From: House Committee on Science, Space, and Technology
Posted: Thursday, October 27, 2005
CFO Says She Would Not Certify Agency's Finances if Bound by Sarbanes-Oxley
WASHINGTON, DC - The National Aeronautics and Space Administration (NASA) has made very little progress in reforming its troubled financial management system, the agency's Inspector General (IG) and the Government Accountability Office (GAO) told Congress today.
NASA's Chief Financial Officer, Gwendolyn Sykes, also told Congress that she would not certify the agency's financial statements if she were bound by Sarbanes-Oxley, the federal law that provides severe penalties to private sector officials for financial misstatements.
The officials made their comments in testimony before a joint hearing of the Science Subcommittee on Space and Aeronautics, and the Government Reform Subcommittee on Government Management, Finance, and Accountability.
At today's hearing, GAO released a report, requested by the Science Committee, examining NASA's implementation of 45 recommendations GAO issued to the Agency in four reports in 2003. GAO found that of the 45 recommendations, only three had been closed out by NASA; 13 were found to be partially implemented.
Space and Aeronautics Subcommittee Chairman Ken Calvert (R-CA) said, "I want NASA to be successful. However, as a businessman, I also know that without sound financial management, NASA will not be able to achieve the goals set for its programs."
Chairman Calvert continued, "I am concerned that in three of the past four years, independent auditors have been unable to give NASA's financial records a passing grade. Administrator Griffin, when he testified before the Science Committee in June, characterized the status of NASA's financial management as 'deplorable.' Not only is financial management critical to successful operation of the agency, but we in the Congress also need reliable financial information in order to carry out effective oversight. We don't want to risk the future of NASA's new programs and ventures, by having them built on a shaky financial infrastructure. I want to see this great nation lead in the areas of exploration, aeronautics and the sciences, and don't want us to risk this leadership with unstable underpinnings in the agency's financial system."
Gregory Kutz, GAO's Managing Director of Forensic Audits and Special Investigations, testified that, "Our report today shows some progress, however overall progress to date has been slow."
"In summary, NASA currently lacks the systems, processes, and human capital needed to produce credible cost estimates, oversee its contractors and their financial and program performance, control program costs, and produce timely, reliable financial information and auditable annual financial statements," Kutz explained, adding, "NASA has fundamental problems with its financial management operations that not only affect its ability to externally report reliable information, but more importantly, hamper its ability to effectively manage and oversee its major programs, such as the space station and shuttle program."
In the report it released today, GAO found that NASA's new core financial management system has not resolved the Agency's most serious management challenges. "Because NASA did not use disciplined acquisition and implementation practices, the new system lacks basic functionality - such as the ability to (1) produce transaction-level support for key account balances, (2) properly identify adjustments or correcting entries, and (3) correctly and consistently post transactions to the right accounts. In addition, NASA did not use the implementation of its new system as an opportunity to transform its operations and instead, automated many of its existing, ineffective processes. Compounding its problems, NASA also failed to recognize the importance and need for highly skilled, well-trained financial personnel."
GAO added that while most federal agencies have obtained unqualified (passing) audits, "NASA's financial statements remain unauditable."
Robert Cobb, NASA's IG, said, "NASA does not currently have a financial system that can properly account for the taxpayers' dollars, or support program managers with accurate financial information necessary to carry out their responsibilities. For fiscal years 2003 and 2004, the independent public accountant auditing NASA's financial statements was unable to render an opinion on those statements. The primary reason was that NASA could not provide sufficient evidence to support the statements throughout the year and at year end. My office, which hires and supervises the auditor, expects that the auditor will be unable to render an opinion on NASA's fiscal year 2005 statements for the same reasons. The auditor's report is due by November 15."
Cobb added, "Our continuing efforts to obtain comprehensive corrective action plans to address the internal control deficiencies identified during NASA's financial statement audits have largely been unsuccessful. NASA senior management continues to provide only high-level, broadly worded proposed initiatives that lack sufficient detail and strategies to address the outstanding deficiencies."
Also testifying at today's hearing were Patrick Ciganer, Executive Officer of NASA's Integrated Enterprise Management Program, and Allen Li, Director of Acquisition and Source Management at GAO.
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