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September 19, 2007 1 SAT-OMC Internal Controls: Financial ...

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  • 1. SAT-OMC Internal Controls: Financial Management Summary of Major Changes for Sept 19
    • The SAT agreed to recommend removing:
    • Financial Management Policy and Procedures as a management challenge
    • Eliminated Full Cost Integration as a management challenge
    • The OCFO recommends:
    • Downgrading of Financial Management Systems to a management challenge
  • 2. Asset Management Office of the Chief Financial Officer Terry Bowie September 19, 2007
  • 3. Background Asset Management
    • The OMC and NASA’s independent financial auditors designated asset management (Property, Plant, and Equipment) as a Material Weakness. “Asset Management” includes Contractor-held and NASA-held property.
    • Currently, the OCFO is sharing responsibility for this Material Weakness with the Programmatic Internal Control Team (PICT) and the Institutional Internal Control Team (IICT).
    • Corrective Action Plans have been developed to address auditor recommendations from both the FY 2005 and FY 2006 financial statement audits. These plans define the goal, objectives, strategies, and actions for improving NASA’s internal controls over Property, Plant, and Equipment.
  • 4. Issue Asset Management
    • NASA needs to improve its management controls for the financial reporting of Property, Plant and Equipment, and materials including Theme Assets (formerly Assets-in-Space), Contractor-held property, spare parts and assets under construction. Lack of proper management controls can result in inconsistent financial recording practices that can misstate asset values and period expenses.
    • Root cause
      • NASA’s policies and procedures are not fully in conformance with federal requirements.
      • NASA’s obligation documents and disbursements are not coded to identify whether they relate to acquisition of property.
    • Corrective actions taken and progress to date
      • Integrated PP&E requirements into 7120.5d for Project Managers to identify planned capital acquisitions before their purchase or fabrication
      • Provided revisions to Agency-wide policy/process documents
        • 7120.7 – Establishes WBS Level 2 requirements for Internal Use Software projects
        • Financial Management Requirements (FMR), Volume 6, Chapter 4, “Plant, Property and Equipment”
        • 7120.X (Research and Technology) - Establishes the requirement for Project Managers to determine Alternative Future Use for projects and identify capital acquisitions from project inception
      • Created a system change request to have a capital asset indicator added to both SAP and MdM, which will allow for flagging of costs from inception
      • Documented AS-IS and TO-BE process flows for all PP&E reporting categories. Identified system and process controls required throughout processes.
      • Drafted NASA Interim Directive (NID) to address requirements for the identification and cost accumulation of NASA capitalizable assets
      • Analyzed current PP&E balance sheet to determine the financial impact of implementing NASA’s revised Capitalization Policy on the 2007 financial statements. Provided impact analysis to OIG and auditors.
      • Received AAPC guidance on NASA capitalization policy. Guidance is consistent with NASA’s revised policy.
      • Conducted workshop with Center representatives (Finance, Logistics, Procurement, Program/Project) to finalize proposed implementation approach for revised policy.
  • 5. Critical Milestone Status Asset Management 7/25/07 8/31/07 6/30/07 Coordinate with cross-functional teams to ensure communication plans are developed Meetings have been held with JWST, Ares Upper Stage, and CEV project managers to discuss the implementation of OCFO’s proposed solution. Using the various WBS dictionaries as a guide, the PM’s were walked through the creation of the WBS. 6/30/07 6/30/07 3/16/07 Prototype financial property solutions with existing project System Change Request submitted. Configuration is dependent upon the Competency Center schedule and release of SAP version 8.1. 10/1/07 1/31/07
    • System Changes
      • MdM
      • SAP
    NID in review cycle. Anticipate release 9/30 for 10/1 implementation. 9/30/07 12/30/06 Finalize Capitalization Policy 9/29/06 9/29/06 Complete interim policy and process changes Revisions to contract language to follow rollout of process changes. 10/1/07 3/31/07 Full Implementation of Lifecycle Management of Property Complete 4/26/07 3/31/07 11/30/06 Asset related requirements reflected in 7120.5D Comments Actual Date Revised Plan Original Plan Milestone Completion Dates Major Milestones from CAP
  • 6. Planned Actions for Next Quarter Asset Management
    • Release NASA’s revised Capitalization Policy
      • Issue Property NASA Interim Directive to address requirements for the identification and cost accumulation of NASA capitalizable assets
      • Update FMR to further instruct financial community of revised policy changes
    • Publish updated Asset Management Policies in the Financial Management Requirements (FMR), as necessary; draft Asset Accounting Procedural manual
    • Establish a standard Data Requirements Description (DRD) related to Contractor’s reporting of 533 costs for capital assets.
    • Continue work on PP&E Implementation plan tasks to include revising and documenting business process, policy and procedural changes
      • Continue working with the Offices of Program and Institutional Integration, Policy, Procurement, Chief Engineer and Mission Directorates, to ensure revisions to the contractor cost reporting process are developed by all stakeholders.
        • Review NF 533 handbook to verify whether requirements need to be revised regarding data submitted by contractors through reporting categories.
        • Review, and modify as necessary, the invoicing requirements so that tracking of assets is easily facilitated
      • Continue working with the Procurement and Logistics communities to integrate property management practices.
      • Continue working with the IEMP IAM Project Team members on the blueprinting of the PP&E Module to ensure revised business processes are implemented.
      • Continue to work with MdM and Competency Center staff to ensure requested system changes are configured
    • Work with OCE to ensure asset related changes are incorporated into final issuance of 7120.7 and 7120.8
    • Through the Senior Assessment Team (SAT), continue to work with the Institutional Internal Control Team (IICT), the Programmatic Internal Control Team (PICT), and the Financial Management Internal Control Team (FMICT) to integrate policy, procedures, and internal controls
  • 7. Recommendation Asset Management
    • Asset Management should continue to be carried as a Material Weakness
  • 8. Financial Management System Office of the Chief Financial Officer Terry Bowie September 19, 2007
  • 9. Background Financial Management System
    • In 2005, the OMC designated “Financial Management System” as a Material Weakness. “Financial Management System” captures challenges related to:
      • Confirming configuration
      • Validating the accounting
      • Validating construction of the financial reports
    • Currently, the OCFO is sharing responsibility for this Material Weakness with the Office of the Chief Information Officer and the Integrated Enterprise Management Program (IEMP) Office.
    • Corrective Action Plans have been developed to address auditor recommendations from both the FY 2005 and FY 2006 financial statement audits. These plans address improvements required for NASA’s financial management system and ensure that processes achieve accurate, reliable, and timely financial information.
  • 10. Issue Financial Management System
    • Since the completion of the rollout of the new system, challenges in system processing, configuration, and capabilities have surfaced and the current version of the SAP system has some capability limitations which have required the definition and implementation of compensating controls.
    • Root cause
      • Conversion from 10 disparate legacy financial systems supported by over 120 subsidiary systems, along with over a decade of historical data, to a single integrated financial management system highlighted long-standing data and process issues.
    • Corrective actions taken and progress to date
      • Implemented SAP Version Update system improvements in 2007
      • Continued to generate and review monthly reconciliations
      • Continued to execute compensating procedures to analyze Business Warehouse data on a quarterly basis to ensure that liabilities are appropriately recorded
      • Submitted request to OMB for certification of NASA’s Funds Control system
  • 11. Critical Milestone Status Financial Management System Complete 4/20/07 3/31/07 2/28/07 Submit NASA funds control process to OMB for certification All monthly and quarterly dates have been met 21 days after month end Monthly Generate monthly financial statements and review prior to quarterly and year-end reporting dates to ensure completeness. Identified Agency critical financial data issues. For each issue, Centers monitor, report and correct data anomalies monthly. Monitoring and Control procedures are under review and will be updated Monthly 9/30/06 6/30/06 Monitor progress until remaining data anomalies are resolved. Complete 11/13/06 11/13/06 10/2/06 Implement Core Financial System Version Update project, including improved process designs. Comments Actual Date Revised Plan Original Plan Milestone Completion Dates Major Milestones from CAP
  • 12. Planned Actions for Next Quarter Financial Management System
    • Continue to prepare monthly financial statements within 21 days of period close
    • Continue to generate and review monthly management reports
    • Implement SAP intra-governmental reports to streamline NASA reconciliation with its federal trading partners
    • Continue weekly ViTS with the Competency Center to address issues as they are identified
  • 13. Recommendation Financial Management System
    • Financial Management System should be downgraded to a Management Challenge.
  • 14. Financial Management Data Integrity Office of the Chief Financial Officer Terry Bowie September 19, 2007
  • 15. Background Financial Management Data Integrity
    • In 2005, the OMC designated “Financial Management Data Integrity” as a Material Weakness. “Financial Management Data Integrity” captures challenges related to:
      • Environmental Liabilities
      • Fund Balance with Treasury (FBWT)
    • Currently, the OCFO is sharing responsibility for this Material Weakness with the Offices of Infrastructure and Administration, Procurement, and the Integrated Enterprise Management Program (IEMP).
    • The FY 2006 financial statement audit removed Environmental Liabilities and Fund Balance with Treasury (FBWT) as reportable conditions.
    • Corrective Action Plans have been developed to address auditor recommendations from both the FY 2005 and FY 2006 financial statement audits. These plans address validating the tools and methodology used to prepare the unfunded environmental liability estimates and ongoing monitoring and control of financial accounts, including Fund Balance with Treasury.
  • 16. Issue Financial Management Data Integrity
    • NASA needs to continue to improve its current procedures to ensure that all reconciling items are thoroughly researched, resolved timely, and reviewed by appropriate center and headquarters OCFO personnel. NASA needs to improve existing environmental liability procedures and implement needed internal controls to assure the improved procedures are adhered to and followed.
    • Root cause
      • Relates to issues from data conversion system processing in the early stages of production operation.
    • Corrective actions taken and progress to date
      • Monitored metrics monthly
      • Conducted on-going monitoring to ensure monthly reconciliations are performed and appropriate corrective actions are taken
      • Continued to conduct on-going review and monitoring of compliance with Fund Balance with Treasury policies, procedures, and practices
      • Developed account reconciliation and analysis procedures
      • Improved process for validating estimates of environmental liabilities and conducted training in collaboration with Environmental Management Division
  • 17. Critical Milestone Status Financial Management Data Integrity 6/30/07 9/30/07 3/31/07 Complete analysis of existing guidance for account reconciliation and analysis, including Fund Balance with Treasury Monthly Monthly Complete review and certification of Center financial data within 30 days of the month end Monthly Monthly Review and monitor compliance with FBWT policies, procedures, and practices Monthly Monthly Monitor Center CFOs to ensure monthly reconciliations are performed Comments Actual Date Revised Plan Original Plan Milestone Completion Dates Major Milestones from CAP
  • 18. Planned Actions for Next Quarter Financial Management Data Integrity
      • Review existing guidance for account reconciliation and analyses. Publish revised guidance, as necessary to improve procedures
      • Continue to monitor metrics monthly
      • Continue to conduct on-going monitoring to ensure monthly reconciliations are performed
      • Evaluate effectiveness of updated guidance for account reconciliation and analyses
  • 19. Recommendation Financial Management Data Integrity
    • Financial Management Data Integrity should be downgraded to a Management Challenge.
  • 20. Financial Management Staffing Office of the Chief Financial Officer Terry Bowie September 19, 2007
  • 21. Background Financial Management Staffing
    • In 2005, the OMC designated “Financial Management Staffing” as a Management Challenge. “Financial Management Staffing” captures challenges related to:
      • Staffing Levels
      • Personnel Skill Mix
      • Workforce Development
    • Currently, the OCFO is sharing responsibility for this Management Challenge with the Office of Institutions and Management.
    • Corrective Action Plans have been developed to address auditor recommendations from both the FY 2005 and FY 2006 financial statement audits. The plans include actions to address workforce development.
  • 22. Issue Financial Management Staffing
    • NASA needs to ensure adequate staffing for financial management functions across Headquarters and the Centers and to continually provide additional “hands–on” training for financial personnel to ensure that they understand their roles in financial reporting.
    • Root cause
      • With the implementation of the Integrated Enterprise Management Program (IEMP), additional training was required due to new processes.
      • The implementation of the IEMP Core Financial module represented a major transformation of NASA's financial management systems and processes.
    • Corrective actions taken and progress to date
    • Status of Prior Vacancy Announcements Submitted to HR:
      • External Reporting Branch Chief (GS-15) Hired – April 2007 .
      • Administrative Officer (GS-9/11/12) Announced – June 2007.
      • 2 Supervisory Budget Analysts (GS-15) Hired – August 2007.
      • Supervisory Accountant (GS-15) Hired – August 2007.
      • Accountant (GS-9/11/12 and GS-13/14) Announced – August 2007.
      • IT Specialist (GS-13/14) Announced – August 2007.
      • Budget Analyst (GS-9/11/12 and GS-13/14) – Awaiting Announcement .
    • Currently 22 vacancies.
    • OCFO Reorganization Proposal Reviewed with Administrator and Submitted to HR in April 2007. Final Approval Received.
    • Developed a Workforce Assessment (Sep 06) and a Workforce Plan (Oct 06)
      • Workforce Plan includes career development, forecasting, performance measurement, and recruiting/retention
  • 23. Critical Milestone Status Financial Management Staffing 5/17/07 (Design) 5/31/07 Design and implement a training program to address the needs of the organization Hiring targets and priorities will be determined at OCFO Offsite planned for August 8/30/07 4/30/07 Establish hiring targets for needed skills On-Going On-Going Continue to hire as expeditiously as possible up to the allocated ceiling Comments Actual Date Revised Plan Original Plan Milestone Completion Dates Major Milestones from CAP
  • 24. Planned Actions for Next Quarter Financial Management Staffing
    • Continue hiring to approved ceiling
    • Design training program to address the needs of the organization, consistent with workforce analysis
  • 25. Recommendation Financial Management Staffing
    • Financial Management Staffing should continue to be carried as a Management Challenge.