United States General Accounting Office GAO Report to the Chairman, Committee on Science, House of Representatives March 1999 FEDERAL RESEARCH Guidance for Equipment Acquired Under Grants and Cooperative Agreements GAO/RCED-99-73 United States GAO General Accounting Office Washington, D.C. 20548 Leter Resources, Community, and Economic Development Division Leter B-281935 March 24, 1999 The Honorable F. James Sensenbrenner, Jr. Chairman, Committee on Science House of Representatives Dear Mr. Chairman: During fiscal year 1997, three agencies--the National Science Foundation (NSF), National Institutes of Health (NIH), and the National Oceanic and Atmospheric Administration (NOAA)--awarded over $12 billion in grants and cooperative agreements to nonprofit scientific organizations or nonprofit institutions of higher education to conduct basic or applied scientific research. These funds included several hundred million dollars for equipment. As requested, we • identified the guidance NSF, NIH, and NOAA used to ensure that the recipients of grants and cooperative agreements for scientific research provide management controls over the equipment they acquire with federal funds; and • determined if four NSF recipients from the Washington, D. C., area had acquired equipment under 14 awards of varying dollar amounts. Results in Brief Each of the three agencies generally allows the recipients of grants and cooperative agreements to have title to the purchased equipment, but they also provide some guidance on how recipients are to account for this equipment. After the grants and cooperative agreements are awarded, these agencies do not maintain records showing which equipment was actually purchased. However, the agencies have some assurance that the equipment was in fact purchased because these organizations have audits to ensure compliance with the award agreements, and these audits, together with the recipients’ proposals, identify the equipment that the recipients proposed acquiring. We reviewed documents showing that the recipients we visited had acquired the equipment specified in their proposals, and we saw the equipment either being used or awaiting installation. Leter Page 1 GAO/RCED-99-73 Federal Research B-281935 Background Under the Federal Grant and Cooperative Agreement Act of 1977, as amended, executive agencies have the authority to give title to tangible personal property--including equipment--to nonprofit institutions of higher education or nonprofit organizations whose primary purpose is scientific research, if this property is acquired with federal funds under a grant or cooperative agreement for scientific research. The legislative history indicates that this authority is provided, in part, to eliminate the costs to the government associated with maintaining the property records for this equipment. Using this authority, executive agencies can give title to such a recipient institution when (1) the recipient acquires the equipment using federal funds and (2) the agency decides giving title furthers its objectives. The agency head has discretion to give title without further obligation to the federal government or under the conditions that the head of the agency considers appropriate. Oversight of The Office of Management and Budget (OMB) has issued guidance to agencies on requiring recipients to maintain records for equipment Equipment Acquired acquired with federal funds. However, the Federal Grant and Cooperative Under Grants and Agreement Act of 1977, as amended, allows agencies to differ from this guidance in setting their own requirements for research equipment Cooperative acquired under an award to conduct basic or applied scientific research by Agreements a nonprofit institution of higher education or a nonprofit organization whose primary purpose is conducting scientific research. For this type of equipment, the three agencies use their own guidance, which adopt different parts of the OMB guidance. While the agencies do not maintain records of the equipment after it is acquired, required annual audits help ensure that the equipment was purchased. OMB Has Issued Guidance OMB has issued guidance, in the form of property standards, for equipment for Managing Property that is acquired under grants and cooperative agreements with federal funds by institutions of higher education, hospitals, and other nonprofit organizations. Although such a recipient holds title to the equipment, the recipient is required to follow OMB’s guidance if the equipment has a useful life of more than 1 year and cost $5,000 or more. As part of this guidance, recipients are to maintain property management records that include a description of the equipment, the identification numbers, the source, the Leter Page 2 GAO/RCED-99-73 Federal Research B-281935 acquisition date, and the cost. The institution must inventory the equipment at least once every 2 years. The OMB guidance also includes procedures for the disposition of the equipment. When this type of recipient no longer needs the equipment for the original purpose for which it was acquired, the recipient may use it for other federally sponsored activities. However, if the recipient does so, and the equipment has a current fair market value of $5,000 or more, the recipient must compensate the government for the percentage of the current fair market value attributable to the government’s share of the original project or program. If the recipient has no need for the equipment, it is to request disposition instructions from the federal government. These instructions may require the recipient to return the equipment to the government. Alternatively, the recipient can sell, transfer, or dispose of the equipment and reimburse the government for its fair share. Although OMB has issued guidance, the Federal Grant and Cooperative Agreement Act of 1977, as amended, gives the heads of executive agencies the discretion to give title to equipment acquired through grants or cooperative agreements for scientific research to certain types of recipients without further obligation to the federal government. The act also allows agencies to set general property standards for this equipment at their discretion. When the heads of executive agencies exercise this authority, the equipment is exempt from OMB guidance. NIH, NOAA, and NSF Adopt The three agencies have different guidance for exempt equipment. NIH— Different Guidance for an agency within the Department of Health and Human Services—follows its Department’s guidance, which adopts parts of the OMB guidance. Exempt Equipment NOAA—an agency within the Department of Commerce—follows that Department’s guidance. Commerce fully adopted OMB’s guidance. NSF uses guidance that it developed. Table 1 compares the agencies’ property management standards and disposition guidance for exempt equipment. Leter Page 3 GAO/RCED-99-73 Federal Research B-281935 Table 1: Guidance for Exempt Equipment Used by NIH, NOAA, and NSF Property management Disposition of Agency Title kept by standards property National Institutes of Recipient None NIH may require the Health transfer of title to equipment to the government or a third party if equipment has an acquisition cost of $5,000 or more. If NIH exercises its rights to transfer property, guidance similar to OMB’s is followed. National Oceanic Recipient OMB’s guidance OMB’s guidance and Atmospheric Administration National Science Recipient in normal OMB’s guidance NSF may identify items Foundation situations and the of $5,000 or more in government in which it retains the special situations right to transfer title to the government or a third party. Source: GAO’s analysis of NSF, NIH, and NOAA’s guidance. Annual Audits Provide After they award grants and cooperative agreements, NIH, NOAA, and NSF Some Assurance That do not maintain records showing which equipment was actually purchased. The agencies have some assurance that the equipment was acquired Proposed Equipment Was because institutions of higher education or other nonprofit organizations Acquired are subject to the audit requirements contained in the Single Audit Act Amendments of 1996.1 Under this act and OMB Circular A-133, nonprofit institutions of higher education and other nonprofit organizations that spend $300,000 or more in a year in federal awards must have an audit conducted for that year. Among other things, the audit is to assess the recipient’s compliance with the provisions of the award agreements identifying the equipment proposed for acquisition. 1 OMB’s audit guidance implementing the 1996 amendments is included in OMB Circular A-133, “Audits of States, Local Governments, and Non-Profit Organizations.” Leter Page 4 GAO/RCED-99-73 Federal Research B-281935 Four Recipients We reviewed 14 NSF research awards of varying dollar amounts that were awarded to three universities and one nonprofit organization in the Acquired the Property Washington, D. C., area. We found that each recipient had documents They Proposed showing that it had acquired the equipment specified in its proposals, and we saw the equipment either being used or awaiting installation. For 11 of the 14 awards, the NSF funds for equipment were supplemented by the recipients’ funds. Table 2 shows the equipment that we observed and the amounts that NSF and the recipients had proposed for the cost- sharing arrangements in the award documents. Table 2: Equipment Observed at the Four Institutions Government’s share Recipient’s share of Equipment Total proposed cost of costs costs Laser system $174,785 $94,785 $80,000 Workstations $63,978 $49,648 $14,330 Shaking table $485,186 $300,000 $185,186 Very high speed Backbone Network System $700,000 $350,000 $350,000 Electron microscope $617,000 $617,000 0 Laser system $85,000 $85,000 0 Electron microscope $603,176 $422,223 $180,953 High-resolution electron microscopy facilities $1,360,000a $680,000 $680,000 High performance computer system and X-ray detector $602,128 $402,128 $200,000 Very high speed backbone network system $196,200 $46,200 $150,000 Spectrophotometer $46,000 $46,000 0 Workstations $90,000 $45,000 $45,000 Supercomputer 548,480 $383,936 $164,544 Mass spectrometer $1,043,950 $574,172 $469,778 a Includes funds for installing the equipment. Source: GAO’s analysis of NSF’s data. Leter Page 5 GAO/RCED-99-73 Federal Research B-281935 We found that the four recipients had acquired either the equipment they had proposed purchasing in their applications or similar equipment. Generally, the recipients explained that differences between the proposed and acquired equipment were due to manufacturers’ improvements or lower market prices between the time the equipment was proposed and acquired. All the recipients provided us with records showing that the equipment that they had proposed was acquired and listed in their records, and they explained that their equipment records were audited in accordance with the Single Audit Act Amendments of 1996 and OMB Circular A-133. We saw the equipment, but in some cases it had not been completely installed because more time was needed to build it or to modify buildings to house it. For example, one recipient had acquired a large electron microscope system, but modifications to the building that will house the equipment had not been finished. In these cases, we observed the equipment that had been acquired and stored at the recipients’ facility. Agency Comments NSF, NIH, and NOAA commented on the information in the report pertaining to their respective agency. They provided some technical clarifications concerning their guidance. We made the suggested revisions, and the agencies agreed that our report is factually correct. Additionally, the George Washington University, the Johns Hopkins University, the University of Maryland, and the Carnegie Institution of Washington agreed that the information concerning their awards was correct. Scope and To identify the guidance NSF, NIH, and NOAA use to ensure that recipients of grants and cooperative agreements provide management controls over Methodology the property they acquire, we reviewed OMB’s and the three agencies’ guidance. Additionally, we discussed this guidance with representatives of the three agencies. To review the equipment acquired by recipients of grants and cooperative agreements awarded by NSF, we selected 13 grants and 1 cooperative agreement awarded to three universities and one nonprofit organization in the Washington, D. C., area: the George Washington University, Washington, D.C.; the Johns Hopkins University, Baltimore, Maryland; the University of Maryland, College Park, Maryland; and the Carnegie Institution of Washington, Washington, D.C. We selected the educational Leter Page 6 GAO/RCED-99-73 Federal Research B-281935 institutions because they were three of the largest recipients of NSF funds in the Washington, D.C., area. We selected the Carnegie Institution of Washington to include a nonprofit research organization in our review. At the recipients’ facilities, we reviewed documentation to show that the equipment was accounted for in the recipients’ records, observed the equipment, and spoke with either the principal investigators or with a person familiar with the operations of the equipment. We selected equipment for review by using NSF award data for fiscal year 1992 through fiscal year 1997. These award data identify the award and the dollar amount that NSF budgeted for acquiring equipment under the award. After we selected the awards for our review, we obtained the individual award files from NSF and identified the equipment that the recipients had proposed acquiring. We selected equipment valued at different amounts for our review. We conducted our work from June 1998 through February 1999 in accordance with generally accepted government auditing standards. As arranged with your office, unless you publicly announce its contents earlier, we plan no further distribution of this report for 7 days after the date of this letter. At that time, we will send copies to Senator John McCain, Chairman, and Senator Ernest Hollings, Ranking Member, Senate Committee on Commerce, Science, and Transportation; Senator Ted Stevens, Chairman, and Senator Robert Byrd, Ranking Member, Senate Committee on Appropriations; Representative George E. Brown, Jr., Ranking Member, House Committee on Science; Representative C. W. Bill Young, Chairman, and Representative David R. Obey, Ranking Member, House Committee on Appropriations; We are also sending copies of the report to the Honorable Jacob J. Lew, Director, Office of Management and Budget; the Honorable Dr. Rita R. Colwell, Director, National Science Foundation; the Honorable Dr. Harold Varmus, Director, National Institutes of Health; and the Honorable D. James Baker, Administrator, National Oceanic and Atmospheric Administration. Additionally, we are sending copies of this report to the Honorable Clayton D. Mote, President, University of Maryland; the Honorable William R. Brody, President, Johns Hopkins University; the Honorable Stephen Joel Trachtenberg, President, George Washington University; and the Honorable Dr. Maxine Singer, President, Carnegie Institution of Washington. We will also make copies available to others on request. Leter Page 7 GAO/RCED-99-73 Federal Research B-281935 If you or your staff have any questions about this report, please call me at (202) 512-3841. Sincerely yours, Susan D. Kladiva Associate Director, Energy, Resources, and Science Leter Page 8 GAO/RCED-99-73 Federal Research Page 9 GAO/RCED-99-73 Federal Research Appendix I Comments From the National Science Foundation AppeIx ndi (141197) L ertet Page 10 GAO/RCED-99-73 Federal Research Ordering Information The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary, VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. Orders by mail: U.S. General Accounting Office P.O. Box 37050 Washington, DC 20013 or visit: Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (202) 512-6061, or TDD (202) 512-2537. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists. For information on how to access GAO reports on the INTERNET, send an e-mail message with “info” in the body to: firstname.lastname@example.org or visit GAO’s World Wide Web Home Page at: http://www.gao.gov United States Bulk Rate General Accounting Office Postage & Fees Paid Washington, D.C. 20548-0001 GAO Permit No. GI00 Official Business Penalty for Private Use $300 Address Correction Requested
Federal Research: Guidance for Equipment Acquired Under Grants and Cooperative Agreements
Published by the Government Accountability Office on 1999-03-24.
Below is a raw (and likely hideous) rendition of the original report. (PDF)