NASA, We Have a Problem

Can Gwendolyn Brown fix the space agency's chronic financial woes?

The National Aeronautics and Space Administration has long been criticized for its inability to manage costs. During the 1990s, faced with flat budgets and ambitious program goals, NASA adopted a management approach of “faster, better, cheaper.” But by the decade’s end, the approach was blamed for a number of mission failures. Meanwhile, the cost of the International Space Station (ISS) spiraled billions of dollars over budget. Embattled administrator Daniel Goldin resigned in 2001 after nearly 10 years on the job, and NASA named Sean O’Keefe, a self-described “bean counter,” as Goldin’s replacement. Fourteen months later, the loss of the Columbia space shuttle and its seven astronauts shook the agency to its core.

Then, last January, President George W. Bush unveiled a grand “vision” of landing astronauts on the moon by 2020, and on Mars sometime thereafter. The vision gave NASA a new sense of mission, lifted its morale, and raised expectations of steadily increasing budgets. But the vision also came under fire from critics who wondered fire from critics who wondered why the country needed to go to Mars, and how it could afford it.

Two weeks later, troubling new doubts were raised about NASA’s financial management. PricewaterhouseCoopers, the agency’s auditor, issued a disclaimed opinion on NASA’s 2003 financial statements. PwC complained that NASA couldn’t adequately document more than $565 billion — billion — in year-end adjustments to the financial-statement accounts, which NASA delivered to the auditors two months late. Because of “the lack of a sufficient audit trail to support that its financial statements are presented fairly,” concluded the auditors, “it was not possible to complete further audit procedures on NASA’s September 30, 2003, financial statements within the reporting deadline established by [the Office of Management and Budget].”

Ironically, the PwC audit report was posted on the NASA inspector general’s Website on March 11 — the same day that O’Keefe testified before a Senate appropriations subcommittee regarding the agency’s FY 2005 budget request. But no one seemed to notice, or care.

NASA says blame for the financial mayhem falls squarely on the so-called Integrated Financial Management Program (IFMP), an ambitious enterprise-software implementation. In June 2003, the agency finished rolling out the core financial module of the program’s SAP R/3 system. NASA’s CFO, Gwendolyn Brown, says the conversion to the new system caused the problems with the audit. In particular, she blames the difficulty the agency had converting the historical financial data from 10 legacy systems — some written in COBOL — into the new system, and reconciling the two versions for its year-end reports. Brown says that despite the difficulties with both the June 30 quarterly financial-statement preparation and the year-end close, the system is up and running, and she has confidence in the accuracy of the agency’s financial reporting going forward.

“It is working,” says Brown, who was confirmed as CFO in November 2003, “and we are moving forward to ensure that we’re ready to go to the moon, to Mars, and beyond, financially.”

But when will they be ready? NASA’s target date of 2007 for completing the SAP rollout seems optimistic, given the agency’s track record so far. What’s more, the problems with financial management go well beyond implementing new software. Brown’s explanation for the disclaimed audit may account for some of the problems identified in both the June 30, 2003, financials and the year-end audit — but only some.

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