Although NASA’s institutional deficiencies are significant, some problems are exclusively the province of NASA’s finance department. Based on its history, it appears that the team is just not very good at what it’s supposed to do.
The department’s repeated inability to properly prove it is adhering to spending caps on the ISS and shuttle-related costs — and its failure to disclose those obligations in its FY 2005 budget request — are sadly typical of the way the finance team prepares its financial statements, critics charge. Internal sources say that the $2 billion Treasury-balance discrepancy in this year’s financial statements was nothing more than “sloppy bookkeeping.” The GAO has said repeatedly that human capital and lack of skills are key material weaknesses on NASA’s finance team.
Brown concedes that human capital is an issue. “We’re working toward doing some realignment to make sure we can fully support the new vision,” she says. “We’re asking, ‘What are the knowledge skills and abilities that I need to have on the financial-management side and the budget side?’” She has made attracting new talent one of her top priorities, an especially pressing one since many finance staffers will be retiring soon, she says. It might not be easy to replace them, however, in part because NASA, and all government agencies, use a different general-ledger system than that taught in accounting classes.
“I have been having a hard time attracting people,” admits Brown. “We are hoping to find the brightest and train them.”
As far back as January 2003, PwC recommended that NASA improve its processes for preparing its financial statements to “assure that information presented on the financial statements and footnote disclosures are accurate and are consistent with the requirements of” the OMB. The auditor credits NASA with some improvement in this area — such as issuing an internal “quality review checklist” and doing technical training — but it says that the 2003 statements contained “inconsistencies that should have been identified and corrected by NASA management through its internal quality-control review.” The statements did not contain key disclosures, including the fund-balance problem and a change in the way NASA depreciated assets between 2002 and 2003.
Brown says that NASA filed the initial financial statements in December, and that “we thought [they] were in pretty good shape.” (The filing didn’t include footnotes, which are usually filed later during an “iterative process,” she says.) Shortly after seeing them, PwC’s auditors indicated it would take them too long to complete the audit, and they would have to disclaim it. “Once they say you’re getting a disclaimer, it doesn’t make sense to go back and redo [the footnotes],” says Brown. “You take what you can get and move forward and make a note for the following year.”
In addition, despite opposition by the GAO, NASA still uses an accounting procedure that doesn’t comply with government accounting regulations — or even with NASA’s own financial-management manual. NASA creates a “suspense file” into which it dumps any costs incurred that exceed obligations, instead of accruing those costs as they are incurred, as required. But Gregory defends the practice. In his rebuttal to the November 2003 GAO report, he denies that the suspense file is a problem, and says it’s the method NASA uses to alert management to cost overruns. Gregory explains that at year-end, the costs over obligations are put back into the general ledger manually — a practice that the GAO understandably sees as a risk.