	Financial Audit Results

After five years of receiving an unqualified opinion on its financial  statements, on February 22, 2002, NASA’s new independent auditordisclaimed an opinion on the agency’s fiscal year 2001 financial  statements. The report also  states that NASA’s financial management systems do not substantially  comply with federal financial management systems requirements and  applicable federal accounting standards. Based on this work, we questioned NASA management’s and its auditor’s  determination that NASA’s systems were in substantial compliance with  the requirements of FFMIA. In part to address concerns regarding the escalating space station costs,  section 202 of the National Aeronautics and Space Administration  Authorization Act for Fiscal Year 2000 (P.L. The stakes are particularly high,  considering this is NASA’s third attempt since 1988 to implement a new  system. The first two attempts were abandoned after 12 years and after  spending about $180 million. NASA expects to complete the current  systems effort by 2006 at a cost of $475 million. These elements, which will be key to  any successful approach to financial management reform, include: addressing NASA’s financial management challenges as part of a  comprehensive, integrated, NASA-wide business process reform; providing for sustained leadership by the Administrator to implement  needed financial management reforms; establishing clear lines of responsibility, authority, and accountability for  such reform tied to the Administrator;  incorporating results-oriented performance measures and monitoring tied  to financial management reforms; providing appropriate incentives or consequences for action or inaction; establishing an enterprisewide system architecture to guide and direct  financial management modernization investments; and ensuring effective oversight and monitoring.
What GAO Found

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