November 18, 2004 Lisa M. Oliver, Chief Accountant

1. LaRC Office of Chief Financial Officer Presentation to LaRC Contractor Steering CouncilContractor Cost Reporting and Cost in Excess of Obligations November 18, 2004 Lisa M. Oliver, Chief Accountant

2. Agenda • Importance of timely and accurate contractor cost reporting • Cost in excess of obligations • Background • Definition • Current initiatives • Questions

3. Contractor Cost Reporting – Why is it Important? • Timeliness • Facilitates our ability to report actual and estimated costs so program/project decisions can be made with the latest, most current information • Out of LaRC’s73 active contracts subject to contractor cost reporting, 53% arrive after the contractual due date • Accuracy • Facilitates decision making based on reliable information • Out of LaRC’s73 active contracts subject to contractor cost reporting, 79% report variances between estimated and actual costs in excess of 10%

4. Cost in Excess of Obligations • Background • Cost in excess of obligations (CIEO) has existed in NASA for many years • Since NASA’s implementation of Core Financial (SAP R/3), CIEO has been recorded for internal reporting purposes only; it has not been reported in the general ledger (this is a system design limitation within SAP) • Recent audit findings have highlighted an area of concern due to the materiality of CIEO and unrecorded, unfunded liabilities • Prior to closing FY 2004, LaRC had over $2M in CIEO, out of approximately $160M throughout NASA • Complications: • Continuing resolutions • Pace and prioritization of funds distribution and funding actions • Understanding importance of contract funds management

5. Cost in Excess of Obligations (cont.) • Definition – NASA defines cost in excess of obligations when the cumulative cost at the appropriate reporting level (task or contract) exceeds the amount funded at the same level • Cumulative cost is calculated from actual costs for the reporting period plus the estimate for the current month • For example: Oct. ’04 actual costs $1,000 Nov. ’04 est. costs $ 100 Total cum. Costs $1,100 Total funded $1,050 CIEO $ 50 NOTE: Contractor cost reports provide a estimates for the 2 months following the month being reported.

6. Cost in Excess of Obligations (cont.) • Current initiatives • Agency has mandated that NASA will not record CIEO, even for internal reporting purposes • During FY 2004 closeout activities, Agency OCFO required all centers to actually record the obligation and cost for any “true” CIEO situations • LaRC did not record any obligation or cost for our CIEO; we worked with the Contracting Officer’s (CO) and Contracting Officer’s Technical Representatives (COTR) to resolve CIEO instances • Obtained additional funding from appropriate sources • Invoked funding limitation clauses on contracts to reduce cost to funding levels • Notified contractors that they would be responsible for absorbing any additional costs they incur above the funding limits • OCFO and Office of Procurement are jointly working short and long-term solutions • Take a more proactive approach to funds management of our contracts • Education for CO’s, COTR’s, Contractors and others as appropriate

7. Summary • Submission of contractor cost reports timely and accurately will enable more effective and efficient management of NASA’s programs • Cost in excess of obligations will become a “thing of the past” as NASA performs more effective contract funds management • Your assistance is needed if these objectives are to be realized!

8. Questions