IG-03-015 May 30, 2003 A-01-061-00 Integrated Financial Management Program Core Financial Module Conversion to Full Cost Accounting
In conducting this audit, we found that the Core Financial Module software, which has been implemented at six NASA Centers, has the capability to implement full cost accounting. Before implementation can take place, NASA must resolve several extraordinarily complex accounting and costing issues. These involve how to allocate service and general and administrative (G&A) costs, civil service costs, and unassigned costs. These issues incorporate NASA's conspicuous inability to provide full cost accounting data for the International Space Station (ISS) and the Space Shuttle. Once the accounting and costing issues are resolved, NASA has to configure the Integrated Financial Management Program (IFMP) software to reflect the changes.
According to NASA's plans for full cost accounting, IFMP, and the Core Financial Module, the Agency will begin configuring the IFMP software after the last NASA Center has implemented the Core Financial Module (currently scheduled for June 23, 2003). NASA will have to resolve the cost accounting issues in slightly over 3 months following June 23, 2003, and then configure the Core Financial Module software in order for NASA to meet its targeted implementation date of October 1, 2003. As noted in NASA's Core Financial Project Full Cost Configuration Strategy, if full cost procedures are not implemented by October 1, 2003, the Agency faces a high risk that it will be unable to use IFMP to report full cost accounting data until fiscal year (FY) 2005. A substantial delay in the availability of full cost accounting data could extend the implementation date of the Agency's overall Full Cost Initiative.
Converting Core Financial Module Software To Accommodate Full Cost Accounting
Although NASA's Full Cost Initiative Agencywide Implementation Guide (Full Cost Guide) establishes Agencywide service and G&A cost pools, it does not establish Centerunique cost pools and does not address how the Core Financial Module will allocate service and G&A costs, civil service personnel costs, and unassigned costs required to implement full cost accounting. Pools are used to accumulate similar costs and are distributed to projects based on an allocation methodology that best represent the types of costs that are in the pools. For example, wind tunnel costs can be accumulated in a wind tunnel service pool and allocated to programs based on hours of usage. NASA will need to (1) establish the appropriate cost pools, (2) configure the Core Financial Module software to accommodate the cost pool structure, and (3) properly test the new configuration.
Accounting and Costing Issues
G&A Cost Allocation. NASA's Full Cost Guide states that each Center will be responsible for managing its respective G&A costs and requires the Centers to allocate these costs to specific projects. Currently, NASA does not tie G&A costs to specific projects. Examples of G&A costs are costs associated with financial management, procurement, security, and legal activities. To successfully allocate these costs to projects, Agency and Center management should (1) determine the content of the G&A cost pool, (2) determine the G&A levels required to support operations, (3) determine the rate at which G&A costs will be allocated, and (4) establish the appropriate structure within the Core Financial Module to ensure accurate allocations of G&A costs to all projects.
Space Shuttle Program. Determining which costs should be allocated to programs (such as the ISS) that benefit from Space Shuttle services is a vital component of NASA's efforts to establish the full cost of its programs. NASA has recently addressed the issue of allocating Space Shuttle costs to the ISS. However, the Agency needs to decide whether and how Space Shuttle Program costs will be allocated to other benefiting NASA programs and projects and must then determine how the Core Financial Module will accommodate that decision.
Civil Service Personnel Costs. Civil service personnel costs must be directly associated with the project to which they relate. Currently, NASA does not have a standardized Agencywide methodology for associating civil service personnel costs to projects. Establishing this methodology could be challenging in identifying personnel who work in more than one project, G&A cost area, or service cost area.
Unassigned Costs. NASA has five Strategic Enterprises that cover the major areas of the Agency's research and development efforts. In NASA's FY 2001 Consolidated Statement of Net Cost, the Agency reported costs of more than $1 billion that were not assigned to specific Enterprises. To achieve full cost accounting, NASA should determine a methodology for allocating those costs to benefiting programs.
We recommended that the Deputy Chief Financial Officer for Financial Management revise the IFMP plans to include:
Management concurs with the recommendation. NASA has formed the Full Cost Policy and Operations Team, comprised of members from the Centers, the IFMP Core Financial Team, and Headquarters enterprise/functional offices. The Team has identified timeframes, milestones, and resources for completing the steps necessary to implement full cost accounting and to address those cost issues identified in the report. The Team will brief and make recommendations to the NASA Full Cost Committee and update the Full Cost Initiative Agencywide Implementation Guide. In addition, NASA has appointed a full-time Director of Full Cost to manage the full cost implementation process. The Agency plans to have all phases of full cost accounting implemented by October 1, 2003.
Evaluation of Management's Response
Based on management's response; further discussion with the NASA Program Executive for IFMP, Deputy Chief Financial Officer, and Director of Full Cost; and review of NASA's full cost planning documentation, we consider management's action responsive to the recommendation, which is now closed.
Among the appendices, note Appendix D, in particular, which discusses NASA's history of implementing a financial management system, and Appendix E on full cost management.