NASA, We Have a Problem

No Accountability
Perhaps the most fundamental problem with financial management at NASA is that the agency doesn't need to be financially accountable to get full funding for its projects. This lack of any consequence for the poor quality of its work makes dramatic improvement in NASA's finance department unlikely, despite Brown's firm commitment to do just that.

Kutz believes that NASA, with some discipline, can overcome the financial-management challenges it faces. "The Department of Defense's problems are 100 times more challenging than NASA's problems," he notes. "NASA is much smaller; its problems are solvable."

But despite Brown's noble intentions, the truth is that even 14 years after passage of the 1990 Federal CFO Act, which requires federal agencies to produce auditable financial statements, a disclaimed audit opinion is still no big deal. Lack of consequences could take all the teeth out of any attempts by Brown to instill real financial discipline. "To my knowledge, there is no negative consequence for a disclaimed or failed audit," says Kutz, "except maybe for some bad publicity, or someone might call a hearing."

Don't look to Congress to impose accountability on NASA's financials. This year's disclaimed audit opinion barely caused a blip on its radar screen. "The direction of NASA and safety issues has been our overarching concern," says David Matsuda, a spokesperson for Sen. Frank R. Lautenberg (D­N.J.), a member of the Senate Commerce, Science, and Transportation Committee. That sentiment is echoed by a staffer for the House Science Committee, who said that he was notified in January about the disclaimed audit and that he took the "conversion" explanation at face value. "I think there's a little numbness to it," says the staffer. "It's really hard to get congressmen fired up about a bad audit."

Indeed, shortly after the disclaimed audit was revealed, the Senate adopted a budget resolution that includes the President's budget request for NASA of $16.244 billion for FY 2005, and assumes full funding for Bush's NASA request through 2009. If approved by the House and later the full Congress, NASA's budget will be one of the only nondefense discretionary budget items in the resolution that receives an increase next year.

Given the uncertain state of the economy and the sure-to-be-astronomical costs of the moon-Mars program — not to mention the nation's looming Social Security and Medicare obligations — maybe it's time that NASA's financial problems were on somebody's radar screen.

Kris Frieswick is a senior writer at CFO.

Mission (out of) Control

Every year since 1990, the General Accounting Office has kept NASA on its "high risk" watch list because of the agency's problems with contract management. As excerpts from a 2003 GAO report indicate, the root of the problem is a lack of reliable financial information:

Much of NASA's success depends on the work of its contractors — on which it spends the greatest part of its funds… . But for many years, NASA has not been able to effectively oversee contracts, principally because it lacked accurate and reliable information on contract spending and it has placed little emphasis on end results, product performance, and cost control. NASA has addressed many acquisition-related weaknesses, but key tasks remain, including completing the design and implementation of a new integrated financial management system.

...NASA's ability to collect, maintain, and report the full cost of its projects and programs is weakened by diverse and often incompatible center-level accounting systems and uneven and nonstandard cost-reporting capabilities....

...NASA does not track the actual costs of completed space station components, even though it often estimates costs at the component level for planning and budgeting purposes.... NASA is also not yet able to uniformly ensure that contractors provide cost data at a level that will give managers the information they need to assess the validity of previous cost estimates, fully monitor the work being performed, and appropriately identify cost drivers....

Overall, our reviews as well as NASA's show that finance is not viewed as intrinsic to NASA's program management decision process, nor does it focus on what "could" and "should" take place from an analytical cost-planning standpoint.

Source: "Major Management Challenges and Program Risks; National Aeronautic and Space Administration," GAO, January 2003

Mars Retreats?

Dramatic as the unveiling of President Bush's moon-Mars vision was, almost as surprising was how quickly the vision faded. In his State of the Union address just days after the announcement, Bush didn't mention space. Skeptics charged that the mission was dreamed up to boost the President's reelection campaign, especially since most of the enormous funds needed for the program would be appropriated after a Bush second term ended.

But if the moon-Mars mission has dimmed in the public eye, NASA is putting it front and center, reshuffling its priorities and redirecting its spending. Initial outlays on the mission are modest. From 2005 to 2009, NASA's budget for the mission is $12.6 billion, but only $1 billion of that is new funds; the rest will be diverted from other activities. (Those activities included the servicing of the Hubble space telescope, but the resulting outcry has prompted NASA to consider other options.)

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