At a Glance Performance Audit of Incurred Costs — Scripps Institution of Oceanography, University of California, San Diego Report No. 17-1-005, March 23, 2017 Audit Objective Audit Results The National Science Foundation, Office of Inspector General (OIG) engaged Costs Scripps charged to its NSF-sponsored agreements did WithumSmith+Brown (WSB) to conduct not comply with Federal and NSF award requirements. The a performance audit of incurred costs at auditors questioned $111,516 of costs claimed by Scripps Scripps Institution of Oceanography, during the audit period. Specifically, auditors found: University of California, San Diego • $95,203 in equipment, materials, and supplies expenses (Scripps) for the period April 1, 2012, to unreasonably purchased near award expiration; March 31, 2015. The audit universe • $7,723 in unallowable indirect costs; included more than $110 million in costs • $4,700 in unreasonable participant support claimed to NSF. The objective of the expenditures; and audit was to determine if costs claimed • $3,890 in unallocable transactions. by Scripps during this period were allocable, allowable, reasonable, and in conformity with NSF award terms and conditions and applicable Federal financial assistance requirements. WSB is responsible for the attached auditor’s report and the conclusions expressed in this report. The NSF OIG Awardee Response does not express any opinion on the conclusions presented in WSB’s audit Of the four findings in the report, Scripps agreed with two report. and disagreed with two. Scripps contends that the costs within the findings are allowable and disagreed with the auditors’ interpretation of the Federal guidance. Scripps also Recommendations did not agree with the auditors’ statements that there were The auditors included four findings in weaknesses in management and administrative controls. the report with associated After taking Scripps’ comments into consideration, the recommendations for NSF to resolve the auditors continue to question the costs and left the findings questioned costs and to ensure Scripps unchanged. strengthens administrative and management controls. Scripps’ response is attached in its entirety to the report as Appendix A. Contact Information For further information, contact the NSF OIG at (703) 292-7100 or oig@nsf.gov. National Science Foundation • Office oflnspector General 4201 Wilson Boulevard, Suite I-1135, Arlington, Virginia 22230 MEMORANDUM Date: March 23, 2017 To: Dale Bell Director, Division of Institution and Award Support Jamie French Director, Division of Grants and Agreements From: Mark Bell Assistant Inspector General, Office of Audits Subject: Audit Report No. 17-1-005 Scripps Institution of Oceanography, University of California, San Diego This memo transmits the WithumSmith+Brown (WSB) report for the audit of costs totaling approximately $110 million charged by Scripps Institution of Oceanography, University of California, San Diego (Scripps) to .its sponsored agreements with the National Science Foundation during the period April 1, 2012, to March 31, 2015 . The objective of the audit was to determine if costs claimed by Scripps during this period were allocable, allowable, reasonable, and in conformity with NSF award terms and conditions and applicable Federal financial assistance requirements. In accordance with Office of Management and Budget Circular A-50, Audit Followup, please provide a written corrective action plan to address the report recommendations. In addressing the report's recommendations, this corrective action plan should detail specific actions and associated milestone dates. Please provide the action plan within 60 calendar days of the date of this report. OIG Oversight of Audit To fulfill our responsibilities under generally accepted government auditing standards, the Office of Inspector General: • reviewed WSB's approach and planning of the audit; • evaluated the qualifications and independence of the auditors; • monitored the progress ofthe audit at key points; • coordinated periodic meetings with WSB and NSF officials, as necessary, to discuss audit progress, findings, and recommendations; • reviewed the audit report prepared by WSB to ensure compliance with generally accepted government auditing standards; and • coordinated issuance of the audit report. We thank your staff for the assistance that was extended to the auditors during this audit. If you have any questions regarding this report, please contact Keith Nackerud at 303-844-5745. Attachment cc: Dr. Joan Ferrini-Mundy, Chief Operating Officer (Acting), OD Fae Korsmo, Senior Advisor, OD Christina Sarris, Assistant General Counsel, OD Teresa Grancorvitz, Deputy Office Head, Office of Budget, Finance, and Award Management Pamela Hawkins, Director of Operations, Division of Grants and Agreements Alex Wynnyk, Staff Associate for Oversight, DIAS Rochelle Ray, Branch Chief, Resolution and Advanced Monitoring Branch, DIAS Carrie Davison, Lead Analyst for Audit Resolution, Resolution and Advanced Monitoring Branch, DIAS John Anderson, Chair, Oversight Committee, NSB Ken Chason, Counsel to the Inspector General, OIG 2 Scripps Institution of Oceanography University of California San Diego Audit of Incurred Costs for National Science Foundation Awards For the Period April 1, 2012 to March 31, 2015 TABLE OF CONTENTS Page Independent Auditors’ Report....................................................................................................................... 1 Results in Brief ............................................................................................................................................. 1 Findings and Recommendations ................................................................................................................... 2 Appendix A: Awardee Response .................................................................................................................. 9 Appendix B: Objectives, Scope, and Methodology .................................................................................... 15 Appendix C: Questioned Cost Summary by Award ................................................................................... 16 ACRONYMS ARRA American Recovery and Reinvestment Act CFR Code of Federal Regulation DIAS Division of Institution and Award Support NSF National Science Foundation OIG Office of Inspector General OMB Office of Management and Budget PI Principal Investigator P.L. Public Law SIO Scripps Institution of Oceanography Independent Auditors’ Report The National Science Foundation (NSF) is an independent Federal agency created by the National Science Foundation Act of 1950 (P.L. 810-507). Its mission is “to promote the progress of science; to advance the national health, prosperity, and welfare; and to secure the national defense.” NSF is also committed to ensuring an adequate supply of the Nation’s scientists, engineers, and science educators. NSF funds research and education in science and engineering by awarding grants and contracts to educational and research institutions in all parts of the United States. Through grants, cooperative agreements, and contracts, NSF enters into relationships with non-federal organizations to fund research education initiatives and assist in supporting internal program operations. The Scripps Institution of Oceanography, University of California San Diego (SIO) is an NSF award recipient. The mission of SIO is to communicate scientific understanding of the oceans, atmosphere, Earth, and other planets for the benefit of society and the environment. In fiscal year 2015, SIO received $124 million in sponsored Federal research dollars. NSF was the largest contributor at $32 million. Because SIO receives significant NSF awards, the NSF Office of Inspector General (OIG) selected SIO for audit. WithumSmith+Brown, under contract with NSF OIG, audited the costs claimed by SIO on NSF awards for the period beginning April 1, 2012, and ending March 31, 2015. The audit objective was to determine whether the costs claimed complied with NSF award terms and conditions and Federal financial assistance requirements. We conducted this performance audit in accordance with generally accepted government auditing standards, which 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. Our objectives, scope, methodology, and criteria are detailed in Appendix B. Results in Brief To aid in determining reasonableness, allowability, and allocability of costs, we obtained from SIO all award transactions comprising costs claimed on NSF awards during the period of April 1, 2012, through March 31, 2015. This provided an audit universe of approximately $110 million, in approximately 63,000 transactions, across 291 individual NSF awards. For transaction testing we judgmentally selected 283 transactions totaling $2.0 million and utilized a data analytics approach to identify potential risk areas. We also performed additional non-transaction based tests as we deemed necessary. Of the $2.0 million in the transaction testing, our audit questioned $111,516 of costs claimed on nine NSF awards because SIO did not comply with Federal and NSF award requirements. Specifically, we noted: $95,203 in equipment, materials, and supplies expenses unreasonably purchased near award expiration; $7,723 in unallowable indirect costs; $4,700 in unreasonable participant support expenditures; and $3,890 in unallocable transactions. These questioned costs resulted in four areas identified where SIO controls could be improved to ensure compliance with laws and regulations. SIO reviewed and agreed with the facts for $7,723 in unallowable indirect costs and $3,890 in unallocable costs. SIO did not agree with $99,903 in questioned costs: 1) $95,203 in equipment, materials, and supplies expenses unreasonably purchased near award expiration; and 2) $4,700 in unreasonable participant support expenditures. The findings are outlined in our report and presented by award in Appendix C. Additional information concerning the questioned items was provided separately by OIG to the Division of Institution and Award Support (DIAS), Resolution and Advanced Monitoring Branch. 1 Findings and Recommendations Finding 1 – Equipment, Materials, and Supplies Unreasonably Purchased Near Award Expiration We found that equipment, materials, and supply expenses totaling $95,203 charged to five NSF awards were not necessary or reasonable in accordance with Federal cost principles. According to 2 Code of Federal Regulation (CFR) 220 (2 CFR 220), Appendix A, Section C, to be allowable for a Federal grant, a cost must be allocable to the Federal award and be necessary and reasonable for the administration and performance of the award. Furthermore, Section C.3 provides that a reasonable cost is one that a “prudent person” would have incurred under similar circumstances. 2 CFR 220, Appendix A, Section C.4 states that a cost is allocable to a sponsored agreement if it is incurred solely to advance the work under the sponsored agreement or it benefits both the sponsored agreement and other work of the institution in proportions that can be approximated through use of reasonable methods. The recipient institution is responsible for ensuring that costs charged to a sponsored agreement are allowable, allocable, and reasonable under these cost principles. Section A states, “the accounting practices of individual colleges and universities must support the accumulation of costs as required by the principles, and must provide for adequate documentation to support costs charged to sponsored agreements.” Additionally, NSF’s Award and Administrative Guide, Chapter V, Section A.2.c states that a grantee should not purchase items of equipment, computing devices, or restock materials and supplies where there is little or no time left for such items to be utilized in the actual conduct of the research. Specifically, we questioned the $95,203 below on five awards for equipment and supplies purchased near the award expiration that did not appear to benefit the award or that did not appear reasonable or prudent considering the limited time remaining on the awards. $67,545 ($43,577 plus $23,968 associated indirect costs) for the purchase of 11 recorders on one award. The recorders were shipped between July 14 and July 24, 2014, on a 4-year award that expired on August 31, 2014. The recorders were shipped with only 3 percent of the grant life remaining (48 out of 1,460 days). Per SIO, “these recorders were replacements/upgrades of recorders that were lost in the Antarctic on birds that did not return from sea.... As indicated in our budget justification, we had recorders on hand at the beginning of the award, and these were used during this project's field seasons. We also indicated that the NSF would be used to replace the lost recorders.” Per the revised NSF award budget justification, SIO had 10 recorders on hand at the beginning of the award ready for deployment and had budgeted $7,800 to cover the potential damage or loss at sea of two recorders. It is unreasonable that SIO, with 3 percent of the grant life remaining, spent $67,545, 17 percent of the total NSF award budget, on recorders that were never used on the NSF award. $12,024 ($7,782 plus $4,242 associated indirect costs) for the purchase of a Mac Pro, MacBook Pro, iPad Air, and computer accessories on one award. The MacBook Pro, iPad Air, and computer accessories were purchased on August 26, 2014, and the Mac Pro was purchased on August 29, 2014, on a 6-year award that expired on August 31, 2014. The MacBook Pro, iPad Air, and computer accessories were available for 5 days prior to the award expiration (5 out of 2,190 days), and the Mac Pro was available for 2 days prior to the award expiration (2 out of 2,190 days). $7,231 ($4,681 plus $2,550 associated indirect costs) for the purchase of a Mac Pro. The computer was purchased on April 5, 2012, 25 days prior to the award expiration on April 30, 2012. The entire award budget was meant to cover the cost of securing ship time on a vessel; the purchase of the computer does not appear reasonable or necessary. 1 $4,255 ($2,754 plus $1,501 associated indirect costs) for the purchase of a Navigator Pump. The item was shipped on August 14, 2014, on a 4-year award that expired on August 31, 2014. The pump was available for 1 percent of the grant life (17 out of 1,446 days). $4,148 ($2,685 plus $1,463 associated indirect costs) for the purchase of a MacBook Pro and an iMac. The two computers were purchased on May 11, 2013, on a 3-year award that expired on July 31, 2013. The computers were available for 7 percent of the grant life (81 out of 1,095 days). The PI stated, the “iMac replaced my old iMac, which was so slow it was unusable, and the MacBook was an addition to compliment [sic] my workstation and also to allow mobility….” The purchase of two computers at the end of the grant life does not appear prudent or necessary. SIO personnel did not adequately review the expenditures charged to the NSF awards, which resulted in unreasonable costs. Without an effective process in place to ensure the reasonableness of equipment, materials, and supplies expenses, there is the increased risk that funds may not be used as required to accomplish the necessary project objectives in accordance with Federal and NSF requirements. Recommendation 1: We recommend that the NSF’s Director of the DIAS address and resolve the following SIO recommendations: 1) Work with NSF to resolve the $95,203 of questioned costs; and 2) Strengthen the administrative and management controls and processes for reviewing and approving equipment, materials, and supplies charged to NSF awards. Summary of Awardee Response: SIO disagrees with the conclusions for the $95,203 of questioned costs. SIO does not concur with questioned costs totaling $67,545 for the purchase of 11 recorders. SIO stated that all of the researcher’s federally funded awards are so closely interrelated that it is unreasonable to prorate the expenses. The proposal stated that 10 recorders were on hand at the beginning of the project, and the budgeted expenses were to cover recorders that were damaged or lost. SIO stated that the replacement recorders will be used for continuing research funded by NSF and the National Oceanic and Atmospheric Administration (pending awards). SIO does not concur with questioned costs totaling $12,024 for the purchase of a Mac Pro, MacBook Pro, iPad Air, and computer accessories. SIO believes the computers and related accessories were reasonable and necessary, and stated that the purchase continues to be used in support of NSF-sponsored research. SIO does not concur with questioned costs totaling $7,231 for the purchase of a Mac Pro. SIO stated that the award budget was funded as a supplement to an American Recovery and Reinvestment Act award and the funds requested were for securing additional ship time on a vessel. The additional ship time allowed the researchers to collect a large volume of data and SIO believes the purchase of the computer was reasonable and necessary to carry out the data quality control and analysis. SIO does not concur with questioned costs totaling $4,255 for the repair of a Navigator Pump. SIO stated the pump repair was needed to validate data collected throughout the life of the project and without the pump repair the PI would not have had conclusive verified results to report. SIO does not concur with questioned costs totaling $4,148 for the purchase of a MacBook Pro and iMac. SIO believes the computers were necessary to achieve the aims of the project. 2 See Appendix A for the complete SIO response. Auditor Comments: The purchase of 11 recorders costing $67,545 was not reasonable. Per the revised NSF award budget justification, SIO had 10 recorders on hand at the beginning of the award ready for deployment and had budgeted $7,800 to cover the potential damage or loss at sea of two recorders. It is unreasonable that SIO, with 3 percent of the grant life remaining, spent $67,545, 17 percent of the total NSF award budget, on recorders that were never used on this NSF award. Therefore, the report finding remains as previously stated. The purchase of a Mac Pro, MacBook Pro, iPad Air, and computer accessories, costing $12,024, with just 5 days remaining on the award, was not reasonable or prudent. Although the computers may have benefitted the research efforts, given the limited time remaining on the NSF award, that benefit is greater for future research projects. Therefore, the report finding related to these matters remains as previously stated. The purchase of a MacPro costing $7,321 was not reasonable. The entire award budget was meant to cover the cost of securing ship time on a vessel; the computer should have been charged to the larger project, not the supplemental award. Additionally, per NSF’s Award and Administrative Guide, Chapter I, Section E.2, residual funds remaining in the old grant cannot be transferred to the new grant. Therefore, the report finding related to this matter remains as previously stated. The repair of the Navigator Pump costing $4,255 with less than 1 percent of the grant life remaining was not reasonable. Although the pump may have benefitted the research efforts, given the limited time remaining on the NSF award, that benefit is greater for future research projects. Therefore, the report finding related to this matter remains as previously stated. The purchase of a MacBook Pro and an iMac costing $4,148 for use by the PI at the end of the grant life was not prudent or necessary. Therefore, the report finding related to these matters remains as previously stated. Finding 2 – Unallowable Indirect Costs We questioned $7,723 in unallowable indirect costs charged to two NSF awards. The indirect costs were assessed against equipment purchases, which is unallowable in accordance with Federal cost principles. According to 2 CFR 220, Appendix A, Section G.2, “F&A [facilities and administrative] costs shall be distributed to applicable sponsored agreements and other benefiting activities within each major function on the basis of modified total direct costs, consisting of all salaries and wages, fringe benefits, materials and supplies, services, travel, and subgrants and subcontracts up to the first $25,000 of each subgrant or subcontract (regardless of the period covered by the subgrant or subcontract). Equipment, capital expenditures, charges for patient care and tuition remission, rental costs, scholarships, and fellowships as well as the portion of each subgrant and subcontract in excess of $25,000 shall be excluded from modified total direct costs.” 3 Specifically, we questioned the indirect costs assessed against the following purchases: $5,545 for indirect costs charged on the purchase of computer servers. $2,178 for indirect costs charged on the purchase of a broadband transducer. SIO personnel incorrectly coded the above transactions as non-inventorial equipment, and, therefore, they were assessed indirect costs. Without an effective process in place to ensure equipment is excluded from modified total direct costs, there is the increased risk that funds may not be spent in accordance with Federal requirements. SIO indicated that it has performed corrective actions to remove $7,723 in unallowable costs from the awards in question. NSF, during the audit resolution process, should ensure that the awards have been credited as appropriate. Recommendation 2: We recommend that the NSF’s Director of the DIAS address and resolve the following SIO recommendations: 1) Work with NSF to ensure the $7,723 of questioned costs have been removed from NSF awards; and 2) Strengthen the administrative and management controls and processes for reviewing and approving indirect costs charged to NSF awards. Summary of Awardee Response: SIO agrees with the conclusion for $7,723 of questioned costs. SIO agrees to refund $5,545 and has taken corrective action to reverse the $2,178. See Appendix A for the complete SIO response. Auditor Comments: SIO’s comment related to the $7,723 is responsive to the issue noted in this finding. Once NSF determines that the recommendation has been adequately addressed and the $7,723 in questioned costs has been returned, this issue should be closed. Finding 3 – Unreasonable Participant Support Expenditures We questioned $4,700 charged to one NSF award for rental of the Scripps Forum facility to hold a workshop, which was not in accordance with Federal cost principles. According to 2 CFR 220, Appendix A, Section C, to be allowable for a Federal grant, a cost must be allocable to the Federal award and be necessary and reasonable for the administration and performance of the award. Furthermore, Appendix A, Section C.3, provides that a reasonable cost is one that a “prudent person would have incurred under similar circumstances.” The total NSF award budget was $52,998, of which $47,564 was budgeted for participant support funds requested “for 37 workshop participants’ travel, subsistence and lodging,” to attend the workshop held at the Scripps Forum facility. The budget also included $3,800 for materials, supplies, and salaries. The cost of the Scripps Forum facility rental was not included in the NSF award budget. 4 Per the NSF Grant Proposal Guide (effective Dec. 26, 2014) Chapter II, (C.2.g.v), participant support refers to costs for items such as stipends or subsistence allowances, travel allowances, and registration fees paid to or on behalf of participants or trainees in connection with NSF-sponsored conferences or training projects. Funds provided for participant support may not be used for other categories of expense without specific prior NSF written approval. The $4,700 for rental of the Scripps Forum facility was not participant support, and SIO did not receive prior NSF written approval to use participant support funds for the facility rental. The $4,700 that was charged to rent the facility could have been used on additional workshop participants. Additionally, the $4,700 for the cost of the facility rental was transferred on August 13, 2013, from another award that was over budget and expired on August 31, 2013. Finally, per the “Facilities, Equipment and Other Resources” statement in the award proposal, access to the Scripps Forum was necessary and available. According to the NSF Grant Proposal Guide, the Foundation expects the resources identified will be provided, or made available, should the proposal be funded. It is not reasonable to charge NSF $4,700 for the facility rental that the proposal indicated would be available. SIO personnel did not adequately review the expenditures charged to the NSF award, which resulted in unreasonable participant support costs. Without an effective process in place to ensure the reasonableness of expenditures, there is the increased risk that funds may not be used as required to accomplish the necessary project objectives in accordance with Federal and NSF requirements. Recommendation 3: We recommend that the NSF’s Director of the DIAS address and resolve the following SIO recommendations: 1) Work with NSF to resolve the $4,700 of questioned costs; and 2) Strengthen the administrative and management controls and processes for reviewing and approving transactions charged to NSF awards. Summary of Awardee Response: SIO does not concur with questioned costs totaling $4,700 for the rental of the Scripps Forum facility. SIO stated that this NSF grant was awarded to fund the EarthCube End User Workshop, the proposal discusses the use of Scripps Forum as the venue for this conference, and the cost of the venue was specifically targeted for participant support. SIO believes the venue costs were meaningful and necessary expenses in support of each participant attending and contributing to the EarthCube End User Workshop. See Appendix A for the complete SIO response. Auditor Comments: The $4,700 for rental of the Scripps Forum facility was not participant support, and SIO did not receive prior NSF written approval to use participant support funds for the facility rental. Per the NSF award budget, participant support funds were requested to fund 37 workshop participants’ travel, subsistence and lodging; the cost of the Scripps Forum facility rental was not included in the NSF award budget. Per the “Facilities, Equipment and Other Resources” statement in the award proposal, access to the Scripps Forum was necessary and available. According to the NSF Grant Proposal Guide, the grantee is required to obtain written authorization before reallocating participant support funds and the Foundation expects the resources 5 identified will be provided should the proposal be funded. Therefore, the report finding related to these matters remains as previously stated. Finding 4 – Unallocable Transactions We questioned $3,890 charged to one award for the purchase of a data storage system that was not in accordance with Federal cost principles. 2 CFR 220, Appendix A, Section C.4 states that a cost is allocable to a sponsored agreement if it is incurred solely to advance the work under the sponsored agreement or it benefits both the sponsored agreement and other work of the institution in proportions that can be approximated through the use of reasonable methods. The recipient institution is responsible for ensuring that costs charged to a sponsored agreement are allowable, allocable, and reasonable under these cost principles. SIO purchased parts for a data storage system costing $7,780 ($6,592 plus $1,188 associated indirect costs) and charged the entire cost to the NSF award; however, SIO personnel stated that the data storage system was only used 50 percent on the NSF award. We are questioning 50 percent of the $7,780 charged to NSF because it was not allocable to the NSF award; $3,890 ($3,296 plus $594 associated indirect costs). SIO personnel did not adequately review the expenditures charged to NSF awards, which resulted in unallocable costs. Without an effective process in place to ensure costs are allocable to the award, there is the increased risk that funds may not be used as required to accomplish the necessary project objectives in accordance with Federal and NSF requirements. Recommendation 4: We recommend that the NSF’s Director of the DIAS address and resolve the following SIO recommendations: 1) Work with NSF to resolve the $3,890 of questioned costs; and 2) Strengthen the administrative and management controls and processes for reviewing and approving transactions charged to NSF awards. Summary of Awardee Response: SIO agrees with the conclusion for $3,890 of questioned costs and agrees to refund $3,890. See Appendix A for the complete SIO response. Auditor Comments: SIO’s comment related to the $3,890 is responsive to the issue noted in this finding. Once NSF determines that the recommendation has been adequately addressed and the $3,890 in questioned costs has been returned, this issue should be closed. WithumSmith+Brown, PC 3/21/17 6 APPENDICES 7 APPENDIX A AWARDEE RESPONSE UNfVERSITY OF CALIFORNIA, SAN DIEGO UCSD l\UDIT & MAllll\GBMBNT ADVISORY SERVICES 9500 GI LMAN DRIV!< TEL: tlm) 534-3617 I.A JQJ, 1,.A. CALI FORNIA 920\IJ-0919 f AX; (858) 534-7632 fAX February 6, 2017 WithumSmith+Brown PC Two Logan Square, Suite 2001 Eighteeth & Arch Streets P hiladelphia, Pennsylvania 19 l 03-2726 The University of California, San Diego (Un iversity) submits the following comments in response to Wi l h11mSmith~ Brown's (WS B) draft report for the Audit o f Incurred Costs fo r National Science Fouodaiion (NSF) Awards to Scripps lns tilution of Oceanography (SIO) for the period April I, 2012 to March 3 1, 20 15. WSB identified four findings on nine NSF awards. Responses to each are provided below. 1. Equipinent, Materials, a nd Supplies Unreasonably P urch ased near Awn rd ~ plra lion WBS found thal equipment, materials, 311d supply expenses totaling $95,203 charged to five NSF awards were not necessary or reaso nable in accordance with Federal cost principles. A. $67,545 (S43.577 plus $23,968 associated indirecl costs) for the purchase of 11 rceordcrs on one awa.rd. llnjversitv Response: T he University does not concur with the auditor's conclusion. All of the researcher's federelly funded research awards are in support of the same techniques and goals, measuring blood oxygen depletion, heart rate, and other physiological variab les in marine mammals and emperor pengu ins. These projects are so closely interrelated that it is unreasonable to prorate the expenses as the loggers wou ld benefit m011y of the researcher's ongoing projects. Recorders fro m other projects that were current in 2010-201 1 (and o thers th at were st ill functional from prior proje<:ts) were utilized in lhe polar programs projecl. Use of this pool of recorders among different projects allows projects to be accomplished in these times o f budge! restrai nt~ . Some of the recorders have been used in the researcher' s Federal Demonstration Partnership (FOP) Office of Naval Research (ONR) project with sea lions and he will continue to use them on current and future l~DP related sponsored research. The proposal for this award included a lmdget for replacement of digital ECG re<:orders and TDR. The proposal clearl)' slates thal live ECG recorders and five TDR' s were on hand at the beginning of the project, and the budgeted expenses were to cover potential damage ro recorders , or recorders chat have been lost 111 sea. The recorders were all lost while at sea., and the funds were used to replace the recorders, l'ngc I o f6 8 APPENDIX A AWARDEE RESPONSE as stated in the proposal. These replacement recorders will be used for continuing research funded by NSF and National Oceanic and Atmospheric Administra1ion (NOAA) (pending awards). PerFDP: "(2) The following clarification applies to the standard in paragraph c.4.d. ofOMB Circular A-2 1, which relates 10 allocation ofcosts for interrelated projects supported by multiple Federal awards: The interrelationsh ip between or among projects does not have to be formally stipulated, but must be dcmonslmblc on lhc basis of Che following crilcriu. Either: (a) the theoretical approac hes are interrelated; (b) s tudies o f the same phenomena are conducted by the same or different techniques; or (c) scudics of different phenomena are conducted by the same technique." Additionally, per 2 CFR 220 Appendix A, Section C.4.d: "(3) Direct cost allocation principles. !fa cost benefits two or more projeclS or activities in proportions that can be determined without undue effon or cost, the cost should be allocated to the projects f)ased on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined because of the ioterrelaiionsh ip of the wol'k involved, then, notwilhsl.llndingsubsection b, the costs may be allocated or transferred to benefited projects on any reasonable basis, consistent with s ubsections d. ( I) and (2).• If lhe audit finding is sustained, it would p lace an undue burden on tl1e Univers ity to fund an expense thai was anticipated and budgeted by the UnivcrSity, and approved by NSF. This would not be an equitable or reasonable outcome. B. $ 12.024 ($7.782 plus $4,242 associated indirect costs) for the purchase ofa Mac Pro, Mac8ook l>ro, i?ad Air and computer accessories on one award. Un iversity Resoonse: The University does not concur with the auditor's conclusion. The computer and related accessories were used for data analysis, manuscript preparation, and science presentations related to the award. The purchase continues to be used in supp ort o f NSF sponsored research with the receipt of an NSF FDP related award in September . T he new award is a continuation of the sampled award of tl1e PJ's research focus on microbi ~.I d iversity and adaptation in ocean trenche$. Per 2 CFR 220, Appendix A, Section C.3, this cost should be cotisidered reasonable as it was necessary for the perfonnance of the sponsored agreement. Additionally, the award end date does not constitute end of the work performed fo r the award. As d efined by NSF Granl Policy Manual, the "expiracion date is the date spec ified in the grant notice aficr which expenditures may not be charged against Inc grant except to satisfy obligations lo pay allowable project costs committed on or before that date.• The NSF Grant Policy Manual recognizes that it could be detem1ined on the last day o f the award that additional expenses arc n~eded to complete the performance of the sponsored agreement. We would also like to emphasize that Uniform G uidance (2 CFR 200) recognized tliat ttie requirement~ set fonh in prior c irculars relating to the direct charging of computing devices was overly reslrictive. Uniform Guidance has eased those restrictions by allowing the direct charging of compllling devices when they are essential and benefit the project. and no longer req uires that lhu duvices be solely dedicated to the project. Page 2of6 9 APPENDIX A AWARDEE RESPONSE C. $7,23 1 ($4,681 plus $2,550 associated indirect costs) for the purchase of a Mac Pro. Vniversjtv Resoonse: The Universi1y does not concur with the auditor's conclusion. The award bud et was funded as a supplement to NSF American Recovery and Reinvest111ent Acl (ARRA) The requested supplemental budget clearly stated that it was for SUPJ'.><>11 of the • • • • T he reason 1he fund s were requested was for additional ship days and the use o f a bigger barge. The auditor states th.at "'The entire award budget was meant to cover the cost of securing ship time on a vessel.'" T he auditors are ignoring 1he purpose ofwhy there was the need to secure the ship time in the first place. The ship time by itself accomplishes nothing. The ship time must be in support of a larger project. II is - lso im rtant to note 1~he actual ship time was split funded 50/50 between SF ARRA and NSF NSF was awarded as a new award due 10 NSF's funding limitation. The project was initially proposed as a 3-year project and was funded from ARRA funds (ARRA I I ). All 3 year's funding was received in one increment. Under normal circumstances, lhe supplement would have been funded as a modification to lhe exist ing award. However, al the lime the supplement was reyuested NSF no longer had ARRA funds. Because you cannot coming.le funds, a new award NSF • was issued. NSF vas not funded as an independe nt project but was funded to support the existing ARRA - project. T his ship lime allowed the researchers to collect a large volume of d ata and the purchase ofthe computer was reasonable and necessary 10 carry ~ty control and analysis. The proje.ct continued until September 30,• • and the NSF ~roject received the full bc11cfi1 of this purchase. We would a lso like to emphasi1.e that Uniform G uidance (2 CFR 200) recognized that the requirements set forth in prior circulars relating to the direct charging ofcomputing devices was overl y restrictive. Unifonn G1.1idance has eased those restrictions by allowing the direct charging of computing d evices when they are essential !I/Id benefit the project, nnd 110 lo11ger requires that the devices be solely dedicated 10 the project. D. $4,255 ($2 ,754 pllL~ $1,501 associated indirect costs) for the purchase of a Navigator Pump. University Response : The University does not concur with the auditor's conclusion. This expellse was to repair a navigator pump, not the purchase ofa new pump as asserted by lhc auditors. T his repair was c ri tic.al in acf'lieving seve ral stated goals oftl1e award. T he duration of use is irrelevant to the allocation o f the expense because ii is not a production environment where a component (pump) is used to produce a certain number of units over a defined time period. The pump repair was needed lo validate data collected throughout the life of the project. Without the pump repair, the Principal Investigator (Pl) would have had no conclusive verified results to report. As stated in the NSF G rant Pol icy Manual, the "expiration date is the date spec ified in the gmnt notice after which expenditures may not be charged against the gmnt except to satisfy obligations to pay allowable project costs commit1ed on or before that date.• The G rant Po licy Manual recognizes that it Page J of6 10 APPENDIX A AWARDEE RESPONSE could be dctcrmjncd on the last day ofthe award that additional expenses are needed to complete the performance of the sponsorud agreement. A reasonable and prudent person would undcrStand that the end date of the award does not constitute the end of the work performed for the project. Additionally, as outlined in 2 CFR 220 Appendix A, Section C3, the expense should be m:ognized as a reasonable cost because it was necessary for the performance of the sponsored agreement. It would not have been reasonable to put the expense on another award when it was purchased exclusively fo r this award, nor would it have been reasonable to allocate the cost based on arbitrary assumptions. E. $4,148 (S2,68S plus $1 ,463 associaied indirect costs) for the purchase ofa MacBook Pro and iMac. Un jvers itv Response: The University does not concur with the auditor's conclusion. TI1e purchase of the computers was necessary to achieve the aims ofthe project. The co.mp\l\CTS were used to analyze the large data sets that were collected throughout the life of the project. Per 2 CFR 220, Appendix A, Section C.J, this cost should be considered reasonable as it was necessary for the pcrfonnancc of the sponsored agTeement. Add icionally, the award end date docs not constitute end of the work perfonne~ for the award. As defined by NSF Grant Policy Manual, tJ1e "expiration date is the date specified in tJ1e grant notice after which expenditures may not be charged against che grant except to satisfy obligations to pay allowable project costs committed on or before that dote." The GPM recognizes that it could be determined on the lase day of the award that additional expenses are needed to complete the performance of the sponsored agreement We would olso like to emphasize that Uniform Guidance (2 CFR 200) recognized that the requirements set forth in prior circulars relating to the dire.ct charging of computir1g devices was overly restrictive. Uniform Guidance has eased those restrictions by allowing the direct charging ofcomputing devices when they are essential and allocable to the project, and no longer requires that the devices be solely dedicated to the project. 2. Unellowable bicllrcct Costs WSB found S7.723 in unnllowable indirect costs charged to two NS awards. A. $5.545 for indirect costs charged on the purchase of computer servers. University Response; The University concurs with auditor's conclusion, The Univarsity agrees lo refund $5.545. B. S2, I78 for indirect costs charged on the purchase of a broadband transducer. University ResoooSCi TI1e University concurs with che auditor's conclusion. Corrective action has been taken to reverse the JDC assessment. Therefore, a refund for the $2, 178 is unnecessary. Page 4 of6 11 APPENDIX A AWARDEE RESPONSE 4. Unreasonable Participant Support Expenditures WSB found $4,700 charged to one NSF award for rental of the Scripps Forum facility to hold a workshop, which was not in accordance with Federal cost principles. University Response: The University does not concur with the auditor's conclusion. This NSF grant was awarded to fund the EarthCube End User Workshop. The cost of the venue was specifically targeted for participant support. These costs were directly attributed to individual participants as each participant benefitted from the use ofthe fac ility/ lab resource. The venue is not only a location to hold the workshop but a teaching lab with resources, including digital projection, research tools that support data sharing, networking capacity, and other research and communication capabilities in direct support and benefit to each individual workshop participant. The venue costs were meaningful and necessary expenses in support of each participant attending and contributing to the Earth Cube End User Workshop. Additionally, to help defray the costs of each participant in the Earth Cube End User Workshop by not charging a registration fee, funds for the venue were expended. We point to the proposal regarding the use of Scripps Forum as the venue for this conference. I. Page 8 of the proposal under Project Description, in the second paragraph 3rd sentence reads: "The physical workshop will be held at Scripps Institution of Oceanography in La Jolla, California, with virtual presence of the SERC website (src.carleton,edu), . ... " 2. "Workshop Format & Logistics", it c learly states that the workshop will take place at the "Scripps Forum." 3. Page 37 under "Facilities" Offices and Proj ect Support Scripps Forum. This document in the proposal gives a detailed description of the faci lity and its resources. Moreover, the venue expense was limited to the duration of the workshop. It was reasonable, necessary and limited to the days of attendance at the conference. The costs were also accounted for separately under participant support to refl ect the project costs components. Therefore the costs should be considered reasonable and allocable to the participant in support of their attendance to the Earth Cube Conference project. Each participant directly benefited from the rental ofthe facility. 5. Unallocable Transactions WBS found $3,890 charged to one award for the purchase of a data storage system that was not in accordance with Federal cost principles. University Response: The University concurs with auditor's conclusion. The University agrees to refund $3,890. Page 5 of6 12 APPENDIX A AWARDEE RESPONSE 4. Unreasonable Participant Support Expenditures WSB found $4,700 charged to one NSF award for rental of the Scripps Forum facility to hold a workshop, which was not in accordance with Federal cost principles. University Response: The University does not concur with the auditor's conclusion. This NSF grant was awarded to fund the EarthCube End User Workshop. The cost of the venue was specifically targeted for participant support. These costs were directly attributed to individual participants as each participant benefitted from the use ofthe fac ility/ lab resource. The venue is not only a location to hold the workshop but a teaching lab with resources, including digital projection, research tools that support data sharing, networking capacity, and other research and communication capabilities in direct support and benefit to each individual workshop participant. The venue costs were meaningful and necessary expenses in support of each participant attending and contributing to the Earth Cube End User Workshop. Additionally, to help defray the costs of each participant in the Earth Cube End User Workshop by not charging a registration fee, funds for the venue were expended. We point to the proposal regarding the use of Scripps Forum as the venue for this conference. I. Page 8 of the proposal under Project Description, in the second paragraph 3rd sentence reads: "The physical workshop will be held at Scripps Institution of Oceanography in La Jolla, California, with virtual presence of the SERC website (src.carleton,edu), . ... " 2. "Workshop Format & Logistics", it c learly states that the workshop will take place at the "Scripps Forum." 3. Page 37 under "Facilities" Offices and Proj ect Support Scripps Forum. This document in the proposal gives a detailed description of the faci lity and its resources. Moreover, the venue expense was limited to the duration of the workshop. It was reasonable, necessary and limited to the days of attendance at the conference. The costs were also accounted for separately under participant support to refl ect the project costs components. Therefore the costs should be considered reasonable and allocable to the participant in support of their attendance to the Earth Cube Conference project. Each participant directly benefited from the rental ofthe facility. 5. Unallocable Transactions WBS found $3,890 charged to one award for the purchase of a data storage system that was not in accordance with Federal cost principles. University Response: The University concurs with auditor's conclusion. The University agrees to refund $3,890. Page 5 of6 13 APPENDIX A AWARDEE RESPONSE Thank you for the opportunity to respond to the findings that were identified in your audit. If you have any questions related to the response provided, please contact me at 858-534-1334. David Meier Oire<:tor Audit and Management Advisory Services Universiiy of California, San Diego P~e 6 of6 14 APPENDIX B OBJECTIVES, SCOPE, AND METHODOLOGY The audit objective was to determine whether the costs claimed complied with NSF award terms and conditions and Federal financial assistance requirements. Our audit included assessing the allowability, allocability, and reasonableness of costs claimed by SIO through the Award Cash Management $ervice for the 3-year period beginning April 1, 2012, through March 31, 2015. The audit was performed in accordance with Government Auditing Standards for performance audits. To aid in determining reasonableness, allowability, and allocability of costs, we obtained from SIO all award transactions comprising all costs claimed to NSF during the period of April 1, 2012, through March 31, 2015. This provided an audit universe of approximately $110 million, in approximately 63,000 transactions, across 291 individual NSF awards. For transaction testing we judgmentally selected 283 transactions totaling $2.0 million and utilized a data analytics approach to identify potential risk areas. We also performed additional, non-transaction based tests as we deemed necessary. Our work required reliance on computer-processed data obtained from SIO and NSF. At our request, SIO provided detailed transaction data for all costs charged to NSF awards during our audit period. We also extracted award data directly from NSF’s various data systems. To select transactions for further review, we designed and performed automated tests of SIO and NSF data to identify areas of risk and conducted detailed reviews of transactions in those areas. We assessed the reliability of the data provided by SIO by: 1) comparing costs charged to NSF award accounts within SIO’s accounting records to reported net expenditures, as reflected in SIO’s financial reports submitted to NSF for the corresponding periods; 2) performing general ledger to sub-ledger reconciliations of accounting data; and 3) reviewing and testing the parameters SIO used to extract transaction data from its accounting records and systems. Based on our testing, we found SIO computer-processed data sufficiently reliable for the purposes of this audit. We did not review or test whether the data contained in, or controls over, NSF’s databases were accurate or reliable; however, the independent auditors’ report on NSF’s financial statements for fiscal years 2014 and 2015 found no reportable instances in which NSF’s financial management systems did not substantially comply with applicable requirements. In assessing the allowability of costs claimed to NSF by SIO, we also gained an understanding of the internal controls applicable to the scope of this audit through interviews with SIO, review of policies and procedures, and conducting walkthroughs as applicable. We assessed SIO’s compliance with its internal policies and procedures, as well as the following: 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards; 2 CFR Part 220, Cost Principles for Educational Institutions (OMB Circular A-21); 2 CFR Part 215, Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations (OMB Circular A-110); NSF Proposal and Award Policies and Procedures Guide (includes the Grant Proposal Guide and Award and Administration Guide); NSF Award Specific Terms and Conditions; and NSF Federal Demonstration Partnership Terms and Conditions. 15 APPENDIX C Questioned Cost Summary by Award Amount Overhead Award ID Total Questioned Questioned Questioned Finding 1 – Equipment, Materials, and Supplies Unreasonable Purchases Near Award Expiration 0944220 $ 43,577 $ 23,968 $ 67,545 0827051 7,782 4,242 12,024 1132984 4,681 2,550 7,231 1013423 2,754 1,501 4,255 0948338 2,685 1,463 4,148 Finding 1 Total 61,479 33,724 95,203 Finding 2 – Unallowable Indirect Costs 1220630 - 5,545 5,545 1440580 - 2,178 2,178 Finding 2 Total - 7,723 7,723 Finding 3 – Unreasonable Participant Support Expenditures 1313870 4,700 - 4,700 Finding 3 Total 4,700 - 4,700 Finding 4 – Unallocable Transactions 1061050 3,296 594 3,890 Finding 4 Total $ 3,296 $ 594 $ 3,890 16
Performance Audit of Incurred Costs - Scripps Institution of Oceanography, University of California, San Diego
Published by the National Science Foundation, Office of Inspector General on 2017-03-23.
Below is a raw (and likely hideous) rendition of the original report. (PDF)