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Operations Management Council Internal Control Quarterly Status

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Title: Operations Management Council Internal Control Quarterly Status


1
Operations Management Council Internal Control
Quarterly Status
  • Thursday, February 15, 2007
  • NASA Headquarters
  • Room 7C61

2
Internal Control Quarterly Status AgendaFebruary
15, 2007
  • Opening Remarks Action Status Ms. Dominguez
    5 min.
  • HQ Management Systems Status Ms. Cline 10 min.
  • Status of Current Internal Control Deficiencies
    40 min.
  • Owner Recommendation
  • Asset Management (MW) OCFO no change
  • Financial Management System (MW) OCFO no
    change
  • Financial Management Data Integrity (MC) OCFO no
    change
  • Financial Mgmt. Policy Procedures (MC) OCFO no
    change
  • Financial Management Staffing (MC) OCFO no
    change
  • Full Cost Integration (MC) OCFO no change
  • Information Technology Security (MW) OCIO no
    change
  • NASA Declassification Program (MC) OSPP close
  • Mission Management Aircraft (MC) OIM no change
  • Acquisition Management (OW) OPII no change
  • Undefinitized Contract Actions (MC) OIM close

Key Material Weakness (MW) Other Weakness
(OW) Management Challenge (MC)
3
Action from 7/28/06 Internal Control Meeting
  • The Office of Infrastructure and Administration
    (IA) will analyze the process for updating key
    Agency documents, determine the cause of delays,
    and make recommendations to the Deputy
    Administrator on ways to improve accountability
    for completion of required actions. Due October
    6, 2006.
  • Status Closed per presentation to the Deputy
    Administrator on February 9, 2007

4
Classification of Internal Control Deficiencies
  • Material Weakness (MW) a deficiency in
    internal controls that is significant enough to
    be reported outside the Agency.
  • May jeopardize the Agencys mission
  • Violates statutory or regulatory requirements
  • Significantly weakens safeguards against waste,
    loss, unauthorized use, mismanagement of funds,
    property, other assets
  • Other Weakness (OW) a deficiency in internal
    controls that should be reported and monitored
    internally.
  • Management Challenge (MC) a concern about a
    challenge to management. There is insufficient
    information to confirm a serious systemic
    internal control weakness in this area. It may
    pertain to issues that are outside managements
    control or factors that may create an adverse
    condition. Close monitoring is required.

5
Summary
6
NASA Headquarters Audit StatusPresentation to
theOperations Management Council
Management Systems Division Office of
Infrastructure and Administration
  • Lynn F. H. Cline
  • Deputy Associate Administrator, Space Operations
  • Mission Directorate
  • Headquarters Executive Management Representative
    (EMR)
  • February 15, 2007

7
Activity since last status
  • Internal Audit conducted September 18-22, 2006
  • External Surveillance audit conducted by National
    Quality Assurance, Inc. November 8-10, 2006

8
Results
  • There is one major finding of nonconformance as a
    result of surveillance audits
  • The Quality Systems Manual is still not updated
    (Carry-over for past three assessments)
  • This has been in work for some time, and is now
    at the step where comments received in NODIS have
    been dispositioned and official signature package
    in process. Document must be signed out by
    Deputy Administrator. If not approved by next
    surveillance audit, it will be a significant
    issue.
  • The Quality Systems Manual was signed on November
    26, 2006 and verification will be confirmed
    during the May 2007 External Surveillance Audit.
  • There is one minor nonconformance finding
  • Management Review input shall include information
    on, results of audits, customer feedback, process
    performance and product conformity, status of
    preventive and corrective actions, follow up from
    previous reviews, changes affecting the QMS and
    recommendations for improvement.
  • There is currently no document that clearly
    describes how this management review activity is
    conducted. It is presented as a complex, multi
    layered approach to reporting, with information
    reported in various venues, but there is no clear
    document specifying how this is to occur. (This
    should be considered a significant issue.)
  • Updating NPD 1000.0 and NPD 1000.3 should resolve
    this issue.

9
Focus Area
  • Look at causes of hindrances to timely review and
    approval of Quality Manual and other documents.
  • Previous action discussed by Olga Dominguez
    should be adequate, if properly implemented, to
    address this on-going HQ Management System
    concern
  • Next surveillance audit will review the status
    and concurrency of Agency top level policy and
    requirements documents
  • NPD 1000.0, Strategic Management and Governance
    Handbook
  • NPD 1001.0, NASA Strategic Plan
  • NPD 1000.3, NASA Organization

10
Future Activities
  • Internal Audit March 12-16, 2007
  • Surveillance Audit May 2-3, 2007
  • Core Requirements (Management Review, Internal
    Audit, Corrective Action, Preventive Action,
    Customer Satisfaction, Continual Improvement)
  • Resource Management (6.1, 6.2, 6.3, 6.4)
  • Verification of Major Nonconformance corrective
    action

11
Back Up Charts
12
HQ Quality Management System
  • The Headquarters (HQ) Quality Management System
    (QMS) is a process-based management system that
    controls the quality of HQ customer products and
    mission requirements
  • Implements the HQ quality policy (which is also
    NASAs policy) as stated in the 2006 NASA
    Strategic Plan
  • HQs customer products are
  • NASA Strategic Plan,
  • Annual Budget and the Annual Performance Plan (as
    represented in the Integrated Budget and
    Performance Document), and
  • Annual Performance and Accountability Report
  • The scope of the HQ QMS is mission and mission
    support management of the Vision for Space
    Exploration, aeronautics and science.
  • The Deputy Administrator, as the
    official-in-charge of the HQ QMS, provides the
    resources to implement, maintain, and improve the
    QMS
  • The scope of the Operations Management Council
    encompasses all activities conducted by NASA,
    including the review of the HQ QMS
  • The Executive Management Representative has
    day-to-day responsibility for the HQ QMS
  • Supported by the Office of Infrastructure and
    Administration

13
Asset Management
  • Office of the Chief Financial Officer
  • Terry Bowie
  • February 15, 2006

14
BackgroundAsset Management
  • The OMC and NASAs 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 NASAs
    internal controls over Property, Plant, and
    Equipment.

15
IssueAsset 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
  • NASAs policies and procedures are not fully in
    conformance with federal requirements.
  • NASAs obligation documents and disbursements are
    not coded to identify whether they relate to
    acquisition of property.
  • Updates Since Last Quarter
  • Provided revisions to Agency-wide policy/process
    documents
  • 7120.5D Establishes the requirement for Project
    Managers to determine Alternative Future Use for
    projects and identify capital acquisitions from
    project inception
  • 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
  • Provided Business Process Requirements for the
    IEMP Integrated Asset Management PPE Module
  • Met with OPII, OCE, PAE, Policy, Procurement,
    and Mission Directorates to discuss proposed
    changes to the Contractor Cost Reports (NF533)
    and WBS changes
  • 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
  • Met with Procurement and Logistics
    representatives to integrate property management
    practices.

16
Critical Milestone StatusAsset Management
17
Planned Actions for Next QuarterAsset Management
  • Continue working with the AAPC and FASAB to
    finalize guidance on the accounting treatment of
    our Agencys space exploration projects
    (mission-related projects)
  • Continue work on PPE Implementation plan tasks
    to include revising and documenting business
    process, policy and procedural changes
  • Meet with the Mission Directorate Business
    Analysts community to communicate their roles and
    responsibilities in the management of PPE
  • Prototype financial property solution with
    existing project
  • 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.
  • 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 PPE 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 7120.5D,
    7120.7 and 7120.X
  • 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

18
RecommendationAsset Management
  • Asset Management should continue to be carried as
    a Material Weakness

19
Financial Management System
  • Office of the Chief Financial Officer
  • Terry Bowie
  • February 15, 2007

20
BackgroundFinancial 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
    NASAs financial management system and ensure
    that processes achieve accurate, reliable, and
    timely financial information.

21
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.
  • Updates Since Last Quarter
  • Implemented SAP Version Update system
    improvements
  • 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

22
Critical Milestone Status Financial Management
System
23
Planned Actions for Next Quarter Financial
Management System
  • Review funds control processes and submit to OMB
    for certification
  • Continue to prepare monthly financial statements
    within 30 days of period close
  • Continue to generate monthly management reports

24
Recommendation Financial Management System
  • Financial Management System should continue to be
    carried as a Material Weakness.

25
Financial Management Data Integrity
  • Office of the Chief Financial Officer
  • Terry Bowie
  • February 15, 2007

26
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.
  • In 2006, the OMC lowered the significance level
    of Financial Management Data Integrity to a
    Management Challenge

27
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.
  • Updates Since Last Quarter
  • 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

28
Critical Milestone Status Financial Management
Data Integrity
29
Planned Actions for Next Quarter Financial
Management Data Integrity
  • Review existing guidance for account
    reconciliation and analyses
  • Continue to monitor metrics monthly
  • Continue to conduct on-going monitoring to ensure
    monthly reconciliations are performed

30
Recommendation
  • Financial Management Data Integrity should
    continue to be carried as a Management Challenge.

31
Financial Management Policy and Procedures
  • Office of the Chief Financial Officer
  • Terry Bowie
  • February 15, 2007

32
Background Financial Management Policies and
Procedures
  • In 2005, the OMC designated Financial Management
    Policies and Procedures as a Management
    Challenge. This challenge is related to
    completion of the Financial Management
    Requirements (FMR).

33
IssueFinancial Management Policies and Procedures
  • NASA needs to continue to improve its current
    policy to ensure improvement of existing
    procedures and implement needed internal controls
    to assure the improved procedures are adhered to
    and followed.
  • Root cause
  • NASAs policies and procedures are not fully in
    conformance with federal requirements
  • Implementation of the Integrated Enterprise
    Management Program required revision of policies
    and procedures
  • Updates Since Last Quarter
  • Implemented monthly financial reporting,
    including Center compliance with monitoring and
    controls requirements
  • Performed/performing A-123 and monitoring reviews
    at Centers

34
Critical Milestone Status Financial Management
Policies and Procedures
35
Recommendation Financial Management Policies and
Procedures
  • Financial Management Policies and Procedures
    should continue to be carried as a Management
    Challenge.

36
Financial Management Staffing
  • Office of the Chief Financial Officer
  • Terry Bowie
  • February 15, 2007

37
BackgroundFinancial 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.

38
Issue Financial Management Staffing
  • NASA needs to ensure adequate staffing for
    financial management functions across
    Headquarters and the Centers and to continually
    provide additional handson 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.
  • Updates Since Last Quarter
  • Made minimal progress in hiring this quarter
  • Vacancy announcements were posted for GS9-14
    Accountants, Budget Analysts and GS-15
    Accountants
  • Fourth quarter of 2006 5 candidates accepted
    offers 7 staff members resigned
  • Currently 24 vacancies (8 managerial positions)
  • 3 Budget Analyst and 1 Administrative Officer
    positions announced and candidates selected
    offer pending outcome of external assessment
  • 2 Supervisory Budget Analyst positions pending
    outcome of external assessment
  • Submitted an OCFO Reorganization Proposal on
    September 1, 2006
  • Developed a Workforce Assessment (Sep 06) and a
    Workforce Plan (Oct 06)
  • Workforce Plan includes career development,
    forecasting, performance measurement, and
    recruiting/retention
  • Training Provided to OCFO Staff
  • Appropriation Law
  • Budget Analysts Essential Guide to Formulation,
    Justification and Execution
  • U.S. Standard General Ledger

39
Critical Milestone Status Financial Management
Staffing
40
Planned Actions for Next Quarter Financial
Management Staffing
  • Gain approval for proposed reorganization
  • Finalize FTE ceilings and establish hiring
    targets for needed skills, consistent with
    workforce analysis
  • Continue hiring to approved ceiling
  • Design training program to address the needs of
    the organization, consistent with workforce
    analysis

41
Recommendation Financial Management Staffing
  • Financial Management Staffing should continue to
    be carried as a Management Challenge.

42
Full Cost Integration
  • Office of the Chief Financial Officer
  • Terry Bowie
  • February 15, 2007

43
BackgroundFull Cost Integration
  • In 2005, the OMC designated Full Cost
    Integration as an Other Weakness. Full Cost
    Integration addresses challenges related to a
    lack of understanding of full cost policies and
    procedures.
  • In the past, the emphasis of full cost activity
    was focused on full cost accounting. Today,
    emphasis is needed on cost information tailored
    to science/engineering and institutional program
    decision making.
  • In 2006, the OMC reduced the significance level
    of Full Cost Integration to a Management
    Challenge.

44
IssueFull Cost Integration
  • Full Cost concepts need to be better integrated
    into NASA operations. Despite implementing a Full
    Cost accounting system and many Full Cost
    processes, NASA still lacks the level of cultural
    change needed to fully transition to Full Cost
    management.
  • Root cause
  • Insufficient stakeholder training
  • Unintended consequences and behaviors realized
    from initial full cost approaches
  • Some policies and planned processes were based on
    insufficient experience and need to be refined to
    reflect lessons learned
  • Updates Since Last Quarter
  • Cost Objectives Study completed by independent
    cost experts
  • Cost Objectives Working Group assessing those
    study findings
  • Clarify objectives for full cost management
  • Develop/prioritize specific cost information
    improvement actions
  • Develop plan of action and milestones
  • Support Agency requirement for simplified cost
    management
  • Center Management and Operations (CMO) in place
    for FY07

45
Critical Milestone Status Full Cost Integration
46
Planned Actions for Next QuarterFull Cost
Integration
  • Complete Cost Objectives Working Group report
  • Plan for implementation of near-term
    recommendations in 4th quarter

47
RecommendationFull Cost Integration
  • Full Cost Integration should continue to be
    carried as a Management Challenge.

48
Information Technology Security
  • Office of the Chief Information Officer
  • Scott Santiago
  • February 15, 2007

49
Background
  • The current audits of NASAs IT Security Program
    by the NASA OIG are identifying similar
    deficiencies that had been identified and
    addressed in previous OIG audits and through NASA
    corrective actions.
  • Impacts
  • Effect on mission accomplishment puts the
    integrity, availability and confidentiality of
    all NASAs critical data at risk.
  • Cost impact potential loss of ITAR and SBU
    information that costs NASA billions to develop
    or acquire.
  • Compliance impact noncompliant with the Federal
    Information Security and Management Act.
  • Budgets and schedule Corrective Action Plan
    requires reallocation of mission resources to
    bring Agency IT systems into compliance,
    potentially impacting mission budgets and
    schedules,
  • Operating efficiency collaboration across
    Centers is seriously hampered due to
    inconsistencies in the way security solutions
    have been implemented at Centers.
  • All NASA organizations are at risk.

50
Issue
  • Description of deficiency In order to properly
    protect NASAs information and Information
    Technology (IT), the NASA IT Security Program
    needs more effective implementation, monitoring,
    verification and validation and enforcement.
  • Root cause Current ITS Review established to
    determine root cause. On schedule to be completed
    February 2007.
  • Updates since last quarter
  • New IT Security clause - Completed Feb. 2007
  • Completed NASA IT Security review, finalizing
    report and corrective action plan. Scheduled for
    completion end of February 2007.
  • Established interim FISMA corrective action plan
    in December 2006

51
Deficiency Milestone Status
52
Planned Actions for Next Quarter
  • Review completed January 2007, the final report
    with recommendations and corrective action plan
    due February 2007.

53
Recommendation
  • Continue as a Material Weakness until corrective
    actions are implemented and they begin to
    demonstrate to NASA management the required
    results to assure that risk is being managed at
    an acceptable level
  • All Centers have demonstrated that all updated or
    new ITS Plans comply with existing NASA Policy.
  • NASA computers and devices have mitigated known
    vulnerabilities based on accepted risk levels.
  • NASA intrusion response
  • Intrusion detection covers all network
    demarcation points between NASA networks and
    external networks.
  • NASA is capable of investigating all potential
    compromised devices immediately following
    detection.

54
NASA Declassification ProgramManagement
Challenge (MC)
  • Office of Security and Program Protection
  • Steve Peyton
  • February 15, 2007

55
Background
  • NASA had a significant backlog of permanent
    records containing classified national security
    information (CNSI) that needed to be reviewed for
    continued classification pursuant to EO 12958
    amended.

56
Issue
  • Deficiency Description
  • NASA faced a December 2006 deadline to insure
    that all permanent records containing CNSI that
    are 25-years old or older are subjected to
    classification review. Poor past records
    management practices prevented the identification
    of records subject to Section 3.3 of EO 12958
    amended, resulting in NASAs inability to
    identify its total universe to be considered for
    declassification. The identified root causes
    significantly impeded the classification review
    programs efforts. EO 12958 as amended contains
    a sliding-window requirement for NASA to conduct
    yearly classification reviews of permanent
    records containing CNSI.
  • Root Causes
  • Insufficient staffing
  • Historically poor records management
  • Insufficient funding
  • Lack of Declassification Guides
  • Insufficient resident expertise to perform
    classification reviews for older programs
  • Insufficient support from senior management
    (commitment of resources)
  • Corrective Action Plan (CAP)
  • A comprehensive CAP was developed and distributed
    to the OMC, OIG, all Mission Directorates, and
    Center Security Offices on August 1, 2005.
  • Update Since Last Quarter
  • 661,000 pages reviewed (goal was 500,000)

57
Deficiency Milestone Status
58
Planned Actions for Next Quarter
  • Begin to review documents to meet December 31,
    2007 deadline.
  • Review the number of Referrals received from
    Other Government Agencies to meet December 31,
    2009 deadline.
  • Review Special Media requirements that are
    required to be reviewed by December 31, 2011.

59
Recommendation
  • This deficiency should be removed as a Management
    Challenge (MC).
  • The lessons learned and the established teams
    will enable us to keep the Declassification
    process moving forward.
  • Request the Mission Directorates and Center
    Directors continue to provide their support to
    this continued declassification effort.

60
Mission Management Aircraft
  • Infrastructure and Administration
  • Joe Walker
  • February 15, 2007

61
Background
  • GAO audit of Agencys FY03 and FY04 Mission
    Management Aircraft (MMA) operations highlighted
    control deficiencies with respect to management
    of NASAs MMA.
  • MMA operations were also questioned in several
    prior GAO and NASA IG audit reports.

62
Issue
  • Inadequate documentation and periodic review of
    MMA mission requirements Resolved
  • A-76 cost comparisons of all alternatives to
    government ownership of MMA have been completed
  • Insufficient HQ oversight - Resolved
  • Lack of integrated IT system to capture and
    report aircraft cost utilization Resolved
  • MMA downgraded from an Other Weakness to a
    Management Challenge at the October 2006 OMC
    Meeting.

63
Deficiency Milestone Status
64
Planned Actions for Next Quarter
  • Respond to recommendations from OIG audit of A-76
    Cost Comparison studies

65
Recommendation
  • Mission Management Aircraft should remain a
    Management Challenge until completion of the OIG
    audit of the A-76 Cost Comparison studies

66
Acquisition Management
  • Office of Program and Institutional Integration
    (OPII)
  • Rita Svarcas
  • February 15, 2007

67
Background
  • The Inspector General (IG) and the GAO (via its
    High Risk List) assert that NASA is not providing
    proper acquisition oversight. This is a
    long-standing deficiency. OCE, OP, OGC, OCFO,
    IEMP, and OPII are working together, and with the
    OIG and the GAO, to address the concerns and
    correct the deficiency.
  • Major activities include
  • 16 May 06 SMC approved Agency Strategic
    Acquisition Approach that enables informed
    decisions earlier in the acquisition process.
  • 18 July 06 OCE briefed Deputy Administrator on
    recommended approach that addresses IGs concerns
    and GAOs High Risk rating.
  • 28 July 06 Based on OCE briefing, Acquisition
    Management deficiency designated as an Other
    Weakness, with OPII as the POC.
  • 15 September 06 OCE presented draft
    implementation documents to OPII for review and
    finalization.
  • 21 November 06 Team of HQ representatives
    presented status of related activities to GAO
    team, with OIG in attendance.
  • 31 January 07 GAO issued High-Risk Update,
    re-stating concerns and necessary improvements.

68
Issue Description of Deficiency
  • Weak link between financial management and
    program management decisionmaking
  • hinders Agencys ability to effectively
  • Estimate costs
  • Perform contract oversight
  • Analyze contractor performance, including EVM
  • Establish strong integrated business processes
    and associated tools

69
Issue Root Cause
  • GAO High-Risk (May 19, 2004)
  • Weak link between financial management and
    program management decision-making
  • Financial management culture that has not fully
    acknowledged nature and extent of financial
    management difficulties
  • GAO High-Risk (January, 2005)
  • Lack of modern, fully implemented integrated
    financial management system
  • Undisciplined cost estimating processes in
    project development
  • Inability to obtain information needed to assess
    contract progress
  • GAO High-Risk (Jan 31, 2007)
  • Calls for re-engineering of cost reporting
    process
  • Lack of cost and performance data
  • To develop credible estimates
  • To compare BCWP to ACWP
  • Lack of analytical tools
  • Lack of trained staff for cost analysis and EVM

70
Updates Since Last Quarter
  • Planned Actions were
  • Finalize list of policies requiring modification.
  • Accomplished.
  • Establish case study criteria, review current
    candidates, and obtain approval of senior
    management.
  • Revised approach contemplates joint case studies
    addressing both this Weakness and the IEMP
    program/project management study (regarding
    requirements and data gaps).
  • Research relevant Agency analyses and
    initiatives, including IEMP and other tools.
  • Accomplished. Reviewed related studies and
    identified new Management/Business Systems
    Integration Group (M/BSIG) as a key venue for
    addressing business process issues in a
    cross-functional manner.

71
Deficiency Milestone Status
72
Planned Actions for Next Quarter
  • Prepare Corrective Action Plan to resolve High
    Risk area
  • Involving multiple organizations OCFO, OP,
    PAE, OCE, IEMP (M/BSIG), OPII
  • Plan will ultimately involve
  • GAO agreement
  • Deputy Administrator correspondence
  • Tracking progress to completion (GAO
    concurrence)
  • Continue modifying policies to incorporate
    ASP/ASM/PSM
  • Establish case study plan in conjunction with
    IEMP and the M/BSIG

73
Recommendation
  • This deficiency should continue to be carried as
    an Other Weakness.

74
Undefinitized Contract Actions (UCAs)
  • Office of Procurement
  • Deborah ONeill
  • February 15, 2007

75
Background
  • UCAs are used when there is an urgent need to
  • - initiate work by contractors to meet
    schedules or
  • - turn off contractor performance in order to
    stop their incurrence of costs before a final
    price or estimated cost and fee have been
    negotiated and mutually agreed upon by NASA and
    the contractor.
  • When used appropriately, UCAs are a legitimate
  • procurement tool.

76
Issue
  • Description of Deficiency
  • - GAO audits identified in early 1990s large
    dollar amount of UCAs (6.6 billion) which
    resulted in their appearing as part of GAO
    Contract Management High Risk. This remained the
    case until the GAO 2007 update when UCAs were no
    longer identified as part of the Contact
    Management High Risk.
  • Root cause
  • - Use of UCAs has fluctuated over time due to
    the temporary need to expedite certain
    activities. Problems may occur if they are
    inappropriately used, there are no dollar
    limitations on the amount of a UCA, and UCAs are
    not definitized in a reasonable period of time.

77
Deficiency Milestone Status
78
Planned Actions for Next Quarter
  • Continue to require prior approval
  • - Head of Contracting Activity for UCAs gt 100K
  • - Center Procurement Officer for UCAs lt 100K
  • - AA for Procurement for Letter Contracts gt
    Center
  • Master Buy Plan threshold or 10M (ESMD
    and
  • SOMD)
  • - Center Procurement Officer for all other
    Letter
  • Contracts
  • Continue to monitor and follow up with Centers on
    UCA activity on a monthly basis
  • Dollars
  • Number of actions
  • Time it takes to definitize (within 180 days)

79
Planned Actions for Next Quarter(Continued)
  • Continue to review as part of each Center
    Procurement Management Survey, self-assessments,
    and Center Procurement Officer one-on-one
    meetings with Assistant Administrator for
    Procurement

80
Recommendation
  • This deficiency should be closed because UCAs are
    actively being managed and reported resulting in
    the dollar amount having declined from 6.6
    billion in the early 1990s to less than 500
    million. This has been recognized by GAO with
    the deletion of UCAs from its January 2007
    updated High Risk Series report.

81
Backup
82
Total NASA UCAs Actions by Age January 31, 2007
83
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84
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85
Summary
86
Governance of Internal Controls at
NASAChristyl JohnsonTerry BowieCharles
ScalesFebruary 15, 2007
87
Background
  • Agency must comply with updated OMB Circular
    A-123, Managements Responsibility for Internal
    Control, Dec. 2004
  • Provide assurances of internal controls
  • Separate assurance on internal controls over
    financial reporting
  • Report on identified material weaknesses and
    corrective actions
  • Assessment of internal controls must include
    programmatic, financial, and institutional
    management, and must be conducted as effectively
    and efficiently as possible

88
Need for Modification to Current Approach
  • In 2006, it became obvious that supporting
    documentation and evidence for the annual
    statement of assurance was severely lacking.
    Financial evidence was documented, but the
    programmatic and institutional components were
    not.
  • NASA relied upon external audit bodies to
    identify weaknesses, instead of actively
    identifying, managing and correcting weaknesses
    internally.
  • Perception existed that internal controls is
    strictly financial

89
Need for Modification to Current Approach
  • OMC was tasked with the responsibility of
    reviewing and monitoring all reported internal
    control deficiencies. This proved to be an
    arduous task, and not an efficient role for the
    OMC. The Senior Assessment Team (SAT) was not
    functioning as reviewing body.
  • An Internal Controls workshop with representation
    from programmatic, financial, and institutional
    components revealed a stovepiped approach to
    managing internal controls. The SAT was not
    effectively integrating internal controls as a
    consequence, risk to NASA increased both for
    internal management effectiveness and external
    audits.

90
Previous Responsibilities of the Senior
Assessment Team
  • Promote effective Agency-wide internal controls
  • Identify who will perform assessments
  • Document performance requirements and guidance
  • Approve assessment objectives, scope, and other
    relevant requirements and communicate these to
    assessable units
  • Monitor the progress of internal control
    assessments

91
New Responsibilities of the Senior Assessment Team
  • Ensures adequate resources are devoted to the
    internal control evaluation process and NASAs
    compliance with the requirements of OMB Circular
    A-123 (identifying key controls, developing a
    testing plan, documenting test results, and
    reporting on the effectiveness of the controls)
  • Ensures Senior Assessment Team decisions are
    documented
  • Advises the Operations Management Council on the
    content of the Administrators Annual Statement
    of Assurance, and submits to the Administrator a
    statement on whether there is reasonable
    assurance that NASAs internal controls over
    programs, institutions, and financial reporting
    are achieving their intended objectives.

92
Proposed Responsibilities of the Senior
Assessment Team
  • Integrates and coordinates internal controls and
    policies across programmatic, financial, and
    institutional management for improved efficiency
    and effectiveness of Agency internal management
    controls
  • Provides oversight of the design and
    implementation of an effective and comprehensive
    Agency-wide internal control program
  • Leads Agency prioritization of internal control
    requirements for the current year and develops
    plans for prioritization in the out-years
    consistent with Agency vision and mission
  • Monitors and assesses Agency material weaknesses
    for the OMC recommends action as appropriate

93
Proposed Responsibilities of the Senior
Assessment Team
  • Reports material weaknesses to OMC for further
    action
  • Tracks progress of Agency-wide corrective action
    resolution
  • Supports OMC and the establishment of an
    integrated set of metrics to measure the Agencys
    progress towards its goals
  • Compiles supporting documentation for the
    Administrators Statement of Assurance from HQ
    Offices and Centers
  • Promotes continuous internal controls evaluation
    and monitors the progress of assessments
    throughout the Agency

94
Previous Governance Structure
Operations Management Council (OMC)
95
New Governance Structure
Operations Management Council (OMC)
96
Justification for Change to Chair of the SAT
  • Under the new governance structure, the Office of
    Program and Institutional Integration (OPII) is
    the manager of Agency-level integration of
    programmatic and institutional functions and
    activities, and is best positioned to recognize
    internal management control deficiencies across
    programmatic, institutional, and financial
    entities
  • The SAT will enhance the OPII role as focal point
    for programmatic requirements and as the
    integrator of functional policy requirements by
    providing current information on the state of
    internal management controls to meet those
    requirements across the Agency

97
Justification for Change to Chair of the SAT
  • The OPII, as SAT Chair, is best positioned to
    coordinate the development of an Integrated
    Internal Control Plan and determine appropriate
    assessable units for review and analysis
  • The OPII as SAT Chair, is best positioned to
    identify internal control deficiencies within the
    Agency management systems and recommend
    appropriate action
  • The OPII, as SAT Chair, is best positioned to
    render decisions in the overall best interests of
    the Agency, with no dominant programmatic,
    institutional or financial filter

98
Previous Execution of Internal Controls Functions
OFFICE OF
INSTITUTIONS AND MANAGEMENT
OFFICE OF THE ASSOCIATE ADMINISTRATOR FOR
INSTITUTIONS AND MANAGEMENT
OFFICE OF DIVERSITY AND EQUAL OPPORTUNITY
OFFICE OF
OFFICE OF HUMAN CAPITAL MANAGEMENT
INFRASTRUCTURE
AND
ADMINISTRATION
OFFICE OF SMALL BUSINESS PROGRAMS
OFFICE OF SECURITY AND PROGRAM PROTECTION
NASA SHARED
OFFICE OF PROCUREMENT
SERVICES CENTER
In accordance with law, the offices of
Diversity and Equal Opportunity and Small
Business Programs maintain reporting
relationships to the Administrator and Deputy
Administrator.
99
New Execution of Internal Controls Functions
OFFICE OF
INSTITUTIONS AND MANAGEMENT
OFFICE OF THE ASSOCIATE ADMINISTRATOR FOR
INSTITUTIONS AND MANAGEMENT
OFFICE OF INTERNAL CONTROLS AND
MANAGEMENT SYSTEMS
OFFICE OF INFRASTRUCTURE AND ADMINISTRATION
OFFICE OF DIVERSITY AND EQUAL OPPORTUNITY
OFFICE OF HUMAN CAPITAL MANAGEMENT
OFFICE OF SMALL BUSINESS PROGRAMS
OFFICE OF SECURITY AND PROGRAM PROTECTION
NASA SHARED SERVICES CENTER
OFFICE OF PROCUREMENT
In accordance with law, the offices of
Diversity and Equal Opportunity and Small
Business Programs maintain reporting
relationships to the Administrator and Deputy
Administration.
100
Justification for New Office Reporting to AA, IM
  • The new Office will
  • Help ensure compliance with Federal objectives
    and requirements for internal management controls
  • Provide focused leadership to assess and
    integrate a comprehensive internal management
    control program consistent with the Agency
    governance structure
  • Acquire and administer the resources necessary to
    identify key management controls, develop a
    testing plan, document testing results, and
    report on the effectiveness of the Agencys
    internal controls
  • Provide the daily oversight of the Agency
    internal control program including establishing
    controls, performing assessments, identifying and
    reporting deficiencies, and monitoring corrective
    actions

101
Justification for New Office Reporting to AA, IM
(cont.)
  • Creation of this new Office demonstrates
    NASAs commitment to a comprehensive and
    integrated internal management control program
    and emphasizes the importance of internal
    management controls and risk assessment to the
    NASA community in support of the Agencys mission

102
Office of Internal Controls and Management
Systems Responsibilities
  • Executive Leadership for Internal Controls
  • Support for the Senior Assessment Team (SAT)
  • Operational leadership of the Institutional
    responsibilities of the SAT
  • Support for correction of internal control
    deficiencies
  • Mission Support Plan (MSP) Maintenance and
    Oversight
  • Progress reporting against MSP objectives and
    goals
  • Updates of MSP and process enhancements
  • Audit Liaison
  • Primary point-of-contact for GAO/OIG audit
    activities
  • Reporting on audit recommendations and corrective
    actions
  • Management Systems
  • Support for internal and external assessments
  • Directives Management and NASA Online Directives
    Information System (NODIS)

103
Next Steps
  • Move current management systems function from IA
    to a new office for Internal Management Controls,
    which reports directly to the AA for Institutions
    and Management
  • Update Charter with approved roles and
    responsibilities
  • Finalize an Organizational Implementation Plan
  • Finalize an Integrated Internal Controls Plan
  • Update Internal Control policy documents
  • Implement Plan in FY07 (2nd Quarter)
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