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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. Audit & Finance Committee

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NASA Advisory Council Meeting

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  1. 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

  2. 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

  3. Kennedy Space Center (KSC) Briefing to NASA Advisory Council (Audit & Finance Committee) Susan Kroskey Chief Financial Officer October 14, 2008

  4. 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

  5. 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

  6. 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)

  7. 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)

  8. 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)

  9. 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

  10. 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

  11. 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.

  12. Agency Unobligated EOY Carryover History FY 2003 through FY 2008

  13. 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.”

  14. 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

  15. 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

  16. 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

  17. 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

  18. 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

  19. 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

  20. 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

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

  22. 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

  23. 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)

  24. 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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