NASA, We Have a Problem

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

In 2000, a $644 million oversight was discovered on NASA’s 1999 financial audit. The mistake was detected not by its auditors (then Arthur Andersen) nor by its CFO (then Arnold Holz), but by a congressional staffer reviewing the statements. As a result of the mistake and subsequent investigation, the GAO called into question the quality of the five previous Andersen audits — all clean, and a source of agencywide pride. “[The GAO] said the Arthur Andersen audits were audit failures,” says Kutz. “They had given NASA clean audit opinions for five years. Andersen said the reporting systems were compliant and that there were no material weaknesses.”

In 2001, with Andersen dissolving in the wake of Enron, NASA chose PwC as its new auditors. The firm gave the space agency its first disclaimed audit opinion, blaming widespread reporting and audit-trail deficiencies. “How could PwC all of a sudden say that everything is a problem, when all that changed was the auditor?” asks Kutz.

Dueling Fiefdoms

In NASA’s defense, many of its problems with financial management are endemic to the agency as a whole. NASA has long been faulted for its “stovepipe” structure, in which each center behaves as an independent entity with a unique history and culture that is loath to brook “outside” interference from other parts of NASA. Finance executives are co-located in NASA’s 10 centers, and each center has a different financial-reporting system. Each finance chief reports to the center’s director, with only a dotted line to CFO Brown.

“It’s like a dozen dueling fiefdoms,” says Keith Cowing, editor of NASA Watch, a Website devoted to tracking all things NASA. (The site claims a devoted readership, including some highly placed members of the agency and Congress.) Administrator O’Keefe has recognized the problem and is trying to unite the organization through his so-called One NASA management approach (of which the SAP system is a cornerstone). But Cowing isn’t sure he’ll succeed. “This whole notion of ‘one NASA’ sounds good on paper, and they’ve done some things that cracked through the walls,” he says. “But I don’t know how much they’ll ever integrate.”

The structural barriers have combined over time to make any NASA-wide initiatives an exercise in frustration, a problem that Brown is also working hard to overcome. The CFO has instituted policy changes that she hopes will make finance-team members more accountable to her. Prior to her arrival, policies were written on an agencywide level, but each center was free to create processes and procedures to apply the policies as it wished. Brown has sought to change that.

“I’ve told them that from now on, the agency will set policy, process, and procedure, and you, the centers, will do implementation,” says Brown. “If we’re going to be accountable and credible, that’s what we have to do here.” The centers are “not as autonomous as they used to be,” a change that, she reports, has been met with some “inertia” from finance staffers. The problem isn’t just administratively challenging: one of the main reasons that Brown offers for the mammoth $2 billion difference between its year-end fund account balance and its Treasury account balance is that the center-based finance staffers “failed to follow policies and procedures” — policies that include monthly reconciliations with the actual Treasury balance — once the SAP module was installed. (NASA headquarters is also required to do those monthly reconciliations.)


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