Inspectors General: Actions Needed to Improve Audit Coverage of NASA
Released: 2009-01-12T00:00:00

Letter

Scope and Methodology

To review the OIG’s audit oversight coverage of NASA, we obtained the 71 final reports from the Office of Audits as reported in the OIG’s semiannual reports to the Congress for fiscal years 2006 and 2007, which included 46 audits with statements of compliance with Government Auditing Standards and 25 reports without reference to compliance with auditing standards. For purposes of our review, we considered only those reports that stated compliance with Government Auditing Standards as audit reports and refer to the reports without such statements as nonaudit reports. We compared the contents of the 46 audit reports with the high- risk areas designated by us and with the management challenges identified by the NASA OIG to determine the audit coverage of these areas. We also analyzed the nature and scope of all 71 final reports and the resulting recommendations to determine the extent to which they addressed compliance with laws, regulations, and NASA policies and procedures; economy and efficiency; or the effectiveness of NASA’s programs and operations. To review the investigative coverage, we used the identification of closed cases reported by the OIG in semiannual reports for fiscal years 2006 and 2007. We also obtained the OIG’s strategic and annual audit plans covering the same 2-year period to determine if they contained goals and objectives to provide audit coverage of NASA’s program compliance with laws and regulations and program economy, efficiency, and effectiveness.

We identified monetary and other audit and investigative accomplishments reported by the NASA OIG in semiannual reports to the Congress for fiscal years 2003 through 2007 in order to observe any long-term trends. We limited our review of the NASA OIG’s accomplishments to the results of audits and investigations reported to the Congress for this period and did not audit or otherwise verify the dollar amounts of the monetary accomplishments or potential savings to the government reported by the NASA OIG. We also obtained the semiannual reports issued by all 30 IGs appointed by the President and confirmed by the Senate to obtain the monetary accomplishments reported by those IGs during fiscal year 2007. We obtained the total budgetary resources of each OIG for fiscal year 2007 from the Office of Management and Budget (OMB) and compared the reported monetary accomplishments with budgetary resources to obtain a return on investment for each IG office.

We obtained the total budgetary resources at the NASA OIG and the agency for fiscal years 2003 through 2007 from OMB in order to observe any long-range budgetary trends. We obtained additional information on staffing levels, resource distribution, and attrition rates from the OIG to identify staffing trends over this period. The attrition rates for NASA overall were verified by NASA management officials. We compared the total budgetary resources for fiscal year 2007 of the 30 IGs appointed by the President and confirmed by the Senate with the total budgetary resources of their respective agencies for the same year. We calculated a ratio for each OIG’s budget information as a percentage of its respective agency’s budget for comparative purposes.

We obtained reports from the external reviews of the NASA OIG completed during fiscal years 2003 through 2007 to observe any long-term trends in OIG quality for both audits and investigations. Specifically, we obtained the audit peer review report of audit quality dated January 8, 2004, completed by the Department of Justice OIG, and the March 13, 2007, peer review report completed by the General Services Administration OIG. We also obtained the July 8, 2005, peer review report of the NASA OIG’s investigative quality completed by the Department of Transportation OIG. In addition, we obtained the report of investigation completed by the Integrity Committee of PCIE and ECIE, which addressed allegations of the NASA IG’s misconduct and appearance of a lack of independence. This investigative report was released in late March 2007 to the House Committee on Science and Technology, which has oversight responsibilities for scientific research and development at NASA and other nondefense agencies. We discussed the disposition of the investigation with the Integrity Committee. We met with the NASA IG and senior OIG staff at the beginning of our review regarding our scope and methodology. We conducted a series of interviews coordinated through the IG’s Executive Officer which included the Deputy Inspector General, the Counsel to the IG, the Assistant IG for Audits, the Assistant IG for Investigations, and the Assistant IG for Management and Planning. At the completion of our work we met with the NASA IG and senior OIG staff to discuss our report findings, conclusions, and recommendations.

We conducted this performance audit from November 2007 through December 2008 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.

Background

NASA was established by the National Aeronautics and Space Act of 1958 to provide research into problems of flight within and outside Earth’s atmosphere and to ensure that the United States conducts activities in space devoted to peaceful purposes for the benefit of mankind. On January 14, 2004, the President announced a new vision for space exploration endorsed by the Congress in the NASA Authorization Act of 2005 which includes a journey of exploring the solar system, returning astronauts to the moon in the next decade, and venturing to Mars and beyond.

NASA comprises the Headquarters in Washington, D.C., nine field centers located throughout the country, and the Jet Propulsion Laboratory (JPL) operated for NASA by the California Institute of Technology. The NASA centers and JPL conduct NASA’s programs in exploration, discovery, and research and are led by four mission directorates at NASA Headquarters. (See table 1.)

The NASA OIG was established by the IG Act to provide an independent office within NASA to conduct and supervise audits and investigations; provide leadership and coordination and recommend policies to promote economy, efficiency, and effectiveness; and prevent and detect waste, fraud, abuse, and mismanagement. The IG Act provides protections to IGs’ organizational independence through key provisions that require specified IGs, including the NASA IG, to be appointed by the President with the advice and consent of the Senate. This appointment is required to be without regard to political affiliation and is to be based solely on an assessment of the candidate’s integrity and demonstrated ability. Such presidentially appointed IGs can only be removed from office by the President who must communicate the reasons for removal to both houses of the Congress. The current NASA IG was appointed by the President on April 16, 2002, after Senate confirmation. In addition to the IG, the Deputy IG, and the Executive Officer, the OIG is organized into four offices to provide oversight of NASA, as shown in table 2.

As a presidentially appointed IG, the NASA IG is a member of the PCIE, which together with the ECIE, operates a joint Integrity Committee that is empowered to investigate allegations of wrongdoing against IGs and certain members of their staff. The Inspector General Reform At of 2008, enacted on October 14, 2008, authorizes a new statutory Council of the Inspector General on Integrity and Efficiency which is to have its own Integrity Committee with powers similar to the PCIE and ECIE Integrity Committee and disestablishes the PCIE and ECIE effective on the earlier of the creation of the new Council, or 180 days after the passage of the Act. As of the date of this report the new Council has not yet been established, and the PCIE, ECIE, and their Integrity Committee continue operation.

Since 1990, we have periodically reported on government operations that we have designated as high risk because of their greater vulnerabilities to fraud, waste, abuse, and mismanagement as well as challenges to economy, efficiency, or effectiveness. In January 2007, we identified 27 high-risk areas across the federal government. These included high-risk areas applicable to NASA that had been reported in prior high-risk reports. We specifically identified NASA’s contract management as a high-risk area because of weaknesses in NASA’s integrated financial management system. For example, we have reported that NASA’s contractor cost reporting process does not provide cost information that program managers and cost estimators need to develop credible estimates and compare budgeted and actual cost with the work performed. Also, NASA has lacked a modern financial management system to provide accurate and reliable information on contract spending and placed little emphasis on product performance, cost controls, and program outcomes. On a governmentwide basis, we also identified protecting the federal government’s information systems and strategic human capital management across the executive branch as high-risk areas.

Beginning in 1997, the IGs were asked by congressional leaders to identify the 10 most serious management problems in their respective agencies. The request began a yearly process that continues in response to requirements established in the Reports Consolidation Act of 2000. This act calls for executive agencies, including NASA, to report their IGs’ lists of significant management challenges in their annual performance and accountability reports to the President, OMB, and the Congress. In fiscal years 2006 and 2007, the NASA OIG identified management challenges that included areas also identified in our high-risk reports and in the additional areas of financial management, space operations and exploration, and safety and security.

The OIG has identified NASA’s Integrated Enterprise Management Program as key to improving NASA’s ability to provide reliable information to management, support compliance with federal requirements, and strengthen the internal control program to address continuing problems, such as NASA’s internal control weaknesses over property, plant, and equipment and materials. Regarding space operations and exploration, the OIG has identified the transition from the space shuttle to the next generation of space vehicles as a management challenge as NASA balances schedule and resource constraints while maintaining the capabilities required to fly the space shuttle and simultaneously developing the next generation of space vehicles. In the area of safety and security the OIG has identified NASA’s need to manage risk, safety, and mission assurance controls to ensure reliable operations in the context of aggressive launch and mission schedules, funding limitations, and future uncertainties as management challenges.

NASA OIG Provides Limited Monetary Accomplishments from Audits

The IG Act requires independent IG offices to provide leadership on issues of economy and efficiency and to report on the effectiveness of programs, offices, and activities within their respective agencies. The NASA OIG’s Office of Audits provides financial and performance audits and other reviews to examine NASA’s operations. The NASA OIG has conducted audit activity in most high-risk areas identified by us and the management challenges identified by the OIG for fiscal years 2006 and 2007. In addition to audits, the NASA OIG reported closing 153 investigative cases during fiscal years 2006 and 2007 in response to allegations of fraud, waste, and abuse. In providing audit coverage, the NASA OIG has generally not focused on audits with recommendations for improving the economy and efficiency of NASA’s programs and operations with potential monetary savings. For example, during fiscal years 2006 and 2007 the OIG had one audit with recommendations with potential monetary savings.

During the 5-year period of fiscal years 2003 through 2007, 99 percent of NASA OIG’s dollar accomplishments came from investigations with 88 percent coming from two joint investigations with other OIGs. The remaining 1 percent of the monetary accomplishments reported by the NASA OIG during this 5-year period was from audits. We believe that improvements to the OIG’s strategic and annual audit planning could help to ensure that audits with an emphasis on NASA’s economy and efficiency through potential cost savings are included in its annual audit activities.

Audit Coverage of High Risk Areas and Management Challenges

Over fiscal years 2006 and 2007 the NASA OIG’s Office of Audits reported having completed 71 reports. Of these, the NASA OIG issued 13 audit reports in fiscal year 2006 and 20 audit reports in fiscal year 2007 on high- risk areas identified by us, and on NASA’s management challenges identified by the OIG. As shown in table 3, multiple NASA OIG audit reports were completed in most of the areas designated as high risk and as management challenges with the exception of asset management and human capital. Most of the OIG’s reports were in the areas of information technology security, contract management, and financial management. In contrast, the area of asset management had one report, and there were no audits of human capital issues even though these areas are both among GAO high-risk areas and NASA’s management challenges. (The OIG is currently auditing an issue of asset management and has plans to address an issue of NASA’s human capital.)

In addition, the NASA OIG’s audit reports also addressed areas not identified as high-risk areas or management challenges. These included quality control reviews of the audits of federal award recipients by nonfederal auditors to ensure that these audits are performed in compliance with government auditing standards. In addition, while the OIG’s audit policy is to complete audits using Government Auditing Standards and the IG Act requires that all NASA OIG audits be completed using these standards, 25, or approximately 35 percent, of the OIG’s 71 reports completed by the NASA OIG Office of Audits were completed without using these standards. Those reports included transmittal letters and information without a statement of compliance with auditing standards. Consequently, we did not consider these reports as part of the OIG’s audit coverage for high-risk areas and management challenges.

Investigative Coverage from Closed Cases

In addition to audits, the NASA OIG reported closing 153 investigative cases during fiscal years 2006 and 2007 in response to allegations of fraud, waste, and abuse. The OIG’s Office of Investigations investigates allegations of crime, cybercrime, fraud, waste, abuse, and misconduct that could affect NASA’s programs, projects, operations, and resources. The Office of Investigations refers its findings either to the Department of Justice for criminal prosecution and civil litigation or to NASA management for administrative action. In addition, the Office of Investigations identifies crime indicators and recommends measures for NASA management that are designed to reduce NASA’s vulnerability to criminal activity.

The OIG’s closed cases focused on NASA procurements or procurement activities and investigations of computer crimes. (See fig. 1.) In addition, there were investigations of conflicts of interest, large-scale thefts of government property, and false statements. Other investigations included safety, state and local crimes, travel card fraud, and drug abuse.

NASA OIG’s Monetary Accomplishments Are Largely from Investigations

Statutory OIGs subject to the IG Act, including the NASA OIG, are required to report the monetary value of certain findings and recommendations in their semiannual reports provided by the OIGs through their agency heads to the Congress. As required, the NASA OIG’s semiannual reports for fiscal years 2003 through 2007 included the number of audit reports issued and the questioned costs, unsupported costs, and funds to be put to better use identified by the OIG’s audits. As defined by the IG Act, questioned costs include either alleged violations of laws, regulations, contracts, grants, or agreements; costs not supported by adequate documentation; or the expenditure of funds for an intended purpose that was unnecessary or unreasonable. In addition, unsupported costs are defined as costs that do not have adequate documentation, and funds to be put to better use are inefficiencies identified by the OIG in the use of agency funds. These are often potential savings to the government.

The monetary accomplishments of the NASA OIG’s Office of Investigations are largely from closed investigations that result in recoveries of federal dollars which include fines and court ordered restitutions regarding individuals and contractors who have defrauded the government. As shown in table 4, almost all of the NASA OIG’s monetary accomplishments have come from investigations during fiscal years 2003 through 2007.

In fiscal year 2006 the OIG reported the results of a joint investigation with the Department of Defense and Department of Justice OIGs that had total recoveries of $615 million from a settlement with the Boeing Company regarding criminal and civil allegations. Also, in fiscal year 2003 the OIG reported another joint investigation with recoveries of about $111 million. The results of these two investigations alone account for 88 percent of the NASA OIG’s reported total monetary accomplishments of over $824 million from both audits and investigations over fiscal years 2003 through 2007. The total monetary accomplishments from OIG investigations for this period were $815 million, or 99 percent of all reported OIG monetary accomplishments. In contrast, over the same 5- year period the OIG’s potential audit savings contributed about $9 million or about 1 percent of the OIG’s total reported 5-year monetary accomplishments, with one audit in fiscal year 2007 responsible for $7 million of this amount and another audit in fiscal year 2004 responsible for about $1.5 million. Therefore, approximately 94 percent of all NASA OIG audit monetary accomplishments reported over the 5-year period came from the results of two audits. In addition, during the 1-1/2-year period from April 1, 2004, through September 30, 2005, the OIG reported no monetary accomplishments from its audit activity.

A comparison of the OIG’s fiscal year 2007 total budgetary resources of $34 million to its reported combined monetary accomplishments for that year results in a return of $0.36 for each budget dollar. When this same calculation is made based on the monetary accomplishments reported by all 30 OIGs with IGs appointed by the President and confirmed by the Senate, the overall average return on their total budgetary resources in fiscal year 2007 was $9.49 for every dollar spent by the government for their offices, or almost 26 times that of the NASA OIG for fiscal year 2007. In addition, when compared to these other OIGs, the year that the NASA OIG had its largest monetary accomplishment from audits it ranked 27 out of the 28 OIG offices reporting monetary accomplishments for fiscal year 2007. (See app. I.)

OIG Planning Lacks Economy and Efficiency Objectives

Of the 71 reports completed by the NASA OIG’s Office of Audits over fiscal years 2006 and 2007, 70 did not include recommendations that address the economy and efficiency of NASA’s programs and operations with potential cost savings. The one exception to this was an OIG audit that addressed an area of NASA’s economy and efficiency and resulted in about $7 million in reported potential monetary savings. The remaining 70 reports included recommendations for improving compliance with laws, regulations, and NASA policies and procedures; internal controls; and addressed specific areas of NASA’s operations. Nevertheless, these recommendations did not provide measurable improvements to the costs and resources used to achieve program results.

To illustrate, in fiscal year 2006 the NASA OIG audited the awards of subcontracts worth $4.6 billion for NASA’s space flight operations. The OIG found that the primary government contractor’s actions had complied with requirements for competition, quality assurance, and other procurement regulations, but also found examples of inadequate pricing determinations. The report recommended that the NASA contracting officer ensure compliance with contract agreements and procurement regulations but did not include recommendations to help ensure that this area will be effective or efficient in the future and did not identify any measurable cost savings to the government resulting from inadequate pricing. In addition, over the 2-year period we reviewed there were no OIG audits with recommendations to increase the economy and efficiency of NASA’s space flight operations with identified cost savings even though the IG had identified this program as one of NASA’s management challenges.

The OIG’s annual audit plan addresses NASA’s programs in high-risk areas and management challenges but does not have a strategy to deal with economy and efficiency associated with these NASA programs. The OIG’s strategic plan and annual audit plans do not identify goals and audit objectives related to evaluating NASA’s programs and operations through economy and efficiency audits. The OIG’s annual audit plans for fiscal years 2006 and 2007 provided details on the objectives of each individual audit; however, similar to the results that we found for the OIG’s audits, the objectives of the audits in these plans were not directed at audits that might result in measurable cost savings. A subsequent revision of the fiscal year 2007 audit plan also had no specific objectives for addressing NASA’s economy and efficiency.

In addition, through limited scope audits of compliance as well as investigations, the OIG addresses allegations received. To illustrate, OIG auditors and investigators are often assigned reviews of allegations or other assignments received from the OIG’s Senior Staff Referral Review Committee (SSRRC). The SSRRC was established by the NASA IG in the fall of 2005 to act as a clearinghouse for allegations and to review all work planned for OIG staff. The SSRRC is composed of the Assistant IG for Investigations, the Deputy Assistant IG for Audits, the OIG Counsel, and the IG’s Executive Officer. The SSRRC meets once a week to coordinate audit and investigative assignments, review fraud hotline information, review letters with allegations, and decide on where to assign the work. Generally, if the issues involve wrongdoing by NASA employees or contract fraud the OIG investigators will handle the cases. The OIG auditors are generally assigned limited scope procurement issues and issues that involve violations of NASA regulations. Issues involving standards of conduct or personnel matters will generally be referred to NASA management.

The NASA OIG’s limited monetary accomplishments from its audit activity can be attributed to (1) the lack of emphasis in its annual audit plan on goals and objectives for areas to improve economy and efficiency of NASA’s programs and operations and (2) the OIG’s focus on reviews of allegations and limited scope issues in a reactive approach to audit planning through assignments from the SSRRC, which can encroach on the ability to assign staff needed for other performance audits that can address potential dollar savings. We believe that the OIG can improve its audit plans by providing more specific attention to performance audits that address the economy and efficiency of NASA’s programs and operations, and that the OIG should consult with an objective, knowledgeable outside party with experience in these types of audits when completing these plans.

NASA OIG’s Budgets and Staffing

From fiscal year 2003 through fiscal year 2007, the NASA OIG’s total budgetary resources increased by approximately 17 percent, from approximately $29 million to $34 million in constant dollars, while the FTEs increased 4 percent, from 191 to 199. Of the 199 FTEs at the end of fiscal year 2007, 47 percent were in the Office of Audits, 37 percent in the Office of Investigations, 10 percent in the Office of Management and Planning, and 4 percent and 2 percent, respectively, for the Counsel to the IG and the IG’s immediate office. (See fig. 2.)

A comparison of NASA OIG’s total budgetary resources with NASA’s total budgetary resources shows that the OIG’s budget as a percentage of NASA’s budget has increased. In addition, NASA OIG’s staffing levels have increased while NASA’s staffing level has decreased. During fiscal years 2003 through 2007, NASA’s overall total budgetary resources increased by about 4 percent, compared with the OIG’s budgetary resources, which increased by about 17 percent. Therefore, the NASA OIG’s total budgetary resources as a percentage of NASA’s total budgetary resources increased from 0.15 percent to 0.17 percent. (See table 5.) During that same period, NASA’s FTEs decreased by approximately 2.7 percent, compared with the OIG’s FTE increase of about 4 percent.

When NASA OIG’s budget-to-agency-budget ratio is compared to this same ratio for other OIGs in which the IG is appointed by the President with Senate confirmation, the percentages vary depending on the size of the federal agencies, their missions, and the oversight issues emphasized by each OIG. Such a comparison for fiscal year 2007 budgets indicates that the ratio of the NASA OIG’s total budgetary resources to the total budgetary resources for NASA was within the range of these percentages for other OIGs and their agencies. Specifically, the comparison of these other OIGs’ budgets with those of their agencies ranged from 0.005 percent to 1.10 percent, and the NASA OIG’s percentage of NASA resources was at 0.17 percent, which ranks 11th of these 30 agencies. (See app. II.)

Regarding staffing levels, we obtained the attrition rates for the NASA OIG for fiscal years 2003 through 2007. Attrition is the percentage of personnel losses for all reasons during the fiscal year, and is measured by comparing personnel losses during the year to the total personnel strength on board at the beginning of the year. The staff attrition rate for NASA OIG has increased over the 5-year period from 12.4 percent in 2003 to 19.9 percent in 2007. Specifically, the NASA OIG had losses of 24 personnel in fiscal year 2003 compared to a loss of 40 personnel in fiscal year 2007, an increase of approximately 67 percent. (See table 6.) As a comparison, the overall attrition rate for NASA was about 5 percent in both fiscal years 2006 and 2007.

From fiscal years 2003 through 2007, the NASA OIG lost 157 staff. These losses affect the ability of the OIG to maintain experienced audit personnel. To illustrate this effect on the Office of Audits, we compared the audit staff on board in January 2003, shortly after the current IG took office, to the audit staff on board in March 2008. Of the 78 auditors on board in January 2003, 42 auditors have left the OIG audit directorate, including 9 of the 10 management-level auditors. Those leaving included all but one of the audit directors, the Assistant IG for Audits, and 2 deputy assistant IGs for audits. We did not review the reasons for the OIG’s employee turnover but believe that the OIG would benefit from a review by an objective third-party expert to address the reasons for the relatively high attrition rate as compared to the overall rate for NASA.

External Reviews of NASA OIG and the Integrity Committee’s Investigation

Over the 5-year period of fiscal years 2003 through 2007, NASA OIG had three routine external peer reviews—two reviews of its auditing practice and one review of its investigative practice. The NASA OIG also had a nonroutine external review performed by the Integrity Committee of PCIE and ECIE completed in fiscal year 2007 as a result of concerns about the management practices and conduct of NASA’s IG.

Routine Peer Reviews

Government Auditing Standards requires audit organizations that perform audits in accordance with the standards to have external peer reviews on a routine basis, at least once every 3 years. Those reviews are to be performed by reviewers independent of the audit organization. In the federal IG community, other federal IGs perform these peer reviews. The purpose of the peer review is to conclude whether the audit organization has a system of quality control that is suitably designed and implemented in order to provide reasonable assurance of conforming to applicable professional standards. In addition, for investigations, the Homeland Security Act of 2002 amended the IG Act to require that each OIG with investigative or law enforcement authority under the act have its investigative function reviewed periodically by another IG office.

For peer reviews of the audit practices, the external reviewers concluded that NASA OIG’s system of quality control for the audit function provided reasonable assurance of material compliance with professional auditing standards. The peer review of the NASA OIG’s investigative function concluded that the system of internal safeguards and management procedures for the Office of Investigations was in full compliance with the quality standards established by PCIE and ECIE and the Attorney General’s investigation guidelines.

Integrity Committee’s Investigation

The NASA OIG also had a nonroutine external review completed in fiscal year 2007 as a result of serious concerns that had been raised about the management practices and conduct of the IG. At the request of the Integrity Committee of PCIE and ECIE, the Department of Housing and Urban Development’s (HUD) OIG conducted an investigation into the allegations of possible misconduct by the NASA IG. The Integrity Committee initiated the investigation through a request letter to the HUD OIG dated January 6, 2006, and forwarded 18 complaints with 79 separate allegations regarding actions of the NASA IG to the HUD OIG investigators.

The HUD OIG submitted the results of its investigation for the Integrity Committee’s consideration on August 30, 2006. In a January 22, 2007, letter to the OMB Deputy Director for Management who serves as the Chair of both PCIE and ECIE, the Integrity Committee concluded that (1) the NASA IG had engaged in abuse of authority by creating an abusive work environment and (2) the NASA IG’s actions in two instances created an appearance of a lack of independence. In addition, the Integrity Committee stated that the IG had sought to develop and maintain a close relationship with the former NASA Administrator and that this effort contributed to an appearance that his independence was being compromised. However, the Integrity Committee offered no recommendations for corrective actions in their letter.

Executive Order 12993 entitled Administrative Allegations Against Inspectors General provides guidance to address investigations of alleged IG wrongdoing. Under this guidance the Integrity Committee is responsible for deciding whether the investigative report prepared at its request establishes any administrative misconduct within its oversight jurisdiction. If in the Integrity Committee’s opinion the report establishes such issues or otherwise requires action, the report is referred to the Chair of PCIE and ECIE with recommendations for appropriate action. The Integrity Committee advised us that they had not believed it necessary to include specific recommendations in this case due to the extent of the findings and the presumption that the Chair of PCIE and ECIE would take disciplinary action commensurate with these findings.

In accordance with the Executive Order, the Chair of PCIE and ECIE advised the NASA Administrator to determine the appropriate actions to address the investigation’s conclusions. The NASA Administrator proposed to the Chair that the NASA IG attend the Federal Executive Institute to develop a leadership and management training plan, attend at least one management/leadership program annually, obtain the services of an executive coach, and meet with the Deputy NASA Administrator on a bimonthly basis to discuss implementation of the leadership and management plan as well as the NASA IG’s professional growth. The NASA Administrator also stated that the proposed actions would resolve any concerns he had after reviewing the Integrity Committee’s report of investigation.

Reacting to the NASA Administrator’s response, the Integrity Committee expressed its view in a March 20, 2007 letter to the Chair of PCIE and ECIE that the proposed actions were inadequate to address the investigation’s conclusions. Specifically, the Integrity Committee stated that “ll members of the committee believed the proposed course of action recommended by the Administrator of NASA was inadequate to address the conduct of . All members of the committee further believed that disciplinary action up to and including removal could be appropriate.”

In a follow-up letter dated March 29, 2007, the NASA Administrator reaffirmed his belief that his proposed actions were adequate. With respect to the appearance of a lack of impartiality he stated that he and the IG had a professional arms-length relationship and that he did not believe that additional corrective measures were necessary. In a letter also dated March 29, 2007, the Chair of PCIE and ECIE asked the Integrity Committee for confirmation on several matters including that its members (1) had not concluded that the IG had broken any laws or acted illegally; (2) had no uniform view on what actions would be appropriate to address its concerns regarding the IG; (3) that it was not now recommending removal of the IG as a disciplinary action; and (4) that the January 22, 2007, letter to the PCIE and ECIE Chair had not contained recommendations on this matter. That same day, the Chair of the Integrity Committee confirmed that the PCIE and ECIE Chair’s understanding accurately reflected the intent of the Integrity Committee. In accordance with the discretion afforded in the Executive Order and the related implementing guidance, on April 18, 2007, the Chair of PCIE and ECIE advised the Chair of the Integrity Committee to consider the actions in the NASA Administrator’s March 29, 2007, letter as constituting the final disposition of the investigation. In line with the Executive Order, the Integrity Committee informed the NASA IG that their review was complete and that the case is considered closed.

Notwithstanding the formal process outlined by the Executive Order, the Integrity Committee confirmed in a written response to our questions, its continued concern that the actions taken regarding the appearance of a lack of independence were insufficient. In the same response, the Integrity Committee stated that the views expressed in its March 20, 2007, letter remain unchanged and that the NASA IG’s lack of an appearance of independence was not resolved by the actions proposed by the NASA Administrator.

In late March 2007, both the Chairman of the Subcommittee on Space, Aeronautics, and Related Matters, Senate Committee on Commerce, Science and Transportation, and the Chairman of the Subcommittee on Investigations and Oversight, House Committee on Science and Technology, received a copy of the Integrity Committee’s report of investigation. In their letter of April 2, 2007, to the President of the United States, the Chairmen requested that the President remove the NASA IG from office based on the results of the investigation. The letter states that the committees and the public are not receiving useful assistance from the NASA IG, one of their primary tools for oversight, and that the NASA IG can no longer be effective in his office and should be replaced immediately.

In prepared testimony on June 7, 2007, before a joint hearing between the Subcommittee on Space, Aeronautics, and Related Sciences, Senate Committee on Commerce, Science and Transportation, and the Subcommittee on Investigations and Oversight, House Committee on Science and Technology, the NASA IG disputed the findings of the Integrity Committee investigation by calling the allegations unjustified and the investigation flawed. The IG pointed out his views regarding possible mistakes by the investigators, and provided arguments to explain his actions regarding many of the allegations investigated. In this joint hearing members of both the House and the Senate called for the IG to resign.

Independence is the cornerstone of professional auditing. The IG Act requires that IGs comply with Government Auditing Standards, which specifies that auditors and audit organizations be free from personal, external, and organizational impairments and avoid the appearance of such impairments to independence. Auditors and audit organizations must maintain independence so that their opinions, findings, conclusions, judgments, and recommendations will be impartial and, just as important, viewed as impartial by objective third parties with knowledge of the relevant information.

Quality Standards for Federal Offices of Inspector General issued by PCIE and ECIE include requirements for IGs to be objective with an obligation to be impartial, intellectually honest, and free of conflicts of interest. Independence is considered by these standards to be a critical element of objectivity, and without independence both in fact and in appearance, objectivity is impaired.

As noted above, the absence of actions to address the perceived lack of independence can perpetuate concerns regarding the IG’s objectivity in dealing with IG responsibilities related to audits and investigations. Given the importance of IG independence both in fact and appearance and the lack of any corrective actions to fully resolve this matter, we believe that additional follow up and recommendations by the Integrity Committee are warranted related to its investigative finding dealing with the NASA IG’s appearance of a lack of independence.

Conclusions

The fundamental mission of the NASA OIG includes providing independent and objective oversight of NASA to identify areas for improved economy, efficiency, and effectiveness, and to detect and prevent fraud, waste, and abuse. While the OIG has conducted audits in areas of high risk and management challenges and provided the results of investigations, the OIG’s monetary accomplishments from its audit activities have been limited by a lack of audits to evaluate the economy and efficiency of NASA’s programs and operations that result in recommendations for measurable cost savings.

The NASA OIG’s monetary accomplishments and recommendations in the areas of economy and efficiency significantly lag behind the accomplishments and return on investment of the federal OIG community as a whole. A reevaluation of audit planning and methods within NASA’s OIG is needed to include audits that hold NASA accountable for its stewardship of public funds through independent audits and investigations that include recommendations for economy and efficiency. Due to the importance of this issue, we believe that a reexamination of the audit strategy and planning approach within the OIG can best be accomplished with the assistance of an objective outside party with experience in these types of audits.

The OIG’s budgets and staffing levels have not been adversely affected when compared to both the NASA budgets and staffing and to the budgets of other OIGs. However, the effectiveness of the OIG can be negatively affected by an environment of high staff turnover, which has especially affected audit management staff. The reasons for the relatively high rate and recent increases in employee turnover should be examined by an objective expert so that any underlying issues can be addressed and the NASA OIG can effectively meet its mission of providing objective and reliable information.

The independence of the IG is central to the effectiveness of the IG’s office. The Integrity Committee, which has the authority to make recommendations regarding the outcomes of its investigations, considers the actions taken by the NASA Administrator to be insufficient, that the NASA IG’s lack of an appearance of independence is not resolved, and that the views expressed in its letter of March 20, 2007, are unchanged. Because independence is fundamental to effective oversight and professional auditing, we believe that additional follow up actions are warranted related to the Integrity Committee’s findings dealing with the appearance of a lack of independence on the part of NASA’s IG.

Recommendations for Executive Action

In order to strengthen audit oversight and management of the NASA OIG, we recommend that the NASA IG include in strategic and annual planning, performance audits that address NASA’s economy and efficiency with potential monetary savings and that the OIG work closely with an objective outside party to obtain external review and consultation in the strategic and annual planning processes, and identify the causes of high employee turnover with the assistance of an objective expert, and determine actions needed as appropriate.

In order to resolve the matter regarding the appearance of independence of the NASA IG, we recommend that the Integrity Committee follow up regarding its investigative finding regarding the NASA IG’s appearance of a lack of independence and make any recommendations needed.

Agency Comments and Our Evaluation

In written comments on a draft of our report, the NASA IG expressed widespread disagreement with our conclusions and recommendations and questioned the depth and scope of our evaluation. We disagree with the IG and in the following paragraphs reaffirm our conclusions and recommendations. We augmented our discussions of the scope and methodology of our work and expanded the evidentiary matter in the body of this report for issues related to the Integrity Committee’s investigation and the monetary accomplishments reported by the NASA OIG over fiscal years 2003 through 2007. We rebut what we consider the most important aspects of his disagreement in this section of the report. In addition, please refer to the appendix section of this report following our reprint of the IG’s comments (see app. IV) in which we rebut or clarify other less material matters.

The Integrity Committee limited its comments to matters in our draft report concerning the committee’s investigation of allegations against the NASA IG. The Integrity Committee restates its determination that actions taken by NASA regarding the appearance of a lack of independence findings were insufficient, states that the Integrity Committee has no power to compel any particular action, and suggests that we should present our recommendation to the Chair of PCIE and ECIE. However, we see nothing in the guidance in Executive Order 12993 to prohibit the Integrity Committee from making recommendations to the Chair of PCIE and ECIE regarding its investigative finding which has not been fully resolved. Therefore, we reaffirm our recommendation to the Integrity Committee. (See app. III.)

Integrity Committee Investigation

In the written comments, the NASA IG stated that the Integrity Committee investigation of allegations against him was a closed matter. He emphasized that the Integrity Committee’s views regarding the independence matter were from a historical perspective and that there was nothing to suggest that the appearance of a lack of independence was an ongoing issue. Further, he stated that the Integrity Committee had not included any recommendations in its report and that therefore, nothing is unresolved.

The IG commented that we had ignored the documented final disposition of this matter in the PCIE and ECIE Chair’s April 18, 2007 letter, and that we had selectively included or excluded information to suggest that a closed matter is still open. We fully understand that the formal investigation has run its course, and we have added discussion to the body of the report to reflect the documented interactions among the Chairman of PCIE and ECIE, the Integrity Committee, the NASA Administrator, and the NASA IG. Our report acknowledges that the Integrity Committee did not make any specific recommendations to address either the investigative findings of an abusive work environment or the perception of a lack of independence. However, despite the PCIE and ECIE Chair’s acceptance of the actions proposed by the NASA Administrator and closure of the case, the Integrity Committee stated in response to our questions, that the actions were not adequate to resolve the investigative conclusion that the IG lacked an appearance of independence.

As discussed in our report, the Integrity Committee told us that it did not include recommendations for corrective actions in its January 22, 2007, letter to the Chair of PCIE and ECIE regarding the results of its investigation because of the extent of the findings and a presumption that the Chair of PCIE and ECIE would take disciplinary action commensurate with these findings. These concerns are captured in the Integrity Committee’s March 20, 2007, letter to the Chair of PCIE and ECIE, which stated that “ll members of the committee further believed that disciplinary action up to and including removal, could be appropriate.”

Given the Integrity Committee’s documented dissatisfaction with the corrective actions and that no actions we are aware of address the independence issue, we disagree that this matter has been fully resolved. Objective third parties with knowledge of the relevant information including that of the Integrity Committee’s investigation; the lack of actions to attempt to change perceptions; and the Integrity Committee’s continuing concern, expressed in a written response to our questions, that the actions taken were inadequate; could conclude that the appearance of independence issues have not been resolved. As a result, the decisions and actions of the IG may not be fully accepted as a basis for policy or other changes. This perspective is illustrated by the stances taken by the leadership of NASA’s oversight committees. As noted in the body of the report, in their joint letter dated April 2, 2007, the Chairman of the Subcommittee on Space, Aeronautics, and Related Matters, Senate Committee on Commerce, Science and Transportation, and the Chairman of the Subcommittee on Investigations and Oversight, House Committee on Science and Technology, requested that the President of the United States remove the NASA IG from office based on the results of the Integrity Committee’s investigation. The letter states that the oversight committees and the public are not receiving useful information from the NASA IG, one of their primary tools for oversight, and that the IG can no longer be effective in his office and should be replaced.

The Integrity Committee commented that it could not concur with our recommendation because it lacked the authority to compel any particular corrective action. However, our recommendation to the Integrity Committee does not call for it to compel the corrective action, but rather to exercise its authority as allowed in Executive Order 12993 and acknowledge the concerns of its own members and make appropriate recommendations to the Chair of PCIE and ECIE for corrective action regarding its unresolved investigative finding that the NASA IG lacked an appearance of independence. The Integrity Committee confirmed its opinion that the actions taken were not sufficient and restated its opinion in the March 20, 2007 letter to the Chair of PCIE and ECIE that it supported a range of actions to be considered, up to and including removal of the NASA IG from office. Because the Integrity Committee has the authority to make recommendations within the guidance of the Executive Order, we reaffirm our report recommendation.

Interviews with OIG Management

Contrary to the NASA IG’s statement that we failed to consult with NASA OIG’s senior leadership on the important issues in this report, we met with the NASA IG and the senior OIG staff at the beginning of our review regarding our scope and methodology. We also coordinated a series of interviews through the IG’s Executive Officer with the OIG senior management officials responsible for all areas addressed in our report. In all instances, we identified the purpose of our planned contacts, and the IG’s Executive Officer scheduled meetings with those NASA OIG management staff who were best suited to address each matter. These included the Deputy Inspector General, the Counsel to the IG, the Assistant IG for Audits, the Assistant IG for Investigations, and the Assistant IG for Management and Planning. At the completion of our work we met with the NASA IG and the senior OIG staff to discuss our report findings, conclusions, and recommendations. All meetings were coordinated through the IG’s office, and we were available for any input the IG may have wished to provide.

Audit Coverage

The NASA IG disagreed with our recommendation to revise approaches taken in audits to include in strategic and annual planning, performance audits that address NASA’s program results, effectiveness, and outcomes as well as audits of economy and efficiency by working closely with an objective outside party. Specifically, the NASA IG did not agree with our conclusion that the OIG’s effectiveness has been hindered by reliance on audits that do not include evaluating NASA’s program economy, efficiency, and effectiveness, and result in limited monetary accomplishments. The IG Act requires that IGs address issues of economy and efficiency and provide independent audits and investigations. We have removed our concern regarding effectiveness because of the subjective nature of evaluating the OIG’s efforts in this regard. However, as stated in our report, the NASA OIG had reported only one audit with recommendations for economy and efficiency and potential cost savings to the agency over fiscal years 2006 and 2007. Therefore, we have narrowed the focus of our report and our recommendation in order to address our major concern that the OIG has an insufficient number of economy and efficiency audits that result in reported monetary savings.

In addition, the IG does not believe that our conclusions regarding audit coverage are sufficiently balanced to recognize audits that are focused on areas other than economy and efficiency. Contrary to this statement, our report provides information stating that the OIG’s audits have addressed areas designated as high-risk and management challenges. We also state that while the OIG’s audits do not adequately address the economy and efficiency of NASA’s programs and operations, they do include recommendations for improving compliance with laws, regulations, and NASA policies and procedures; internal controls; and other specific areas of NASA’s operations.

The IG provided a listing of issued audit products that he said have addressed economy, efficiency, and effectiveness issues and specifically highlighted nine examples. While the report recommendations may affect the economy and efficiency of NASA’s operations, none of these reports highlighted by the IG have specific recommendations to improve NASA’s economy and efficiency with potential cost savings. In addition, the reports’ recommendations address compliance with laws, regulations, policies and procedures, internal controls, and other areas. In addition, two of the highlighted reports were not audits and made no reference to professional auditing standards. To illustrate our concerns regarding the lack of OIG audit reports with recommendations for improving NASA’s economy and efficiency, our report provides an example of an OIG audit regarding a NASA contractor’s inadequate pricing determinations. The audit recommends that the contracting officer ensure compliance with contract agreements. However, even though the OIG had the opportunity, the report did not identify any measurable cost saving to the government resulting from the inadequate pricing and made no recommendations to help ensure that pricing determinations will be accurate in the future.

Monetary Accomplishments

The NASA IG states the difference between actual monetary recoveries from investigations and potential monetary accomplishments from audits. The IG comments that the results of audits are more speculative and must rely on the implementation of management to be realized. This statement acknowledges the different purposes of audits and investigations: audits can recommend improvements to future operations, and investigations tend to focus on the identification of fraudulent and illegal activities that have occurred.

Audit Planning

Our review found that the OIG’s strategic and annual audit plans did not have goals and objectives that specifically address the economy and efficiency of NASA’s programs and operations. We had recommended that the NASA IG include in strategic and annual planning, performance audits that address NASA’s economy and efficiency with potential monetary savings and that the OIG work closely with an objective outside party, such as the PCIE, to obtain external review and consultation in the strategic and annual planning processes. The NASA IG stated his intent to benchmark with the PCIE community to provide assurance that audits address these areas. While this is a positive statement we continue to make our recommendation that the IG work closely with an objective outside party during the strategic and annual planning processes. However we no longer specify that the IG work with the PCIE Audit Committee on this issue.

Staff Attrition

The NASA IG also disagrees with our recommendation to identify the causes of high employee turnover with the assistance of an objective expert and determine actions needed as appropriate. The IG states that we did not discuss employee turnover with OIG leadership. To the contrary, our discussions with OIG management, both past and present, provided the information on turnover in our report and alerted us to the problem of the OIG’s relatively high staff attrition rate. The IG also provides attrition rates of other agency OIGs that are all lower than that of the NASA OIG and supports our conclusion that the NASA OIG has a comparably high staff attrition rate even when compared to other OIGs. The IG also states that a number of steps have been taken to address the continuing significant turnover rates. We are encouraged that the IG is already taking steps in this area, however, because of the OIG’s relatively high rate of staff attrition we are recommending that the NASA IG use the assistance of an objective expert to identify the causes of employee turnover.

As agreed with your offices, unless you publicly announce the contents of this report earlier, we will not distribute it until 30 days from its date. At that time we will send copies of the report to the NASA Administrator; the NASA IG; the Chairman of the Integrity Committee; the OMB Deputy Director for Management; the Chairman and Ranking Member of the Senate Committee on Commerce, Science and Transportation; interested congressional committees; and other parties. This report will also be available at no charge on the GAO Web site at http://www.gao.gov.

If you have any questions or would like to discuss this report, please contact me at (202) 512-9471 or franzelj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Major contributors to this report are listed in appendix V.

Appendix I: Monetary Accomplishments Reported in OIGs’ Semiannual Reports to the Congress for Fiscal Year 2007

Department of Housing and Urban Development

Appendix II: Comparison of OIGs’ Budgetary Resources with Total Budgetary Resources of Their Agencies for Fiscal Year 2007

Amounts for TVA’s IG are from PCIE’s fiscal year 2007 profile data.

Appendix III: Comments from the Integrity Committee

The following is GAO’s comment on the Integrity Committee’s letter dated October 10, 2008.

Comment 1.

As the Integrity Committee stated, the information related to its activities in this report was obtained in connection with our separate ongoing audit of the activities and operations of the Integrity Committee.

Appendix IV: Comments from the Inspector General, National Aeronautics and Space Administration

The following are GAO’s comments on the NASA Inspector General’s letter dated October 14, 2008.

GAO Comments

Comment 1.

The meetings referred to by the IG do not result in an endorsement of the OIG’s work plans but rather are discussions between the NASA OIG and GAO for purposes of coordination and cooperation. Our review of the NASA OIG’s strategic and annual plans on this audit was in response to our findings regarding the need for additional oversight of NASA’s economy and efficiency and measurable potential cost savings from OIG audits. We are encouraged by the NASA IG’s intent to benchmark with the PCIE community to provide assurance that audits addressing program effectiveness, economy, and efficiency fulfill the OIG mission. Therefore, we have modified our report recommendation to have the OIG work closely with an objective outside party to include audits of NASA’s economy and efficiency with potential monetary savings in strategic and annual plans.

Comment 2.

The IG’s comments do not cite any specific recommendations that are targeted toward economy and efficiency with potential cost savings. In addition, we reviewed all the recommendations in the OIG’s audit products issued during fiscal years 2006 and 2007 and found only one report with these types of recommendations. By providing the titles of OIG reports, the IG provides little if any additional information on whether economy and efficiency issues were addressed by the outcomes of the reports. Therefore, our report continues to focus on the OIG’s lack of economy and efficiency audit results with measurable cost savings as well as the lack of a strategy for dealing with these types of objectives in the annual and strategic audit plans.

Comment 3.

The OIG’s audit of NASA’s plan for Space Shuttle transition concluded that NASA’s transition plan did not comprehensively address all elements critical for a successful transition and recommended that the planning be enhanced and that the transition be recognized as an agency management challenge. Neither this report nor any other OIG report issued during fiscal years 2006 and 2007 had any specific recommendations to improve NASA’s economy and efficiency with measurable cost savings related to this important and costly transition program.

Comment 4.

We did not include the percent of OIG recommendations implemented as part of our review. We evaluated the substance of the recommendations to determine whether they identified opportunities for improvements to NASA’s economy and efficiency with measurable potential cost savings.

Comment 5.

This investigation was a coordinated effort by several offices including those from NASA, components of the Department of Defense, and academia, but was not performed by the NASA OIG. Our scope was to review the results of audits and investigations by the OIG and thus,we did not include it in our review.

The IG also provided the title of an investigative report regarding allegations that NASA had suppressed climate change information as an example of an accomplishment. This information does not deal with the economy and efficiency of NASA’s programs and operations and monetary accomplishments which is a focus of our findings and recommendations.

Comment 6.

We did not consider DCAA audits to be related to the NASA OIG’s accomplishments since they are routinely provided as a service to NASA’s contracting officers. The NASA IG points out that in our comparison of monetary accomplishments and the return on investment by 30 IG offices where the IGs are appointed by the President and confirmed by the Senate, our presentation of monetary accomplishments for the Department of Agriculture OIG and the Department of Homeland Security OIG includes the accomplishments of DCAA. Accordingly, we have removed the DCAA amounts from the accomplishments reported for these OIGs and adjusted the total monetary accomplishments for all 30 OIGs for fiscal year 2007 from a $9.52 dollar return on all their budgets to a $9.49 return. This did not affect the status of the NASA OIG’s monetary accomplishments, which continues to be a $0.36 dollar return on the OIG’s budgetary resources and continues to rank 27th out of 28 OIGs reporting such accomplishments for fiscal year 2007.

Comment 7.

We selected fiscal year 2007 for comparison because at the time of our review it was the most recent full year with comparative data among the OIGs, and it was the year with the largest reported dollar savings resulting from NASA OIG’s audits. However, in response to the NASA IG’s suggestion that we provide data on accomplishments over a 5-year period, we added table 4 to our report. It shows the NASA OIG’s monetary accomplishments from fiscal years 2003 through 2007 and further supports our conclusion that the OIG provides limited monetary accomplishments from audits.

Comment 8.

We agree that the NASA IG should be committed to the full range of activities and objectives stated in the IG Act. Those objectives and activities include audits that result in recommendations to improve the economy and efficiency of NASA’s programs and operations with measurable cost savings, as well as receiving whistleblower complaints.

Comment 9.

Our review compared the NASA OIG’s total budgetary resources to NASA’s total budgetary resources for fiscal years 2003 through 2007 to determine whether the OIG’s budgets were increasing or decreasing relative to NASA’s overall budgets. As stated in our report, the OIG’s budget as a percent of NASA’s budget increased from 0.15 to 0.17 percent during this period. The NASA IG states that $3.5 million in funding was shifted from NASA to the OIG to pay for financial audits but cites this as having no actual impact on funds available for OIG operations. We disagree that these funds do not contribute to the resources available for OIG operations. The NASA IG is subject to the Chief Financial Officers Act of 1990 which specifies that the IG is responsible for the financial statement audits of the agency. The increase of $3.5 million provides resources in the OIG’s budget for these mandated audits. As stated in our report, over the 5-year period we reviewed the OIG’s budgets kept pace with or were slightly better than NASA’s budgets as a whole. In addition, when compared to other OIGs for fiscal year 2007, the NASA OIG ranked 11th out of 30 agencies in the ratio of the OIGs’ budgets to their agencies’ budgets.

Appendix V: GAO Contact and Staff Acknowledgments

Acknowledgments

In addition to the contact named above, Jackson Hufnagle, Assistant Director; Francis Dymond; Jacquelyn Hamilton; Jason Kirwan; and Clarence Whitt made key contributions to this report.