ES, IG-98-019, Aeronautics Program Grant Financial Transactions

AERONAUTICS PROGRAM GRANT
FINANCIAL TRANSACTIONS
IG-98-019

Executive Summary

Background
The NASA Headquarters Office of Aeronautics and Space Transportation Technology (OASTT) expressed concerns to us that grant reports from educational institutions may be late, inaccurate, and incomplete. Other concerns included untimely grant recording procedures.

A June 1996 NASA report, "The Management and Liquidation of Budget Authority," stated that NASA's budget through the end of 1995 showed a trend of increasing unliquidated budget authority. NASA's unliquidated budget authority balance increased 25 percent from September 1993 to September 1995. The 1996 report partly attributes this increase to untimely grant reports and closeouts, inaccurate and untimely cost accrual data for grants, and delayed disbursements. Our review addressed these issues. Related OIG reports and reviews are shown in Appendix 4.

From fiscal year (FY) 1995 to 1997, NASA grant obligations exceeded $1.2 billion, while OASTT obligations exceeded $124 million. We reviewed 60 grants with total obligations exceeding $14 million. Our review focused on FY's 1996 and 1997 recording and reporting practices. Grantees report costs and disbursements quarterly on Standard Form (SF) 272, the Federal Cash Transaction Report. NASA uses the SF 272 reports, as well as other sources, to enter accounting information into the Agency's financial records. Financial procedures require NASA to record an "accrual" for unreimbursed costs.

Objectives
Our overall objective was to evaluate procedures used to process and manage grant financial transactions. Our specific goals were to answer the following:

Do Headquarters and the aeronautics Centers' financial management offices record grant financial transactions both accurately and in a timely manner?

Are grantee SF 272 reports accurate, and do grantees submit the reports in a timely manner?

During our audit, we became aware of delays in closing out grants. Therefore, we also evaluated aspects of the close-out process. We provide additional information on objectives, scope, and methodology in Appendix 1.

Results of Audit
Grant problems described in the June 1996 NASA report still exist. Our review showed OASTT grant costs are too often inaccurate. Also, grantees often submit quarterly SF 272 reports late, FY 1997 costs appear overstated, and the number of grants awaiting closeout has increased. Some of our issues extend beyond OASTT grants. For example, almost 50 percent of quarterly SF 272 reports on grants were late. Many of NASA's grantees report financial data for all their grants on a single, quarterly SF 272 report. Thus, late reports affect the timely recording of data for numerous grants (not only OASTT grants). We also found Headquarters had not always accrued costs each month as required for more than 2,000 grants. Grant management requires improvement in the following five areas.

Langley Research Center (LaRC) grant costs have not always been accurate and current. LaRC sometimes did not make needed cost adjustments or adjust costs accurately. As a result, costs were not always accurate and reliable. If costs are overstated, the availability of funding for other programs is adversely impacted. This could result in needed work being canceled or delayed. Understated costs increase cost carryover, which can impact program operations and future budgets.

Headquarters grant financial data was not always recorded in a timely manner. Staffing was inadequate to record costs each month, and other recording delays occurred that were avoidable. Thus, costs and disbursements are often understated; and uncosted obligations, a component of unliquidated budget authority, are inaccurate and overstated.

Grantee reports at the Centers we reviewed were often late and sometimes incomplete or inaccurate, thereby delaying the recording process. This affected the accuracy and timeliness of grant/program costs and disbursements. Management could be using inaccurate data to make program or funding decisions.

The FY 1997 average monthly costs for aeronautics grants exceeded average monthly disbursements by 43 percent, while the NASA standard is 5 percent. Overstated costs inappropriately increase accounts payable and unliquidated budget authority at a time when the Agency is trying to reduce these amounts.

The grant close-out process needs improvements. NASA has delegated close-out responsibility for most of its grants to the Office of Naval Research (ONR). However, the close-out process has been ineffective, and the number of grants awaiting closeout continues to increase. This presents administrative and financial burdens to NASA. For example, the difference between obligated grant funds and possible disbursements arising from grants awaiting closeout contributes to increases in unliquidated budget authority.

LaRC and Headquarters Have Taken Some Corrective Actions
During our audit, LaRC and Headquarters took or promised to take remedial actions that should improve system processes, data accuracy, and close-out procedures. For example, LaRC documented automated system procedures and corrected automated system problems that occurred due to a contractual change that brought in a new contractor and modified the scope of work. Management also told us that grant file documentation will be improved. Furthermore, Headquarters and Center staff responsible for grant closeout met with officials of the ONR at Headquarters in 1997 to discuss delays in closing grants. ONR management committed to improving communication and coordination processes. We commend management's efforts.

Recommendations
Our report contains nine recommendations requiring cooperation and corrective actions by several Headquarters and Center organizations.

Management's Response Management concurred with seven of the nine recommendations, and planned actions are responsive to the intent of our recommendations. Although management concurred with the first element of recommendation 9, the planned action was not responsive. With respect to management's nonconcurrences with recommendation 4 and the second element of recommendation 9, we reaffirm these recommendations. We have requested additional management comments where further action is needed or nonconcurrence exists. Management's response is shown in Appendix 5.

Background	The NASA Headquarters Office of Aeronautics and Space Transportation Technology (OASTT) expressed concerns to us that grant reports from educational institutions may be late, inaccurate, and incomplete. Other concerns included untimely grant recording procedures. A June 1996 NASA report, "The Management and Liquidation of Budget Authority," stated that NASA's budget through the end of 1995 showed a trend of increasing unliquidated budget authority. NASA's unliquidated budget authority balance increased 25 percent from September 1993 to September 1995. The 1996 report partly attributes this increase to untimely grant reports and closeouts, inaccurate and untimely cost accrual data for grants, and delayed disbursements. Our review addressed these issues. Related OIG reports and reviews are shown in Appendix 4. From fiscal year (FY) 1995 to 1997, NASA grant obligations exceeded $1.2 billion, while OASTT obligations exceeded $124 million. We reviewed 60 grants with total obligations exceeding $14 million. Our review focused on FY's 1996 and 1997 recording and reporting practices. Grantees report costs and disbursements quarterly on Standard Form (SF) 272, the Federal Cash Transaction Report. NASA uses the SF 272 reports, as well as other sources, to enter accounting information into the Agency's financial records. Financial procedures require NASA to record an "accrual" for unreimbursed costs.
Objectives	Our overall objective was to evaluate procedures used to process and manage grant financial transactions. Our specific goals were to answer the following: Do Headquarters and the aeronautics Centers' financial management offices record grant financial transactions both accurately and in a timely manner? Are grantee SF 272 reports accurate, and do grantees submit the reports in a timely manner? During our audit, we became aware of delays in closing out grants. Therefore, we also evaluated aspects of the close-out process. We provide additional information on objectives, scope, and methodology in Appendix 1.
Results of Audit	Grant problems described in the June 1996 NASA report still exist. Our review showed OASTT grant costs are too often inaccurate. Also, grantees often submit quarterly SF 272 reports late, FY 1997 costs appear overstated, and the number of grants awaiting closeout has increased. Some of our issues extend beyond OASTT grants. For example, almost 50 percent of quarterly SF 272 reports on grants were late. Many of NASA's grantees report financial data for all their grants on a single, quarterly SF 272 report. Thus, late reports affect the timely recording of data for numerous grants (not only OASTT grants). We also found Headquarters had not always accrued costs each month as required for more than 2,000 grants. Grant management requires improvement in the following five areas. Langley Research Center (LaRC) grant costs have not always been accurate and current. LaRC sometimes did not make needed cost adjustments or adjust costs accurately. As a result, costs were not always accurate and reliable. If costs are overstated, the availability of funding for other programs is adversely impacted. This could result in needed work being canceled or delayed. Understated costs increase cost carryover, which can impact program operations and future budgets. Headquarters grant financial data was not always recorded in a timely manner. Staffing was inadequate to record costs each month, and other recording delays occurred that were avoidable. Thus, costs and disbursements are often understated; and uncosted obligations, a component of unliquidated budget authority, are inaccurate and overstated. Grantee reports at the Centers we reviewed were often late and sometimes incomplete or inaccurate, thereby delaying the recording process. This affected the accuracy and timeliness of grant/program costs and disbursements. Management could be using inaccurate data to make program or funding decisions. The FY 1997 average monthly costs for aeronautics grants exceeded average monthly disbursements by 43 percent, while the NASA standard is 5 percent. Overstated costs inappropriately increase accounts payable and unliquidated budget authority at a time when the Agency is trying to reduce these amounts. The grant close-out process needs improvements. NASA has delegated close-out responsibility for most of its grants to the Office of Naval Research (ONR). However, the close-out process has been ineffective, and the number of grants awaiting closeout continues to increase. This presents administrative and financial burdens to NASA. For example, the difference between obligated grant funds and possible disbursements arising from grants awaiting closeout contributes to increases in unliquidated budget authority.
LaRC and Headquarters Have Taken Some Corrective Actions	During our audit, LaRC and Headquarters took or promised to take remedial actions that should improve system processes, data accuracy, and close-out procedures. For example, LaRC documented automated system procedures and corrected automated system problems that occurred due to a contractual change that brought in a new contractor and modified the scope of work. Management also told us that grant file documentation will be improved. Furthermore, Headquarters and Center staff responsible for grant closeout met with officials of the ONR at Headquarters in 1997 to discuss delays in closing grants. ONR management committed to improving communication and coordination processes. We commend management's efforts.
Recommendations	Our report contains nine recommendations requiring cooperation and corrective actions by several Headquarters and Center organizations.
Management's Response	Management concurred with seven of the nine recommendations, and planned actions are responsive to the intent of our recommendations. Although management concurred with the first element of recommendation 9, the planned action was not responsive. With respect to management's nonconcurrences with recommendation 4 and the second element of recommendation 9, we reaffirm these recommendations. We have requested additional management comments where further action is needed or nonconcurrence exists. Management's response is shown in Appendix 5.