National Aeronautics and Space Administration: Leadership and Systems Needed to Effect Financial Management Improvements

In fiscal years 1996 to 2000, the National Aeronautics and Space Administration (NASA) was one of the few agencies that received an unqualified opinion on its financial statements and was in substantial compliance with the Federal Financial Management Improvement Act (FFMIA). This suggested that NASA could generate reliable information for annual external financial reporting and could provide accurate, reliable information for day-to-day decision-making. In contrast with the unqualified or "clean" audit opinions of its previous auditor, Arthur Andersen, NASA's new independent auditor, PricewaterhouseCoopers, disclaimed an opinion on the agency's fiscal year 2001 financial statements because of significant internal control weaknesses. PricewaterhouseCoopers also concluded that NASA's financial management systems do not substantially comply with the requirements of FFMIA. Modernizing NASA's financial management system is essential to providing accurate, useful information for external financial reporting as well as internal management decision-making. NASA is working on an integrated financial management system that it expects to have fully operational in fiscal year 2006 at an estimated cost of $475 million. This is NASA's third attempt to implement a new financial management system. The first two efforts were abandoned after 12 years and $180 million. Given the high stakes involved, NASA's top management must provide the necessary direction, oversight, and sustained attention to ensure the project's success.