MAY 1, 2012

AUDIT REPORT

REPORT NO. IG-12-015 (ASSIGNMENT NO. A-11-020-00)

OFFICE OF AUDITS

NASA’S EFFORTS TO IDENTIFY, REPORT, AND 

RECAPTURE IMPROPER PAYMENTS

OFFICE OF INSPECTOR GENERAL

National Aeronautics and 

Space Administration

 
REPORT NO. IG-12-015 

Final report released by:

Paul K. Martin

Inspector General

Acronyms 

AFR Agency Financial Report

ARMD Aeronautics Research Mission Directorate

Caltech California Institute of Technology 

CFO Chief Financial Officer

DCAA Defense Contract Audit Agency 

FAR Federal Acquisition Regulation 

FY Fiscal Year

GAO Government Accountability Office 

HST Hubble Space Telescope

IPERA Improper Payments Elimination and Recovery Act 

IPIA Improper Payments Information Act 

JPL Jet Propulsion Laboratory 

JWST James Webb Space Telescope

PAR Performance and Accountability Report

OCFO Office of the Chief Financial Officer

OIG Office of Inspector General

OMB Office of Management and Budget

RMB Reimbursable 

SOFIA Stratospheric Observatory for Infrared Astronomy 
MAY 1, 2012

REPORT NO. IG-12-015 

OVERVIEW

NASA’S EFFORTS TO IDENTIFY, REPORT, AND RECAPTURE 

IMPROPER PAYMENTS

The Issue

Each year, the Federal Government wastes billions of taxpayer dollars on improper 

payments to individuals, organizations, and contractors. An improper payment is any 

payment that should not have been made; was made in an incorrect amount, to an 

ineligible recipient, for ineligible goods or services, or for goods or services not received; 

was duplicative; or did not reflect credit for applicable discounts.1

To combat improper payments, Congress passed the Improper Payments Information Act 

(IPIA) of 2002 and the Improper Payments Elimination and Recovery Act (IPERA) of 

2010. These Acts require agencies to identify and report on programs or activities that 

are susceptible to significant improper payments by conducting a risk assessment, testing 

a sample of transactions, and determining the estimated amount of improper payments. 

Agencies are required to report to the President and Congress in their annual Performance 

and Accountability Report (PAR) or Agency Financial Report (AFR) the amount of 

estimated improper payments, along with steps taken and actions planned to reduce those 

payments. Since fiscal year (FY) 2006, NASA has consistently reported that it has 

identified no programs with significant improper payments.

 Improper payments 

may result from inadequate recordkeeping, inaccurate eligibility determinations, 

inadvertent processing errors, lack of timely and reliable information to confirm payment 

accuracy, or fraud.

IPIA also requires agencies to conduct payment recapture audits to review and analyze

their accounting and financial records to identify overpayments. In addition, IPERA 

requires Inspectors General to determine whether their respective agencies comply with 

IPIA requirements, evaluate the accuracy and completeness of agency reporting, and 

evaluate agency performance in reducing and recapturing improper payments. The 

Office of Management and Budget (OMB) has issued guidance regarding agency 

compliance with IPIA.2

The Quality Assurance Division of the NASA Office of the Chief Financial Officer 

(OCFO) is responsible for ensuring that NASA complies with IPIA. The OCFO employs 

two contractors to assist the Agency with IPIA compliance: one to conduct improper 

 

1 Office of Management and Budget Circular No. A-123, “Management’s Responsibility for Internal 

Control,” Appendix C. 

2 From this point forward, the term “IPIA” will be used to refer to IPIA as amended by IPERA. 
OVERVIEW

ii REPORT NO. IG-12-015 

payments testing (IPIA contractor) and one to conduct recapture audits (recapture 

auditor). 

The first step in determining whether an agency’s programs are susceptible to significant 

improper payments is to identify its programs. For the 2011 reporting period, NASA 

began this process by querying its financial system, SAP, for all FY 2010 disbursements. 

NASA provided this information to the IPIA contractor who segregated the data by 

mission, ultimately identifying 132 programs within seven mission areas.3 With the 

Quality Assurance Division’s approval, the contractor removed the two programs under 

the Office of Inspector General (OIG) mission area from this list and combined 32 

programs into a single program labeled Institutions and Management, bringing the list to 

a total of 99 programs. All programs with more than $80 million in disbursements during 

the fiscal year would be subject to further assessment.4

The Agency reported in the PAR that it had conducted a risk assessment on these 34 

programs, which had total disbursements of $19.1 billion. Of these programs, NASA 

identified 7 as potentially susceptible to significant improper payments: Constellation 

Systems, Institutions and Management, International Space Station, Mars Exploration, 

Reimbursable (RMB) – Science Mission Directorate Programmatic, Space 

Communications and Navigation, and the Space Shuttle Program. The combined 

disbursements subject to testing for these 7 programs totaled approximately $5.1 billion. 

Testing of these programs resulted in the discovery of one improper payment, which was

used to statistically project $1.5 million of improper payments made by NASA in 

FY 2010. This amount did not meet the threshold established in the OMB guidance as 

significant and, as a result, the Agency reported in its FY 2011 PAR that no programs 

were susceptible to significant improper payments. The Agency also reported that it had 

recovered no improper payments as a result of the recapture auditor’s efforts.

 NASA reported that 34 programs 

met this threshold.

In this audit, we examined whether NASA was identifying, reporting on, and reducing 

improper payments in accordance with IPIA. Specifically, we reviewed the IPIA section 

of the PAR and supporting documentation to ensure NASA’s methodology and 

determinations were sound, accurate, and complete, and evaluated the Agency’s 

performance and methodology for identifying, reducing, and recapturing improper 

payments. 

 

3 Aeronautics Research Mission Directorate, Cross Agency Support Programs, Exploration Systems 

Mission Directorate, Institutions and Management, Office of Inspector General, Science Mission 

Directorate, and Space Operations Mission Directorate. 

4 This $80 million threshold assumes an improper payment error rate of 12.5 percent, which could 

potentially lead to $10 million in improper payments, which OMB guidance established as the threshold 

for significant improper payments.
OVERVIEW

REPORT NO. IG-12-015 iii

Results

NASA has limited the scope of its IPIA efforts, which in turn has minimized the 

Agency’s ability to identify, report on, and recapture improper payments. Although the 

Agency completed the steps required by IPIA and reported the results of its review in its 

FY 2011 PAR, NASA is not fully compliant with the requirements of the Act. 

Specifically, with NASA’s approval, the IPIA contractor interpreted and manipulated 

disbursement data from the Agency’s accounting system to identify and group its 

programs and activities. However, some programs and activities were improperly 

grouped, potentially masking improper payment rates, while other programs were 

excluded from the risk assessment altogether. Correctly identifying the Agency’s 

programs and activities is the critical first step in performing a program-specific risk 

assessment. Because NASA did not properly identify all programs and activities, the 

Agency did not meet IPIA requirements to conduct a program-specific risk assessment 

for each of the Agency’s programs and activities. 

We also have concerns that the Agency’s method for evaluating risk is inconsistent 

across various programs and activities and that NASA places too heavy a reliance on the 

IPIA contractor to evaluate the level of risk in the Agency’s programs. Further, we 

question NASA’s decision to completely exclude payments to and by the Jet Propulsion 

Laboratory (JPL) from its IPIA review and to exclude grants from its transaction testing. 

We also identified several errors and omissions in the IPIA section of the PAR that lead 

us to question whether NASA’s reporting efforts are accurate and complete and whether 

NASA’s oversight and review of the contractor’s work is adequate. Finally, while NASA 

conducted recapture audits, the audits were limited to 26 percent of the Agency’s total 

disbursements and NASA did not target known high-risk programs or report on improper 

payments identified through methods other than recapture audits. As a result, the Agency 

may be missing an opportunity to identify and recover a larger population of improper 

payments. 

Defining Programs for Program-Specific Risk Assessment. To comply with IPIA, 

agencies must conduct a program-specific risk assessment for each program or activity 

they administer. Moreover, OMB guidance states that for risk assessment purposes 

agencies must not group programs or activities in ways that potentially mask significant 

improper payments. We found that in defining its programs and activities NASA did not 

comply with this guidance and therefore failed to conduct a program-specific risk 

assessment of all programs and activities as required by IPIA. Specifically, we identified 

instances where program data was combined and other instances where programs should 

have been combined but were not. For example, the IPIA contractor grouped 32 

programs such as Information Technology Services, the NASA Shared Services Center, 

and Institutional Construction of Facilities into one large program labeled Institutions and 

Management. The total disbursements for these 32 programs was $3.7 billion, the largest 

disbursement total of any program subjected to risk assessment. However, by combining 

programs in this way NASA tested transactions from only 13 of the 32 programs, 

representing only $773.8 million in disbursements. 
OVERVIEW

iv REPORT NO. IG-12-015 

Additionally, in other instances programs that might have been deemed high risk if 

considered in isolation could have been masked within larger programs in which the 

overall risk of improper payments was deemed low. For example, the IPIA contractor 

combined the James Webb Space Telescope (JWST) with other projects under the 

heading Cosmic Origins and determined that the overall program risk for JWST was low. 

As a result, JWST – a project with a total life-cycle cost of $8.8 billion and $390 million

in FY 2010 disbursements that has been subject to scrutiny by Congress for cost overruns 

and schedule slippage – was not individually assessed for risk or included in NASA’s 

improper payment testing. 

We also identified programs that were inappropriately excluded from IPIA testing. 

Specifically, we identified 13 sets of programs within SAP that had identical or similar 

naming conventions, such as RMB-Aeronautics Research Mission Directorate (ARMD)

Program Programmatic and RMB-ARMD Programmatic, that should have been 

combined. Had the IPIA contractor combined these sets of programs, they would have 

identified three additional programs that exceeded NASA’s $80 million materiality 

threshold and therefore would have been subject to a program-specific risk assessment. 

In another instance, the IPIA contractor identified the Safety and Mission Success 

program as having disbursed $198 million in FY 2010 but did not include the program in 

the risk assessment.

Inconsistent Execution of the Risk Assessment. We are concerned that the Agency’s 

method for evaluating the level of risk is inconsistent across programs. Further, NASA’s 

reliance on the IPIA contractor to conduct the risk assessment may not lead to an accurate 

assessment of the level of risk in the Agency’s programs. During our review of the risk 

rating scores assigned to each of the programs, we noted that not all program managers 

provided the necessary information about their programs. The IPIA contractor therefore 

made determinations of risk in the absence of complete program information. In 

addition, we found inconsistencies in how the IPIA contractor assigned ratings to various 

risk factors. Materiality is the most heavily weighted stand-alone factor in the risk 

assessment (40 percent of total); however, the IPIA contractor also considered materiality 

in its assignment of the other risk factors such as programmatic risk and human capital 

risk prior to assigning an overall risk rating. This practice increased the potential that risk 

was not accurately identified or appropriately and consistently measured across NASA’s 

programs and activities. Overall, we believe that risk ratings may have been inaccurately 

assigned as a result of incomplete data provided by Agency program managers and the 

subjective assignment of risk by the IPIA contractor. 

Exclusion of NASA’s Contract with the Jet Propulsion Laboratory. JPL is a 

federally funded research and development center operated for NASA by the California 

Institute of Technology (Caltech). JPL received $1.6 billion from NASA in FY 2010 and 

is the second largest recipient of Agency procurement funds after private businesses. 

However, NASA excluded payments made to and by JPL from its IPIA review because it 

is the Agency’s position that the payments NASA makes to JPL are not at risk and that 

payments made by JPL to its subcontractors are not subject to IPIA. However, we 
OVERVIEW

REPORT NO. IG-12-015 v 

believe that payments made to and by JPL meet OMB’s definition of payment, which

includes disbursements to and by a governmental or other organization administering a 

Federal program or activity. At a minimum, to comply with IPIA NASA should assess 

the risk of improper payments to and by JPL consistent with its assessment of other 

Agency programs. 

Exclusion of Grants from Testing. From FY 2006 through FY 2010, NASA awarded 

approximately $3 billion in grants to external entities with approximately $570 million

awarded in FY 2010 alone. Nevertheless, NASA excluded grants from its improper 

payment testing and reporting. The Quality Assurance Division stated that this decision 

was based on prior results that indicated testing of first-line grant payments was not costeffective, coupled with a lack of clear guidance from OMB as to how to conduct testing 

beyond the primary recipient. However, OMB calls for agencies to include grants as part 

of their improper payment review and the IPIA contractor recommended in its FY 2011 

final report that NASA consider including grants in future IPIA testing programs. 

Moreover, other Federal agencies such as the Department of Justice and the Department 

of Health and Human Services included grants in their IPIA reviews. By not including 

grants, NASA has excluded from its IPIA testing disbursements in programs the NASA 

OIG has previously identified as having internal control weaknesses.5

Evaluation of Improper Payment Testing and Estimating. IPIA requires agencies to 

estimate the annual amount of improper payments for each program and activity 

identified as susceptible to significant improper payments and report the results in the 

PAR. NASA identified nine programs as susceptible but only reported improper 

payment estimates for seven of these programs. OMB guidance allows agencies to 

request relief from this reporting requirement; however, NASA did not provide evidence 

that such a request was made. By not testing and using the results to estimate improper 

payment rates for all nine programs and activities identified as high risk, NASA did not 

meet IPIA requirements for compliance. 

NASA also reported in the PAR that the total payments related to these seven programs 

was approximately $5.1 billion. However, the FY 2010 disbursements from these seven 

programs actually totaled $13.4 billion. NASA and the IPIA contractor stated that the 

$5.1 billion represents only the disbursements related to contracts, purchase cards, and 

travel, the only types of transactions NASA tested. According to the IPIA contractor, the 

remaining $8.3 billion (62 percent) was excluded from testing because it related to grants 

($668 million) and payroll ($765 million). However, as discussed above grants should 

have been included in NASA’s IPIA testing. Furthermore, neither NASA nor the 

contractor could tell why the remaining $6.9 billion was excluded. Therefore, we have 

no assurance that all eligible disbursements made in the seven programs were subject to 

testing. Additionally, we determined that the total amount of disbursement transactions 

tested for the Institutions and Management program was $803 million instead of the 

$3.7 billion identified in the risk assessment. This occurred because five programs within 

 

5 NASA OIG, “NASA’s Grant Administration and Management” (IG-11-026, September 12, 2011). 
OVERVIEW

vi REPORT NO. IG-12-015 

Institutions and Management that accounted for 81 percent of the disbursements were not 

included in NASA’s IPIA testing. We believe these exclusions could be misleading and 

are not a transparent representation of the work conducted. 

PAR Reporting. We noted several errors and omissions in NASA’s FY 2011 PAR that 

affect the accuracy and completeness of the information reported. For instance, the PAR

states that NASA’s updated risk assessment identified 34 programs with a total of 

$19.1 billion in FY 2010 disbursements. However, we determined that NASA actually 

identified 33 programs with $18.9 billion in disbursements. 

Further, OMB guidance requires that agencies with programs or activities susceptible to 

significant improper payments include a table in the PAR that specifically lists all risk 

susceptible programs, the current year and prior years’ improper payment dollars and 

percentages, designation of over- and underpayments, and future year outlay estimates. 

However, the table in NASA’s PAR only includes the one program the Agency identified 

as containing an improper payment and not the other programs identified as susceptible 

to risk or the other required information. Further, we noted inaccurate results from prior 

years’ testing in the PAR table labeled “NASA Programs Identified as Susceptible to 

Improper Payments.” In another instance, NASA reported that 1,788 transactions were 

selected for testing when the supporting documentation showed that only 1,426 sample 

transactions had been tested. The PAR did not note that transactions were omitted from 

testing or why the omission occurred. 

OMB guidance also requires agencies to provide information summarizing their recapture 

audit efforts in five different tables. In NASA’s PAR, one of the five tables was shown 

with either a not applicable (N/A) or $0 response. The Quality Assurance Division stated 

that the information for this table was not readily available or identifiable because it was 

new to the PAR and the Division had limited time to gather the data. Although the 

information reported in this table indicates to the reader that work was performed and the 

outcome was either not applicable or that no funds were recaptured, the Quality 

Assurance Division’s response does not support this view. Based on the errors and 

omissions noted in the IPIA section of the PAR, we question the level of NASA’s 

oversight of the IPIA process, including the rigor with which NASA reviewed the IPIA 

contractor’s report and supporting documentation.

Scope of NASA’s Recapture Audits Efforts Limited. The Agency’s current recapture 

methodology may not identify as many improper payments as reasonably possible 

because NASA limits its annual recapture audits to fixed-price contract payments, does 

not target known high-risk programs, and does not report on improper payments 

identified outside of payment recapture audits. NASA policy states that all classes of 

contracts and contract payments should be considered for recapture audits. However, 

OMB guidance allows agencies to exclude program and activity payments from recapture 

audit activities if the agency determines that payment recapture audits are not a costeffective method for identifying and recapturing improper payments. NASA made such a 

determination with regard to cost-type contracts and accordingly limited its recapture 

auditing efforts to fixed-price contracts. In the PAR, NASA stated that the Agency 
OVERVIEW

REPORT NO. IG-12-015 vii

employs the Defense Contract Audit Agency (DCAA) to perform auditing procedures on 

cost-type contracts and therefore excludes these contracts from recapture audits. 

However, DCAA policy specifically states that DCAA audits generally do not cover 

recapture audit activities. Further, OMB makes a distinction between recapture and postaward audits.6

Additionally, NASA did not report on improper payments identified and recovered 

through sources other than payment recapture audits as required by IPIA. Further, IPIA 

states that the head of the agency shall give priority to the most recent payments and to 

payments made in any program or activity identified as being susceptible to significant 

improper payments. However, NASA did not instruct the recapture auditor specifically

to target known high-risk programs. While some fixed-price contract payments may fall 

within high-risk programs, other types of payments in high-risk programs, such as grants, 

were excluded. We also found no evidence that NASA prioritized payments associated 

with programs or activities susceptible to improper payments. Because of the limits 

NASA places on its recapture audits, the Agency may be missing an opportunity to 

identify, recover, and report on a larger population of improper payments. 

 By limiting recapture audits to fixed-price contracts, NASA also excluded 

payments made pursuant to grants and cooperative agreements from the universe of 

payments subject to audit. 

Management Action

We made nine recommendations to improve NASA’s improper payment identification, 

reporting, and recapture efforts. We recommended that the Chief Financial Officer

(CFO) develop a methodology to identify Agency programs and activities that does not 

potentially mask improper payments and coordinate with the Mission Directorates to 

require that NASA program managers provide updated and accurate program information 

to allow for the performance of a comprehensive risk assessment. We also recommended

that the CFO assess the risk of improper payments to and by JPL consistent with the 

methodology used to assess other NASA programs. The CFO should also increase the 

scope of the Agency’s IPIA testing to include grants and report improper payment 

estimates for all programs identified as susceptible to improper payments or request relief 

from this reporting requirement. Additionally, the CFO should evaluate the current 

process for reviewing the IPIA contractor’s results and develop a process to ensure that 

information reported in the PAR is correct and based on appropriate supporting 

documentation. Further, the CFO should include all required tables and data in the IPIA 

section of the PAR. Lastly, we recommended that the CFO analyze and document the 

feasibility of expanding the scope of the Agency’s recapture audits beyond fixed-price 

contracts to include other payments, such as grants and cooperative agreements, and 

reconsider the exclusion of cost-type contracts and document any determinations made. 

 

6 DCAA classifies incurred cost audits as post-award contract audits. 
OVERVIEW

viii REPORT NO. IG-12-015 

In response to a draft of our report, the CFO concurred with six of our recommendations 

and said she would address them by increasing the scope of the Agency’s IPIA testing to 

include grants; reporting improper payment estimates for all programs determined to be 

susceptible or requesting relief from this requirement; developing a process for reviewing 

the IPIA contractor’s results to ensure accuracy; including all required tables in the PAR 

with detailed information clearly explaining the data to the reader; and analyzing and 

documenting the feasibility of expanding the scope of recapture audits beyond fixed-price 

contracts to include other payments. The CFO also agreed to reconsider the feasibility of 

including cost-type contracts in the Agency’s recapture audit efforts and make a 

determination for implementation in FY 2013. We consider the CFO’s proposed actions 

responsive and will close these recommendations upon completion and verification of the 

proposed corrective actions. 

The CFO partially concurred with our recommendations to develop a methodology to 

identify programs and activities that does not inappropriately mask improper payments, 

to coordinate with the Mission Directorates to require that NASA program managers 

provide updated and accurate program information for risk assessment purposes, and to 

assess the risk of improper payments by and to JPL consistent with the methodology used 

for other NASA programs. 

With regard to the first recommendation, the CFO does not agree that NASA’s current 

methodology masks improper payments, noting that the testing of 5,488 transactions and 

802 contracts over the last 3 years uncovered only 5 improper payments. She also stated 

that the centralized nature of NASA’s procurement and payment activities mitigates the 

risk of improper payments across the Agency. Nevertheless, she stated that NASA is 

considering an alternative approach by which it would group its activities by payment 

type (e.g., vendor payments, purchase and travel card reimbursements) and that the 

Agency would analyze the pros and cons of this approach and make a determination for 

execution by FY 2013. For the reasons stated in our report, we continue to believe that 

NASA’s improper payment testing was flawed. However, because the Agency has 

agreed to consider changes to its approach, we are resolving this recommendation and 

will close it once we have determined that the Agency has adopted an approach that 

addresses our concerns. 

With regard to the second recommendation, the CFO agreed that better communication 

could improve the gathering of program-specific data and stated that as part of its 

assessment of an alternative improper payment testing methodology NASA will consider 

the extent to which program information impacts the risk factors and risk conditions 

integral to the Agency’s risk assessment methodology. She stated that the Agency would 

analyze the pros and cons of refining its approach and make a determination for 

execution by FY 2013. Accordingly, the recommendation is resolved and will be closed 

when we verify that the Agency’s actions address our concerns. 

With regard to our recommendation concerning JPL, the CFO agreed to include 

payments made by NASA to JPL in the Agency’s improper payment program by the end 

of FY 2012. However, she did not agree to include payments made by JPL to 
OVERVIEW

REPORT NO. IG-12-015 ix

subcontractors. The CFO asserts that IPIA applies to entities that “administer Federal 

programs” and that this means managing an ongoing process of distributing Federal 

monies, developing or enforcing regulations, conducting inspections, or other 

programmatic activities. She further asserts that JPL conducts none of these activities 

and is simply a Federal contractor. 

We disagree that there is a sound basis under IPIA for distinguishing between payments 

made to JPL and payments made by JPL to its subcontractors. Under IPIA, payments 

made to a contractor and payments made by a contractor are equally subject to review so 

long as they are made in furtherance of the administration of a Federal program. By 

virtue of its contract to manage JPL, Caltech is one of NASA’s largest contractors and

plays a vital role in administering NASA’s science and space exploration programs. 

Accordingly, in our view JPL conducts “programmatic activity” that qualifies even under 

the CFO’s definition of IPIA’s scope. Because we continue to believe that NASA should 

assess the risk that improper payments are being made from the more than $1 billion of 

Federal money awarded annually to JPL, this recommendation is unresolved. 

Management’s comments on the recommendations are reprinted in Appendix B. The 

CFO separately provided technical comments on the draft, which we incorporated as 

appropriate. 

MAY 1, 2012

REPORT NO. IG-12-015 

CONTENTS

INTRODUCTION

Background _________________________________________ 1 

Objectives __________________________________________ 5 

RESULTS

NASA Used Flawed Methodology to Identify Programs 

Potentially Susceptible to Improper Payments ____________ 6 

NASA’s Testing, Estimating, and Reporting of Improper 

Payments _______________________________________ 13

Recapture Audit Efforts Could Be Improved________________ 19

APPENDIX A 

Scope and Methodology_______________________________ 23

Review of Internal Controls ____________________________ 24

Prior Coverage ______________________________________ 24

APPENDIX B 

Management Comments ______________________________ 26

APPENDIX C 

Report Distribution___________________________________ 30

MAY 1, 2012

REPORT NO. IG-12-015 1 

INTRODUCTION

Background

The Improper Payments Information Act (IPIA) was passed in November 2002 to 

enhance the accuracy and integrity of Federal payments. IPIA requires executive branch 

agency heads to review all agency programs and activities annually and identify those 

that may be susceptible to significant improper payments. For each program and activity 

identified as susceptible, agencies must estimate the annual amount of improper 

payments and report those estimates to Congress, together with their actions to reduce 

such payments for any program in which the estimate exceeds $10 million. The Act also 

requires the Director of the Office of Management and Budget (OMB) to prescribe

implementing guidance for agencies.

Fiscal year (FY) 2011 marked the eighth year of IPIA implementation and the first year 

of implementation of the Improper Payments Elimination and Recovery Act of 2010 

(IPERA). IPERA amends IPIA by expanding on the requirements for identifying, 

estimating, and reporting on programs and activities susceptible to significant improper 

payments. IPERA also includes a requirement that agencies conduct recapture audits, if

cost-effective, for each program and activity with at least $1 million in annual program 

outlays.7

According to OMB guidance, compliance with IPIA means that the agency has: 

 

• published a Performance and Accountability Report (PAR) or Agency Financial 

Report (AFR) for the most recent fiscal year and posted that report and any 

accompanying materials required by OMB on the agency website;

• conducted a program-specific risk assessment for each program or activity;

• published improper payment estimates for all programs and activities identified as 

“susceptible” to significant improper payments;8

• published programmatic corrective action plans in the PAR or AFR as required; 

• published, and has met, annual reduction targets for each program assessed to be 

at risk and measured for improper payments; 

 

7 From this point forward the term “IPIA” will be used to refer to IPIA as amended by IPERA. 

8 “Significant improper payments” are (1) gross annual improper payments in a program exceeding both 

2.5 percent of program outlays and $10 million of all program or activity payments during the fiscal year 

reported or (2) $100 million regardless of the improper payment error rate. 
INTRODUCTION

2 REPORT NO. IG-12-015 

• reported a gross improper payment rate of less than 10 percent for each program 

and activity for which an improper payment estimate was obtained and published 

in the PAR or AFR; and 

• reported information on its efforts to recapture improper payments. 

The IPIA and OMB require Inspectors General to determine annually whether their 

respective agencies comply with key statutory requirements and evaluate the accuracy 

and completeness of their agencies’ reporting and performance in reducing and 

recapturing improper payments. 

Office of Management and Budget Guidance. OMB plays a key role in the 

Government’s efforts to combat improper payments by establishing guidance for Federal 

agencies for reporting on, reducing, and recovering such payments.9

 As defined by 

OMB, an improper payment is “any payment that should not have been made or that was 

made in an incorrect amount under statutory, contractual, administrative, or other legally 

applicable requirements.”10

The first step in identifying improper payments is for the agency to define its population 

of programs. OMB defines a program as all activities or sets of activities recognized as 

programs by the public, OMB, or Congress, as well as those that entail program 

management or policy direction. This definition includes but is not limited to all grants, 

including competitive grant programs and block/formula grant programs; noncompetitive grants such as single-source awards; regulatory activities; research and 

development activities; direct Federal programs; all types of procurements (including 

capital assets and service acquisition); and credit programs. OMB’s definition of a 

program or activity also includes all activities engaged in by the agency in support of its 

programs. After consultation with OMB, agencies are authorized to determine the 

grouping of programs that most clearly identifies and reports improper payments. 

However, OMB cautions that agencies must avoid grouping programs and activities in 

ways that may mask significant improper payments. For transparency purposes, the basis 

for the agency’s groupings must be reported in its annual PAR or AFR. 

 Improper payments may take the form of payments to an 

ineligible recipient or for ineligible goods or services, duplicate payments, or payments in 

the incorrect amount and may result from inadequate recordkeeping, inaccurate eligibility 

determinations, inadvertent processing errors, lack of timely and reliable information to 

confirm payment accuracy, or fraud. 

Once an agency defines its population of programs, it must determine which of those 

programs are susceptible to significant improper payments. OMB requires that agencies 

 

9 OMB Circular No. A-136 (Revised), “Financial Reporting Requirements,” October 27, 2011; OMB 

Memorandum M-11-16, “Issuance of Revised Parts I and II to Appendix C of OMB Circular A-123,” 

April 14, 2011; OMB Memorandum M-11-04, “Increasing Efforts to Recapture Improper Payments by 

Intensifying and Expanding Payment Recapture Audits,” November 16, 2010; and OMB Memorandum 

M-10-13, “Issuance of Part III to OMB Circular A-123, Appendix C,” March 22, 2010.

10 OMB Circular No. A-123, “Management’s Responsibility for Internal Control,” Appendix C. 
INTRODUCTION

REPORT NO. IG-12-015 3 

institute a systematic method of analyzing risk to determine susceptibility. At a 

minimum, agencies should consider the following factors: 

• whether the program or activity is new to the agency; 

• the complexity of the program or activity; 

• the volume of payments made annually; 

• whether payments or payment eligibility decisions are made outside of the 

agency; 

• recent major changes in program funding, authorities, practices, or procedures; 

• the level, experience, and quality of training for personnel responsible for making 

program eligibility determinations; 

• significant deficiencies cited in audit reports of the agency; and 

• results from prior improper payment work. 

For each program identified as susceptible, agencies are to use an OMB-approved 

methodology to test a sample of transactions and obtain a statistically valid estimate of 

the annual amount of improper payments. At the conclusion of testing, agencies with 

significant improper payment rates are required to develop and implement a corrective 

action plan that identifies root causes and establishes reduction targets as well as 

accountability for reducing improper payments. Additionally, agencies are required to 

report the estimated annual improper payments and the progress in reducing those 

improper payments in their annual PAR or AFR. 

In addition to analyzing susceptibility to improper payments, IPIA requires agencies to 

conduct payment recapture audits for all programs with $1 million or more in annual 

expenditures. OMB defines a payment recapture audit as a review and analysis of an 

agency or program’s accounting and financial records, supporting documentation, and 

other pertinent information supporting its payments specifically designed to identify 

overpayments. OMB instructs agencies to prioritize payment recapture audits on 

activities that have a high potential for overpayments and recoveries, but allows them to 

exclude payments from programs or activities for which they determine payment 

recapture audits are not a cost-effective means of identifying and recapturing improper 

payments. To exclude payments from the recapture audit requirement, the agency must 

notify OMB as well as the agency’s Inspector General of its decision and underlying 

rationale. 

GAO Review of NASA’s Compliance with IPIA. In 2007, the Government 

Accountability Office (GAO) reviewed NASA’s efforts to comply with IPIA and 

identified several deficiencies. Specifically, GAO found that the Agency had not 
INTRODUCTION

4 REPORT NO. IG-12-015 

developed a systematic process to identify risk and that its risk assessment documentation 

was insufficient to support its conclusion that none of its programs were susceptible to 

significant improper payments. Ultimately, GAO concluded that the Agency had not 

effectively implemented IPIA.

11

NASA’s FY 2011 IPIA Reporting Process. For the IPIA section of the FY 2011 PAR, 

NASA began the process of identifying its programs and activities by querying its 

financial system, SAP, for all FY 2010 disbursements. NASA provided this information 

to the IPIA contractor who segregated the data by mission, ultimately identifying 132 

programs within seven mission areas.

 In response to the GAO report, NASA centralized its 

IPIA activities in the Quality Assurance Division of its Office of the Chief Financial 

Officer (OCFO) and hired an external firm to assist NASA in developing its initial risk 

assessment methodology. As a result, GAO considered these issues resolved. 

Subsequently, NASA hired two additional external contractors, one to perform the 

Agency’s annual programmatic risk assessment and conduct related improper payment 

testing and reporting (IPIA contractor) and the other to perform payment recapture audits 

(recapture auditor). 

12

The IPIA contractor requested that the program manager for each of the 34 programs 

complete a questionnaire designed to help assess the risk for improper payments within 

that program. In addition, the IPIA contractor considered other program-specific factors 

such as the control environment, amount of disbursements, and the programmatic and 

human capital risks specific to particular programs. Within the risk assessment, 

materiality of the program accounts for 40 percent of the risk rating while all other 

factors constitute the remaining 60 percent. Based on this information, the IPIA 

contractor assigned an overall risk rating to each of the 34 programs and identified 9 

programs as potentially susceptible to significant improper payments. However, after 

considering the results of prior years’ testing, NASA determined that only 7 of these 

programs would be subject to further testing: Constellation Systems, Institutions and 

Management, International Space Station, Mars Exploration, Reimbursable (RMB) – 

Science Mission Directorate Programmatic, Space Communications and Navigation, and 

the Space Shuttle Program. 

 With the Quality Assurance Division’s approval, 

the contractor removed the two programs under the Office of Inspector General (OIG) 

mission area from this list and combined 32 programs into a single program labeled

Institutions and Management, bringing the list to a total of 99 programs. All programs 

with more than $80 million in disbursements during the fiscal year would be subject to 

further assessment. NASA reported that 34 programs met this threshold. 

 

11 GAO, “Improper Payments: Weaknesses in [U.S. Agency for International Development]’s and NASA’s 

Implementation of the Improper Payments Information Act and Recovery Auditing” (GAO-08-77, 

November 2007). 

12 Aeronautics Research Mission Directorate, Cross Agency Support Programs, Exploration Systems 

Mission Directorate, Institutions and Management, Office of Inspector General, Science Mission 

Directorate, and Space Operations Mission Directorate. 
INTRODUCTION

REPORT NO. IG-12-015 5 

The IPIA contractor developed the testing sample for each of the seven programs from 

vendor payments, purchase card transactions, and travel expenditures, excluding grant 

payments. Further, all payments made for the operation of the Jet Propulsion Laboratory 

(JPL) were excluded from the IPIA review. The IPIA contractor identified only one 

improper payment in the seven programs. Based on that payment, NASA projected that 

it had made $1.5 million in improper payments in FY 2010. Because this amount was 

below OMB’s threshold for significance, NASA reported in its FY 2011 PAR that it had 

identified no significant improper payments. 

In addition to the testing for improper payments described above, NASA contracted with 

the recapture auditor to perform audits on all fixed-price contract payments. The 

recapture auditor contacted vendors to identify whether their records indicated funds due 

to NASA. In addition, the recapture auditor tested all payments made on fixed-price 

contracts during the fiscal year to identify duplicate payments, overpayments, or 

payments to the wrong vendor. To initiate the audit, NASA provided the recapture 

auditor with a listing of all non-voided invoices for FY 2009, which totaled $12.4 billion. 

The recapture auditor then selected for testing those invoices reflecting payments 

associated with fixed-price contracts, which totaled $4.4 billion. From this subset of 

invoices, the recapture auditor identified 115 potential duplicate payments totaling 

$68.5 million. After further analysis, Agency officials determined that none of these

payments was actually improper. 

Objectives

Our audit objective was to determine whether NASA was identifying, reporting on, and 

reducing improper payments in accordance with IPIA. Specifically, we reviewed the 

IPIA section of NASA’s FY 2011 PAR and supporting documentation to ensure NASA’s 

methodology and determinations were sound, accurate, and complete. We also reviewed 

internal controls related to the overall objective. See Appendix A for details of the 

audit’s scope and methodology, our review of internal controls, and a list of prior 

coverage. 
RESULTS

6 REPORT NO. IG-12-015 

NASA USED FLAWED METHODOLOGY TO IDENTIFY 

PROGRAMS POTENTIALLY SUSCEPTIBLE TO 

IMPROPER PAYMENTS

The process through which NASA identified programs potentially susceptible to 

improper payments was flawed. Specifically, with NASA’s approval the IPIA 

contractor interpreted and manipulated disbursement data from the Agency’s 

accounting system to identify and group its programs and activities. However, some 

programs and activities were grouped in ways that potentially masked improper 

payments, while others were excluded from the risk assessment process altogether. 

Because NASA did not properly identify all programs and activities, the Agency did 

not conduct program-specific risk assessments as required by IPIA. In addition, we 

are concerned that the Agency’s method for evaluating the level of risk in its 

programs was applied inconsistently across programs and that the Agency’s heavy 

reliance on the IPIA contractor’s judgments may have skewed the risk assessment. 

Lastly, we disagree with NASA’s decision to exclude from the risk assessment 

process payments made to and by the Jet Propulsion Laboratory (JPL). 

Defining Programs for Program-Specific Risk Assessment

To comply with IPIA, agencies must conduct a program-specific risk assessment for each 

program or activity they administer. NASA’s FY 2011 PAR states that the Agency 

completed its improper payment identification and reporting process in compliance with 

OMB Circular A-123, Appendix C.13

To determine the universe of NASA programs, Agency officials executed a query in SAP 

to identify all FY 2010 disbursements. The IPIA contractor segregated this data by 

mission, initially identifying 132 programs, and then narrowed this list to 99 programs by 

removing two programs associated with the OIG and combining 32 other programs, 

including Information Technology Services, the NASA Shared Services Center, and 

Institutional Construction of Facilities, into a single program labeled Institutions and 

Management. The FY 2010 combined disbursements for these 32 programs was 

$3.7 billion, with 7 meeting NASA’s materiality threshold of $80 million on their own. 

The effect of combining these 32 programs was that none was subject to an individual 

 However, NASA did not adhere to OMB guidance 

in developing its methodology for identifying Agency programs or activities. 

Specifically, working with NASA, the IPIA contractor interpreted and manipulated 

disbursement data from the Agency’s accounting system, SAP, which resulted in 

program groupings that potentially masked improper payment rates and other programs 

being excluded from the risk assessment altogether. 

 

13 OMB Memorandum M-11-16, “Issuance of Revised Parts I and II to Appendix C of OMB Circular 

A-123,” April 14, 2011.
RESULTS

REPORT NO. IG-12-015 7 

assessment of risk. Similarly, NASA grouped the James Webb Space Telescope (JWST), 

Hubble Space Telescope (HST), and Stratospheric Observatory for Infrared Astronomy 

(SOFIA) into one program labeled Cosmic Origins and the Multi-Purpose Crew Vehicle, 

Constellation System, and Space Launch System into another program labeled 

Constellation Systems. OMB guidance advises agencies to avoid grouping programs in 

ways that may mask the rate of improper payments within distinct programs. We believe 

that NASA’s Institutions and Management, Cosmic Origins, and Constellation Systems 

groupings were inconsistent with this directive. 

First, combining programs reduced the volume of testing performed on individual 

programs. When an individual program is selected for testing, the testing sample is 

selected from the entire population of transactions in that program; however, when 

distinct programs are combined the sample is selected from a larger population, thereby

potentially reducing the number of transactions subject to testing from any particular 

program. Indeed, out of the 32 programs grouped into Institutions and Management with 

$3.7 billion in total disbursements, the transactions selected for testing represented only 

13 programs and $773.8 million in disbursements. 

Second, when programs are combined, a program that might be deemed high risk 

standing alone could be masked within a larger program in which the overall risk of 

improper payments is deemed low. For example, grouping JWST into the Cosmic 

Origins program meant that a project with a total projected cost of $8.8 billion and 

$390 million in FY 2010 disbursements was not individually assessed for risk or tested 

for improper payments. In our view, the JWST, HST, and SOFIA projects each meet 

OMB’s definition of a program. Each project is identified individually in NASA’s 

budget and appropriation documents as a specific line item and each employs its own 

program management. Further, each of these projects would arguably have different 

levels of risk based on the amount of disbursements and the maturity of the project life 

cycle. For example, while JWST significantly exceeded $80 million in disbursements, 

HST and SOFIA had much lower disbursement totals. With regard to project life-cycle 

risk, JWST is in the research and development phase while HST and SOFIA are 

operational. For similar reasons, we believe NASA should have separately assessed for 

risk the Multi-Purpose Crew Vehicle, Constellation System and Space Launch System

programs rather than combining them all as Constellation Systems under the Exploration 

Systems mission area. 

We also identified programs we believe were inappropriately excluded from NASA’s risk 

assessment. Specifically, we identified 13 sets of programs within SAP that had identical 

or similar naming conventions such as RMB-Aeronautics Research Mission Directorate 

(ARMD) Program Programmatic and RMB-ARMD Programmatic. These programs had 

different program numbers but were both related to the Aeronautics Research Mission 

Directorate. When we examined the disbursements for these programs with OCFO 

budget officials, they determined that 12 of the 13 sets of programs we had identified 

should have been combined. Had NASA combined these sets of programs, three

additional programs would have exceeded the $80 million materiality threshold and been 
RESULTS

8 REPORT NO. IG-12-015 

subject to a program-specific risk assessment. For instance, had RMB-ARMD Program 

Programmatic and RMB-ARMD Programmatic been combined, their disbursement total 

would have been $84.9 million. In another example, had NASA’s three separate 

Environmental Compliance Restoration programs been combined, they would have been 

evaluated for risk based on $86.9 million of disbursements. Instead, one of the three, 

with $17.4 million in disbursements, was grouped within Institutions and Management 

and the other two were excluded from the risk assessment altogether. In a separate 

instance, the IPIA contractor identified the Safety and Mission Success program as 

having $198 million in FY 2010 disbursements, but this program was not included in the 

risk assessment. 

Finally, NASA is required to report the basis for any program groupings in its annual 

PAR, but the FY 2011 PAR contained no explanation or description of the Institutions 

and Management program.

Inconsistent Execution of NASA’s Risk Assessment. NASA’s risk assessment process 

may not be accurately identifying and appropriately measuring risk. Specifically, risk 

may have been inaccurately assessed and assigned to certain programs due to incomplete 

data, a heavy reliance on materiality, and the subjective assignment of risk by the IPIA 

contractor. We believe that these factors increase the potential that risk is not accurately 

identified or appropriately and consistently measured across NASA’s programs and 

activities. If risk is not appropriately assessed, programs may be inappropriately 

excluded from testing and, consequently, improper payments not identified and reported. 

The lack of uniformity in the assignment of risk ratings begins with the process used to 

obtain background information related to NASA’s programs. For each NASA program 

or activity identified as risk susceptible based on the materiality threshold of $80 million, 

the IPIA contractor asked the program manager to complete a questionnaire designed to 

provide further information relating to risk. The IPIA contractor used responses from 

these questionnaires to assess the overall risk factors related to the program and assign a 

risk rating score. The IPIA contractor stated that the level of response and completeness 

of the questionnaires by program managers varied and that in some instances there was a 

lack of “buy-in” or cooperation by program managers. In fact, the IPIA contractor only 

received 14 questionnaires completed by program managers for the 33 programs included 

in the risk assessment.

14

As part of the risk assessment process, the IPIA contractor considered such factors as the 

control environment, programmatic risks, materiality of program disbursements, and 

human capital risks, and used this information to assign risk rating scores to each of the 

 In instances in which the program manager did not return the 

questionnaire, the IPIA contractor completed it using online resources or prior risk 

assessment results. We have concerns about the heavy reliance NASA placed on its IPIA 

contractor, who has less program knowledge than NASA personnel, to assess the level of 

risk in the Agency’s programs.

 

14 Although NASA reported in its FY 2011 PAR that 34 programs were included in its IPIA risk 

assessment, we found that only 33 were actually included.
RESULTS

REPORT NO. IG-12-015 9 

programs. However, we found inconsistencies in how the IPIA contractor assigned risk 

ratings. We noted instances in which the IPIA contractor rated risk factors for which the 

program manager had provided no information a “1” (low), while in other programs such 

factors were rated a “5” (high). The IPIA contractor stated that this occurred because it

considered the materiality of the program when evaluating other risk factors and 

therefore, if no other information was provided, one program could be rated differently 

than another program at the IPIA contractor’s discretion. However, materiality is a 

stand-alone factor in NASA’s risk assessment and IPIA states that materiality is only one 

factor in a risk assessment process. By incorporating materiality into the determination 

of other risk factors, the IPIA contractor may be amplifying its affect on a program’s 

overall assessment of risk.

Exclusion of the Jet Propulsion Laboratory 

JPL is a federally funded research and development center (FFRDC) operated for NASA 

by the California Institute of Technology (Caltech). FFRDC’s enable agencies to use 

private sector resources to accomplish tasks that are integral to the mission and operation 

of the sponsoring agency that cannot be met with normal contractor resources. As such, 

FFRDC’s have access to government resources beyond which is common to the normal 

contractual relationship and are expected to operate in the public interest and fully 

disclose their affairs to the sponsoring Agency. According to NASA’s Procurement 

Report for FY 2010, JPL received $1.6 billion in FY 2010 and is the second largest 

recipient of NASA procurement funds after private businesses.15

The Associate Deputy Chief Financial Officer (Associate Deputy CFO) stated that NASA 

did not include JPL because it believes that payments made by NASA to JPL are not at 

risk for improper payments and because payments made by JPL to subcontractors are

outside IPIA’s scope. Specifically, he stated that NASA has established a line of credit 

for making payments to Caltech, that Caltech draws down funds as needed, and that these

transactions are made electronically between banks. Based on these factors, NASA

concluded that the payment stream to JPL would always be accurate. The Associate 

Deputy CFO also stated that IPIA only requires NASA to consider first-line Government 

payments to prime contractors and therefore payments made by JPL to its subcontractors 

are not subject to the statute. 

 However, NASA did 

not include payments made to or by JPL in its IPIA review. 

OMB defines a payment as any payment derived from Federal funds or other Federal 

sources; ultimately reimbursed from Federal funds or resources; or made by a Federal 

agency, a Federal contractor, or a governmental or other organization administering a 

Federal program or activity. This definition includes Federal awards subject to OMB 

 

15 The Procurement Report is available online at http://prod.nais.nasa.gov/pub/pub_library/annual2010.pdf

(accessed March 14, 2012).
RESULTS

10 REPORT NO. IG-12-015 

Circular No. A-133, “Audits of Institutions of Higher Education and Other Non-Profits,” 

that are expended by both recipients and sub-recipients. 

Because Caltech administers JPL as a Federal program or activity and JPL’s operation is 

analogous to other NASA Centers, it is our view that both payments NASA makes to 

Caltech and subsequent payments by Caltech to subcontractors meet OMB’s definition of 

a payment. Further, as transactions between banks are not impervious to the risk of 

improper payment, we do not believe that this factor alone is sufficient reason to exclude 

JPL from NASA’s risk assessment. In line with OMB guidance, payments are only 

proper when made for eligible goods and services under the provisions of a contract, 

grant, lease, cooperative agreement, or other funding mechanism. In addition, JPL is 

subject to the Single Audit Act requiring A-133 audits that include reviews of 

disbursements past the primary recipient. Between FYs 2007 and 2010, these A-133 

audits of JPL conducted by an external contractor and the Defense Contract Audit 

Agency (DCAA) identified approximately $18 million in questioned costs. While 

questioned costs are not necessarily improper payments and A-133 audits are not 

specifically designed to identify such payments, these audits highlight weaknesses that 

could lead to improper payments at JPL. 

Based on the questioned costs identified in A-133 audits of JPL, we believe that had the 

disbursements made to and by JPL in FY 2010 been included in the Agency’s IPIA 

review, the Agency may have identified additional improper payments. At a minimum, 

NASA should have formally assessed the risk of improper payments made by and to JPL 

consistent with the way it assessed risk in its other programs. 

Recommendations, Management’s Response, and Evaluation of 

Management’s Response

Recommendation 1. We recommended that NASA’s Chief Financial Officer develop a 

methodology to identify programs and activities that does not inappropriately mask 

improper payments. 

Management’s Response. The CFO partially concurred, stating that she strongly 

believes that NASA’s current methodology does not mask improper payments and 

adequately identifies and categorizes NASA’s programs and activities. She noted that 

NASA’s procurement and payment activities are centralized at NASA Centers and the 

NASA Shared Services Center with a clear segregation of duties that provides a sound 

internal control environment that mitigates the risk of improper payments across the 

entire Agency. She contends that the Agency’s current methodology is cost-effective, 

meets the goals and objectives of IPIA, and complies with the intent of OMB guidance – 

pointing to the results of NASA’s last three improper payment reviews that uncovered 

only five improper payments and to the fact that NASA consistently reports improper 

payment rates below OMB’s significance threshold as support for her contention. 

Nevertheless, she stated that it may be more appropriate for NASA to assess improper 
RESULTS

REPORT NO. IG-12-015 11

payments by payment type and associated “procure to pay” activities rather than by 

“programs” and that the Agency will consider refining its approach and make a 

determination for execution by FY 2013. 

Evaluation of Management’s Response. Although the CFO strongly believes that the 

Agency’s current methodology meets the goals and objectives of IPIA and complies with 

OMB guidance, our review indicates otherwise. We cited multiple examples in our 

report where improper payments were potentially masked and the Agency did not dispute 

our analysis or address our specific findings. Moreover, the fact that NASA has 

identified relatively few improper payments over the past 3 years means little if, as we 

assert, the Agency is using a methodology that may mask such payments. Similarly, 

NASA already considers the centralized nature of its procurement and payment activities 

in its risk assessment methodology and by solely focusing on the financial control 

environment, risk factors unique to specific programs, such as JWST, may be ignored. 

However, we consider this recommendation to be resolved because the CFO stated that 

NASA will reassess its approach to testing for improper payments. The recommendation 

will be closed once we have determined that the Agency has adopted an approach that 

addresses our concerns. 

Recommendation 2. We recommended that NASA’s Chief Financial Officer coordinate 

with the Mission Directorates to require that NASA program managers provide updated and 

accurate program information to allow for the performance of a comprehensive risk 

assessment.

Management’s Response. The CFO partially concurred, stating that while she agreed 

that better communication could improve the gathering of data from program managers, 

program-specific data is only a minor component of the Agency’s improper payment risk 

assessment. As noted above, the CFO also stated that her office will evaluate an 

alternative method of conducting improper payment testing. As part of this analysis, the 

CFO will consider the extent to which program information impacts the risk factors and 

risk conditions integral to the Agency’s risk assessment methodology. The OCFO will 

analyze the pros and cons of this alternative approach and make a determination for 

execution by FY 2013. 

Evaluation of Management’s Response. Because program-specific data makes up 

60 percent of the current overall risk assessment score, we disagree that the data was a 

minor component of the assessment. In fact, all risk elements except for materiality 

require program-specific input according to NASA’s risk assessment methodology. We 

also noted that the IPIA contractor relied heavily on questionnaires completed by 

program managers to assign a risk rating score to each of the programmatic elements. 

However, based on the CFO’s assertion that her office will consider this issue as part of 

its analysis of possible revisions to its improper payment testing methodology, the 

recommendation is resolved and will be closed when we verify that the Agency’s actions 

address our concern. 
RESULTS

12 REPORT NO. IG-12-015 

Recommendation 3. We recommended that NASA’s Chief Financial Officer include JPL 

in NASA’s IPIA review and assess the risk of improper payments by and to JPL consistent 

with the methodology used for other NASA programs. 

Management’s Response. The CFO partially concurred, stating that NASA will include 

payments made to JPL in NASA’s improper payment program by the end of FY 2012. 

However, the CFO does not concur with including payments made by JPL in NASA’s

improper payment program. The CFO stated that NASA has never considered JPL a 

“Federal program or activity” that requires administration. According to the CFO, IPIA 

differentiates “administering Federal programs” from status as a “Federal contractor” and 

for the purposes of IPIA, administering a Federal program means managing an ongoing 

process of distributing Federal monies, developing or enforcing regulations, conducting 

inspections, or some other programmatic activity. The CFO contends that Caltech/JPL 

does none of these things. 

Evaluation of Management’s Response. We consider management’s comments 

unresponsive. Therefore, this recommendation will remain unresolved. We disagree that 

there is a sound basis under IPIA for distinguishing between payments made to JPL and 

payments made by JPL to its subcontractors. Under IPIA, payments made to a contractor 

and payments made by a contractor are equally subject to review so long as they are 

made in furtherance of the administration of a Federal program. By virtue of its contract 

to manage JPL, Caltech is one of NASA’s largest contractors and plays a vital role in 

administering NASA’s science and space exploration programs. Accordingly, in our 

view, JPL conducts “programmatic activity” that qualifies even under the CFO’s 

definition of what IPIA covers. We continue to believe that the Agency should assess the 

risk that improper payments are being made from the more than $1 billion of Federal 

money entrusted to JPL each year. 
RESULTS

REPORT NO. IG-12-015 13

NASA’S TESTING, ESTIMATING, AND REPORTING 

OF IMPROPER PAYMENTS

NASA improperly excluded grant payments from IPIA testing. In addition, NASA 

identified two programs as susceptible to improper payments but did not test these 

programs for such payments or request a waiver to the requirement that it do so. We 

also identified several errors and omissions in the IPIA section of the PAR that lead 

us to question the rigor of NASA’s oversight and review process and whether 

NASA’s reporting is accurate and complete.

Exclusion of Grants from Testing

From FY 2006 through FY 2010, NASA awarded approximately $3 billion in grants to 

external entities with approximately $570 million awarded in FY 2010 alone. 

Nevertheless, NASA excluded grants from improper payment testing and reporting.16 By 

not testing grants, NASA excluded payments in programs known to have internal 

controls weaknesses and did not comply with IPIA requirements. In September 2011, the 

NASA OIG reported that NASA does not have an adequate system of controls in place to 

ensure proper administration and management of its grant program and, as a result, some 

grant funds are not being used for their intended purposes.17

OMB requires any agency with programs or activities susceptible to significant improper 

payments to complete a corrective action plan and directs agencies with risk susceptible 

grant programs to discuss in the PAR what the agency has accomplished in the area of 

funds stewardship past the primary recipient.

 The OIG also reported that 

NASA did not provide adequate oversight of grantee performance and expenditures and 

awarded unauthorized and unallowable grant supplements contrary to Federal and NASA 

regulations. 

18

According to the OCFO’s Quality Assurance Division, NASA did not include grants in 

its IPIA compliance efforts because 2007 testing of first-line grant payments was not 

cost-effective and because there is no clear guidance on how to conduct testing beyond 

the primary recipient. However, OMB calls for agencies to include all grants – 

competitive grant programs, block/formula grant programs, and non-competitive grants 

 Although NASA identified $668 million

in grants within the seven programs identified as susceptible to improper payments, all 

payments associated with these grants were removed prior to transaction testing. 

 

16 GAO reported this same deficiency in a 2007 report: “Improper Payments: Weaknesses in [U.S. Agency 

for International Development]’s and NASA’s Implementation of the Improper Payments Information 

Act and Recovery Auditing” (GAO-08-77, November 2007). 

17 NASA OIG, “NASA’s Grant Administration and Management” (IG-11-026, September 12, 2011). 

18 OMB A-136 (Revised), October 27, 2011. 
RESULTS

14 REPORT NO. IG-12-015 

such as single-source awards – as part of their improper payment review. Additionally, 

OMB’s definition of a “payment” includes disbursements to a Federal grantee or a 

governmental or other organization administering a Federal program or activity. Further, 

the IPIA contractor recommended in its FY 2011 final report that NASA consider 

including grants in future IPIA testing programs. 

We benchmarked with three grant-making Federal agencies to determine how they 

handle grants in their IPIA testing by interviewing personnel from the agencies’ OIGs.

19

Evaluation of Improper Payment Testing and Estimating 

 

We learned that each of the agencies include grants in their IPIA review and tailor their 

approach specifically to their grant processes. For instance, one agency reconciled 

quarterly financial reports provided by the grantees to supporting documentation while 

another sampled grant transactions and traced disbursements back to supporting 

documentation. The third agency included grants in its IPIA review; however, it did not 

identify any grant programs as high risk and therefore did not perform transaction testing. 

Representatives from two of the three agencies with whom we benchmarked participate 

in an interagency working group with NASA to discuss internal control issues including 

IPIA-related topics. 

Absent a waiver, IPIA requires agencies to estimate the annual amount of improper 

payments for each program and activity identified as susceptible to significant improper 

payments and report the results in the PAR or AFR. However, NASA only reported 

improper payment estimates for seven of the nine programs it identified as susceptible, 

excluding Earth Science Research and Earth Systematic Mission, which respectively had 

$420 million and $770 million in FY 2010 disbursements. The Quality Assurance 

Division told us that this decision was based on the results of previous years’ testing that 

had identified no significant improper payments in these programs. 

OMB guidance states that if a program is determined susceptible to improper payments 

but subsequent transaction testing demonstrates no significant improper payments for a 

minimum of two consecutive years, the agency may request relief from the annual 

reporting requirements for this program or activity. This request must be submitted in 

writing to OMB and include an assertion from the agency’s OIG that it concurs with the 

agency’s request for relief. NASA neither requested nor received such a waiver from 

OMB for its Earth Science Research and Earth Systematic Mission programs. 

Accordingly, it was required to test and report estimates for these two programs. 

Testing of Disbursements. NASA reported in its PAR total disbursements of 

approximately $5.1 billion for the seven programs it identified as susceptible to improper 

payments. However, the total FY 2010 disbursements from these seven programs was 

 

19 We interviewed OIG officials for the Department of Justice, the Department of Health and Human 

Services, and the Corporation for National and Community Service. 
RESULTS

REPORT NO. IG-12-015 15

actually $13.4 billion. NASA and the IPIA contractor stated that the $5.1 billion

represents only the disbursements related to contracts, purchase cards, and travel, the 

only types of transactions NASA tested. Of the remaining $8.3 billion (62 percent), 

$1.4 billion was excluded from testing because it related to grants ($668 million) and

payroll ($765 million). However, as discussed above grants should have been included in 

NASA’s IPIA testing. Furthermore, neither NASA nor the contractor could tell why the 

remaining $6.9 billion was excluded. Therefore, we have no assurance that all eligible 

disbursements made in the seven programs were subject to testing. In response to our 

audit work, the IPIA contractor stated that it would examine the excluded transaction 

types in future years to determine if they should be included in IPIA testing. 

Additionally, we determined that although the 32 programs combined in the Institutions 

and Management program had a total of $3.7 billion in disbursements, NASA selected its 

sample for testing from only $803 million in disbursements. This occurred because the 

IPIA contractor failed to include five programs with a combined disbursement total of 

$2.96 billion in the testing universe. As a result, the five programs that account for 

81 percent of the Institutions and Management program disbursements were not included 

in NASA’s IPIA testing. When questioned, the IPIA contractor’s response was that this 

error did not affect the results. However, we believe that including only 19 percent of the 

disbursements made in a high-risk program may minimize the number of improper 

payments identified. 

PAR Reporting

To comply with IPIA, each agency must publish an annual financial statement for the 

most recent fiscal year and post that report and any accompanying materials on its 

website. Although NASA met these requirements with the publication of the FY 2011 

PAR, we noted several errors that affect the accuracy and completeness of the 

information reported. For instance, the PAR states that NASA’s updated risk assessment 

identified 34 programs that covered $19.1 billion in FY 2010 disbursements. However, 

we determined that the Agency’s risk assessment only included 33 programs with 

$18.9 billion in FY 2010 disbursements. We brought this $200 million discrepancy to the 

attention of the Quality Assurance Division and the IPIA contractor prior to publication 

of the PAR but the information was not corrected. 

We also noted inaccurate results from prior years’ testing in the PAR table labeled

“NASA Programs Identified as Susceptible to Improper Payments.” The table indicates 

that four programs – Institutions and Management, International Space Station, Mars 

Exploration, and Space Shuttle – were tested in FYs 2009 and 2010 and that the risk after 

testing was determined to be “low.” In reality, these programs were identified as 

susceptible to improper payments in these years but were not tested. In addition, 

Constellation Systems is identified as not having been tested in FY 2008 when in fact it 

was tested, and RMB-Science Mission Directorate Programmatic was identified as tested 
RESULTS

16 REPORT NO. IG-12-015 

in FY 2010 with the results being “low” when in fact the program was not tested or even 

mentioned in the FY 2010 PAR. 

OMB guidance requires that agencies include in their PAR or AFR a table that lists all

programs or activities they identified as susceptible to significant improper payments, the 

current year and prior years’ improper payment dollars and percentages, designation of 

over- and underpayments, and future year outlay estimates. However, the table in 

NASA’s PAR does not include this information. Additionally, NASA reported that 1,788 

transactions were selected for testing when the supporting documentation indicated that 

1,786 transactions had been selected and only 1,426 transactions had actually been tested. 

The PAR did not note that these transactions had been omitted from testing or explain 

why.

OMB guidance also requires agencies to provide recapture audit information in five 

different tables to summarize agency recapture efforts. While NASA included these 

tables, the information reported in one table – “Overpayments Recaptured Outside of 

Payment Recapture Audits” – was completed with either a not applicable (N/A) response 

or “$0.” When we asked for the information used to prepare the tables, the Quality 

Assurance Division told us the requirement was new to the PAR, the information was not 

readily available, and that it had had limited time to incorporate the information into the 

report. However, as part of our benchmarking efforts, we noted that other agencies 

completed this table as required. Further, while the information reported in these tables 

indicates to the reader that work was performed and the resulting outcome was either not 

applicable or that no funds were recaptured, based on the Quality Assurance Division’s 

response to our inquiry this was not the case. 

We also identified that the cumulative amount determined not to be collectable from 

previous years in the table labeled “Payment Recapture Audit Reporting” is incorrect by 

several hundred dollars. According to the PAR, $18,367 was not collectable, although 

supporting documentation indicates the correct amount is $19,337. The Quality 

Assurance Division acknowledged this minor error. 

The IPIA contractor provides NASA a draft report for review prior to issuing the final 

report. This report is the basis for the information included in the PAR. We compared 

the draft to the final report and noted the same errors in each and that these errors were 

carried over into the PAR. Accordingly, we question the rigor with which NASA 

reviewed the IPIA contractor’s draft report and supporting documentation. 
RESULTS

REPORT NO. IG-12-015 17

Recommendations, Management’s Response, and Evaluation of 

Management’s Response

In order to increase opportunities to identify additional improper payments and ensure 

accurate reporting, we made the following recommendations to the Chief Financial Officer: 

Recommendation 4. Increase the scope of the Agency’s IPIA testing to include grants. 

Management’s Response. The CFO concurred, stating that her office has evaluated its 

improper payment program approach and implementation and will include grants in the 

scope of the improper payments review by the end of FY 2012. 

Evaluation of Management’s Response. Management’s proposed actions are 

responsive; therefore, the recommendation is resolved and will be closed upon 

completion and verification of the proposed actions. 

Recommendation 5. Report improper payment estimates for all programs identified as 

susceptible to improper payments or request relief from the annual reporting requirement. 

Management’s Response. The CFO concurred and will execute this approach by the 

end of FY 2012. 

Evaluation of Management’s Response. Management’s proposed actions are 

responsive; therefore, the recommendation is resolved and will be closed upon 

completion and verification of the proposed actions. 

Recommendation 6. Evaluate the current process for reviewing the IPIA contractor’s 

results and develop a process to ensure that information reported in the PAR is correct and 

based on appropriate supporting documentation. 

Management’s Response. The CFO concurred and will execute this approach by the 

end of FY 2012. 

Evaluation of Management’s Response. Management’s proposed actions are 

responsive; therefore, the recommendation is resolved and will be closed upon 

completion and verification of the proposed actions. 

Recommendation 7. Include all required tables and data in the IPIA section of the PAR. 

Management’s Response. The CFO concurred, stating that even though the required 

tables were included in the FY 2011 PAR, the information in the tables was subject to 

interpretation by the reader. Therefore, the CFO will provide more specificity in the 

tables and provide clarity to the information reported as appropriate. This approach will 

be executed by the end of FY 2012. 
RESULTS

18 REPORT NO. IG-12-015 

Evaluation of Management’s Response. Management’s proposed actions are 

responsive; therefore, the recommendation is resolved and will be closed upon 

completion and verification of the proposed actions. 
RESULTS

REPORT NO. IG-12-015 19

RECAPTURE AUDIT EFFORTS COULD 

BE IMPROVED

Although NASA’s recapture audit program met the technical requirements of the 

IPIA, improvements could enhance the Agency’s ability to identify and recapture 

improper payments. Specifically, we determined that NASA contractually limits its 

annual recapture audits to fixed-price contracts, thereby excluding a substantial 

portion of expenditures from testing such as payments made to cost-type contracts, 

grants and cooperative agreements. Accordingly, NASA may be missing an 

opportunity to identify and recover additional improper payments. We also found 

that NASA did not report on improper payments identified through sources other 

than payment recapture audits, such as OIG audits, internal efforts, or vendor 

repayments, and did not prioritize recapture audits to target the Agency’s programs 

or activities known to be high risk. 

Scope of NASA’s Recapture Efforts Limited

In its FY 2011 PAR, NASA reported that no improper payments were identified or 

recovered through recapture audits. We are concerned that NASA is unduly restricting 

the scope of recapture audits and therefore not identifying as many improper payments as 

reasonably possible. Specifically, by limiting recapture audits to fixed-price contract 

payments, only $4.4 billion or 26 percent of the Agency’s total procurement expenditures 

in FY 2009 were subject to audit. 

NASA policy states that all classes of contracts and contract payments should be 

considered for recapture audits. However, OMB guidance allows agencies to exclude 

program and activity payments from recapture audits if the agency determines that such 

audits are not a cost-effective method for identifying and recapturing improper payments. 

NASA determined that recapture audits are not cost-effective for cost-type contracts and

therefore excluded them from its recapture audit efforts. 

According to OMB guidance, if an agency excludes payments from certain programs and 

activities because of cost concerns, the agency must notify OMB and its Inspector 

General and provide the analysis used in making the determination. While NASA 

notified OMB and the OIG of its intention to exclude cost-type contracts, NASA did not 

specifically report that other types of payments, such as those relating to grants and 

cooperative agreements, would also be excluded or provide the analysis to support these 

exclusions. 

After reviewing NASA’s draft FY 2011 PAR, OMB requested that the Agency provide a 

more detailed explanation in the final document as to why it had excluded cost-type 
RESULTS

20 REPORT NO. IG-12-015 

contracts. To address OMB’s request, NASA stated it excluded these contracts because 

DCAA audits them. 

In 2007, NASA asked DCAA to confirm that it can rely on DCAA audits for recapture 

purposes. In response, a DCAA representative indicated that cost-type contracts are 

subject to continuous audit coverage from award through completion and that payments 

under these contracts are provisionally approved subject to later audit. 

NASA asserts that because DCAA is auditing cost-type contracts and reviews many 

associated invoices before payment, performing a separate recapture audit on these 

contracts would be duplicative and therefore not cost-effective. However, in guidance 

issued in April 2011, OMB specifically differentiates recapture audits from post-award 

audits. Specifically, OMB defines recapture auditing as the review and analysis of an 

agency or program’s accounting and financial records, supporting documentation, and 

other pertinent information supporting its payments that is specifically designed to 

identify overpayments. A recapture audit is not an audit in the traditional sense but rather 

a detective and corrective control activity designed to identify and recapture 

overpayments. 

In contrast, post-award audits examine the accounting and financial records of a payment 

recipient and are normally performed to determine if amounts claimed by the recipient 

are in compliance with the terms of the award or contract and applicable laws and 

regulations.20

NASA also states in the FY 2011 PAR that the contractual terms of NASA’s cost-type 

contracts provide for audit access only by DCAA and that allowing access by the 

recapture auditor would require contract modifications and likely result in increased 

costs. However, our review of OMB Circular A-133, the Federal Acquisition Regulation 

(FAR), the NASA FAR Supplement, Title 10 of the United States Code, and the Single 

Audit Act determined that while it is generally the Government’s position to avoid 

duplication of effort in auditing, there is no legal impediment to having an outside auditor 

perform payment recapture audits. IPIA allows for payment recapture audits to be 

performed by agency employees, other agencies, non-Federal entities, contractors, or any 

combination thereof. 

 Although post-award audits may also include a review of pertinent records 

and recipients’ systems for identifying and returning any improper payments received, 

DCAA policy specifically states that its audits generally do not cover recapture audit 

activities and that DCAA should normally have no role in most recapture audits. Based 

on OMB’s definition and DCAA guidance, recapture audits differ from post-award audits 

of cost-type contracts. Further, because NASA did not publish the amount of improper 

payments identified by DCAA, we are unable to determine whether DCAA audits are 

identifying duplicate or overpayments or whether the audits themselves are in fact 

duplicative. 

 

20 DCAA classifies incurred-cost audits as post-award contract audits. 
RESULTS

REPORT NO. IG-12-015 21

Additionally, IPIA states that the head of the agency shall give priority to the most recent 

payments and to payments made in any program or activity identified as being 

susceptible to significant improper payments. However, NASA does not instruct the 

recapture auditor specifically to target high-risk programs. While some payments made 

by high-risk programs may be associated with fixed-price contracts, because the 

recapture auditor is only reviewing such contracts, other types of payments that fall 

within high-risk programs are not prioritized but rather are excluded all together.

As noted above, while NASA relies on DCAA for audits of cost-type contracts, the 

Agency did not report the results of these audits in the PAR. In fact, NASA did not 

report on any improper payments identified and recovered through sources other than 

payment recapture audits. OMB guidance states that, as applicable, agencies should also 

report on improper payments identified and recovered through sources other than 

payment recapture audits. Some examples of other sources provided by OMB include 

statistical samples conducted under IPIA; agency post-payment reviews or audits; OIG

reviews; Single Audit reports; self-reported overpayments; and reports from the public. 

Recommendations, Management’s Response, and Evaluation of 

Management’s Response

In order to increase opportunities to identify additional improper payments, we made the 

following recommendations to the Chief Financial Officer:

Recommendation 8. Analyze and document the feasibility of expanding the scope of the 

Agency’s recapture audits beyond fixed-price contracts to include other payments such as 

grants and cooperative agreements. 

Management’s Response. The CFO concurred, stating that the Agency will analyze and 

document the feasibility of expanding the scope of the Agency’s recapture audits beyond 

fixed-price contracts to include other payments such as grants and cooperative 

agreements. This action will be completed by the end of FY 2012. 

Evaluation of Management’s Response. Management’s proposed actions are 

responsive; therefore, the recommendation is resolved and will be closed upon 

completion and verification of the proposed actions. 

Recommendation 9. Reconsider including cost-type contract payments in the Agency’s 

recapture audit efforts and document any determinations made. 

Management’s Response. The CFO concurred, stating that the Agency will analyze the 

feasibility of a refined approach and make a determination for execution by FY 2013. 

The CFO noted that NASA’s current approach was developed in collaboration with OMB 

during the early stages of the Agency’s improper payment program. 
RESULTS

22 REPORT NO. IG-12-015 

Evaluation of Management’s Response. Management’s proposed actions are 

responsive; therefore, the recommendation is resolved and will be closed upon 

completion and verification of the proposed actions. 
APPENDIXES

REPORT NO. IG-12-015 23

APPENDIX A 

Scope and Methodology

We performed this audit from September 2011 through April 2012 in accordance with 

generally accepted government auditing standards. Those standards require that we plan 

and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable 

basis for our findings and conclusions based on our audit objectives. We believe that the 

evidence obtained provides a reasonable basis for our findings and conclusions based on 

our audit objectives. 

To determine whether NASA was identifying, reporting on, and reducing improper 

payments in accordance with IPIA, as amended by IPERA, we reviewed applicable laws 

and regulations and interviewed OCFO personnel, including the Associate Deputy CFO

and the Quality Assurance Division’s Director. We also interviewed the responsible 

contractor personnel at the two external firms contracted to conduct the IPIA testing and 

recapture audits on NASA’s behalf. We reviewed the IPIA contractor’s work papers and 

its draft and final reports. We also reviewed the IPIA section of the PAR and supporting 

documentation. Based on our reviews and interviews, we determined whether NASA 

met the requirements of IPIA; evaluated the soundness, accuracy, and completeness of 

the Agency’s reporting of its efforts in the PAR; and evaluated the Agency’s process and 

methodology related to that reporting. Finally, we interviewed representatives at three 

other Federal agencies to benchmark with their IPIA efforts. 

Federal Laws, Regulations, Policies, and Guidance. We reviewed the following in the 

course of our audit work: 

• Public Law 107-300, Improper Payments Information Act (IPIA) of 2002 

• Public Law 111-204, Improper Payments Elimination and Recovery Act (IPERA) 

of 2010 

• Public Law 104-156, Single Audit Act Amendments of 1996 

• Title 10, United States Code (10 U.S.C.), “Armed Forces,” January 7, 2011 

• Executive Order 13520, “Reducing Improper Payments,” November 2009 

• Federal Acquisition Regulation (FAR) and NASA FAR Supplement 

• OMB Circular No. A-133, “Audits of States, Local Governments, and Non-Profit 

Organizations,” June 27, 2003, and June 26, 2007 

• OMB Circular No. A-136 (Revised), “Financial Reporting Requirements,” 

September 29, 2010, and October 27, 2011 
APPENDIX A 

24 REPORT NO. IG-12-015 

• OMB Memorandum M-11-16, “Issuance of Revised Parts I and II to Appendix C 

of OMB Circular A-123,” April 14, 2011 

• OMB Memorandum M-11-04, “Increasing Efforts to Recapture Improper 

Payments by Intensifying and Expanding Payment Recapture Audits,” 

November 16, 2010 

• OMB Memorandum M-10-13, “Issuance of Part III to OMB Circular A-123, 

Appendix C,” March 22, 2010 

• NASA Procedural Requirements (NPR) 9010.3, “Financial Management Internal 

Control,” September 30, 2008 

• NPR 9050.4, “Cash Management and Improper Payments,” September 20, 2008 

• Defense Contract Audit Agency Memorandum 05-PPD-076(R), “Audit Guidance 

on Recovery Audits,” December 29, 2005 

Use of Computer-Processed Data. We did not review the general and application 

controls surrounding NASA’s financial accounting system (SAP). However, as part of 

NASA’s annual financial statement audit, these controls were subject to testing and 

evaluation. While weaknesses in Privileged User Access Controls and Monitoring of the 

SAP Environment were identified, these deficiencies do not affect the overall 

completeness and reliability of the data we reviewed or the outcome of this audit. 

Review of Internal Controls 

We reviewed and evaluated the internal controls associated with NASA’s sampling, 

testing, and reporting of improper payment estimates and the Agency’s efforts to reduce 

and recapture improper payments. We found internal control deficiencies as discussed in 

this report. Our recommendations, if implemented, should correct the weaknesses we 

identified.

Prior Coverage

During the last 5 years, the NASA OIG and GAO have issued four reports of particular 

relevance to the subject of this report. Unrestricted reports can be accessed over the 

Internet at http://oig.nasa.gov/audits/reports/FY12 (NASA OIG) and http://www.gao.gov

(GAO). 

NASA Office of Inspector General

“NASA’s Grant Administration and Management” (IG-11-026, September 12, 2011) 
APPENDIX A 

REPORT NO. IG-12-015 25

Government Accountability Office

“Improper Payments: Moving Forward with Governmentwide Reduction Strategies” 

(GAO-12-405T, February 7, 2012) 

“Improper Payments: Weaknesses in [U.S. Agency for International Development]’s and 

NASA’s Implementation of the Improper Payments Information Act and Recovery 

Auditing” (GAO-08-77, November 2007) 

“Improper Payments: Agencies’ Efforts to Address Improper Payment and Recovery 

Auditing Requirements Continue” (GAO-07-635T, March 29, 2007) 
APPENDIX B

26 REPORT NO. IG-12-015 

MANAGEMENT COMMENTS
APPENDIX B

REPORT NO. IG-12-015 27
APPENDIX B

28 REPORT NO. IG-12-015 
APPENDIX B

REPORT NO. IG-12-015 29
APPENDIX C 

30 REPORT NO. IG-12-015 

REPORT DISTRIBUTION

National Aeronautics and Space Administration

Administrator

Deputy Administrator

Chief of Staff

Chief Financial Officer

Deputy Chief Financial Officer

Executive Director, NASA Shared Services Center

NASA Advisory Council’s Audit, Finance, and Analysis Committee 

Director, Jet Propulsion Laboratory 

Non-NASA Organizations and Individuals

Office of Management and Budget

Deputy Associate Director, Energy and Science Division

Branch Chief, Science and Space Programs Branch

Government Accountability Office 

Director, Office of Financial Management and Assurance 

Director, Office of Acquisition and Sourcing Management 

Congressional Committees and Subcommittees, Chairman and 

Ranking Member

Senate Committee on Appropriations 

Subcommittee on Commerce, Justice, Science, and Related Agencies

Senate Committee on Commerce, Science, and Transportation

Subcommittee on Science and Space

Senate Committee on Homeland Security and Governmental Affairs

House Committee on Appropriations 

Subcommittee on Commerce, Justice, Science, and Related Agencies

House Committee on Oversight and Government Reform 

Subcommittee on Government Organization, Efficiency, and Financial Management

House Committee on Science, Space, and Technology 

Subcommittee on Investigations and Oversight

Subcommittee on Space and Aeronautics
REPORT NO. IG-12-015 31

Major Contributors to the Report: 

Laura Nicolosi, Director, Mission Support Directorate

Julia Eggert, Project Manager

Jason Hensley, Lead Auditor 

Linda Hargrove, Management Analyst

Scott Riggenbach, Auditor 
MAY 1, 2012

REPORT No. IG-12-015 

OFFICE OF AUDITS

OFFICE OF INSPECTOR GENERAL

ADDITIONAL COPIES

Visit http://oig.nasa.gov/audits/reports/FY12/ to obtain additional copies of this report, or contact the 

Assistant Inspector General for Audits at 202-358-1232. 

COMMENTS ON THIS REPORT

In order to help us improve the quality of our products, if you wish to comment on the quality or 

usefulness of this report, please send your comments to Mr. Laurence Hawkins, Audit Operations and 

Quality Assurance Director, at Laurence.B.Hawkins@nasa.gov or call 202-358-1543. 

SUGGESTIONS FOR FUTURE AUDITS

To suggest ideas for or to request future audits, contact the Assistant Inspector General for Audits. 

Ideas and requests can also be mailed to:

Assistant Inspector General for Audits 

NASA Headquarters

Washington, DC 20546-0001 

NASA HOTLINE

To report fraud, waste, abuse, or mismanagement, contact the NASA OIG Hotline at 800-424-9183 or 

800-535-8134 (TDD). You may also write to the NASA Inspector General, P.O. Box 23089, L’Enfant 

Plaza Station, Washington, DC 20026, or use http://oig.nasa.gov/hotline.html#form. The identity of 

each writer and caller can be kept confidential, upon request, to the extent permitted by law.