Show
Property Management: Lack of Accountability and Weak Internal
Controls Leave NASA Equipment Vulnerable to Loss, Theft, and
Misuse (25-JUN-07, GAO-07-432).
For years, GAO and others have reported that the National
Aeronautics and Space Administration (NASA) does not maintain
effective control over the $35 billion of property, plant, and
equipment (PP&E) and materials that it reports on its financial
statements. GAO's report, the first in a planned series,
addresses whether NASA's control environment and internal
controls over NASA-held equipment provide reasonable assurance
that (1) these assets are not vulnerable to loss, theft, and
misuse and (2) all equipment costs are appropriately recorded in
the agency's financial statements. GAO evaluated the design of
NASA's property management controls by reviewing agencywide and
local policies, obtaining equipment loss reports for all NASA
centers, and evaluating actions taken to hold employees
accountable. To confirm its understanding of the design of NASA's
property controls, GAO conducted on-site visits at two NASA
centers and interviewed property management officials at the
remaining seven NASA centers.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-07-432
ACCNO: A71431
TITLE: Property Management: Lack of Accountability and Weak
Internal Controls Leave NASA Equipment Vulnerable to Loss, Theft,
and Misuse
DATE: 06/25/2007
SUBJECT: Accountability
Accounting procedures
Equipment inventories
Equipment management
Federal property
Federal property management
Financial records
Financial statements
Internal controls
Losses
Policy evaluation
Property and supply management
Property losses
Records
Records management
Waste, fraud, and abuse
Policies and procedures
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GAO-07-432
* [1]Results in Brief
* [2]Background
* [3]NASA's Equipment Management Policies
* [4]NASA's Property Management Organizational Responsibilities
* [5]Lack of Accountability and Weak Internal Controls Leave NASA
* [6]Weaknesses in NASA's Internal Control Environment Continue t
* [7]NASA Management Was Unresponsive to Prior Equipment
Manageme
* [8]Management Does Not Enforce Accountability for Equipment
Los
* [9]When Faced with High Equipment Loss Rates, NASA Removed
Cont
* [10]NASA Failed to Track and Control Millions of Dollars of Equi
* [11]NASA Does Not Place Restrictions on the Amount or Type
of Eq
* [12]NASA Lacks Effective Equipment Management Training
* [13]NASA Lacks an Integrated Financial Management System
That Co
* [14]NASA Does Not Report All Equipment Costs on Its Financial St
* [15]Conclusion
* [16]Recommendations for Executive Action
* [17]Agency Comments and Our Evaluation
* [18]GAO Comments
* [19]GAO Contact
* [20]Acknowledgments
* [21]GAO's Mission
* [22]Obtaining Copies of GAO Reports and Testimony
* [23]Order by Mail or Phone
* [24]To Report Fraud, Waste, and Abuse in Federal Programs
* [25]Congressional Relations
* [26]Public Affairs
Report to the Chairman, Committee on Science and Technology, House of
Representatives
United States Government Accountability Office
GAO
June 2007
PROPERTY MANAGEMENT
Lack of Accountability and Weak Internal Controls Leave NASA Equipment
Vulnerable to Loss, Theft, and Misuse
[27]GAO-07-432
Contents
Letter 1
Results in Brief 3
Background 6
Lack of Accountability and Weak Internal Controls Leave NASA Equipment
Vulnerable to Loss, Theft, and Misuse 10
NASA Does Not Report All Equipment Costs on Its Financial Statements 29
Conclusion 31
Recommendations for Executive Action 31
Agency Comments and Our Evaluation 33
Appendix I Objectives, Scope, and Methodology 35
Appendix II Comments from the National Aeronautics and Space
Administration 39
GAO Comments 44
Appendix III GAO Contact and Staff Acknowledgments 45
Tables
Table 1: Excerpts from Selected NASA Survey Reports Describing the
Circumstances Surrounding Equipment Losses 16
Table 2: Disposition of Recently Purchased Sensitive Equipment Costing
Less Than NASA's Sensitive Equipment Threshold 20
Table 3: Examples of Equipment Not Controlled in NASA's Property
Management System 25
Table 4: Description of the Population and Sample of Transactions 37
Figures
Figure 1: NASA Equipment Control Number (ECN) Tag Attached to Controlled
Property 8
Figure 2: NASA's Equipment Loss Rates for Fiscal Years 1997 through 2006
11
Figure 3: Noncontrolled Microscope Costing $1,700 18
Figure 4: Noncontrolled Multimedia Projector Costing $2,450 19
Figure 5: Camera Costing $1,500 Not Controlled in NASA's Property
Management System 24
Figure 6: Macintosh G5 Computer with a Cost of $2,449 Not Controlled in
the Property Management System 26
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.
Abbreviations
ASTM American Society of Testing and Materials
COTS commercial off-the-shelf
ECN equipment control number
ERP enterprise resource planning
FMR Federal Management Regulation
GSA General Services Administration
IAM integrated asset management
IEMP Integrated Enterprise Management Program
LMD Logistics Management Division
NASA National Aeronautics and Space Administration
NEMS NASA Equipment Management System
NPD NASA Policy Directive
NPR NASA Procedures and Requirements
OCFO Office of the Chief Financial Officer
OIG Office of the Inspector General
PDA personal digital assistant
PP&E property, plant, and equipment
RAIF Research Aircraft Integration Facility
SEMO Supply Equipment Management Officer
United States Government Accountability Office
Washington, DC 20548
June 25, 2007
The Honorable Bart Gordon
Chairman
Committee on Science and Technology
House of Representatives
Dear Mr. Chairman:
For years, we and others have reported that the National Aeronautics and
Space Administration (NASA) has not maintained effective control over the
$35 billion of property, plant, and equipment (PP&E) and materials that it
reports on its financial statements. More specifically, NASA is not able
to link the money it spends on the purchase or construction of its
property to discrete property items and, therefore, is unable to provide
independent control over these assets. Concerned that weaknesses in NASA's
internal controls over PP&E and materials have made these assets
vulnerable to loss, theft, and misuse, you asked us to determine whether
NASA maintains appropriate accountability over its physical assets and
properly accounts for all costs associated with the acquisition of its
physical assets. NASA's PP&E and materials are physically located
throughout the world, at locations including NASA centers, contractor
facilities, other private or government-run facilities, and in space. In
addition, the processes and controls over NASA's PP&E and materials vary
depending on a wide variety of factors including the property's value,
useful life, purpose, and location. As agreed with your staff, given the
scope of the work required to audit the various types of NASA property, we
plan to issue a series of reports that will address issues unique to each
property category.
This first report focuses on equipment items held by NASA. Specifically,
this report addresses whether NASA's control environment and internal
controls over NASA-held equipment provide reasonable assurance that
(1) these assets are not vulnerable to loss, theft, and misuse and (2) all
equipment costs are appropriately recorded in the agency's financial
management system and subsequently reported on its financial statements.
NASA defines equipment to include special tooling and test equipment and
agency-peculiar property, such as the Space Shuttle, rockets, engines, and
scientific components unique to NASA space programs. According to its
fiscal year 2006 financial statements, NASA reported that it owned $623
million^1 in NASA-held equipment. In addition to the amounts reported on
its financial statements, in accordance with NASA's accounting policy, the
agency also purchases hundreds of millions of dollars of equipment each
year that it does not report on its financial statements. Although not
reported in the agency's financial statements, it is NASA's policy to
track and control equipment that meets the agency's definition of
controlled property. NASA defines controlled equipment as (1) sensitive
equipment--items that are pilferable or possibly hazardous--with an
acquisition cost of $500 or more; (2) all weapons and hazardous devices,
regardless of acquisition cost; and (3) all nonsensitive equipment with an
acquisition cost of $5,000 or more that has an estimated service life of 2
years or more, which will not be consumed or expended as part of an
experiment.
To determine whether NASA's control environment and internal controls over
NASA-held equipment provide reasonable assurance that these assets are not
vulnerable to loss, theft, and misuse, we (1) evaluated management's
responsiveness to observations and recommendations made in prior audit
reports and internal management reports, (2) documented agency-wide trends
in equipment losses and evaluated actions taken by management to hold
employees accountable, and (3) evaluated the design of NASA's internal
controls by reviewing and analyzing agencywide and local equipment
management policies and procedures and comparing NASA's policies and
procedures with federal and other standards for controlling property. We
also interviewed the agency's top property management officials to obtain
their views on NASA's property management policies and processes and
previously identified property management weaknesses. We conducted
walkthroughs at two NASA centers and interviewed property management
officials at the remaining seven NASA centers to confirm our understanding
of the design of NASA's property management process and controls. To
determine whether equipment items purchased by NASA are properly recorded
in NASA's property management system and, therefore, subject to physical
inventory inspection, we selected a statistical sample of equipment
purchases made during fiscal years 2005 and 2006 that, based on our
analysis, did not appear to be recorded in NASA's property management
system. We also obtained and analyzed other internal property management
reports.
^1This amount represents the reported book value of NASA-held equipment,
which is the reported acquisition cost of $2.3 billion less accumulated
depreciation of $1.6 billion.
To determine whether equipment costs are appropriately recorded in the
agency's financial management system and subsequently reported on its
financial statements, we reviewed a nonrepresentative selection of
equipment purchases and traced these transactions to their source
documents and assessed whether all costs related to the purchases we
reviewed were accurately recorded in the property management system. We
interviewed officials with the Office of the Chief Financial Officer
(OCFO) and property officials and documented NASA's process for recording
equipment transactions in the agency's financial management system and
general ledger. We determined that the data were sufficiently reliable for
the purpose of this report. We performed our work from April 2006 through
March 2007 in accordance with U.S. generally accepted government auditing
standards. Details on our objective, scope, and methodology are in
appendix I.
We requested comments on a draft of this report from the NASA
Administrator or his designee. Written comments from the Deputy
Administrator are reprinted in appendix II. NASA also provided separate
technical comments, which have been incorporated into our report as
appropriate.
Results in Brief
Over the past 10 years, NASA has reported that it lost over $94 million in
equipment and for 6 of those years, its equipment loss rate has exceeded
its annual performance goal of 0.5 percent. Although, according to NASA,
some of this equipment was eventually located during subsequent physical
inventories,^2 NASA's failure to keep track of these items leaves them
vulnerable to theft and misuse. The high equipment losses are due, in
large part, to a weak internal control environment. NASA's internal
control environment is characterized by management's (1) lack of
responsiveness to prior equipment management recommendations, (2)
reluctance to hold employees accountable for equipment loss, and (3)
decision to remove from control (decontrol) millions of dollars of
equipment, when faced with equipment losses that exceeded the agency's
annual performance goal. Instead of tightening controls, as recommended by
the agency's 2002 equipment loss study, when faced with equipment losses,
NASA raised its threshold for tracking and controlling nonsensitive^3
equipment items from $1,000 to $5,000. This essentially eliminated control
over all nonsensitive equipment costing less than $5,000. In addition,
NASA has yet to address previously reported weaknesses in its process for
reviewing and investigating equipment losses or strengthen its policy
related to users' accountability for equipment losses. As a result, NASA
employees are rarely held accountable for equipment losses. Of the 1,136
equipment loss reports completed during fiscal year 2006 that NASA
provided to us, only 282--or about 25 percent--were investigated. Of those
investigated, only
2 reports indicated that employees would be disciplined or held
financially accountable.
^2During the course of our audit, NASA was unable to provide us with
information we requested on the total amount of equipment located during
subsequent inventories for the 10-year period. In technical comments on a
draft of this report, NASA stated the agency recovered $34.5 million in
previously lost equipment over the 10-year period. However, the agency did
not provide documentation to support these amounts, and we were unable to
verify the reliability of these reported recovery amounts.
Weaknesses in the design and operation of NASA's systems, processes, and
policies over the receipt and acceptance of equipment do not provide
reasonable assurance that equipment purchases that meet NASA's definition
of controlled property are routinely entered into NASA's property
management systems and, therefore, subject to physical inventory control.
Specifically, NASA's equipment management policy allows employees to
bypass the agency's central receiving function--which should serve as the
primary control point for receipt and acceptance--and does not limit the
amount or type of equipment purchases that may be sent directly to an
end-user. Further, end-users are not adequately trained and, therefore, do
not take the steps necessary to ensure that equipment is entered into the
property management system. Finally, the agency lacks an integrated
financial management system that could mitigate the problems associated
with bypassing central receiving. As a result, over the past 10 years,
NASA reported^4 that it failed to enter
$199 million of controlled equipment purchases into its property
management system. In addition, we estimated that NASA failed to track at
least another $13 million of controlled equipment purchased during fiscal
years 2005 and 2006, which represents approximately 4 percent of NASA's
total reported controlled equipment purchased during the same period.
Equipment not tracked in NASA's property management system is not subject
to the same physical inventory procedures as other controlled equipment
items and as a result, is at much higher risk of being lost or stolen
without NASA being aware of it. Although NASA plans to implement a new
integrated asset management (IAM) system in October 2007, the new system,
as currently planned, will not significantly improve NASA's ability to
provide reasonable assurance that all equipment purchases are
appropriately recorded in the agency's property management system. Based
on our assessment of NASA's IAM system requirements and other planning
documents, NASA's planning effort thus far has been focused primarily on
equipment that it reports on its financial statements. According to NASA
officials, for external financial reporting purposes, IAM will identify
the cost of capital equipment as those costs are incurred. However, for
controlled equipment that NASA does not report on its financial
statements, the system is not being designed with front-end controls that
would identify or flag purchases as equipment when the item is ordered.
Instead, NASA will continue to rely heavily on end-users to ensure that
equipment is entered into the property management system after it has been
received.
^3NASA defines nonsensitive equipment as items that are not pilferable or
possibly hazardous.
^4NASA, Agency Annual Report of Controlled Equipment-Equipment by Center
for fiscal years 1997 through 2006.
In accordance with NASA's accounting policy, NASA reports only equipment
items valued at $100,000 or more and with a useful life of
2 years or more on its financial statements. Although these items
represent only a portion of NASA's total equipment inventory, NASA is
unable to accurately account for and report the value of this equipment.
Because NASA uses the amounts recorded in its property records as the
basis for reporting equipment amounts in its financial statements, the
weaknesses in NASA's receipt and acceptance process also affect the
agency's financial reporting capabilities. As a result, during fiscal
years 2005 and 2006, NASA failed to accurately account for and report at
least $2.3 million of the total equipment items purchased that cost
$100,000 or more. In addition, although NASA often purchases components
for the purpose of fabricating an equipment item, it does not have an
effective way to identify and link the cost of the components with the
end-item being produced. As a result, NASA often does not capture and
report the full cost of these items on its financial statements. Without
the systems and processes needed to identify all equipment costs as they
are incurred, NASA must continue to rely on a retrospective review of
transactions entered into NASA's property management system to determine
which costs should be capitalized--a process that has proven to be
ineffective.
We are making 10 recommendations aimed at strengthening NASA's internal
control environment and improving its property management controls. These
recommendations are focused on designing an effective system of controls
that includes, among other things, strengthening agencywide policy on user
accountability for equipment loss, and improved financial and physical
control over equipment. In written comments, which are reprinted in
appendix II, NASA concurred with 8 of our 10 recommendations and partially
concurred with the remaining
2 recommendations related to (1) strengthening NASA's policy on user
accountability for equipment loss and (2) defining and enforcing
reasonable workload standards for property custodians. In its comments,
NASA also stated that many of GAO's recommendations related to efforts
currently under way.
With respect to our recommendation related to strengthening NASA's policy
on user accountability, NASA disagreed with the portion of that
recommendation that would require employees to acknowledge in writing, for
all personal use equipment, their responsibility for maintaining NASA
equipment. Instead, NASA cited plans to implement other measures to
reinforce user accountability requirements. These measures, if effectively
implemented, would help establish user accountability for lost or missing
property, which was the intent of our recommendation. In addition,
although NASA agreed with the intent of our recommendation related to
defining and enforcing reasonable workload standards for property
custodians, the agency expressed concern that implementation of such a
recommendation would be difficult to achieve. We continue to believe that
reasonable parameters could be established and are a critical step in
ensuring that the custodians are able to effectively carry out their
responsibilities. NASA also provided separate technical comments, which
have been incorporated into our report as appropriate.
Background
NASA's mission is to pioneer the future in space exploration, scientific
discovery, and aeronautics research. To accomplish its mission, NASA
procures, fabricates, and maintains billions of dollars of PP&E and
operating materials and supplies. According to its fiscal year 2006
financial statements, NASA reported $35 billion in PP&E and operating
materials and supplies, which represents more than 77 percent of the
agency's total assets. In accordance with NASA's capitalization policy,
however, the amount reported on NASA's financial statements reflects PP&E
and operating materials and supplies with a unit cost of $100,000 or more
and a useful life of 2 years or more. NASA also purchases and expenses
billions of dollars of equipment and materials each year, which are not
reflected in the amount reported above.
NASA's ability to effectively manage its PP&E and operating materials and
supplies will continue to be important going forward. On January 14, 2004,
the President announced a new exploration policy--A Renewed Spirit of
Discovery: The President's Vision for U.S. Space Exploration
(Vision)--that directs NASA to focus its efforts on returning humans to
the moon by 2020 in preparation for future, more ambitious missions. Over
the next two decades NASA plans to spend nearly $230 billion implementing
the new exploration policy. Implementing the Vision will require that the
agency procure, fabricate, and maintain significant amounts of PP&E and
operating materials and supplies. As such, it is important that the agency
have the processes, systems, and controls in place that are needed to
manage and control this property.
NASA's Equipment Management Policies
NASA's PP&E and materials are physically located at many locations
throughout the world, including NASA centers, contractor facilities, other
private or government-run facilities, and in space. As discussed
previously, this report focuses specifically on NASA-held equipment.
According to its fiscal year 2006 financial statements, NASA reported that
it owned
$623 million^5 in NASA-held capital equipment. NASA defines capital
equipment, in accordance with its capitalization criteria, to include
special tooling and test equipment and agency-peculiar property, such as
the Space Shuttle, rockets, engines, and scientific components unique to
NASA space programs. However, according to NASA's equipment management
policy, NASA also tracks and controls certain equipment such as laptop
computers, cameras, cell phones, and other items that fall under its
$100,000 capitalization threshold but meet its definition of controlled
equipment. NASA defines controlled equipment as (1) sensitive
equipment--items that are pilferable or possibly hazardous--with an
acquisition cost of $500 or more; (2) all weapons and hazardous devices,
regardless of acquisition cost; and (3) all nonsensitive equipment with an
acquisition cost of $5,000 or more that has an estimated service life of
2 years or more, and that will not be consumed or expended as part of an
experiment. NASA defines noncontrolled items as sensitive items under $500
and nonsensitive items under $5,000.
NASA's equipment management policy requires that the agency assign a
unique equipment control number (ECN), as shown in figure 1, to each
controlled equipment item and that NASA use the NASA Equipment Management
System (NEMS) to track and control these items.
^5This amount represents the reported book value of NASA-held equipment,
which is the reported acquisition cost of $2.3 billion less accumulated
depreciation of $1.6 billion.
Figure 1: NASA Equipment Control Number (ECN) Tag Attached to Controlled
Property
NEMS contains information on controlled equipment such as the item's name,
purchase price, manufacturer's information, item location and condition,
property custodian, and end user and serves as the basis for performing
periodic physical inventory procedures.
NASA's Property Management Organizational Responsibilities
According to NASA's property management policy^6 and procedural
guidance,^7 property management at NASA involves five key players--the
Logistics Management Division (LMD), the supply equipment management
officer (SEMO), property custodians, end users, and central receiving. A
description of their roles and responsibilities is as follows:
o The LMD, which is located at NASA headquarters in Washington,
D.C., is responsible for establishing policies and procedures that
govern the agency's equipment management activities. The LMD is
also responsible for (1) assisting NASA centers^8 in the
development and operation of internal processes, procedures, and
systems to ensure their compatibility with agency programs; (2)
establishing necessary agency performance measures and reports on
the overall implementation of equipment management programs; (3)
conducting reviews and assessments of equipment management
activities; and
(4) defining training requirements to ensure properly trained
property personnel across the agency.
o The SEMO is responsible for managing the centers' equipment
program--providing functional management, leadership, and
necessary resources to ensure the implementation of an effective
equipment management program. The SEMO is also responsible for (1)
ensuring that loss, damage, or destruction of equipment is
promptly reported, investigated, and reviewed to prevent
recurrences, and taking corrective actions as recommended by the
Property Survey Officer or Board; (2) implementing the necessary
equipment control procedures to ensure proper accountability for
center equipment; (3) ensuring that prescribed physical
inventories of controlled equipment are taken and adjustments are
made to property and financial records; and
(4) establishing a process to ensure that all personnel associated
with the utilization of government equipment receive documented,
up-to-date property users training (with special emphasis on the
consequences of poor stewardship and negligent use).
o Property custodians are designated by the Division Director or
chief for each property management area or program. Full-time
property custodians may be appointed by the SEMO. Custodians'
responsibilities include maintaining records for all controlled
equipment assigned to them; educating employees that equipment is
used for official purposes only; reporting untagged controlled
equipment including fabricated equipment found in their assigned
area to the SEMO, and assisting in identifying the circumstances
relating to untagged items; cooperating in physical inventories
and assisting in follow-up actions; identifying controlled
equipment no longer needed and coordinating disposition with
users; ensuring that missing or stolen equipment is investigated,
documented, and reported promptly to the center logistics and
property management and center security office; assigning
sensitive items to a primary user; and ensuring that prior to
retirement, transfer, or resignation of an employee, all equipment
is properly transferred.
o An individual end user has a duty to protect and conserve
government property and should not use such property, or allow its
use, for other than authorized purposes. The user should also
report any missing or untagged equipment, transfer, location
change, or user change of equipment to the property custodian
immediately. Other responsibilities include notifying the property
custodian, supervisor, and the center security officer immediately
if theft of government property is suspected. The user should also
ensure that equipment is used only in pursuit of approved NASA
programs and projects and notify the property custodian of
equipment not actively being used for determination of proper
disposition. The individual is responsible for ensuring that
equipment is returned through the property custodian when no
longer needed.
o Each center is required to establish a centralized receiving
location for processing equipment purchases. The equipment, along
with receiving documents, is delivered to a centralized receiving
warehouse location, which may be managed by NASA contractors. Upon
receipt, warehouse personnel inspect the equipment for possible
damage or defects and ensure that the items received are
consistent with the requirements of the acquisition documents
before accepting the items. Using receiving documents and, when
necessary, by consulting with the end user, warehouse officials
determine whether the equipment meets NASA's definition of
controlled property and if so, they attach an ECN tag and enter
the equipment into NEMS. According to NASA's property management
guidance, employees may bypass the central receiving warehouse and
have equipment shipped directly to the end user, or NASA employees
may also purchase equipment directly from local merchants using a
government purchase card. In such cases, the employee receiving
the equipment is required to notify the center's central receiving
warehouse officials that they have received or purchased equipment
that should be controlled in NEMS.
^6NASA, Equipment Management, NASA Policy Directive (NPD) 4200.1B (rev.
Jan. 23, 2006).
^7NASA, Equipment Management Procedural Requirements, NASA Procedures and
Requirements (NPR) 4200.1F (Nov. 14, 2006).
^8NASA activities are performed largely at its headquarters location in
Washington, D.C., and its nine centers, as follows: Ames Research Center,
Dryden Flight Research Center, Glenn Research Center, Goddard Space Flight
Center, Johnson Space Center, Kennedy Space Center, Langley Research
Center, Marshall Space Flight Center, and Stennis Space Center.
Lack of Accountability and Weak Internal Controls Leave NASA Equipment
Vulnerable to Loss, Theft, and Misuse
Over the past 10 years, NASA has reported that it has lost over $94
million in equipment. Although, according to NASA, some of this equipment
was eventually located during subsequent physical inventories,^9 NASA's
failure to keep track of these items leaves them vulnerable to theft and
misuse. As shown in figure 2, NASA's reported equipment loss rate exceeded
its annual performance goal of 0.5 percent for 6 of the past 10
years--hitting a high of 1.046 percent in fiscal year 2001.
^9During the course of our audit, NASA was unable to provide us with
information we requested on the total amount of equipment located during
subsequent inventories for the 10-year period. In technical comments on a
draft of this report, NASA stated the agency recovered $34.5 million in
previously lost equipment over the 10-year period. However, the agency did
not provide any documentation to support these amounts, and we were unable
to verify the reliability of the reported recovery amounts.
Figure 2: NASA's Equipment Loss Rates for Fiscal Years 1997 through 2006
According to NASA's own studies and our assessment of the agency's
equipment management policies, procedures, and control environment, the
high equipment loss rates NASA has reported over the past decade are due,
in large part, to a general lack of accountability and weak internal
control environment. In addition, weaknesses in NASA's financial
management system and property management processes and controls do not
provide reasonable assurance that equipment is routinely tracked and
controlled in NASA's property management system. As a result, over the
past 10 years, NASA also reported^10 that it did not enter $199 million of
controlled equipment purchases into the agency's property management
system. In addition to the $199 million of equipment NASA reported, we
estimated that NASA failed to track at least another $13 million of
controlled equipment purchased during fiscal years 2005 and 2006--leaving
these items vulnerable to theft or misuse, which represents approximately
4 percent of NASA's total reported controlled equipment purchased during
the same period. Because this equipment was not tracked in NASA's property
management system, it is not subject to the same physical inventory
procedures as other controlled equipment items and, therefore, is at much
higher risk of being lost or stolen without NASA being aware of it.
^10NASA, Agency Annual Report of Controlled Equipment-Equipment by Center
for fiscal years 1997 through 2006.
Weaknesses in NASA's Internal Control Environment Continue to Drive High
Equipment Loss Rates
According to GAO's standards for internal control^11, an agency's internal
control environment is essentially the organizational climate or culture
in which job processes and internal controls operate and is shaped by the
values maintained and demonstrated by management through its written
policies, words, and actions. NASA's internal control environment is
characterized by management's (1) lack of responsiveness to prior
equipment management recommendations, (2) reluctance to hold employees
accountable for equipment loss, and (3) decision to remove from control
(decontrol) millions of dollars of equipment, when faced with high
equipment loss rates.
NASA Management Was Unresponsive to Prior Equipment Management Recommendations
Although we and other auditors have reported for decades that weaknesses
in NASA's equipment management systems, processes, and internal control
environment leave NASA vulnerable to loss, theft, and misuse, NASA has
done little to address the weaknesses identified. Many of the issues we
raise in this report mirror those we reported on as far back as 1976,
including failure on the part of NASA management to address known
weaknesses in its property management control environment. More recently,
in 1998, NASA's Office of Inspector General (OIG) reported^12 that NASA
frequently did not investigate the loss of equipment, as required by
NASA's equipment management policy. Further, the OIG reported that when
NASA did investigate equipment losses, it rarely imposed disciplinary
actions or pursued monetary recovery, although, in many cases, according
to the OIG report, the property loss resulted from employee negligence. As
discussed later, NASA has yet to address these weaknesses.
Although a 2002 NASA study^13 identified the agency's weak internal
control environment as the underlying cause of high equipment loss rates,
NASA management has yet to establish an effective control environment and
make property accountability a top priority. In response to high 2001
equipment loss rates, NASA conducted this equipment loss review in August
2002 to (1) determine what factors led to the excessive equipment losses
and (2) evaluate the possibility of raising its accountability
threshold--which, at the time, was set at $1,000. According to the 2002
equipment loss study, NASA's high equipment loss rates were driven by
weaknesses in NASA's control environment, which stemmed from a general
lack of emphasis on equipment accountability and control. For example, the
study cited factors such as a lack of security measures to prevent
equipment theft, failure on the part of management to hold employees
accountable for lost items, and span of control issues that made it
difficult for property custodians to effectively track and manage
equipment items.
^11GAO, Standards for Internal Control in the Federal Government, GAO/AIMD
00-21.3.1 (Washington, D.C.: November 1999).
^12NASA OIG, Assessment of NASA Property Survey Boards and Officers Final
Report, G-96-020 (Washington, D.C., February 1998).
^13NASA, NASA Headquarters Equipment Loss Analysis (Washington, D.C., Aug.
22, 2002).
To address these weaknesses, the study recommended a number of property
management improvements including (1) instituting a variety of initiatives
aimed at increasing property accountability awareness, (2) replacing the
triennial inventory process with a biennial process, (3) reducing the
amount of equipment assigned to property custodians, and (4) strengthening
the agency's policy on users' accountability for lost items. However,
according to NASA's LMD director, the recommendations included in the 2002
equipment loss study were not so much recommendations as they were
suggestions for improvement. He stressed that implementation of these
recommendations by the centers was optional. Consequently, while some of
the centers instituted initiatives aimed at increasing property
accountability awareness, only four of NASA's nine centers converted from
a triennial to either a biennial or annual inventory schedule and none of
the centers addressed the issue of reducing the amount of property
assigned to property custodians.
According to NASA's property management guidance, property custodians play
a key role in controlling equipment at NASA. However, NASA's 2002
equipment loss study stated that property custodians were given
responsibility for too many equipment items, making it difficult for them
to effectively track and manage the items. Based on our analysis of NASA's
fiscal year 2005 and 2006 property data, the number of equipment items
assigned to each property custodian varied widely--with some property
custodians responsible for as many as 4,000 items and others responsible
for as few as one item. It is important to note that for most, the duties
of property custodians are in addition to their primary job
responsibilities. For example, at one center, a full-time engineering
technician is also the property custodian for about 4,000 pieces of
equipment. At another center, an administrative program analyst is also
responsible for managing about 1,200 pieces of equipment.
According to NASA officials, NASA's new property management guidance,
issued in November 2006, strengthened the agency's policy on user
accountability for equipment loss. However, NASA officials were unable to
provide us the specific changes to the guidance that they believed
strengthened the policy. Based on our review, the current language in
NASA's equipment management guidance related to user accountability is the
same as the previous version, and we believe the policy could be
strengthened. For example, although NASA's equipment loss policy provides
the authority to take disciplinary action or hold employees financially
accountable for equipment losses that result from employee negligence, as
discussed later, the policy does not clearly describe the minimum level of
care that NASA expects employees to exercise over equipment. According to
the LMD director, negligence is difficult to define and, therefore, each
center should have the flexibility to define it as they see fit. As
discussed further below, GAO does not share this view.
Management Does Not Enforce Accountability for Equipment Losses
One of the most effective ways for management to communicate the
importance of maintaining accountability over government property is to
hold employees accountable for equipment losses that result from
negligence.^14 However, even when employee negligence may have led to
equipment loss, we found that most centers did not hold employees
accountable for equipment loss. According to NASA's property management
policy and procedural guidance, when accountable government property is
lost, damaged, or destroyed, the user is to immediately notify his or her
property custodian and initiate the preparation of NASA Form 598--Property
Survey Report--by providing a description of the circumstances surrounding
the loss of property. According to NASA's policy, each survey report will
be fully investigated and written findings provided by an independent
Property Survey Board or Officer.^15 However, we found that equipment
losses were not always reported promptly and when reported, losses were
not always investigated. Of the 1,136 survey reports initiated during
fiscal year 2006,^16 465, or 41 percent, involved equipment lost in fiscal
years 2005 and prior. In addition, of the 1,136 survey reports NASA
provided us, only 282--or about 25 percent--were investigated by either a
Survey Board or Officer. For the remaining 854 survey reports, there was
no evidence that these reports were investigated as required by NASA
policy. Of those investigated, only 2 reports indicated that employees
would be disciplined or held financially accountable.
^14An accepted definition of negligence is a determination, after a review
of all the relevant facts, that a person who had a duty of care toward
property failed to exercise the level of care that a reasonable person
would have exercised under the circumstances and that failure caused the
loss or damage of property.
^15Each center director is responsible for appointing a Property Survey
Officer and the Property Survey Board.
Although NASA's equipment loss policy provides the authority to take
disciplinary action or hold employees financially accountable for
equipment losses that result from employee negligence, as discussed
previously, the policy does not clearly describe the minimum level of care
that NASA expects employees to exercise. According to NASA's property
management policy guidance, NASA employees have the duty to protect and
conserve government property but the policy does not provide any
additional information about what it means to protect or conserve property
or describe the minimum level of care that it expects employees to
exercise over equipment. For example, NASA does not provide guidance such
as (1) assigned government property should not be stored in an unlocked
vehicle or (2) laptop computers should be stored in a locked room or
otherwise secured in such a way to deter theft when not in the possession
of the employee. As a result, it was not surprising that our review of
NASA's property survey reports revealed a widespread lack of
accountability with few adverse consequences for equipment losses. Table 1
provides examples from our review of NASA property survey reports
initiated during fiscal year 2006, which show little accountability and no
disciplinary actions taken for controlled equipment losses.
^16According to NASA's property management metrics, employees submitted
1,452 survey reports during fiscal year 2006; however, NASA provided us
with only 1,136 reports.
Table 1: Excerpts from Selected NASA Survey Reports Describing the
Circumstances Surrounding Equipment Losses
Equipment
Equipment value Disciplinary
description (dollars) Statement of circumstance action taken
Desktop computer $4,855 Around 8 years ago, my wife was None
and laser in desperate need for a computer
printer system at home to perform her
work as a real estate broker. I
could not afford a computer at
the time because of my wife's
medical expenses. I knew that
surplus computers were available
in the warehouse for checkout so
I checked one out. It was already
old and outdated but it helped my
wife work at home, which was
greatly appreciated. She used the
computer for about 2 1/2 years
and then I turned the computer
back in. This occurred about 5
years ago. I never received a
receipt but I believe the
computer was excessed and given
to a school.
Laptop computer 4,265 This computer, although assigned None
to me, was being used on board
the International Space Station.
I was informed that it was tossed
overboard to be burned up in the
atmosphere when it failed.
Projector 7,525 User loaned the projector to None
another employee but does not
recall when or to whom it was
loaned.
Micro computer 3,072 As system administrator, I had None
several items in my name. I gave
the computer to someone and
because I didn't keep good
records, I do not remember who
this was given to.
Research 850,321 A thorough and reasonable search None
Aircraft was conducted but we were unable
Integration to locate the missing property.
Facility (RAIF) Prior users were contacted to
missing establish the whereabouts of the
property, 65 property. These items are
items normally located in the lab and
office areas of the RAIF. Normal
security procedures are in place;
however, we are unable to lock
down and control access to these
RAIF areas at all times. In
general, the missing items
consist of older equipment that
has been replaced or is no longer
necessary for standard
operations.
DVD recorder, 6,087 I signed for these items when two None
television set, employees retired. It was my
two desktop belief that these items would
computers show up during our next scheduled
inventory but they did not. I
feel we have exhausted all known
efforts to locate these items.
Five desktop 10,527 I have no recollection of the None
computers whereabouts of this equipment. It
has probably been excessed since
for the past year I have not been
able to find it.
Notebook 3,399 This notebook was transferred None
computer into my name in 2004 but I never
had a use for it. It was old and
very outdated. It sat in my
office for 6 to 8 months until I
moved to my new office. I
honestly don't know when I last
saw the computer.
Six computers, $26,827 A property custodian, who was None
three display assigned almost 100 items,
units, recorder retired but did not properly
transfer accountability for the
equipment. After many months of
searching for the equipment, most
of the equipment was located, but
the listed items could not be
found. Signing this form for
these items does not signify that
I am taking responsibility for
the lost equipment.
Source: GAO analysis of NASA data.
Note: Data are from NASA survey reports for fiscal year 2006.
When Faced with High Equipment Loss Rates, NASA Removed Control over Millions
of Dollars of Equipment
When faced with high equipment loss rates, instead of tightening controls
as recommended by the agency's 2002 equipment loss study, in April 2003,
NASA raised its threshold for tracking and controlling nonsensitive
equipment items from $1,000 to $5,000--eliminating control over
nonsensitive equipment costing less than $5,000. According to the analysis
used to justify this decision, NASA estimated that raising the
accountability threshold would remove control over $472 million of
nonsensitive equipment--or 13 percent of the value of its total equipment
inventory. Although NASA officials originally told us that they did not
keep track of the actual quantity or dollar amount of equipment
decontrolled due to the policy change, they subsequently told us that they
decontrolled 75,576 items valued at $148 million. However, NASA did not
provide us with documentation to support these figures. Further, according
to the 2002 study, raising the threshold would allow the agency to
prioritize its property management control activities. The study suggested
that by raising the threshold, NASA could reduce the overall property
management workload, which would allow property custodians to focus on
higher-value equipment and sensitive items. Although NASA reduced its
overall property management workload by raising its nonsensitive equipment
accountability threshold, the agency has done little to prioritize its
remaining workload to ensure that it is using its property management
resources in a cost-effective way.
NASA's 2002 equipment loss study warned that if NASA raised its
accountability threshold, it should also implement the study's recommended
improvement measures to mitigate the risk that raising the threshold could
result in decreased oversight and thus, increased equipment losses.
However, as discussed previously, NASA has not implemented most of the
study's recommended property management improvements. In addition, NASA
has not followed through on many of the tenets outlined in its April 2003
policy memo announcing the new capitalization threshold for nonsensitive
equipment. Specifically, the memo indicated that the new policy did not
reduce the responsibility for proper stewardship of assets costing less
than $5,000. The policy letter goes on to state that the Logistics
Management Office will revise NASA's equipment management guidance to
include the proper care, management, and protection of all NASA equipment,
including noncontrolled equipment. However, when NASA issued its revised
property guidance over 3 years later in November 2006, the only
requirement related to noncontrolled equipment is the requirement that a
sticker be placed on noncontrolled items that reads "Property of U.S.
Government," as shown in figure 3.
Figure 3: Noncontrolled Microscope Costing $1,700
Prior to April 2003, NASA would have controlled the microscope shown in
figure 3 as well as the multimedia projector shown in figure 4. However,
NASA removed these items from its sensitive equipment list in April 2003,
even though NASA's 2002 equipment loss study identified laboratory
instruments and equipment and video projectors as high-loss equipment.
NASA property sticker
Figure 4: Noncontrolled Multimedia Projector Costing $2,450
Note: The projector shown in figure 4 was in a box for 12 months after
receipt. The NASA property sticker was not attached--increasing the
projector's vulnerability to theft.
According to NASA's equipment management policy, with the exception of
weapons and hazardous devices, it also does not track or manage items that
it considers pilferable, such as cell phones, digital cameras, or personal
digital assistants (PDA), if these items cost less than $500. Based on our
analysis of NASA's procurement data for fiscal years 2005 and 2006, NASA
purchased over $14 million of equipment that met NASA's definition of
sensitive equipment but fell under NASA's $500 sensitive equipment
threshold. Tracking information on these items would be useful for
maintenance/supply purposes or to ensure that the items are returned by
employees upon their departure. However, NASA currently has no way of
knowing to whom it has supplied cell phones, cameras, or other electronic
devices costing less than $500.
To gain a better understanding of who had these devices and how they were
used, and to verify that the purchase price was less than $500, at one
NASA center we spoke with the purchasers and users of recently purchased
items. Using NASA's fiscal years 2005 and 2006 accounting records, we
selected six items purchased with agency purchase cards. Although NASA did
not maintain property records for the items we selected, all of the
purchase card holders were able to recall for whom they had purchased the
items. As shown in table 2, four of the six items were actually over the
$500 sensitive equipment threshold--when the cost of other equipment
peripherals was included in the purchase price--and should have been
tracked as controlled equipment items. Of the remaining two items that
fell below NASA's sensitive equipment threshold, one could not be located
and the other was at the employee's home because, according to the
employee, he no longer had a business use for it.
Table 2: Disposition of Recently Purchased Sensitive Equipment Costing
Less Than NASA's Sensitive Equipment Threshold
Equipment description Cost (dollars)^a Disposition of equipment
Axim(TM) X50 personal This PDA meets NASA's control
digital assistant criteria for sensitive equipment
(PDA) when the cost of the accompanying
memory card ($68) and carrying
case ($30) is added to the total
cost of the PDA. According to the
employee, the property was at home
and is not used at work. The item
$493.16 was not tracked in NEMS.
Camera This camera meets NASA's criteria
for controllable equipment items
when the telephoto lens costing
$999.99 is added to the total cost
of the camera. Neither the camera
nor the lens was tracked or
488.38 controlled in NEMS.
Canon PowerShot(TM) This camera meets NASA's control
Camera criteria for sensitive equipment
when the cost of the accompanying
memory card ($140) is added to the
total cost of the camera. This
item was located in the employee's
possession, but was not tracked in
474.99 NEMS.
Dell Axim(TM) X51V This PDA meets NASA's control
PDA criteria for sensitive equipment
when the cost of the accompanying
battery ($89) and aluminum case
($32) is added to the total cost
of the PDA. This item was located
in the employee's possession, but
449.00 was not tracked in NEMS.
Digital Camera NASA was unable to locate the
459.97 property during our visit.
Palm LifeDrive(TM) According to the employee,
Handheld although he had the device for
less than 6 months, NASA provided
him with a newer model; therefore,
he no longer had a business need
for this equipment--which was at
$449.00 the employee's home.
Source: GAO Analysis of NASA data.
aThe cost listed is the price of the equipment item, excluding the cost of
any accompanying accessories.
The examples provided in table 2 are based on a nonrepresentative
selection of recent purchases because, as discussed previously, with the
exception of weapons and hazardous devices, NASA does not maintain
information on sensitive items under $500 and therefore, could not provide
us with a complete population of these items from which to select a
statistical sample.
As discussed previously, more frequent inventories provide a valuable tool
for maintaining control over property and other assets vulnerable to theft
and loss, but physical inventory inspections take time and cost money. To
balance the need to control equipment with the cost of performing physical
inventories, agencies should prioritize these activities--focusing more
attention on high-dollar equipment, sensitive or pilferable items, and
property of strategic importance to the agency. NASA justified raising its
accountability threshold based on the premise that doing so would allow
property custodians to focus on higher-value equipment and sensitive
items. However, NASA has not prioritized its remaining workload to ensure
that it is using its property management resources in a cost-effective
way. Instead, NASA has adopted an all-or-nothing approach to property
management. With the exception of weapons and hazardous devices, NASA
applies the same level of control to all equipment meeting its definition
of controlled property. For example, NASA does not inventory sensitive or
pilferable items or more valuable items more frequently than other
equipment items. As discussed previously, most centers perform physical
inventories on a triennial or biennial basis. Although NASA's property
management guidance provides NASA centers with the option of performing a
separate or more frequent inventory of sensitive equipment, according to
each of the nine SEMO directors we spoke with, none have elected to do so.
In designing an effective system of property management controls, an
entity must weigh the cost of tracking, controlling, and inventorying
equipment with the risk that the equipment may be lost, stolen, or
damaged. Although comprehensive federal personal property management
guidance does not exist,^17 the General Services Administration (GSA) has
established several principles intended to govern the management of
federal personal property. These include maximizing return on investment,
managing inventory effectively, and minimizing the cost of management
systems. GSA also encourages federal agencies to refer to other private
sector authoritative property management resources such as the American
Society for Testing and Materials (ASTM).
According to ASTM, one commonly used method for prioritizing property
management control activities involves Pareto's^18 principle--or the
80/20 rule. Pareto's principle suggests that 80 percent of the value of an
organization's property will be concentrated in 20 percent of its assets.
As such, Pareto's principle can be an effective tool for analyzing,
classifying, and prioritizing property control activities, as shown in the
following example.
^17GSA has not issued a specific Federal Management Regulation (FMR) on
the management of federal personal property. The FMR prescribes policies
concerning property management and related administrative activities.
Although GSA has reserved a section of the FMR, which is codified at 41
C.F.R. pt.102, entitled management of personal property, there currently
is no specific regulation governing the management of personal property.
^18Pareto's principle is named for a turn-of-the-century Italian economist
and sociologist, Vilfredo Pareto, who is known for his theory on the
distributions of wealth in different countries, concluding that a fairly
consistent minority--about 20 percent--of people controlled the large
majority--about 80 percent--of a society's wealth. This same distribution
has been observed in other areas and has been termed the Pareto effect or
Pareto's principle.
o Equipment group A: the top 80 percent of the value concentrated
in
20 percent of the property.
o Equipment group B: the next 15 percent of the value concentrated
in another 35 percent of the property.
o Equipment group C: the last 5 percent of the value concentrated
in another 45 percent of the property.
Based on these groupings, an organization is able to prioritize its
property control activities--spending more time and effort on equipment
group A and less effort on equipment groups B and C. In addition, other
risk factors should be considered when determining how much time and
effort should be spent tracking and controlling property--including
whether an item is considered sensitive or pilferable.
NASA Failed to Track and Control Millions of Dollars of Equipment Due to
Weaknesses in Its Property Management System, Processes, and Policies
NASA's systems, processes, and policies over its receipt and acceptance
function do not provide reasonable assurance that purchases meeting NASA's
definition of controlled equipment are routinely entered into NASA's
property management systems. Specifically, NASA's property management
guidance allows employees to bypass its central receiving function--which
should serve as the primary control point for the receipt and acceptance
of equipment--and does not limit the amount or type of equipment that is
sent directly to the end user. Further, when equipment is sent to end
users, they often do not understand their role in the receipt and
acceptance process and fail to take the steps necessary to ensure that
equipment is entered into NASA's property management system. Because this
equipment is not tracked in NASA's property management system, it is not
subject to the same physical inventory procedures as other
controlled-equipment items and, as a result, is at much higher risk of
being lost or stolen without NASA being aware of it. Finally, NASA lacks
an integrated financial management system that, if designed and
implemented appropriately, could mitigate the problems associated with
NASA's practice of bypassing its central receiving function.
As discussed previously, over the past 10 years, NASA reported that it
failed to enter $199 million of controlled equipment purchases into its
property management system. To identify other equipment items not recorded
in the property management system, in addition to those reported by NASA,
we compared equipment purchases recorded in NASA's core financial system
for fiscal years 2005 and 2006 with detailed property records contained in
NASA's property management system. Based on this comparison, we identified
12,128 transactions in NASA's core financial system that were coded as
equipment and met NASA's criteria for controlled equipment but that were
not found in NASA's property management system. However, based on our
assessment of the reliability of NASA's accounting and property data, we
were concerned that coding errors in either system could result in false
positives. For example, a nonequipment item that NASA mistakenly coded as
equipment in its core financial system could falsely appear to be
controlled equipment not recorded in NASA's property management system.
Because of these data reliability issues, we tested a stratified random
sample of the population of 12,128 transactions resulting from our
comparison of the accounting and property data. Based on the results of
our sample, we estimate that in addition to the $199 million of equipment
NASA found and reported, at least another $13 million of the equipment
NASA purchased during fiscal years 2005 and 2006 was not entered into its
property management system. See appendix II for the detailed results of
our sample. In addition, we found that NASA does not report all the
untagged equipment that it discovers. According to NASA's property
management guidance, when property officials discover equipment that has
not been entered into its property management system, they are supposed to
assign it a code in the property management system that identifies the
equipment as "found on center." In some cases, however, we found that
property officials enter this equipment into the property management
system as if it were a new procurement. Specifically, we identified at
least 41 controlled equipment purchases during fiscal years 2005 and
2006--totaling $1.8 million--that were inappropriately coded as new
procurements when in fact they should have been coded as "found on
center." By miscoding these items, NASA is underreporting the problem of
controlled equipment not being recorded in the property management system
at the time of purchase.
NASA Does Not Place Restrictions on the Amount or Type of Equipment Purchases
Sent Directly to the End User
According to NASA's property management guidance, all NASA centers are
required to have a central receiving function--which should serve as the
primary control point for the receipt and acceptance of equipment.
However, NASA's property management guidance provides no further
information on when the central receiving function should be used. As a
result, we found that equipment was often sent directly to the end user,
bypassing the central receiving function. We found this to be the case
with both lower-cost items purchased by purchase card holders as well as
high-dollar-value equipment purchased by procurement officials. When
equipment is sent directly to the end user, according to NASA's property
guidance, the end user must immediately notify central receiving personnel
so that they can assign the equipment a unique control number and enter it
into NASA's property management system.
Based on our sample results and our site visits, we found that when
equipment was sent directly to the end user, he or she often did not take
the steps required to ensure that the equipment was entered into the
property management system. For example, although the camera shown in
figure 5 meets NASA's definition of controlled equipment, it was not
controlled in NASA's property management system because, according to the
end user, he had not gotten around to notifying the SEMO that he had
purchased the camera 3 months earlier.
Figure 5: Camera Costing $1,500 Not Controlled in NASA's Property
Management System
In some cases, although the equipment vendor sent the equipment to NASA's
central receiving warehouse, receiving officials forwarded the item to the
end user without first entering it into the property management system.
For example, according to NASA officials at two NASA centers, central
receiving does not open packages if they are purchase card orders or if
the purchase order is not properly displayed on the front of the package.
Instead, these items are sent unopened to the end user. Table 3
illustrates the type of equipment that bypassed NASA's central receiving
function or was sent unopened to the end user by central receiving. As a
result, these items were not entered into NASA's property management
system until we brought them to NASA's attention.
Table 3: Examples of Equipment Not Controlled in NASA's Property
Management System
Equipment value Elapsed time before control
Equipment description (dollars) (months)
Positioner with remote $198,000 21
controller
Microscope 18,256 12
3 computer servers 6,328 (each) 11
Abrasive jet-table 167,563 2
Kodak camera 4,475 20
Balloon flight detector 23,800 13
system
Hardware modeler 15,000 14
Cryopump compressor $6,077 8
Source: GAO analysis of NASA data.
NASA Lacks Effective Equipment Management Training
Although NASA relies heavily on end users to ensure that property is
entered into its property management system, NASA has not established or
enforced agencywide or local training requirements. According to NASA's
equipment management guidance, the LMD is responsible for defining
agencywide training requirements and the SEMO is responsible for
establishing a process to ensure that all personnel associated with the
utilization of government equipment receive documented, up-to-date
property training. Although most of NASA's centers reported implementing
some type of property training and awareness initiatives, the LMD has yet
to establish agencywide training requirements. Consequently, the training
provided by most centers was not mandatory.
Based on our site visits and the responses provided as part of our
testing, some of NASA's employees are still unfamiliar with agency
equipment policies and procedures. For example, we found that some
officials--including an official from the property management
office--mistakenly thought that NASA did not control any property under
$5,000, to include sensitive items. They were not familiar with the agency
listing of sensitive items and did not know that it is NASA's policy to
tag and control this equipment. As shown in figure 6, a computer meeting
NASA's definition of controlled equipment was not in NASA's property
management system because, according to the end user, he was not aware of
the requirement to control sensitive equipment under $5,000.
Figure 6: Macintosh G5 Computer with a Cost of $2,449 Not Controlled in
the Property Management System
In another example, NASA did not tag or control an item costing $129,920
because, according to the SEMO director, the item in question--which is
used to convert force into a measurable electrical output--was a component
of a larger end-item. However, according to NASA's property management
guidance, components of a larger system--costing $5,000 or more--should be
controlled in NASA's property management system.
NASA Lacks an Integrated Financial Management System That Could Mitigate the
Problems Associated with Bypassing Central Receiving
A well-designed, integrated financial management system could mitigate the
problems associated with NASA's practice of bypassing its central
receiving function by facilitating the flow of information among the
property, procurement, and accounting functions. Although NASA currently
lacks an integrated financial management system, NASA's ongoing system
modernization effort, known as the Integrated Enterprise Management
Program (IEMP), includes plans to improve its equipment management
capabilities. Specifically, NASA plans to implement its IAM module in
October 2007. However, IAM, as currently planned, may not effectively
mitigate the problems associated with NASA's practice of bypassing its
central receiving function.
The accurate flow of information between an entity's property,
procurement, and accounting functions can support its ability to maintain
physical control over its property. With such a system, receipt and
acceptance information would only be entered once and it would allow
property officials to establish operational control over equipment,
accounting officials to accurately account for the cost of the equipment,
and payment officials to pay equipment-related vendor and contractor
invoices. Currently, because NASA's property, procurement, and accounting
functions are not integrated, when equipment is received either by central
receiving or an end user, receipt and acceptance must be acknowledged
separately in the property management system and the accounting/vendor
payment system. Because payment officials must match receipt and
acceptance documentation with a vendor invoice before the invoice is paid,
this provides a means of identifying instances when receipt and acceptance
has not been properly acknowledged and updated in the vendor payment
system. However, property officials have no such control mechanism, and
therefore, have no effective way of knowing that equipment was received
and accepted but not appropriately recorded in the property management
system. As discussed later, NASA's current systems and processes also do
not provide reasonable assurance that accounting officials accurately
capture the cost of equipment and report it on the agency's financial
statements.
Traditionally, entities have relied on manual and automated interfaces to
facilitate the flow of information among separate property, procurement,
and accounting systems. More recently, both private sector and government
entities--including NASA--have begun to replace their procurement,
accounting, property, and other systems with commercial-off-the-shelf
(COTS) Enterprise Resource Planning (ERP) systems. ERP software integrates
all departments and functions across an entity onto a single computer
system, using a single database that serves the needs of all departments.
As such, ERP systems, if implemented properly, eliminate the need to
update information in the procurement, property, and accounting systems
using manual and automated interfaces. Instead, the system must be
designed to ensure that the data contained in the ERP database serve the
needs of the procurement, property, and accounting departments.
To maximize the success of any business system modernization effort,
organizations need to consider the redesign of their existing business
processes. In fact, the Clinger-Cohen Act of 1996 requires agencies to
analyze the missions of the agency and, according to the analysis, revise
mission-related and administrative processes, as appropriate, before
making significant investments in information technology used to support
those missions.^19 Moreover, as we noted in our Executive Guide: Creating
Value Through World-class Financial Management,^20 leading finance
organizations have found that the key to successfully implementing COTS
systems and best practices is reengineering business processes to fit new
software applications. This is because COTS software, including that used
for IEMP, is designed to employ best practices for carrying out standard
business processes.
Business processes are the various steps that must be followed to perform
a certain activity. For example, the procurement or acquisition process
would start when the agency defines its needs, and issues a solicitation
for goods or services, and would continue through contract award, receipt
of goods and services, and would end when the vendor properly receives
payment. Using the agency's new COTS software and the business process
supported by the software, a user would request the need for new
equipment, the appropriate manager would approve the purchase request, the
equipment would be purchased through the purchasing department, and an
equipment account would be created and the vendor invoice paid when
receipt and acceptance was acknowledged.
^19See 40 U.S.C. S 11303(b)(2)(C).
^20GAO, Executive Guide: Creating Value Through World-class Financial
Management, GAO/AIMD-00-134 (Washington, D.C.: April 2000).
By adopting the standard processes supported by NASA's COTS software, the
software would identify purchases as controlled equipment when ordered,
which would provide reasonable assurance that the agency's equipment
records are updated upon receipt and acceptance of the property. Because
acknowledging receipt and acceptance is a prerequisite to paying a vendor
invoice, when receipt and acceptance is acknowledged as part of the vendor
payment function, the system will automatically establish the appropriate
equipment account for the purpose of establishing operational control over
the property. Although still in the early planning stages, based on our
assessment of NASA's IAM system requirements and other planning documents,
NASA's planning effort thus far has been focused primarily on capital
equipment items. According to NASA officials, IAM will identify the cost
of capital equipment items as those costs are incurred. However, for
noncapital controlled equipment, NASA will continue its practice of
recording these purchases after they are received and accepted by NASA.
NASA Does Not Report All Equipment Costs on Its Financial Statements
NASA's controls over equipment do not provide reasonable assurance that
all capital equipment costs are appropriately recorded in the agency's
financial management system and subsequently reported in its financial
statements. Because NASA's systems and processes are not designed to allow
the agency to identify and record capital costs as they are incurred, we
found that NASA did not account for and report all of the capital
equipment items it purchased during fiscal years 2005 and 2006 and often
did not capture the full cost of the equipment items it did capitalize.
In accordance with NASA's accounting policy, NASA reports only equipment
items valued at $100,000 or more and having a useful life of
2 years or more on its financial statements. In its fiscal year 2006
financial statements, NASA reported approximately $623 million, net of
depreciation, in NASA-owned/NASA-held equipment. Although these items
represent only a portion of NASA's total equipment inventory, NASA remains
unable to accurately account for and report the value of this equipment in
its financial statements. Just as we have reported in the past, NASA's
independent auditor reported for fiscal year 2006^21 that until NASA
successfully implements an integrated system for reporting PP&E, and
develops a methodology to identify costs that need to be capitalized
starting at the budget/procurement cycle through to the processing and
disbursing of funds as the transaction is processed, NASA will continue to
experience difficulties in recording property-related balances and
transactions.
^21NASA, Performance and Accountability Report 2006 (Washington, D.C.,
November 2006).
Currently, NASA expenses all costs (except for certain construction of
NASA-held real property) and then performs a retrospective review of
transactions entered into NASA's property management system to determine
which costs should be capitalized. The subsequent review increases the
risk that related costs will not be properly captured and capitalized.
Because NASA uses the amounts recorded in its accountable property records
as the basis for reporting capital equipment amounts in its financial
statements, the problems discussed previously that resulted in millions of
dollars of equipment not being recorded in the property management system
also limit NASA's ability to properly identify and report capital assets
on its balance sheet. As part of our sample of fiscal years 2005 and 2006
equipment purchases, discussed previously, we identified 11 equipment
items each costing $100,000 or more, with a total cost of $2.3 million,
that were not recorded in NASA's property management system and therefore,
not subject to being reported in NASA's financial statements.
We also found that NASA often did not capture the full cost of the
equipment items it did capitalize. According to NASA policy and federal
accounting standards, capitalized costs should include all costs incurred
to bring the property to a form and location suitable for its intended
use. However, we found that NASA does not have an effective way of
identifying these costs. As a result, NASA does not consistently identify
all shipping and installation costs associated with the capital assets it
purchases. Moreover, if NASA purchased components for the purpose of
fabricating a piece of equipment, it often did not aggregate the cost of
all components to arrive at the total cost of the end-item and, instead,
capitalized only the cost of the components costing more than $100,000. In
some cases, if all the components were under $100,000, none of the costs
were capitalized even if the aggregate cost of the components was over
$100,000. For example:
o In fiscal year 2005, NASA purchased and received a strain and
motion analysis system costing $203,590. The system consisted of
five components each costing less than $100,000. Although each
component was tagged and entered into NASA's property management
system, because none of the components exceeded $100,000, they
were not identified in the property management system as capital
equipment.
o Also in fiscal year 2005, NASA purchased and received a
microscope system costing $298,669. Although the system consisted
of four components, only one component, which cost $187,459, was
over $100,000. Therefore, the remaining three components with a
combined cost of $111,210 were not identified in NASA's property
management system as capital equipment.
Without the systems and processes needed to identify all equipment costs
as they are incurred, NASA must continue to rely on a retrospective review
of transactions entered into NASA's property management system to
determine which costs should be capitalized--a process that has proven to
be ineffective. As discussed previously, NASA's ongoing systems
modernization effort includes plans to implement IAM capabilities in
October 2007. Although NASA is still in the early planning stages,
according to NASA officials, IAM will identify the capital costs as they
are incurred. To maximize the success of NASA's effort, as discussed
previously, it will be important that NASA adopt the standard business
processes supported by the IAM software it has selected.
Conclusion
While modernizing NASA's financial management system--which includes
implementing a new asset management system--is essential for strengthening
controls over the agency's equipment, NASA cannot rely on technology alone
to solve its equipment management problems. Many of NASA's equipment
management problems are deeply rooted in an agency culture that does not
enforce accountability, which undermines its ability to carry out its
stewardship responsibilities for managing millions of dollars of
government equipment. Transforming NASA's culture and strengthening the
agency's control environment will require the sustained attention and
commitment of NASA's top leadership. This commitment must be demonstrated
through both the words and actions of the agency's leadership. To send a
clear message that equipment accountability is a priority, NASA management
must start by holding employees accountable for equipment losses.
Recommendations for Executive Action
To strengthen NASA's control environment and internal controls, we
recommend that NASA's Administrator direct the Assistant Administrator for
the Office of Infrastructure and Administration to take the following
eight actions:
o Strengthen and enforce NASA's policy on user accountability for
equipment loss, to include the following:
o Providing guidance on the minimum level of care
NASA expects employees to exercise over equipment and
the circumstances under which employees will be held
accountable for equipment loss.
o Requiring employees to acknowledge in writing, for
all personal use equipment, their responsibility for
maintaining NASA equipment including an
acknowledgment of the minimum level of care NASA
expects employees to exercise over equipment and the
circumstances in which they will be held accountable
for equipment loss.
o Requiring that employees be held financially
accountable or subject to other disciplinary actions
when equipment is lost due to user negligence.
o Enforce the existing policy to prepare survey reports
immediately when accountable property is lost, damaged, or
destroyed.
o Enforce the existing policy to fully investigate all survey
reports and provide written findings to an independent Property
Survey Board or Officer.
o Define and enforce reasonable workload standards for property
custodians.
o Establish a sound methodology for prioritizing property
management control activities, such as physical inventory
inspections and investigations of equipment loss, to ensure that
more time and effort is spent on high-dollar and sensitive or
pilferable equipment.
o Clarify property management guidance to maximize the use of
NASA's central receiving function and at a minimum, require that
all equipment sent through central receiving is properly tagged
and entered into the property management system by warehouse
personnel.
o Require that all packages sent through central receiving are
opened and tagged accordingly--regardless of whether they are
procured with a purchase card or by purchase order.
o Establish and enforce property management training requirements
for all personnel involved in the use, stewardship, and management
of equipment, including central receiving warehouse personnel, end
users, purchase card holders, and property custodians.
As part of NASA's ongoing system modernization effort, we recommend that
NASA's Administrator direct the Assistant Administrator for the Office of
Infrastructure and Administration to take the following two actions to
work in coordination with the OCFO and the Director of NASA's IEMP to
adopt the standard business process supported by its software to ensure
that the new system will be capable of the following:
o Identifying capital costs as they are incurred for all capital
equipment items, starting at the budget/procurement cycle through
to the processing and disbursing of funds as the equipment
transaction is processed.
o Identifying purchases as controlled equipment when ordered,
which would provide reasonable assurance that the agency's
equipment records are updated upon receipt and acceptance of the
property.
Agency Comments and Our Evaluation
In written comments, which are reprinted in appendix II, NASA concurred
with 8 of our 10 recommendations and partially concurred with the
remaining 2 recommendations related to (1) strengthening NASA's policy on
user accountability for equipment loss and (2) defining and enforcing
reasonable workload standards for property custodians. In its comments,
NASA also stated that many of GAO's recommendations related to efforts
currently under way.
With respect to our recommendation related to strengthening NASA's policy
on user accountability, NASA disagreed with the portion of that
recommendation that would require employees to acknowledge in writing, for
all personal use equipment, their responsibility for maintaining NASA
equipment. Instead, NASA cited plans to implement other measures to
reinforce user accountability requirements. Specifically, NASA stated that
it would (1) make viewing of its existing property management training
video mandatory, (2) establish a process to be used at NASA centers in
determining whether an employee will be held accountable for property that
is lost, stolen, damaged, or destroyed, and (3) establish a process as
part of its implementation of IAM to acknowledge receipt and
accountability for property. These steps, if effectively implemented,
would help establish user accountability for lost or missing property,
which was the intent of our recommendation. In addition, although NASA
agreed with the intent of our recommendation related to defining and
enforcing reasonable workload standards for property custodians, the
agency expressed concern that implementation of such a recommendation
would be difficult to achieve. According to NASA, it would be difficult to
dictate the number of items a property custodian should be responsible for
controlling. While we agree that defining workload standards for property
custodians may be difficult, we continue to believe that reasonable
parameters could be established and are a critical step in ensuring that
the custodians are able to effectively carry out their responsibilities.
NASA also provided separate technical comments, which have been
incorporated into our report as appropriate.
As agreed with your office, unless you announce its contents earlier, we
will not distribute this report further until 30 days from its date. At
that time, we will send copies to interested congressional committees, the
NASA Administrator, and the Director of the Office of Management and
Budget. We will make copies available to others upon request. In addition,
the report will be available at no charge on the GAO Web site at
[28]http://www.gao.gov .
If you or your staff have any questions concerning this report, please
contact me at (202) 512-9095 or [29][email protected] . Contact points
for our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. Key contributors to this report are
acknowledged in appendix III.
Sincerely,
McCoy Williams
Director, Financial Management and Assurance
Appendix I: Objectives, Scope, and Methodology
To determine whether the National Aeronautics and Space Administration's
(NASA) control environment and internal controls over NASA-held equipment
provide reasonable assurance that these assets are not vulnerable to loss,
theft, and misuse, we evaluated management's responsiveness to
observations and recommendations made in prior audit reports and internal
management reports related to NASA's property management. Specifically, we
(1) reviewed prior NASA internal, Office of the Inspector General (OIG),
and independent public accountants' reports as well as prior GAO reports
and report recommendations, (2) interviewed the agency's top property
management officials to obtain their views on previously identified
property management weaknesses, and (3) obtained documentation to support
improvement claims made by agency officials. In addition, we documented
trends in equipment losses and other equipment management problems by
reviewing and analyzing NASA's equipment loss and other equipment
management reports for fiscal years 1997 through 2006. We evaluated
actions taken by management to hold employees accountable for equipment
loss by requesting all NASA survey reports for fiscal year 2006 and
reviewing and analyzing those reports provided to us by NASA.
We evaluated the design of NASA's internal controls by reviewing and
analyzing agencywide and local equipment management policies and
procedures and comparing NASA's policies and procedures with federal and
other standards for controlling property--including GAO's standards for
internal control,^1 the General Services Administration's (GSA) principles
for managing personal property, American Society for Testing and Materials
(ASTM) property standards,^2 and GAO's best-practice guide for performing
physical inventory counts.^3 We also obtained and reviewed the procedures
used and results of fiscal year 2006 physical inventory inspections for
headquarters and nine centers and NASA's internal control improvement
initiatives. To confirm our understanding of NASA's property management
process and controls, we conducted walkthroughs at two NASA centers.^4 We
also interviewed NASA officials responsible for equipment management and
reporting, including the Director of the Logistics Management Division
(LMD), LMD Management Analyst, Asset Manager, Agency Equipment Program
Manager, and the supply equipment management officer (SEMO) at
headquarters and each of NASA's nine centers, warehouse officials, NASA
Equipment Management System (NEMS) property managers, property custodians,
purchasers, property users, and officials from the Office of the Chief
Financial Officer.
^1GAO, Standards for Internal Control in the Federal Government,
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999)
^2ASTM International for the National Property Management Association,
Standards for Moveable and Durable Property Management (West Conshohocken,
Pa, 2005).
^3GAO, Executive Guide: Best Practices in Achieving Consistent, Accurate
Physical Counts of Inventory and Related Property, GAO-02-447G
(Washington, D.C.: March 2002).
To determine whether equipment items purchased by NASA are properly
recorded in NASA's property management system and, therefore, are subject
to physical inventory inspection, we selected a stratified random sample
of equipment purchases made during fiscal years 2005 and 2006 that, based
on our analysis, were not recorded in NASA's property management system.
First, we interviewed NASA's NEMS program manager and equipment program
manager for the core financial system, to gain a thorough understanding of
NEMS and the core financial system. Next, we obtained NASA's property
management database--NEMS--as of September 30, 2006, and all purchase
transactions recorded in the agency's core financial system for fiscal
years 2005 and 2006. Finally, to identify equipment items not recorded in
the property management system, using a common data field, we compared
equipment purchases recorded in NASA's core financial system with detailed
property records contained in NASA's property management system.
Based on this comparison, we identified 12,128 transactions in NASA's core
financial system that were coded as equipment and met NASA's criteria for
a controllable item but that were not found in NASA's property management
system. However, based on our assessment of the reliability of NASA's
accounting and property data, we were concerned that coding errors in
either system could result in false positives. For example, a nonequipment
item that NASA mistakenly coded as equipment in its core financial system
could falsely appear to be controllable equipment not recorded in NASA's
property management system.
Because NASA's accounting and property data contained significant coding
errors--which could result in false positives--we tested a stratified
random sample of 172 transactions from the population of transactions
resulting from our comparison of the accounting and property data. We
stratified the population into three groups based on the unit cost of the
transactions and selected all transactions with a unit cost of $100,000 or
more. With this probability sample, each transaction in the population had
a known, nonzero probability of being selected. Each selected transaction
was subsequently weighted in the analysis to account statistically for all
transactions in the population, including those that were not selected.
^4We conducted walkthroughs at Marshall Space Flight Center and Langley
Research Center.
Table 4: Description of the Population and Sample of Transactions
Strata: unit cost Transactions population Transactions sample
$500-4,999.99 10,335 100
$5,000-99,999.99 1,761 40
$100,000 and over 32 32
Total 12,128 172
Source: GAO.
Because we selected a sample of transactions, our results are estimates of
the population and thus are subject to sample errors that are associated
with samples of this size and type. Our confidence in the precision of the
results from this sample is expressed in 95 percent confidence intervals,
which are expected to include the actual results in 95 percent of the
samples of this type.
We tested 172 sample transactions to determine whether they were equipment
that met NASA's criteria for a controlled item but were not in NASA's
property management system. Based on information provided by NASA, we
determined that 121 of the sample transactions were either miscoded as
equipment in NASA's financial records or miscoded in NASA's property
management system. In other words, these transactions were false
positives. The remaining 51 transactions tested were, in fact, equipment
items that met NASA's definition as controlled equipment but were not
recorded in the agency's property management system.
To estimate the dollar amount of controlled equipment purchases that NASA
did not record in the population, we multiplied the unit cost by the
number of items for each transaction that was determined to be a
controlled equipment item. We used a ratio estimator to generate an
estimate of the total dollar amount and calculated the one-sided
95-percent confidence lower bound. Based on our sample results, we are
95-percent confident that during fiscal years 2005 and 2006, NASA did not
record at least $13 million of controlled equipment purchases.
To gain a better understanding of the controls over sensitive equipment
costing less than $500, at one NASA center we spoke with the purchasers
and users of recently purchased items. Because, with the exception of
weapons and hazardous devices, NASA does not maintain information on
sensitive items under $500, and could not provide us with a complete
population of transactions from which to sample, we selected a
nonrepresentative sample of six items purchased using a purchase card.
To determine whether all equipment costs are appropriately recorded in the
agency's financial management system and subsequently reported on its
financial statements, we reviewed all the capital (i.e., $100,000 or more)
equipment transactions from our stratified random sample. We traced
selected transactions to their source documents and to NEMS. We assessed
whether all costs were accurately recorded in NEMS. We reviewed NASA's
financial management and reporting policies and procedures, reports by
NASA's OIG, and fiscal years 2005 and 2006 internal control weaknesses
reported by NASA's independent auditors. We also interviewed NASA OCFO and
property officials to determine the process for recording capital
equipment transactions in the agency's financial management system and
general ledger. The scope of our work did not include an assessment of
whether the equipment amounts reported on NASA's financial statements were
fairly stated. Accordingly, our scope also did not address the materiality
of the equipment amounts NASA failed to report on its fiscal year 2005 and
2006 financial statements.
To assess the current status of NASA's effort to implement its integrated
asset management (IAM) system, we interviewed the IAM project manager and
obtained and analyzed relevant planning documents, including IAM system
requirements documentation.
We conducted our work from April 2006 through March 2007 in accordance
with U. S. generally accepted government auditing standards. We requested
comments on a draft of this report from the NASA Administrator or his
designee. Written comments from the NASA Deputy Administrator are
presented and evaluated in the "Agency Comments and Our Evaluation"
section of this report and are reprinted in appendix II.
Appendix II: Comments from the National Aeronautics and Space
Administration
Note: GAO comments supplementing those in the report text appear at the
end of this appendix.
See comment 1.
See comment 1.
See comment 2.
GAO Comments
The following are GAO's comments on the NASA letter dated June 7, 2007.
1. See the "Agency Comments and Our Evaluation" section of this
report.
2. While we have made technical clarifications as appropriate, we
do not agree that the draft included inaccurate statements.
Appendix III: GAO Contact and Staff Acknowledgments
GAO Contact
McCoy Williams, (202) 512-9095 or [email protected]
Acknowledgments
Staff members who made key contribution to this report were Diane Handley,
Assistant Director; James Ashley; Fannie Bivins; Francine DelVecchio;
Yvonne Dorcas; Jody Ecie; Carmen Harris; and Inna Livits.
(195085)
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[36]www.gao.gov/cgi-bin/getrpt?GAO-07-432 .
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For more information, contact McCoy Williams at (202) 512-9095 or
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Highlights of [37]GAO-07-432 , a report to the Chairman, Committee on
Science and Technology, House of Representatives
June 2007
PROPERTY MANAGEMENT
Lack of Accountability and Weak Internal Controls Leave NASA Equipment
Vulnerable to Loss, Theft, and Misuse
For years, GAO and others have reported that the National Aeronautics and
Space Administration (NASA) does not maintain effective control over the
$35 billion of property, plant, and equipment (PP&E) and materials that it
reports on its financial statements. GAO's report, the first in a planned
series, addresses whether NASA's control environment and internal controls
over NASA-held equipment provide reasonable assurance that (1) these
assets are not vulnerable to loss, theft, and misuse and (2) all equipment
costs are appropriately recorded in the agency's financial statements. GAO
evaluated the design of NASA's property management controls by reviewing
agencywide and local policies, obtaining equipment loss reports for all
NASA centers, and evaluating actions taken to hold employees accountable.
To confirm its understanding of the design of NASA's property controls,
GAO conducted on-site visits at two NASA centers and interviewed property
management officials at the remaining seven NASA centers.
[38]What GAO Recommends
GAO is recommending 10 actions aimed at strengthening users'
accountability for equipment loss and improving internal controls over
equipment. NASA concurred with 8 of GAO's 10 recommendations and partially
concurred with 2. NASA also provided technical comments that have been
incorporated as appropriate
Over the past 10 years, NASA reported that it lost over $94 million of
equipment. The high equipment losses are due mainly to a weak internal
control environment. Although some equipment was located during subsequent
physical inventories, NASA's failure to keep track of these items leaves
them vulnerable to theft and misuse. When faced with high equipment
losses, instead of tightening controls, NASA raised its threshold for
tracking and controlling equipment. Also, NASA management was unresponsive
to prior equipment management recommendations, frequently did not
investigate equipment losses, and was reluctant to hold employees
accountable for loss--as shown in the following examples.
Explanations Provided for Equipment Loss in Which No One Was Held
Accountable
Equipment
value
Equipment description (dollars) Explanation provided
Desktop computer and 4,855 My wife needed a computer at home to
laser printer perform her work as a real estate broker
so I checked one out from the surplus
stock available. I turned the computer
back in when she was done using it but
never received a receipt.
Laptop computer 4,265 This computer, although assigned to me,
was being used on board the International
Space Station. I was informed that it was
tossed overboard to be burned up in the
atmosphere when it failed.
Various missing 850,321 A thorough and reasonable search was
property, 65 items conducted but we were unable to locate
the missing property. In general, the
missing items consist of older equipment
that has been replaced or is no longer
necessary for standard operations.
Source: GAO analysis of NASA's fiscal year 2006 equipment loss reports.
NASA also lacks the integrated systems and processes needed to provide
reasonable assurance that equipment purchases are recorded in the property
management system. As a result, over the past 10 years, NASA reported that
it failed to enter $199 million of equipment purchases into its property
management system. Equipment not tracked in NASA's property management
system is not subject to the same physical inventory procedures as other
controlled equipment items and, as a result, is at much higher risk of
being lost or stolen without NASA being aware of it. Because NASA uses the
amounts recorded in its property records as the basis for reporting
equipment amounts in its financial statements, NASA did not report the
full cost of this equipment on its financial statements. Although NASA
expects its system modernization effort to improve controls for ensuring
that equipment purchases are recorded in the property system, NASA cannot
rely on technology alone to solve its equipment management problems. These
problems are deeply rooted in an agency culture that does not demand
accountability or fully recognize the value of effectively managing
government assets.
References
Visible links
27. http://www.gao.gov/cgi-bin/getrpt?GAO-07-432
28. http://www.gao.gov/
29. mailto:[email protected]
30. http://www.gao.gov/
31. http://www.gao.gov/
32. http://www.gao.gov/fraudnet/fraudnet.htm
33. mailto:[email protected]
34. mailto:[email protected]
35. mailto:[email protected]
36. http://www.gao.gov/cgi-bin/getrpt?GAO-07-432
37. http://www.gao.gov/cgi-bin/getrpt?GAO-07-432
*** End of document. ***
Which of the following control activities most likely would justify a reduced level of control risk concerning property plant and equipment?Which of the following internal controls is most likely to justify a reduction of control risk concerning plant and equipment acquisitions? Periodic physical inspection and reconciliation of plant and equipment to the detailed accounting records by the internal audit staff.
Which of the following control activities is most likely to prevent the improper disposition of equipment *?Which of the following procedures is most likely to prevent the improper disposition of equipment? Separation of duties between those authorized to dispose of equipment and those authorized to approve removal work orders.
Which of the following controls would most likely detect equipment acquisitions that are misclassified?Choice “C” is correct. Equipment acquisitions that are misclassified as maintenance expense most likely would be detected by internal control procedures that provide for investigation of variances within a formal budgeting system.
Which of the following is not a common internal control activity related to the acquisition of property plant and equipment?Property, plant, and equipment transactions include all of the following, except: Recording operating leases. Which of the following is not a common internal control activity related to the acquisition of property, plant and equipment? Establishing a written company policy regarding the acquisition of raw material.
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Which of the following control activities most likely would justify a reduced level of control risk concerning property plant and equipment acquisitions?
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