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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

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


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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


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Kennedy Space Center (KSC)

Briefing to NASA Advisory Council

(Audit & Finance Committee)

Susan Kroskey

Chief Financial Officer

October 14, 2008


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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


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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


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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)


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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)


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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)


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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


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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


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NASA UNOBLIGATED FUNDS CARRYOVER LIST

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.


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Agency Unobligated EOY Carryover History LIST FY 2003 through FY 2008


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NASA UNOBLIGATED FUNDS CARRYOVER (CONTINUED) LIST

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.”


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CMP Results and Trends for FY08 LIST

  • 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


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CMP Results and Trends for FY08 LIST

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


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CMP Results and Trends for FY08 LIST

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


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Shuttle Transition LIST

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


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Earned Value Management LIST

  • 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


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FY2008 Financial Statement Audit Update LIST

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


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FY2008 Financial Statement Audit Update LIST

  • 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


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Summary of Material Weaknesses and Reportable Conditions LIST Issued during the past Five Years


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Old Business – Update LIST

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


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Old Business – Update LIST

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)


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Old Business – Update LIST

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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