NASA Still Struggles with Accounting

SAN FRANCISCO — Although NASA failed for the seventh year in a row to receive a passing grade from independent auditors, the U.S. space agency has made significant progress in cleaning up its financial records, Elizabeth Robinson, NASA’s newly appointed chief financial officer, told members of the House Science and Technology Committee during a Dec. 3 hearing.

The major problem preventing auditors from Ernst & Young LLP from approving NASA’s books is the space agency’s difficulty in calculating the value of its two largest assets: the space shuttle and international space station, said Paul Martin, NASA’s new inspector general. That problem was serious enough to be deemed a material weakness because it made it impossible for auditors to determine whether information included in the space agency’s balance sheets was accurate, said Daniel Murrin, a partner in New York-based Ernst & Young.

Space agency officials have been trying to determine the value of NASA’s largest assets for years, a task complicated by the size and scope of the programs, changes in NASA’s financial systems, revised federal accounting rules and the hiring of new teams of auditors. “This tale has gone on for so many years and has so many twists and turns,” Robinson told the panel.

The issue is likely to be resolved in the near future, however, because the agency that issues guidance in this area, the Federal Accounting Standards Advisory Board, published new rules in October designed to assist federal agencies, including NASA, in calculating the cost of extremely large assets based on estimates. “The adoption of the new rule provides a unique opportunity for NASA to address the issue,” Murrin said.

In addition, the space shuttle and space station will become less prominent features of NASA’s financial accounts because the programs are nearing completion. At the end of 2009, those two programs comprised approximately 77 percent of the total value of NASA’s property, plants and equipment as well as 38 percent of the space agency’s total assets, Robinson said. Since the shuttle program is scheduled to conclude in 2010, and the space station is on a depreciation schedule that ends in 2016, NASA will not have to account for the cost of those assets much longer, she added.

Nevertheless, NASA’s financial managers are not waiting until the completion of the space station program to clear up their financial records. Instead, NASA officials testifying at the hearing were cautiously optimistic that they would be able to calculate the value of the shuttle and space station programs and obtain a clean bill of health from auditors in 2010.

Robinson also assured the committee that NASA will be better able to evaluate the cost of major assets because the space agency is better able to track financial data. “It is now standard practice in contracts to acquire the accounting information we need,” Robinson said. “Our contractors have felt the burden of giving us all of the data and have worked very closely with us to ensure it is the right data. … We feel like we are on a strong footing.”

Still, NASA financial managers have two other issues to tackle. The Ernst & Young auditors cited deficiencies in NASA’s ability to calculate its environmental liability as well as the space agency’s failure to comply with the Federal Financial Management Act of 1996.

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