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)