Business Modernization: NASA's Challenges in Managing Its	 
Integrated Financial Management Program (21-NOV-03, GAO-04-255). 
                                                                 
The National Aeronautics and Space Administration (NASA) spends  
90 percent--$13 billion--of its budget on contractors. Yet since 
1990, GAO has designated NASA's contract management as a	 
high-risk area--in part because the agency failed to implement a 
financial management system to provide information needed to make
key program decisions. In April 2000, NASA initiated its most	 
recent effort to implement an effective financial management	 
system--the Integrated Financial Management Program (IFMP). Three
years into the program, GAO found NASA risks building a system	 
that will cost more and do less than planned. As a result, the	 
Congress requested reviews of NASA's IFMP enterprise architecture
and financial reporting and program cost and schedule controls.  
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-255 					        
    ACCNO:   A08907						        
  TITLE:     Business Modernization: NASA's Challenges in Managing Its
Integrated Financial Management Program 			 
     DATE:   11/21/2003 
  SUBJECT:   Contract administration				 
	     Cost control					 
	     Financial management				 
	     Financial management systems			 
	     Internal controls					 
	     Program management 				 
	     Reporting requirements				 
	     Enterprise architecture				 
	     NASA Integrated Financial Management		 
	     Program						 
                                                                 

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GAO-04-255

United States General Accounting Office

 GAO 	Summary Report to the Committee on Commerce, Science, and Transportation,
      U.S. Senate, and the Committee on Science, House of Representatives

November 2003

BUSINESS MODERNIZATION

NASA's Challenges in Managing Its Integrated Financial Management Program

GAO-04-255

Highlights of GAO-04-255, a summary report of GAO-04-43, GAO-04-151, and
GAO-04-118, reports to the Senate Committee on Commerce, Science, and
Transportation, and the House Committee on Science

The National Aeronautics and Space Administration (NASA) spends 90
percent-$13 billion-of its budget on contractors. Yet since 1990, GAO has
designated NASA's contract management as a high-risk area-in part because
the agency failed to implement a financial management system to provide
information needed to make key program decisions. In April 2000, NASA
initiated its most recent effort to implement an effective financial
management system-the Integrated Financial Management Program (IFMP).
Three years into the program, GAO found NASA risks building a system that
will cost more and do less than planned. As a result, the Congress
requested reviews of NASA's IFMP enterprise architecture and financial
reporting and program cost and schedule controls.

GAO is making recommendations in three separate reports:

o  	On IFMP's enterprise architecture, GAO recommends that NASA establish
an effective architecture to guide and constrain the program.

o  	On IFMP's financial reporting, GAO recommends that NASA identify and
address all areas that do not comply with federal systems requirements.

o  	On IFMP's cost and schedule control, GAO recommends that NASA follow
best practices and NASA guidance in preparing the life-cycle cost
estimate.

www.gao.gov/cgi-bin/getrpt?GAO-04-255.

To view the full product, including the scope and methodology, click on
the link above.

November 2003

BUSINESS MODERNIZATION

NASA's Challenges in Managing Its Integrated Financial Management Program

IFMP offers NASA an opportunity to modernize its business processes and
systems and improve its operations. However, NASA's acquisition strategy
has created a number of challenges for IFMP. First, NASA has acquired and
implemented many IFMP components-including the Core Financial module, the
backbone of the system-without an enterprise architecture, or
modernization blueprint, to guide and constrain the program. NASA has
since recognized the need for an architecture and, after GAO completed its
audit work, released one that NASA stated was incomplete. NASA has also
taken steps to implement key architecture management capabilities, such as
establishing an architecture program office and designating a chief
architect. However, NASA has yet to establish other key architecture
management capabilities, such as designating an accountable corporate
entity to lead the architecture effort. Moreover, the architecture
products NASA has used to date were insufficient to manage its investment
in IFMP. NASA's approach of acquiring and implementing IFMP outside the
context of an architecture increases the risk that the system's components
will not support agencywide operations-an outcome that could cause costly
system rework.

Two years into IFMP's development, NASA accelerated its implementation
schedule from fiscal year 2008 to fiscal year 2006, with the Core
Financial module to be completed in June 2003. To meet this aggressive
schedule, NASA deferred testing and configuration of many key capabilities
of the Core Financial module, including the ability to report the full
cost of its programs. When the module was implemented at each of NASA's 10
centers, many of the financial events or transaction types needed by
program managers to carry out day-to-day operations and produce useful
financial reports had not been included. As a result of these and other
weaknesses, NASA cannot ensure that the system routinely provides its
program managers and other key stakeholders and decision makers-including
the Congress-with the financial information needed to measure program
performance and ensure accountability.

IFMP is further challenged by questionable cost estimates, an optimistic
schedule, and insufficient processes for ensuring adequate funding
reserves. IFMP's current life-cycle cost estimate does not include the
full cost likely to be incurred during the life of the program. Until NASA
uses more disciplined processes to prepare IFMP's life-cycle cost
estimate, the program will have difficulty controlling costs. In addition,
IFMP's schedule margins may be too compressed to manage program
challenges-such as personnel shortages, uncertainties about software
availability, and Office of Management and Budget initiatives to implement
electronic systems for agency business processes governmentwide. These
initiatives have already affected planning for IFMP's payroll,
procurement, and travel components, an outcome that could result in
schedule delays and cost growth. Finally, reserve funding for IFMP
contingencies may be insufficient-particularly problematic, given the
significant risks confronting the program.

Contents

                                    Letter 1

  Appendix 	NASA's Challenges in Managing Its Integrated Financial Management
  Program 4

Results in Brief 4

IFMP Has Proceeded without an Enterprise Architecture, and NASA's Ongoing
Architecture Management Efforts Are Missing Key Elements 7

Core Financial Module Lacks Capabilities to Facilitate Timely and Accurate
Reporting and Comply with Federal Law 9 IFMP Further Challenged by
Questionable Cost Estimates and an Optimistic Schedule 11 Conclusions 13

Abbreviations

IFMP Integrated Financial Management Program
FFMIA Federal Financial Managememt Improvement Act of 1996
NASA National Aeronautics and Space Administration
OMB Office of Management and Budget

This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.

United States General Accounting Office Washington, DC 20548

November 21, 2003

The Honorable John McCain
Chairman
The Honorable Ernest F. Hollings
Ranking Minority Member
Committee on Commerce, Science, and Transportation
United States Senate

The Honorable Sherwood L. Boehlert
Chairman
The Honorable Ralph M. Hall
Ranking Minority Member
Committee on Science
House of Representatives

The National Aeronautics and Space Administration's (NASA) activities
encompasses a broad range of complex and technical endeavors-from
investigating the composition and resources of Mars to providing satellite
and aircraft observations of Earth for scientific and weather forecasting
purposes. Over the past decade, NASA has advanced space exploration,
scientific knowledge, and international cooperation, and has accomplished
unparalleled feats of engineering.

More than two-thirds of NASA's workforce is made up of contractors and
grantees, and 90 percent, or roughly $13 billion, of NASA's annual budget
is spent on work performed by its contractors. Yet since 1990, we have
identified NASA's contract management as a high-risk area-in part
because the agency has failed to implement a modern, fully integrated
financial management system. The lack of such a system has hampered
NASA's ability to oversee contracts, control program costs, and ensure an
effective human capital strategy-raising serious concerns about NASA's
management of its largest and most costly programs, including the space
shuttle program and the International Space Station.

In April 2000, NASA initiated its third and most recent effort to
implement
an effective financial management system-the Integrated Financial
Management Program (IFMP)-which NASA expects to complete in fiscal
year 2006. Through IFMP, NASA plans to replace the separate and
incompatible financial management systems used by NASA's 10 centers
with one integrated system. The new system is expected to provide better

decision data, consistent information across centers, and improved
functionality, thereby improving agencywide management of NASA's
financial, physical, and human resources.

However, 3 years into the development of IFMP-with significant investment
already made in the program-we found that NASA's acquisition strategy has
increased the risk that the agency will implement a system that will cost
more and do less than planned. As a result, the Congress requested reviews
of IFMP in three areas: enterprise architecture, financial reporting, and
program cost and schedule control. This report provides a summary of the
results of these reviews, which are being reported today in the following
three separate products:

o  	Information Technology: Architecture Needed to Guide NASA's Financial
Management Modernization, GAO-04-43 (Washington, D.C.: Nov. 21, 2003). For
more information on this report, please contact Randolph C. Hite at (202)
512-3439 or [email protected].

o  	Business Modernization: NASA's Integrated Financial Management Program
Does Not Fully Address External Reporting Issues, GAO-04151 (Washington,
D.C.: Nov. 21, 2003). For more information on this report, please contact
Gregory D. Kutz at (202) 512-9095 or [email protected], Keith A. Rhodes at
(202) 512-6412 or [email protected], or Diane Handley at (404) 679-1986 or
[email protected].

o  	Business Modernization: Disciplined Processes Needed to Better Manage
NASA's Integrated Financial Management Program, GAO-04118 (Washington,
D.C.: Nov. 21, 2003). For more information on this report, please contact
Allen Li at (202) 512-4841 or [email protected].

This summary report-along with our three reports-will not be further
distributed until 30 days from its date, unless you announce its contents
earlier. At that time, we will send copies to interested congressional
committees, the NASA Administrator, and the Director of the Office of
Management and Budget. We will also make copies available to others
upon request. In addition, the report will be available at no charge on
the
GAO Web site at http://www.gao.gov.

Randolph C. Hite, Director
Information Technology Architecture and Systems Issues

Gregory D. Kutz, Director
Financial Management and Assurance

Keith A. Rhodes, Chief Technologist
Applied Research and Methods

Allen Li, Director
Acquisition and Sourcing Management

Appendix: NASA's Challenges in Managing Its Integrated Financial Management
Program

For more than a decade, we have identified weak contract management and
the lack of reliable financial and performance information as posing
significant challenges to NASA's ability to effectively run its largest
and most costly programs. While NASA has made some progress in addressing
its contract management weaknesses through improved management controls
and evaluation of its procurement activities, NASA has struggled to
implement a modern integrated financial management system. Such a system
is key to efficiently producing accurate and reliable information to
oversee contracts, estimate and control program costs, and report program
financial activities to the Congress and other stakeholders.

In April 2003, we issued a report on the agency's Integrated Financial
Management Program (IFMP)-NASA's latest effort to implement a modern
financial management system-and found that the agency has not followed key
best practices for acquiring and implementing IFMP and concluded that the
agency was at risk of implementing a system that would not optimize
mission performance.1 As agreed with the Congress, we continued our review
to determine (1) whether NASA has been acquiring and implementing IFMP in
the context of an enterprise architecture; (2) the extent to which key
components of IFMP will assist NASA in meeting its external reporting
requirements; and (3) the reasonableness of NASA's life-cycle cost
estimate, schedule, and reserve funding for IFMP.

Through IFMP, NASA has committed to modernizing its business processes and
systems in a way that will introduce interoperability and thereby improve
the efficiency and effectiveness of its operations as well as bring the
agency into compliance with federal financial management requirements.
NASA has also committed to implementing IFMP within specific cost and
schedule constraints. However, earlier this year, we reported that NASA
faced considerable challenges in meeting these commitments. Through our
reviews of NASA's enterprise architecture and IFMP's financial reporting
and program cost and schedule control, we found that NASA remains
challenged in its ability to meet its IFMP commitments in several
areas-areas that continue to put the agency's resources and programs at
high risk.

  Results in Brief

1 U.S. General Accounting Office, Business Modernization: Improvements
Needed in Management of NASA's Integrated Financial Management Program,
GAO-03-507 (Washington, D.C.: Apr. 30, 2003).

Appendix: NASA's Challenges in Managing Its Integrated Financial
Management Program

First, NASA has acquired and implemented significant components of
IFMP-including the Core Financial module, the backbone of the
system-without an enterprise architecture, or blueprint, to guide and
constrain the program. Our research has shown that attempting major
modernization programs like IFMP without having a well-defined
architecture risks, for example, implementing processes and building
supporting systems that are duplicative, lack interoperability, and do not
effectively and efficiently support mission operations and performance.
Since we completed our audit work, NASA issued an initial version of an
enterprise architecture, continuing its commitment to pursing a complete
architecture and acquiring and implementing IFMP within the context of
that architecture. However, because of the timing of our report, we were
unable to assess NASA's initial architecture. NASA has also established
some important architecture management controls-such as establishing an
enterprise architecture program office and designating a chief architect.
However, it has not yet established others, which will make its efforts to
develop, implement, and maintain a well-defined architecture more
challenging.

Second, NASA has been pursuing an aggressive IFMP implementation schedule,
to the point of delaying implementation of many system capabilities. NASA
accelerated its schedule by 2 years, with the Core Financial module to be
completed in fiscal year 2003. To meet this compressed schedule, NASA
deferred configuration and testing of many key capabilities of the Core
Financial module, including the ability to report the full cost of its
programs. When NASA announced in June 2003, full implementation of the
module at each of its 10 centers, many of the financial events or
transaction types needed by program managers to carry out day-to-day
operations and produce useful financial reports had not been included. If
these and other weaknesses are not addressed, the Core Financial module
and related systems will not comply with the requirements of the Federal
Financial Management Improvement Act (FFMIA) of 1996.2 Specifically, NASA
cannot ensure that the system routinely provides NASA program managers and
other key stakeholders and decision makers-including the Congress-with
reliable, useful, and timely financial information needed to measure
program performance and ensure accountability.

2 31 U.S.C. 3512 note (2000) (Federal Financial Management Improvement).

Appendix: NASA's Challenges in Managing Its Integrated Financial
Management Program

Finally, questionable cost estimates, an optimistic schedule, and
insufficient processes for ensuring adequate funding reserves put IFMP at
further risk of not meeting its cost and schedule commitments. In
preparing the current cost estimate for IFMP's 10-year life cycle, NASA
did not include the full cost likely to be incurred during the life of the
program, including costs to retire the system and other direct and
indirect costs. Until NASA uses more disciplined processes in preparing
the program's cost estimate, the reliability of the life-cycle cost
estimate will be uncertain and the program will have difficulty
controlling costs. In addition, IFMP's compressed schedule margins may be
insufficient to manage program challenges-such as personnel shortages,
uncertainties about software availability, and Office of Management and
Budget (OMB) initiatives to implement electronic systems for agency
business processes governmentwide. These OMB initiatives have put IFMP in
a reactionary mode and are already affecting planning for the payroll,
procurement, and travel components of the integrated system, further
impacting the program's cost and schedule. Reserve funding for IFMP
contingencies may also be insufficient-which is particularly problematic,
given the significant risks facing the program. The Budget Formulation
module is already experiencing shortfalls in its reserves.

We have made a number of recommendations in our three reports to improve
NASA's acquisition strategy for IFMP. NASA reviewed and provided comments
on drafts of each of the three reports and concurred with all of our
recommendations aimed at establishing and maintaining an effective
enterprise architecture and accurately estimating program cost and
predicting the impact of program challenges. However, NASA did not concur
with our recommendations aimed at ensuring compliance with FFMIA
requirements because the agency believes that it is currently in
compliance. NASA's comments and our response can be found in the full
reports. Because this summary report draws exclusively from our three IFMP
reports and previously issued reports, we did not ask NASA to provide
separate comments on a draft of the summary report.

Appendix: NASA's Challenges in Managing Its Integrated Financial
Management Program

  IFMP Has Proceeded without an Enterprise Architecture, and NASA's Ongoing
  Architecture Management Efforts Are Missing Key Elements

NASA has thus far acquired and deployed system components of IFMP without
an enterprise architecture, or agencywide modernization blueprint, to
guide and constrain program investment decisions-actions that increased
the chances that these system components will require additional time and
resources to be modified and to operate effectively and efficiently. To
correct this past practice, NASA released an initial version of a new
enterprise architecture after we completed our audit work, which NASA
recognizes as not yet complete but plans to evolve and use to guide and
constrain future IFMP investment decisions. NASA's ability to do so
effectively, however, is constrained by missing architecture management
capabilities. NASA's chief technology officer agreed that these
capabilities need to be established and said that NASA plans to do so.

More specifically, NASA's stated intention is to use an architecture as
the basis for agencywide business transformation and systems
modernization. Such an intention necessitates that its architecture
products provide considerable depth and detail as well as logical and
rational structuring and internal linkages. That is, it means that these
architecture products should contain sufficient scope and detail so that,
for example, (1) duplicative business operations and systems are
eliminated, (2) business operations are standardized and integrated and
supporting systems are interoperable, (3) use of enterprisewide services
are maximized, and (4) related shared solutions are aligned, like OMB's
e-Government initiatives.3 Moreover, this scope and detail should be
accomplished in a way that (1) provides flexibility in adapting to changes
in the enterprise's internal and external environments; (2) facilitates
its usefulness and comprehension by varying perspectives, users, or
stakeholders; and (3) provides for properly sequencing investments to
recognize, for example, the investments' respective dependencies and
relative business value.

The architecture artifacts that NASA's chief technology officer provided
to us and represented as those used to date in acquiring and implementing
IFMP do not contain sufficient context (depth and scope of agencywide
operational and technical requirements) to effectively guide and constrain

3 OMB has identified 24 Electronic Government-or
"e-Government"-initiatives that advocate the use of Internet-based
technologies governmentwide for agency business processes, such as
payroll, travel management, and recruiting. These initiatives are expected
to support the goal of the President's Management Agenda and ultimately
provide improved government services to citizens, businesses, and other
levels of government.

Appendix: NASA's Challenges in Managing Its Integrated Financial
Management Program

agencywide business transformation and systems modernization efforts. More
specifically, these artifacts do not satisfy the most basic
characteristics of architecture content, such as clearly distinguishing
between artifacts that represent the "As Is" and the "To Be" environments.
In general, these products were limited to descriptions of (1) technology
characteristics, which is one of many enterprise architecture elements,
and (2) one of nine business operations (finance and accounting). The
chief technology officer agreed that the architecture products used to
date to acquire and implement IFMP do not provide sufficient scope and
content to constitute a well-defined enterprise architecture.

Moreover, as NASA proceeds with its enterprise architecture effort, it is
critical that it employs rigorous and disciplined management practices.
Such practices form the basis of our architecture management maturity
framework,4 which specifies by stages the key architecture management
controls that are embodied in federal guidance and best practices,
provides an explicit benchmark for gauging the effectiveness of
architecture management and provides a road map for making improvements.
During the course of our review of IFMP, NASA implemented some of these
key architecture management capabilities, such as having an enterprise
architecture program office, designating a chief architect, and using an
architecture development methodology, framework, and automated tools.
However, NASA has not established other key architecture management
capabilities, such as designating an accountable corporate entity to lead
the architecture effort, having an approved policy for developing and
maintaining the architecture, and implementing an independent verification
and validation function to provide needed assurance that architecture
products and architecture management processes are effective.

The chief technology officer agreed that NASA needs an effective
enterprise architecture program and stated that efforts are under way to
establish one. The chief technology officer also provided us with an
initial version of a NASA enterprise architecture on September 24, 2003,
which was after we completed our audit work. According to this official,
while this initial version of the architecture is incomplete, it does
provide some

4 U.S. General Accounting Office, Information Technology: A Framework for
Assessing and Improving Enterprise Architecture Management (Version 1.1),
GAO-03-584G (Washington, D.C.: Apr. 1, 2003).

Appendix: NASA's Challenges in Managing Its Integrated Financial
Management Program

  Core Financial Module Lacks Capabilities to Facilitate Timely and Accurate
  Reporting and Comply with Federal Law

of the missing contextual information (operational and technical) that we
had identified during our review.

Based on our experience in reviewing other agencies, not having an
effective enterprise architecture program is attributable to limited
senior management understanding and commitment, and cultural resistance to
having and using one. Our experience with federal agencies has also shown
that attempting to define and build major IT systems, like IFMP, without
first completing an enterprise architecture often results in IT systems
that are duplicative, are not well integrated, are unnecessarily costly to
maintain and interface, and do not effectively optimize mission
performance.

The Core Financial module, considered the backbone of IFMP,5 is intended
to provide NASA's financial and program managers with timely, consistent,
and reliable cost and performance data to support management decisions and
external financial reporting. However, as we reported in April 2003, the
Core Financial module was not designed to integrate the cost and schedule
data needed to oversee NASA's contractors-primarily because NASA did not
adequately define the requirements of key stakeholders, including program
managers and cost estimators, to allow it to configure the module to
address their needs.

NASA originally planned to complete implementation of IFMP in fiscal year
2008, but in fiscal year 2002, NASA accelerated the implementation
schedule to fiscal year 2006, with the Core Financial module to be
completed in fiscal year 2003. To meet this compressed schedule, NASA
deferred configuration and testing of almost half of the financial events
or transaction types that NASA identified as critical for carrying out
day-today operations and for producing external financial reports.
Moreover, NASA does not plan to automate more than a third of the critical
transaction types. Rather, NASA plans to continue entering these
transactions manually, making the agency more vulnerable to processing
errors and delays. For example, the Core Financial module does not
appropriately capture and record property, plant, and equipment and
material in its general ledger at the transaction level-which is needed to
provide independent control over these assets.

5 Related IFMP modules will be integrated or interfaced with the Core
Financial module, where applicable.

Appendix: NASA's Challenges in Managing Its Integrated Financial
Management Program

As part of its implementation strategy, NASA delayed conversion to
fullcost accounting until the Core Financial module was implemented at all
centers. After announcing in June 2003 full implementation of the module
at each of its 10 centers, NASA began designing the new cost allocation
structure and expected that the full-cost accounting capabilities needed
to provide the full cost of its programs and projects for external
reporting purposes would be available through the Core Financial module in
October 2003. Because of the timing of our reports, we could not verify
the availability of this capability.

The Core Financial module as implemented in June 2003 also lacks the
capability to automatically classify and record upward and downward
adjustments of prior year obligations to the appropriate general ledger
accounts-a federal financial management system requirement and a key
capability to providing the data needed to prepare a Statement of
Budgetary Resources.6 When NASA tested specific requirements related to
adjustments to prior year obligations, the Core Financial module
incorrectly posted the adjustments. Consequently, NASA deferred
implementation of these requirements and opted to rely on manual
compilations, system queries, or other work-arounds to extract these data.
This cumbersome, labor-intensive effort to gather end-of-year information
greatly increases the risk of misreporting-as we stated in March 2001,
when NASA reported a misstatement of $644 million in its fiscal year 1999
Statement of Budgetary Resources.7 While NASA had hoped to use a "patch"
release or future software upgrade to post upward and downward
adjustments-and thereby eliminate manual work-arounds-these efforts have
proven unsuccessful. NASA is continuing to work with the software vendor
to reconfigure the software as necessary to accommodate upward and
downward adjustment processing.

Finally, the Core Financial module does not capture accrued costs or
record accounts payable if the cumulative costs exceed obligations for a
given contract. Yet, federal accounting standards and NASA guidance
require costs to be accrued in the period in which they are incurred and
any corresponding liability to be recorded as an account payable-
regardless of amounts obligated. Further, federal standards require

6 The Statement of Budgetary Resources provides information on the
availability and use of budgetary resources, as well as the status of
budgetary resources at the end of the period.

7 U. S. General Accounting Office, Financial Management: Misstatement of
NASA's Statement of Budgetary Resources GAO-01-438, Mar. 30, 2001).

  Appendix: NASA's Challenges in Managing Its Integrated Financial Management
                                    Program

agencies to disclose unfunded accrued costs-that is, costs in excess of
obligations. As of June 30, 2003, NASA had not processed approximately
$245 million in costs that exceeded obligations or recorded the
corresponding accounts payable. Instead, these transactions have been held
outside of the general ledger in suspense until additional money can be
obligated. As a result, costs or liabilities could be understated in its
reports by the amount held in suspense if NASA fails to adjust these
amounts.

The Core Financial module was intended to streamline many of NASA's
processes and eliminate the need for many paper documents. However, in
some areas, the new system has actually increased NASA's workload. Because
the core financial software allows obligations to be posted to the general
ledger before a binding agreement exists, NASA must process purchase
orders and contract documents outside the system until they are signed or
otherwise legally binding. At that point, NASA initiates the procurement
action in the system and repeats the steps that were manually performed
outside the system.

If NASA continues on its current track-one that has resulted in
significant limitations with regard to property accounting, full-cost
reporting capabilities, budgetary accounting, accrued costs, and accounts
payable-the Core Financial module and IFMP will fail to comply with FFMIA
requirements to build a fully integrated financial management system that
routinely provides decision makers with timely, reliable, and useful
financial information.

  IFMP Further Challenged by Questionable Cost Estimates and an Optimistic
  Schedule

Questionable cost estimates, an optimistic schedule, and insufficient
processes for ensuring adequate funding reserves have put IFMP at an even
greater risk of not meeting program objectives. In preparing its lifecycle
cost estimates for IFMP,8 NASA did not use disciplined costestimating
processes as required by NASA and recognized as best practices. For
example, NASA's current IFMP life-cycle cost estimate- which totals $982.7
million and is 14 percent, or $121.8 million, over the previous IFMP
life-cycle cost estimate-was not prepared on a full-cost basis. The
estimate includes IFMP direct program costs, NASA enterprise support, and
civil service salaries and benefits, but it does not include the cost of
retiring the system, enterprise travel costs, the cost of nonleased

8 Fiscal years 2001 through 2010.

Appendix: NASA's Challenges in Managing Its Integrated Financial
Management Program

NASA facilities for housing IFMP, and other direct and indirect costs
likely to be incurred during the life of the program. In addition, NASA
did not consistently use breakdowns of work in preparing the cost
estimate, although NASA guidance calls for breaking down work into smaller
units to facilitate cost estimating and project and contract management as
well as to help ensure that relevant costs are not omitted. In cases where
work breakdowns were used, the agency did not always show the connection
between the work breakdown estimates and the official program cost
estimate. This has been a weakness since the inception of the program.
Without a reliable life-cycle cost estimate, NASA will have difficulty
controlling program costs.

In addition, NASA's schedule may not be sufficient to address program
challenges, such as personnel shortages and uncertainties about software
availability. To address personnel shortages during the implementation of
the Core Financial module, NASA paid nearly $400,000 for extra hours
worked by center employees and avoided a slip in IFMP's compressed
schedule. However, the schedule for implementing the Budget Formulation
module has slipped because IFMP implemented this module simultaneously
with the Core Financial module-an action advised against by a contractor
conducting a lessons-learned study-placing heavy demand on already scarce
resources. Uncertainty regarding software availability also puts the
program at risk for completing the integrated system on schedule. OMB's
e-Government initiatives-which aim to eliminate redundant systems
governmentwide by using "best of suite" software-could also create more
difficult interface development and a less integrated system, risking
additional schedule delays and cost growth. E-Government initiatives are
already affecting planning for IFMP's payrolland procurement-related
modules, and OMB's e-Travel could replace IFMP's Travel Management module,
which has already been implemented. IFMP's fiscal year 2002 Independent
Annual Review found that e-Government initiatives are forcing the program
into a reactive mode, noting that (1) the benefits of a fully integrated
system could be lost under e-Government, (2) the scope of IFMP and timing
of future projects' implementation have become uncertain, and (3) cost
increases and schedule slippage to accommodate directives may occur.

Finally, the program did not consistently perform in-depth analyses of the
potential cost impact of risks and unknowns specific to IFMP, as required
by NASA guidance. Instead, the program established funding reserves on the
basis of reserve levels set by other high-risk NASA programs. As a result,
reserve funding for IFMP contingencies may be insufficient-which is
particularly problematic, given the program's questionable cost

  Appendix: NASA's Challenges in Managing Its Integrated Financial Management
                                    Program

  Conclusions

(120303)

estimates and optimistic schedule. One module-Budget Formulation-is
already experiencing shortfalls in its reserves, and project officials
expressed concern that the module's functionality may have to be reduced.
Moreover, the program did not quantify the cost impact of highcriticality
risks-risks that have a high likelihood of occurrence and a high magnitude
of impact-or link these risks to funding reserves to help IFMP develop
realistic budget estimates.

NASA's latest effort to develop and implement an integrated financial
management system has been driven by an aggressive schedule-not by
requirements, available resources, and strategic planning. Without a
mature enterprise architecture to rationalize IFMP's implementation
schedule and reliable life-cycle cost estimates to ensure program
efficiency, NASA is creating a system that may lack the functionality to
achieve its intended goal: to provide accurate and timely financial data
needed to manage NASA's programs and account for the billions of dollars
the agency spends annually on work performed by its contractors.

In our three reports being issued today, we make a number of
recommendations to the NASA Administrator, which if implemented
appropriately should help program managers get IFMP on track and,
ultimately, provide NASA with the fully integrated financial management
system that it has sought to acquire for more than a decade.

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