NASA – GSFC Procurement Property Training P roperty Financial Reporting Issues

1. NASA – GSFC Procurement Property TrainingProperty Financial Reporting Issues ELAINE SLAUGH Chief, Property Accounting Branch NASA, Office of the CFO April 27, 2005

2. Discussion Goals: • Importance of Property Management • Recent Audit Findings and Implications • Property Management Concerns • Future Goals • Open Forum

3. WHY IS PROPERTY MANAGEMENT IMPORTANT? ACCOUNTABILITY • ACQUIRE WISELY • SAFEGUARD • USE EFFICIENTLY • DISPOSE OF TIMELY/SAFELY

4. PROPERTY VERSUS FINANCIAL MANAGEMENT ACCOUNTABILITY • ACQUIRE WISELY – Lease vs. Buy vs. Fabricate • SAFEGUARD – Assets on Balance Sheet exist • UTILIZED EFFICIENTLY – User Charges • DISPOSED TIMELY/SAFELY – Idle or Obsolete Assets Off the Balance Sheet, Environmental Liabilities Disclosed

7. PRESIDENT’S MANAGEMENT AGENDA To Reform Government as a result of: • GAO’s continual reporting of "high-risk" areas vulnerable to fraud, waste, and abuse. • Government programs too often deliver inadequate services at excessive cost. One initiative is improved financial management: • Financial Systems that routinely produce timely, useful and reliable information • Improved accountability through audited financial statements

9. SCORECARD STANDARDS FOR SUCCESS

10. FY04 Audit Results Disclaimer of opinion or “No Opinion”, and Material Weakness on Auditors Report on Internal Controls: “Enhancements Needed for Controls Over Property, Plant and Equipment and materials…” that if not implemented “…could prevent material misstatements from being detected in a timely manner.”

11. Causes of Material Weakness • Contractor-Held Property • Inadequate Documentation • Work In Process (WIP) Reporting • Obsolete WIP & Materials • Lack of Internal Controls • Theme Assets • Inconsistent Capitalization Methods • Insufficient Audit Trail

12. Causes of Material Weakness Inadequate Documentation • Property Items with no supporting or inadequate documentation • Unsupported Estimates • Incomplete transfer or delivery documents • Signatures • Dates • Values

13. Causes of Material Weakness Work In Process (WIP) • Failure to Report • Reporting Previously Delivered Items • Inaccurate Valuation • Inadequate Documentation • Lack of Policies and Procedures • Lack of Internal Controls

14. Causes of Material Weakness Lack of Internal Controls • Lack of guidance • Lack of procedures • Lack of reviews

15. Corrective Action: Internal Controls • Increase Guidance and Training • Establish procedures • Outreach out to Enterprise, Procurement, Logistics and Contractor Communities • Increase Reviews and Validations

16. Improved Internal Controls • Contractor-Held Asset Tracking System (CHATS) Reporting • Large Contractors (>$10 million in property) • Allow for Analysis of Individual Transactions • Report Monthly

17. Concerns • Identification • Valuation • Transfers • Work in Process (WIP) • Theme Assets

18. What is Property? FASAB #6 states PP&E is: • Tangible assets that have an estimated useful life of 2 or more years • Are not intended for sale in the ordinary course of business; and • Are intended to be used by the entity PPE excludes items held in anticipation of physical consumption

19. Identification - Are All of NASA ‘s Assets Recorded? Issue: NASA doesn’t know what property it is buying Solution: • Identify deliverables of property (hardware and software) in the contract • Assign specific WBS to deliverables of property

20. Valuation Requirements FASAB #6 states: PP&E shall be recorded at cost incurred to bring its to a form and location suitable for its intended use. Include: • Amounts paid to vendors ■ Transportation • Handling and storage ■ Installation • Labor, other direct or indirect production costs • Designs, plans and surveys ■ Direct inspection costs Solution: Cost reports identifies costs of assets acquired by contractors. This cost is used for valuation.

21. Transfers • Issues transferred between Centers, Contractors, and Other Government Agencies: • Don’t always get deleted/picked up • Don’t always get deleted/picked at proper value and same classification • No way to readily reconcile transfers • Solution: PIC to be issued May 2005, will require: • all transfers (of capital items) to be documented in contract. • Paperwork to be forwarded to logistics & finance. • Transfers tracked in NEMS.

22. Theme Assets • Assets that are destined for permanent operation in space • Problems: • Identifying assets • Determining Costs • Determining Project Phase • Solution - Work with Enterprises to: • Establish roles & responsibilities • Develop procedures • Establish appropriate WBS to capture costs

23. Work In Process • FASAB #6 states: “In the case of constructed PP&E, the PP&E shall be recorded as construction work in process until it is placed in service...” • Issues: Is all WIP currently accounted for? Is all WIP “in process?”

24. Why Account for WIP? C O S T S NASA SAP CAPITALIZE EXPENSE

25. Corrective Action: Work-In Process • Develop Additional Guidance & Procedures • Working with Missions to identify WIP for Theme Assets and Components under fabrication, • Review of Contracts with large value of contract costs • Any fabrication? • Any software? • On-site versus off-site • Future Action – Structure WBS to specific asset development

26. Future Goals • More automated ways of identifying property received or in process • Identify deliverables of property (hardware and software) in the contract • Assign specific WBS to deliverables of property • Reconcile Transfers • Cost reports identifies costs of assets acquired by contractors • Acquisition Value of Assets calculated automatically by accounting system (using assigned WBS) • All contracts/grants in CHATS

27. Open Forum • Questions? • Other issues / problems

28. Contact Information: Elaine Slaugh elaine.m.slaugh@nasa.gov (202)358-2599 Property Accounting Related Websites: Accounting Standards: fasab.gov NASA Financial Management Manual: http://www.hq.nasa.gov/fmm/9200/9250.pdf