ES, IG-99-026, Implementation of NASA's Integrated Financial Management Project

IMPLEMENTATION OF NASA'S INTEGRATED
FINANCIAL MANAGEMENT PROJECT
IG-99-026

Executive Summary

Introduction
Office of Management and Budget Circular A-127, "Financial Management Systems," requires Federal agencies to maintain a single, integrated financial management system. To fully comply with the circular, NASA established the Integrated Financial Management Project (IFMP), which will also facilitate compliance with other statutory and regulatory requirements including the Federal Financial Management Improvement Act of 1996. See Appendix B for the applicable requirements.
On September 18, 1997, NASA awarded a fixed-price contract, valued at $186 million, to KPMG Peat Marwick (KPMG) to provide commercial-off-the-shelf (COTS) software for, and to implement NASA-wide, the IFMP. The contract required that the IFMP be implemented at all NASA Centers by July 1, 1999. On February 26, 1998, KPMG notified NASA that it would not meet key elements of the contract delivery schedule. NASA issued a contract modification that recognized a revised delivery schedule and allowed additional costs of up to $7.1 million for an extended delivery schedule.
On December 1, 1998, KPMG made an incomplete delivery of the IFMP system to the IFMP Integrated Test Facility (IITF) - the first major milestone under the revised delivery schedule. The incomplete delivery of IFMP required further contract modification, and NASA was unable to determine the extent to which the incomplete delivery would impact the revised delivery schedule.

Objectives
The overall objective was to evaluate contractor performance on the IFMP. Specifically, we determined whether:

the IFMP contractor's performance was adequate, and
NASA's oversight of the IFMP contractor was adequate.
See Appendix A for details on our audit scope and methodology.

Results of Audit
From its inception, the IFMP contract experienced significant performance problems. In 18 months since the contract award, the project has experienced a delivery schedule slip of 11 months with additional schedule slippage pending, and the COTS software that KPMG promised to be available at contract award is still incomplete. The delay in implementing IFMP will prevent NASA from meeting Federal financial management system requirements and will result in material costs to the agency. Additionally, the IFMP as delivered, may not fulfill Federal financial management system requirements in areas such as agency reports, standard general ledger, receipts management, and payment management and will require additional testing by NASA to ensure that those requirements are met.
Since contract award, NASA has taken steps to ensure the success of IFMP. The Agency has implemented a contractor surveillance plan to better monitor KPMG's performance on IFMP. NASA has also prepared a contingency plan to better prepare itself in the case of further problems with contractor performance.

Recommendations
The IFMP Director should:

Take necessary steps to ensure that NASA receives reasonable consideration due to KPMG's nonperformance including requesting the IFMP contracting officer (CO) to perform an assessment of the cost impact to NASA for use in evaluating proposed consideration.
Perform validation testing of the IFMP core financial module to ensure that it meets Joint Financial Management Improvement Program (JFMIP)⁽¹⁾ requirements as contracted for, and implement compensating controls for those JFMIP requirements that will not be met.
Document the contract file regarding NASA's decisions concerning the contractor's non-performance.

Management's Response
Management concurred with the recommendations and has taken actions to correct identified weaknesses. The complete text of the response is in Appendix F.

Evaluation of Management's Response
Management's corrective actions planned or completed are responsive to the recommendations.

FOOTNOTE

1. The JFMIP is a joint and cooperative undertaking of the U.S. Department of Treasury, the General Accounting Office, the Office of Management and Budget, and the Office of Personnal Management, working in cooperation with each other and other agencies to improve financial management practices in Government.

Introduction	Office of Management and Budget Circular A-127, "Financial Management Systems," requires Federal agencies to maintain a single, integrated financial management system. To fully comply with the circular, NASA established the Integrated Financial Management Project (IFMP), which will also facilitate compliance with other statutory and regulatory requirements including the Federal Financial Management Improvement Act of 1996. See Appendix B for the applicable requirements. On September 18, 1997, NASA awarded a fixed-price contract, valued at $186 million, to KPMG Peat Marwick (KPMG) to provide commercial-off-the-shelf (COTS) software for, and to implement NASA-wide, the IFMP. The contract required that the IFMP be implemented at all NASA Centers by July 1, 1999. On February 26, 1998, KPMG notified NASA that it would not meet key elements of the contract delivery schedule. NASA issued a contract modification that recognized a revised delivery schedule and allowed additional costs of up to $7.1 million for an extended delivery schedule. On December 1, 1998, KPMG made an incomplete delivery of the IFMP system to the IFMP Integrated Test Facility (IITF) - the first major milestone under the revised delivery schedule. The incomplete delivery of IFMP required further contract modification, and NASA was unable to determine the extent to which the incomplete delivery would impact the revised delivery schedule.
Objectives	The overall objective was to evaluate contractor performance on the IFMP. Specifically, we determined whether: the IFMP contractor's performance was adequate, and NASA's oversight of the IFMP contractor was adequate. See Appendix A for details on our audit scope and methodology.
Results of Audit	From its inception, the IFMP contract experienced significant performance problems. In 18 months since the contract award, the project has experienced a delivery schedule slip of 11 months with additional schedule slippage pending, and the COTS software that KPMG promised to be available at contract award is still incomplete. The delay in implementing IFMP will prevent NASA from meeting Federal financial management system requirements and will result in material costs to the agency. Additionally, the IFMP as delivered, may not fulfill Federal financial management system requirements in areas such as agency reports, standard general ledger, receipts management, and payment management and will require additional testing by NASA to ensure that those requirements are met. Since contract award, NASA has taken steps to ensure the success of IFMP. The Agency has implemented a contractor surveillance plan to better monitor KPMG's performance on IFMP. NASA has also prepared a contingency plan to better prepare itself in the case of further problems with contractor performance.
Recommendations	The IFMP Director should: Take necessary steps to ensure that NASA receives reasonable consideration due to KPMG's nonperformance including requesting the IFMP contracting officer (CO) to perform an assessment of the cost impact to NASA for use in evaluating proposed consideration. Perform validation testing of the IFMP core financial module to ensure that it meets Joint Financial Management Improvement Program (JFMIP)⁽¹⁾ requirements as contracted for, and implement compensating controls for those JFMIP requirements that will not be met. Document the contract file regarding NASA's decisions concerning the contractor's non-performance.
Management's Response	Management concurred with the recommendations and has taken actions to correct identified weaknesses. The complete text of the response is in Appendix F.
Evaluation of Management's Response	Management's corrective actions planned or completed are responsive to the recommendations.