NASA: Actions Needed to Improve the Management of Human Spaceflight Programs

NASA is undertaking a trio of closely related programs to continue human space exploration beyond low-Earth orbit. These three programs include a launch vehicle, a crew capsule, and the associated ground systems at Kennedy Space Center. All three programs are working towards a launch readiness date of June 2020 for the first mission. NASA then plans for these systems to support future human space exploration goals, which include seeking to land two astronauts on the lunar surface. GAO has a body of work highlighting concerns over NASA's management and oversight of these programs.

This statement discusses (1) the cost and schedule status of NASA's human spaceflight programs and (2) lessons that NASA can apply to improve its management of its human spaceflight programs. This statement is based on eight reports issued from 2014 to 2019 and selected updates as of September 2019. For the updates, GAO analyzed recent program status reports on program progress.

The National Aeronautics and Space Administration's (NASA) three related human spaceflight programs are in the integration and test phase of development, a phase of the acquisition process that often reveals unforeseen challenges leading to cost growth and schedule delays. Since GAO last reported on the status of these programs in June 2019, each program has made progress. For example, the Orion program conducted a key test to demonstrate the ability to abort a mission should a life-threatening failure occur during launch. As GAO found in June 2019, however, the programs continue to face significant schedule delays. In November 2018, within one year of announcing an up to 19-month delay for the three programs—the Space Launch System (SLS) vehicle, the Orion crew spacecraft, and Exploration Ground Systems (EGS)—NASA senior leaders acknowledged the revised launch date of June 2020 is unlikely. In addition, any issues uncovered during integration and testing may push the date as late as June 2021. Moreover, GAO found that NASA's calculations of cost growth for the SLS program is understated by more than 750 million dollars.

GAO's past work has identified a number of lessons that NASA can apply to improve its management of its human spaceflight programs. For example, NASA should enhance contract management and oversight to improve program outcomes. NASA's past approach in this area has left it ill-positioned to identify early warning signs of impending schedule delays and cost growth or reap the benefits of competition. In addition, NASA's approach to incentivizing contractors through contract award fees did not result in desired outcomes for the SLS and Orion programs. Further, NASA should minimize risky programmatic decisions to better position programs for successful execution. This includes providing sufficient cost and schedule reserves to, among other things, address unforseen risk. Finally, realistic cost estimates and assessments of technical risk are particularly important at the start of an acquisition program. But NASA has historically provided little insight into the future cost of these human spaceflight programs, limiting the information useful to decision makers.

GAO has made 19 recommendations in these eight prior reports to strengthen NASA's acquisition management of SLS, Orion, and EGS. NASA generally agreed with GAO's recommendations, and has implemented seven recommendations. Further action is needed to fully implement the remaining recommendations.

I am pleased to be here today to discuss the National Aeronautics and  Space Administration’s (NASA) management of its human space  exploration programs. These programs are developing the systems that  will enable the agency to achieve its human space exploration goals,  which include seeking to land two astronauts on the lunar surface as soon  as 2024. The focus of my statement today is on three programs that will  contribute to achieving this goal:

The Space Launch System (SLS) program is developing a vehicle to  launch a crew capsule and cargo beyond low-Earth orbit.

The Orion Multi-Purpose Crew Vehicle (Orion) program is developing  a crew capsule to transport humans beyond low-Earth orbit.

The Exploration Ground Systems (EGS) program is developing  systems and infrastructure to support assembly, test, and launch of  the SLS and Orion crew capsule, and recovery of the Orion crew  capsule.

Each of these programs represents a large, complex technical and  programmatic endeavor and is currently in the integration and test phase  of development. Our prior work has shown this phase of the acquisition  process often reveals unforeseen challenges leading to cost growth and  schedule delays.

GAO has designated NASA’s management of acquisitions as a high-risk  area for almost three decades. In our March 2019 high-risk report, we  reported there was a lack of transparency in NASA’s major project cost  and schedules, especially for its human spaceflight programs. We  reported that the agency has not taken action on several  recommendations related to understanding the long-term costs of its human exploration programs. For example, EGS and SLS do not have a  cost and schedule baseline that covers activities beyond the first planned  flight, and Orion does not have a baseline beyond the second planned  flight. We have previously reported that without transparency into these  estimates, NASA does not have the data to assess long-term affordability  and it may be difficult for Congress to make informed budgetary  decisions. Moreover, while human spaceflight programs have inherent  technical, design, and integration risks, we have consistently found that  management and oversight problems are the real drivers behind program  cost and schedule growth.

My statement today discusses (1) the cost and schedule status of NASA’s  human spaceflight programs and (2) lessons that NASA can apply to  improve its management of its human spaceflight programs. This  statement is based primarily on work completed from eight GAO reports  issued from May 2014 through June 2019. To conduct our prior work on  the cost and schedule performance of these programs, we compared cost  and schedule estimates that were current as of the reporting timeframes  in our June 2019 report to their original cost and schedule baselines,  analyzed quarterly program status reports, interviewed NASA program  and headquarters officials, and reviewed program documentation. To  identify lessons that can be applied to NASA’s management of human  spaceflight programs, we reviewed issues and recommendations made in  our prior reports such as those related to approaches to managing  contractors and incentivizing contractor performance, the quality of the  cost and schedule estimates, and long-term cost estimates. Detailed  information on the objectives, scope, and methodologies for that work is  included in each of the reports that are cited throughout this statement.  We updated the progress the programs have made with information  obtained from NASA programs’ quarterly reports since June 2019, where  available.

We conducted the work on which this statement is based in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on  our audit objectives.

The NASA Authorization Act of 2010 directed NASA to develop SLS, to  continue development of a crew vehicle, and to prepare infrastructure at  Kennedy Space Center to enable processing and launch of the launch  system. To fulfill this direction, NASA formally established the SLS  launch vehicle program in 2011. Then, in 2012, NASA aligned the  requirements for the Orion program with those of the newly created SLS  and EGS programs. Figure 1 provides details about each SLS hardware  element and its source as well as identifies the major portions of the  Orion spacecraft.

History of Program Cost and Schedule Changes

In order to facilitate Congressional oversight and track program progress,  NASA establishes an agency baseline commitment—the cost and  schedule baselines against which the program may be measured—for all  projects that have a total life cycle cost of $250 million or more. NASA  refers to these projects as major projects or programs. When the NASA  Administrator determines that development cost growth within a major  project or program is likely to exceed the development cost estimate by  15 percent or more, or a program milestone is likely to be delayed from  the baseline’s date by 6 months or more, NASA replans the project and  submits a report to this committee—the Committee on Science, Space,  and Technology of the House of Representatives—and the Committee on  Commerce, Science, and Transportation of the Senate. Should a major  project or program exceed its development cost baseline by more than 30  percent, the program must be reauthorized by the Congress and  rebaselined by NASA in order for the contractor to continue work beyond  a specified time frame. NASA tied the SLS and EGS program cost and  schedule baselines to the uncrewed first mission—known now as  Artemis-1—originally planned for November 2018. The Orion program’s  cost and schedule baselines are tied to a crewed second mission—known  as Artemis-2—planned for April 2023.

In April 2017, we found that given combined effects of ongoing technical  challenges in conjunction with limited cost and schedule reserves, it was  unlikely that these three programs would achieve the originally committed  November 2018 launch readiness date. Cost reserves are for costs that  are expected to be incurred—for instance, to address project risks—but  are not yet allocated to a specific part of the project. Schedule reserves  are extra time in project schedules that can be allocated to specific  activities, elements, and major subsystems to mitigate delays or address  unforeseen risks. We recommended that NASA confirm whether the  November 2018 launch readiness date was achievable and, if warranted,  propose a new, more realistic Artemis-1 date and report to Congress on  the results of its schedule analysis. NASA agreed with both  recommendations and stated that it was no longer in its best interest to  pursue the November 2018 launch readiness date. Subsequently, NASA  approved a new Artemis-1 schedule of December 2019, with 6 months of  schedule reserve available to extend the date to June 2020, and revised  the costs that it expects to incur (see table 1).

Cost and Schedule Status of NASA’s Human Spaceflight Programs

In June 2019, we found that within 1 year of announcing a delay for the  first human spaceflight mission, senior NASA officials acknowledged that  the revised Artemis-1 launch date of December 2019 was unachievable  and the June 2020 launch date (which takes into account schedule  reserves) was unlikely. These officials estimated that there were 6 to 12  months of schedule risk associated with this later date, which means the  first launch may occur as late as June 2021 if all risks are realized. As we  found in June 2019, this would be a 31-month delay from the schedule  originally established in the programs’ baselines. Officials attributed the  additional schedule delay to continued production challenges with the  SLS core stage and the Orion crew and service modules. NASA officials  also stated that the 6 to 12 months of risk to the launch date accounts for  the possibilities that SLS and Orion testing and final cross-program  integration and testing at Kennedy Space Center may result in further  delays. As we noted in our report, these 6 to 12 months of schedule risk  do not include the effects, if any, of the federal government shutdown that  occurred in December 2018 and January 2019.

In commenting on our June 2019 report, NASA stated that its Lunar 2024  planning activities would include an Artemis-1 schedule assessment.  However, in July 2019, NASA reassigned its senior leaders responsible  for human spaceflight programs. The NASA Administrator stated in  August 2019 that, as a result, the agency does not plan to finalize  schedule plans for Artemis-1 until new leadership is in place at the  agency. Additional details follow on the status of each program, including  cost, schedule, and technical challenges.

SLS. As we found in June 2019, ongoing development issues with the  SLS core stage—which includes four main engines and the software  necessary to command and control the vehicle—contributed to the SLS  program not being able to meet the June 2020 launch date. Officials  from the SLS program and Boeing, the contractor responsible for building  the core stage, provided several reasons for the delays. These reasons  include the underestimation of the complexity of manufacturing and  assembling the core stage engine section—where the RS-25 engines are  mated to the core stage—and those activities have taken far longer than  expected.

Since our June 2019 report, based on our review of the program’s most  recent status reports, NASA has reported progress across many parts of  the SLS program. For example, NASA has delivered the four RS-25  engines to Michoud Assembly Facility. NASA has also completed  qualification testing of all components of the boosters and reports that  there is schedule margin remaining for the booster deliverables. In  addition, NASA reports that Boeing has made continued progress and  expects that the core stage will be complete and ready for testing in  December 2019. Completion of the core stage will represent a significant  milestone for the program.

In June 2019, we found that that SLS program has been underreporting  its development cost growth since the December 2017 replan. This  underreporting is because of a decision to shift some costs to future  missions while not adjusting the baseline costs downward to reflect this  shift. The SLS development cost baseline established in August 2014 for  Artemis-1 includes cost estimates for the main vehicle elements—stages,  liquid engines, boosters—and other areas. According to program officials,  because of the December 2017 replan process, NASA decided that costs  included as part of the SLS Artemis-1 baseline cost estimate would be  more appropriately accounted for as costs for future flights. Thus, NASA  decided not to include those costs, approximately $782 million, as part of  the revised SLS Artemis-1 cost estimate. However, NASA did not lower  the $7 billion SLS development cost baseline to account for this  significant change in assumptions and shifting of costs to future flights.

This decision presents challenges in accurately reporting SLS cost growth  over time. NASA’s decision not to adjust the cost baseline downward to  reflect the reduced mission scope obscures cost growth for Artemis-1. In  June 2019, we found that NASA’s cost estimate as of fourth quarter fiscal  year 2018 for the SLS program indicated development cost growth had  increased by $1 billion, or 14.7 percent. However, our analysis showed  that development cost growth actually increased by $1.8 billion or 29.0  percent, when the development baseline is lowered to account for the  reduced mission scope. Essentially, NASA is holding the baseline costs  steady, while reducing the scope of work included in current cost  estimates (see figure 2). As NASA determines its new schedule for the  first mission, it is likely this cost growth will increase as additional time in  the schedule leads to additional costs.

In our June 2019 report, we recommended that the SLS program  calculate its development cost growth using a baseline that is  appropriately adjusted for scope and costs NASA has determined are not  associated with the first flight, and determine if the development cost  growth has increased by 30 percent or more. NASA agreed with the  recommendation and NASA officials stated that they plan to implement  the recommendation when new leadership is in place for the human  space exploration programs.

Looking ahead, based on our review of the program’s most recent status  reports, completing core stage manufacturing and integration and green  run testing will be the critical path—the path of longest duration through  the sequence of activities in the schedule—for the SLS program. During  green run testing, NASA will fuel the completed core stage with liquid  hydrogen and liquid oxygen and fire the integrated four main engines for  about 500 seconds. The green run test carries risks because it is the first  time that several things are being done beyond just this initial fueling. For  example, it is also the first time NASA will fire the four main engines  together, test the integrated engine and core stage auxiliary power units  in flight-like conditions, and use the SLS software in an integrated flight  vehicle. In addition, NASA will conduct the test on the Artemis-1 flight  vehicle hardware, which means the program would have to repair any  damage from the test before flight.

Orion. While the Orion program’s schedule performance is measured  only to the Artemis-2 mission, we found in June 2019 that the program  was not on schedule to support the June 2020 launch date for the first  mission. This was due to delays with the European Service Module and  component issues for the avionics systems for the crew module, including  issues discovered during testing. We found that these specific problems  were resolved by the time of our report, but had already contributed to the  inability of the program to meet the June 2020 launch date. Since we last  reported, as of August 2019, the Orion program has completed significant  events including completing the crew module and the service module  prior to integration and conducting a test to demonstrate the ability to  abort a mission should a life-threatening failure occur during launch. The  program is tracking no earlier than October 2020 for an Artemis-1 launch  date but that does not reflect the ongoing agency-wide schedule  assessment noted above.

In June 2019, we found that the Orion program has reported development  cost growth but is not measuring that growth using a complete cost  estimate. In summer 2018, the Orion program reported development  cost growth of $379 million, or 5.6 percent above its $6.768 billion  development cost estimate. Program officials explained that the major  drivers of this cost growth were the slip of the Artemis-1 launch date,  which reflected delays in the delivery of the service module; Orion  contractor underperformance; and NASA-directed scope increase.

However, during our review, Orion program officials originally stated that  this cost estimate assumes an Artemis-2 launch date of September 2022,  which is 7 months earlier than the program’s agency baseline  commitment date of April 2023 that forms the basis for commitments  between NASA, the Congress, and Office of Management and Budget.

Subsequently, during the review, program officials told us that its cost  projections fund one of those 7 months. In either case, NASA’s current  cost estimate for the Orion program is not complete because it does not  account for costs that NASA would incur through April 2023. As of  September 2019, the program was targeting October 2022 for the  Artemis-2 launch.

In June 2019, we recommended that the Orion program update its cost  estimate to reflect its committed Artemis-2 baseline date of April 2023.  In its response, NASA partially agreed with our recommendation. NASA  stated that providing the estimate to the forecasted launch date— September 2022—rather than to the committed baseline date of April  2023 is the most appropriate approach. However, by developing cost  estimates only to the program’s goals and not relative to the established  baseline, the Orion program is not providing NASA or the Congress the  means of measuring progress relative to the baseline. We continue to  believe that NASA should fully implement this recommendation.

Looking ahead, based on our review of the program’s most recent status  reports, there is an emerging issue that may delay schedule further for  the first mission. Namely, there is the risk of damage to the Orion capsule  during travel to and from integrated testing at Plum Brook Station in Ohio.  The program office is studying whether it will be able to safely transport  the integrated crew and service modules via the Super Guppy airplane as  planned or if it will have to use an alternate airplane. We will continue to  monitor this effort.

Beyond Artemis-1, the Orion program must also complete development  efforts for future missions. For example, the Artemis-2 crew module will  need environmental control and life support systems, system updates  from Artemis-1, and updated software to run these new elements.

EGS. At the time of our June 2019 report, the EGS program was  expecting to have facilities and software ready by the planned June 2020  launch date. We found that the program had overcome many  challenging development hurdles that led to previous schedule delays.  These hurdles included completing and moving the Mobile Launcher—a  platform that carries the rocket to the launch pad and includes a number  of connection lines that provide SLS and Orion with power,  communications, coolant, fuel, and stabilization prior to launch—into the  Vehicle Assembly Building for the multi-element verification and validation  processes. Since our June 2019 report, the program is now targeting an  Artemis-1 launch date of August 2020. According to NASA officials, the  delay is primarily driven by challenges encountered installing ground  support equipment on the Mobile Launcher and developing software, and  does not reflect the ongoing agency-wide schedule assessment. The  program has operated within the costs established for the June 2020  launch date, $3.2 billion, but officials stated that NASA is reevaluating the  program’s development cost performance and will establish an updated  baseline when new leadership is in place.

Moving forward, based on our review of the program’s most recent status  reports, the program has to complete the multi-element verification and  validation process for the Mobile Launcher and Vehicle Assembly  Building and complete its two software development efforts. Additionally,  the EGS program is responsible for the final integration of the three  programs. NASA officials stated that the 6 to 12 months of risk to the  June 2020 launch date includes risk associated with EGS completing this  integration that includes test and checkout procedures after SLS and  Orion components arrive. Officials explained that the EGS risk is based  on a schedule risk analysis that considered factors such as historical pre- launch integrated test and check out delays and the learning curve  associated with a new vehicle. As previously stated, our prior work has  shown that the integration and test phase often reveals unforeseen  challenges leading to cost growth and schedule delays.

Lessons that NASA Can Apply to Better Manage its Human Spaceflight Acquisitions

NASA is currently embarking on an aggressive goal to return humans to  the lunar surface in 2024. To achieve this goal, NASA not only needs  SLS, Orion, and EGS to have completed their first two test missions, but  is also developing several new systems. These new systems include a  Lunar Gateway that will orbit the moon, landers that will transport  astronauts from the Gateway to the lunar surface, and new space suits.

Human spaceflight projects face inherent technical, design, and  integration risks because they are complex, specialized, and are pushing  the state of the art in space technology. Moreover, these programs can  be very costly and span many years, which means they may also face  changes in direction from Administrations and the Congress. Meeting the  2024 goal will also be challenging given the effort needed to better  manage SLS, Orion, and EGS, coupled with the addition of the new  programs, which are likely to compete for management attention and  resources. Nevertheless, our past work has identified a range of actions  that NASA can take to better position its human spaceflight programs for  success.

Today I would like to highlight three lessons from the SLS, Orion, and  EGS programs that NASA can apply to improve the management of its  human spaceflight programs.

Enhance Contract Management and Oversight to Improve Program  Outcomes. Over the past several years, we and the NASA Office of the  Inspector General have identified shortcomings related to NASA’s  management and oversight of its human spaceflight contracts. These  shortcomings have left NASA ill-positioned to identify early warning signs  of impending schedule delays and cost growth, reap the potential benefits  of competition, and achieve desired results through contractor incentives.

In July 2014, we found that NASA allowed high-value modifications to  the SLS contracts to remain undefinitized for extended periods—in  one instance a modification remained undefinitized for 30 months.  Undefinitized contract actions such as these authorize contractors to  begin work before reaching a final agreement with the government on  terms and conditions. We have previously found that while  undefinitized contract actions may be necessary under certain  circumstances, they are considered risky in part because the  government may incur unnecessary costs if requirements change  before the contract action is definitized. Because lack of agreement  on terms of the modification prolonged NASA’s timeframes for  definitizing, the establishment of contractor cost and schedule  baselines necessary to monitor performance was delayed.  Specifically, we found in July 2014 that, in most cases, the SLS  program did not receive complete earned value management data  derived from approved baselines on these SLS contracts. Earned  value, or the planned cost of completed work and work in progress,  can provide accurate assessments of project progress, produce early  warning signs of impending schedule delays and cost overruns, and  provide unbiased estimates of anticipated costs at completion.

In July 2014, we also found the SLS program could be in a favorable  position to compete contracts for the exploration upper stage, the  upper stage engine, and advanced boosters that it expected to use on  future variants of the launch vehicle. At that time, except for the RS- 25 engines, NASA’s contracting approach for the SLS program did not  commit the program beyond the hardware needed for the second  mission, and we found that moving forward the agency would be in a  position to take advantage of the evolving launch vehicle market. We  found that an updated assessment of the launch vehicle market could  better position NASA to sustain competition, control costs, and better  inform the Congress about the long-term affordability of the program.  We recommended that before finalizing acquisition plans for future  capability variants, NASA should assess the full range of competition  opportunities and provide to the Congress the agency’s assessment  of the extent to which development and production of future elements  of the SLS could be competitively procured. NASA agreed with the  recommendation, which we have identified as among those that  warrant priority attention.

Since we made that recommendation, NASA has awarded a sole- source contract for the upper stage engine and agency officials told us  in July 2018 that they planned to incorporate additional booster  development under the existing contract. This further limits an  opportunity for competition for the program. Our body of work on  contracting has shown that competition in contracting is a key element  for achieving the best return on investment for taxpayers. We have  found that promoting competition increases the potential for acquiring  quality goods and services at a lower price and that noncompetitive  contracts carry the risk of overspending because, among other  reasons, they have been negotiated without the benefit of competition  to help establish pricing.

In July 2016, we found that the lack of earned value management  data for the SLS Boeing core stage contract persisted. Without this  information, some 4.5 years after contract award, the program  continued to be in a poor position to understand the extent to which  technical challenges with the core stage were having schedule  implications or the extent to which they may have required reaching  into the program’s cost reserves.

In October 2018, the NASA Office of Inspector General reported that  NASA does not require Boeing to report detailed information on  development costs for the two core stages and exploration upper  stage, making it difficult for the agency to determine if the contractor is  meeting cost and schedule commitments for each deliverable. The  NASA Office of Inspector General found that given the cost-reporting  structure, the agency is unable to determine the cost of a single core  stage. Internally, Boeing tracks all individual costs but submits a  combined statement of labor hours and material costs through the one  contract line item for all its development activities. NASA  approximates costs based on numerous monthly and quarterly  reviews with the contractor to track the progress of each individual  deliverable. The NASA Office of Inspector General made a number of  recommendations aimed at improving reporting relative to the core  stage contract. Among these was a specific recommendation to  separate each deliverable into its own contract line item number for  tracking performance, cost, and award fees. NASA concurred with this  recommendation and is currently renegotiating the core stage contract  with Boeing.

In June 2019, we found that NASA’s approach to incentivizing Boeing  for the SLS stages and Lockheed Martin for the Orion crew spacecraft  have not always achieved overall desired program outcomes. NASA  paid over $200 million in award fees from 2014-2018 related to  contractor performance on the SLS stages and Orion spacecraft  contracts, but the programs continue to fall behind schedule and incur  cost overruns. For example, in its December 2018 award fee letter to  Boeing in which the contractor earned over $17 million in award fees,  NASA’s fee determination official noted that the significant schedule  delays on this contract have caused NASA to restructure the flight  manifest for SLS. For the Lockheed Martin Orion contract, the  contractor earned over $29 million for the award fee period ending  April 2017. NASA noted that Lockheed Martin was not able to  maintain its schedule for the crew service module and that the  contractor’s schedule performance had decreased significantly over  the previous year.

In June 2019, we reported that our past work shows that when  incentive contracts are properly structured, the contractor has profit  motive to keep costs low, deliver a product on time, and make  decisions that help ensure the quality of the product. Our prior work  also shows, however, that incentives are not always effective tools for  achieving desired acquisition outcomes. We have found that, in some  cases, there are significant disconnects between contractor  performance for which the contractor was awarded the majority of  award fees possible without achieving desired program results.  Additionally, we have found that some agencies did not have  methods, data, or performance measures to evaluate the  effectiveness of award fees.

As part of our June 2019 report, we recommended that NASA direct  the SLS and Orion programs to reevaluate their strategies for  incentivizing contractors and determine whether they could more  effectively incentivize contractors to achieve the outcomes intended  as part of ongoing and planned contract negotiations. NASA agreed  with the intent of this recommendation and stated that the SLS and  Orion program offices reevaluate their strategies for incentivizing  contract performance as part of contracting activities including  contract restructures, contract baseline adjustments, and new contract  actions. We will continue to follow-up on the actions the agency is  taking to address this recommendation after its ongoing contract  negotiations are complete.

Minimize Risky Programmatic Decisions to Better Position  Programs for Successful Execution. Through our reviews of  NASA’s human spaceflight programs, we have found that NASA  leadership has approved programmatic decisions that compound  technical challenges. These decisions include approving cost and  schedule baselines that do not follow best practices, establishing  insufficient cost and schedule reserves, and operating under  aggressive schedules. As a result, these programs have been at risk  of cost growth and schedule delays since NASA approved their  baselines.

In July 2015, we found that NASA generally followed best practices in  preparing the SLS cost and schedule baseline estimates for the  limited portion of the program life cycle covered through launch  readiness for the first test flight of SLS. However, we could not deem  the cost estimate fully reliable because it did not fully meet the  credibility best practice. While an independent NASA office reviewed  the cost estimate developed by the program and as a result the  program made some adjustments, officials did not commission the  development of a separate independent cost estimate to compare to  the program cost estimate to identify areas of discrepancy or  difference. In addition, the program did not cross-check its cost  estimate using an alternative methodology. The purpose of  developing a separate independent cost estimate and cross-checking  the estimate is to test the program’s cost estimate for reasonableness  and, ultimately, to validate the cost estimate.

In July 2016, we found that the Orion program’s cost and schedule  estimates were not reliable based on best practices for producing  high-quality estimates. For example, the cost estimate lacked  necessary support and the schedule estimate did not include the level  of detail required for high-quality estimates. Therefore, we  recommended that NASA perform an updated joint cost and schedule  confidence level analysis including updating cost and schedule  estimates in adherence with cost and schedule estimating best  practices, which we have identified as among those recommendations  that warrant priority. NASA officials have stated that they have no  plans to implement our recommendation. In commenting on the July  2016 report, NASA stated that the agency reviewed, in detail, the  Orion integrated cost/schedule and risk analysis methodology and  determined the rigor to be a sufficient basis for the agency  commitments. However, without sound cost and schedule estimates,  decision makers do not have a clear understanding of the cost and  schedule risk inherent in the program or important information needed  to make programmatic decisions. We continue to believe that NASA  should fully implement our recommendation.

In our 2017 High-Risk Report, we highlighted concerns that all three  programs—SLS, Orion, and EGS—were operating with limited cost  reserves, limiting each program’s ability to address risks and  unforeseen technical challenges. For example, we found in July  2016 that the Orion program was planning to maintain low levels of  cost reserves until later in the program. The lack of cost reserves at  that time had caused the program to defer work to address technical  issues to stay within budget.

Also in our 2017 High-Risk Report, we highlighted concerns regarding  each program managing to an aggressive internal NASA launch  readiness date. This approach creates an environment for programs  to make decisions based on reduced knowledge to meet a date that is  not realistic. For example, the EGS program had consolidated future  schedule activities to prepare the Mobile Launcher—the vehicle used  to bring SLS to the launch pad—to meet its internal goal. The program  acknowledged that consolidating activities—which included  conducting verification and validation concurrent with installation  activities—increased risk because of uncertainties about how systems  not yet installed may affect the systems already installed. Officials  added, however, that this concurrency is necessary to meet the  internal schedule. Subsequently, as discussed above, NASA delayed  its committed launch readiness date.

Improve Transparency into Costs for Long-term Plans. As we  previously reported, a key best practice for development efforts is that  requirements need to be matched to resources (for example, time,  money, and people) at program start. In the past, we have found that  NASA programs, including the Constellation Program, did not have  sufficient funding to match demanding requirements. Funding gaps can  cause programs to delay or delete important activities and thereby  increase risks.

In addition, since May 2014, we have found there has been a lack of  transparency into the long-term costs of these human spaceflight  programs. As discussed above, the EGS and SLS programs do not  have a cost and schedule baseline that covers activities beyond the first  planned flight. In addition, as previously noted, the Orion program does  not have a baseline beyond the second planned flight. As a result, NASA  is now committing to spend billions of taxpayer dollars for missions that  do not have a cost and schedule baseline against which to assess  progress.

To that end, we have made recommendations in the past on the need for  NASA to baseline these programs’ costs for capabilities beyond the first  mission; however, a significant amount of time has passed without NASA  taking steps to fully implement these recommendations. Specifically,  among those recommendations that we have identified as warranting  priority attention, in May 2014, we recommended that, to provide  Congress with the necessary insight into program affordability, ensure its  ability to effectively monitor total program costs and execution, and to  facilitate investment decisions, NASA should:

Establish a separate cost and schedule baseline for work required to  support the SLS for the second mission and report this information to  the Congress through NASA’s annual budget submission. If NASA  decides to fly the SLS configuration used in the second mission  beyond that mission, we recommended that it establish separate life  cycle cost and schedule baseline estimates for those efforts, to  include funding for operations and sustainment, and report this  information annually to Congress via the agency’s budget submission.

Establish separate cost and schedule baselines for each additional  capability that encompass all life cycle costs, to include operations  and sustainment. This is important because NASA intends to use the  increased capabilities of the SLS, Orion, and EGS well into the future.

As part of the latter recommendation, we stated that, when NASA could  not fully specify costs due to lack of well-defined missions or flight  manifests, the agency instead should forecast a cost estimate range— including life cycle costs—having minimum and maximum boundaries and  report these baselines or ranges annually to Congress via the agency’s  budget submission.

In its comments on our 2014 report, NASA partially concurred with these  two recommendations, noting that much of what it had already done or  expected to do would address them. For example, the agency stated  that establishing the three programs as separate efforts with individual  cost and schedule commitments met the intent of our recommendation.  NASA also stated that its plans to track and report development,  operations, and sustainment costs in its budget to Congress as the  capabilities evolved would also meet the intent of the recommendation. In  our response, we stated that while NASA’s prior establishment of three  separate programs lends some insight into expected costs and schedule  at the broader program level, it does not meet the intent of the two  recommendations because cost and schedule identified at that level is  unlikely to provide the detail necessary to monitor the progress of each  block against a baseline. Further, we stated that reporting the costs via  the budget process alone will not provide information about potential  costs over the long term because budget requests neither offer all the  same information as life-cycle cost estimates nor serve the same  purpose. Life-cycle cost estimates establish a full accounting of all program costs for planning, procurement, operations and maintenance,  and disposal and provide a long-term means to measure progress over a  program’s life span. We continue to believe that NASA should fully  implement these recommendations.

As NASA considers these lessons, it is important that the programs place  a high priority on quality, for example, holding suppliers accountable to  deliver high-quality parts for their products through such activities as  regular supplier audits and performance evaluations of quality and  delivery. As we found in June 2019, both the SLS and Orion programs  have struggled at times with the quality of parts and components. For  example, the Orion contractor has had a number of issues with  subcontractor-supplied avionics system components failing during testing  that have required time to address. NASA has highlighted concerns over  the contractor’s ability to manage its subcontractors and the resulting  significant cost, schedule, and technical risk impacts to the program. And  the SLS program faced setbacks after its contractor did not verify the  processes that its vendors were using to clean the fuel lines, resulting in  delays to resolve residue and debris issues.

Chairwoman Horn, Ranking Member Babin, and Members of the  Subcommittee, this completes my prepared statement. I would be  pleased to respond to any question that you may have at this time.

If you or your staff have any questions about this testimony, please  contact Cristina T. Chaplain, Director, Contracting and National Security  Acquisitions at (202) 512-4841 or chaplainc@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this statement. GAO staff who made key contributions  to this statement include Molly Traci, Assistant Director; John Warren;  Sylvia Schatz; Ryan Stott; and Chad Johnson.

This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product 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.

NASA is developing 3 systems to put astronauts into space—the Orion crew vehicle, Space Launch System, and Exploration Ground Systems. NASA will need these systems for its human space exploration goals, including sending astronauts to the moon as soon as 2024.

We’ve been concerned about how NASA is managing these large and complex efforts. Past reports have noted that schedules were overly optimistic and that NASA’s reporting of cost growth for SLS and Orion is distorted.

This testimony provides an update on the progress NASA has made developing these systems and some lessons NASA could apply in managing the human spaceflight programs.


Child Nutrition: Observations on USDA Actions to Improve Program Integrity and Address Improper Payments

In fiscal year 2018, the federal government provided about $30 billion for USDA's child nutrition programs, including the school meals programs, WIC, and SFSP, among others. In that year, the federal government spent almost $14 billion on the largest of these programs, the National School Lunch Program, which supported the provision of meals to about 30 million children. Federal, state, and local entities play important roles in administering the child nutrition programs and ensuring program integrity. For example, USDA annually estimates improper payments in these programs, which are an indicator of program integrity, and states monitor implementation of the programs by local organizations that directly provide food and services to participants.

This testimony discusses (1) actions USDA has taken to address GAO's prior recommendations related to program integrity in the child nutrition programs and (2) improper payments in these programs. This testimony is based on prior GAO reports on child nutrition programs issued from 2013 through 2018, recent GAO and USDA reports on improper payments, and updates GAO obtained in March and April 2019 from USDA officials on actions related to GAO's prior recommendations and improper payments in child nutrition programs.

The U.S. Department of Agriculture (USDA) has taken steps, or is planning steps, to improve the integrity of the child nutrition programs in response to recommendations from GAO's prior work. For example:

School meals. In 2014, GAO identified several opportunities for USDA to improve school meals oversight and integrity. For example, through GAO's survey of states, over three-fourths reported a need for USDA guidance on monitoring the financial management of local entities that provide meals to children in schools—an area we reported states were newly required to review. GAO recommended that USDA assess states' needs for information in this area. USDA did this assessment and provided related guidance and training to states.

Special Supplemental Nutrition Program for Women, Infants, and Children (WIC). In 2013 and 2014, GAO identified several ways that USDA could improve program integrity and oversight in WIC, which provides food benefits to individuals who are low-income. For example, GAO found that USDA had not used its own monitoring findings on state policies for determining applicants' income eligibility to target assistance to states, and recommended that USDA do so. In response, USDA developed a process for reviewing and acting on its monitoring results.

Summer Food Service Program (SFSP). In 2018, GAO identified several opportunities for USDA to improve program integrity in the SFSP, which provides food to children in low-income areas when schools are closed for vacation. For example, GAO found that USDA did not collect reliable data on children's participation in the program and that estimates were calculated inconsistently from state to state and from year to year. GAO recommended that USDA take steps to improve the reliability of these estimates and take additional actions to improve program integrity. USDA recently reported plans to address GAO's recommendations.

USDA reported improper payments for four child nutrition programs totaling an estimated $1.8 billion in fiscal year 2018, or just over 1 percent of the $151 billion in improper payments that agencies estimated government-wide. GAO has reported that reducing improper payments—which generally include payments that should not have been made or were made in an incorrect amount—is critical to safeguarding federal funds. Since fiscal year 2013, the school meals programs have consistently reported the highest improper payment rates across the child nutrition programs. Over time, USDA has taken a variety of corrective actions aimed at reducing improper payments in child nutrition programs, yet estimated improper payment rates for these programs remained generally steady until fiscal year 2018. For that year, USDA changed what it considers to be an improper payment in the school meals programs, resulting in improper payment estimates that are substantially lower than those from prior years. The Office of Management and Budget (OMB) provides guidance to federal agencies on measuring and reporting improper payment rates, and USDA reported that it made this change after consultation with OMB.

GAO made 14 recommendations to USDA in its prior reports on child nutrition. USDA generally concurred with the recommendations and has addressed nine, taken some steps to address one, and is planning to address the remaining four.

Thank you for inviting me here today to discuss our work addressing  program integrity in the U.S. Department of Agriculture’s (USDA) child  nutrition programs. In fiscal year 2018, the federal government provided  about $30 billion for these programs, which include the school meals  programs, Child and Adult Care Food Program (CACFP), Summer Food  Service Program (SFSP), and the Special Supplemental Nutrition  Program for Women, Infants, and Children (WIC), among others. In that  year, the federal government spent almost $14 billion on the largest of  these programs, the National School Lunch Program (NSLP), which  supported the provision of meals to about 30 million children, according to  USDA.

Federal, state, and local entities play important roles in administering the  child nutrition programs, which generally provide nutrition assistance to  children from low-income families, and ensuring program integrity. At the  federal level, USDA’s Food and Nutrition Service (FNS) oversees these  programs by issuing rules and guidance, providing federal  reimbursements to states, monitoring states, and estimating programs’  improper payments—generally payments that should not have been  made or were made in an incorrect amount. The states administer the  programs, in part by establishing agreements with organizations that  directly provide food and related services to participants at a variety of  locations, such as schools, local health clinics, child care centers, and  summer camps. States also monitor these organizations’ implementation  of the programs.

The child nutrition programs were last reauthorized by the Healthy,  Hunger-Free Kids Act of 2010, and since then, we have issued several  reports that recommended improvements aimed at ensuring the integrity  of these programs. My statement today discusses (1) actions FNS has  taken to address our recommendations related to program integrity in the  child nutrition programs, and (2) improper payments in these programs.  My statement is primarily based on our prior reports on these topics,  issued from February 2013 through December 2018, which are cited  throughout this statement. More detailed information on the objectives,  scope, and methodology for that work can be found in each report. We  also reviewed USDA’s recent reports on improper payments in the child  nutrition programs and obtained updates from USDA officials in March  and April 2019 on actions related to our prior recommendations and  improper payments in the child nutrition programs.

The work upon which this statement is based was conducted in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

According to USDA, beginning with NSLP’s authorization in 1946, the  federal government has gradually built an array of nutrition assistance  programs designed to help the most vulnerable populations meet their  food needs. Currently, eight of USDA’s nutrition assistance programs are  targeted to providing food to children, as noted in table 1. USDA oversees  the child nutrition programs at the federal level, and state agencies and  local organizations play key roles in program administration and  implementation.

The Improper Payments Information Act of 2002 (IPIA), as amended,  requires agencies to estimate improper payments for programs and  activities identified as being susceptible to significant improper payments,  implement corrective actions, and report on their results for these  programs, among other things. An improper payment is any payment  that should not have been made or that was made in an incorrect amount  (including overpayments and underpayments) under statutory,  contractual, administrative, or other legally applicable requirements. It  includes any payment to an ineligible recipient, any payment for an  ineligible good or service, any duplicate payment, any payment for a good  or service not received (except for such payments where authorized by  law), and any payment that does not account for credit for applicable  discounts. Reducing improper payments—such as payments to ineligible  recipients or duplicate payments—is critical to safeguarding federal funds.  The Office of Management and Budget (OMB) provides guidance to  federal agencies on effectively measuring, reporting, and reducing their  improper payment rates.

USDA reports annual improper payment estimates for four child nutrition  programs: the school meals programs—NSLP and SBP—as well as WIC,  and CACFP. IPIA, as amended, requires agencies to review all programs  and activities at least once every 3 years and identify those that may be  susceptible to significant improper payments. Federal law also requires  agencies’ Inspectors General to annually assess and report on whether  agencies complied with six criteria listed in the Improper Payments  Elimination and Recovery Act of 2010 (IPERA), as amended, related to  improper payments. These criteria are (1) publish an agency financial  statement in the form required by OMB guidance; (2) conduct program- specific improper payment risk assessments, if required; (3) publish  improper payment estimates, if required; (4) publish corrective action  plans for programs and activities deemed susceptible to significant  improper payments; (5) publish and meet annual improper payment  reduction targets; and (6) report an improper payment rate of less than 10  percent for each program and activity for which an improper payment  estimate was published. Federal law requires agencies with 3 or more  consecutive years of noncompliance findings by their Inspectors General  to submit to Congress a reauthorization proposal or a proposal for  statutory changes necessary to bring programs into compliance.

FNS Has Taken Steps to Address Several Issues Affecting Program Integrity in the Child Nutrition Programs

FNS has taken various actions to improve the integrity of the child  nutrition programs in response to findings from our prior work. Over the  last 6 years, we issued five reports on the school meals programs, WIC,  and SFSP, which included recommendations to FNS intended to improve  the integrity of these programs. In response, FNS has addressed many of  these recommendations, though additional actions are needed.

FNS Took Steps to Improve Oversight of School Meals

In 2014, we issued two reports on school meals that found multiple  opportunities for FNS to improve school meals program integrity and  oversight, all of which FNS has since acted on. Specifically, in January  2014, we recommended that FNS take two different actions aimed at  providing assistance to improve state oversight of local school food  authority (SFA) administration of the programs; and in May 2014, we  recommended that FNS take multiple actions to improve oversight and  enhance verification processes that ensure only children who meet  income requirements receive free and reduced price school meals.

In January 2014, we reported that FNS had provided a significant amount  of guidance and training to help states with oversight of local SFAs that  directly provide meals to children in schools, but that certain aspects of  the guidance may have hindered state oversight of program  compliance. (See fig. 1 for entities involved in school meals oversight.)  For example, we found evidence indicating that FNS’s guidance allowing  states to focus their oversight on providing technical assistance to SFAs,  rather than documenting instances of noncompliance and requiring  corrective actions to address them, may have resulted in some SFAs that  were not fully meeting requirements being certified as in compliance.  According to Standards for Internal Control in the Federal Government,  federal agencies should have policies and practices in place to provide  reasonable assurance that programs are operating in compliance with  applicable laws and regulations. Without documentation of  noncompliance and requirements for corrective actions, SFAs may not  have adequate information on the types of ongoing compliance issues  and the need to take corrective actions. Further, FNS may lack  information on areas that are problematic across SFAs, which could be  the focus of future technical assistance efforts.

In 2014, FNS substantially revised and updated the process through  which states conduct program oversight—the administrative review—and  in our January report, we also found that states reported a need for more  information and training related to monitoring SFA financial  management. Specifically, we reported that, previously, states had not  been required to assess SFA financial management during monitoring  reviews, but that states were now responsible for reviewing several  aspects of SFA financial management, such as their nonprofit food  service accounts and indirect costs. We surveyed all of the states, and  over three-fourths reported the need for additional guidance or training  from FNS on SFA financial management. We found that while FNS had  provided some assistance to states on the new requirements related to  SFA financial management, FNS officials had not collected information  from all states on their needs in this area. Because state reviews are the  key tool used to ensure the integrity of the school meals programs, if state  reviewers are unable to effectively review SFA financial management, the  federal government will lack assurance that SFAs are complying with  federal requirements in this area.

In our January 2014 report, we recommended that the Secretary of  Agriculture direct the Administrator of FNS to (1) clarify to states the  importance of documenting compliance issues found during  administrative reviews and requiring corrective actions to address them,  and (2) assess all states’ needs for information to improve their ability to  oversee SFA financial management and provide assistance to meet  identified needs. FNS officials generally agreed with our  recommendations and have since addressed them. For example, FNS  issued a memo on July 11, 2014, to all regional and state directors  reiterating the importance of documenting review findings and any  resulting technical assistance and corrective actions. Also in that month,  FNS completed its initial efforts to systematically assess all states’ needs  for information to improve their ability to oversee SFA financial  management. Further, in 2015 and 2016, FNS discussed financial  management issues with states during a national meeting and held three  national training sessions and a webinar focused on reviewing SFA  financial management.

In our May 2014 report on school meals, we found that FNS had taken  steps to help identify and prevent children ineligible for free or reduced  price meals from receiving those benefits, but additional opportunities  existed to enhance the application verification process and strengthen  program integrity. For example, we reported that school districts are  required to verify applications for free and reduced price meals if they are  deemed to be questionable, known as for-cause verification. Some school  districts were not conducting any for-cause verifications and FNS  guidance did not provide indicators or describe scenarios that could assist  school districts in identifying questionable applications. Further, FNS’s  data on the outcomes of applications verified for cause were combined  with data on the outcomes of applications verified for other reasons,  limiting FNS’s ability to use these data to assess the effectiveness of for- cause verifications. Standards for Internal Control in the Federal  Government direct agencies to design control activities to ensure  management’s directives are carried out. Without FNS analysis of data  on the outcomes of for-cause verifications, or provision of additional  guidance on applications that may merit for-cause verification, some  school districts may have continued to overlook these applications,  potentially hindering program integrity.

In our May 2014 report, we recommended that the Secretary of  Agriculture take multiple actions to improve integrity of the school meals  programs through additional verification of applications, including that  USDA evaluate the data collected on for-cause verification outcomes,  and, if appropriate, provide additional guidance for conducting for-cause  verification that includes possible indicators of questionable or ineligible  applications. FNS took actions in response to all of our  recommendations. For example, FNS reported in March 2017 that it  analyzed the data on verification outcomes and did not find that any  benefit in integrity and oversight would be gained by requiring the  reporting of for-cause verification outcomes separately. However, FNS  also reported that it disseminated additional guidance in August 2014 for  conducting for-cause verifications, which included criteria for identifying  possible indicators of questionable or ineligible applications.

FNS Took Steps to Improve WIC Program Integrity and Oversight

In 2013 and 2014, we issued two reports on WIC that found multiple  opportunities for FNS to improve program integrity and oversight, many of  which FNS has since addressed. Specifically, in February 2013, we  recommended that FNS review federal monitoring reports on state WIC  program administration to assess program risks at a national level, and in  December 2014, we recommended that FNS take multiple actions to  improve federal WIC oversight and assist states’ efforts to prevent and  address online sales of WIC formula.

In our February 2013 report, we found that FNS regularly assisted and  monitored states’ administration of WIC but needed to improve agency  oversight of states’ policies and procedures for determining WIC  applicants’ income eligibility for the program. We reported that while  federal regulations define criteria that must be used to determine  applicants’ income eligibility for WIC, state and local agencies are also  given some discretion. We found that FNS generally had not focused its  assistance to states on key income eligibility requirements for which  states have discretion, such as determination of family size and the time  period of income assessed, in the years preceding our report. However,  through its monitoring reports, FNS had identified problems with, or  concerns about, income eligibility determination policies or procedures in  one-third of the states reviewed. Standards for Internal Control in the  Federal Government indicate that management should identify, analyze,  and respond to risks related to achieving defined objectives and note that  risk identification methods may include consideration of deficiencies  identified through audits and other assessments. At the time of our  review, FNS officials said that they planned to begin regularly reviewing  monitoring findings at the national level to identify areas of program risk  and target assistance to states accordingly; however, officials did not  indicate when those reviews would begin. Without conducting a complete  review of its state monitoring findings, FNS lacked information it could  potentially use to target additional assistance and clarification on income  eligibility determination to states and help ensure overall program  integrity.

In our February 2013 report, we recommended that the Secretary of  Agriculture direct FNS to develop a timeline for reviewing its federal  monitoring reports on state WIC program administration to assess  program risks at a national level and target assistance to states. FNS  officials concurred with our recommendation, and FNS has since  addressed it. Specifically, in that year, FNS staff developed a process to  use an automated report to identify areas in need of correction or  improvement that were found during its monitoring reviews of WIC  conducted across the country. The report went into production on  November 1, 2013, and FNS reported that staff would review the reports  quarterly to assess the frequency of findings in each policy and program  area and respond by providing policy clarification, training, or other  corrective actions to states.

A posting from late June 2014  included the container size in the title  and stated: “I am looking to sell 5 [brand  name] 12.5oz cans (NOT OPENED)  because  is super picky and does  not want to drink it no matter what i do.   will drink the  kind  for some reason. I told my WIC office to  switch me to another brand but they say  it might take 3 months. Im asking 35$ but  best offer will do since the brand I buy is  from  so Im not looking to make a  profit here if you consider each can is  16$ at the store. please text if  interested!!  A posting from early July 2014  included the brand, type, and  container size in the title and stated:  “I have 7 powder cans of   they dnt expire for another year at least  just got them from my wic n we ended up  switching formulas so its $65.oo for pick  up all 7 cans or $70 if i have to drive.”

In December 2014, we reviewed the online sale of infant formula provided  to WIC participants, a practice prohibited by WIC program rules, and  concluded that FNS had provided limited assistance to states in  preventing and addressing these sales. We found that FNS had not  conducted any nationwide studies on the extent of online sales of WIC  formula by program participants, though information gathered from state  WIC officials and our own limited monitoring suggested that some WIC  formula was offered for sale online. (See sidebar.) The use of the  internet as a marketplace had substantially increased in the years  preceding our report; therefore, actions needed to ensure WIC  participants did not inappropriately use infant formula had changed as  well. Yet, we found that FNS had not studied cost-effective techniques for  monitoring potential online sales of WIC benefits. Standards for Internal  Control in the Federal Government note that agencies should identify,  analyze, and respond to significant changes that could impact the internal control system. However, FNS had not directed states to inform  participants that selling WIC formula, including online, is against program  rules, which could lead to participants making these sales and  unknowingly using program resources inappropriately. Further, we noted  that although states are responsible for controlling participant violations— including sales of WIC benefits—FNS is responsible for determining  compliance with the WIC statute and regulations. However, we reported  that FNS had not required states to describe procedures for controlling  these violations in their WIC state plans, leaving the agency without  assurance that efforts were taking place nationwide.

Through interviews with state and local WIC agency officials from 12  states for our December 2014 report, we found that states varied in their  approaches and the amount of resources devoted to monitoring  attempted WIC formula sales, and some expressed concerns about the  return on investment for these efforts. Because WIC participants  purchase the same brands and types of infant formula from stores as  non-WIC customers, monitoring attempted online sales of WIC formula  can present a challenge. State officials we spoke with cited additional  challenges to monitoring online sales, including the difficulty of identifying  WIC participants in online posts that allow sellers to remain relatively  anonymous, and as a result, some expressed concerns about the return  on investment for these monitoring efforts. Standards for Internal Control  in the Federal Government suggest that agencies consider both benefits  and costs when designing and implementing internal controls. However,  because FNS had not assessed the nationwide extent of online sales of  WIC formula by program participants, nor determined cost-effective  approaches for identifying and addressing these sales, FNS and the  states were poorly positioned to strike the appropriate balance of costs  and benefits when determining how to target their resources to ensure  program integrity.

In our December 2014 report, we recommended that the Secretary of  Agriculture direct the Administrator of FNS to (1) instruct states to inform  participants that they are not allowed to sell WIC food benefits, including  online; (2) require states to inform FNS of their procedures for identifying  attempted sales of WIC food benefits and analyze the information to  ascertain the national extent of state efforts; and (3) collect information to  help assess the national extent of attempted online sales of WIC formula  and determine cost-effective techniques states can use to monitor online  classified advertisements. FNS agreed with our recommendations and  took several steps to address them, though the agency has yet to fully  address the third. Specifically, FNS promulgated final regulations that  were effective in May 2016 requiring state agencies to inform applicants  and participants about the prohibition against the sale of WIC food  benefits, including online. Further, in April 2015, FNS issued guidance  directing states to articulate their policies and procedures for identifying  and monitoring online sales of WIC benefits in their state plans; and in  July 2018, an FNS contractor completed a study analyzing state efforts in  this area. Also in that month, an FNS contractor completed a study  intended to provide information to help FNS address our third  recommendation that the agency assess the prevalence of online sales of  WIC formula and identify cost-effective techniques states can use to  monitor and prevent them. However, FNS indicated that it would not be  releasing the study to states, in part because it included information that  was investigative in nature. In April 2019, FNS officials indicated that they  are currently developing guidance on best practices and cost-effective  techniques identified in the report to disseminate to WIC state agencies  later in 2019. Informing states of cost-effective techniques for monitoring  and preventing online WIC formula sales would address our  recommendation.

FNS Is Planning Steps to Address Our SFSP Recommendations

In May 2018, we reviewed the SFSP, which generally provides food to  children in low-income areas during periods when schools are closed for  vacation, and assessed several aspects of the program, including  participation. (See fig. 2 for an SFSP breakfast we observed during a  site visit to one of three states we visited.) We found that nationwide, the  total number of meals served to children in low-income areas through the  SFSP increased from 113 to 149 million (about 32 percent) from fiscal  year 2007 through 2016. FNS directs states to use the number of meals  served, along with other data, to estimate the number of children  participating in the SFSP. However, we found that participation estimates  had been calculated inconsistently from state to state and year to year.  Recognizing this issue, in 2017, FNS clarified its instructions for  calculating participation estimates to help improve their consistency,  noting that these estimates are critical for informing program  implementation and strategic planning. However, we determined that the  method FNS directed states to use would continue to provide unreliable  estimates of participation, hindering the agency’s ability to use them for  these purposes. Standards for Internal Control in the Federal Government  state that agencies should maintain quality data and process it into quality  information that is shared with stakeholders to help achieve agency  goals.

In our May report, we made four recommendations to FNS to improve the  integrity of the SFSP, including that FNS take steps to improve its  estimate of children’s participation in the SFSP by addressing, at a  minimum, identified issues that continued to limit the reliability of the  estimate. FNS officials generally agreed with our recommendations, and  the agency has since provided information on actions it has planned, or  begun to take, to address them. For example, in March 2019, FNS  reported that it plans to complete an evaluation of how SFSP participation  is calculated by summer 2020. We will continue to monitor FNS’s  progress in addressing our SFSP recommendations.

Child Nutrition Programs Estimated $1.8 Billion in Improper Payments in Fiscal Year 2018 and Have Consistently Been Reported as Noncompliant with Improper Payment Requirements

In fiscal year 2018, USDA reported improper payments for the child  nutrition programs totaling an estimated $1.8 billion, or just over 1 percent  of the $151 billion in improper payments federal agencies estimated  government-wide in that year. GAO has reported improper payments as a  material weakness in internal control in its reports on the U.S.  government’s consolidated financial statements, noting that improper  payments have consistently been a government-wide issue and reducing  these payments is critical to safeguarding federal funds. Since fiscal  year 2013, the school meals programs have consistently reported the  highest improper payment rate estimates across the child nutrition  programs. For example, in recent years, USDA reported annual improper  payment rate estimates of about 15 percent and 24 percent for the NSLP  and SBP, respectively, compared to about 5 percent and 1 percent for  WIC and CACFP, respectively. The estimated total amount of improper  payments in the school meals programs are also high, and these  programs, along with WIC, are included on OMB’s list of programs with  over $100 million in annual monetary losses.

The USDA Office of Inspector General’s (OIG) most recent report on the  department’s compliance with improper payment requirements, which  assessed fiscal year 2017, found that the four child nutrition programs for  which USDA estimates improper payments were noncompliant with  improper payment requirements. The reasons for noncompliance  varied, as the OIG noted that USDA has yet to develop a methodology to  report a complete improper payment estimate for CACFP, and  corrective actions taken in the other child nutrition programs have not  yielded the desired reductions in estimated improper payments.  According to our 2018 report, the four child nutrition programs contributed  to the government-wide total of 58 programs in 14 federal agencies that  agency inspectors general found were noncompliant with improper  payment requirements in fiscal year 2017. Further, the four child  nutrition programs had been reported as noncompliant for 7 years. We  also noted that USDA was one of three federal agencies with programs  reported as noncompliant for 3 or more consecutive years that had not  notified Congress of their noncompliance, as required, despite prior  recommendations that we, and the OIG, had made to USDA to do so.  However, USDA submitted a letter to Congress in June 2018 that  reported these programs’ noncompliance and described the agency’s  planned actions to bring them into compliance.

Over time, USDA has undertaken a variety of corrective actions aimed at  reducing improper payments in the child nutrition programs, yet the  estimated improper payment rates for these programs remained generally  steady until fiscal year 2018. For that year, USDA changed what it  considers to be an improper payment in the school meals programs,  resulting in improper payment estimates that are substantially lower than,  and not comparable to, those from prior years. According to USDA, FNS  made this change after evaluating its definition of improper payments for  the school meals programs and determining that the agency would no  longer include a previously identified source of error in its estimates.  According to FNS officials, FNS implemented this change after  consultation with OMB, and FNS also briefed the USDA OIG on the  change in advance of implementation. The USDA OIG has not yet  released its report assessing USDA’s fiscal year 2018 compliance with  improper payment requirements.

To help ensure that annual estimates are produced for all child nutrition  programs susceptible to significant improper payments, a 2018 USDA  OIG report recommended that FNS complete an SFSP risk assessment  for improper payments taking into account all of the risk factors identified  by OMB as likely to contribute to improper payments. Although FNS’s  2017 SFSP risk assessment concluded that the program was at low risk  for significant improper payments, the OIG found that FNS’s assessment  was insufficient because it did not consider multiple risk factors regarding  program vulnerabilities and improper payments that OMB requires be  taken into account. The OIG reviewed SFSP’s payment structure,  monitoring results, and investigations and media cases regarding fraud,  and found that these suggest the program is vulnerable to significant  improper payments. FNS concurred with the OIG’s recommendation. In  April 2019, a senior FNS official indicated that the agency completed a  risk assessment for SFSP in response to the OIG’s recommendation,  determined that the program is at a high risk of improper payments, and  is currently developing a methodology for measuring improper payments  in the program.

Chairman Roberts, Ranking Member Stabenow, and Members of the  Committee, this completes my prepared statement. I would be pleased to  respond to any questions that you may have at this time.

If you or your staff have any questions about this testimony, please  contact Kathryn A. Larin, Director, Education, Workforce, and Income  Security Issues at (202) 512-7215 or larink@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this statement. GAO staff who made key contributions  to this testimony include Rachel Frisk (Assistant Director) and Theresa Lo  (Analyst in Charge). In addition, key support was provided by David  Barish, Daniel Flavin, Alex Galuten, Sheila R. McCoy, Jean McSween,  Almeta Spencer, and Matt Valenta.

This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product 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.

The U.S. government allocated about $30 billion for child nutrition programs in FY 2018, including about $14 billion for the school lunch program.

USDA oversees the programs. States contract with schools and others to provide the services.

In prior work, we have recommended ways USDA can improve its oversight of the programs. This testimony discusses steps USDA has taken, or is planning to take, to address our recommendations. For example, USDA

Gave states information and training on monitoring finances for school meals

Plans to collect more reliable data on children's participation in the summer meals program