[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



 
         MISSION IMPOSSIBLE? FIXING NASA'S FINANCIAL MANAGEMENT

=======================================================================

                                HEARING

                               before the

                 SUBCOMMITTEE ON GOVERNMENT EFFICIENCY
                        AND FINANCIAL MANAGEMENT

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 19, 2004

                               __________

                           Serial No. 108-193

                               __________

       Printed for the use of the Committee on Government Reform


  Available via the World Wide Web: http://www.gpo.gov/congress/house
                      http://www.house.gov/reform





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95-741                  WASHINGTON : 2004
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                     COMMITTEE ON GOVERNMENT REFORM

                     TOM DAVIS, Virginia, Chairman
DAN BURTON, Indiana                  HENRY A. WAXMAN, California
CHRISTOPHER SHAYS, Connecticut       TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida                PAUL E. KANJORSKI, Pennsylvania
MARK E. SOUDER, Indiana              CAROLYN B. MALONEY, New York
STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
DOUG OSE, California                 DENNIS J. KUCINICH, Ohio
RON LEWIS, Kentucky                  DANNY K. DAVIS, Illinois
JO ANN DAVIS, Virginia               JOHN F. TIERNEY, Massachusetts
TODD RUSSELL PLATTS, Pennsylvania    WM. LACY CLAY, Missouri
CHRIS CANNON, Utah                   DIANE E. WATSON, California
ADAM H. PUTNAM, Florida              STEPHEN F. LYNCH, Massachusetts
EDWARD L. SCHROCK, Virginia          CHRIS VAN HOLLEN, Maryland
JOHN J. DUNCAN, Jr., Tennessee       LINDA T. SANCHEZ, California
NATHAN DEAL, Georgia                 C.A. ``DUTCH'' RUPPERSBERGER, 
CANDICE S. MILLER, Michigan              Maryland
TIM MURPHY, Pennsylvania             ELEANOR HOLMES NORTON, District of 
MICHAEL R. TURNER, Ohio                  Columbia
JOHN R. CARTER, Texas                JIM COOPER, Tennessee
MARSHA BLACKBURN, Tennessee          ------ ------
PATRICK J. TIBERI, Ohio                          ------
KATHERINE HARRIS, Florida            BERNARD SANDERS, Vermont 
                                         (Independent)

                    Melissa Wojciak, Staff Director
                   David Marin, Deputy Staff Director
                      Rob Borden, Parliamentarian
                       Teresa Austin, Chief Clerk
          Phil Barnett, Minority Chief of Staff/Chief Counsel

     Subcommittee on Government Efficiency and Financial Management

              TODD RUSSELL PLATTS, Pennsylvania, Chairman
MARSHA BLACKBURN, Tennessee          EDOLPHUS TOWNS, New York
STEVEN C. LaTOURETTE, Ohio           PAUL E. KANJORSKI, Pennsylvania
CANDICE S. MILLER, Michigan          MAJOR R. OWENS, New York
MICHAEL R. TURNER, Ohio              CAROLYN B. MALONEY, New York
KATHERINE HARRIS, Florida

                               Ex Officio

TOM DAVIS, Virginia                  HENRY A. WAXMAN, California
                     Mike Hettinger, Staff Director
                 Larry Brady, Professional Staff Member
                          Sara D'Orsie, Clerk
            Adam Bordes, Minority Professional Staff Member




                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on May 19, 2004.....................................     1
Statement of:
    Brown, Gwendolyn, Chief Financial Officer, National 
      Aeronautics and Space Administration, accompanied by 
      Patrick Ciganer, Program Executive Officer for Integrated 
      Financial Management, NASA; Robert Cobb, Inspector General, 
      National Aeronautics and Space Administration; and Greg 
      Kutz, Director, Financial Management and Assurance, U.S. 
      General Accounting Office, accompanied by Allen Li, NASA 
      Program Director...........................................     5
Letters, statements, etc., submitted for the record by:
    Brown, Gwendolyn, Chief Financial Officer, National 
      Aeronautics and Space Administration, prepared statement of     7
    Cobb, Robert, Inspector General, National Aeronautics and 
      Space Administration, prepared statement of................    16
    Kutz, Greg, Director, Financial Management and Assurance, 
      U.S. General Accounting Office, prepared statement of......    30
    Platts, Hon. Todd Russell, a Representative in Congress from 
      the State of Pennsylvania, prepared statement of...........     3


         MISSION IMPOSSIBLE? FIXING NASA'S FINANCIAL MANAGEMENT

                              ----------                              


                        WEDNESDAY, MAY 19, 2004

                  House of Representatives,
Subcommittee on Government Efficiency and Financial 
                                        Management,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 3 p.m., in 
room 2247, Rayburn House Office Building, Hon. Todd R. Platts 
(chairman of the subcommittee) presiding.
    Present: Representatives Platts, Towns, Blackburn, Turner 
and Harris.
    Staff present: Mike Hettinger, staff director; Larry Brady 
and Tabetha Mueller, professional staff members; Amy Laudeman, 
legislative assistant; Sara D'Orsie, clerk; Adam Bordes, 
minority professional staff member; Earley Green, minority 
chief clerk; and Jean Gosa, minority assistant clerk.
    Mr. Platts. This hearing of the Subcommittee on Government 
Efficiency and Financial Management regarding NASA will come to 
order.
    I appreciate everyone's attendance here today and also 
appreciate your patience both with the Murphy's law of the vote 
schedule delaying the start of our mark up and thus pushing 
back the start of this hearing as well. I appreciate your 
indulgence. We are glad to be here today and begin this hearing 
regarding the financial management of NASA.
    As part of our ongoing oversight of financial management at 
all Federal agencies, the subcommittee will discuss today the 
business and accounting processes at the National Aeronautics 
and Space Administration and the findings of its fiscal year 
2003 financial audit. The audit raised some very serious 
concerns, but it also provided important recommendations, all 
of which we will discuss today.
    Administrator Sean O'Keefe has made financial management a 
top priority at NASA. With his leadership, NASA has begun the 
process of re-engineering the way it does business by 
implementing a more effective accounting system, the Integrated 
Financial Management Program. The functioning of this new 
system will be enhanced by NASA's plan to consolidate financial 
services at one center in the near future. The process of 
converting data from 145 different financial management systems 
into one core data base has not been easy. In fact, the 
enormous number of adjustments that had to be made, and that 
have been widely reported in the media, came about largely 
because of this data conversion.
    We have to make sure that we understand exactly what this 
number represents, and, more important, we need to make sure it 
does not obscure the fact that other serious problems were 
identified, such as a failure to comply with Federal accounting 
standards. That is why this hearing today is so important. We 
need to get the facts behind what the audit showed, and we need 
to examine the recommendations that were made. We also need to 
make sure that NASA is managing the implementation of its new 
system properly. The IFMP is a huge investment, and it is our 
hope that it will bring great returns.
    We are honored to have before the subcommittee, Mr. Robert 
Cobb, NASA's Inspector General; Ms. Gwendolyn Brown, Chief 
Financial Officer for NASA; and Mr. Gregory Kutz, Director of 
Financial Management and Assurance at the U.S. General 
Accounting Office. I certainly thank each of you for your 
attendance and participation here today. The written testimony 
you submitted ahead of time was, as I call in my hearings, my 
homework that you gave me in preparation for today's hearing, 
and I look forward to our interaction with each of you as part 
of this hearing.
    I would now like to yield to our Vice Chair, the gentlelady 
from Tennessee, Mrs. Blackburn, for purposes of making an 
opening statement.
    [The prepared statement of Hon. Todd Russell Platts 
follows:]
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    Mrs. Blackburn. Thank you, Mr. Chairman.
    In your opening statement, you outlined some of the 
concerns with NASA's financial management and one specific 
persistent problem that is of concern to me is that NASA fails 
to keep proper records which provide the key information for 
auditors and investigators to track financial transactions.
    First, NASA's own financial statements cannot be supported 
or varied due to lack of proper documents. As information for 
these financial statements was entered through its data 
conversion process, NASA posted numerous adjustments as the 
chairman mentioned outside its financial system and could not 
provide documentation that would validate those adjustments.
    Second, NASA is unable to support the amounts it has 
obligated for the Space Station and the Space Shuttle support. 
Even its new Core Financials module will not correct this 
problem as it cannot provide cost information to Congress or 
program managers to generate reliable data for daily operations 
and decisionmaking. This new financial management system does 
not even comply with the requirements of FFMIA where again no 
audit trail will exist to support future financial statements.
    Fourth, its own internal control weaknesses continue to 
produce major errors in reporting property and materials for 
financial statements. Mr. Chairman, I am distressed at how the 
agency has failed to use best practices and has repeatedly 
denied the existence of many of its financial management 
problems that have been reported for many years by GAO and 
NASA's Inspector General.
    Mr. Chairman, I believe this agency will waste billions of 
taxpayers' dollars in this new financial system and until they 
transform its financial management organization, NASA will 
continue to face the same financial management problems it has 
for the last two decades.
    I look forward to the hearing today and to having more 
information and understanding of their financial situation.
    Mr. Platts. Thank you, Mrs. Blackburn.
    I would now like to swear in our witnesses. I understand 
Mr. Ciganer and Mr. Li are going to be sworn in with you as 
well.
    [Witnesses sworn.]
    Mr. Platts. The clerk willl note that all witnesses 
affirmed the oath. The subcommittee certainly appreciates the 
substantive written testimonies that each of you have provided 
for the record. We now move on to your oral testimony. We will 
try to stay to about 5 minutes, not a hard and fast rule, but 
if you can stay as close to 5 minutes with your opening 
statement, then we will get to questions and answers.
    First, we will begin with Ms. Brown and then we will follow 
with Mr. Cobb and then Mr. Kutz. Ms. Brown, if you would like 
to begin.

    STATEMENTS OF GWENDOLYN BROWN, CHIEF FINANCIAL OFFICER, 
 NATIONAL AERONAUTICS AND SPACE ADMINISTRATION, ACCOMPANIED BY 
   PATRICK CIGANER, PROGRAM EXECUTIVE OFFICER FOR INTEGRATED 
  FINANCIAL MANAGEMENT, NASA; ROBERT COBB, INSPECTOR GENERAL, 
 NATIONAL AERONAUTICS AND SPACE ADMINISTRATION; AND GREG KUTZ, 
  DIRECTOR, FINANCIAL MANAGEMENT AND ASSURANCE, U.S. GENERAL 
   ACCOUNTING OFFICE, ACCOMPANIED BY ALLEN LI, NASA PROGRAM 
                            DIRECTOR

    Ms. Brown. Mr. Chairman and members of the subcommittee, I 
am here this afternoon to report on the current state of NASA's 
effort to improve its financial management capabilities. As 
stated during my confirmation hearing last November, I accepted 
the appointment of Chief Financial Officer to specifically 
focus on enhancing NASA's financial management operation and to 
help restore fiscal discipline and credibility to our agency. 
NASA was implementing in planned phases, the Core Financials 
module throughout fiscal year 2003. This is a commercial, off 
the shelf, agency-wide accounting module which is part of the 
Integrated Enterprise Resource Planning Software Suite of 
applications acquired from SAP.
    The implementation of the Core Financials module and other 
related software applications is part of the agency's 
Integrated Financial Management Program. In fiscal year 2000, 
NASA initiated a 7-year agency-wide effort aimed at providing a 
single integrated suite of financial project, contract and 
human capital management tool. Mr. Patrick Ciganer, NASA's 
Program Executive Officer for Integrated Financial Management, 
manages this effort. Mr. Ciganer and I report directly to the 
NASA Administrator. I thank you for allowing him to join me at 
this hearing and to provide his insight on the deployment of 
the Core Financials module during 2003 and the overarching 
Innovative Financial Management Program.
    As mentioned earlier, our Core Financials modules replaced 
10 main disperate center accounting systems and over 120 
ancillary subsystems in operation through NASA for the past two 
decades. This conversion effort required some very complex data 
cleanup, in addition to increased adjustments and reporting 
work at the end of the fiscal year 2003. These activities 
significantly impacted the timeliness and the initial quality 
of the information required in preparing NASA's interim and 
year-end financial statements.
    NASA underestimated the amount of data that had to be 
identified, validated and documented and adjusted during our 
fiscal year-end closing process. Additionally, many of NASA 
personnel were faced with the task of creating and processing 
those adjustments in a new environment within a very short 
timeframe. The result was a $565 billion in posted adjustments 
to the new module. This figure reflects a year-end, absolute 
dollar value adjustment to our records which we processed and 
gave to the auditors. This amount is the sum of many consequent 
correcting entries often for a single posting logged by the 
internal tracking control function of our new system.
    In the past, the agency had been cited for failing to 
implement adequate internal controls in its contract management 
activities. The new system is configured not to allow direct 
reversal or erasures on our wrongly posted entries but rather 
requires the usual use of a formal accounting series of steps, 
e.g., credits and debits and debits and credits for any 
reversal and logs for every single step in an absolute value 
running total.
    As has been promulgated by my colleagues here at the table, 
NASA does have a significant challenge ahead. I am now leading 
the financial management community in developing and 
implementing standardized policies, processes and procedures 
that will support the financial system and improve the 
financial operations of NASA for the long run. We have the NASA 
Financial Improvement Plan which is our overall, get well plan 
for charting the course for improving financial management 
operations. I have a long road to haul and I accept the 
challenge willingly. I appreciate the support and the insight 
that I have received from the IG and the GAO and many other 
entities that have provided guidance which has been 
instrumental in helping NASA to get it right in financial 
management for the long term.
    Thank you.
    [The prepared statement of Ms. Brown follows:]
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    Mr. Platts. Thank you, Ms. Brown.
    Mr. Cobb.
    Mr. Cobb. Chairman Platts, members of the subcommittee, in 
the interest of time, with the committee's permission, I will 
summarize my written testimony.
    Mr. Platts. Thank you.
    Mr. Cobb. Thank you for the opportunity to discuss 
financial management at NASA. The Office of Inspector General 
has identified NASA's efforts to improve financial management 
as one of the most serious management and performance 
challenges facing agency leadership. We think the attention 
this committee is giving to the issue will help ensure the 
agency's commitment to fixing its financial management 
problems.
    As requested in your letter of April 26, my testimony 
addresses the findings of NASA's fiscal year 2003 financial 
audit and reviews the efforts to improve overall financial 
management at the agency. First, the fiscal year 2003 audit 
disclaimer. In January 2004, the independent auditor 
PriceWaterhouseCoopers conducted NASA's audit pursuant to the 
Chief Financial Officer's Act and under the direction of the 
Office of Inspector General and determined that it could not 
render an opinion on NASA's financial statements for fiscal 
year 2003. Generally speaking, the reason for the disclaimer is 
that NASA cannot produce timely and accurate financial 
statements. PriceWaterhouseCoopers, found that NASA lacked an 
audit trail to show that its fiscal year 2003 financial 
statements were presented fairly. They found that NASA made 
inadequately documented adjustments of $2 billion net to its 
fund balance with Treasury and found that NASA still lacked 
adequate controls to reasonably assure that Government-owned 
contractor-held property was accurately presented.
    A major factor that contributed to NASA's inability to 
provide sufficient evidence to support its statements was the 
agency's conversion during fiscal year 2003 from 10 legacy 
accounting systems to a single integrated financial management 
system called the IFMP. The conversion led to significant 
problems with data quality and accuracy that NASA was unable to 
resolve. NASA management has not yet demonstrated that it can 
produce quarterly financial statements from the Core Financial 
Module of the IFMP.
    Another factor is NASA's inadequate policies and procedures 
to ensure accurate financial reporting such as appropriate 
reviews and approvals of transactions and accounting entries. I 
note that implementing agencywide internal controls is 
particularly difficult where the 10 NASA Center Chief Financial 
Officers report to Center Directors rather than the CFO.
    Now I would like to describe NASA's efforts to improve 
overall NASA financial management. This year NASA management 
has taken initial steps toward improving financial management 
by developing an improvement plan to address internal control 
weaknesses. The high level goals of the NASA improvement plan 
appear to be appropriate given the state of NASA's financial 
systems and underlying records. The plan is designed to improve 
the organization of the CFO's office and financial policies and 
procedures. The plan also calls for the establishment of an 
audit committee.
    However, there are significant challenges to the success of 
the improvement plan. For example, the Office of Inspector 
General believes NASA has insufficient Civil Service staff to 
carry out its plan. Heavy use of contractor personnel is not a 
long-term solution to staffing shortages. Also, without 
successful implementation of NASA's IFMP, NASA's high level 
goals of its improvement plan will be difficult, if not 
impossible, to achieve.
    To date, there have been problems with IFMP. The data 
conversion problems and the inability to generate accurate 
financial statements impacted the financial audit. The Office 
of Inspector General has found other problems with IFMP 
planning, testing and reporting. The results of these problems 
are bugs in the system and output that is not user friendly and 
requires significant manual manipulation.
    What is the outlook for the future? The pervasiveness of 
NASA's control weaknesses and the inability to produce complete 
and accurate financial data will most likely result in a 
disclaimer of opinion on the fiscal year 2004 audit. Because of 
the Government-owned, contractor-held property issue, it may be 
years before NASA can achieve an unqualified or clean audit. 
But getting clean audits should not be the priority. Fixing 
NASA's internal controls and getting the IFMP to fulfill its 
potential are critical. Fix those, and clean audits will 
follow.
    The Office of Inspector General is closely monitoring 
NASA's efforts to improve financial management through 
oversight of the financial audit being conducted by NASA's new 
independent public accountant, Ernst & Young. We will be 
conducting other activities to assess financial management 
including auditing the overall status of IFMP.
    The Office of Inspector General believes it is important 
that NASA get its financial management in order so that 
Congress and the public can have full confidence in agency 
expenditure of taxpayer dollars.
    Thank you.
    [The prepared statement of Mr. Cobb follows:]
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    Mr. Platts. Thank you, Mr. Cobb.
    Mr. Kutz.
    Mr. Kutz. Chairman Platts and Representative Blackburn, 
thank you for the opportunity to discuss NASA financial 
management.
    Since its inception in 1958, NASA has made incredible 
scientific and technological advances that have enhanced the 
quality of life on Earth. However, that same level of 
excellence is not evident in NASA's financial management, the 
topic of today's hearing. My testimony has two parts, first, 
NASA's history of financial management problems and second, 
efforts to implement a new financial system.
    First, our reports have shown that NASA's financial 
management problems impact its ability to manage its 
contractors and major programs. NASA has a long history of 
schedule problems and cost overruns with its programs such as 
the space station. Our reports have highlighted NASA's problems 
overseeing its contractors and their financial performance, 
controlling program costs, producing credible cost estimates 
and supporting reports to the Congress related to spending 
limits for the Space Station and related Shuttle support. In 
fact, since 1990, we have reported NASA contract management as 
an area of high risk in part due to the financial management 
problems. However, a series of failed financial audits served 
to mask NASA's problems, specifically from 1996 to 2000, Arthur 
Anderson issued unqualified opinions on NASA's financial 
statements, reporting no material weaknesses and systems that 
complied with Federal standards. During that time, we reported 
that Arthur Anderson's 1999 audit did not meet professional 
standards and we questioned NASA management and its auditors' 
conclusion that its systems complied with Federal standards. 
Recent audit reports confirm the prior audit failures and 
NASA's serious problems. Nonetheless, the misleading prior 
audit reports fueled NASA's optimistic views of its financial 
operations.
    My second point is that NASA is implementing a system 
intended to address both program management and external 
reporting needs. We agree with NASA's goal for the new system, 
however, in 2003, we issued five reports expressing our 
concerns that the new system as implemented will not meet 
NASA's stated goal. For example, the system does not fully 
address NASA's external reporting needs. NASA continues to 
represent that the Core Financial module was fully implemented 
in June 2003. However, we reported that significant 
capabilities for external reporting were not implemented. More 
importantly, we reported that the new system is not being used 
to manage NASA's programs. We found that program managers and 
cost estimators were not involved in developing requirements 
for the system. As a result, they continued to use hard copy 
reports, spreadsheets and other labor intensive means to 
monitor contractor performance.
    Historically, finance has not been viewed as an integral 
part of NASA's program management decision process. Thus, it is 
not surprising that the new system was not designed or 
implemented with program managers or cost estimators in mind. 
If program managers do not use the new system and continue 
using their ad hoc systems, then NASA will continue to have two 
sets of books.
    In conclusion, it is clear that NASA has significant 
financial challenges. However, as noted by Representative 
Blackburn, NASA in many cases has denied the existence of its 
problems and has attributed its difficulties to the auditors 
sampling methodology or the lack of understanding of its 
operations. Unfortunately, GAO and NASA have generally agreed 
to disagree on many of the facts.
    For reform to succeed, management must acknowledge the 
serious nature of its problems and take action to address the 
people, process and system challenges. Consistent congressional 
oversight of NASA's financial management is also needed for 
reform to succeed. We look forward to working with the 
Inspector General and NASA management on solutions to these 
challenges.
    Mr. Chairman, this ends my testimony. Mr. Allen Li, the 
Director in charge of our NASA program work is with me to 
answer questions.
    [The prepared statement of Mr. Kutz follows:]
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    Mr. Platts. Thank you, Mr. Kutz.
    Again, I appreciate all of your testimony and if Mr. 
Ciganer or Mr. Li would like to join the other three at the 
table as we move forward to questions. We will again be guided 
by a loose 5 minute rule and begin questions with Mrs. 
Blackburn and myself and Mr. Towns who is going to be rejoining 
us.
    I would like to start with the structure at NASA. One of 
the things that came through loud and clear in the statements 
here today and in the written statements and other coverage of 
the challenges to NASA regarding financial management is the 
need to change the culture. This must be a priority, and, in 
reality, the programs NASA is so well known and appropriately 
applauded for will be that much stronger if we do right on the 
financial management side.
    One of the challenges that seems to surface in the past 
structure of NASA, hand in hand with the culture of leadership, 
is the delineation of authority in the 10 separate centers with 
the CFOs of each center answering to the center director but 
not to the CFO for the entire agency. Ms. Brown, if you could 
share with us what you are doing to address that decentralized 
approach of the past and how you are trying to better 
centralize it, because as we see here today you are the one 
that needs to answer for the agency as the agency CFO. How you 
are getting your hands around those 10 independent centers?
    Ms. Brown. Thank you for that opportunity. I would like to 
state for the record too that we are working that at NASA. It 
is a challenge having 10 different, separate CFOs reporting to 
a center director but I have imparted what we call team clarity 
at NASA. It is basically a group of individuals at NASA within 
the NASA community working toward restructuring and realigning 
the agency as a total and whole in order to meet our new 
vision. In that effort, we have had multiple discussions with 
regards to the reporting structure that would be instrumental 
in my being able to resolve this challenge we have in financial 
management. To that end, we are looking at having a couple of 
options, one being having the center CFOs report directly to me 
or my being able to work with the center directors in the 
hiring, firing and performance evaluation of those center CFOs 
in order to strengthen that relationship. So we are looking at 
a couple options and we will be providing those to the 
committee once those are finalized.
    Mr. Platts. Expand on that. I was under the belief that 
delineation of authority or realignment had already occurred 
where the center CFOs would be reporting directly to you. That 
is something you are looking at and discussing but has not 
taken place thus far?
    Ms. Brown. Correct.
    Mr. Platts. That is something that concerns me, that given 
what we know about the challenges in the past, even in this 
past year and the 2003 audit, the 2003 numbers, that we are now 
halfway through 2004 and we have not actually made that change. 
You are the agency CFO and the need for that information and 
that authority over those centers is going to be critical if 
you are to truly get your hands around the challenge before 
you.
    Ms. Brown. Chairman Platts, you are indeed correct on that. 
We have taken steps within my organization to work with the 
center CFOs. There hasn't been a challenge in that respect and 
getting their attention to the issue. The disclaimer was a 
definite wake-up call for that but we have not formally 
documented that in our new organizational structure.
    Mr. Platts. What is the timeframe for the two changes, one, 
them answering to you directly, the center CFOs and two, your 
having whether it is a veto role or a sign-off role in the 
hiring of staff in the CFO offices in each of the centers?
    Ms. Brown. Actually we are working toward those and should 
have them within the next couple of weeks.
    Mr. Platts. I would appreciate and ask that you do share 
the results of that realignment as soon as it is complete so we 
are aware of how you are going to be going forward. One of the 
weaknesses that came forward I believe in the Inspector 
General's statement was staff not understanding the 
requirements of the Federal financial management laws and what 
was required of them. Given that these are individuals being 
entrusted with oversight of management of billions of dollars, 
there clearly is a need for improvement in the staff knowledge 
and actions. I know you have only been there 6 months or so, 
but you accepted that challenge and now are responsible for 
each and every one of those individuals within the financial 
management field. We would appreciate your diligent efforts 
regarding that management aspect.
    Mr. Kutz or Mr. Li could you comment on the change in 
culture, the alignment and what has occurred in GAO's opinion 
and what needs to occur further?
    Mr. Li. I think we can both address culture with regards to 
the financial unit and the larger aspect of NASA. As you know, 
after the Columbia Accident Investigation Board issued its 
findings, it identified that culture was indeed an issue in the 
whole agency. So while I am encouraged by what Ms. Brown talks 
about in terms of the organizational improvements and the 
realignment in her unit, the other thing we need to keep in 
mind is that culture change also has to deal with the alignment 
of both the program and the financial management unit. In other 
words, if these people cannot talk to one another and manage 
these programs, getting the financial data to manage these 
programs like the spacecraft and the human space flight 
programs, it is not going to work. So culture change cannot 
just be one in which we fix what happens at the CFO level. It 
has to be throughout the agency.
    Mr. Platts. Is it your opinion that with the realignment, 
and the shared services center up and coming would that help to 
address some of that issue?
    Mr. Li. I don't believe so, sir. I think that is an issue 
of their trying to get more efficiencies and trying to co-
locate some of the administrative functions they have, so I 
don't believe that is going to solve the cultural issue you 
talked about.
    Mr. Platts. I take it the issues being discussed that 
direct authority of Ms. Brown over those center CFOs and input 
into the hiring of the staffs in those center CFO offices, that 
is something you think is important moving toward changing the 
mentality and the way of operating?
    Mr. Li. Yes, I do.
    Mr. Platts. Mr. Kutz, did you want to add anything?
    Mr. Kutz. I would just add with respect to the other 
cultural issue, making sure that the program in finance is 
better integrated. That is an important issue that goes back to 
finance being somewhat stovepiped from the program which gets 
into is this IFMP going to meet the needs of those people. I 
think NASA's goal up front was for the integrated financial 
management system to be something the program managers used to 
manage on a day to day basis. We don't see that happening right 
now and that needs to be one of the goals and results of this, 
before we spend $1 billion on a system that is just an 
accounting system. I think that is a very critical aspect to 
discuss in today's hearing.
    Mr. Platts. Mr. Cobb.
    Mr. Cobb. I would like to comment just because I have a 
slightly different dichotomy to lay out for you. In one sense I 
don't think the CFO will have the ability to carry out her 
function until the people who are the CFOs at the field centers 
report directly to her and she writes their performance 
evaluations and is responsible for their bonuses and 
fundamentally they work for her. I am not sure that is what is 
being contemplated in connection with the organizational 
changes at NASA in the CFO shop or in the CIO shop or in the 
Safety and Engineering area. I think they are contemplating 
something that is more complex with dual reporting requirements 
but that ultimately the employees we are talking about will be 
responsive to the center directors.
    Mr. Platts. I share your belief. As a subcommittee with 
oversight, if those individuals aren't reporting and answering 
to you, that means I am going to have to bring all 10 of the 
individual center CFOs here to answer for themselves if they 
are not going to be answering to you.
    Ms. Brown. And given the two comments made from the GAO and 
the IG, you see my dilemma in trying to formulate what is the 
best plan moving forward. The GAO, as just stated, says you 
need the financial manager and the program manager working 
diligently together moving the agency forward. If I take the 
CFOs and have them report directly to me, they are no longer 
responsive to the center director or the program managers at 
those different centers. Therefore, that relationship breaks 
down and they will be responsive and beholding to me.
    The IG feels we should have a stronger input having a 
direct line to myself and that is the debate and discussion we 
are having today within NASA. What is the best structure for 
NASA, for our leadership in order to develop the agency not 
only for today to meet the challenges I have currently for 
financial management, but also moving forward and meeting the 
vision. This dichotomy between the two here is the same debate 
we are having at NASA. Once we finalize that, get it in written 
form, we will provide it to the committee, but it is not my 
hope to have 10 different accounting CFOs coming to report to 
this committee. I am accountable for NASA's financial status 
and they report to me and they work with me.
    Mr. Platts. Under the CFO Act, you are deemed the one 
accountable. Those regional, center CFOs are not under the act.
    I did read it different, Mr. Kutz and Mr. Cobb, that they 
didn't necessarily disagree, Mr. Kutz and Mr. Li, that program 
managers need to work hand in hand with the CFOs but I want to 
followup. Do you object or think it is a bad idea for the 
center CFOs to answer directly to Ms. Brown in the chain of 
command?
    Mr. Li. No. I was not implying that the organizational 
alignment of the CFO precluded or would impact upon that 
closeness of working together between the program managers. 
Just ensuring that the way of doing business incorporates the 
financial discipline of managing a program does not require 
that organizational alignment.
    Mr. Platts. I think how I took the GAO's statement, Ms. 
Brown, in your written statement you capture it well where you 
say ``A clean opinion should reflect a reliable, transparent 
and efficient set of financial management practices.'' It 
should not, in itself, be a goal but rather a reflection of 
those practices; that by putting in the good processes, 
including how we align the financial managers by their work, 
they will generate good information that benefits program 
managers because of having timely accurate information to work 
with.
    Ms. Brown. Correct.
    Mr. Platts. I want to yield to the Vice Chair, but in this 
first round, I wanted to get into one of the issues that goes 
to the data and the errors in basic accounting. The 2003 audit 
disclosed the $2 billion discrepancy between NASA's books and 
the fund balance with Treasury. In reading the various reports 
in preparing for this, I think it was best captured in the 
GAO's written statements how I looked at that. I may be unusual 
but I am the one that writes all the bills in our house and I 
balance my checkbook to the penny every month. If I find I am 
off a dime, I go find the dime. It was amazing to me as a 
taxpayer, the way I understand this is that NASA's books were 
off by $2 billion and there is basically just a correction made 
but no effort, at least initially, and I am not sure yet there 
has been a detailed explanation given of how that $2 billion 
discrepancy came to be. Where is it? What happened to the 
money?
    Ms. Brown and Mr. Ciganer, if you can expand on that issue 
because remember you are speaking to the guy who looks for the 
dime I am missing at the end of the month in my checkbook 
balance and $2 billion is a heck of a lot of money from 
hardworking Americans.
    Mr. Ciganer. Mr. Chairman, we actually share your concern 
and one of the stated objectives of the new system was to 
actually bring a level of transparency to the information and a 
level of detail to the individual transactions that did not 
exist in the previous systems. As we stated earlier not only 
did we consolidate 10 separate, independent accounting systems 
from each center but a variety of subsystems.
    What we tried to do moving forward is not only rolling out 
this new environment but also taking care of cleaning up an 
awful lot of information that was residing at the level of 
detail that we did not consider sufficient moving forward. We 
were aiming, and are still aiming, at exactly what the GAO and 
the IG pointed out, which is to develop a much closer 
relationship in cost and performance on the management of our 
major programs. We are very conscious that the stovepipes that 
were established individually, geographically and even by 
department, all have to be broken down very, very quickly. We 
tried to actually not only convert the data from a historical 
accounting standpoint, but also to look at the individual 
transactions and the system we selected is transaction oriented 
as opposed to just accounting oriented, and break down a lot of 
the information that existed in a much higher level in the past 
into a much lower level so you can go task by task and start 
doing the analysis you require.
    Mr. Platts. Those are issues that I do want to get into 
with the new integrated financial management program and how we 
are going to get more detail. I actually have some questions 
about the way the system is designed and how much detail we 
get. I would like to focus on the $2 billion discrepancy. As we 
sit here today, do we know where that money went, why there was 
a discrepancy, to ensure there wasn't fraud, waste or misuse of 
funds?
    Ms. Brown. No, it was not a matter of fraud, waste, abuse 
or misuse of funds. Basically, it comes down to accounting 
practices, policies and procedures. Again, as Patrick said, 
when we implemented the new system, we had over 120 legacy 
systems that we were migrating. A lot of those systems didn't 
have the financial rigor or the reconciliation. Like you said, 
every month you reconcile your checkbook even down to the dime. 
It was not a prevailing practice. We weren't quite sure as we 
were moving through the migration and we started doing a 
reconciliation from pre-migration into that area. We started 
seeing the differences and we are researching the differences.
    What I have done in my NASA financial improvement plan 
because that was one of the issues raised within the audit and 
is a material weakness identified. In my plan, we are doing a 
soup to nuts reconciliation starting back to 2000, 2001, 2002, 
and 2003. Basically I am reconciling my checkbook for the last 
5 years and I will continue that until I am able to get to a 
point where I am comfortable in knowing where each and every 
dime went.
    Three weeks ago we received the tapes from Treasury so that 
we can begin that process. I don't mind providing the committee 
with the results of going through that process but again, it is 
through years of being able to do that. We have it now in a 
single system. I can identify at the transactional level down 
to the detail because people had to go back and do that rework 
and put in that information. Not all those systems had that 
information in them. Now I am beginning to process through my 
NASA financial management improvement plan to do that 
reconciliation starting back in 2000.
    Mr. Platts. If I understand correctly, as you are going 
forward trying to best determine where that $2 billion went, 
you have records from Treasury now that would be the records of 
who was paid for what and what amount and you are working 
through that process?
    Ms. Brown. Correct and I do have support doing that.
    Mr. Platts. You said it was 3 weeks ago you got that 
information?
    Ms. Brown. I received the tapes from Treasury starting from 
2000, 2001, 2002, 2003, correct. It was a little difficult for 
Treasury to come up with the older records.
    Mr. Platts. There was a request a while back?
    Ms. Brown. Correct.
    Mr. Platts. And it took a while for Treasury to put 
together the information?
    Ms. Brown. Correct.
    Mr. Platts. As you move through that process and get more 
detail and try to account for all those dimes that make up that 
$2 billion, I would appreciate that information being shared 
because one thing as I read everything is more than 6 months 
after the close of the end of the fiscal year, we still don't 
know, and I am hesitant that we can say there was no misuse, 
there was no intentional defrauding of the public. At this 
point we really don't know where the money went. We just know 
it went somewhere, $2 billion more than what NASA thought.
    Ms. Brown. It is not that the money actually went 
someplace, it is a matter of whether or not the information was 
recorded in our legacy systems and properly transferred into 
our current new environment.
    Mr. Platts. You don't know at this point whether it was 
even recorded in your legacy systems accurately?
    Ms. Brown. Correct.
    Mr. Platts. So the sooner we get to that detail, I think we 
will be more comfortable because it really goes to one, how 
taxpayer funds are being spent but also that foundation we are 
trying to build on as you are making the transformation to the 
new system that we are correcting the errors of the past. The 
sooner we know what those errors were, the sooner we can make 
sure they are corrected as we go forward.
    Ms. Brown. Correct and that is why this is one of the 
biggest and most pressing priorities we have been working on 
the NASA Financial Management Improvement Plan. Again, it is 
kind of like going back to your bank and asking for your prior 
records from many years. I had to go back to Treasury and ask 
for those records. Having received those, we are beginning the 
effort of going back there and doing that reconciliation. That 
is why we have not taken that $2 billion lightly. That is why 
we are devoting the effort to do so.
    Mr. Platts. One followup on that and I want to get Mr. Cobb 
and Mr. Kutz's comments on this. I realize this was as you were 
being sworn in as CFO but when the report was filed, there was 
no mention of that $2 billion correction in the papers filed. 
The auditor brought it to your attention so it should have been 
at least footnoted. Is there an explanation from someone at 
NASA of why? The Federal accounting requirements should have 
shown that we made this correction. Is there an explanation for 
why it was not noted?
    Ms. Brown. Actually that was an initial oversight at the 
point in time we actually provided our financial statements to 
our auditors. It was literally an oversight. Of course we would 
have adjusted them afterwards as we went through the process 
but because of the timing and because of having to meet the 
November 15 date, we never went back. At that point in time, we 
also knew we were getting a disclaimer. It is a matter of not 
going back and adding the footnote.
    Mr. Platts. I say this in a respectful way and you are the 
one here and the one responsible but I think it kind of 
captures the cultural change that needs to happen that there is 
a $2 billion oversight and whoever is putting together those 
reports doesn't understand that we have a fiduciary 
responsibility to disclose that. That epitomizes a lack of 
appreciation for what the standard practice requires and what 
is needed. I appreciate that is part of what you are seeking to 
change.
    Ms. Brown. Therein lies my challenge.
    Mr. Platts. I do want to get to Mrs. Blackburn but Mr. Cobb 
and Mr. Kutz, if you want to comment on this aspect of the 
audit and the $2 billion and where we stand today?
    Mr. Cobb. Just briefly, I think the reason you have 
internal controls is so that you create an environment where 
fraud, waste and abuse doesn't occur. That is one comment. 
Second, it strikes me that NASA should be able to get to the 
bottom of what happened to the $2 billion without going to the 
bank to find out what happened with respect to the 
transactions. That seems like a work around to a much better 
way of getting at it.
    Mr. Platts. It is fair to say, Ms. Brown, that is what you 
are saying, that you had to go to the bank, the Treasury, 
because your data was so inappropriately maintained in the 
legacy systems?
    Ms. Brown. Yes.
    Mr. Platts. Mr. Cobb, your comment about the internal 
controls, I assume something looking at whether there should be 
an audit of their internal controls, an audit level opinion on 
the internal controls, that is something you would support?
    Mr. Cobb. I would agree with the notion and I have heard 
discussions about the idea of whether or not the independent 
auditors should render an opinion on internal controls, I would 
agree with that notion. I think the NASA experience alluded to 
in Mr. Kutz's testimony where there were a number of favorable 
unqualified opinions, including most recently in fiscal year 
2002, really hid the ball on what the problems were at NASA. If 
there had been greater focus on internal controls, to the point 
of rendering an opinion on internal controls, we might not be 
in the situation we are in today.
    Mr. Platts. Thank you.
    Mr. Kutz, did you want to add anything?
    Mr. Kutz. Just quickly. I would say your analogy is 
accurate and unfortunately, NASA is not the first agency this 
has happened to. This has happened in many other agencies 
before. I would say it is kind of a two-part issue. One is you 
have to go back and reconcile all the old stuff but the next 
question is what has happened beyond September 30, 2003 with 
the new. I think you have to look both ways. Some of the 
agencies we have dealt with on this before, because they will 
never reconcile it down to the dime as you mentioned in your 
statement, they may have to get some write-off authority to 
clean up the books. Then the important part is going forward 
and not letting it happen again.
    Mr. Platts. That internal control system being in place 
going forward is critical too.
    Mr. Kutz. Monthly balancing, yes.
    Mr. Platts. After her patience with me, I was about to 
yield. As soon as Mrs. Blackburn comes back we will yield to 
her. Let me continue on some of the audit issues.
    Ms. Brown, in your discussion about the $582 billion or so 
adjustments and explaining how one correction may be $30 
billion done three times and equals $90 billion, you sought to 
explain that. Do you want to expand on that and how you are 
looking at what happened in the past that we have that huge 
number as we go into the 2004 end of the year audit. If there 
is a one-time correction that cumulative is $582 billion 
because you are correcting for all the wrongs of the past, 
hopefully this year we are not going to see similar types of 
corrections in this year's audits. Would you like to expand on 
that?
    Ms. Brown. We are going to show you a couple charts and I 
am going to have Patrick explain to you what happened last 
year, what is happening this year and hopefully give you an 
idea of what you can expect with what regards to what we call 
journal vouchers or JB type of entries.
    Mr. Ciganer. As we mentioned earlier, 2003 was the year 
where we deployed the new system and it was deployed in a 
series of waves. We learned from the previous failed attempt in 
trying to do everything at once was just not feasible while 
trying to keep the risk at a limit we could live with. 
Unfortunately, 2003 was the fiscal year in which the agency was 
gradually converting to the new system. This created enhanced 
work for the auditors that went beyond anybody's expectation. 
All of a sudden, our audit team had to audit the old systems 
and the conversion to the new system and then what the new 
system reflected. Additionally the ability to prepare financial 
statements following adjustments had to be done in a manual way 
because the new system went live in late June for the last 
centers of the agency. There was no capability, as was 
accurately pointed out, to prepare our financial statements 
right out of the system.
    The first chart basically describes, and I will not go into 
the detail, the number of steps that had to be taken in 2003 in 
order to not only prepare the statements but also identify and 
post all those adjustments. As we were at the end of the fiscal 
year, generating the data in the new system, all of the 
adjustments had to be posted to that new system and part of the 
internal controls required the tracking of every individual 
step and in addition, the training that was required to post 
those adjustments, had not been as efficient as we had hoped.
    Essentially, a lot of mistakes in postings were recorded 
and then those postings had to be reversed. We have a specific 
occasion, which is very unfortunate, where a simple $500,000 
adjustment that got posted to a wrong account was reposted over 
15 times and therefore the audit log trail we created 
registered that amount. Imagine 10 centers, $15 billion, for 
the year worth of adjustments, including all the open 
contracts, some of which cover several years and you can see 
the amount of postings and adjustments that took place. It is 
not optimum, but, what we are aiming to do in 2004, is by 
moving completely in 2003 the agency, since October 1, has been 
operating in the new system and, as you can see, we now will 
have a much cleaner way of producing the statements and the 
adjustments.
    Mr. Platts. When I saw that $582 billion, I thought it was 
a misprint. I appreciate the explanation.
    You diplomatically said that some of the errors or a large 
part of those are mispostings that had to be corrected and one 
apparently 15 different times and that tells us that the 
training, the skill level of some of the individuals making 
these postings was not adequate. I assume you are giving 
everyone a crash course in how to more accurately post their 
data?
    Ms. Brown. An extremely correct assumption, yes, but will 
people still incorrectly post adjustments or incorrectly post 
data into the new system? Yes. It is part of the learning 
curve, it is part of what we call the adaptation phase of any 
new system of implementation. Will the numbers be in the 
billions? I definitely hope not. We are working through these 
areas. I don't think we have seen anything at this point in 
time.
    Mr. Platts. My understanding is that of the total amount of 
adjustments, the $565 billion roughly was related to data 
conversion. That still leaves another $17 billion that is not 
related to data conversions. Can you expand on what that other 
$17 billion relates to?
    Ms. Brown. That is related to the contractor-held property 
which again is outside of our system. That is the information 
that is reported to us or pushed to us from our contractors. It 
is basically contractor-held property that is in the hands of 
contractors by which they have to report back to us. Those 
discrepancies were in the contractors' information being pushed 
to us and we cannot manipulate change or do anything with that 
because it is reporting to us.
    Mr. Platts. But you subsequently learned it was inaccurate 
to the tune of $17 billion and corrected that. That leads us to 
another issue which I was going to followup later which is your 
contract management practices.
    Ms. Brown. Correct.
    Mr. Platts. As we said, the wrongful transfer of data was 
about training and knowledge of making postings, and that $17 
billion tells us that even though it seems small compared to 
$582 billion, it is still $17 billion in errors by contractors 
submitting information because it is contractor-held but NASA-
owned?
    Ms. Brown. Correct.
    Mr. Platts. So they are inaccurately reporting to the 
taxpayers what their assets are. I assume you are taking 
action. I don't know if you want to expand now on the contract 
management and how you are trying to address the errors in 
oversight of your contractors?
    Mr. Ciganer. This became a very significant issue starting 
2 years ago and over time we realized the only way we were able 
to accurately track our assets that were currently being 
developed by the contractors is to develop a more sophisticated 
automation process. Currently the contractors are generating 
essentially year-end reports that give us the information. That 
report in itself needs to be audited. Every time we audited it, 
we found mistakes.
    The next module of the IFM program, Integrated Asset 
Management which just got started right now, is specifically 
focused at addressing this issue which is in itself very 
complex from a systems standpoint because we need to have 
insight into the various asset management systems held by our 
contractors.
    Mr. Platts. It is going to be a critical part because my 
understanding is 90 percent of your budget is spent on 
contracts. So you need to get this aspect in order.
    Ms. Brown. About 98 percent contracted out and of the 
assets on my balance sheet, it is actually 75 percent. This is 
a very key element of our module that I am looking forward to 
as the Chief Financial Officer in getting and it is a definite 
requirement that we need.
    Mr. Platts. Mr. Cobb and Mr. Kutz if you could comment and 
then Mrs. Blackburn, I promise not to ask another question and 
yield to you.
    On the two issues we have talked about here, one is the 
$582 billion in adjustments and your understanding of how that 
came to be and also your assessment of the data that 
substantiates what adjustments were made. Are you comfortable 
with your knowledge base of how that huge sum came to be and 
how it is being addressed?
    The second part is on the contract management side of how 
we are moving forward and getting our arms around the 
contractors who expend a huge sum of the funds in NASA and hold 
a huge portion of their assets.
    Mr. Cobb. Yes, I do feel as though there is a general 
understanding of how the large numbers came to be. I think in 
simple terms, adjustments and multiple adjustments were made to 
bundles of transactions because of errors in the system and 
then those errors in the adjustments were grossed up and you 
ended up with large numbers.
    To me there were numerous in and outs that led to the gross 
$582 billion. To me, the number is not as important as the 
inadequacy of the documentation that shows what the basis was 
for the various adjustments. But with respect to the difference 
between the 2003 chart on how IFMP was going to work and the 
2004 chart, the key is how much manual manipulation it is going 
to take. Is the CFO going to be able to press a button and have 
accurate financial statements issued? I think if you look at 
the chart, it says in effect no because there is going to be a 
body of corrective activity that has to take place. In fact, I 
question whether or not one can press a button and have any 
financial statements issued at this point.
    We understand the problems that were identified in fiscal 
year 2003 are not fixed. There continue to be data integrity 
problems, and there continue to be questions about whether or 
not the system can generate financial statements. Ultimately 
the policies and procedures that Gwen's improvement plans are 
trying to implement are still not firmly in place. So will 
there be another year with $582 billion? The number will be 
different I am sure and probably be less but my guess is there 
are going to be substantial problems.
    Mr. Platts. The underlying problems still exist that 
generated all those adjustments? We are not yet close to 
addressing that?
    Mr. Cobb. That is right and I have a great deal of respect 
for the CFO and her team that are trying to get on top of the 
problems, as well as for Mr. Ciganer's efforts to get on top of 
the issues relating to IFMP, but there are still plenty of 
issues.
    Mr. Platts. Mr. Kutz.
    Mr. Kutz. Yes. I will be quick. I am sure Representative 
Blackburn would like to take her turn.
    With respect to the $565 billion, I think it is a 
reflection of problems with following disciplined processes and 
system implementation, issues with respect to requirements, 
testing, and risk management. I am sure if they look back, they 
would like to have dealt a little bit more with these things 
before they implemented the system. Now it is kind of a 
patchwork, catch-up, fix it after the fact, so that would be my 
observation. I can't add anything more to what they have said 
on the other part.
    On the property, I agree 100 percent with Mr. Ciganer with 
respect to the automated interfaces needed into the contractor 
records which the analogy would be Procter and Gamble has the 
same thing into WalMart's system and it is a little different 
scenario with inventory but the same concept. They need to have 
that to have asset traceability from their general ledger at 
NASA to the detailed records at the contractor of the property 
assets. I would agree with him on that.
    Mr. Platts. What was the timeframe? You are beginning that 
now, that module?
    Mr. Ciganer. Yes, sir. As a matter of fact, one chart shows 
we are starting right now development of the module and the 
target date for completion is the first quarter of fiscal 2008, 
again because it is a fairly complicated undertaking from both 
a system design and validation and data integrity standpoint.
    Mr. Platts. That leaves me to other questions but I am 
going to hold on to them for now. Mrs. Blackburn has been very 
patient. Mrs. Blackburn is recognized for the purpose of 
questions.
    Mrs. Blackburn. Thank you, Mr. Chairman. I want to thank 
our panel for your time today. We really want to work with you 
to be certain that these situations are addressed. I will 
apologize to you all for stepping out. I had a group of four 
constituents who were waiting to visit with me on an issue that 
is as important to them and to our district as your financial 
health and your agency's health is to our Nation.
    Ms. Brown, I would like to begin with you just for a couple 
points of clarification. As the chairman was talking with you 
about the reporting structure for the CFOs, you mentioned your 
timeline for change should be ready in about 2 weeks. My 
question is, is this just your human capital change or does 
that also include your financial systems and the changes there?
    Ms. Brown. The change I was speaking of is mostly in human 
capital. We are looking at reorganizing or restructuring within 
the NASA community for the human capital. We are working toward 
the systems side.
    Mrs. Blackburn. Another point of clarification. In your 
written testimony, you say you have used blended data to 
prepare your financial statements. For the record, would you 
explain what blended data is?
    Ms. Brown. Blended data would have been the legacy system 
and the SAP system because we had over 110 different systems 
that we had to migrate through and it was done in a wave 
approach. Not all the centers in fiscal year 2003 were all 
operating on the SAP environment. We had to take data from the 
legacy system up to the point of conversion and then also data 
from the SAP system at the point of conversion forward. That is 
what we termed blended data.
    Mrs. Blackburn. Your SAP system, that software, is it my 
understanding that is being phased out and that by 2012, you 
will have no technical support for that financial system?
    Ms. Brown. I am going to give that one to my project 
manager.
    Mr. Ciganer. It is accurate that the current version of the 
software that is being implemented is being slotted for 
upgrade. Those very large enterprise resource planning systems 
are consistently developing new upgrades and new updates, so, 
the SAP current product has been advertised as being phased 
out. We have actually planned the migration to the new version 
which is indicated in the schedule where it says: ``enterprise 
upgrade'' will start fairly shortly and will take approximately 
15 months. We were very aware unfortunately of the fact that 
this type of environment requires you to consistently update 
your system. This is just like Windows, just a lot more.
    Mrs. Blackburn. Mr. Kutz, would you like to comment on 
that, sir?
    Mr. Kutz. I agree with what he said. I think there are 
going to be some licensing fees and other costs involved in 
this that may or may not be involved in the total cost of the 
program at this point but hopefully, also there will be some 
additional capabilities since it will be a new generation of 
software. That might help them with other things.
    Mrs. Blackburn. Mr. Kutz, the new financial system that we 
are dealing with, how do you see this helping them address 
their financial weaknesses and the internal controls. You may 
have addressed this a bit while I was out of the room. I would 
be interested in your take on that.
    Mr. Kutz. With respect to the overall concept of having an 
integrated system, I think it is definitely the right move. We 
support what they are doing from a conceptual standpoint. Our 
issues have been with the implementation of the system. Having 
an integrated system and trying to shut down the different 
systems at the 10 centers is the right thing to do so it should 
help from that perspective. It should also help them with 
issues such as property management in the long term, although 
as Mr. Ciganer said, I think really to have their systems be 
compliant with Federal standards, they are going to have to 
develop that automated look into the contractors' records with 
respect to the actual asset traceability. Those are really long 
term types of issues but the concept of this for external 
reporting purposes and also for program management purposes is 
conceptually correct. Our issues have been with some of the 
implementation steps.
    Mrs. Blackburn. Is this FFMIA compliant?
    Mr. Kutz. We reported it was not and again, we had reported 
there were a number of capabilities that were deferred from 
June 2003 when they said the core modules were fully 
implemented, there were a lot of capabilities deferred in our 
view relative to things like budgetary reporting, the property 
issue is not dealt with and as Mr. Cobb noted, the system right 
now cannot prepare financial statements. Their quarterly 
reports to OMB are going over as estimates. Those are 
significant capabilities that although they said the system was 
fully implemented in June, clearly there are things that still 
need to be done for it to be compliant. I think the property 
issue that Mr. Ciganer says is 2008, our belief is that will 
have to be done for the system to be compliant.
    Mrs. Blackburn. So we are basically a long way away from 
their having a compliant system?
    Mr. Kutz. Given the timeline he mentioned, I would say yes.
    Mrs. Blackburn. Do you have a thought on what the cost is 
going to be, the true cost of this?
    Mr. Li. The cost of the system that NASA has reported to 
you this year, fiscal year 2005, when you take a look at that 
number, it is around the $500 million. That is only for the 
direct procurement costs of this particular system. What is not 
within that explanation is that it requires also the Civil 
Service costs associated with the personnel to implementing the 
system and also the enterprise costs that are needed. The 
enterprises are the individual organizations within NASA. When 
you add up all those numbers, you are up to about three-
quarters of $1 billion. In our report we provided last 
November, we reported on life cycle costs, which are the costs 
that would be needed to not only develop the system but to 
maintain it over the life of the system. The life we had used 
in coming up with our estimate was 2000-2010. For that period, 
the total, including the operations and maintenance for IFMP is 
very close to $1 billion.
    Mrs. Blackburn. Mr. Li, let me ask this. Would it be your 
recommendation, the GAO recommendation, that they scrap this 
and start over?
    Mr. Li. No. I think we are beyond that point. I think Core 
Financial has been implemented, I think at this point in time 
there are recommendations we have made to NASA and I am hopeful 
and I am encouraged they have accepted our recommendations. We 
are looking forward to those changes being made.
    Mrs. Blackburn. Mr. Cobb, did you have a comment on that?
    Mr. Cobb. Just to followup on what Allen just said. The 
Office of Inspector General intends to conduct an overall audit 
of the IFMP. We intend to work closely with GAO and use 
resources they have offered to us in connection with that 
activity to get at whether or not NASA is following up on the 
recommendations that GAO and we have made. We will look at the 
contracts that have been entered in connection with IFMP, and 
the resource issues to see whether or not the dollar numbers we 
have been discussing are accurate. In addition, we will 
evaluate whether the various modules work in concert with each 
other so that the system can be most effective from the users' 
standpoint in generating information for managing activities.
    Mrs. Blackburn. Let us continue along that line. Mr. Kutz 
said something about the contractor-held assets. We have talked 
some about the internal controls. What type internal controls 
should NASA establish so that they get a more reliable and 
consistent reporting of those contractor-held assets?
    Mr. Cobb. Fundamentally, I see the problem that NASA can 
establish reporting systems for contractors to report on NASA-
owned contractor-held property. The independent auditor 
typically looks for how NASA understands that the numbers being 
reported are right, how does it go about that? Those are the 
internal controls they are talking about. Both Mr. Ciganer and 
Mr. Kutz have talked about that what you need is a system 
linked between the contractors and the agency that gives you a 
real time understanding of what is happening with respect to 
evaluation of the contractor-held property. Until you have that 
in place, contractor-held property is going to be a problem in 
connection with the annual CFO audits that are conducted and if 
everything else is fixed, might result in qualified opinions 
until that asset module is in place and working.
    Mrs. Blackburn. Mr. Kutz, did you have a comment on that?
    Mr. Kutz. I would add he was getting into too that they are 
reliant upon the controls at the contractor, so once that 
automated interface is there you still have to have reliable 
data at the contractor. I think that was the internal control 
that Mr. Cobb was talking about and I would concur with what he 
said.
    Mrs. Blackburn. Ms. Brown, you had a comment?
    Ms. Brown. I was also going to say I agree with Mr. Cobb on 
two things. First, we need the system. Second, we need the real 
time look into the contractor-held property but the third thing 
that we would need is flexibility to be able to go in and do 
quality assurance audits to ensure that they are in compliance 
with those regulations and they have proper accounting of the 
property onsite. That is something we are working toward also.
    Mrs. Blackburn. Ms. Brown, do you have a set of best 
practices or an agency you are looking at, something that is 
more or less a template you are following to get things on 
track?
    Ms. Brown. Actually, we are looking at several. When we 
first started the implementation of the SAP enterprise 
relationship we had actually engaged Northrop Grumman and they 
have kind of been our yardstick as to where we are and being 
able to chart our milestones as we move through the process. As 
we have been getting a lot of attention on our financial 
management, other agencies have been coming to the forefront 
and extending their best practices and some of the lessons they 
have learned as they went through the process like Dupont and 
also some other agencies.
    Mrs. Blackburn. Mr. Kutz, if proper best practices had been 
followed, wouldn't that have avoided a lot of the problems we 
are talking about today?
    Mr. Kutz. I believe to some extent that is true. You 
mentioned Northrop Grumman and I visited with Northrop Grumman 
also and they are putting in SAP in their organization but our 
recommendations with respect to project management have gotten 
into requirements, testing, and risk management, those types of 
project management items. As Mr. Li said, we are hopeful they 
will be implemented and they have said they will implement our 
recommendations. If they do and follow the best practice and 
discipline processes of project management, I think there is 
nothing wrong with the SAP software. That has been proven to be 
software that can be used to do the kinds of things we are 
talking about. So it is a matter of having disciplined project 
management to put that in place and make it work.
    Mrs. Blackburn. I thank you for that and I think we all 
know the best practices issue is probably one that we have 
throughout Government.
    Thank you, Mr. Chairman, and I will yield back.
    Mr. Platts. Thank you, Mrs. Blackburn.
    I want to followup with the new integrated financial 
management program and the Core Financial Module in particular. 
It was kind of touched upon, but I am not sure I have a 
complete answer as far as the ability of the system, the CFM, 
to generate financial statements. It is my understanding that 
the quarterly statements for the first two quarters of this 
year were generated manually, not by the CFM. Is that to 
continue for this coming quarter? What is the problem that we 
have a new system that wasn't designed to generate the 
financial statements as required?
    Mr. Ciganer. The question really breaks down into two 
components. The first component is whether or not the system 
itself, the environment we adopted in Core Financials is 
capable of giving us the data that is required to produce 
financial statements. The answer is yes. As Mr. Kutz indicated, 
SAP is an off the shelf system that has the ability from an 
accounting standpoint to manage and track the information very 
accurately.
    The byproduct of being an off the shelf system is the fact 
that it did not come with NASA specific report writing 
capability. That is something that the agency itself had to 
develop. So the environment maintains the core transaction 
information but the production of the reports to meet both our 
internal and external requirements is truly an internal effort.
    We are in the process of developing those reports. As was 
accurately pointed out by the IG and the GAO, we did not have 
that capability in October when the financial statements were 
due. This is taking time. We are specifically focused on trying 
to get the first test of the automated reporting capability in 
June but, again, it is fairly complex. I would like to point 
out that we are actually trying to do something which I don't 
think is fairly pervasive in the Federal environment which is 
extract financial statements and notes directly out of the 
accounting environment. Most agencies produce trial balances 
and then generate manual reports for reasons that range from 
staffing levels to the complexity of our projects and programs 
being consolidated. We decided to actually take a leading edge 
position and develop a series of report generation capabilities 
that would ultimately aim at what Mr. Cobb was stating which is 
why I don't think we will ever be able to push a button but 
will have a system doing the majority of the consolidation and 
reporting work including generating the data from notes.
    To date this has not been accomplished I believe anywhere 
in the financial community we work with. So it is a daunting 
task.
    Mr. Platts. That is where we want everybody to be and 
certainly you are striving for that approach because that is 
part of why as taxpayers we are willing to spend perhaps $1 
billion on technology, to allow you to be able to push a button 
and not just at the end of the year but throughout the year 
because that goes into what we talked about earlier, the 
financial managers and the program managers being able to work 
hand in hand. It can't be once a year at the end of the year 
that you give information, it has to be pretty much ideally 
every week, where are we, do we have problems with overruns and 
costs. That information needs to be generated immediately. It 
can't take a heroic manual effort each time. Otherwise you will 
never have the benefit of what we are after.
    It sounded like you said for the June 30th quarterly, you 
are going to test the ability of the system to generate the 
financial statements?
    Ms. Brown. Correct. We are in the process of testing that 
feature at the moment and we are going through the initial dry 
run. Our plan is to be able to, as Cobb says, press the button 
in June and be able to produce the financial statements. That 
is what we have been working toward. Right now, my staff has 
informed me that it is in the testing phase at this point in 
time so that we can go into actual operation by June.
    Mr. Platts. Mr. Cobb and Mr. Kutz, your assessments of 
where we are now in the system and the ability to generate 
those financial statements?
    Mr. Cobb. I have some skepticism as to whether or not on 
June 30 the system is going to be able to generate financial 
statements that are a fair representation of the financial 
state at NASA.
    Mr. Kutz. I would concur. I think this is a symptom of what 
was a schedule driven, core module implementation in 2003 and 
that we have a system now almost a year later that can't 
prepare financial statements. I think in looking forward, a 
lesson learned from this is as we move forward to make sure we 
follow very disciplined processes and not jump ahead of 
ourselves and turn on the switch before we are ready to go.
    Mr. Platts. Is the fact that we moved forward without an 
enterprise structure plan in place, in trying to get it out 
there and underway, part of the reason why we maybe weren't as 
thorough in having all the partners involved in the design and 
plans for the system?
    Mr. Kutz. I think it is really the requirements and 
testing. If you had a requirement which it did have a 
requirement, JFMIP requires you to have the system be able to 
prepare financial statements. If you had a test case in place 
to test it before you went live, you would have known that you 
couldn't do it. So I think it gets back to basic project 
management of requirements and testing.
    Mr. Platts. Are we testing the ability of NASA to meet the 
November 15 deadline for this 2004 end of the year statements?
    Mr. Ciganer. I would like to clarify the fact that we are 
testing our ability to produce quarterly financial statements 
using this function. I do not think, and I agree with the 
Inspector General, that the June results are going to be what 
we want to see. This is the first time that a lot of the 
weaknesses that were identified from the fiscal year end close 
were fixed and at least some of them were patched because they 
were fundamental software issues.
    We should point out that although the report generation 
capability is something we are developing internally, our 
objective is to be able to very quickly generate the base 
information out of the system. It is unlikely, and I agree with 
the OIG and GAO, that in this fiscal year we will be able to 
produce by November 15 a set of reports that accurately 
represent automatically the financial position of the agency. 
It is still going to require manual work.
    Mr. Platts. You are still going to require manual work. 
Even with that manual work, will you make the November 15th 
deadline?
    Ms. Brown. Yes, we will make the November 15th deadline. As 
one of his most significant customers with the IFMP program 
right now, I am demanding quite a bit of attention from him as 
you see him sitting here with me today but also my whole goal 
in being able to go through this process, as arduous as it is, 
is making sure that we have a system that we are pulling data 
directly from our system and producing those financial 
statements in an automated fashion. As you know, moving the 
date to November 15 is just the first step. I see down the 
horizon that you will probably want to have financial 
statements on a monthly basis. If I am successful in doing 
this, this will set NASA on the course of being able to do 
monthly financial statements with footnotes.
    Mr. Platts. That relates to the issue now of monthly 
reconciliations with Treasury?
    Ms. Brown. Correct.
    Mr. Platts. Is that ongoing?
    Ms. Brown. Actually, we have already set up that process 
with part of our NASA financial management improvement plan. We 
have monthly reconciliations which are being certified not only 
by the center CFOs but once we get the center CFOs educated and 
working through this process, we are going to educate our 
center directors also so that they have an understanding of 
what is going on with their checkbook at each of the centers. 
It is a two-pronged process we are working on but again, a lot 
of these fixes are not going to happen overnight. We are 
plotting a long-term course because this is a significant 
challenge.
    Mr. Platts. It is a balance between not rushing forward and 
making errors that you have to spend a lot of time correcting 
but at the same time, trying to be as quick as possible and 
there is no easy way to err, quick and errors or longer and 
less information in the meantime.
    Ms. Brown. As I will echo from my Office of Inspector 
General, we can no longer afford at NASA to continue to put 
patches on different problems. We need to fix the problems for 
the long term. Again, we sit down, we do the analysis, we say 
what is it today, where is it we want to be tomorrow and what 
are the changes that need to be implemented? That is what we 
are doing in financial management at NASA because we have a 
system that is the underpinning to getting us there and it has 
flexibility.
    Mr. Platts. It might be a good time for the broad question 
of all of you. The track record, $180 million spent, two 
different efforts, no success. We are now going to spend what 
we believe to be close to $1 billion over 8 to 10 years on this 
new system. Whatever time it takes, what is your confidence 
level, each of you from your different perspectives that when 
the system, all the modules are in place and we have the system 
as we have planned it up and running that we will have a system 
that generates accurate, timely, actionable information month 
in, month out, year in and year out?
    Ms. Brown. My confidence is high. Given right now the 
challenges I see, it is hard to see, as they say, the light at 
the end of the tunnel. If I take the time and use this 
opportunity as the Chief Financial Officer to set the stage 
today to do the right things in financial management to set the 
course such that we can be there tomorrow, we will be able to 
do that. I would probably like Mr. Ciganer to comment as far as 
the cost because he has been doing a bit on that area. Again, I 
am a primary customer of the IFMP program and I recognize that 
yes, we do have a lot of challenges, the system is expensive 
but it is the right course and right now as the CFO, I don't 
see any other alternative.
    Mr. Ciganer. I just want to add to what Ms. Brown was 
saying. The system itself is a series of tools, it is an 
environment that provides information more efficiently over 
time, hopefully. A significant component of this entire process 
is also the changes that should take place within the agency. 
That includes some of the comments that were made in more 
tightly coupling financial management to program management. 
Those stovepipes cannot stay the way they are. We have to also 
be sure that all program reviews consist of costs, technical 
performance and schedule and all three of those elements have 
to be looked at and analyzed.
    We are building the tools but although daunting, the 
technical challenges are only half of the undertaking. Changing 
and moving forward the way we manage and also guide the agency 
to using that information is a cornerstone. That is way beyond 
the systemic element.
    One last thing I want to add is that I know it is a 
tradeoff on getting the system up and running or making sure it 
is perfect and then getting it up and running. We made a 
conscious decision, I made a conscious decision, to roll out 
the system during fiscal year 2003 to get it at least running. 
Some of the issues that we identified subsequently could not 
have been identified solely in testing and simulation. In 
addition to that, we should mention that for the first time in 
its history, the agency is actually operating from a single 
system day in and day out. All of the bills are paid out of 
that system, all of the transactions are tracked. There is a 
lot to be done, there absolutely are software flaws that need 
to be fixed, processes that need to be changed but the 
significant step has been taken forward in that 2003 extremely 
painful year.
    Mr. Platts. Mr. Cobb, Mr. Kutz, your confidence in where we 
will be after the years pass and the $1 billion or so is spent?
    Mr. Cobb. I think that I would agree with Mr. Ciganer that 
a condition to being able to implement the system is that the 
agency has to embrace it, the agency at all levels of 
management. In terms of a prediction of success or failure, I 
would only say I think there is going to be a vast number of 
implementation issues that the agency has to work through over 
a significant period of time. NASA is going to need to be 
patient and beyond that, I don't have the audit work to support 
a conclusion, but I think it is all the right idea and is worth 
continuing to plug away at it. If we think it is going to be 
good money after bad, we are certainly going to raise the flag 
on that.
    Mr. Platts. Things such as what we discussed earlier, Ms. 
Brown having direct authority over those center CFOs, that is 
part of the other half of the equation beyond the technology is 
the personnel and structure of responsibility?
    Mr. Cobb. It is a big issue the 45 year history of the 
agency, and I think a lot of areas at NASA are fighting the 
idea that you have in effect a centralized management.
    Mr. Platts. Mr. Kutz.
    Mr. Kutz. I would say from a confidence level with respect 
to getting at least marginal improvement from the accounting 
side, I think it is very likely they will get that. They have 
already had some benefits and if they do some patchwork to deal 
with some of the things like the budgetary reporting, year-end 
closing and so forth, I think they are going to get that. The 
harder part is going to be, as Mr. Ciganer said, to make this 
NASA's system for program managers and to overcome that 
obstacle which is a two-part obstacle. One, you have to get the 
data that he talked about, cost schedule and performance 
information for your contracts in the system so they actually 
use it. Then you have to convince them to actually use the 
system. That is going to be a major challenge as is the look 
into the contractors systems for the property and equipment. 
Those are major challenges that are fairly far out into the 
future for them. Those are going to be probably the hardest 
things to implement.
    Mr. Li. If I can just comment, the first effort that failed 
was an in-house effort. They tried to develop an integrated 
financial system in-house. The second done was one in which a 
firm indicated they had the solution but they would make minor 
modifications to it. It turned out those modifications were a 
lot more extensive and that failed.
    The thing that differentiates this last effort with the 
other two is the level of support and involvement in terms of 
top management. I think Mr. O'Keefe has really been vigilant 
and is imposing a lot of pressure on getting this particular 
system. That is a two-edged sword because that pressure also 
manifests itself in terms of the schedule pressures that my 
colleague just talked about in terms of wanting to get this 
particular system out there and when they did so, they only did 
it because they were able to defer some functions, some 
functions were not available, and I think that says something 
about trying to meet a schedule as opposed to trying to meet 
what your needs are.
    Mr. Platts. I concur with you with Mr. O'Keefe's commitment 
and Ms. Brown's commitment of changing the dynamics of the 
agency and truly embracing what we are all after, that 
accurate, reliable, actionable information.
    Mrs. Blackburn.
    Mrs. Blackburn. Just a couple quick things to wrap up. Ms. 
Brown, I like your optimism and I think if anyone can make this 
come about and get those reports by November 15, that you are 
the one. You are going to put the energy in to accomplish that 
so I would like to know if you agree with the Inspector 
General's report that NASA has insufficient Civil Service staff 
to carry out the financial management implementation plan?
    Ms. Brown. Definitely I do. Of course coming on board as 
the new Chief Financial Officer in November, that has been one 
of the areas I have been working diligently with my current 
CFOs. They have identified to me already the staffing shortages 
and we are working through that in order to promulgate that 
through the budget process to see if we can get those 
additional resources. Even at the headquarters level, I am 
having staffing challenges. I have went to three 1990's from 75 
just in the financial management area and I am now down to 
about 22 at this point in time. That is the staff that I have 
to put together the whole agency's financial management 
statement.
    Mrs. Blackburn. Am I correct in understanding you have 
hired an outside consultant to assist with this?
    Ms. Brown. Yes. Due to the deficiency that I have in my 
current personnel allocation, I have had to hire contractor 
resources to do that. It is only a short term fix. I am 
confident and hopeful that through the committee and through 
other processes that I would be able to increase, augment and 
be able to supplement throughout the future as that has been 
identified by the IG as a definite high risk area for myself.
    Mrs. Blackburn. Mr. Cobb, did you have a comment on that?
    Mr. Cobb. No, it seems as though Ms. Brown agreed with what 
most people are articulating. in terms of the issuance of 
financial statements by November 15, one question is whether or 
not those financial statements are going to be auditable in a 
manner that could get you to something other than a disclaimer 
or an unqualified opinion. I think that is unlikely.
    Mrs. Blackburn. Mr. Kutz, any comment?
    Mr. Kutz. I think that the human capital issue is critical 
here because when you look at something like this, you see 
human capital all over it. I look at NASA kind of as where IRS 
was several years ago with respect to that and bringing in 
several really good people could make a big difference for the 
CFO. I believe that is an important aspect of this. The 
environment out there for hiring is not bad although in 
Washington it is particularly difficult because there are so 
many people looking for government accounting types but we have 
found we are much more competitive at GAO compared to the big 
four accounting firms than we might have been 4 or 5 years ago. 
We have gotten some very, very good people recently so I hope 
the NASA people will be able to bring in some good talent.
    Mrs. Blackburn. Ms. Brown, I don't want you to take the 
time to answer this today but I am going to ask you to submit a 
written answer. I know we are running long. I am looking at the 
clock and it is already 4:30 p.m. and you all have been very 
generous with your time to talk with us today. We have kind of 
talked all around this. We have talked about the errors and how 
the books have not reconciled and not knowing where some of the 
money is. Those are of great concern to us. We are talking long 
term and we are talking stop gap. I want to go back to the stop 
gap right now.
    What I would like to know from you is what measures you 
have implemented can minimize the numerous additional 
transactions to undo and correct your financial reporting in 
those transactions? I think that would be instructive to us as 
we look at going forward and just to know what we are dealing 
with, what measures you all have taken to be sure that this 
year we are going to be moving toward having timely and 
accurate financial statements?
    Mr. Chairman, I will yield back to you.
    Mr. Platts. Thank you, Mrs. Blackburn.
    I have just a couple followup questions that we will wrap 
up with. One is on the staffing issue and I appreciate your 
frankness on the need both in the centers and in the 
headquarters for additional staff. I believe the current budget 
year request is about $900 million increase from last year that 
has been submitted by the administration. Is any part of that 
specifically allocated to additional staff for financial 
management activities?
    Ms. Brown. Yes. I actually received an augmentation of 15 
individuals for my staff. Unfortunately, those are 15 other 
than full-time equivalents meaning they are anywhere from 2 
year to 3 year temporary type hires.
    Mr. Platts. So there is some help but it is not a permanent 
acknowledgment for the need for additional commitment. That is 
something I think in trying to help move along this process, 
this committee, because we are investing whether it is a $500 
million settlement, the procurement aspects of this new but we 
are not adequately funding the human capital side of this 
effort, is going to be good money after bad because it is not 
going to work. It is going to have to be a partnership. I hope 
internally you will continue advocate the human capital side of 
what you need, although we are an oversight committee and not 
an appropriating committee, we would like to be on the 
appropriating side but it is something that is going to be 
critical to your efforts.
    Mr. Li. On that point of human capital, I think we have 
identified and GAO has identified human capital as a major 
challenge for the entire Federal Government. In addition to 
financial management organizations having difficulty, I think 
this is prevalent throughout not only all agencies but at NASA. 
NASA in the past year has received additional personnel 
flexibilities by which it will be able to retain and attract 
higher talent. So it is not like they haven't addressed this 
particular issue. They do have some tools available to them.
    Mr. Platts. Are you seeing benefits from that flexibility? 
It is similar to what we have done at DOD and the GAO in 
wanting to have those same types of options.
    Ms. Brown. Actually I have seen great benefits from that 
because I have actually been sending some of my direct reports 
from here out to the colleges and universities and using that 
capability we have been given and that flexibility to do direct 
hiring at the colleges and universities in order to bring in 
individuals. We are looking at being able to get one out of the 
two offers we just did within the last 30 days. So we are using 
a lot of those flexibilities. Mr. Chairman, I am using anything 
that I can to get any bodies that I can into my organization be 
it here at headquarters or at the centers in order to address 
this issue.
    Mr. Platts. I am not sure how the funds for financial 
management come to you in the agency. The dollar amount 
correlates to both the technical and the human capital but how 
is it allocated? Is it specifically delineated for financial 
management or is it part of a larger pool of money for the 
general management? How is that set up?
    Mr. Ciganer. It is actually part of our G&A allocation both 
at the corporate level and also at center level.
    Mr. Platts. Explain to me as a lay person, G&A?
    Mr. Ciganer. General and administrative.
    Mr. Platts. Generic administrative sum and then you compete 
for your amount within that?
    Mr. Ciganer. Exactly. We are not viewed as a line item 
project. We are competing every year for those funds supporting 
our budgetary requirements.
    Mr. Platts. Given Mr. O'Keefe's commitment to this effort, 
is there discussion ongoing about it being delineated as a 
parity line item?
    Mr. Ciganer. Yes, there is. As we move away from the purely 
financial components as Mr. Kutz mentioned, the accounting 
system parts into the much broader applications that we want to 
develop, project management, asset tracking, human capital, the 
need to be very stable in managing the funding requirements is 
becoming more pervasive. So there is ongoing discussion.
    Mr. Platts. Mr. Cobb, do you want to comment?
    Mr. Cobb. No.
    Mr. Platts. One final question. As we look ahead to this 
year's year-end statements, one of the things that struck me in 
Mr. Kutz's testimony is the fact that the auditor of the 2003 
statements stated, I guess this was the third year and 
concurred with the GAO's opinion that the financial statements 
were not in compliance with the Federal Financial Management 
Improvement Act. I think that is one of the areas where there 
is agreement to disagree at some point or if we are all on the 
same page, I would like each of you to comment on the fact that 
is the auditor's opinion as stated in that audit, that the 2003 
and previous years were not in compliance with FFMIA and where 
will it be in the 2004 audit. Will we have a similar 
discrepancy? Mr. Cobb.
    Mr. Cobb. I think consistent with my prior testimony on 
this, I would render a prediction and I would expect that the 
new independent auditor is going to find problems in terms of 
compliance with FFMIA in this year, 2004, and quite possibly 
into 2005.
    Mr. Platts. Mr. Kutz.
    Mr. Kutz. We don't believe they have ever been in 
compliance with FFMIA despite prior reports that said they 
were. I believe one of the reasons they are implementing IFMP 
is to truly become in compliance with that. Things like the 
property and equipment reporting and using the system to manage 
programs are two of the critical elements in our view that are 
necessary for that to be successful and that is not going to 
happen in the short term in all likelihood.
    Mr. Platts. You think the asset module will be several 
years in the process. You envision to get true compliance, we 
will need that in place?
    Mr. Kutz. That would be GAO's view.
    Mr. Platts. Right.
    Ms. Brown. We would be in agreement with that. Again, like 
I said, our goal here is we do want to become compliant but we 
need to lay the foundation and the groundwork to do so. Again, 
it is going to take time and we will be working through these 
processes to make sure we are compliant as we go through the 
steps. We are looking to show measurable improvement moving 
toward and in that direction of being FFMIA compliant.
    Mr. Platts. We look forward as a committee to continue to 
work with each of you in your respective entities as you go 
forward. Certainly all of us will anxiously await November 15th 
to see this year's reports. I meant to emphasize up front and 
will close with, that as a subcommittee, Mrs. Blackburn, 
myself, Mr. Towns and other Members, we see ourselves as 
partners with the agencies we are working with. In today's 
hearing, to have you, Ms. Brown and Mr. Ciganer for the agency, 
the Inspector General, GAO, as well as Mr. Kutz and Mr. Li, 
what I hope is that the dialog that has gone on today will 
continue on a regular basis as we go forward especially between 
each of your entities as you work together to get what we are 
all after which is to allow NASA to do its great work and be 
able to be openly accountable to the American taxpayers who are 
funding that great work.
    I look at the record of the past years and into the 1990's 
and where the independent auditor thought maybe it was doing 
NASA and its staff and its supporters a favor in giving audit 
opinions that were clean when they shouldn't have been and what 
the record tells us today, they really did a disservice to 
NASA. I appreciate that each of you are seeking to correct the 
errors of the past today and hence forth. Given the number of 
years the practices were not as legitimate and accurate as they 
should have been, that certainly is a challenge. As a 
subcommittee, we look forward to continuing to work with you.
    Ms. Brown, as you work to have better authority over those 
independent centers and the financial management end of this, I 
have plenty to fill my schedule but if it means I need to have 
10 center CFOs be requested to testify because they are not 
adequately being responsive to you, then so be it. I am 
optimistic as well that you are going to be persuasive in that 
realignment and gain the oversight and authority you need to 
well fulfill your statutory responsibilities. We wish you well 
in that effort.
    Ms. Brown. Thank you.
    Mr. Platts. Mrs. Blackburn, did you have anything in 
closing?
    Mrs. Blackburn. No.
    Mr. Platts. If not, we will keep open the record for 2 
weeks from today for those who want to submit additional 
information and for that additional information, Ms. Brown, we 
have asked of you.
    I certainly appreciate the majority and minority staff 
members' efforts today in working with each of our guests and 
their staffs and appreciate everyone's attendance and 
participation.
    This hearing stands adjourned.
    [Whereupon, at 4:45 p.m., the subcommittee was adjourned, 
to reconvene at the call of the Chair.]
    [Additional information submitted for the hearing record 
follows:]
[GRAPHIC] [TIFF OMITTED] 95741.040


                                 
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