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NASA Advisory Council Meeting. Report of Audit and Finance Committee October 16, 2008 Members: NASA: Mr. Robert Hanisee, Chairman Mr. Ron Spoehel Hon. Ted McPherson Mr. Terry Bowie Hon. Michael Montelongo Mr. Howard Stanislawski. Audit & Finance Committee

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nasa advisory council meeting

NASA Advisory Council Meeting

Report of Audit and Finance Committee

October 16, 2008

Members:NASA:

Mr. Robert Hanisee, Chairman Mr. Ron Spoehel

Hon. Ted McPherson Mr. Terry Bowie

Hon. Michael Montelongo

Mr. Howard Stanislawski

slide2
Audit & Finance Committee

Kennedy Space Center Meeting

Bldg: OSB II, Room: 4130

October 14 & 15, 2008

FINAL Agenda

October 14, 2008

Presentation # 1 Opening Remarks Terry Bowie

Presentation # 2 Presentation from KSC CFO Susan Kroskey

Presentation # 3 FY08 Financial Statement Audit Update Frank Petersen

Break

Presentation # 4 Unfunded Environmental Liability

- Audit Status Olga Dominquez

Presentation # 5 GAO High Risk List – Status of

Corrective Action Plan Rita Svarcas

Presentation # 6 NSSC Transition Recap/Benchmarking Joyce Short

Administrative Session A&F Members

October 15, 2008

Presentation # 1 Update on Phasing Plan/Dashboard John Scholtz

Presentation # 2 CMP Results & Trends for FY08 Leslie Hyland

Break

Presentation # 3 Shuttle Transition – Property Disposition

And Financial Accounting Leslie Hyland

Pick-Up Lunch

Presentation # 4 Earned Value Management Dorothy Tiffany

Administrative Session A&F Members

kennedy space center ksc
Kennedy Space Center (KSC)

Briefing to NASA Advisory Council

(Audit & Finance Committee)

Susan Kroskey

Chief Financial Officer

October 14, 2008

kennedy space center cont
Kennedy Space Center (Cont.)

Challenge: Shuttle Wind-down

Constellation Ramp-up

Employment

KSC CFO Office

Civil Servants 2,117 119

Contractor/Tenants 13,000 28

~15,000

kennedy space center cont5
Kennedy Space Center (Cont.)

2009 Budget - $1.5B

CFO Office – Strategic Plan and Initiative

Center CFO Vision – “Making $ Make Sense”

Center CFO Goal Categories Initiatives

Financial 6

Systems & Processes 6

Customer 3

Team & Culture 3

Audit Status – E&Y reported no findings in PP&E audit of internal control in FY2007 or 2008

slide6

KSC FY 2009 President’s Budget by Major Program*

$ Millions

Agency FY 2009 President’s Budget per N2 (Feb 08)

*Includes Space Program Operation Contract (SPOC)

unfunded environmental liabilities
Unfunded Environmental Liabilities
  • Future cost of completing environmental closure of known contaminated sites and facilities
  • FY08 Year-End Unfunded Environmental Liability - $943M
    • 134 projects at 15 NASA Sites
    • Estimates range from $12K to $168M
    • White Sands Test Facility cleanup (39% of total) will take over 50 years to complete (two other cleanup estimates to take more than 100 years)
unfunded environmental liabilities cont
Unfunded Environmental Liabilities (cont.)
  • E&Y Finding – Management review of estimate not functioning adequately to identify inconsistencies and mistakes – No audit trail
  • Integrated Data Evaluation and Analysis Library (IDEAL)
    • Lacks Software Assurance
    • Lacks IV&V
    • Lacks formal controls and audit trail
  • OCFO Action
    • Completed Software Assurance self assessment – 7/08
    • Configuration management plan being prepared -

(Complete 12/08)

    • Conducting Parametric model calibration
    • IDEAL mod to include controls White Sands Test Facility cleanup (39% of total) will take over 50 years to complete (two other cleanup estimates to take more than 100 years)
unfunded environmental liabilities cont9
Unfunded Environmental Liabilities (cont.)

Future Issue – Asbestos

  • After 9/00/09 NASA must survey and record liability associated with asbestos in NASA property
  • Center surveys are incomplete – not required by environmental safety laws and regs
  • Agency has proposed using statistical estimating techniques
  • E&Y wants surveys which would cost $5M to $10M
  • NASA spends $45M per year on clean-up
nasa and government accountability office gao high risk list
NASA AND GOVERNMENT ACCOUNTABILITY OFFICE (GAO) HIGH RISK LIST

Issue: NASA has been designated as a High Risk agency since 1990 due to concerns relating to:

  • Post award contract administration
  • Financial management
  • Program/project management
  • Cost estimating and analysis

Solution:Corrective action plan now prepared with input from Office of Management and Budget (OMB) with clear definition of results required.

Results: For major development projects with a life-cycle cost of $250 million or more:

  • Cost within 110% of baseline
  • Scheduled slippage within 110% of baseline
  • Mission Success by meeting requirements by 90% of its portfolio of major deployment missions
nasa unobligated funds carryover
NASA UNOBLIGATED FUNDS CARRYOVER

Issue: Each year during Fiscal Years 2003 through 2007, NASA has had $1.5 billion to $2.1 billion in unobligated funds carryover at the end of the year. (“uninvested money”)

Solution: In April 2008 NASA’s Chief Financial Officer, Ron Spoehel implemented a “Phasing Planning and Reporting Process” to enable NASA’s resource managers to invest NASA’s appropriated funds more effectively, with a specific goal of cutting year-end unobligated funds in half to $1 billion.

Result: For Fiscal Year 2008 just completed, NASA’s Unobligated Funds Carryover was reduced from $2.1 billion in 2007 to $535 million in 2008.

nasa unobligated funds carryover continued
NASA UNOBLIGATED FUNDS CARRYOVER (CONTINUED)

Business Benefits

  • Enhanced the pace of investment by providing insight as to the timing of the deployment of financial resources, thereby better aligning and balancing budget formulation and execution.
  • Improved effectiveness and financial flexibility of investments, for example:
    • Facilitated the reprogramming of $31 million cost of facility, two-year funds into another current purpose in NASA’s Third Operations Plan, approved by Congressional Appropriations Committee during FY 2008.
  • Instilled routine management reporting (“dashboards”) by cost element, centers, projects, programs, themes, and missions for NASA’s “investment portfolio.”
cmp results and trends for fy08
CMP Results and Trends for FY08
  • Refresher

- Continuous Monitoring Program (CMP) is NASA’s Internal Control

platform

- Implemented February 2008

- Designed to assess, coordinate and address

- Internal Controls for accounting, financial management, and

stewardship

- Compliance with Generally Accepted Accounting Principles

(GAAP)

  • Status

- Monthly tracking of center by center transaction performance for

accounting and control activities (e.g. fund balance,

A/R, A/P, inventory, status of funds, etc.)

- Exceptions or deficiencies are improving

- 17% total exception rate in May 2008

- 9% total exception rate in Sept 2008

cmp results and trends for fy0815
CMP Results and Trends for FY08

Status (Cont)

- Specific areas of progress

- A/R

- Other Liabilities

- Resources

- Purchase Order/Obligations

- Review of Blank funds

- Areas still needing attention

- Prepaid Expenses

- Financial Analysis

cmp results and trends for fy0816
CMP Results and Trends for FY08

Status (Cont)

- Key Areas of Concern

- Status of Funds (budgetary and proprietary

synchronization)

- Intra-center transactions resulting in high suspense account

balances

  • Next Steps
      • Continue “clean-up”
      • Reduce Exception Rate
      • Streamline Process
shuttle transition
Shuttle Transition

Property Disposition and Financial Accounting

  • One third of Shuttle Property identified will be applied to Constellation

Two Types of Sales

Property Sales (Not Land) - Proceeds go to Treasury

Exchange Sale - NASA keeps proceeds and applies to Constellation after 10% fee to GSA

  • Hundreds of thousands of items – No reliable estimate of salvage value

Accounting Treatment

  • NO gain on sale
  • Treated as a refund (reduction of cost) on Center identified contract;
  • Money received will have no effect on Constellation budget
earned value management
Earned Value Management
  • A corporate management imperative

- Facilitates management control of projects

- Requires managing performance against plan

  • An OMB (and NASA) imperative

- OMB Circular A-11 requires EVM consistent with ANSI/EIA-748 for in-house and contractor work

- NPR 7120.5D, NASA Space Flight Program and Project Management Requirements

  • Strategy/Status

- “Bottoms Up” approach to “sell” an enterprise solution and affect culture change

- Build EVM competency through EVM training courses (665 in FY08; 1080 in

FY09)

- Develop an agency-wide EVM system/solution

- Build for Constellation

- Secure DCMA validation

- Offer it to Mission/Centers for single solution adoption

fy2008 financial statement audit update
FY2008 Financial Statement Audit Update

Audit Milestones/Schedule

FY07 Lessons Learned w/OIG & E&Y Jan. 29, 2008

FY08 Agency-wide Kick-Off Meeting Mar. 13, 2008

FY08 Walkthrough (Center)

LaRC Mar. 31 – Apr. 4, 2008

GSFC Apr. 14 – 25, 2008

HQ Walkthrough Meetings Mar. 10 – Apr. 11, 2008

FY08 Internal Control Testing

at Centers Jun. 2, 2008 – Jul. 18, 2008

  • General Audit
  • Information Technology
  • Environmental
  • Property, Plant and Equipment

FY08 Substantive Testing – New Milestone Aug – Sept 2008

FY08 Field Work Completed Oct. 2008

FY08 Opinion Rendered - Agency Financial

Report Completed Nov. 14, 2008

fy2008 financial statement audit update20
FY2008 Financial Statement Audit Update
  • FY 2008 Financial Statements due October 17th.
  • Testing
    • Internal Control Testing (June – August)
    • Interim Testing of June 30th balances

(July – October)

    • Substantive Testing of September 30 Balances (October – Early November)
  • Results to Date:
    • 32 Findings and Recommendations (NFR’s) for example:
      • Insufficient completion, review, and resolution of control activities and exceptions
      • Untimely resolution of transactions in budget clearing accounts (inter-agency eliminations)
      • Property
      • Environmental Liabilities
      • Delayed close-out of grants, contracts, purchase orders, etc.
      • Material weaknesses and reportable conditions
old business update
Old Business – Update

PP&E – No change in E&Y position

Terry Bowie will meet with OIG, FASAB and E&Y to seek resolution by treating ISS as R&D (Approx $13.2B)

IAM tool was implemented in May

old business update23
Old Business – Update

Financial Staff Personnel

Authorized FTE – 103 - No Change

Current FTE 93

New hires 3

FTE’s with New Hires 96

Shortfall 7

(spread over several functions)

old business update24
Old Business – Update

NSSC

August 08 – All centers on line

On time payments 96% (98% required for passing grade)

Interest Payments per $1M - $41 (under $200 for passing grade)

Transactions processed – 45K per month following Wave 4

Customer call center – 92 - 93% handled within center to increase transaction volume requires additional capital investment

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