NASA's chief for internal financial management said the problem stemmed from a rough transition from 10 different internal accounting programs to a new integrated one, but audit firm PriceWaterhouseCoopers noted basic accounting errors and a breakdown in NASA's financial controls.
PriceWaterhouseCoopers and NASA parted ways earlier this year, according to the space agency's inspector general, Robert Cobb. PriceWaterhouseCoopers declined to comment, but a source familiar with the situation said the audit firm opted out of the contract because it was unhappy with the relationship.
In a scathing report on NASA's Sept. 30, 2003, financial statement, the audit firm accused the space agency of one of the cardinal sins of the accounting world: failing to record its own costs properly.
The same report said the transition to the new accounting program triggered a series of blunders that made completing the NASA audit impossible.
There were hundreds of millions of dollars of "unreconciled" funds and a $2 billion difference between what NASA said it had and what was actually in its accounts, which are held by the Treasury Department (news - web sites), PriceWaterhouseCoopers said in its report.
$565 BILLION
"The documentation NASA provided in support of its September 30, 2003, financial statements was not adequate to support $565 billion in adjustments to various financial statement accounts," the auditor wrote in a Jan. 20 report to Cobb, NASA's inspector general. It also noted "significant errors" in financial statements provided by NASA.
That big number -- $565 billion, with a "B" -- was the result of posting problems, new software and a "massive cleanup" of 12 years of NASA's financial records, said Patrick Ciganer, NASA's chief for integrated financial management.
Under the new system, Ciganer said in a telephone interview, errors that were discovered in the transition could show up multiple times in the accounting process: once as an erroneous credit in one column, then as a debit to delete the error, then as a credit in the correct column. By this reckoning, a $40 billion contract that stretched over nine years and several separate NASA centers generated $120 billion worth of entries, and these were turned over to the auditors.
"They have weak controls and problems with their internal system and that would make them vulnerable to (financial) fraud, although we don't have that evidence yet," said Gregory Kutz, a director in the General Accounting Office (news - web sites), which is looking into NASA's accounting issues. A Senate hearing on the issue was set for Wednesday.
PRIORITIES
With a current annual budget of $16.2 billion, NASA's priorities include an ambitious multi-year mission to the moon and possibly Mars, finishing construction on the International Space Station (news - web sites) and returning the grounded shuttle fleet to flight after the 2003 Columbia disaster.
The independent investigation of the Columbia accident, in which seven astronauts died, found NASA's culture at fault. The same spirit that fueled the early boom in space exploration in the 1950s evolved into separate parts of a sprawling agency working independently rather than cooperatively.
The same independent path extends to NASA's financial accounting, Cobb said.
"You've got an environment at the agency where there are these 10 centers which pride themselves on their independence ... and it becomes very difficult in connection with any of NASA's functional management responsibilities to have people kowtow to the folks at (NASA) headquarters who have the responsibility to pull it all together," Cobb said.
Cinager said he was hopeful that NASA's culture would change, noting a new "willingness of all of the constituencies in the agency to introspectively look at how can they improve the way they are doing their specific duties."
But Shyam Sundar, a professor in accounting with Yale School of Management, described the event as "a big mess," after seeing the auditor's report.
"If NASA would have been a public company, the management would have been fired by now," he said.
Somebody should tell NASA about QuickBooks.
Does any Govt Dept actually balance their books?