Summary

National Aeronautics and Space Administration (NASA) financial managers are responsible for almost $27 billion worth of assets and nearly $14 billion in appropriations each year. The Office of Management and Budget (OMB) has declared NASA's financial management systems to be at risk for waste, abuse, and mismanagement, and both OMB and GAO have designated NASA contract administration at high risk because of previously cited weaknesses and NASA's growing reliance on its contractors for data. GAO discovered that NASA's internal controls and financial management systems do not provide accurate and reliable financial information to effectively manage the agency, especially oversight of the significant assets and funds under the control of its contractors. NASA did not always receive contractor-reported cost and performance data, and program analysts inappropriately adjusted contractor cost data without supporting documentation. In some cases, this practice concealed overruns, or underruns, or instances in which costs exceeded obligations of budget plans. For example, cost reports for development of space shuttle toilets showed major cost growth, but NASA took little action to control costs until GAO discovered a 900-percent increase over the initial estimate. Due to fundamental accounting and systems problems, NASA's fiscal year 1991 year-end reports to the Treasury Department contained more than $500 million in errors.

GAO found that: (1) NASA managers use contractor-reported cost data as a primary source of information to manage billions of dollars in contractor-operated programs and projects, establish and update accounts payable, and determine budget needs; (2) NASA did not ensure that the reports from contractors were timely and accurate, or that they provided the detail needed for management decisions; (3) center-level analysts inappropriately adjusted contractors' cost data and did not enter costs into centers' accounting systems; (4) NASA internal financial controls did not ensure that government-owned, contractor-held property was properly accounted for or that the reported value was accurate; (5) NASA did not timely receive contractors' property reports for updating NASA accounts at year-end; (6) reports on property disposals were late and erroneous; (7) NASA officials did not consistently observe and enforce spending limits because they did not have current information on funds available and controls were not adequate to prevent the recording of obligations in excess of funding limits; and (8) NASA accounting and reporting systems had fundamental deficiencies that impaired accurate reporting which included nonintegrated systems, improper accounting practices, and numerous weaknesses in accounting and reporting over NASA reimbursable activity.