By Arindam Nag and Deborah Zabarenko
New York - As Nasa sets
course for the moon and Mars, the space agency's finances are in disarray,
with significant errors in its last financial statements and
inadequate documentation for $565-billion
posted to its accounts, its former auditor
reported.
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 September 30, 2003, financial statement - which got scant
attention at its release but was detailed in a cover story in the May
issue of CFO Magazine - 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, PriceWaterhouseCoopers said in its
report.
"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 January 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 centres 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, which is looking into Nasa's accounting issues.
A Senate hearing on the issue was set for Wednesday.
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 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 fuelled the early boom
in space exploration in the 1950s evolved into separate parts of a
sprawling agency working independently rather than
co-operatively.
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 centres 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.
