated interfaces needed into the contractor

records which the analogy would be Procter and Gamble has the

same thing into WalMart’s system and it is a little different scenario with inventory but the same concept. They need to have that

to have asset traceability from their general ledger at NASA to the

detailed records at the contractor of the property assets. I would

agree with him on that.

Mr. PLATTS. What was the timeframe? You are beginning that

now, that module?

Mr. CIGANER. Yes, sir. As a matter of fact, one chart shows we

are starting right now development of the module and the target

date for completion is the first quarter of fiscal 2008, again because

it is a fairly complicated undertaking from both a system design

and validation and data integrity standpoint.

Mr. PLATTS. That leaves me to other questions but I am going

to hold on to them for now. Mrs. Blackburn has been very patient.

Mrs. Blackburn is recognized for the purpose of questions.

Mrs. BLACKBURN. Thank you, Mr. Chairman. I want to thank our

panel for your time today. We really want to work with you to be

certain that these situations are addressed. I will apologize to you

all for stepping out. I had a group of four constituents who were

waiting to visit with me on an issue that is as important to them

and to our district as your financial health and your agency’s

health is to our Nation.

Ms. Brown, I would like to begin with you just for a couple points

of clarification. As the chairman was talking with you about the reporting structure for the CFOs, you mentioned your timeline for

change should be ready in about 2 weeks. My question is, is this

just your human capital change or does that also include your financial systems and the changes there?

Ms. BROWN. The change I was speaking of is mostly in human

capital. We are looking at reorganizing or restructuring within the

NASA community for the human capital. We are working toward

the systems side.

Mrs. BLACKBURN. Another point of clarification. In your written

testimony, you say you have used blended data to prepare your financial statements. For the record, would you explain what blended data is?

Ms. BROWN. Blended data would have been the legacy system

and the SAP system because we had over 110 different systems

that we had to migrate through and it was done in a wave approach. Not all the centers in fiscal year 2003 were all operating

on the SAP environment. We had to take data from the legacy sysVerDate 11-MAY-2000 12:49 Sep 17, 2004 Jkt 000000 PO 00000 Frm 00063 Fmt 6633 Sfmt 6633 D:\DOCS\95741.TXT HGOVREF1 PsN: HGOVREF1
60

tem up to the point of conversion and then also data from the SAP

system at the point of conversion forward. That is what we termed

blended data.

Mrs. BLACKBURN. Your SAP system, that software, is it my understanding that is being phased out and that by 2012, you will

have no technical support for that financial system?

Ms. BROWN. I am going to give that one to my project manager.

Mr. CIGANER. It is accurate that the current version of the software that is being implemented is being slotted for upgrade. Those

very large enterprise resource planning systems are consistently

developing new upgrades and new updates, so, the SAP current

product has been advertised as being phased out. We have actually

planned the migration to the new version which is indicated in the

schedule where it says: ‘‘enterprise upgrade’’ will start fairly shortly and will take approximately 15 months. We were very aware unfortunately of the fact that this type of environment requires you

to consistently update your system. This is just like Windows, just

a lot more.

Mrs. BLACKBURN. Mr. Kutz, would you like to comment on that,

sir?

Mr. KUTZ. I agree with what he said. I think there are going to

be some licensing fees and other costs involved in this that may or

may not be involved in the total cost of the program at this point

but hopefully, also there will be some additional capabilities since

it will be a new generation of software. That might help them with

other things.

Mrs. BLACKBURN. Mr. Kutz, the new financial system that we

are dealing with, how do you see this helping them address their

financial weaknesses and the internal controls. You may have addressed this a bit while I was out of the room. I would be interested in your take on that.

Mr. KUTZ. With respect to the overall concept of having an integrated system, I think it is definitely the right move. We support

what they are doing from a conceptual standpoint. Our issues have

been with the implementation of the system. Having an integrated

system and trying to shut down the different systems at the 10

centers is the right thing to do so it should help from that perspective. It should also help them with issues such as property management in the long term, although as Mr. Ciganer said, I think really

to have their systems be compliant with Federal standards, they

are going to have to develop that automated look into the contractors’ records with respect to the actual asset traceability. Those are

really long term types of issues but the concept of this for external

reporting purposes and also for program management purposes is

conceptually correct. Our issues have been with some of the implementation steps.

Mrs. BLACKBURN. Is this FFMIA compliant?

Mr. KUTZ. We reported it was not and again, we had reported

there were a number of capabilities that were deferred from June

2003 when they said the core modules were fully implemented,

there were a lot of capabilities deferred in our view relative to

things like budgetary reporting, the property issue is not dealt with

and as Mr. Cobb noted, the system right now cannot prepare financial statements. Their quarterly reports to OMB are going over as

61

estimates. Those are significant capabilities that although they

said the system was fully implemented in June, clearly there are

things that still need to be done for it to be compliant. I think the

property issue that Mr. Ciganer says is 2008, our belief is that will

have to be done for the system to be compliant.

Mrs. BLACKBURN. So we are basically a long way away from their

having a compliant system?

Mr. KUTZ. Given the timeline he mentioned, I would say yes.

Mrs. BLACKBURN. Do you have a thought on what the cost is

going to be, the true cost of this?

Mr. LI. The cost of the system that NASA has reported to you

this year, fiscal year 2005, when you take a look at that number,

it is around the $500 million. That is only for the direct procurement costs of this particular system. What is not within that explanation is that it requires also the Civil Service costs associated

with the personnel to implementing the system and also the enterprise costs that are needed. The enterprises are the individual organizations within NASA. When you add up all those numbers, you

are up to about three-quarters of $1 billion. In our report we provided last November, we reported on life cycle costs, which are the

costs that would be needed to not only develop the system but to

maintain it over the life of the system. The life we had used in

coming up with our estimate was 2000–2010. For that period, the

total, including the operations and maintenance for IFMP is very

close to $1 billion.

Mrs. BLACKBURN. Mr. Li, let me ask this. Would it be your recommendation, the GAO recommendation, that they scrap this and

start over?

Mr. LI. No. I think we are beyond that point. I think Core Financial has been implemented, I think at this point in time there are

recommendations we have made to NASA and I am hopeful and I

am encouraged they have accepted our recommendations. We are

looking forward to those changes being made.

Mrs. BLACKBURN. Mr. Cobb, did you have a comment on that?

Mr. COBB. Just to followup on what Allen just said. The Office

of Inspector General intends to conduct an overall audit of the

IFMP. We intend to work closely with GAO and use resources they

have offered to us in connection with that activity to get at whether

or not NASA is following up on the recommendations that GAO

and we have made. We will look at the contracts that have been

entered in connection with IFMP, and the resource issues to see

whether or not the dollar numbers we have been discussing are accurate. In addition, we will evaluate whether the various modules

work in concert with each other so that the system can be most effective from the users’ standpoint in generating information for

managing activities.

Mrs. BLACKBURN. Let us continue along that line. Mr. Kutz said

something about the contractor-held assets. We have talked some

about the internal controls. What type internal controls should

NASA establish so that they get a more reliable and consistent reporting of those contractor-held assets?

Mr. COBB. Fundamentally, I see the problem that NASA can establish reporting systems for contractors to report on NASA-owned

contractor-held property. The independent auditor typically looks

62

for how NASA understands that the numbers being reported are

right, how does it go about that? Those are the internal controls

they are talking about. Both Mr. Ciganer and Mr. Kutz have talked

about that what you need is a system linked between the contractors and the agency that gives you a real time understanding of

what is happening with respect to evaluation of the contractor-held

property. Until you have that in place, contractor-held property is

going to be a problem in connection with the annual CFO audits

that are conducted and if everything else is fixed, might result in

qualified opinions until that asset module is in place and working.

Mrs. BLACKBURN. Mr. Kutz, did you have a comment on that?

Mr. KUTZ. I would add he was getting into too that they are reliant upon the controls at the contractor, so once that automated

interface is there you still have to have reliable data at the contractor. I think that was the internal control that Mr. Cobb was talking

about and I would concur with what he said.

Mrs. BLACKBURN. Ms. Brown, you had a comment?

Ms. BROWN. I was also going to say I agree with Mr. Cobb on

two things. First, we need the system. Second, we need the real

time look into the contractor-held property but the third thing that

we would need is flexibility to be able to go in and do quality assurance audits to ensure that they are in compliance with those regulations and they have proper accounting of the property onsite.

That is something we are working toward also.

Mrs. BLACKBURN. Ms. Brown, do you have a set of best practices

or an agency you are looking at, something that is more or less a

template you are following to get things on track?

Ms. BROWN. Actually, we are looking at several. When we first

started the implementation of the SAP enterprise relationship we

had actually engaged Northrop Grumman and they have kind of

been our yardstick as to where we are and being able to chart our

milestones as we move through the process. As we have been getting a lot of attention on our financial management, other agencies

have been coming to the forefront and extending their best practices and some of the lessons they have learned as they went

through the process like Dupont and also some other agencies.

Mrs. BLACKBURN. Mr. Kutz, if proper best practices had been followed, wouldn’t that have avoided a lot of the problems we are

talking about today?

Mr. KUTZ. I believe to some extent that is true. You mentioned

Northrop Grumman and I visited with Northrop Grumman also

and they are putting in SAP in their organization but our recommendations with respect to project management have gotten

into requirements, testing, and risk management, those types of

project management items. As Mr. Li said, we are hopeful they will

be implemented and they have said they will implement our recommendations. If they do and follow the best practice and discipline processes of project management, I think there is nothing

wrong with the SAP software. That has been proven to be software

that can be used to do the kinds of things we are talking about.

So it is a matter of having disciplined project management to put

that in place and make it work.

63

Mrs. BLACKBURN. I thank you for that and I think we all know

the best practices issue is probably one that we have throughout

Government.

Thank you, Mr. Chairman, and I will yield back.

Mr. PLATTS. Thank you, Mrs. Blackburn.

I want to followup with the new integrated financial management program and the Core Financial Module in particular. It was

kind of touched upon, but I am not sure I have a complete answer

as far as the ability of the system, the CFM, to generate financial

statements. It is my understanding that the quarterly statements

for the first two quarters of this year were generated manually, not

by the CFM. Is that to continue for this coming quarter? What is

the problem that we have a new system that wasn’t designed to

generate the financial statements as required?

Mr. CIGANER. The question really breaks down into two components. The first component is whether or not the system itself, the

environment we adopted in Core Financials is capable of giving us

the data that is required to produce financial statements. The answer is yes. As Mr. Kutz indicated, SAP is an off the shelf system

that has the ability from an accounting standpoint to manage and

track the information very accurately.

The byproduct of being an off the shelf system is the fact that

it did not come with NASA specific report writing capability. That

is something that the agency itself had to develop. So the environment maintains the core transaction information but the production of the reports to meet both our internal and external requirements is truly an internal effort.

We are in the process of developing those reports. As was accurately pointed out by the IG and the GAO, we did not have that

capability in October when the financial statements were due. This

is taking time. We are specifically focused on trying to get the first

test of the automated reporting capability in June but, again, it is

fairly complex. I would like to point out that we are actually trying

to do something which I don’t think is fairly pervasive in the Federal environment which is extract financial statements and notes

directly out of the accounting environment. Most agencies produce

trial balances and then generate manual reports for reasons that

range from staffing levels to the complexity of our projects and programs being consolidated. We decided to actually take a leading

edge position and develop a series of report generation capabilities

that would ultimately aim at what Mr. Cobb was stating which is

why I don’t think we will ever be able to push a button but will

have a system doing the majority of the consolidation and reporting

work including generating the data from notes.

To date this has not been accomplished I believe anywhere in the

financial community we work with. So it is a daunting task.

Mr. PLATTS. That is where we want everybody to be and certainly you are striving for that approach because that is part of

why as taxpayers we are willing to spend perhaps $1 billion on

technology, to allow you to be able to push a button and not just

at the end of the year but throughout the year because that goes

into what we talked about earlier, the financial managers and the

program managers being able to work hand in hand. It can’t be

once a year at the end of the year that you give information, it has

64

to be pretty much ideally every week, where are we, do we have

problems with overruns and costs. That information needs to be

generated immediately. It can’t take a heroic manual effort each

time. Otherwise you will never have the benefit of what we are

after.

It sounded like you said for the June 30th quarterly, you are

going to test the ability of the system to generate the financial

statements?

Ms. BROWN. Correct. We are in the process of testing that feature

at the moment and we are going through the initial dry run. Our

plan is to be able to, as Cobb says, press the button in June and

be able to produce the financial statements. That is what we have

been working toward. Right now, my staff has informed me that it

is in the testing phase at this point in time so that we can go into

actual operation by June.

Mr. PLATTS. Mr. Cobb and Mr. Kutz, your assessments of where

we are now in the system and the ability to generate those financial statements?

Mr. COBB. I have some skepticism as to whether or not on June

30 the system is going to be able to generate financial statements

that are a fair representation of the financial state at NASA.

Mr. KUTZ. I would concur. I think this is a symptom of what was

a schedule driven, core module implementation in 2003 and that

we have a system now almost a year later that can’t prepare financial statements. I think in looking forward, a lesson learned from

this is as we move forward to make sure we follow very disciplined

processes and not jump ahead of ourselves and turn on the switch

before we are ready to go.

Mr. PLATTS. Is the fact that we moved forward without an enterprise structure plan in place, in trying to get it out there and underway, part of the reason why we maybe weren’t as thorough in

having all the partners involved in the design and plans for the

system?

Mr. KUTZ. I think it is really the requirements and testing. If you

had a requirement which it did have a requirement, JFMIP requires you to have the system be able to prepare financial statements. If you had a test case in place to test it before you went

live, you would have known that you couldn’t do it. So I think it

gets back to basic project management of requirements and testing.

Mr. PLATTS. Are we testing the ability of NASA to meet the November 15 deadline for this 2004 end of the year statements?

Mr. CIGANER. I would like to clarify the fact that we are testing

our ability to produce quarterly financial statements using this

function. I do not think, and I agree with the Inspector General,

that the June results are going to be what we want to see. This

is the first time that a lot of the weaknesses that were identified

from the fiscal year end close were fixed and at least some of them

were patched because they were fundamental software issues.

We should point out that although the report generation capability is something we are developing internally, our objective is to be

able to very quickly generate the base information out of the system. It is unlikely, and I agree with the OIG and GAO, that in this

fiscal year we will be able to produce by November 15 a set of reVerDate 11-MAY-2000 12:49 Sep 17, 2004 Jkt 000000 PO 00000 Frm 00068 Fmt 6633 Sfmt 6633 D:\DOCS\95741.TXT HGOVREF1 PsN: HGOVREF1
65

ports that accurately represent automatically the financial position

of the agency. It is still going to require manual work.

Mr. PLATTS. You are still going to require manual work. Even

with that manual work, will you make the November 15th deadline?

Ms. BROWN. Yes, we will make the November 15th deadline. As

one of his most significant customers with the IFMP program right

now, I am demanding quite a bit of attention from him as you see

him sitting here with me today but also my whole goal in being

able to go through this process, as arduous as it is, is making sure

that we have a system that we are pulling data directly from our

system and producing those financial statements in an automated

fashion. As you know, moving the date to November 15 is just the

first step. I see down the horizon that you will probably want to

have financial statements on a monthly basis. If I am successful in

doing this, this will set NASA on the course of being able to do

monthly financial statements with footnotes.

Mr. PLATTS. That relates to the issue now of monthly reconciliations with Treasury?

Ms. BROWN. Correct.

Mr. PLATTS. Is that ongoing?

Ms. BROWN. Actually, we have already set up that process with

part of our NASA financial management improvement plan. We

have monthly reconciliations which are being certified not only by

the center CFOs but once we get the center CFOs educated and

working through this process, we are going to educate our center

directors also so that they have an understanding of what is going

on with their checkbook at each of the centers. It is a two-pronged

process we are working on but again, a lot of these fixes are not

going to happen overnight. We are plotting a long-term course because this is a significant challenge.

Mr. PLATTS. It is a balance between not rushing forward and

making errors that you have to spend a lot of time correcting but

at the same time, trying to be as quick as possible and there is no

easy way to err, quick and errors or longer and less information in

the meantime.

Ms. BROWN. As I will echo from my Office of Inspector General,

we can no longer afford at NASA to continue to put patches on different problems. We need to fix the problems for the long term.

Again, we sit down, we do the analysis, we say what is it today,

where is it we want to be tomorrow and what are the changes that

need to be implemented? That is what we are doing in financial

management at NASA because we have a system that is the underpinning to getting us there and it has flexibility.

Mr. PLATTS. It might be a good time for the broad question of all

of you. The track record, $180 million spent, two different efforts,

no success. We are now going to spend what we believe to be close

to $1 billion over 8 to 10 years on this new system. Whatever time

it takes, what is your confidence level, each of you from your different perspectives that when the system, all the modules are in

place and we have the system as we have planned it up and running that we will have a system that generates accurate, timely,

actionable information month in, month out, year in and year out?

66

Ms. BROWN. My confidence is high. Given right now the challenges I see, it is hard to see, as they say, the light at the end of

the tunnel. If I take the time and use this opportunity as the Chief

Financial Officer to set the stage today to do the right things in

financial management to set the course such that we can be there

tomorrow, we will be able to do that. I would probably like Mr.

Ciganer to comment as far as the cost because he has been doing

a bit on that area. Again, I am a primary customer of the IFMP

program and I recognize that yes, we do have a lot of challenges,

the system is expensive but it is the right course and right now as

the CFO, I don’t see any other alternative.

Mr. CIGANER. I just want to add to what Ms. Brown was saying.

The system itself is a series of tools, it is an environment that provides information more efficiently over time, hopefully. A significant component of this entire process is also the changes that

should take place within the agency. That includes some of the

comments that were made in more tightly coupling financial management to program management. Those stovepipes cannot stay

the way they are. We have to also be sure that all program reviews

consist of costs, technical performance and schedule and all three

of those elements have to be looked at and analyzed.

We are building the tools but although daunting, the technical

challenges are only half of the undertaking. Changing and moving

forward the way we manage and also guide the agency to using

that information is a cornerstone. That is way beyond the systemic

element.

One last thing I want to add is that I know it is a tradeoff on

getting the system up and running or making sure it is perfect and

then getting it up and running. We made a conscious decision, I

made a conscious decision, to roll out the system during fiscal year

2003 to get it at least running. Some of the issues that we identified subsequently could not have been identified solely in testing

and simulation. In addition to that, we should mention that for the

first time in its history, the agency is actually operating from a single system day in and day out. All of the bills are paid out of that

system, all of the transactions are tracked. There is a lot to be

done, there absolutely are software flaws that need to be fixed,

processes that need to be changed but the significant step has been

taken forward in that 2003 extremely painful year.

Mr. PLATTS. Mr. Cobb, Mr. Kutz, your confidence in where we

will be after the years pass and the $1 billion or so is spent?

Mr. COBB. I think that I would agree with Mr. Ciganer that a

condition to being able to implement the system is that the agency

has to embrace it, the agency at all levels of management. In terms

of a prediction of success or failure, I would only say I think there

is going to be a vast number of implementation issues that the

agency has to work through over a significant period of time. NASA

is going to need to be patient and beyond that, I don’t have the

audit work to support a conclusion, but I think it is all the right

idea and is worth continuing to plug away at it. If we think it is

going to be good money after bad, we are certainly going to raise

the flag on that.

Mr. PLATTS. Things such as what we discussed earlier, Ms.

Brown having direct authority over those center CFOs, that is part

67

of the other half of the equation beyond the technology is the personnel and structure of responsibility?

Mr. COBB. It is a big issue the 45 year history of the agency, and

I think a lot of areas at NASA are fighting the idea that you have

in effect a centralized management.

Mr. PLATTS. Mr. Kutz.

Mr. KUTZ. I would say from a confidence level with respect to

getting at least marginal improvement from the accounting side, I

think it is very likely they will get that. They have already had

some benefits and if they do some patchwork to deal with some of

the things like the budgetary reporting, year-end closing and so

forth, I think they are going to get that. The harder part is going

to be, as Mr. Ciganer said, to make this NASA’s system for program managers and to overcome that obstacle which is a two-part

obstacle. One, you have to get the data that he talked about, cost

schedule and performance information for your contracts in the

system so they actually use it. Then you have to convince them to

actually use the system. That is going to be a major challenge as

is the look into the contractors systems for the property and equipment. Those are major challenges that are fairly far out into the

future for them. Those are going to be probably the hardest things

to implement.

Mr. LI. If I can just comment, the first effort that failed was an

in-house effort. They tried to develop an integrated financial system in-house. The second done was one in which a firm indicated

they had the solution but they would make minor modifications to

it. It turned out those modifications were a lot more extensive and

that failed.

The thing that differentiates this last effort with the other two

is the level of support and involvement in terms of top management. I think Mr. O’Keefe has really been vigilant and is imposing

a lot of pressure on getting this particular system. That is a twoedged sword because that pressure also manifests itself in terms of

the schedule pressures that my colleague just talked about in

terms of wanting to get this particular system out there and when

they did so, they only did it because they were able to defer some

functions, some functions were not available, and I think that says

something about trying to meet a schedule as opposed to trying to

meet what your needs are.

Mr. PLATTS. I concur with you with Mr. O’Keefe’s commitment

and Ms. Brown’s commitment of changing the dynamics of the

agency and truly embracing what we are all after, that accurate,

reliable, actionable information.

Mrs. Blackburn.

Mrs. BLACKBURN. Just a couple quick things to wrap up. Ms.

Brown, I like your optimism and I think if anyone can make this

come about and get those reports by November 15, that you are the

one. You are going to put the energy in to accomplish that so I

would like to know if you agree with the Inspector General’s report

that NASA has insufficient Civil Service staff to carry out the financial management implementation plan?

Ms. BROWN. Definitely I do. Of course coming on board as the

new Chief Financial Officer in November, that has been one of the

areas I have been working diligently with my current CFOs. They

68

have identified to me already the staffing shortages and we are

working through that in order to promulgate that through the

budget process to see if we can get those additional resources. Even

at the headquarters level, I am having staffing challenges. I have

went to three 1990’s from 75 just in the financial management area

and I am now down to about 22 at this point in time. That is the

staff that I have to put together the whole agency’s financial management statement.

Mrs. BLACKBURN. Am I correct in understanding you have hired

an outside consultant to assist with this?

Ms. BROWN. Yes. Due to the deficiency that I have in my current

personnel allocation, I have had to hire contractor resources to do

that. It is only a short term fix. I am confident and hopeful that

through the committee and through other processes that I would

be able to increase, augment and be able to supplement throughout

the future as that has been identified by the IG as a definite high

risk area for myself.

Mrs. BLACKBURN. Mr. Cobb, did you have a comment on that?

Mr. COBB. No, it seems as though Ms. Brown agreed with what

most people are articulating. in terms of the issuance of financial

statements by November 15, one question is whether or not those

financial statements are going to be auditable in a manner that

could get you to something other than a disclaimer or an unqualified opinion. I think that is unlikely.

Mrs. BLACKBURN. Mr. Kutz, any comment?

Mr. KUTZ. I think that the human capital issue is critical here

because when you look at something like this, you see human capital all over it. I look at NASA kind of as where IRS was several

years ago with respect to that and bringing in several really good

people could make a big difference for the CFO. I believe that is

an important aspect of this. The environment out there for hiring

is not bad although in Washington it is particularly difficult because there are so many people looking for government accounting

types but we have found we are much more competitive at GAO

compared to the big four accounting firms than we might have

been 4 or 5 years ago. We have gotten some very, very good people

recently so I hope the NASA people will be able to bring in some

good talent.

Mrs. BLACKBURN. Ms. Brown, I don’t want you to take the time

to answer this today but I am going to ask you to submit a written

answer. I know we are running long. I am looking at the clock and

it is already 4:30 p.m. and you all have been very generous with

your time to talk with us today. We have kind of talked all around

this. We have talked about the errors and how the books have not

reconciled and not knowing where some of the money is. Those are

of great concern to us. We are talking long term and we are talking

stop gap. I want to go back to the stop gap right now.

What I would like to know from you is what measures you have

implemented can minimize the numerous additional transactions to

undo and correct your financial reporting in those transactions? I

think that would be instructive to us as we look at going forward

and just to know what we are dealing with, what measures you all

have taken to be sure that this year we are going to be moving toward having timely and accurate financial statements?

69

Mr. Chairman, I will yield back to you.

Mr. PLATTS. Thank you, Mrs. Blackburn.

I have just a couple followup questions that we will wrap up

with. One is on the staffing issue and I appreciate your frankness

on the need both in the centers and in the headquarters for additional staff. I believe the current budget year request is about $900

million increase from last year that has been submitted by the administration. Is any part of that specifically allocated to additional

staff for financial management activities?

Ms. BROWN. Yes. I actually received an augmentation of 15 individuals for my staff. Unfortunately, those are 15 other than fulltime equivalents meaning they are anywhere from 2 year to 3 year

temporary type hires.

Mr. PLATTS. So there is some help but it is not a permanent acknowledgment for the need for additional commitment. That is

something I think in trying to help move along this process, this

committee, because we are investing whether it is a $500 million

settlement, the procurement aspects of this new but we are not

adequately funding the human capital side of this effort, is going

to be good money after bad because it is not going to work. It is

going to have to be a partnership. I hope internally you will continue advocate the human capital side of what you need, although

we are an oversight committee and not an appropriating committee, we would like to be on the appropriating side but it is something that is going to be critical to your efforts.

Mr. LI. On that point of human capital, I think we have identified and GAO has identified human capital as a major challenge

for the entire Federal Government. In addition to financial management organizations having difficulty, I think this is prevalent

throughout not only all agencies but at NASA. NASA in the past

year has received additional personnel flexibilities by which it will

be able to retain and attract higher talent. So it is not like they

haven’t addressed this particular issue. They do have some tools

available to them.

Mr. PLATTS. Are you seeing benefits from that flexibility? It is

similar to what we have done at DOD and the GAO in wanting to

have those same types of options.

Ms. BROWN. Actually I have seen great benefits from that because I have actually been sending some of my direct reports from

here out to the colleges and universities and using that capability

we have been given and that flexibility to do direct hiring at the

colleges and universities in order to bring in individuals. We are

looking at being able to get one out of the two offers we just did

within the last 30 days. So we are using a lot of those flexibilities.

Mr. Chairman, I am using anything that I can to get any bodies

that I can into my organization be it here at headquarters or at the

centers in order to address this issue.

Mr. PLATTS. I am not sure how the funds for financial management come to you in the agency. The dollar amount correlates to

both the technical and the human capital but how is it allocated?

Is it specifically delineated for financial management or is it part

of a larger pool of money for the general management? How is that

set up?

70

Mr. CIGANER. It is actually part of our G&A allocation both at

the corporate level and also at center level.

Mr. PLATTS. Explain to me as a lay person, G&A?

Mr. CIGANER. General and administrative.

Mr. PLATTS. Generic administrative sum and then you compete

for your amount within that?

Mr. CIGANER. Exactly. We are not viewed as a line item project.

We are competing every year for those funds supporting our budgetary requirements.

Mr. PLATTS. Given Mr. O’Keefe’s commitment to this effort, is

there discussion ongoing about it being delineated as a parity line

item?

Mr. CIGANER. Yes, there is. As we move away from the purely

financial components as Mr. Kutz mentioned, the accounting system parts into the much broader applications that we want to develop, project management, asset tracking, human capital, the need

to be very stable in managing the funding requirements is becoming more pervasive. So there is ongoing discussion.

Mr. PLATTS. Mr. Cobb, do you want to comment?

Mr. COBB. No.

Mr. PLATTS. One final question. As we look ahead to this year’s

year-end statements, one of the things that struck me in Mr. Kutz’s

testimony is the fact that the auditor of the 2003 statements stated, I guess this was the third year and concurred with the GAO’s

opinion that the financial statements were not in compliance with

the Federal Financial Management Improvement Act. I think that

is one of the areas where there is agreement to disagree at some

point or if we are all on the same page, I would like each of you

to comment on the fact that is the auditor’s opinion as stated in

that audit, that the 2003 and previous years were not in compliance with FFMIA and where will it be in the 2004 audit. Will we

have a similar discrepancy? Mr. Cobb.

Mr. COBB. I think consistent with my prior testimony on this, I

would render a prediction and I would expect that the new independent auditor is going to find problems in terms of compliance

with FFMIA in this year, 2004, and quite possibly into 2005.

Mr. PLATTS. Mr. Kutz.

Mr. KUTZ. We don’t believe they have ever been in compliance

with FFMIA despite prior reports that said they were. I believe one

of the reasons they are implementing IFMP is to truly become in

compliance with that. Things like the property and equipment reporting and using the system to manage programs are two of the

critical elements in our view that are necessary for that to be successful and that is not going to happen in the short term in all likelihood.

Mr. PLATTS. You think the asset module will be several years in

the process. You envision to get true compliance, we will need that

in place?

Mr. KUTZ. That would be GAO’s view.

Mr. PLATTS. Right.

Ms. BROWN. We would be in agreement with that. Again, like I

said, our goal here is we do want to become compliant but we need

to lay the foundation and the groundwork to do so. Again, it is

going to take time and we will be working through these processes

71

to make sure we are compliant as we go through the steps. We are

looking to show measurable improvement moving toward and in

that direction of being FFMIA compliant.

Mr. PLATTS. We look forward as a committee to continue to work

with each of you in your respective entities as you go forward. Certainly all of us will anxiously await November 15th to see this

year’s reports. I meant to emphasize up front and will close with,

that as a subcommittee, Mrs. Blackburn, myself, Mr. Towns and

other Members, we see ourselves as partners with the agencies we

are working with. In today’s hearing, to have you, Ms. Brown and

Mr. Ciganer for the agency, the Inspector General, GAO, as well

as Mr. Kutz and Mr. Li, what I hope is that the dialog that has

gone on today will continue on a regular basis as we go forward

especially between each of your entities as you work together to get

what we are all after which is to allow NASA to do its great work

and be able to be openly accountable to the American taxpayers

who are funding that great work.

I look at the record of the past years and into the 1990’s and

where the independent auditor thought maybe it was doing NASA

and its staff and its supporters a favor in giving audit opinions that

were clean when they shouldn’t have been and what the record

tells us today, they really did a disservice to NASA. I appreciate

that each of you are seeking to correct the errors of the past today

and hence forth. Given the number of years the practices were not

as legitimate and accurate as they should have been, that certainly

is a challenge. As a subcommittee, we look forward to continuing

to work with you.

Ms. Brown, as you work to have better authority over those independent centers and the financial management end of this, I have

plenty to fill my schedule but if it means I need to have 10 center

CFOs be requested to testify because they are not adequately being

responsive to you, then so be it. I am optimistic as well that you

are going to be persuasive in that realignment and gain the oversight and authority you need to well fulfill your statutory responsibilities. We wish you well in that effort.

Ms. BROWN. Thank you.

Mr. PLATTS. Mrs. Blackburn, did you have anything in closing?

Mrs. BLACKBURN. No.

Mr. PLATTS. If not, we will keep open the record for 2 weeks from

today for those who want to submit additional information and for

that additional information, Ms. Brown, we have asked of you.

I certainly appreciate the majority and minority staff members’

efforts today in working with each of our guests and their staffs

and appreciate everyone’s attendance and participation.

This hearing stands adjourned.

[Whereupon, at 4:45 p.m., the subcommittee was adjourned, to

reconvene at the call of the Chair.]

[Additional information submitted for the hearing record follows:]

72

73

74

75

76

77

78

Æ